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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1995
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number: 0-15308
MDT CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 87-0287585
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
Stratford Hall, Suite 200
1009 Slater Road
Morrisville, North Carolina 27560
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (919) 941-9745
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 $1.25 (NASDAQ)
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(Title of class)
Common Stock Purchase Rights
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of common stock held by non-affiliates of the
Registrant, based on the price at which the stock was sold on May 22, 1995, was
approximately $35,964,000.
The number of shares outstanding of the Registrant's common stock, as of May
22, 1995, was 6,769,431.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference:
1. Definitive Proxy Statement of MDT Corporation for the Annual Meeting of
Stockholders to be held on July 19, 1995 (the "Proxy Statement"). See
Part III, Items 10, 11, 12 and 13.
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PART I
ITEM 1. BUSINESS
OVERVIEW
MDT Corporation ("MDT" or the "Company") was organized in 1971 and is
incorporated in Delaware. The Company is a holding company whose principal
operating subsidiaries are MDT Biologic Company, which produces and sells
Sterility Assurance Systems, and MDT Diagnostic Company, which produces and
sells Examining and Operatory Equipment. Effective April 1, 1995, the Company
formed a new operating subsidiary, MDT Technionic Company, which provides
product support, maintenance, repair and other services to customers of MDT
Biologic Company, MDT Diagnostic Company and other manufacturers, and which
also sells to such customers parts and consumable products relating to the
Sterility Assurance Systems and Examining and Operatory Equipment. These
functions were previously performed by the Company's Product Support
Department. The Company also operates international sales and service
subsidiaries, including MDT Asia Limited, MDT Canada Limited and MDT
International Limited. Unless the context otherwise requires, references to
"MDT" and the "Company" include the Company and its subsidiaries.
MDT Biologic Company develops, manufactures and markets Sterility Assurance
Systems, including sterilizers, ultrasonic cleaners, decontaminators, dryers,
scrub sinks and related equipment, accessories and consumables. This equipment
is necessary for cleaning, decontaminating, disinfecting, sterilizing, drying,
aerating, storing and retrieving instruments and other critical items for use
in invasive procedures. Sterility Assurance Systems are used by healthcare
professionals and scientific customers principally to prevent cross-infection
of communicable diseases caused by the use of contaminated instruments or
products.
MDT Diagnostic Company develops, manufactures and markets Examining and
Operatory Equipment for use in diagnostic and therapeutic procedures performed
in hospitals and medical and dental offices, clinics and other non-hospital
treatment facilities. Products include examination, treatment and surgical
tables and lighting systems, dental x-ray machines, dental operatory equipment
(which includes dental chairs, lights and instrument delivery systems) and
other products, together with related accessories and consumables.
MDT Technionic Company (formerly the Product Support Department) services and
otherwise supports the installed base of equipment from both product groups, as
well as the installed base of equipment of other manufacturers.
The Company currently derives approximately 42% and 16% of its revenues from
sales of Sterility Assurance Systems and Examining and Operatory Equipment,
respectively, and approximately 42% of its revenues from the sale of parts,
service and consumables in support of both product groups and, to a much lesser
degree, competitors' products. International sales and service from all product
groups, including the sale of parts, service and consumables, currently account
for approximately 17.8% of the Company's revenues. Financial information can be
found in Items 6, 7 and 8 of this Annual Report.
MDT intends to expand its healthcare products and service business through
the internal development of new products and services complementary to its
current activities. The Company anticipates that such expansion may also take
place, both domestically and internationally, through the acquisition of other
businesses, products and technologies and the development of new manufacturing,
distribution, sales and other strategic relationships with third parties.
Several trends are influencing the need for and use of Sterility Assurance
Systems in the hospital market, including increased utilization of smaller
sterilizers for departmental use to facilitate more rapid turnaround of
expensive instruments and other critical items; aging of the patient
population, with a corresponding increased need for medical care and greater
susceptibility to infection; expanding use of organ replacements and treatment
modalities for patients with cancer, diabetes and other illnesses
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requiring immunosuppressant drug therapies which, by necessity, require more
stringent aseptic practices; and greater use of reusable versus disposable
surgical articles to support healthcare cost containment and to address
concerns about infectious waste.
Other factors are influencing demand for Sterility Assurance Systems in the
dental market. Principally as a result of the use of fluoride in drinking water
by most industrialized countries, the incidence of cavities in their young
adult populations has substantially declined. At the same time, those
populations are living longer and retaining more of their teeth throughout
their lives. Accordingly, while services for the restoration of cavities are
expected to decrease, treatment of periodontal disease, orthodontic procedures,
cosmetic care and other general and specific oral and facial procedures are
expected to increase.
Demand for Sterility Assurance Systems in the hospital, dental and medical
markets is expected to grow over time, due in part to increased professional
awareness and public concern about the risk of cross-infection of virulent
diseases such as AIDS, herpes, hepatitis B and tuberculosis.
According to various market sources, the total number of surgical procedures
performed in all settings (hospitals, surgery centers and medical and dental
offices) has increased from about 22 million in 1985 to just over 29 million in
1994, an increase of approximately 33%. During this period, the proportion of
procedures performed in an outpatient setting has increased from just under 40%
to about 65%. These trends are increasing the utilization of and ultimately the
demand for both Sterility Assurance Systems and Examining and Operatory
Equipment.
A general cautionary note regarding the overall demand for medical equipment
is the growing national concern about the steep rise in the overall cost of
healthcare and its availability, resulting in increasing pressure by
governments, insurers, employers and providers to reduce the growth rates of
healthcare operating and capital costs. The continuing debate on healthcare
reform reflects these and other concerns. Independent of healthcare reform
proposals, healthcare consolidations and alliances are expected to increase
industry efficiencies and strengthen the bargaining position of large providers
of healthcare services. Activities intended to contain the rise in healthcare
costs could continue negatively to impact customer demand for the Company's
products.
RECENT COMPANY EVENTS
During fiscal year 1995, the Company announced a series of measures intended
significantly to reduce the Company's costs and expenses and to improve the
effectiveness of its operations, organization and structure. Announced measures
included elimination of jobs and other costs and expenses, consolidation of
offices and facilities (including relocation of the corporate office from
Torrance, California, to Morrisville, North Carolina) and the reorganization of
the Company into three business units effective April 1, 1995.
On June 9, 1995, the Company's wholly owned subsidiary, MDT Diagnostic
Company, sold to Maxxim Medical, Inc. certain inventories, fixed assets and
intangible assets (including the tradename "Bovie") relating to the Bovie line
of electrosurgical products for the sum of $2,600,000 (subject to certain
inventory and related adjustments). MDT Diagnostic Company received a payment
of $1,000,000 upon closing of the transaction. Maxxim Medical, Inc. also
deposited $1,600,000 (representing the balance of the purchase price) into
escrow pending final transfer of fixed assets and inventory in September 1995.
This transaction is expected to result in a pre-tax gain to the Company of
approximately $700,000 during the first quarter of fiscal 1996. The Company
believes that the transaction will enable MDT Diagnostic Company to concentrate
its resources on patient handling equipment, lighting systems and related
accessories.
Also in June 1995, the Company announced that it would market in the U.S. and
Canada operating room systems manufactured by Kreuzer GmbH, of Puchheim,
Germany. The Kreuzer systems, which deliver and control gases, oxygen and power
for anesthesia, diagnostic and monitoring equipment, are
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complementary to and compatible with operating room tables, lights and related
accessories presently manufactured and marketed by the Company. Such systems
will also be installed and serviced by MDT Technionic Company.
PRODUCTS
The Company's products are organized into two product groups, Sterility
Assurance Systems and Examining and Operatory Equipment, and the related sale
of parts, service and consumable products. The following table sets forth the
percent of sales attributable to each for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
-------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Sterility Assurance Systems.......................... 45.9% 43.3% 41.6%
Examining and Operatory Equipment.................... 17.2 18.5 16.4
Parts, service and consumable products............... 36.9 38.2 42.0
----- ----- -----
Total.............................................. 100.0% 100.0% 100.0%
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</TABLE>
Sterility Assurance Systems. MDT is one of the two principal domestic
suppliers of Sterility Assurance Systems and related parts, service and
consumable products. This product group represents the Company's original
business. Sterility Assurance Systems are marketed under the Castle, Harvey and
Wilson brand names, and are comprehensive systems used by the healthcare
professions for cleaning, decontaminating, disinfecting, sterilizing, drying,
aerating, storing and retrieving instruments and other critical items for use
in invasive procedures, and by scientific customers for pharmaceutical,
laboratory, research and bio-tech applications. MDT Biologic Company develops,
manufactures and markets all of the equipment essential to these processes, of
which sterilizers are the primary component.
Castle sterilizers are manufactured in both steam and gas configurations.
Steam sterilizers account for the majority of units sold. These devices utilize
saturated steam to sterilize instruments and other articles through a
combination of heat, moisture and pressure. Gas sterilizers employ ethylene
oxide to eradicate organisms on instruments and other items which cannot
withstand the high temperature, humidity and pressure generated by steam
sterilizers.
Castle steam and gas sterilizers are equipped with microprocessor control
systems and a wide range of additional features and options. These systems
monitor each phase of the sterilization process and control variables to ensure
that conditions for sterilization are met. The systems also allow cycle
programming, provide power outage protection and produce a complete, printed
record of every cycle.
Harvey Chemiclave sterilizers utilize a proprietary chemical formulation,
produced and sold by the Company under the registered name Vapo-Steril, to
produce water-unsaturated vapor when heated in the sterilizing chamber to
eliminate corroding, rusting and dulling of metal instruments. This proprietary
chemical vapor sterilization process is widely used in the dental environment
for sterilizing instruments and handpieces and supplementally used in medical
and hospital environments for processing delicate surgical instruments. Harvey
Hydroclave sterilizers are smaller, portable steam sterilizers used principally
in medical and dental offices and laboratories.
Wilson stainless steel accessory products include utility and instrument
tables and specialty carts, stools, treatment stands and receptacles. The
product line includes an extensive array of products which are used to support
major and minor operating room procedures in an aseptic environment.
Examining and Operatory Equipment. This product group includes devices,
accessories and consumables for use in various diagnostic and therapeutic
procedures performed in hospitals, medical and dental offices, clinics and
other non-hospital treatment facilities. These products are marketed under the
Castle, Shampaine and McKesson brand names. The major product lines are
examination, treatment and surgical tables and lighting systems, dental x-ray
machines and dental chairs, lights and
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instrument delivery systems. In addition, the Company recently entered into an
agreement with Kreuzer GmbH, of Puchheim, Germany, under which the Company will
act as exclusive distributor of Kreuzer operating room systems in the United
States and Canada. See "Business--Recent Company Events."
Parts, Service and Consumable Products. The Company, principally through its
wholly owned subsidiary, MDT Technionic Company, maintains, repairs and
provides replacement parts and consumables for use with both the Company's and
certain competitors' equipment. MDT employs service technicians throughout the
United States and Canada who service Sterility Assurance Systems and Examining
and Operatory Equipment, including electronic controls and electro-mechanical
and mechanical components.
In addition to Vapo-Steril, the proprietary chemical solution used in the
Harvey Chemiclave sterilizer, the Company offers a number of consumable
products for use with Sterility Assurance Systems. Principal among these are
process indicators, including self-sealing indicator bags and biological
monitors which test the sterilizer function and operator technique, detergents
used in washer/sterilizers and decontaminators, cleaning agents used in
ultrasonic cleaners and disposable test packs which provide daily operational
proof of mechanical air removal from high vacuum sterilizers. The Company also
offers a range of accessories and consumables for use with Examining and
Operatory Equipment.
Warranties. The Company generally provides a one-year limited warranty to
end-users on its products, except for power systems and x-ray tube heads, on
which the Company provides a two-year limited warranty, and examination and
treatment tables, which include a three-year limited warranty. The warranties
extend to materials and workmanship and provide for normal exclusions for
improper product use. In the United States and Canada, the warranty for certain
major components is extended for periods ranging from two to fifteen years
conditioned upon normal use, operation and maintenance. The Company maintains a
warranty expense reserve which it believes is adequate to absorb normal charges
at the Company's current level of business.
MARKETING
The Company has organized its marketing and sales resources within six
healthcare markets: hospital; medical; dental; governmental; scientific; and
international. In each of these six markets, the Company has utilized common
sales organizations and channels of distribution for both of its product groups
(Sterility Assurance Systems and Examining and Operatory Equipment). MDT,
principally through MDT Technionic Company, also provides parts, service and
consumables for these markets.
The following table sets forth for the periods indicated the approximate
percent of net sales represented by each of these markets:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
-------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Equipment (both product groups):
Hospital........................................... 32.9% 32.7% 29.0%
Medical............................................ 3.0 3.3 5.5
Dental............................................. 6.0 4.4 4.2
Governmental....................................... 7.5 6.1 4.2
Scientific......................................... 2.7 2.9 2.7
International...................................... 11.0 12.4 12.4
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63.1% 61.8% 58.0%
Parts, service and consumable products............... 36.9 38.2 42.0
----- ----- -----
Total.............................................. 100.0% 100.0% 100.0%
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</TABLE>
Hospital sales are made domestically through MDT sales representatives
directly to hospitals and teaching institutions. A growing portion of such
sales are made under the terms of agreements with hospital groups which are
from one to three years in duration.
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Medical sales are made domestically through MDT sales representatives to
authorized full-service dealers for physicians, group practices and clinics,
other non-hospital treatment facilities, veterinary care facilities and
laboratories. Medical dealers buy, stock, sell and service MDT products, as
well as competitive products, and receive discounts from the Company's
suggested retail prices.
Dental sales are made domestically through MDT sales representatives to
authorized full-service dealers for dentists, group practices and clinics and
dental laboratories. Dental dealers buy, stock, sell and service MDT products,
as well as competitive products, and receive discounts from the Company's
suggested retail prices.
Governmental sales are made to military facilities and hospitals. The
Company generally sells to these accounts directly, often under competitive
bid arrangements.
Scientific sales are made to various laboratories, biotechnology and
research centers, pharmaceutical firms and other manufacturers. Specifically
designed products, in addition to certain of MDT's hospital, medical and
dental products, are available to this market segment and are generally sold
on a direct basis, often under competitive bid arrangements. In addition, MDT
contracts with several independent sales organizations to serve certain
geographic markets.
International sales (exclusive of Canada) are generally made to contract
distributors who buy, stock, sell and service MDT products. The distributors
are generally exclusive as to such products, and their contracts generally
continue unless terminated by either party with appropriate (minimum 90 days)
notice. In Canada, the Company's sales representatives sell directly to
hospitals and to medical dealers and dental dealers. The Company's principal
export markets are Canada, the Pacific Basin, the Middle East, Mexico and
Latin America and Europe. All international sales are in U.S. dollars, except
in Canada, where sales are denominated in Canadian dollars.
No customer of the Company accounted for more than 10% of consolidated net
sales in fiscal 1995, 1994 or 1993, and no material part of the business is
dependent upon a single customer or a few customers.
PRODUCT DEVELOPMENT
MDT expended $4,451,000, $4,692,000 and $4,428,000 on product development in
the three fiscal years ended March 31, 1995, 1994 and 1993, respectively.
Since March 31, 1992, the Company has developed, produced and marketed a
number of new sterility assurance products, including new generations of
Harvey tabletop sterilizers, systems for reducing emissions from ethylene
oxide (EO) sterilizers, a system for using ethylene oxide with non-ozone layer
depleting carbon dioxide (EO/CO/2/) gas mixtures in Castle EO sterilizers, and
a system for reducing water consumption by Castle steam sterilizers.
Additionally, in March 1993, the Company introduced the first of several
specially designed scientific sterilizers. The Company has also introduced
during this same period several new examining and operatory products,
including a battery operated version of Shampaine surgical tables, a Shampaine
surgical table designed to support endoscopic surgical procedures, and a
Shampaine dental chair and Castle dental light.
The Company is in varying stages of planning, developing and testing
additional products and product enhancements to be introduced within the next
18 months. The planned new products and product enhancements involve the
Company's two product groups and include additional models of Harvey tabletop
sterilizers and large Castle sterilizers for scientific use, data collection
enhancements for Castle microprocessor controlled sterilizers, and further
enhancements to Shampaine surgical tables and dental operatory equipment. The
Company also anticipates that additional accessory products and biological,
chemical and other consumable products will be introduced over the next 18
months. These introductions are expected to complement existing product lines.
Certain of these products will be used exclusively with the Company's devices,
while others may also be used with comparable devices of other manufacturers.
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The Company's research and development program in the field of chemical
sterilization of temperature, moisture and pressure sensitive medical and
dental instruments continued in fiscal 1995, as it will in fiscal 1996. The
Company has acquired an option to purchase certain patents and related rights
covering sterilization of medical and dental instruments and other items by
means of plasma-generated, electrically neutral biocidal species in a field-
free, glowless zone. Such patents are the subject of patent infringement
lawsuits pending in the United States and Canada. See "Business--Product
Liability and Litigation." The Company expects to market a product based on
these patents in 1996, although significant further investment will be required
prior to commercialization.
MDT has, from time to time, expanded its product lines through the
acquisition of businesses, products and technologies. The Company intends to
continue to seek appropriate opportunities to acquire compatible businesses,
products and technologies and to enter into manufacturing, distribution, sales
and other strategic relationships with third parties, both domestically and
internationally.
MANUFACTURING
MDT's production facilities utilize numerically controlled and robotic tools
and contain sections for machining, metal fabricating, welding and brazing,
painting and finishing, plating and buffing, assembling, mixing, and inspecting
and testing. Certain of the Company's production facilities also contain
microbiology laboratories.
The Company has alternative sources for most of the materials, parts and
components which it purchases. Certain vendors hold tooling owned by the
Company which is necessary for the production of certain parts and components.
Should one or more of these vendors cease deliveries to the Company for any
reason, production schedules would be disrupted while the Company moved its
tooling to another vendor and deliveries were resumed.
BACKLOG
The Company's backlogs at March 31, 1995 and 1994, were approximately $27.1
million and $28.1 million, respectively, of which approximately $21.2 million
and $22.7 million, respectively, were for Sterility Assurance Systems and
approximately $5.9 million and $5.4 million, respectively, were for Examining
and Operatory Equipment. All orders comprising the backlog are firm, written
orders from qualified customers. Approximately 95% of these orders are expected
to be filled in fiscal 1996, with the remainder to be filled in fiscal 1997.
COMPETITION
Certain of the Company's competitors have greater financial and other
resources than the Company has. The Company competes in the Sterility Assurance
Systems business primarily with American Sterilizer Company, a subsidiary of
AMSCO International, Inc.; Getinge Inc.; and, in the tabletop sterilizer
market, with Pelton & Crane Company, a subsidiary of Siemens A.G., and several
smaller private companies. Product features, reliability, operating costs,
after-sales service, delivery times and price are the most prevalent
competitive factors with respect to these products.
The Company competes in Examining and Operatory Equipment primarily with
AMSCO International, Inc., Siemens Medical Systems, Inc., a subsidiary of
Siemens A.G., Skytron, a division of Kawasaki Midwest, Inc., and Midmark, Inc.
(examination and surgical tables and lights); Dentsply International (dental x-
ray machines); and Adec Inc., Pelton & Crane Company and other subsidiaries of
Siemens A.G., and several independent companies represented in the United
States by Professional Sales Associates, Inc. (dental chairs, lights and
delivery systems). Product features, reliability, after-sale service, delivery
times and price are the most prevalent competitive factors with respect to
these products.
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PATENTS AND TRADEMARKS
The Company actively develops innovative technology and improvements with
respect to its product lines. The Company typically secures patent protection
for significant innovations, and currently holds in excess of 100 unexpired
patents granted by the United States and various foreign countries, ten of
which were issued during the fiscal year ended March 31, 1995. Additional
patent applications are both pending and in preparation. The Company considers
patent rights generally to be of value in terms of its competitive position,
particularly in connection with its sterilizers and related products and
surgical tables and lights.
The Company sells its products under a variety of trademarks, some of which
are considered of sufficient importance to warrant registration in the United
States and various foreign countries in which the Company does business. Among
the Company's registered marks used in connection with Sterility Assurance
Systems are MDT, Castle, Harvey, Chemiclave, Hydroclave, Vibraclean, Vapo-
Steril, Spor-Test, Unispor, Tec-test, Chemitest, Sani-Jet and Wilson.
Registered marks used in connection with Examining and Operatory Equipment
include MDT, Castle, Shampaine, Radi-Op, McKesson, AsepTec, Steri-grip,
Steeltone, Medera, Image and E-Series.
GOVERNMENT REGULATION
Most of the Company's current and planned products must be accepted,
registered or licensed prior to sale by the federal Food and Drug
Administration (the "FDA"), the federal Environmental Protection Agency (the
"EPA"), and/or other regulatory authorities, both domestic and foreign. These
authorities also regulate labeling, advertising and other forms of product
marketing claims. Some of the Company's sterilizers and sterilization products
may also be regulated under California's Proposition 65 (the Safe Drinking
Water and Toxic Enforcement Act of 1986). This act prohibits the discharge of
carcinogens and reproductive toxins into sources of drinking water and mandates
that businesses give "clear and reasonable" warnings prior to exposing
individuals to such chemicals. Other pertinent legislation includes the
California Clean Air Act and Birth Defect Prevention Act which are concerned
with the release of substances which may be carcinogenic or reproductive
toxicants into the environment. These acts require the generation of data in
the form of extensive laboratory and animal testing regarding the carcinogenic
and toxic nature of certain of the Company's products and the development of
means to control their release to the environment. Local districts within
California are further empowered to enact legislation which may be even more
stringent than that enacted on a statewide basis.
The Company's Chemiclave sterilizers utilize Vapo-Steril solution as the
sterilizing agent. Vapo-Steril is a chemical formulation which contains a trace
of formaldehyde, a chemical regulated under California's Proposition 65.
Accordingly, Proposition 65 warnings are included in the materials shipped with
Vapo-Steril. Vapo-Steril solution, as a sterilant, is considered a pesticide
and, as such, is registered with the EPA under the Federal Insecticide,
Fungicide and Rodenticide Act ("FIFRA").
Certain of the Company's sterilizers employ ethylene oxide as the sterilizing
agent for certain instruments and other items which cannot withstand the heat,
moisture or pressure common to other types of sterilizers. Use of ethylene
oxide has been the subject of regulatory inquiry on the part of the EPA and
certain state regulatory authorities. Regulatory authorities require control of
emissions of ethylene oxide from such equipment in the work area and may in the
future require reduction of current permissible levels. The Company's ethylene
oxide sterilizers are in compliance with Proposition 65.
The Company's ethylene oxide sterilizers also employ a chlorofluorocarbon,
which is combined with ethylene oxide to form a stable, non-flammable mixture.
Under an international agreement and federal law, production of these
substances will be banned in 1997, in order to protect the stratospheric ozone
layer. Carbon dioxide is a suitable substitute for chlorofluorocarbons. In
addition, major chemical companies have developed other suitable substitutes
for chlorofluorocarbons. The Company provides
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modification kits with which its installed base of ethylene oxide sterilizers
can be retrofitted for use with such alternative mixtures. New ethylene oxide
sterilizers are produced with this capability in order to meet specific
customer requirements.
Under the federal Food, Drug and Cosmetics Act, as amended, the Company is
required to file with the FDA a new device list and to obtain FDA approval for
all new devices which the Company proposes to manufacture and market for use in
the treatment of disease and injury. The procedure for obtaining such approval
differs depending upon the uniqueness of the device, with those devices which
are substantially equivalent to existing devices being eligible for expedited
approval and those devices which represent significant departures from existing
devices requiring pre-marketing approval. In addition, certain claims for some
medical devices cannot be made until the FDA agrees not to object. The devices
are also subject to inspection by the FDA after they receive approval, with
devices which are potentially life-threatening being subject to more stringent
standards. The FDA has established manufacturing standards and record keeping
requirements for manufacturers of medical devices known as "Good Manufacturing
Practices." Each manufacturing facility of the Company must be registered
annually and is subject to recurring, unannounced inspections by the FDA.
The Company must also comply with pressure vessel testing and record keeping
requirements of the American Society of Mechanical Engineers, as required by
applicable laws of various states, and must comply with various requirements
and standards of Underwriters Laboratories, Canadian Standards Association and
other domestic and foreign regulatory agencies.
Although applicable government regulations vary in their provisions, they are
generally stringent and continuing. In addition, regulatory authorities may
exercise their substantial discretion in the application of statutory and
administrative standards in a manner burdensome to the Company. The cost of
compliance with these regulations is difficult to determine, but it is and will
continue to be a significant expense for the Company. The Company believes that
it has obtained, has applied for, or is in the process of applying for, all
material regulatory approvals applicable to its existing products, facilities
and processes.
PRODUCT LIABILITY AND LITIGATION
The nature of the products of the Company, notably ethylene oxide sterilizers
and electrosurgery devices, has, from time to time, resulted in product
liability claims. To date, such claims have been covered by insurance policies,
except for self-insured retentions. MDT intends to continue to be covered by
product liability insurance. The Company's product liability insurance is
generally subject to self-insured retentions of $100,000 per occurrence and
$500,000 annually in the aggregate.
The Company did not produce ethylene oxide sterilizers prior to the
acquisition of Castle Company ("Castle") from Sybron Corporation ("Sybron") on
July 2, 1987. As part of that transaction, Sybron agreed to retain
responsibility for Castle-related product liability claims pending or
threatened as of July 2, 1987, subject to the Company's assumption of liability
in the aggregate up to $1.1 million in connection with such specified claims (a
reserve for which was established by the Company in such amount). The Company
has satisfied its obligation under the agreement.
The Company has been informed that certain of Sybron's excess liability
insurance carriers may not be financially able to pay judgments resulting from
product liability claims relating to incidents occurring prior to January 1,
1986. With respect to any judgments against the Company which exceed the amount
of Sybron's primary insurance coverage, the Company may be responsible for that
portion of a judgment which any excess liability insurance carrier is unable to
pay.
Ethylene oxide product liability cases filed since July 2, 1987, against the
Company by an aggregate of 25 plaintiffs are currently pending in the Illinois
State Circuit Court of Cook County, Law Division, and the Texas State District
Court of Anderson County, Third Judicial District, respectively. The Company's
expenses and any potential judgments in these actions would be covered by the
Company's product
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liability insurance (up to the limits of such coverage), except for self-
insured retentions and punitive damages, if any. The Company believes that the
allegations in all of these cases are without merit, and the Company and its
insurer intend vigorously to defend these actions.
In February 1994, the Company filed a lawsuit against AbTox, Inc., a
privately held company, charging AbTox with infringing patents which MDT has an
option to purchase from the inventor and his controlled corporation (jointly
referred to as "Exitron"). The patents define a technology utilizing plasma-
generated neutral species in a sterilizer intended to replace ethylene oxide
gas sterilizers and other low temperature alternatives to autoclaves. MDT
initially filed suit in the U.S. District Court in the Central District of
California seeking to enforce the Exitron patents and to restrain AbTox from
the production and sale of a product which allegedly infringes the Exitron
patents. In March 1994, AbTox filed substantially identical suits against MDT
and Exitron in U.S. District Courts in Chicago, Illinois and Boston,
Massachusetts, respectively, seeking to invalidate the Exitron patents and
assert an AbTox patent against a plasma sterilization device initially
developed by Exitron and now undergoing additional testing and development by
MDT.
MDT has withdrawn its original complaint and has filed a corresponding
complaint as an intervenor in the suit in Boston, Massachusetts. In November
1994, the suit in Illinois was transferred to Boston and all suits pending were
subsequently consolidated in a single suit in Boston with the parties being
AbTox, Exitron and MDT. In December, 1994, suit was filed by MDT in Canada
against AbTox for patent infringement. MDT intends vigorously to pursue its
claims and to oppose the AbTox claims.
EMPLOYEES
At March 31, 1995, MDT employed 1,102 persons full-time in the following
areas: manufacturing, engineering and quality assurance (526); marketing and
sales (153); product support (304); administration (65); and research,
development and compliance (54). The Company believes that its overall
relations with its employees are good.
Production employees at the Henrietta, New York, manufacturing and
engineering facility are represented by the International Association of
Machinists and Aerospace Workers (AFL-CIO) (the "IAM") and the Metal Polishers,
Buffers, Platers and Allied Workers International Union (AFL-CIO) (the
"Polishers, Buffers and Platers") under three-year contracts which expire April
1, 1997.
The collective bargaining agreements with the unions cover wages, hours and
conditions of employment, as well as health, life and accident insurance and
retirement plans. The Company maintains a pension plan providing retirement and
certain disability benefits to union employees based on years of service.
Retirement age under this plan is 65, with reduced benefits available to
persons who retire between ages 55 and 65 and who meet certain other
conditions. Benefits under the plan are fully vested after seven years of
service. These benefits are comparable to those provided to nonunion employees.
The Company maintains the MDT Corporation Savings and Thrift Plan for Hourly
Employees covering its nonunion hourly employees and the MDT Biologic Company
Union Thrift Plan covering its union employees. These plans are similar to the
MDT Corporation Savings and Thrift Plan for Salaried Employees.
ITEM 2. PROPERTIES
The Company owns approximately 32.5 acres of land and related buildings and
improvements in Henrietta, New York, which house the headquarters and certain
operations for two of its operating subsidiaries, MDT Biologic Company and MDT
Technionic Company, as well as certain corporate activities. The Company owns
approximately three acres of land and a manufacturing and engineering facility
in Rancho Dominguez, California, which is utilized by MDT Biologic Company. The
Company
9
<PAGE>
acquired on August 31, 1992, as part of its acquisition of Consolidated
Equipment Supply Corporation, approximately 2.5 acres of land and a
manufacturing and engineering facility in Mercersburg, Pennsylvania, which is
also utilized by MDT Biologic Company. The Mercersburg property secures two
loans with an aggregate outstanding principal balance of $278,000 as of March
31, 1995. See Note 9 of Notes to Consolidated Financial Statements. None of the
Company's other owned properties is held subject to any major encumbrance.
The Company occupies four leased facilities in North Charleston, South
Carolina, three under co-terminus leases. These facilities house the Company's
third operating subsidiary, MDT Diagnostic Company, and a service center for
MDT Technionic Company. The Company has purchased 15 acres of land in
Summerville, South Carolina (adjacent to North Charleston), on which it intends
to construct a new facility within which it will consolidate the operations of
MDT Diagnostic Company and an MDT Technionic Company service center.
Construction of the new facility is anticipated to begin in the second half of
fiscal 1996 or the first half of fiscal 1997. The Company intends to finance
the new facility with industrial revenue bonds.
The Company occupies its corporate headquarters in Torrance, California under
the terms of a lease which expires on June 30, 1995. The Company is presently
relocating its corporate headquarters to a new leased facility in Morrsville,
North Carolina. Such relocation is expected to be completed in July 1995. The
Company also leases sales and service offices in Anaheim, California; Norcross,
Georgia; Lombard, Illinois; Arnold, Maryland; Athens, Greece; and Hong Kong.
Warehouse facilities as well as sales and service offices are leased in Plano,
Texas, and Toronto, Ontario, and Montreal, Quebec, Canada. The Company also
maintains a liaison office in New Delhi, India. As part of its reorganization,
the Company will close in June 1995 the Plano, Texas, warehouse facilities and
sales and service offices, as well as downsize the other domestic sales and
service offices as their respective leases expire.
The following table sets forth certain information concerning the principal
manufacturing and engineering facilities of the Company and its subsidiaries.
The table excludes the leased corporate facility in Morrisville, North
Carolina, and leased sales and service offices and warehouse facilities
throughout the United States and Canada and in Athens, Greece, and Hong Kong,
totaling approximately 36,000 square feet.
<TABLE>
<CAPTION>
EXPIRATION
SQUARE OF CURRENT
LOCATION FOOTAGE LEASE
-------- ------- ----------
<S> <C> <C>
Henrietta, New York.................................... 313,000 Owned
Rancho Dominguez, California........................... 60,000 Owned
Mercersburg, Pennsylvania.............................. 29,000 Owned
North Charleston, South Carolina(a).................... 132,400 1995/1996
</TABLE>
- --------
(a) Consists of four leased facilities. The leases pertaining to three of the
facilities (comprising approximately 121,000 square feet) expire in
December 1995, but include indefinite 90-day renewal options in favor of
the Company. The lease pertaining to the fourth facility (comprising 11,400
square feet) expires in December 1996.
ITEM 3. LEGAL PROCEEDINGS
In addition to the legal proceedings described or referenced in this Annual
Report under the caption "Business--Product Liability and Litigation," the
Company is a defendant in various other legal proceedings arising in the
ordinary course of business. In the opinion of management, the outcome of such
other legal proceedings will not have a material adverse impact on the
consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded in the NASDAQ National Market System
under the symbol MDTC. The following table sets forth, for the periods
indicated, the range of high and low prices for the Common Stock for each
fiscal quarter since April 1, 1993, as reported by the NASDAQ National Market
System.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1994
First Quarter.......................................... $ 9 3/8 $5 3/8
Second Quarter......................................... 10 1/8 6 3/8
Third Quarter.......................................... 7 3/8 5 1/4
Fourth Quarter......................................... 6 5/8 5 3/8
Fiscal 1995
First Quarter.......................................... 6 1/16 4 1/2
Second Quarter......................................... 5 5/8 4 5/8
Third Quarter.......................................... 6 7/8 5 1/4
Fourth Quarter......................................... 7 1/4 5 5/8
Fiscal 1995
First Quarter (through June 15, 1995).................. 7 1/8 5 1/2
</TABLE>
The last sale price on June 15, 1995, as reported by the NASDAQ National
Market System, was $5 5/8 per share. On May 22, 1995, there were 543 holders of
record of the Common Stock of MDT. The Company has never paid cash or other
dividends and the Board of Directors does not anticipate paying any dividends
in the foreseeable future. In addition, under the terms of the Company's Credit
Agreement with Wells Fargo Bank, National Association, and Chemical Bank, the
Company has covenanted that, without the prior written consent of the banks,
the Company will not pay dividends to its stockholders for as long as any loans
under the Credit Agreement are outstanding.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected consolidated financial data for the
Company for each of the five fiscal years ended March 31, 1995. This
information should be read in conjunction with the more detailed consolidated
financial statements and notes thereto included in Item 8 of this Annual
Report.
The income statement data for each of the five fiscal years ended March 31,
1995 and the balance sheet data as of those dates have been derived from the
Company's consolidated financial statements, which statements have been audited
by KPMG Peat Marwick LLP, independent Certified Public Accountants.
INCOME STATEMENT DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales.................... $135,462 $136,475 $133,947 $119,204 $108,264
Cost of sales............ 92,564 92,728 89,673 82,957 74,997
-------- -------- -------- -------- --------
Gross profit............. 42,898 43,747 44,274 36,247 33,267
Operating expenses:
Marketing and sales.... 24,238 24,574 23,492 20,659 18,387
Administration......... 8,666 9,365 9,329 7,823 7,463
Product development.... 4,451 4,692 4,428 3,887 3,352
-------- -------- -------- -------- --------
37,355 38,631 37,249 32,369 29,202
Reorganization costs..... 1,235(a) -- -- -- --
-------- -------- -------- -------- --------
Operating income......... 4,308 5,116 7,025 3,878 4,065
Interest expense......... 3,514 2,803 2,756 2,963 2,499
Other (income) expense... 113 169 177 119 (24)
-------- -------- -------- -------- --------
Income before income
taxes and accounting
changes................. 681 2,144 4,092 796 1,590
Income taxes............. 405 901 1,716 451 670
-------- -------- -------- -------- --------
Income before accounting
changes................. 276 1,243 2,376 345 920
Accounting changes....... -- 699(b) -- -- 437(c)
-------- -------- -------- -------- --------
Net income............... $ 276 $ 1,942 $ 2,376 $ 345 $ 1,357
======== ======== ======== ======== ========
Earnings per Share:
Income before
accounting changes.... $ .04 $ .18 $ .38 $ .05 $ .15
Accounting changes..... -- .11(b) -- -- .07(c)
-------- -------- -------- -------- --------
Net income............... $ .04 $ .29 $ .38 $ .05 $ .22
======== ======== ======== ======== ========
Weighted average common
and common equivalent
shares outstanding...... 6,775 6,781 6,293 6,319 6,232
</TABLE>
- --------
(a) Reorganization costs, reflecting employee severance payments, lease
termination costs and recruitment and relocation costs which were $1,235 or
$.11 a share.
(b) Cumulative effect of change in accounting method at April 1, 1993 to
reflect the change in applying overhead costs to inventory.
(c) Changes resulting from adoption of Financial Accounting Standards Board
Statement No. 106 on Postretirement Benefits, and change in vacation
policy.
12
<PAGE>
BALANCE SHEET DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Assets......................... $105,349 $105,652 $100,772 $88,912 $79,713
Working Capital...................... 23,427 26,636 23,957 26,827 28,617
Long-term Debt....................... 5,684 8,838 7,919 8,634 7,949
Stockholders' Equity................. 45,461 45,022 39,639 37,247 36,780
Stockholders' Equity Per Share....... 6.72 6.68 6.32 5.94 5.88
</TABLE>
FINANCIAL RATIOS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Current Ratio............................... 1.5:1 1.6:1 1.5:1 1.7:1 2.0:1
Total Liabilities to Stockholders' Equity
Ratio...................................... 1.3:1 1.3:1 1.5:1 1.4:1 1.2:1
Long-term Debt to Stockholders' Equity Ra-
tio........................................ .1:1 .2:1 .2:1 .2:1 .2:1
Return on Average Stockholders' Equity...... .6% 4.6% 6.2% .9% 3.8%
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following table presents for the fiscal years ended March 31, 1995, 1994
and 1993, the Company's Consolidated Statements of Income expressed as a
percentage of sales and the period-to-period percentage changes in the dollar
amounts of the respective line items.
<TABLE>
<CAPTION>
PERCENT INCREASE
(DECREASE)
PERCENT OF NET SALES -------------------
FISCAL YEAR ENDED MARCH 31, 1995 1994
------------------------------- OVER OVER
1995 1994 1993 1994 1993
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales................... 100.0% 100.0% 100.0% (0.7)% 1.9%
Cost of sales........... 68.3 67.9 66.9 (0.2) 3.4
--------- --------- ---------
Gross profit............ 31.7 32.1 33.1 (1.9) (1.2)
Operating expenses:
Marketing and sales... 17.9 18.0 17.5 (1.4) 4.6
Administration........ 6.4 6.9 7.0 (7.5) 0.4
Product development... 3.3 3.4 3.3 (5.1) 6.0
--------- --------- ---------
27.6 28.3 27.8 (3.3) 3.7
Reorganization costs.... 0.9 -- -- -- --
--------- --------- ---------
Operating income........ 3.2 3.8 5.3 (15.8) (27.2)
Interest expense........ 2.6 2.1 2.1 25.4 1.7
Other expense........... 0.1 0.1 0.1 (33.1) --
--------- --------- ---------
Income before income
taxes and cumulative
effect of change in ac-
counting method........ 0.5 1.6 3.1 (68.2) (47.6)
Income taxes............ 0.3 0.7 1.3 (55.0) (47.5)
--------- --------- ---------
Income before cumulative
effect of change in
accounting method...... 0.2 0.9 1.8 (77.8) (47.4)
Cumulative effect of
change in accounting
method for valuation of
inventory, net of in-
come taxes............. -- 0.5 -- -- --
--------- --------- ---------
Net income............ 0.2% 1.4% 1.8% (85.8)% (18.3)%
========= ========= =========
</TABLE>
14
<PAGE>
FISCAL YEAR ENDED MARCH 31, 1995, AS COMPARED TO FISCAL YEAR ENDED MARCH 31,
1994
Sales for the fiscal year ended March 31, 1995, of $135,462,000 were
$1,013,000 below sales for fiscal year 1994, a decrease of 0.7%. Sales of
parts, service and consumables were up 10.8% for the recent year compared to
the prior year while sales of sterility equipment were down 5.9% and sales of
Examining and Operatory Equipment were down 6.9% for the recent year compared
to the prior year. Lower equipment sales resulted from continuing buyer
uncertainty in the domestic healthcare markets related to healthcare reform and
from continuing industry consolidation and retrenchment. Higher sales of parts,
service and consumables reflect customer resolve to extend the life of existing
equipment in the current environment.
Incoming orders of $134,535,000 for the recent year were essentially the same
when compared to incoming orders of $134,403,000 in the prior year. Stronger
orders in the international, scientific and service markets were offset by
weaker orders in the domestic healthcare markets. Backlog was $27,145,000 at
March 31, 1995, compared to $28,072,000 a year earlier.
Gross profit of $42,898,000 was $849,000, or 1.9%, lower in fiscal 1995
compared to fiscal 1994, while gross profit as a percentage of sales was 31.7%
in the current year versus 32.1% in the prior year. Current year gross profit
and gross profit margin were reduced by $371,000 as the result of a strike at
the Company's Henrietta, New York, plant in April 1994. The decrease from the
prior year (excluding the effect of the strike) was primarily due to the
combined effects of lower sales, higher manufacturing costs resulting from
reduced production levels, somewhat lower pricing overall, temporary
manufacturing inefficiencies associated with the consolidation in December 1994
of the former Elkhorn, Wisconsin, operation with the North Charleston, South
Carolina, operation and the comparative impact of implementing the LIFO method
for costing substantially all inventories in fiscal 1995. These negative
impacts were partially offset by cost reductions implemented during the fiscal
year, the favorable gross profit impact of which was first realized during the
fourth quarter of fiscal year 1995.
Effective April 1, 1994, the Company implemented the LIFO method for costing
substantially all of its inventories. In fiscal 1994, approximately 44% of the
Company's consolidated inventories was valued using the LIFO method, with the
balance valued using the FIFO method. During fiscal 1995, the Company recorded
incremental LIFO reserves of $656,000 as a result of this change.
Operating expenses of $37,355,000 decreased $1,276,000, or 3.3%, in fiscal
1995 compared to fiscal 1994. The reduction in operating expenses reflects the
implementation of cost reductions during the fiscal year, offset in part by
patent litigation costs and new product introduction costs. Overall, operating
expenses as a percentage of sales decreased to 27.6% in fiscal 1995 from 28.3%
in fiscal 1994.
Reorganization costs, reflecting employee severance payments, lease
termination costs and recruitment and relocation costs, totaling $1,235,000
were recorded in fiscal 1995. These costs are associated with the Company's
efforts to lower its break-even point in the face of current market
uncertainties while at the same time improve the effectiveness of its
operations, organization and structure. Announced measures are intended to
reduce costs in excess of $4,000,000 on an annualized basis from what they
would otherwise have been. The fiscal 1995 cost associated with each of the
measures is: elimination of jobs and other costs and expenses, $733,000;
consolidation of sales and service offices including centralization of service
dispatch and parts and service order entry, $215,000; and reorganization of the
Company into three business units, including the relocation of the Corporate
Office from Torrance, California, to Morrisville, North Carolina, $287,000.
Reorganization costs remaining to be incurred and expensed in fiscal 1996 are
expected to approximate $700,000.
Operating income of $4,308,000 was $808,000, or 15.8%, lower in fiscal 1995
than in fiscal 1994, reflecting lower gross profit and reorganization costs
partially offset by lower operating expenses.
15
<PAGE>
Interest expense increased $711,000 in fiscal 1995 to $3,514,000. The
increase was due primarily to increases in the prime rate, to which most of the
Company's debt is related.
The effective income tax rate increased to approximately 59% in fiscal 1995
compared to 42% in fiscal 1994. The increase in the effective tax rate
primarily reflects the impact on the percentage rate calculation of permanent
book-to-tax differences stemming from the 50% limitation on the deductibility
of travel related expenses applied to reduced taxable income after
reorganization costs.
Income before cumulative effect of change in accounting method of $276,000,
or $.04 per share, in the current year, compares to $1,243,000, or $.18 per
share, in the prior year, a decrease of $967,000, or 77.8%, reflecting the
factors previously discussed.
During fiscal 1994, the Company recorded the effect of a change in accounting
method for applying overhead costs to inventory, which resulted in a cumulative
write-up of inventories of $699,000, net of tax, or $.11 per share. (See Note 2
to the Notes to Consolidated Financial Statements.)
Net Income of $276,000, or $.04 per share, for fiscal 1995, compared to
$1,942,000, or $.29 per share, for fiscal 1994, a decrease of 85.8%.
Reorganization costs of $1,235,000, costs related to a strike in April 1994 of
$371,000 and incremental LIFO reserves of $656,000, taken together with the tax
effect discussed above, reduced net income by $1,312,000, or $.19 per share, in
fiscal 1995.
FISCAL YEAR ENDED MARCH 31, 1994, AS COMPARED TO FISCAL YEAR ENDED MARCH 31,
1993
Sales for the fiscal year ended March 31, 1994, of $136,475,000 were
$2,528,000 above sales for fiscal year 1993, an increase of 1.9%. Higher sales
reflect increased demand for parts, service and consumables, higher shipments
of washing and decontamination equipment and incremental shipments of
"Hamilton" examination and treatment tables acquired in December 1993, which,
taken together, aggregate an increase of 6.3%, partially offset by lower
shipments of sterilization equipment, both domestically and in Canada, which
aggregated 4.4%. Shipments of Examining and Operatory Equipment were
essentially flat when compared to the prior fiscal year.
Incoming orders of $134,403,000 for the fiscal year were essentially flat
when compared to incoming orders in the prior fiscal year of $135,252,000. For
fiscal year 1994, incoming orders reflected similar product and market
patterns, as did sales. The Company has noted that outstanding bid proposals
are at historically high levels, in part due to the Company's entry into the
scientific market. However, uncertainty surrounding pending healthcare reform
slowed the pace of conversion of bid proposals to purchase orders which
resulted in softer demand for hospital equipment. Pricing was more competitive
during the fiscal year, with greater competitiveness noted in the scientific
market where the Company was a recent market entrant. Backlog was $28,072,000
at March 31, 1994, compared to a backlog of $29,505,000 a year earlier.
Gross profit of $43,747,000 was $527,000, or 1.2%, lower in fiscal 1994
compared to fiscal 1993, while gross profit as a percentage of sales was 32.1%
in fiscal 1994 versus 33.1% in fiscal 1993. The lower gross profit and gross
profit margin reflect the unfavorable impact on the Company of lower sales
volume of hospital sterilization equipment and greater price competitiveness,
combined with the write-off of partially remanufactured sterilizers. These
factors more than offset the favorable impact of higher sales of parts, service
and consumables and washing and decontamination equipment.
Operating expenses of $38,631,000 were $1,382,000, or 3.7%, higher in fiscal
1994 than were operating expenses in the prior fiscal year. Sales and marketing
expense increased by $1,082,000, or 4.6%, reflecting higher expense for
advertising, trade shows and product promotion, including launch of APECS
scientific sterilizers. Administrative expense increased $36,000, or 0.4%,
reflecting higher professional fees offset by reduced provisions for incentive
compensation. Product development expense increased $264,000, or 6.0%,
reflecting a somewhat higher level of product development activity. Overall,
operating expenses as a percentage of sales increased to 28.3% in fiscal 1994,
from 27.8% in the prior fiscal year.
16
<PAGE>
Operating income of $5,116,000 was $1,909,000, or 27.2%, lower in fiscal 1994
than in the prior fiscal year, reflecting lower gross profit and higher
operating expense.
Interest expense increased $47,000 in fiscal year 1994, to $2,803,000. The
increase reflects higher levels of borrowing offset in part by lower interest
rates. Additional borrowing was required to finance the purchase of the
Hamilton line of examination tables and to support higher levels of inventory.
The effective income tax rate was essentially unchanged at 42.0% in fiscal
year 1994, as compared to 41.9% in fiscal year 1993.
Effective April 1, 1993, the Company recorded a change in accounting method
which resulted in a cumulative write-up of inventories of $699,000 ($1,206,000
before taxes) to adopt the full-absorption method of accounting for
inventories, which method allocates manufacturing overhead to production
materials as well as to production labor. (See Note 2 of the Notes to
Consolidated Financial Statements.)
Net income of $1,942,000, or $.29 per share, for fiscal 1994, compared to
$2,376,000, or $.38 per share in fiscal 1993, a decrease of 18.3%, reflecting
the aforementioned factors.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company's current ratio was 1.5 to 1 and working
capital was $23,427,000. This compares to a current ratio of 1.6 to 1 and
working capital of $26,636,000 at March 31, 1994. The changes in current ratio
and working capital reflect a $2,983,000 decrease in inventory. The decrease in
inventory was principally the result of the Company's inventory reduction
program, whereby lower production schedules were initiated in July 1994. Normal
production schedules were resumed at each of the Company's manufacturing
facilities during the fourth quarter of fiscal 1995. The Company expects to
continue efforts to reduce inventory in fiscal 1996. Additionally, the current
ratio and working capital reflect a $1,000,000 increase in notes payable and a
$680,000 increase in accounts payable. The aforementioned factors were
primarily offset by an increase in cash of $1,107,000 and an increase in
receivables of $1,510,000. The increase in receivables is primarily attributed
to higher fourth quarter sales. At March 31, 1995, Stockholders' Equity per
share was $6.72 compared to $6.68 at March 31, 1994.
During fiscal 1995, net cash provided by operating activities of $6,440,000
reflected the aforementioned decrease in inventories and increase in accounts
payable and accrual liabilities partially offset by increases in receivables
and other assets. Net cash provided by operating activities was offset by
capital expenditures of $3,067,000, including $1,217,000 for new roofs for the
Company's Henrietta, New York, facilities, and payments on long-term debt of
$3,429,000, which, taken together, resulted in borrowings of $1,000,000 under
the Company's revolving line of credit and an increase in cash balances of
$1,107,000.
The Company has announced a series of measures intended to lower its break-
even point in the face of current market uncertainties, primarily associated
with healthcare reform, while at the same time improve the effectiveness of its
operations, organization and structure. Announced measures include elimination
of jobs and other costs and expenses, consolidation of sales and service
offices, including centralization of service dispatch and parts and service
order entry, and reorganization of the Company into three business units,
including the relocation of the Corporate Office from Torrance, California, to
Morrisville, North Carolina. These measures are intended to reduce costs in
excess of $4,000,000 on an annualized basis from what they would otherwise have
been. Through March 31, 1995, the Company has incurred $1,235,000 in
reorganization costs related to these measures. Reorganization costs remaining
to be incurred and expensed in fiscal 1996 are expected to approximate
$700,000.
17
<PAGE>
In December 1994, the Company consolidated its former Elkhorn, Wisconsin,
operation with its North Charleston, South Carolina, operation. The
consolidation is expected to lower overhead costs by approximately $550,000 on
an annualized basis once the operations are fully integrated.
The Company is directing a significant portion of its research and
development efforts to the development of technology utilizing plasma generated
neutral species in a sterilizer intended to replace ethylene oxide gas
sterilizers and other low temperature alternatives to autoclaves. The Company
expects to introduce a commercial product utilizing the technology sometime in
1996. A significant portion of the technology is embedded in patents which MDT
has an option to purchase from the inventor and his controlled corporation
(jointly referred to as "Exitron"). Development costs are expensed as incurred.
The Company has capitalized $780,000 related to the purchase of the technology
from Exitron together with related patent and other asset costs. MDT has filed
lawsuits against AbTox, Inc., Mundelein, Illinois, in both the United States
and Canada seeking to prove infringement of the patents, obtain monetary
damages, and restrain AbTox from the sale of a product which MDT believes
infringes the patents. AbTox has filed counter claims against MDT and Exitron.
In fiscal 1995, MDT spent $469,000 on legal and professional fees related to
this matter. MDT expects to expend further amounts in fiscal 1996 to
commercialize the technology and to protect its patent position.
The Company made capital expenditures of $3,067,000 in fiscal 1995 compared
to $2,989,000 in fiscal 1994. Capital expenditures are anticipated to total
approximately $2,500,000 in fiscal 1996, for production machinery and
equipment, tooling and molds. Total committed capital expenditures were
approximately $1,333,000 as of March 31, 1995. The Company owns fifteen acres
of land in Summerville, South Carolina (adjacent to North Charleston), on which
it intends to construct and occupy a new manufacturing and engineering facility
and within which operations currently located in four leased facilities in
North Charleston will be consolidated. Construction of the new facility has
been delayed but is expected to begin in the second half of fiscal 1996 or in
the first half of fiscal 1997. The Company estimates that the cost of
construction when complete will approximate $6,000,000 and intends to finance
the new facility with industrial revenue bonds.
On June 9, 1995, the Company's wholly owned subsidiary, MDT Diagnostic
Company, sold to Maxxim Medical, Inc. certain inventories, fixed assets and
intangible assets (including the tradename "Bovie") relating to the Bovie line
of electrosurgical products for the sum of $2,600,000 (subject to certain
inventory and related adjustments). MDT Diagnostic Company received a payment
of $1,000,000 upon closing of the transaction. Maxxim Medical, Inc. also
deposited $1,600,000 (representing the balance of the purchase price) into
escrow pending final transfer of fixed assets and inventory in September 1995.
This transaction is expected to result in a pre-tax gain to the Company of
approximately $700,000 during the first quarter of fiscal 1996.
The Company finances its working capital with a $30,000,000 revolving line of
credit with two commercial banks. The line is to be repaid in full with all
accrued interest on August 1, 1995, unless renewed. The Company expects to
renew and expand the line prior to August 1, 1995. At March 31, 1995, the
outstanding principal balance on the revolving line of credit was $25,600,000.
(See Note 8 of the Notes to Consolidated Financial Statements.) Management
believes that net cash provided by operating activities in conjunction with the
Company's credit resources will be sufficient to meet its cash needs for the
next 12 months.
Healthcare reform, both in the public and private sector, has resulted in
customer uncertainty, flattened sales and pricing pressures. Independent of
healthcare reform proposals, healthcare consolidations and alliances are
expected to increase industry efficiencies and strengthen the bargaining
position of large providers of healthcare services. Activities intended to
contain the rise in healthcare costs could have a negative impact on the
Company. However, management anticipates that ultimately certain other longer-
term trends in the healthcare industry will contribute to further growth
18
<PAGE>
in demand for the Company's products and services. These trends include
increasing awareness and concern regarding the transmission of infectious
diseases, an aging United States population requiring additional levels of
healthcare, expanded use of certain treatments requiring stricter aseptic
practices, an increasing number and variety of surgical procedures and greater
use of reusable, rather than disposable, surgical articles to support
healthcare cost containment.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
MDT Corporation:
We have audited the accompanying consolidated balance sheets of MDT
Corporation and subsidiaries as of March 31, 1995 and 1994 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended March 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MDT
Corporation and subsidiaries as of March 31, 1995 and 1994 and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in note 2 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for inventories.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
May 16, 1995, except as to
note 17, which is as of
June 4, 1995.
20
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash............................................... $ 1,962,000 $ 855,000
Receivables:
Trade accounts................................... 30,958,000 30,137,000
Other receivables................................ 605,000 190,000
Less allowances for doubtful accounts............ (531,000) (805,000)
------------ ------------
31,032,000 29,522,000
Inventories (note 5)............................... 37,061,000 40,044,000
Prepaid expenses................................... 2,576,000 2,897,000
------------ ------------
Total current assets........................... 72,631,000 73,318,000
Property, plant and equipment, less accumulated
depreciation and amortization (note 6)............ 28,132,000 27,860,000
Other assets, less accumulated amortization (note
7)................................................ 4,586,000 4,474,000
------------ ------------
$105,349,000 $105,652,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Note payable (note 8).............................. $ 25,600,000 $ 24,600,000
Current installments of long-term debt (note 9).... 3,617,000 3,530,000
Accounts payable................................... 11,432,000 10,752,000
Accrued liabilities:
Compensation, payroll taxes and benefits......... 1,002,000 1,607,000
Warranty, litigation and other................... 4,550,000 3,518,000
Deferred income.................................... 1,922,000 1,767,000
Deferred income taxes (note 13).................... 1,081,000 908,000
------------ ------------
Total current liabilities...................... 49,204,000 46,682,000
Long-term debt, less current installments (note 9). 5,684,000 8,838,000
Accrued postretirement benefits (note 14).......... 2,266,000 2,282,000
Deferred income taxes (note 13).................... 2,734,000 2,828,000
------------ ------------
Total liabilities.............................. 59,888,000 60,630,000
------------ ------------
Stockholders' equity (notes 12 and 13):
Preferred stock, par value $1.25 per share.
Authorized 1,600,000 shares; none issued and
outstanding..................................... -- --
Common stock, par value $1.25 per share.
Authorized 20,000,000 shares; issued and
outstanding 6,769,431 shares at March 31, 1995
and 6,742,864 shares at March 31, 1994.......... 8,462,000 8,429,000
Additional paid-in capital......................... 27,264,000 27,134,000
Retained earnings.................................. 9,735,000 9,459,000
------------ ------------
Total stockholders' equity..................... 45,461,000 45,022,000
Commitments and contingencies (notes 10, 12 and
14)...............................................
------------ ------------
$105,349,000 $105,652,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Sales................................... $135,462,000 $136,475,000 $133,947,000
Cost of sales........................... 92,564,000 92,728,000 89,673,000
------------ ------------ ------------
Gross profit............................ 42,898,000 43,747,000 44,274,000
------------ ------------ ------------
Operating expenses:
Marketing and sales................... 24,238,000 24,574,000 23,492,000
Administration........................ 8,666,000 9,365,000 9,329,000
Product development................... 4,451,000 4,692,000 4,428,000
------------ ------------ ------------
37,355,000 38,631,000 37,249,000
Reorganization costs (note 3)........... 1,235,000 -- --
------------ ------------ ------------
Operating income........................ 4,308,000 5,116,000 7,025,000
Interest expense........................ 3,514,000 2,803,000 2,756,000
Other expense........................... 113,000 169,000 177,000
------------ ------------ ------------
Income before income taxes and
cumulative effect of change in
accounting method...................... 681,000 2,144,000 4,092,000
Income taxes (note 13).................. 405,000 901,000 1,716,000
------------ ------------ ------------
Income before cumulative effect of
change in accounting method............ 276,000 1,243,000 2,376,000
Cumulative effect of change in
accounting method for valuation of
inventory, net of income taxes
(note 2)............................... -- 699,000 --
------------ ------------ ------------
Net income.......................... $ 276,000 $ 1,942,000 $ 2,376,000
============ ============ ============
Earnings per share (note 1):
Income before cumulative effect of
change in accounting method.......... $ .04 $ .18 $ .38
Cumulative effect of change in
accounting method.................... -- .11 --
------------ ------------ ------------
Net income.......................... $ .04 $ .29 $ .38
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended March 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
--------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (NOTE 13) TOTAL
--------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31,
1992................... 6,272,513 $7,841,000 $24,265,000 $5,141,000 $37,247,000
Common stock issued--
stock options (note
12).................... 7,500 9,000 34,000 -- 43,000
Common stock acquired in
payment of options..... (3,088) (4,000) (23,000) -- (27,000)
Net income.............. -- -- -- 2,376,000 2,376,000
--------- ---------- ----------- ---------- -----------
BALANCES AT MARCH 31,
1993................... 6,276,925 7,846,000 24,276,000 7,517,000 39,639,000
Common stock issued--
stock options (note
12).................... 3,234 4,000 15,000 -- 19,000
Common stock issued,
debt conversion (note
4)..................... 442,477 553,000 2,447,000 -- 3,000,000
Common stock--issued
under the management
incentive compensation
plan................... 20,228 26,000 149,000 -- 175,000
Tax benefit from conver-
sion of debt to common
stock.................. -- -- 247,000 -- 247,000
Net income.............. -- -- -- 1,942,000 1,942,000
--------- ---------- ----------- ---------- -----------
BALANCES AT MARCH 31,
1994................... 6,742,864 8,429,000 27,134,000 9,459,000 45,022,000
Common stock issued--
stock options (note
12).................... 56,000 70,000 288,000 -- 358,000
Common stock acquired in
payment of options..... (29,433) (37,000) (158,000) -- (195,000)
Net income.............. -- -- -- 276,000 276,000
--------- ---------- ----------- ---------- -----------
BALANCES AT MARCH 31,
1995................... 6,769,431 $8,462,000 $27,264,000 $9,735,000 $45,461,000
========= ========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 276,000 $ 1,942,000 $ 2,376,000
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization......... 3,961,000 3,925,000 3,729,000
Provision for losses on accounts re-
ceivable............................. 117,000 368,000 102,000
Loss on disposal of fixed assets...... 26,000 2,000 122,000
Cumulative effect of change in ac-
counting method...................... -- (699,000) --
Change in assets and liabilities:
Receivables.......................... (1,627,000) 1,285,000 (2,860,000)
Inventories.......................... 2,983,000 (2,523,000) (2,017,000)
Prepaid assets....................... 321,000 84,000 (619,000)
Other assets......................... (942,000) (617,000) (711,000)
Accounts payable and other accrued
liabilities......................... 1,325,000 (3,182,000) 1,289,000
----------- ----------- -----------
Net cash provided by operating ac-
tivities.......................... 6,440,000 585,000 1,411,000
----------- ----------- -----------
Cash flows from investing activities:
Payment in purchase of specified assets
of Hamilton and CESCO................. -- (2,400,000) (1,797,000)
Capital expenditures................... (3,067,000) (2,989,000) (2,005,000)
----------- ----------- -----------
Net cash used in investing activi-
ties.............................. (3,067,000) (5,389,000) (3,802,000)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes pay-
able.................................. 1,000,000 1,900,000 5,000,000
Proceeds from issuance of long-term
note payable.......................... -- 10,000,000 162,000
Net proceeds from issuance of common
stock................................. 163,000 19,000 16,000
Principal payments on long-term debt... (3,429,000) (7,502,000) (2,333,000)
----------- ----------- -----------
Net cash provided by (used in) fi-
nancing activities................ (2,266,000) 4,417,000 2,845,000
----------- ----------- -----------
Increase (decrease) in cash........ 1,107,000 (387,000) 454,000
Cash, beginning of year................. 855,000 1,242,000 788,000
----------- ----------- -----------
Cash, end of year....................... $ 1,962,000 $ 855,000 $ 1,242,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest.............................. $ 3,157,000 $ 2,357,000 $ 2,317,000
Income taxes.......................... 879,000 2,177,000 1,277,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH IN-
VESTING AND FINANCING
ACTIVITIES:
Accounts receivable written off against
the allowance for
doubtful accounts..................... $ 391,000 $ 207,000 $ 60,000
Capital lease obligations incurred for
equipment purchases................... 362,000 48,000 940,000
Subordinated note payable--conversion
to common stock
(note 4).............................. -- 3,000,000 --
=========== =========== ===========
ACQUISITIONS OF SPECIFIED ASSETS OF HAM-
ILTON AND CESCO:
Accounts receivable, inventories,
equipment and intangibles............. $ -- $ 2,799,000 $ 5,452,000
Accounts payable, accrued liabilities
and long-term debt.................... -- (399,000) (3,655,000)
----------- ----------- -----------
Cash paid in acquisition of specified
assets of Hamilton and
CESCO................................. $ -- $ 2,400,000 $ 1,797,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company develops, manufactures, markets and services sterility assurance
systems, examining and operatory equipment and associated accessories and
consumables. These products and services are marketed both domestically and
internationally to hospitals, medical and dental practitioners, and
governmental, institutional and scientific organizations. The Company has
organized its marketing and sales resources to serve these markets.
Principles of Consolidation
The consolidated financial statements include the accounts of MDT Corporation
and its wholly owned subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market (see note 2). In fiscal
1995, the cost of substantially all of the Company's inventories is determined
using the last-in, first-out (LIFO) method. In fiscal 1994, the cost of
inventories was determined using both the LIFO and the first-in, first-out
(FIFO) methods.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Depreciation and
amortization is computed using the straight-line method over the estimated
useful lives of the assets. Expenditures for maintenance and repairs are
charged to expense and renewals and improvements are capitalized.
Other Assets
Other assets, consisting primarily of patents, trademarks, noncompete,
consulting and licensing agreements, are being amortized using the straight-
line method over the shorter of their legal or estimated useful lives.
Product Warranties
The Company sells its products generally with warranties ranging from one to
two years. The estimated cost of repairs under existing warranties has been
provided for in the consolidated financial statements.
Revenue Recognition
Product sales are recognized when title passes, generally at the time
products are shipped. Service sales are recognized ratably over the relevant
contractual period or as the service is performed, as appropriate. Service fees
received but unearned are included in the consolidated balance sheets as
deferred income.
25
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
Earnings per Share
Earnings per share are based upon weighted average common and common
equivalent shares outstanding, amounting to 6,775,000, 6,781,000 and 6,293,000
shares for each of the three years ended March 31, 1995, 1994 and 1993,
respectively. Fully diluted earnings per share is not shown since the
calculation is antidilutive.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(Statement 109). Statement 109 requires a change from the deferred method of
accounting for income taxes under APB Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period which includes the enactment date.
The Company adopted Statement 109 in the fiscal year ended March 31, 1994 and
as allowed in Statement 109 has applied the provisions of Statement 109
retroactively to April 1, 1988. Accordingly, all periods prior to March 31,
1994 have been restated.
(2) ACCOUNTING CHANGE
Effective April 1, 1993, the Company changed its method of applying overhead
costs to inventory. Overhead costs attributable to the handling and storage of
inventory are based upon the material component of inventory while other
overhead costs are applied based upon direct labor dollars. Previously, all
overhead costs were allocated to inventory based upon labor dollars. The
Company believes that this change is preferable because it more accurately
matches costs related with revenues. The cumulative effect of this change on
prior years, reported as an increase in net earnings for the year ended March
31, 1994, was $699,000 (net of $507,000 of income taxes) or $.11 a share.
The effect of the change on fiscal 1994 earnings was to decrease income
before cumulative effect of change in accounting principles by $81,000 ($.01
per share). Quarterly results for fiscal 1994 have been restated in note 16 to
these consolidated financial statements to reflect the retroactive application
of this change after a reduction for related income taxes.
(3) REORGANIZATION COSTS
During fiscal 1995, plans were developed with the intention of significantly
reducing the Company's cost structure and improving the effectiveness of its
operations, organization and structure.
The restructuring program involves the reduction of 70 employees,
consolidations of offices and facilities (including the relocation of the
Corporate office from Torrance, California to Morrisville, North Carolina) and
the reorganization of the Company into three business units.
The March 31, 1995 consolidated statement of income includes $1,235,000 of
pre-tax charges related to the aforementioned employee terminations, facility
closures and relocation expenses. At March 31, 1995, $240,000 of this amount,
relating to severance and lease termination costs, remained in accrued
liabilities.
26
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
It is estimated that an additional $700,000 will be incurred and expensed in
fiscal 1996 to complete the plan.
(4) ACQUISITIONS
In fiscal year 1992, the Company acquired certain assets (principally
inventories and specified fixed assets) from the equipment division of Smith &
Nephew, Inc., a manufacturer of operating room tables and other hospital
equipment, for certain consideration including a convertible note payable to
the seller of $3,000,000. The acquisition was accounted for as a purchase.
During fiscal year 1994, Smith & Nephew, Inc. converted the $3,000,000 note
to 442,477 shares of common stock at $6.78 per share.
In connection with the conversion, the tax basis of the Company's investment
in the underlying assets was increased, resulting in additional deductible
amounts for Federal and state tax purposes. In fiscal year 1994, approximately
$476,000 was deductible for Federal and state tax purposes. The tax effect of
this basis difference was reflected as an addition to additional paid-in
capital in the consolidated statements of stockholders' equity.
On August 31, 1992, the Company acquired the Consolidated Equipment Supply
Corporation (CESCO), a manufacturer of cleaning and decontaminating equipment,
for $2,500,000 in cash and a note payable of $2,500,000 in exchange for all of
the outstanding shares of CESCO stock and related noncompetition and consulting
agreements. Approximately $703,000 of the purchased assets were immediately
converted to cash. The acquisition was accounted for as a purchase;
accordingly, the acquired assets and liabilities were recorded at estimated
fair values at the date of acquisition.
On December 1, 1993, the Company acquired the Hamilton line (principally
inventories, fixed assets and intangibles) of examination tables from Mesa
Industries Inc. for $2,400,000 in cash and a $399,000 promissory note. The
acquisition was accounted for as a purchase; accordingly, the acquired assets
and liabilities were recorded at estimated fair market values at the date of
acquisition.
(5) INVENTORIES
Inventories at March 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Raw materials..................................... $13,788,000 $13,513,000
Work-in-process................................... 7,131,000 7,802,000
Finished goods.................................... 16,142,000 18,729,000
----------- -----------
$37,061,000 $40,044,000
=========== ===========
</TABLE>
Certain inventories are valued using the LIFO method and comprise
approximately 97% and 44% of consolidated inventories at March 31, 1995 and
1994, respectively. As a result of this increase, incremental LIFO reserves of
$656,000 were recorded in fiscal 1995. Inventories valued using the LIFO method
would be $2,716,000 and $2,130,000 greater at March 31, 1995 and 1994,
respectively, using the FIFO method. The book value of LIFO inventories differs
from the underlying tax basis due to an acquisition made by the Company in July
1987. At March 31, 1995 and 1994, LIFO inventories for book purposes exceeded
those for tax purposes by $8,170,000 and $8,860,000, respectively.
27
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
ESTIMATED
1995 1994 USEFUL LIVES
----------- ----------- --------------
<S> <C> <C> <C>
Land.................................... $ 3,824,000 $ 3,824,000 --
Buildings and improvements.............. 12,845,000 11,684,000 20 to 40 years
Leasehold improvements.................. 1,077,000 939,000 Term of leases
Machinery and equipment................. 24,114,000 22,493,000 10 to 20 years
Computers, office equipment and furni-
ture................................... 6,347,000 6,032,000 5 to 12 years
----------- -----------
48,207,000 44,972,000
Less accumulated depreciation and amor-
tization............................... 20,075,000 17,112,000
----------- -----------
$28,132,000 $27,860,000
=========== ===========
</TABLE>
(7) OTHER ASSETS
Other assets at March 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
AMORTIZATION
1995 1994 PERIOD
---------- ---------- --------------
<S> <C> <C> <C>
Patents and trademarks..................... $4,834,000 $4,000,000 10 to 17 years
Consulting and noncompete agreements....... 4,450,000 4,450,000 3 to 5 years
License agreements......................... 1,038,000 1,038,000 5 years
Other...................................... 381,000 273,000 --
---------- ----------
10,703,000 9,761,000
Less accumulated amortization.............. 6,117,000 5,287,000
---------- ----------
$4,586,000 $4,474,000
========== ==========
</TABLE>
(8) NOTES PAYABLE
The Company has a secured line of credit with two commercial banks which
provides for advances up to $30,000,000 at .25% above the banks' prime rate of
interest (aggregate of 9.25% at March 31, 1995). In addition, the Company pays
a quarterly commitment fee of .25% per annum on the average unused amount. The
line is to be repaid in full, with all accrued interest, on August 1, 1995. The
line is secured by inventories, accounts receivable, equipment and intangible
assets. The Company is currently negotiating a renewal of a similar line of
credit agreement with its lenders.
28
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
(9) LONG-TERM DEBT
Long-term debt at March 31, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Secured term-loan payable to two commercial banks in
monthly principal installments of $166,667, due August
1, 1998, at the banks' prime rate plus 5/8% (9.625% at
March 31, 1995). A separate interest agreement capped
the rate at 8.9% with a floor rate of 6%. The interest
rate agreement was entered into at no cost to the
Company and expires August 1, 1998...................... $6,833,000 $8,833,000
Secured equipment leases payable in monthly or quarterly
installments ranging from $250 to $36,000, including
interest at rates ranging from 9.89% to 14.08% due
through January 2000.................................... 1,001,000 905,000
Subordinated note payable to an individual in 10
quarterly installments of $250,000, commencing on
September 30, 1993. Interest is payable quarterly at a
rate generally equal to the prime lending rate (9% at
March 31, 1995)......................................... 1,000,000 2,000,000
Subordinated note payable in quarterly installments of
$31,576, due September 30, 1996, with the balance
bearing interest at prime plus 2% (11% at March 31,
1995)................................................... 189,000 316,000
Secured mortgage loan payable to a commercial bank in
monthly installments of $3,481, due December 1997, with
the balance bearing interest at an adjustable rate
(7.25% on March 31, 1995)............................... 137,000 165,000
Pennsylvania Industrial Development Authority Loan
payable in monthly installments of $1,545, due in
January 2006, with the balance bearing interest at 7.0%. 141,000 149,000
---------- ----------
9,301,000 12,368,000
Less current installments................................ 3,617,000 3,530,000
---------- ----------
$5,684,000 $8,838,000
========== ==========
</TABLE>
The secured term-loan and credit line (note 8) agreements contain certain
restrictions on purchases of fixed assets and payment of dividends and various
covenants regarding financial ratios. All covenants were either met or waived
for the period ended March 31, 1995. The term-loan agreement is secured by
inventories, accounts receivable, equipment and intangible assets.
The aggregate maturities of long-term debt for fiscal years subsequent to
March 31, 1995 are as follows:
<TABLE>
<S> <C>
1996........................................................... $3,617,000
1997........................................................... 2,374,000
1998........................................................... 2,235,000
1999........................................................... 933,000
2000........................................................... 53,000
Thereafter..................................................... 89,000
----------
$9,301,000
==========
</TABLE>
29
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
(10) COMMITMENTS AND CONTINGENT LIABILITIES
Operating Leases
The Company occupies manufacturing, warehousing and office facilities under
terms of operating leases which expire at various dates through August 2001.
The annual minimum lease payments thereunder for the years subsequent to March
31, 1995 are as follows: 1996, $605,000; 1997, $244,000; 1998, $160,000; 1999,
$129,000; 2000, $102,000 and thereafter, $136,000. Lease expense totaled
$1,076,000, $942,000 and $739,000 for each of the three years ended March 31,
1995, 1994 and 1993, respectively.
Royalties
The Company has purchased product rights, assembly blueprints and related
documentation for certain products under arrangements calling for licensing
royalties over periods up to 12 years. Royalty fees generally range from 4% to
10% of specified product sales. Total royalty payments made under these
arrangements approximated $144,000, $185,000 and $228,000 in 1995, 1994 and
1993, respectively.
Product Liability
The Company is a party to various claims and legal actions arising during the
ordinary course of business. With respect to product liability claims, the
Company's costs and any potential judgments resulting from such claims would be
covered by the Company's product liability insurance, except for deductible
limits and self-insured retentions. The Company intends to defend such claims
in cooperation with its insurers. It is management's opinion that any eventual
outcome will not have a material adverse effect on the Company's financial
position or results of operations.
(11) COMMON STOCK PURCHASE RIGHTS
The Company has a common stock purchase rights plan under which it has issued
one common stock purchase right (Right) for each outstanding share of common
stock. Each Right entitles the holder to purchase one-fourth share of common
stock at a price of $8, subject to adjustment.
The Rights become exercisable ten days after any public announcement that a
person or group has acquired beneficial ownership of 20% or more of the
Company's common stock, or announces a tender offer or exchange offer for 20%
of the stock, without the prior approval of the Board of Directors.
If a person or group acquires beneficial ownership of 20% or more of the
Company, then each holder of a Right, other than the acquiring person or group,
may thereafter receive upon exercise of four times the exercise price, that
number of shares of the Company's common stock or equivalents having a market
value of eight times the exercise price.
Subsequent to such stock acquisition, if the Company is acquired in a merger
or other business combination, or 50% of the Company's assets or earning power
is sold or transferred, each holder of a Right, other than the acquiring person
or group, may thereafter receive, upon the exercise and payment of four times
the exercise price, that number of shares of common stock of the acquiring
company having a market value of eight times the exercise price at the time of
such transaction.
30
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
With certain restrictions, the Board of Directors may redeem the Rights or
exchange them for shares of common stock. The Rights will expire on February
27, 2000, unless extended or unless earlier redeemed or exchanged by the
Company. At March 31, 1995, the Company has 1,692,358 shares of common stock
reserved for the Rights.
(12) STOCK OPTIONS
The Company has a stock option plan which provides for the granting to
directors and employees of the Company options to purchase up to 1,200,000
shares of the Company's common stock. The options may be granted for terms up
to ten years, and the exercise price must be at least equal to the fair market
value of the common stock on the date of grant. Options are exercisable one
year after the date of grant. If an option is granted to any person owning more
than 10% of the voting power of all classes of the Company's capital stock, the
exercise price of the option must be at least 110% of the fair market value of
the common stock on the date of grant. At March 31, 1995, options for 724,766
shares were outstanding, of which 584,766 shares were exercisable. At that
date, 221,770 shares remained available for future grant under the plan. The
aggregate option price for outstanding options at March 31, 1995, 1994 and 1993
was $4,268,000, $4,882,000 and $4,609,000, respectively.
Transactions and other information relating to stock options for each of the
three years ended March 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OPTION
OF PRICE
SHARES PER SHARE
-------- -----------
<S> <C> <C>
Options outstanding at March 31, 1992.............. 557,270 $5.25--6.94
Options granted.................................. 601,500 5.44--8.81
Options exercised................................ (7,500) 5.25--5.88
Options cancelled or expired..................... (359,770) 5.25--6.63
--------
Options outstanding at March 31, 1993.............. 791,500 5.44--8.81
Options granted.................................. 51,000 6.79--8.56
Options exercised................................ (3,234) 5.44--6.50
Options cancelled or expired..................... (20,000) 5.44--6.50
--------
Options outstanding at March 31, 1994.............. 819,266 5.44--8.81
Options granted.................................. 140,000 5.56--6.50
Options exercised................................ (56,000) 5.94--6.50
Options cancelled or expired..................... (178,500) 5.44--8.56
--------
Options outstanding at March 31, 1995.............. 724,766 5.44--8.81
</TABLE>
(13) INCOME TAXES
The domestic and foreign components of income before income taxes and
accounting changes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ---------- ----------
<S> <C> <C> <C>
United States........................... $728,000 $2,578,000 $3,961,000
Foreign................................. (47,000) (434,000) 131,000
-------- ---------- ----------
Income before income taxes and
accounting changes..................... $681,000 $2,144,000 $4,092,000
======== ========== ==========
</TABLE>
31
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
Actual income tax expense differs from the "expected" tax expense computed by
applying the United States corporate tax rate of 34% to income before income
taxes and accounting changes as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense................ $232,000 $729,000 $1,386,000
Earnings of foreign subsidiaries............... (6,000) (42,000) 11,000
Meals and entertainment........................ 94,000 42,000 36,000
State taxes (net of Federal income tax bene-
fit).......................................... 108,000 187,000 287,000
Other, including purchase accounting differ-
ences......................................... (23,000) (15,000) (4,000)
-------- -------- ----------
$405,000 $901,000 $1,716,000
</TABLE>
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
ALLOCATED
TO
ACCOUNTING
CHANGES
CURRENT OTHER (NOTE 2) TOTAL
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1995:
Federal......................... $ 275,000 $ (12,000) $ -- $ 263,000
State........................... 171,000 (8,000) -- 163,000
Foreign......................... (21,000) -- -- (21,000)
---------- --------- -------- ----------
$ 425,000 $ (20,000) $ -- $ 405,000
1994:
Federal......................... $1,438,000 $(615,000) $410,000 $1,233,000
State........................... 485,000 (201,000) 97,000 381,000
Foreign......................... (206,000) -- -- (206,000)
---------- --------- -------- ----------
$1,717,000 $(816,000) $507,000 $1,408,000
1993:
Federal......................... $1,015,000 $ 210,000 $ -- $1,225,000
State........................... 364,000 72,000 -- 436,000
Foreign......................... 55,000 -- -- 55,000
---------- --------- -------- ----------
$1,434,000 $ 282,000 $ -- $1,716,000
</TABLE>
The "other" component of income tax expense represents the tax effect of
deferred tax charges (principally reserves not yet deductible for Federal and
state income tax purposes), stock option benefits and purchase accounting
liability payments.
As discussed in note 1, the Company adopted Statement 109 in its fiscal year
ended March 31, 1994, and as allowed in Statement 109, elected to apply the
provisions of Statement 109 retroactively to April 1, 1988. The cumulative
effect of the change in the method of accounting for income taxes as of April
1, 1988 was a charge to retained earnings and stockholders' equity of
approximately $3.1 million. This cumulative effect adjustment principally
reflects financial statement and tax basis differences in the value of
inventory and buildings resulting from the Castle Company acquisition as
reported in the fiscal year ended March 31, 1988. In addition to the cumulative
effect adjustment, a separate adjustment was required under Statement 109 to
restate any assets or liabilities previously recorded net-of-tax under Opinion
11 to their pretax (gross) amounts. The pretax (gross) amount is the
32
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
amount of asset or liability which would have been recorded if net-of-tax
accounting had not been used in the acquisition. The effect of this adjustment
on the Company was to eliminate the remaining balance in the deferred tax asset
account relating to the previously recorded net-of-tax adjustments and to
increase the building asset account by approximately $2.1 million. For all
periods ending subsequent to April 1, 1988, and throughout the life of the
building, the annual financial statement impact (i.e., depreciation expense
less deferred tax impact) associated with this step-up in the building asset
will be a reduction of net income of $51,000. The financial statements for the
years ending subsequent to April 1, 1988 have been restated to comply with the
provisions of Statement 109.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at March 31, 1995 and 1994 are
presented below:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts............................. $ 238,000 $ 181,000
Intangible assets, principally due to amortization. 256,000 162,000
Acquisition accrual................................ -- 149,000
Severance accrual.................................. 86,000 --
Warranty accrual................................... 670,000 626,000
Product liability self-insurance accrual........... 270,000 240,000
Deferred income.................................... 169,000 170,000
Postretirement benefit............................. 976,000 993,000
Other.............................................. 7,000 56,000
----------- -----------
Total deferred tax assets........................ 2,672,000 2,577,000
=========== ===========
Deferred tax liabilities:
Inventories........................................ 2,332,000 2,196,000
Prepaid commissions................................ 190,000 220,000
Property, plant and equipment...................... 1,947,000 1,947,000
Accumulated depreciation........................... 1,670,000 1,650,000
Intangible assets.................................. 348,000 300,000
----------- -----------
Total deferred liabilities....................... 6,487,000 6,313,000
----------- -----------
Net deferred tax liability....................... (3,815,000) (3,736,000)
Less current deferred tax liability.................. (1,081,000) (908,000)
----------- -----------
Long-term deferred income tax liability.......... $(2,734,000) $(2,828,000)
=========== ===========
</TABLE>
33
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
(14) EMPLOYEE RETIREMENT AND BENEFIT PLANS
Defined Benefit Pension Plan
The Company provides a defined benefit pension plan covering certain
employees. The plan provides benefits of stated amounts for each year of
service. The Company's funding policy for the plan is to make at least the
minimum annual contributions required by applicable law.
The components of the net periodic pension cost for each of the years ended
March 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the
period................................... $ 173,000 $ 154,000 $ 151,000
Interest cost on projected benefit obliga-
tion..................................... 519,000 479,000 463,000
Actual return on plan assets.............. (408,000) (4,000) (917,000)
Net amortization and deferral............. (120,000) (561,000) 418,000
--------- --------- ---------
Net periodic pension cost............... $ 164,000 $ 68,000 $ 115,000
========= ========= =========
</TABLE>
For determining net periodic pension cost, the weighted-average discount rate
and expected long-term rate of return on assets is 8% for all years presented.
The following table summarizes the funded status of the plan and the amounts
recognized in the Company's consolidated balance sheets at March 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................... $5,731,000 $6,439,000
Nonvested benefit obligation........................ 985,000 77,000
---------- ----------
Accumulated benefit obligation...................... $6,716,000 $6,516,000
========== ==========
Projected benefit obligation........................ $6,716,000 $6,516,000
Plan assets at fair value (principally equity and
debt securities)................................... 6,722,000 6,669,000
---------- ----------
Plan assets in excess of projected benefit obliga-
tion............................................... 6,000 153,000
Unrecognized net loss............................... 155,000 264,000
Unrecognized net transition asset at April 1, 1988,
amortized over 15 years............................ (550,000) (618,000)
Unrecognized prior service cost..................... 690,000 584,000
---------- ----------
Pension asset recognized in the consolidated balance
sheets............................................. $ 301,000 $ 383,000
========== ==========
</TABLE>
34
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
Retirement Plan
The Company provides a defined contribution retirement plan covering certain
employees of the Company with at least one year of service. The plan provides
for contributions of 3% of salaries and wages, exclusive of bonuses, plus 3% of
each participant's compensation in excess of the Social Security earnings base.
Amounts allocated to a participant's account are subject to a vesting schedule
under which a participant would be 20% vested after one year of service and 20%
vested for each year of service thereafter. Contributions to the plan totaled
$1,049,000, $1,069,000 and $954,000 for the years ended March 31, 1995, 1994
and 1993, respectively.
Savings and Thrift Plans
The Company provides savings and thrift plans in which all employees are
eligible to participate. Participants may contribute up to 6% of their
compensation while receiving up to 50% matching contributions from the Company.
The Company's contributions become vested at a rate of 20% after the first year
of service and 20% for each year of service thereafter. The Company's
contributions under the plan totaled $708,000, $704,000 and $605,000 for the
years ended March 31, 1995, 1994 and 1993, respectively.
Supplemental Executive Retirement Plan
The Company has a Supplemental Executive Retirement Plan (SERP) for officers
of the Company and its subsidiaries. The SERP supplements retirement benefits
payable to officers under the Retirement Plan and the Savings and Thrift Plan.
Contributions to the SERP began in 1992 and were $106,000, $87,000 and $76,000
for 1995, 1994 and 1993, respectively. The contributions are actuarially
determined based on age, service time and salary levels of participants.
Postretirement Medical Benefits
The Company sponsors a defined medical benefit plan for retired employees.
Under the plan, benefits are payable to three separate employee groups. The
Company is committed to pay a fixed dollar contribution towards retiree medical
benefits for two of the component groups. The third group, consisting of
employees who retire between the ages of 62 and 65 (with a service requirement
of 25 years), is covered for medical benefits under the same plan as active
employees, with such benefits being discontinued when the participant turns 65.
The Company does not fund benefits in advance of payment thereof.
The following table sets forth the plan's funded status reconciled with the
amount shown in the Company's consolidated balance sheets at March 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees at age 65............................. $ 934,000 $1,047,000
Retirees at ages 62--65........................ 293,000 310,000
Active employees............................... 976,000 1,062,000
---------- ----------
2,203,000 2,419,000
Plus actuarial gain.............................. 246,000 38,000
Less prior service cost.......................... (10,000) (11,000)
Plan assets at fair value -- --
---------- ----------
Accrued postretirement benefit obligation........ 2,439,000 2,446,000
Less current portion............................. 173,000 164,000
---------- ----------
Accrued postretirement benefit liability......... $2,266,000 $2,282,000
========== ==========
</TABLE>
35
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
Net periodic postretirement benefit cost for the years ended March 31, 1995,
1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost--benefits attributed to service
during the period............................... $ 63,000 $ 65,000 $ 65,000
Interest cost on accumulated postretirement
benefit obligation.............................. 184,000 186,000 186,000
Actual return on plan assets..................... -- -- --
Amortization and deferral........................ -- -- --
-------- -------- --------
Net periodic postretirement benefit cost....... $247,000 $251,000 $251,000
======== ======== ========
</TABLE>
For measurement purposes, a 10.0% annual rate of increase in the per capita
cost of covered health care benefits (nonfixed portion) was assumed for 1995;
the rate was assumed to decrease gradually to 5.0% for 2005 and remain at that
level thereafter. The health care cost trend rate assumption only affects
retirees ages 62-65, as all other contributions are fixed. The effect of a 1.0%
increase in the assumed health care cost trend to each year would increase the
accumulated postretirement benefit obligation as of March 31, 1995 by $32,000
and the aggregate net periodic postretirement benefit cost for the year ended
March 31, 1995 would remain approximately equal. The weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
8.5%, 8.0% and 8.0% in 1995, 1994 and 1993, respectively.
(15) BUSINESS SEGMENT AND FOREIGN EXPORT SALES
The Company operates in one business segment, the manufacture and service of
devices and consumables for the health care professions.
Revenues by geographic area for the years ended March 31, 1995, 1994 and 1993
are as follows (in thousands):
<TABLE>
<CAPTION>
MIDDLE
EAST
UNITED PACIFIC WESTERN AND
STATES CANADA BASIN EUROPE OTHER TOTAL
-------- ------ ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
1995......................... $111,297 $7,182 $9,291 $1,821 $5,871 $135,462
1994......................... 114,374 8,192 7,347 2,101 4,461 136,475
1993......................... 111,038 9,150 6,972 3,003 3,784 133,947
</TABLE>
36
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
MARCH 31, 1995 AND 1994
(16) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table summarizes financial information by quarter for the two
years ended March 31, 1995 and 1994 (in thousands, except per share data):
<TABLE>
<CAPTION>
INCOME (LOSS)
INCOME (LOSS) PER SHARE
BEFORE BEFORE
CUMULATIVE CUMULATIVE
EFFECT OF EFFECT OF
CHANGE IN CHANGE IN NET INCOME
GROSS ACCOUNTING FOR NET INCOME ACCOUNTING FOR (LOSS) PER
NET SALES PROFIT INVENTORIES (LOSS) INVENTORIES SHARE
--------- ------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1995:
First quarter........... $ 32,194 $10,664 $ (237) $ (237) $(.04) $(.04)
Second quarter.......... 33,818 10,417 248 248 .04 .04
Third quarter........... 34,049 10,207 122 122 .02 .02
Fourth quarter.......... 35,401 11,610 143 143 .02 .02
-------- ------- ------ ------ ----- -----
$135,462 $42,898 $ 276 $ 276 $ .04 $ .04
======== ======= ====== ====== ===== =====
1994:
First quarter........... $ 33,996 $11,557 $ 594 $1,293 $ .09 $ .20
Second quarter.......... 34,209 11,675 755 755 .11 .11
Third quarter........... 33,536 10,416 158 158 .02 .02
Fourth quarter.......... 34,734 10,099 (264) (264) (.04) (.04)
-------- ------- ------ ------ ----- -----
$136,475 $43,747 $1,243 $1,942 $ .18 $ .29
======== ======= ====== ====== ===== =====
</TABLE>
Certain reclassifications have been made to the previously released 1995
quarterly information to conform with the year-end reporting.
(17) SUBSEQUENT EVENT
On June 4, 1995, MDT Diagnostic Company, a wholly owned subsidiary, entered
into an agreement to sell certain inventories, fixed assets and intangible
assets, including the right to use the tradename "Bovie" to Maxxim Medical,
Inc.
The transaction is expected to close in June 1995. The terms of the agreement
call for the payment of $1,000,000 to the Company upon closing with an
additional $1,600,000 escrowed pending final transfer of fixed assets and
inventory. It is expected that this transaction will result in a pretax gain of
approximately $700,000.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors and executive officers of MDT
Corporation appearing under the captions "Election of Directors," "Executive
Officers" and "Section 16 Compliance" on pages 3 through 5, 11 through 12, and
25, respectively, of the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to director and executive officer compensation appearing
under the captions "Compensation Committee Interlocks and Insider
Participation," "Directors Compensation" and "Executive Compensation" on pages
5 through 7 and pages 13 through 19 of the Proxy Statement is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to the security ownership of certain beneficial owners
and management appearing under the caption "Beneficial Ownership of Common
Stock" on pages 8 through 10 of the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions
appearing under the caption "Certain Transactions" on page 25 of the Proxy
Statement is incorporated herein by reference.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements
The following consolidated financial statements of the registrant and its
subsidiaries and report of independent auditors are included in Item 8 of
this Annual Report:
Independent Auditors' Report.
Consolidated Balance Sheets--March 31, 1995 and 1994.
Consolidated Statements of Income--Years ended March 31, 1995, 1994 and
1993.
Consolidated Statements of Stockholders' Equity--Years ended March 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows--Years ended March 31, 1995, 1994
and 1993.
Notes to Consolidated Financial Statements.
As permitted by Rule 15d-21 promulgated under the Securities Exchange Act
of 1934, as amended, the registrant hereby files the financial statements
required by Form 11-K with respect to the MDT Corporation Savings and
Thrift Plan for Hourly Employees, the MDT Corporation Savings and Thrift
Plan for Salaried Employees and the MDT Corporation Savings and Thrift Plan
for Union Employees. These financial statements and the reports of
independent auditors are attached hereto as Exhibits 99.1 through 99.3 and
are incorporated in this Annual Report on Form 10-K by reference.
2. Consolidated Financial Statement Schedules
The following Schedule to the Consolidated Financial Statements is
included herein:
Independent Auditors' Report on Supporting Schedule, page 41.
Schedule for the three years ended March 31, 1995:
Schedule VIII Valuation and Qualifying Accounts, page 42.
3. Exhibits
The Exhibit Index set forth immediately after the Consolidated
Financial Statement Schedules of this Annual Report is incorporated
herein by this reference.
(b) Reports on Form 8-K
During the quarter ending March 31, 1995, the Company filed no Current
Reports on Form 8-K.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: June 28, 1995
MDT Corporation
By: /s/ J. Miles Branagan
___________________________________
J. Miles Branagan
Chairman of the Board of
Directors,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
J. Miles Branagan Chairman of the Board of June 28, 1995
____________________________________ Directors and Chief
J. Miles Branagan Executive Officer and
President (Principal
Executive Officer)
/s/ Lawrence G. Crowley Director June 28, 1995
____________________________________
Lawrence G. Crowley
/s/ LaMoyne H. Fleming Director June 28, 1995
____________________________________
LaMoyne H. Fleming
Director
____________________________________
Charles A. French
/s/ John S. Gilbertson Director June 28, 1995
____________________________________
John S. Gilbertson
/s/ Charles E. Johnson Director June 28, 1995
____________________________________
Charles E. Johnson
/s/ Clark D. Jones Director June 28, 1995
____________________________________
Clark D. Jones
/s/ Katherine A. Schipper Director June 28, 1995
____________________________________
Katherine A. Schipper
/s/ John C Shamy Director June 28, 1995
____________________________________
John C Shamy
/s/ Thomas M. Hein Vice President, Finance, June 28, 1995
____________________________________ Chief Financial Officer and
Thomas M. Hein Treasurer (Principal
Financial and Accounting
Officer)
</TABLE>
40
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
MDT Corporation:
Under date of May 16, 1995, except as to Note 17 which is as of June 4, 1995,
we reported on the consolidated balance sheets of MDT Corporation and
subsidiaries as of March 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings, and cash flows for each of the years
in the three-year period ended March 31, 1995, as contained in the 1995 annual
report to Stockholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
year 1995. Our report refers to a change in the method of accounting for
inventories. In connection with our audits of the aforementioned consolidated
financial statements, we have also audited the related financial statement
schedule VIII included herein. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such 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.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
May 16, 1995, except
as to note 17, which is
as of June 4, 1995
41
<PAGE>
SCHEDULE VIII
MDT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
CHARGED
BALANCE TO COST BALANCE
BEGINNING AND AT END
OF YEAR EXPENSES DEDUCTIONS(1) OF YEAR
--------- -------- ------------- --------
<S> <C> <C> <C> <C>
Year ended March 31, 1995:
allowance for doubtful accounts..... $805,000 $117,000 $391,000 $531,000
-------- -------- -------- --------
Year ended March 31, 1994:
allowance for doubtful accounts..... $644,000 $368,000 $207,000 $805,000
-------- -------- -------- --------
Year ended March 31, 1993:
allowance for doubtful accounts..... $602,000 $102,000 $ 60,000 $644,000
-------- -------- -------- --------
</TABLE>
- --------
(1)Bad debts written off net of recoveries.
42
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.1 Asset Purchase and Sale Agreement, dated as of November
19, 1993, by and between MDT Diagnostic Company and
Mesa Industries, Inc. (incorporated by reference to
Exhibit 10.11 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1994 (File No.
0-15308) (the "1994 Form 10-K")).*
2.2 Agreement of Purchase and Sale of Assets, dated as of
June 4, 1995, by and among Maxxim Medical, Inc., MDT
Diagnostic Company and MDT Corporation.
3.1 Certificate of Incorporation of MDT Corporation, as
amended (incorporated by reference to Exhibit 3.1 of
the Company's Registration Statement on Form S-1
(Registration No. 33-28981) declared effective June 23,
1989).*
3.2 Bylaws of MDT Corporation, as amended.
4 The Company agrees to furnish to the Commission upon
request a copy of each instrument with respect to
issues of long-term debt of the Company and its
subsidiaries, the authorized principal amount of which
does not exceed 10% of the consolidated assets of the
Company and its subsidiaries.
10.1 MDT Corporation Amended and Restated 1987 Stock Option
Plan (incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1993 (File No. O-15308) (the "1993
Form 10-K")).*
10.2.1 MDT Corporation Retirement Plan (as amended and
restated through April 1, 1989) (incorporated by
reference to Exhibit 10.2 of the Company's Annual
Report on Form 10-K for the fiscal year ended March 31,
1992 (File No. 0-15308) (the "1992 Form 10-K")).*
10.2.2 Amendment No. 1993-I to the MDT Corporation Retirement
Plan (incorporated by reference to Exhibit 10.2.2 of
the 1994 Form 10-K).*
10.2.3 Amendment No. 1994-I to the MDT Corporation Retirement
Plan (incorporated by reference to Exhibit 10.2.3 of
the 1994 Form 10-K).*
10.3.1 MDT Corporation Savings and Thrift Plan for Salaried
Employees (amended and restated as of January 1, 1989)
(incorporated by reference to Exhibit 10.4 of the 1992
Form 10-K).*
10.3.2 Amendment No. 1993-I to the MDT Corporation Savings and
Thrift Plan for Salaried Employees (incorporated by
reference to Exhibit 10.3.2 of the 1994 Form 10-K).*
10.3.3 Amendment No. 1994-I to the MDT Corporation Savings and
Thrift Plan for Salaried Employees (incorporated by
reference to Exhibit 10.3.3 of the 1994 Form 10-K).*
10.4 MDT Corporation Supplemental Executive Retirement Plan,
as amended (incorporated by reference to Exhibit 10.4
of the 1994 Form 10-K).*
10.5.1 MDT Corporation Management Incentive Compensation Plan,
dated and effective as of April 1, 1987, as amended
through March 31, 1995 (incorporated by reference to
Exhibit 10.5 of the 1994 Form 10-K).*
10.5.2 Addendum G to MDT Corporation Management Incentive
Compensation Plan (Fiscal Year 1996).
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.6.1 Employment Agreement between MDT Corporation and J.
Miles Branagan, dated as of April 1, 1995.
10.6.2 Employment Agreement between MDT Corporation and Thomas
M. Hein, dated as of April 1, 1995.
10.6.3 Employment Agreement between MDT Corporation and
William T. Hilvert, dated as of April 1, 1995.
10.6.4 Employment Agreement between MDT Biologic Company and
Melvin K. Nerby, dated as of April 1, 1995.
10.6.5 Employment Agreement between MDT Biologic Company and
Michael L. Schneier, dated as of April 1, 1995.
10.6.6 Employment Agreement between MDT Diagnostic Company and
Charles B. Swenson, dated as of April 1, 1995.
10.6.7 Employment Agreement between MDT Technionic Company and
Richard G. Kinsey, dated as of April 1, 1995.
10.6.8 Employment Agreement between MDT Corporation and
Creighton A. White, dated as of April 1, 1995.
10.7 Lease between MDT Corporation and Petula Associates,
Ltd., dated February 17, 1995.
10.8.1 Lease Agreement between MDT Diagnostic Company and
Ashley Industrial Developers, dated August 9, 1994.
10.8.2 Lease Agreement between MDT Diagnostic Company and
Carolina Industrial Developers, dated August 9, 1994.
10.8.3 Lease Agreement between MDT Diagnostic Company and
Carolina Industrial Developers, dated August 9, 1994.
10.8.4 Lease Agreement between MDT, Inc. and D.E. Gressett,
dated June 1, 1995.
10.9 Credit Agreement, dated August 20, 1993, among MDT
Corporation, MDT Biologic Company, MDT Diagnostic
Company, MDT Canada Limited and Wells Fargo Bank,
National Association, as Agent (incorporated by
reference to Exhibit 10.9 of the 1994 Form 10-K).*
10.10.1 Rights Agreement between MDT Corporation and Bank of
America, NT & SA, as Rights Agent, dated as of February
12, 1990 (incorporated by reference to Exhibit 2.1 to
the Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on February 13,
1990).*
10.10.2 Agreement amending the Rights Agreement, dated as of
August 1, 1992, between MDT Corporation and Chemical
Trust Company of California (incorporated by reference
to Exhibit 10.11.2 of the 1993 Form 10-K).*
11 Statement regarding computation of per share earnings.
21 Subsidiaries of MDT Corporation.
23.1 Consent of KPMG Peat Marwick.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
23.2 Consent of KPMG Peat Marwick with respect to financial
statements contained in Exhibits 99.1 through 99.3.
27 Financial Data Schedule.
99.1 MDT Corporation Savings and Thrift Plan (Hourly
Employees) Financial Statements and Schedules and
Report of Independent Auditors for the Two Years Ended
December 31, 1994.
99.2 MDT Corporation Savings and Thrift Plan (Salaried
Employees) Financial Statements and Schedules and
Report of Independent Auditors for the Two Years Ended
December 31, 1994.
99.3 MDT Corporation Savings and Thrift Plan (Union
Employees) Financial Statements and Schedules and
Report of Independent Auditors for the Two Years Ended
December 31, 1994.
</TABLE>
- --------
*Incorporated by reference.
45
<PAGE>
EXHIBIT 2.2
AGREEMENT OF
PURCHASE AND SALE OF ASSETS
BY AND AMONG
MAXXIM MEDICAL, INC.
MDT DIAGNOSTIC COMPANY
AND
MDT CORPORATION
Dated as of
June 4, 1995
<PAGE>
AGREEMENT OF PURCHASE AND SALE OF ASSETS
----------------------------------------
This Agreement of Purchase and Sale of Assets (the "Agreement") is made
effective as of the 4th day of June, 1995, by and among MAXXIM MEDICAL, INC., a
Delaware corporation ("Buyer"), and MDT DIAGNOSTIC COMPANY, a Delaware
corporation ("Seller"), and MDT CORPORATION, a Delaware corporation and the
parent corporation of the Seller ("MDT"). The Seller, MDT and Buyer may be
referred to herein collectively as the "Parties" or singularly as a "Party."
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller is the owner of certain assets used in connection with
the Business (as hereinafter defined);
WHEREAS, Buyer desires to purchase all or substantially all of the assets
owned by the Seller that are used primarily in the Business, and thereafter
conduct the Business; and
WHEREAS, the Seller desires to sell such assets as provided in this
Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
Parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used herein, the following terms shall have the following meanings:
1.01 AFFILIATE. The term "Affiliate" of a person shall mean, with respect
to that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of the power to direct, cause the direction of,
or influence the management and policies of a person whether through the
ownership of voting securities, by contract, through the holding of a position
as a director or officer of such person, or otherwise. As used in this Section
1.01, the term "person" means an individual, a corporation, a partnership, a
limited liability company, an association, a joint stock company, a trust, an
incorporated organization, or a government or political subdivision thereof.
1.02 BUSINESS. The term "Business" shall mean the current business of the
Seller of manufacturing and selling electrosurgery generators and related parts
and equipment,
2
<PAGE>
including, but not limited to the (i) four models of electrosurgery generators
constituting the Seller's "Bovie" product line and (ii) the electrosurgery
accessories, parts and related disposable products, as both are further
described on Schedule 1.09, but exclude the Bovie line of ultrasonic surgical
aspirators and all accessories, parts and disposable products related
exclusively to such aspirators (such aspirators and related products being
collectively referred to as the "Aspirator Products").
1.03 CLOSING. The term "Closing" shall mean the consummation of the
events and transactions to take place on the Closing Date pursuant to Article
VIII herein.
1.04 CLOSING DATE. The term "Closing Date" shall mean June 9, 1995, or
such other date as may be established by agreement of the Parties.
1.05 DISCLOSURE LETTER. The term "Disclosure Letter" shall mean the
schedule provided by the Seller to Buyer and attached hereto as Schedule 1.05,
-------------
stating any and all exceptions to the representations and warranties of the
Seller and MDT set forth in this Agreement.
1.06 EFFECTIVE DATE. The term "Effective Date" shall mean 12:01 a.m. on
June 1, 1995.
1.07 EMPLOYEE. The term "Employee" shall mean any person who is employed
by the Seller or MDT as of the Closing Date and who performs work or provides
services primarily in connection with the operation of the Business.
1.08 NON-COMPETITION AGREEMENT. The term "Non-Competition Agreement" shall
mean the Non-Competition Agreement to be entered into between Buyer, Seller and
MDT in the form of Exhibit 1.08 hereto.
------------
1.09 PREVIOUSLY DELIVERED INVENTORY. The term "Previously Delivered
Inventory" shall mean all Products delivered to the Buyer or customers of the
Buyer (on behalf of the Buyer) before, on or after the Closing Date under the
terms of the Transition Services Agreement.
1.10 PRODUCTS. The term "Products" shall mean all of the various types of
electrosurgery generators and related accessories, parts and disposable products
manufactured and sold by the Seller in the Business, as further described in
Schedule 1.09, but excluding the Aspirator Products.
1.11 PURCHASE PRICE. The term "Purchase Price" shall mean the sum of (i)
One Million and 00/100 Dollars ($1,000,000) to be paid for all of the Assets
(including the Intangible Property), exclusive of Inventory and Equipment (as
such terms are hereinafter defined), and (ii) the Tangible Asset Value.
3
<PAGE>
1.12 TANGIBLE ASSET VALUE. The term "Tangible Asset Value" shall have the
meaning set forth in Section 2.06 herein.
1.13 TRANSITION SERVICES AGREEMENT. The term "Transition Services
Agreement" shall mean the Transition Services and Supply Agreement to be entered
into at the Closing Date between the Seller and the Buyer in the form of Exhibit
-------
1.13.
- ----
ARTICLE II
PURCHASE OF ASSETS AND PURCHASE PRICE
-------------------------------------
2.01 SALE OF ASSETS. Subject to the terms and conditions set forth in
this Agreement, the Seller agrees to sell, convey, transfer, assign and deliver
to Buyer, and Buyer agrees to purchase from the Seller, at the Closing Date, all
of the following assets (the "Assets"):
(a) All of Seller's right to use the name "Bovie" and any other
tradename or product name, or any similar name or derivative thereof used
in connection with the Business or the Assets (the "Names"), provided that
notwithstanding the foregoing, (i) Seller shall have only a nonexclusive
and non-assignable license to use the Bovie name in connection with the
purchase, manufacture or sales of Aspirator Products until November 30,
1996, and (ii) Buyer shall have only a nonexclusive and non-assignable
license to utilize the "MDT" name with respect to the Business until the
same date for the sole purpose of enabling the Buyer to sell or otherwise
fully utilize all Inventory and related Product manuals, Products brochures
or other Assets that may be marked or otherwise bear the MDT name as of
August 31, 1995 or any prior date;
(b) All raw materials, work-in-process, parts, finished goods, and
inventory owned by the Seller relating to the Business and existing as of
the Effective Date or at the date of termination of the Transition Services
Agreement, including but not limited to that specified on Schedule 2.01(b)
----------------
(the "Inventory");
(c) That certain rolling equipment, machinery, equipment, furniture,
parts inventory, supplies, tools and other tangible property other than
Inventory used in the Business and the engineering and related design and
test equipment located in MDT's facilities in Rochester, New York used for
research and engineering related to the Business, in each case to the
extent listed on Schedule 2.01(c) of this Agreement (such scheduled
----------------
equipment and engineering and related equipment being collectively referred
to as the "Equipment");
(d) To the extent transferable, all of Seller's rights in any product
certifications (including, but not
4
<PAGE>
limited to any product certification of Underwriters' Laboratories or any
similar domestic or foreign organization), FDA product registrations or
approvals, transferable licenses, franchises, permits, and rights used in
connection with the Business to the extent described on Schedule 2.01(d) of
----------------
this Agreement (collectively, the "Licenses");
(e) All miscellaneous assets used in the Business to the extent set
forth on Schedule 2.01(e) of this Agreement (the "Miscellaneous Assets"),
----------------
save and except the Excluded Assets, as such term is defined below;
(f) All patents and patent rights, patent applications, service marks,
trademarks, trade names, trade secrets and royalty rights, copyrights, and
other proprietary intangibles, if any, used in or related to the Business
to the extent described on Schedule 2.01(f) to this Agreement (the
----------------
"Intangible Property"), provided that notwithstanding the foregoing, (i)
Seller shall have a nonexclusive and non-assignable license to use any
service marks, trademarks or tradenames associated with the Bovie name in
connection with the manufacture or sales of Aspirator Products until
November 30, 1996, and (ii) Buyer shall have only a nonexclusive and non-
assignable license to utilize any service marks, trademarks or tradenames
associated with the "MDT" name with respect to the Business until the same
date for the sole purpose of enabling the Buyer to sell or otherwise fully
utilize all Inventory and related Product manuals, Products brochures or
other Assets that may be marked or otherwise bear the MDT name as of August
31, 1995 or any prior date; and
(g) All contracts, agreements, and purchase and sale orders related to
the Business, to the extent described on Schedule 2.01(g) of this Agreement
----------------
(collectively, the "Contracts").
Notwithstanding anything to the contrary contained herein, the Assets shall not
include any of the assets more specifically described on Schedule 2.01 of this
-------------
Agreement (the "Excluded Assets").
2.02 PURCHASE PRICE CONSIDERATION. As consideration for the purchase
of the Assets and the performance by the Seller of various other matters as
provided herein, Buyer shall:
(a) Pay the Seller $1,000,000 in cash at Closing; and
(b) On the Closing Date, deliver $1,600,000 in cash to the Escrow
Agent as provided in Section 2.08 to be paid to the Seller for Equipment
and Inventory and other
5
<PAGE>
items specified herein or returned to the Buyer in accordance with the
provisions of Sections 2.06 through 2.09.
2.03 LIABILITIES.
A. Except as set forth in Section 2.03.B below, Buyer will not
assume or otherwise be responsible for any liabilities or obligations of the
Seller with respect to the Assets or the Business, including but not limited to:
(i) except as otherwise specifically set forth in Section 2.05 herein, any tax
imposed on the Seller, or any Affiliate, arising from the operation of the
Business prior to the Closing Date (except for any liability or obligation to
pay sales tax by reason of the transactions contemplated herein) ; (ii) any of
the liabilities or expenses of the Seller incurred in negotiating and carrying
out its obligations under this Agreement; (iii) any obligations of the Seller or
any Affiliate to any supplier, customer or other creditor of any type (other
than warranty obligations with respect to repair or replacement of Products
asserted after August 31, 1995); (iv) any liabilities or obligations incurred by
the Seller in violation of, or as a result of the Seller's violation of, this
Agreement; (v) any mortgage or other debts or liabilities with respect to the
Assets; or (vi) any products liability for Products sold or shipped prior to the
Effective Date.
B. Buyer shall assume as of the dates specified below, and hereby
agrees to perform, the following obligations and liabilities of Seller (the
"Assumed Liabilities"):
(i) as of the Closing Date, the executory liabilities of Seller under
the Contracts and the Licenses assigned to Buyer hereunder; and
(ii) as of the close of business on August 31, 1995, all warranty
obligations with respect to replacement or repair of any Products (and only
the one year customer warranty obligation with respect to replacement or
repair of Products) manufactured by the Seller on or prior to the Closing
Date and sold after August 31, 1994.
2.04 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among each category of assets constituting the Assets in accordance
with Schedule 2.04. Each of the Parties' agrees to report this transaction for
federal tax purposes in accordance with the allocation of the Purchase Price set
forth on Schedule 2.04.
2.05 TAXES. Buyer and the Seller shall pay their respective
proportions, pro rated as of the Effective Date, of state and local personal
property or ad valorem taxes related to the Business for 1995. Buyer shall not
be responsible for any business, sales, franchise, payroll, occupation,
withholding or similar tax, or any taxes of any kind of the Seller related to
any
6
<PAGE>
period before the Effective Date. Seller shall not be responsible for any
business, sales franchise, payroll, occupation, withholding or similar tax or
any taxes of any kind, of the Buyer related to any period after the Closing
Date, except as may otherwise be provided in the Transition Services Agreement.
2.06 DETERMINATION OF PRELIMINARY VALUATION, CONSIGNMENT INVENTORY
VALUE AND TANGIBLE ASSET VALUE.
A. The Parties agree that the Seller shall through August 31, 1995
(or such other date as may be determined under the Transition Services
Agreement, such date, in either case, being referred to as the "Inventory
Delivery Date") maintain in its possession (and in a commercially reasonable
manner) the Equipment and the Inventory, exclusive of Inventory delivered from
time to time to the Buyer or at the direction of the Buyer pursuant to the
Transition Services Agreement and Inventory consigned to third parties or other
sales representatives by the Seller (the "Consignment Inventory"). The Seller
and Buyer shall jointly perform a physical inventory (the "Delivery Date
Inventory") of the Equipment and Inventory (collectively "Inventory Assets") on
hand as of the Inventory Delivery Date (including any Additional Consignment
Inventory, as defined in paragraph 2.06.E, below) in accordance with the
provisions of this Section, and such Inventory Assets shall then immediately be
delivered into the possession of the Buyer at Seller's facility in Charleston,
South Carolina. Buyer shall have reasonable access to the facilities of Seller
and the Equipment and Inventory, and the use of Employees and computer records
to such extent as Buyer may reasonably request for the purpose of conducting the
Delivery Date Inventory. In addition, Buyer and Seller shall commence such
Delivery Date Inventory on or about five business days before the Inventory
Delivery Date, for the purpose of enabling Seller to prepare and deliver the
Preliminary Valuation (as defined below) on the Inventory Delivery Date.
B. The Delivery Date Inventory shall be used by the Seller to
produce a schedule of all Inventory Assets (including the Additional Consignment
Inventory) as of the Inventory Delivery Date (the "Schedule of Equipment and
Inventory"), including a preliminary good faith determination of the value of
the Inventory included in the Inventory Assets (the "Preliminary Valuation")
determined in accordance with the provisions of this Section and as specified on
Schedule 2.06. The assets set forth in the Schedule of Equipment and
- -------------
Inventory(collectively "Tangible Assets") shall be acquired and paid for by the
Buyer pursuant to the provisions of Section 2.08 and Section 2.09. The Tangible
Assets shall be valued as follows: (i) Inventory (including Additional
Consignment Inventory) shall be valued in accordance with Schedule 2.06 attached
-------------
hereto, and (ii) the Equipment shall be valued at One Hundred Fifty Thousand
Dollars ($150,000). The aggregate value of all of the Equipment and Inventory,
including the value of the Additional Consignment Inventory, as determined from
the Schedule
7
<PAGE>
of Equipment and Inventory, is herein referred to as the "Tangible Asset Value".
C. The determination of the Tangible Asset Value shall become final
upon mutual agreement of the Parties or upon final determination of the
Independent Firm, as set forth below. Buyer or Buyer's accountants shall review
the Schedule of Equipment and Inventory (including any corresponding work papers
of the Seller's auditors) and report to Seller and the Seller's auditors of any
discrepancy in writing within thirty (30) days of receipt thereof (the "Dispute
Period"). Buyer's failure to deliver a dispute notice pursuant to this Section
prior to termination of the Dispute Period shall be deemed for purposes of this
Section to be acceptance by Buyer of the valuation set forth in the Schedule of
Equipment and Inventory. Any dispute notice delivered by Buyer shall set forth
in reasonable detail the elements of the Schedule of Equipment and Inventory
with which Buyer disagrees. Seller and Buyer will have 15 days from the date of
delivery of Buyer's dispute notice to resolve the subject dispute and agree in
writing upon the Tangible Asset Value. If Buyer and Seller do not reach a
resolution within such time period, the items remaining in dispute, at the
election of either Party, shall be submitted for resolution to the Atlanta,
Georgia office of KPMG Peat Marwick or such other "big six" accounting firm as
Buyer and Seller shall mutually agree upon (the "Independent Firm"). The
Independent Firm shall be instructed that its determination shall be based on
(i) the provisions of this Agreement, including Schedule 2.06, and (ii)
-------------
Generally Accepted Accounting Principles, consistently applied ("GAAP");
provided, however, that to the extent the provisions of Schedule 2.06 conflict
- -------- -------
with GAAP, Schedule 2.06 shall control. The Independent Firm shall, within
thirty days after such submission, determine and report upon all such disputed
items, and its report shall be final, conclusive and binding on Buyer and Seller
for purposes of this Section. The fees and disbursements of the Independent
Firm shall be shared equally by Buyer and Seller.
D. Notwithstanding anything herein to the contrary, the Tangible
Asset Value will be reduced by the value of any Equipment set forth on Schedule
--------
2.01(c) that is not included on the Schedule of Equipment and Inventory (other
- -------
than due to customary supply shrinkage), or is not in reasonably good condition
and repair (ordinary wear and tear accepted) on the Inventory Delivery Date,
unless the Seller or MDT replaces (with Equipment of the same or equivalent
make, model and year) or repairs such Equipment prior to the release of any
Escrowed Funds to the Seller. For purposes of this paragraph, items of
Equipment that are not included on the Schedule of Equipment and Inventory, or
are not in the required operating condition on the Inventory Delivery Date, will
be deemed to have such value as agreed to by the Parties or as determined by the
Independent Firm. Irrespective of the foregoing, Seller shall have an absolute
obligation to promptly repair or replace (in accordance with this paragraph) all
Equipment not delivered at the Inventory Delivery Date.
8
<PAGE>
E. On or prior to June 30, 1995, Seller and Buyer shall jointly
perform a physical inventory of all Consignment Inventory which as of such date
(i) has been returned to Seller's facilities in Charleston, South Carolina or
has otherwise been verified to Seller's and Buyer's reasonable satisfaction as
being consigned to and in the possession of third parties, and (ii) is
determined by both Seller and Buyer to be in reasonably good operating and
salable condition, ordinary wear and tear excepted (such items of Consignment
Inventory being collectively referred to as the "Initial Consignment
Inventory"). Such Initial Consignment Inventory shall be valued as of such date
in accordance with the provisions of Schedule 2.06 attached hereto (the
"Consignment Inventory Value"). For purposes of this Agreement, all items of
Consignment Inventory meeting the criteria set forth in clauses (i) and (ii)
above and appearing on the Schedule of Equipment and Inventory as of the
Inventory Delivery Date but which were not included in the Initial Consignment
Inventory shall constitute "Additional Consignment Inventory."
2.07 ESCROW. At the Closing, Buyer shall deliver the amount of
$1,600,000 (the "Escrowed Funds") to Fidelity National Title Insurance Company,
Irvine, California (the "Escrow Agent") which shall be deposited into a money
market interest bearing account in accordance with the terms of a certain Escrow
Agreement to be entered into by and between Buyer, Seller and Escrow Agent in a
form reasonably acceptable to Seller and Buyer and consistent with the terms of
this Agreement. All fees with respect to establishment and normal maintenance
or administration of the Escrow Agreement shall be borne equally by Buyer and
Seller. The Escrowed Funds shall be held in escrow by the Escrow Agent until
disbursed in accordance with the terms of Section 2.08 of this Agreement and the
Escrow Agreement. Upon termination of the escrow, the Escrow Agent shall
deliver to Buyer any cash (plus allocable interest accumulated thereon) to which
Buyer may be entitled under Section 2.08 hereunder, with any balance of the
Escrowed Funds, plus allocable interest, if any, to be delivered to Seller. If
a Net Asset Value Shortfall (as defined in Section 2.08) does not occur, then
all of the Escrowed Funds, together with allocable interest, shall be delivered
to the Seller.
2.08 DISBURSEMENT OF ESCROWED FUNDS.
A. Buyer and Seller shall cause the Escrow Agent to disburse to
Seller on July 1, 1995 from the Escrowed Funds an amount equal to the
Consignment Inventory Value as determined in accordance with Section 2.06.E,
together with allocable interest accumulated on such amount from the Closing
Date.
B. Buyer and Seller shall cause the Escrow Agent to disburse to
Seller on the Inventory Delivery Date from the Escrowed Funds an amount equal to
the sum of the following (together with allocable interest on such amount from
the Closing Date):
9
<PAGE>
1. Eighty percent (80%) of the amount of Seller's Preliminary
Valuation:
2. $150,000 (as the pre-established value of the Equipment): and
3. The full amount of any outstanding and unpaid invoices issued
by Seller to Buyer for Previously Delivered Inventory shipped by Seller
prior to the Inventory Delivery Date in accordance with the terms of the
Transition Services Agreement (the "Unpaid Invoice Amount").
C. On the first business day following the delivery by Buyer of any
dispute notice pursuant to Section 2.06.C hereof, Buyer and Seller shall cause
the Escrow Agent to disburse to Buyer or Seller, as the case may be, from any
Escrowed Funds remaining after the disbursements provided in paragraphs A and B
above, an amount equal to the undisputed amount, as determined on the basis of
Buyer's and Seller's dispute notices for the purposes of determining the
Tangible Asset Value (together with allocable interest on such amount from the
Closing Date).
D. On the first business day following the final determination of
the Tangible Asset Value in accordance with Section 2.06.C, Buyer and Seller
shall cause the Escrow Agent to make disbursements from any Escrowed Funds
remaining after the disbursements provided in paragraphs A, B and C above as
follows:
1. If the sum of (a) the Tangible Asset Value, (b) the Consigned
Inventory Value, and (c) the Unpaid Invoice Amount is less than One Million
and Six Hundred Sixty-Five Thousand Dollars ($1,665,000) (the "Minimum
Value"), then such occurrence shall constitute a "Net Asset Value
Shortfall." Buyer and Seller shall cause the Escrow Agent to disburse to
Buyer from the remaining Escrowed Funds an amount equal to the amount of
any Net Asset Value Shortfall less the principal amount (if any) previously
----
distributed to Buyer pursuant to paragraph C above (together with allocable
interest on such amount from the Closing Date).
2. Buyer and Seller shall cause the Escrow Agent to disburse to
Seller any and all Escrowed Funds (and allocable interest) remaining after
making any disbursements required under paragraphs A, B and C and
subparagraph D.1 above.
2.09 ADDITIONAL PAYMENT FROM SELLER. To the extent that the sum of
(a) the Tangible Asset Value, (b) the Consigned Inventory Value, and (c) the
Unpaid Invoice Amount exceeds the Minimum Value, the Buyer shall pay such excess
to the Seller in cash within ten business days after the final determination of
the Tangible Asset Value pursuant to Section 2.06.C.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND MDT
----------------------------------------------------
10
<PAGE>
Except as set forth in the Disclosure Letter or as otherwise set forth
below, the Seller and MDT jointly and severally represent and warrant as of the
date of this Agreement that:
3.01 ORGANIZATION. The Seller is a corporation duly organized and
validly existing under the laws of Delaware, has all necessary corporate powers
to own its properties and to carry on its business as now owned and operated by
it, and is qualified to do business in any every state where the nature of the
Seller's business is such that it is required to qualify to do business in such
state and the failure to so qualify is likely to have a material adverse affect
on Seller, the Assets or the Business.
3.02 TITLE TO ASSETS. The Seller has good and marketable title to all
Assets, as described on the Schedules hereto, free and clear of restrictions on
transfer or assignment, or mortgages, liens, pledges, charges, encumbrances,
equities or claims. None of the Assets are leased by Seller from third parties.
All Equipment is in reasonably good operating condition and repair, ordinary
wear and tear excepted.
3.03 TAX RETURNS. Within the times and in the manner prescribed by
law, the Seller has filed all federal, state and local tax returns required by
law in respect of the Assets and the Business and has paid (or is contesting in
good faith) all taxes, assessments and penalties due and payable thereon.
3.04 CONTRACTS. Schedule 3.04 and Schedule 2.01(g) list all the
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contracts (the "Material Contracts") to which the Seller is a party and which
relate in any material respect to the Business, exclusive of any such contracts
relating to MDT, Seller and their Affiliates generally or to all of Seller's
existing businesses generally. Each of the Material Contracts is valid and in
full force and effect, and there has not been any default by the Seller or, to
Seller's knowledge, any of the third parties that are a party to any of said
Material Contracts. The Seller has not received notice that any party to any of
the Material Contracts intends to cancel or terminate any of the Material
Contracts or exercise or not exercise any options to cancel or terminate that
they might have under any of these Contracts. In the event any of the Contracts
is, or is later determined to be non-assignable, then the Seller shall, to the
extent permitted by such Contract, subcontract to Buyer or its designee, if
Buyer so desires, all of the rights, duties and obligations under the Contracts,
and the Seller shall forward to Buyer or its designee all proceeds of the
Contracts that it receives with respect to periods after the Closing Date. None
of that portion of the Contracts which constitute agreements for the sale of
Inventory involve obligations or commitments of the Seller which cannot be fully
performed within one (1) year from the Closing Date.
3.05 EQUIPMENT. Schedule 2.01(c) to this Agreement is a schedule
----------------
which is complete and accurate in all material respects describing, and
specifying the location of, the Equipment. No
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Equipment is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement or is located other
than in the possession of the Seller.
3.06 LICENSES. Schedule 2.01(d) to this Agreement identifies all
----------------
Licenses owned by Seller or in which it has any rights or licenses and that
relate in any material respect to the Business, together with a brief
description of each. Seller has not infringed, and is not now infringing, on
any license belonging to any other person, firm, or corporation in respect of
its conduct of the Business. Seller owns or holds adequate licenses or other
rights to use, all Licenses necessary for the Business as now conducted by it
(except for such instances in which the failure to so own or hold any such
license would not reasonably be expected to have a material adverse effect on
the Assets or the Business), and that use does not, and will not, conflict with,
infringe on or otherwise violate any rights of others. At the Closing, the
Seller shall have executed and delivered to Buyer assignments of all the
Licenses that are assignable. With respect to any License in which the consent
of a governmental authority or third party is required, Seller shall cooperate
with Buyer to procure the assignment of all such Licenses to Buyer. Prior to
the successful procurement of any such consent or approval to the assignment of
any Licenses in which same is required, Seller agrees that it shall perform all
acts and execute any and all documents as may be reasonably requested by Buyer
so that Buyer may realize the benefits of such Licenses as Buyer deems necessary
or desirable, until such time as such Licenses are successfully assigned to
Buyer.
3.07 ASSIGNMENT OF CONTRACTS. At the Closing, the Seller shall have
executed and delivered to Buyer assignments of all the Contracts that are
assignable and Buyer shall have delivered an assumption agreement with respect
to such Contracts. With respect to any Contract in which the consent of a
governmental authority or third party is required, Seller shall cooperate with
Buyer to procure the assignment of all such Contracts to Buyer. Prior to the
successful procurement of any such consent or approval to the assignment of any
Contracts in which same is required, Seller agrees that it shall perform all
acts and execute any and all documents as may be reasonably requested by Buyer
so that Buyer may realize the benefits of such Contracts as Buyer deems
necessary or desirable, until such time as such Contracts are successfully
assigned to Buyer. Buyer agrees to indemnify and hold harmless Seller and its
Affiliates from all costs, liabilities, losses and damages incurred by it in
connection with its performance of its obligations under this Section 3.07;
provided, that Seller is not in default thereunder.
3.08 COMPLIANCE WITH LAWS. To the best of Seller's knowledge, the
Seller has complied with, and is not in violation of, applicable federal, state
or local statutes, laws, and regulations that affects, or is reasonably likely
to affect, directly or indirectly, any of the Assets or the Business, except
where any such violation or the failure to comply would not
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reasonably be expected to have a material adverse effect on the Assets or the
Business.
3.09 LITIGATION. There is no suit, action, arbitration or legal,
administrative or other proceeding or governmental investigation pending or, to
Seller's knowledge, threatened against Seller which is reasonably expected to
have a material adverse effect on the Assets or the Business.
3.10 NO BREACH OR VIOLATION. Except for such as may be eliminated or
cured by obtaining third party and governmental consents to assignments
described in this Agreement or in any schedule delivered hereunder, the
consummation of the transactions contemplated by this Agreement will not result
in or constitute any of the following: (i) a default or an event that, with
notice or lapse of time or both, would be a default, breach or violation of the
certificate of incorporation or bylaws of the Seller or MDT, or, would be a
material default, breach or violation of any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement by which the Seller, MDT or the
Business or the Assets are or may be materially adversely affected, (ii) an
event that would permit any party to terminate any Material Contract , or (iii)
the creation or imposition of any lien, charge, or encumbrance on any of the
Assets. The ownership and operation of the Business is not in breach or
violation of any order or decree by any court or administrative agency.
3.11 AUTHORITY. The Seller and MDT each have the full corporate
right, corporate power, legal capacity and corporate authority to enter into,
and perform their respective obligations under this Agreement, and no approvals
or consents of any persons other than the Seller and MDT are necessary in
connection with it. The execution and delivery of this Agreement by the Seller
has been duly authorized by the board of directors of the Seller and MDT, which
constitute all of the necessary corporate actions to consummate the transactions
contemplated by the Agreement and for the Seller and MDT to perform their
respective obligations hereunder.
3.12 PERSONNEL. Attached hereto as Schedule 3.12 is a complete and
-------------
accurate list of the names, hire date, job title and job description of all
hourly Employees and service technicians of the Seller and/or any Affiliate who
provides services with respect to the Business as of the date of this Agreement
stating the rates of compensation payable to each.
3.13 VALID AND BINDING OBLIGATIONS. This Agreement and each of the
documents and instruments to be executed by the Seller and MDT and delivered to
Buyer pursuant to this Agreement when so delivered will constitute the legal,
valid, and binding obligations of the Seller and MDT, as the case may be,
enforceable in accordance with each such agreement's, document's, and
instrument's respective terms, except as may be limited by applicable bankruptcy
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laws, insolvency laws, and other similar laws affecting the rights of creditors
generally.
3.14 TRADE NAMES AND RIGHTS. Schedule 2.01(f) to this Agreement
----------------
includes all (i) registered trade names, trademarks, service marks and
copyrights and their registrations, and (ii) all other trade names, trademarks,
service marks and copyrights, owned by the Seller (or in which it has any rights
or licenses) used in, or relating to, the Business or the Assets (other than in
respect of the name "MDT"), together with a brief description of each. The
Seller has not infringed, and is not now infringing, on any trade name,
trademark, service mark or copyright belonging to any other person, firm, or
corporation used in, or relating to, the Business. The Seller is not a party to
any license, agreement or arrangement, whether as licensor, licensee or
otherwise, with respect to any trademarks, service marks, trade names or
applications for them, or any copyrights which is material to the conduct of the
Business as now conducted. The Seller owns, or holds adequate licenses or other
rights to use, all trademarks, service marks, trade names and copyrights
material to the Business as now conducted by the Seller.
3.15 PATENTS. Schedule 2.01(f) to this Agreement includes all
----------------
patents, inventions, industrial models, processes, designs and applications for
patents owned by the Seller or MDT or in which they have any rights, licenses or
immunities, and which are used in, or relating to, the Business or the Assets.
The patents and applications for patents listed in Schedule 2.01(f) are in full
----------------
force and effect and are not subject to any taxes, maintenance fees or actions
falling due within one (1) year after the Closing Date except as otherwise
indicated on Schedule 3.15. There have not been any interference actions or
-------------
other judicial, arbitration or other adversary proceedings concerning the
patents or applications for patents listed in Schedule 2.01(f). The
----------------
manufacture, use, or sale of the inventions, models, designs and systems covered
by the patents and applications for patents listed in Schedule 2.01(f) do not
----------------
violate or infringe on any patent or any proprietary or personal right of any
person, firm or corporation. Except as set forth in Schedule 2.01(f), the
----------------
Seller is not a party to any license, agreement or arrangement, whether as
licensee, licensor or otherwise, with respect to any patent, application for
patent, invention, design, model, process, trade secret or formula. The Seller
has the right and authority to use such inventions, trade secrets, processes,
models, designs and formulas as are necessary to enable it to conduct and to
continue to conduct the Business, in all material respects, in the manner
presently conducted by it.
3.16 TRADE SECRETS. Schedule 3.16 to this Agreement identifies,
-------------
without extensive or revealing descriptions, trade secrets, formulae, processes,
know-how, programs, routines and other similar technical data of Seller which
are material to the conduct of the Business or the Assets. To the extent the
trade secret is documented, the specific location of each trade secret's
documentation, including its description, specifications, charts,
14
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procedures, and other material relating to it, is also set forth with it in that
Schedule. Each trade secret's documentation is current and accurate in all
material respects and is reasonably sufficient in detail and content to identify
and explain it, and to allow its use by Buyer without reliance on the special
knowledge or memory of others. The Seller has taken reasonable security
measures to protect the secrecy and confidentiality of these trade secrets.
3.17 TITLE TO INVENTORY. Schedule 2.01(b) to this Agreement is a
----------------
complete and accurate schedule of all of the Inventory of the Seller as of the
date of this Agreement. All of such Inventory is usable and, if finished goods,
salable in the ordinary course of the Business.
3.18. CUSTOMERS. Seller will furnish Buyer a complete and accurate
list by name and address of all customers of the Seller related to the Business
together with summaries of the sales made by the Seller to each such customer
during the time period of October 15, 1993 through May 26, 1995.
3.19 SUPPLIERS. Seller will furnish Buyer a complete and accurate
list by name and address of all suppliers of raw materials used in the
production or processing of Inventory, together with summaries of the purchases
made by Seller from each such supplier during the twelve months ending on or
about June 1, 1995.
3.20 INSURANCE POLICIES. Schedule 3.20 to this Agreement is a list
-------------
and description of all insurance policies held by the Seller at the date hereof
concerning the Business. All of these insurance policies are in respect to
principal amounts set forth on Schedule 3.20. The Seller has maintained and now
-------------
maintains (i) insurance on all of its Assets of a type customarily insured,
covering property damage and loss of income by fire or other casualty, and (ii)
insurance protection against all liabilities, claims, and risks against which it
is customary to insure in the industry in which the Seller conducts the
Business.
3.21 FINANCIAL STATEMENTS. The financial statements set forth on
Schedule 3.21 attached hereto consist of an unaudited balance sheet and income
- -------------
statement of MDT at December 31, 1994 (the "Interim Statements"). The Interim
Statements referred to in this Section 3.21 are true and correct in all material
respects as of the date thereof, and are prepared in accordance with generally
accepted accounting principles, consistently applied, and fairly and accurately
present the financial position of MDT as of the date thereof, and the results of
MDT's operations for the periods indicated in all material respects.
3.22 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Interim Statements (the "Interim Statement Date"), there has been (i) no
material adverse change in the condition, financial or otherwise, of the Seller
or the Assets or Business, (ii) no waiver of any valuable right of or claim
held by Seller with respect to the Business or the Assets other than in the
ordinary course of business, (iii) no material loss, destruction or damage to
any of the Assets or other property of Seller, whether or
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not insured, used in the Business, (iv) no contract, commitment or transaction
entered into outside the ordinary course of business with respect to the
Business or the Assets, or (v) no lease of capital equipment or property with
respect to the Assets or the Business. Since the Interim Statement Date, Seller
has not, with respect to the Business or the Assets, made any significant
material adverse change in any method of management, operation or accounting.
3.23 CONSENTS AND APPROVALS. Except for such as are identified in any
schedule to this Agreement, no consent, approval or authorization of, or filing
or registration with, any governmental or regulatory authority, or any other
person or entity is required to be made or obtained by the Seller in connection
with the execution, delivery and performance of this Agreement or any related
agreements (including but not limited to the Exhibits hereto, all of the
foregoing being collectively referred to as the "Related Agreements") and the
consummation of the transactions contemplated hereby, other than any consents,
approvals or authorizations, filings or registrations, the failure of which to
obtain or make, will not have an adverse effect on the Business or on Seller's
ability to perform its obligations hereunder and thereunder.
3.24 DOCUMENTS. Prior to the Closing Date, Seller has provided to
Buyer true and correct copies of all Contracts, documents concerning all
litigation and administrative proceedings, Licenses and other records which are
material to the Assets or the Business.
3.25 BROKERS. Neither Seller nor MDT, nor any of their respective
officers, directors, shareholders or employees, have employed any broker, agent,
or finder, or incurred any liability for any brokerage fees, agent's fees,
commissions or finder's fees in connection with the transactions contemplated
herein.
3.26 SALE OF ASSETS. For purposes of determining whether a sale and
use tax charge is applicable, the sale of the Assets constitutes: (i) the sale
of the entire operating assets of a business or of a separate division, branch,
or identifiable segment of a business, and (ii) a sale outside the ordinary
course of Seller's business, and represents an isolated or occasional sale by a
seller who does not regularly engage in such business. The income and expenses
of the Business can be separately established from the books of account or
records.
3.27 LEGAL PROCEEDINGS. There is no order, action or proceeding
pending or, to the best knowledge of Seller, threatened against Seller that
individually or when aggregated with one or more other orders, actions or
proceedings has or might reasonably be expected to have a material adverse
effect on Seller's ability to perform its obligation under this Agreement and
the Related Agreements or any other aspect of the transactions contemplated
hereby or thereby.
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3.28 ASSETS SUFFICIENT TO MANUFACTURE PRODUCTS. To the best of
Seller's knowledge, the Assets constitute all of the assets which are necessary
to enable the Buyer to manufacture the Products. To the best of MDT's and
Seller's knowledge, Schedule 2.01(d) identifies each type of License required to
enable the Buyer to market and sell the Products in the states and territories
in which Seller presently sells the Products; provided, however, that no
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representation or warranty is made herein with respect to the assignability of
such Licenses or with respect to any license, permit, registration,
certification or similar requirement imposed under any law, rule, regulation,
stature, order or other requirement applicable by reason of the identity or
status of the Buyer.
3.29 FULL DISCLOSURE. This Agreement, the Related Agreements and the
Disclosure Letter attached hereto, are true and complete in all material
respects and do not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made herein and
therein, in light of the circumstances in which they are made, not misleading.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Buyer hereby represents and warrants to the Seller and MDT that:
4.01 ORGANIZATION. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware, and has
all necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it.
4.02 AUTHORITY. Buyer has the right, power, legal capacity, and
authority to enter into, and perform its respective obligations under this
Agreement, and no approvals or consents of any persons are necessary in
connection with it. The execution and delivery of this Agreement by Buyer has
been duly authorized by its board of directors, which constitutes all of the
necessary corporate action to consummate the transactions contemplated by the
Agreement and for Buyer to perform its obligations hereunder.
4.03 VALID AND BINDING OBLIGATIONS. This Agreement and each of the
documents and instruments to be executed by Buyer and delivered to the Seller
pursuant to this Agreement when so delivered will constitute its legal, valid,
and binding obligation enforceable in accordance with such agreements',
documents', and instruments' respective terms, except as limited by bankruptcy
laws, insolvency laws, and other similar laws affecting the rights of creditors
generally.
4.04 CONSENTS AND APPROVALS. No consent, approval or authorization or
declaration of, or filing with, any governmental or regulatory authority or any
other person or entity, is required
17
<PAGE>
to be made or obtained by Buyer in connection with the execution, delivery and
performance of this Agreement and each of the Related Agreements and the
consummation of the transactions contemplated hereby and thereby, other than any
consents, approvals or authorizations, filings or registrations, the failure of
which to obtain or make will not have a material adverse effect on the business
of the Buyer or on Buyer's ability to perform its obligations hereunder and
thereunder.
4.05 BROKERS. Neither Buyer nor any of its respective officers,
directors, or employees, has employed any broker, agent, or finder, or incurred
any liability for any brokerage fees, agent's fees, commissions or finder's fees
in connection with the transactions contemplated herein.
4.06 NO BREACH OR VIOLATION. The execution and delivery of this
Agreement and each of the Related Agreements by Buyer and the consummation of
the transactions contemplated hereby and thereby will not
(a) result in or constitute a default or an event that, with notice or
lapse of time or both, would be a default, breach or violation of the
certificate of incorporation or bylaws of Buyer, except for third party
consents described in the Agreement or any schedule thereunder, any lease,
license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust or other agreement, instrument or
arrangement to which Buyer is a party or by which Buyer is bound.
(b) violate any federal, state or local statute, law or regulation
applicable to Buyer, or
(c) require the approval, consent, authorization or act of, or the
making by Buyer of any declaration, filing or registration with, any
federal, state or local court, governmental authority or regulatory body.
4.07 LEGAL PROCEEDINGS. There is no order, action or proceeding
pending or, to the best knowledge of Buyer, threatened against Buyer that
individually or when aggregated with one or more other orders, actions or
proceedings has or might reasonably be expected to have a material adverse
effect on Buyer's ability to perform its obligations under this Agreement and
the Related Agreements or any other aspect of the transactions contemplated
hereby or thereby.
4.08 FINANCIAL STATEMENTS. The Report on Form 10-Q for the fiscal
quarter ended January 29, 1995 included as Schedule 4.08 attached hereto
-------------
includes an unaudited balance sheet and income statement and related notes
thereto of Maxxim Medical, Inc., the parent of the Buyer (the "Company") at
January 29, 1995 (the
18
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"Interim Maxxim Statements"). The Interim Maxxim Statements referred to in this
Section 4.08 are true and correct in all material respects, and are prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly and accurately present the financial position of the Company as of
the date thereof, and the results of the Company's operations for the respective
periods indicated in all material respects. Buyer represents and warrants that
it has stockholders' equity of in excess of $75,000,000 as of the date of this
Agreement.
ARTICLE V
ADDITIONAL SELLER'S AND MDT WARRANTIES AND
-------------------------------------------
CERTAIN COVENANTS AND AGREEMENTS
--------------------------------
5.01 SELLER'S COVENANTS. The Seller and MDT do hereby jointly and
severally represent, warrant, covenant and agree that since the Interim
Statement Date through the Closing Date hereof the following:
(A) BUSINESS RELATIONSHIPS. Seller and MDT have each used its best
efforts to preserve Seller's business organizations intact, to keep available to
the Business its present Employees and to preserve their present relationship
with suppliers, customers and others having business relationships with it. In
furtherance thereof, Seller shall pay all obligations of Seller with respect to
the Business not assumed by Buyer in the ordinary course in accordance with its
past payment policies and practice.
(B) AGREEMENTS. Seller has not modified, amended, canceled or
terminated any of the Contracts in any material respect or agreed to do any of
those acts other than in the ordinary course of Business.
(C) ASSETS. The Seller has not sold, assigned, transferred or
encumbered any Assets, other than sales of Inventory in the ordinary course of
business.
5.02 TAXES.
(a) The Seller shall pay, and shall be responsible for paying for
(whether at, prior to or after the Closing Date), all federal, state, and local
taxes and charges of any kind whatsoever related thereto, which relate to or
arise from the period prior to the Effective Date, whether such taxes and
charges shall be due and payable before or after the Effective Date.
(b) Buyer shall pay, and shall be responsible for paying for all
federal, state and local taxes and charges of any kind whatsoever (including
without limitation sales, transfer, use and similar taxes) imposed on or in
connection with the purchase, sale or transfer of the Assets to Buyer pursuant
to this Agreement or on the use or ownership thereof by Buyer after the
Effective Date.
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(c) After the Closing, each of the Parties shall, and shall cause
their respective Affiliates, counsel, accountants and other representative to,
provide reasonable cooperation with the other Party and its representatives in
the preparation of all tax returns and financial statements and shall provide,
or cause to be provided at the requesting party's sole cost and expense, to the
other Party any records and other information relating to the Assets or the
conduct of the Business as reasonably requested in connection therewith. After
the Closing, each of the Parties shall, and shall cause their respective
Affiliates and representatives to, provide reasonable cooperation with the other
Party in connection with any tax investigation, audit or other proceeding
relating to the Business or the Assets.
5.03 NON-SOLICITATION OF SELLER'S EMPLOYEES. For a period of three
years following the Closing Date, or until the date on which the employee is
terminated by Seller, whichever is earlier, Buyer agrees that except for such
employees identified on Schedule 5.03 attached hereto, Buyer will not, directly
-------------
or indirectly, without the prior written consent of Seller, (i) knowingly or
purposely solicit or induce any employee of Seller to leave Seller or to accept
any other employment or position, or (ii) knowingly or purposely assist any
other entity in hiring any such employee. With respect to all such Employees of
Seller identified on Schedule 5.03, Seller will not, directly or indirectly,
--------------
without the prior written consent of Buyer, (i) knowingly or purposely solicit
or induce any such employee to leave Buyer or to accept any other employment or
position, or (ii) knowingly assist any other entity in hiring any such employee.
The employment of any person as a result of the placement of an advertisement in
a newspaper or periodical of general or general trade circulation for the
purpose of soliciting employees shall not be deemed to be a violation of the
foregoing covenant.
5.04 NONDISCLOSURE OF PROPRIETARY DATA. Neither Buyer nor any of its
representatives shall, at any time, make use of, or divulge or otherwise
disclose, directly or indirectly, any trade secret or other proprietary data not
included in the Assets (including, but not limited to, any customer list, record
or financial information constituting a trade secret and not constituting part
of the Assets) or any policies of Seller relating to any business currently
conducted by Seller (other than the Business) which Buyer or any representative
of Buyer may have learned in the course of negotiating this Agreement or
consummating the transaction contemplated hereby. Except to the extent
currently used by Seller in the conduct of its other businesses, neither Seller
nor any of its representatives shall, at any time, make use of, or divulge or
otherwise disclose, directly or indirectly, any trade secret or other
proprietary data included in the Assets (including, but not limited to, any
customer list, record or financial information constituting a trade secret and
constituting part of the Assets) or any policies of Buyer relating
20
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to any business currently conducted by Buyer (including the Business) which
Seller , MDT or any representative of the foregoing may have learned in the
course of operating the Business, negotiating this Agreement or consummating the
transaction contemplated hereby or has conveyed or transferred to the Buyer as
part of the Assets.
5.05 WARRANTY WORK. From and after the Closing Date and until the
Inventory Delivery Date, Seller shall, at Seller's sole cost and expense, sell
or perform all warranty work on Products manufactured or sold in the conduct of
the Business regardless of when such Products were manufactured. After the
Inventory Delivery Date, Buyer shall, at Buyer's sole cost and expense sell or
perform all warranty work (such warranty work, in the case of Products sold
prior to the Closing Date, being solely the obligation to repair or replace
defective product sold after August 31, 1994) on Products manufactured or sold
in the conduct of the Business.
5.06 RIGHT OF SELLER TO SELL "ASPIRATOR PRODUCTS" AFTER CLOSING.
Notwithstanding any other provision contained in this Agreement or the Non-
Compete Agreement, Seller shall be entitled to use, on a non-exclusive basis,
until November 30, 1996 the name Bovie solely in connection with the purchase,
marketing and sale of Aspirator Products.
ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
-------------------------------------------
The obligations of the Buyer shall be subject to the following
conditions which shall, unless waived in writing, have occurred at or prior to
the Closing Date:
6.01 REPRESENTATIONS AND WARRANTIES OF SELLER AND MDT; PERFORMANCE BY
SELLER AND MDT; CORPORATE APPROVALS. The representations and warranties of
Seller and MDT herein contained shall be true and correct in all material
respects at the Closing Date; Seller and MDT shall have performed in all
material respects all obligations and complied in all material respects with all
covenants and conditions required by this Agreement to be performed or complied
with by them at or prior to the Closing Date; and Seller and MDT shall have
delivered to Buyer a certificate or certificates of Seller and MDT in form and
substance satisfactory to Buyer, dated the Closing Date and signed by Seller and
MDT to all such effects. Buyer shall have received copies of all resolutions
adopted by the Seller's or MDT's Board of Directors or any committee thereof,
pertaining to the execution and delivery of this Agreement by the Seller or MDT,
and the performance of their respective covenants and agreements and obligations
under it, certified by the secretary or assistant secretary of the Seller and
MDT.
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6.02 CONSENTS. All necessary agreements and consents of any parties
to the consummation of the transactions contemplated by this Agreement by
Seller, or otherwise pertaining to the matters covered by this Agreement with
respect to Seller, shall have been obtained by the Seller and delivered to
Buyer.
6.03 THE NON-COMPETITION AGREEMENT. The Non-Competition Agreement
shall have been executed and delivered by the Seller and MDT in the form of
Exhibit 6.03 hereto.
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6.04 TRANSITION SERVICES AGREEMENT. The Transition Services Agreement
shall have been executed by the Seller and delivered to the Buyer.
6.05 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
by the Seller and the Escrow Agent and delivered to the Buyer.
6.06 LICENSES. The Seller shall have executed and delivered to Buyer
assignments of all the Contracts and Licenses, that are assignable.
6.07 NO PROCEEDINGS. No action or proceedings shall have been
instituted against and no order, decree or judgment of any court, agency,
commission or governmental authority shall exist or be threatened against Buyer
or Seller or any of their respective Affiliates or otherwise which seeks to
restrain or will render it unlawful as of the Closing Date to effect the
transactions contemplated hereby.
6.08 LIENS ON ASSETS. Except as otherwise specifically provided in
Section 5.02 herein, all liens or security interests of any third party as to
any of the Assets described in the Disclosure Letter shall be removed on or
before the Closing Date.
6.09 APPROVAL BY SELLER'S PRINCIPAL BANK. Seller shall have obtained
the approval and consent of Wells Fargo Bank to the execution and delivery of
this Agreement and the Related Documents and consummation of the transactions
set forth herein and therein and such bank shall have agreed at the Closing to
release any and all liens or other security interests with respect to all of the
Assets.
6.10 ESCROW AGREEMENT. The Seller, Buyer and Escrow Agent shall have
agreed as to the form of the Escrow Agreement.
6.11 DELIVERY OF SCHEDULES. Buyer and Seller agree that the
Disclosure Letter and all of the Schedules to this Agreement and the Related
Documents (collectively the "Disclosure Schedules") have not been completed and
furnished to the Buyer at the date of execution of this Agreement and that the
Seller is to deliver such Disclosure Letter and Schedules on or before June 7,
1995. Seller
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shall have delivered the Disclosure Schedules and Buyer shall have approved the
Disclosure Schedules, which approval will not be unreasonably withheld.
ARTICLE VII
CONDITIONS PRECEDENT TO THE SELLER'S AND MDT'S PERFORMANCE
----------------------------------------------------------
The obligations of the Seller and MDT shall be subject to the
following conditions which shall, unless waived, be satisfied at or prior to the
Closing Date:
7.01 REPRESENTATIONS AND WARRANTIES OF BUYER; PERFORMANCE BY BUYER;
CORPORATE APPROVALS. The representations and warranties of Buyer herein
contained shall be true and correct in all material respects at the Closing Date
with the same effect as though made at such time (except insofar as such
representations and warranties are given as of a particular date) except to the
extent waived hereunder or affected by the transactions contemplated or
permitted herein; Buyer shall have performed in all material respects all
obligations and complied in all material respects with all covenants and
conditions required by this Agreement to be performed or complied with by it at
or prior to the Closing Date; and Buyer shall have delivered to Seller a
certificate of Buyer in form and substance satisfactory to Seller, dated the
Closing Date and signed by Buyer, to the knowledge of such officer to all such
effects. Seller shall have received copies of all resolutions adopted by the
Buyer's Board of Directors or any committee thereof pertaining to the execution
and delivery of this Agreement by the Buyer, and the performance of its
covenants and agreements and obligations under it, certified by the secretary or
assistant secretary of Buyer.
7.02 CONSENTS. All necessary agreements and consents of any
governmental authorities, other parties or any parties to the consummation of
the transactions contemplated by this Agreement, or otherwise pertaining to the
matters covered by this Agreement, shall have been obtained by Buyer and
delivered to the Seller.
7.03 APPROVAL BY SELLER'S PRINCIPAL BANK. Seller shall have obtained
the approval and consent (in form reasonably acceptable to MDT and Seller) of
Wells Fargo Bank to the execution and delivery of this Agreement and the Related
Documents and consummation of the transactions set forth herein and therein and
such bank shall have agreed at the Closing to release any and all liens or other
security interests with respect to all of the Assets.
7.04 ESCROW AGREEMENT. The Seller, Buyer and Escrow Agent shall have
agreed as to the form of the Escrow Agreement, and Buyer and Escrow Agent shall
have executed and delivered the Escrow Agreement to Seller.
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7.05 APPROVAL OF SCHEDULES. Buyer shall have approved the Disclosure
Schedules, which approval will not be unreasonably withheld.
7.06 NO PROCEEDINGS. No action or proceedings shall have been
instituted against and no order, decree or judgment of any court, agency,
commission or governmental authority shall exist or be threatened against Buyer
or the Seller or MDT or their respective Affiliates or otherwise which seeks to
restrain or will render it unlawful as of the Closing Date to effect the
transactions contemplated hereby.
ARTICLE VIII
THE CLOSING
-----------
8.01 TIME AND PLACE. Payment of the Purchase Price required to be
made by Buyer to the Seller at the Closing Date in accordance with Section 2.02,
and the transfer of the Assets required to be made by Seller to Buyer at the
Closing date by the Seller to Buyer, and the other transactions contemplated
hereby (the "Closing") shall take place at the offices of the Boyer, Ewing &
Harris Incorporated at Nine Greenway Plaza, Suite 3100, Houston, Texas 77056, at
or about 10:00 a.m., June 9, 1995, to be effective as of the Effective Date.
8.02 THE SELLER'S DELIVERIES. At the Closing, the Seller shall
deliver or cause to be delivered to Buyer:
(a) two (2) copies of a Bill of Sale, Assignment and Assumption
Agreement ("Bill of Sale") in the form reasonably acceptable to Seller;
(b) two (2) copies of an Assignment of Trademarks in the form
reasonably acceptable to Seller;
(c) two (2) copies of an Assignment of Patents in the form reasonably
acceptable to Seller;
(d) all necessary copies of all applicable UCC-3 releases executed by
secured parties identified in the Disclosure Letter in the form reasonably
acceptable to Seller and Buyer;
(e) Certified resolutions adopted by the board of directors of the
Seller and MDT as required by Section 6.01;
(f) The Non-Competition Agreement;
(g) The Transition Services Agreement;
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<PAGE>
(h) The Escrow Agreement executed by the Seller and the Escrow
Agreement in the form to be agreed to by Buyer, Seller and the Escrow
Agent; and
(i) All other items required to be delivered hereunder or as may be
requested which are reasonably necessary for the consummation of the
transactions contemplated hereby.
Except as otherwise set forth herein with respect to the Equipment and
the Inventory, the Seller, through their officers, agents and employees, will
put Buyer into full possession and enjoyment of all the Assets to be conveyed
and transferred by this Agreement immediately upon the occurrence of the
Closing.
8.03 BUYER'S OBLIGATIONS. At the Closing, Buyer will deliver or cause
to be delivered to the Seller, or other designated person, the following:
(a) A wire transfer of funds payable to the Seller in the amount of
One Million Dollars ($1,000,000);
(b) Delivery of the Escrow Agreement and the Escrowed Funds to the
Escrow Agent;
(c) The Non-Competition Agreement;
(d) The Transition Services Agreement;
(e) An instrument evidencing the assumption of the Assumed Liabilities
in the form to be mutually agreed to by Buyer and Seller;
(f) Certified resolutions of the board of directors of Buyer as
required by Section 7.01; and
(g) All other items required to be delivered hereunder or as may be
requested or which are reasonably necessary for the consummation of these
transactions contemplated hereby.
8.04 ACCOUNTS RECEIVABLE COLLECTIONS. All accounts receivable from
sales of Inventory on or after the Effective Date ("Buyer's Sales") shall be the
property of Buyer. The Seller shall invoice all of its sales of Inventory
occurring prior to the Effective Date not previously invoiced within five (5)
days after the Closing Date requesting that payment be made to the Seller. All
accounts receivable with respect to sales made prior to the Closing Date
("Seller's Sales") shall be the sole and exclusive property of the Seller. In
the event Buyer receives any payment on the Seller' Sales, Buyer shall promptly
forward any such payments to the Seller. In the event Seller receives any
payment on the Buyer's Sales, Seller shall promptly forward any such payments to
the Buyer.
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8.05 BULK SALES. It may not be practicable to comply or attempt to
comply with the procedures of the "Bulk Sales Act," if applicable, or similar
law of any or all of the states in which the Assets are situated or of any other
state which may be asserted to be applicable to the transactions contemplated
hereby. Accordingly, to induce Buyer to waive any requirements for compliance
with any or all of such laws, if applicable, Seller hereby agrees, without
admitting the applicability of such laws to the transactions contemplated
hereunder, that except for the Liabilities that are assumed herein, the
indemnity provisions of Section 9.01 hereof shall apply to any Damages of Buyer
arising out of or resulting from the failure of Buyer or Seller to comply with
any such laws or any similar law which may be asserted to be applicable.
8.06 FURTHER ASSURANCES. On and after the Closing Date, the Seller,
MDT and Buyer shall take all appropriate action and execute all documents of any
kind which may be reasonably necessary or desirable to carry out the
transactions contemplated hereby. Buyer shall notify Seller promptly, and in no
event more than ten (10) days after Buyer's receipt, of any tax inquiries or
notifications thereof which relate to any period prior to the Effective Date,
and Seller shall prepare and deliver responses to such inquiries as Seller deems
necessary or appropriate. In addition, Seller shall make available the books
and records of the Business during reasonable business hours and take such other
actions prior to the expiration of the transition period under the Transition
Services Agreement as are reasonably requested by Buyer to assist Buyer in the
operation of the Business.
8.07 PRODUCTS LIABILITY CLAIMS. Seller shall be solely responsible
for all liabilities arising out of the sale and delivery of Products prior to
the Effective Date. Buyer shall be solely responsible for all liabilities
arising out of the sale and delivery of Products on and after the Effective Date
regardless of whether such Products are part of the Inventory being purchased by
Buyer.
ARTICLE IX
INDEMNIFICATION
---------------
9.01 CERTAIN LIABILITIES OF THE SELLER, MDT AND BUYER.
(a) The Seller and MDT shall jointly and severally indemnify, defend
and hold harmless the Buyer from and against any and all Damages (as
defined in Section 9.03(a)) based upon, arising out of or otherwise in
respect of any liability or obligation of the Business or relating to the
Assets (i) relating to any period prior to the Effective Date, or (ii)
arising out of facts or circumstances occurring prior to the Effective
Date; provided, that such obligation to indemnify shall not
26
<PAGE>
exist if the Damages arise as a result of Buyer's breach of this Agreement
or Buyer has agreed herein to be responsible for such Damages.
(b) Buyer shall indemnify, defend and hold harmless the Seller and MDT
from and against any and all Damages based upon, arising out of or
otherwise in respect of any liability or obligation of the Business or
relating to the Assets (i) relating to any period on and after the
Effective Date, or (ii) arising out of facts or circumstances occurring on
and after the Effective Date; provided, that such obligation to indemnify
shall not exist if the Damages arise as a result of the Seller' breach of
this Agreement, the Seller has agreed herein to be responsible for such
Damages or with respect to the liabilities of Seller under Transition
Service Agreement.
9.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in this Agreement shall survive the
Closing for a period of two years following the Closing Date notwithstanding any
investigation made by or on behalf of Seller, MDT or Buyer. All of the
covenants and agreements of Seller, MDT and the Buyer shall survive the
execution and delivery hereof and the Closing hereunder and shall expire when
fully discharged and the applicable period under the statute of limitations
therefor has expired and cannot thereafter be asserted. No claim shall be made
for the breach of any representation or warranty contained in or made pursuant
to this Agreement or any of the Related Agreements after the date on which such
representation or warranty terminates as set forth in this Section; provided,
however, that in the event that it is asserted that any Party has violated any
of the representations and warranties made by it and a claim for indemnification
is made thereon, such representation or warranty shall survive until the final
adjudication of the issue in the form of a final, non-appealable judgment by a
court of law having or arbitrator jurisdiction of the matter or until the issue
is otherwise settled by the Buyer and Seller and MDT.
9.03 INDEMNIFICATION.
(A) BY THE SELLER OR MDT. The Seller and MDT shall jointly and
severally indemnify, save, defend and hold harmless Buyer and Buyer's
directors, officers, agents, employees and Affiliates (collectively, the
"Buyer Indemnified Parties'") from and against any and all costs, lawsuits,
losses, liabilities, deficiencies, claims and expenses, including interest,
penalties, attorneys' fees and all amounts paid in investigation, defense
or settlement of any of the foregoing (collectively referred to herein as
"Damages"), incurred in connection with or arising out of or resulting from
or incident to any breach of any covenant or warranty, or
27
<PAGE>
the inaccuracy of any representation, made by Seller in or pursuant to this
Agreement or any other agreement contemplated hereby or in any schedule,
certificate, exhibit, or other instrument furnished or to be furnished by
the Seller under this Agreement.
(B) BY BUYER. Buyer shall indemnify, save, defend and hold harmless
the Seller, MDT and the Seller' directors, officers, agents, employees and
Affiliates (collectively, the "the Seller' Indemnified Parties'") from and
against any and all Damages incurred in connection with or arising out of
or resulting from or incident to any breach of any covenant or warranty, or
the inaccuracy of any representation, made by Buyer in or pursuant to this
Agreement or any other agreement contemplated hereby or in any schedule,
certificate, exhibit, or other instrument furnished or to be furnished by
Buyer under this Agreement.
(C) DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written
notice thereof describing such lawsuit or enforcement action in reasonable
detail and indicating the amount (estimated, if necessary) or good faith
estimate of the reasonably foreseeable estimated amount of Damages (which
estimate shall in no way limit the amount of indemnification the
indemnified Party is entitled to receive hereunder), shall be given to the
indemnifying Party as promptly as practicable (and in any event within
twenty (20) days, after the service of the citation or summons); provided
that the failure of any indemnified Party to give timely notice shall not
affect its rights to indemnification hereunder to the extent that the
indemnified Party demonstrates that the actual damages to the indemnifying
Party caused by such failure to so notify within twenty (20) days are less
than the amount the indemnified Party is entitled to recover. After such
notice, if the indemnifying Party elects to compromise or defend any such
asserted liability and to assume all obligations contained in this Section
9.03 to indemnify the indemnified Party, then the indemnifying Party shall
be entitled, if it so elects, to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys
of its own choice to handle and defend the same, at the indemnifying
Party's cost, risk and expense, and such indemnified Party shall cooperate
in all reasonable respects, at the indemnifying Party's cost, risk and
expense, with the indemnifying Party and such attorneys in the
investigation, trial, and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified Party
28
<PAGE>
may, at its own cost, risk and expense, participate in such investigation,
trial and defense of such lawsuit or action and any appeal arising
therefrom. If the indemnifying Party promptly notifies the indemnified
Party that it intends to defend the claim and to assume all obligations
contained in this Section 9.03 to indemnify the indemnified Party, the
indemnified Party shall not pay, settle or compromise such claim without
the indemnifying Party's consent, which consent shall not be unreasonably
withheld. If the indemnifying Party elects not to defend the claim or the
indemnified Party, the indemnified Party may, but shall not be obligated to
defend, or the indemnified Party may compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf, for the
account, and at the risk, of the indemnifying Party.
(D) THIRD PARTY CLAIMS. The provisions of this Section 9.03 are not
limited to matters asserted by the Parties', but cover costs, losses,
liabilities, damages, lawsuits, claims and expenses incurred in connection
with third party claims.
9.04 LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding any other
provision contained in this Agreement:
(i) Seller shall not be obligated to indemnify Buyer or any Buyer
Indemnified Parties under this Article IX unless the amount for which
indemnity would be due for the specific claim exceed $2,500 and the
aggregate of all amounts exceeding such $2,500 for which claims for
indemnity would otherwise be payable by Seller exceeds $37,500, and, in
such event, Seller shall be responsible only for the amount in excess of
such $37,500; and
(ii) The aggregate indemnity obligation of Seller pursuant to this
Article IX shall not exceed the Purchase Price received by Seller pursuant
to this Agreement, provided that, such limitation shall not apply with
respect to products liability claims with respect to Products shipped by
Seller prior to the Closing Date.
(b) Any indemnifiable claim with respect to any breach or
nonperformance by either Party of a representation, warranty, covenant or
agreement shall be limited to the amount of actual damages sustained by the
indemnified Party by reason of such breach or nonperformance. Notwithstanding
anything to the contrary elsewhere in this Agreement, no Party or its Affiliates
shall in any event be liable to the other Party or its Affiliates for any
consequential damages, including, but not limited to, loss of revenue or income,
cost of capital, or loss of business reputation or opportunity.
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<PAGE>
(c) The remedies provided in this Article IX shall be the exclusive
post-closing remedies of the Parties for monetary Damages (whether at law or in
equity) resulting from the breach of any representation, warranty or covenant
contained in this Agreement.
9.05 ARBITRATION. (a) Any controversy, dispute or claim under,
arising out of, in connection with or in relation to this Agreement or any of
the Related Agreements, including but not limited to the existence, negotiation,
interpretation, construction, coverage, scope, performance, non-performance,
breach, termination, validity or enforceability of this Agreement or the Related
Agreements, shall be settled, at the request of any Party involved in the
controversy, dispute or claim, but arbitration conducted in accordance with the
following guidelines and procedures:
(i) The arbitration shall be conducted in accordance with the Rules
for Arbitration of Business Disputes promulgated by the American
Arbitration Association ("AAA") by a sole neutral arbitrator agreed upon by
the Parties involved in the controversy, dispute or claim, or if such
Parties are unable to agree upon a sole neutral arbitrator, a panel of
three neutral arbitrators selected in accordance with the AAA Rules;
provided, however, that no arbitrator may serve who, during the three-year
-------- -------
periods preceding the date the arbitration notice if filed, has had a
material personal or financial relationship with any participant to the
dispute or any Affiliate of any such participant. The place of arbitration
shall be Atlanta, Georgia.
(ii) The arbitration shall be governed by the United States
Arbitration Act (9 U.S.C. (S)(S) 1-16). The arbitration of such issued,
including the determination of any amount of damages suffered by any Party
by reason of the acts or omissions of any other Party, shall be final and
binding upon the Parties to this Agreement and the Related Agreements to
the maximum extent permitted by law. Judgment upon the award rendered by
the arbitrator may be entered by any Court having jurisdiction thereof.
(iii) The arbitrator or arbitrators, as the case may be, shall have
the power to grant all legal and equitable remedies (including, without
limitation, specific performance) and award compensatory damages provided
by New York or applicable federal law, but shall not be empowered to act as
amiable compositeur or to award punitive or other damages in excess of
compensatory damages. Each of the Parties hereby waives any right to claim
damages in excess of compensatory damages and agrees not to seek punitive
damages relating to any matter under, arising out of, in connection with or
relating to this Agreement or any of the Related Agreement in any forum.
30
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(iv) The Parties agree to each bear their own attorneys' fees and expenses
and pay the costs of the arbitration proceeding in equal shares; provided,
--------
however, that the arbitrator(s) may, in their discretion, require the
-------
losing Party to pay the costs of the arbitration proceeding and all or a
portion of the attorneys' fees and expenses of the prevailing Party.
(v) The arbitration proceedings contemplated by this Section 9.05
shall be as confidential and private as permitted by law. To that end, the
parties to this Agreement shall not disclose the existence, content or
results of any proceeding conducted in accordance with this Section 9.05,
and materials submitted in connection with such proceedings shall not be
admissible in any other proceedings ; provided, however, that this
-------- -------
confidentiality provision shall not prevent a petition to vacate or enforce
an arbitral award, and shall not bar disclosures required by law.
(b) Notwithstanding any request to arbitrate a dispute, controversy or
claim pursuant to subparagraph (a) above,
(i) a Party, having given the other party at least five (5) business
days' notice of such other Party's alleged breach, may in good faith seek
immediate equitable relief from a court of competent jurisdiction to enable
the instituting Party to prevent irreparable harm (alleged to arise from
the alleged breach) pending arbitral relief; or
(ii) the Parties shall not be required to arbitrate any claim which is
asserted with respect to a third party who is an indispensable or necessary
party, and such third party is not bound and will not, upon request of any
other Party, agree to arbitrate such matter subject to the arbitration
rules provided in this Section 9.05.
(c) The Parties intend that this Section 9.05 shall be valid, binding,
enforceable and irrevocable and shall survive any termination of this Agreement.
ARTICLE X
---------
TERMINATION OF OBLIGATIONS AND WAIVERS
OF CONDITIONS
10.01 TERMINATION OF AGREEMENT. Anything herein to the contrary
------------------------
notwithstanding, this Agreement and transactions contemplated hereby may be
terminated at any time before the Closing, as follows, and in no other manner:
(a) Mutual Consent. By mutual written consent of the Parties.
--------------
31
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(b) Expiration Date. By any Party if the Closing shall not have
---------------
occurred by June 10, 1995 (which date may be extended by mutual agreement of the
Parties)provided, however, that the Party seeking to terminate shall not be in
-------- -------
material breach of any representation, warranty or covenant on its part
contained herein.
(c) At Option of Seller or MDT. By the Board of Directors of Seller or
--------------------------
MDT at any time after June 9, 1995, if, by that date, the conditions set forth
in Section 7.03, 7.04 or 7.05 hereof have not been met, despite the use of all
reasonable efforts of Seller and MDT to cause such conditions to be met.
(d) At Option of Buyer. By the Board of Directors of Buyer at any time
------------------
after June 9, 1995, if, by that date, the conditions set forth in Sections 6.09,
6.10 or 6.11 have not been met, despite the use of all reasonable efforts of
Buyer to cause such conditions to be met.
10.02 OBLIGATIONS UPON TERMINATION; WAIVER OF CONDITIONS. In the
--------------------------------------------------
event that this Agreement shall be terminated pursuant to Section 10.01, all
obligations of the Parties under this Agreement (other than as set forth in
Section 9.05) shall terminate and there shall be no liability of any Party to
another (except, in the case of any termination pursuant to Section 10.01(b)
only, by reason of default hereunder which has not been waived). If any
condition specified in Article Section VI has not been satisfied, Buyer may
nevertheless at its election proceed with the transactions contemplated hereby
and, if any condition specified in Article VII has not been satisfied, Seller
and MDT may nevertheless at their election proceed with the transactions
contemplated hereby. Any such election to proceed shall be evidenced by a
certificate executed on behalf of the electing party by a duly authorized
officer.
ARTICLE XI
MISCELLANEOUS
-------------
11.01 COOPERATION. The Seller and Buyer shall undertake their
respective best efforts to cooperate with each other and their respective
counsel and accountants and other representatives in connection with any steps
required to be taken as part of the respective obligations under this Agreement
and in connection with the consummation of the transactions contemplated hereby.
11.02 MODIFICATION OF AGREEMENT. This Agreement may be amended or
modified only in writing signed by all of the Parties'.
11.03 NOTICES. All notices, consents, demands or other
communications required or permitted to be given pursuant to this Agreement
shall be deemed sufficiently given when delivered personally or telefaxed during
regular business hours during a business day to the appropriate location
described below, or three
32
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(3) business days after posting thereof by United States first-class, registered
or certified mail, return receipt requested, with postage and fees prepaid and
addressed as follows:
IF TO BUYER: Maxxim Medical, Inc.
Attn: Mr. Kenneth W. Davidson
Chairman of the Board, President
and Chief Executive Officer
104 Industrial Blvd.
Sugar Land, Texas 77478
Telephone Number (713) 240-5588
Telefax Number (713) 240-9123
With copy to: Mr. John R. Boyer, Jr., Esq.
Boyer, Ewing & Harris Incorporated
Nine Greenway Plaza, Suite 3100
Houston, Texas 77046
Telephone Number (713) 871-2025
Telefax Number (713) 871-2024
IF TO SELLER OR MDT: MDT Diagnostic Company
7371 Spartan Boulevard East
North Charleston, South Carolina 29418
Attn: Mr. Charles B. Swenson, President
Telephone: (803) 552-8652
Telefax: (803) 552-0348
MDT Corporation
Stratford Hall, Suite 200
1009 Slater Road
Morrisville, North Carolina 27560
Attn: Mr. Thomas M. Hein,
Vice President - Finance
Telephone: (919) 941-9745
Telefax: (919) 941-9755
With copy to: O'Melveny & Myers
400 South Hope Street
Los Angeles, CA 90071
Attn: C. James Levin, Esq.
Telephone: (213) 669-6000
Telefax: (213) 669-6407
Any Party at any time by furnishing notice to the other Party in the manner
described above may designate additional or different addresses for subsequent
notices or communications.
11.04 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of New York. In the
event of a dispute concerning this
33
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Agreement, venue shall lie in the appropriate arbitration panel or federal or
state district courts located in, or if not applicable, closest to Atlanta,
Georgia.
11.05 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not invalidate or affect the enforceability of
any other provision of this Agreement.
11.06 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement among the Parties' with respect to the subject matter hereof.
11.07 WAIVER. No delay in the exercise of any right under this
Agreement shall waive such rights. Any waiver, to be enforceable, must be in
writing.
11.08 ASSIGNMENT. The Seller shall not assign this Agreement without
the prior written consent of Buyer not to be unreasonably withheld. Any
attempted assignment of the rights or obligations by the Seller without such
consent shall be null and void. Buyer and Seller may assign its rights, duties,
and obligations under this Agreement to an Affiliate provided that Buyer and
Seller shall remain liable therefore. Reference to any of the Parties' in this
Agreement shall be deemed to include the successors and assigns of such Party.
11.09 HEADINGS. Headings in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.
11.10 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to
this Agreement are hereby incorporated in and made a part of this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
11.12 REMEDIES. Subject to Section 9.05, if any legal action or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing Party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding.
11.13 RIGHTS OF PARTIES. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the Parties' and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the
34
<PAGE>
obligation or liability of any third persons to any Party to this Agreement, nor
shall any provision give any third person any right of subrogation or action
over against any Party to this Agreement.
11.14 POST-CLOSING BUSINESS RELATIONSHIPS. Until the expiration of
the transition period under the Transition Services Agreement, the Seller and
MDT will assist Buyer, to the extent Buyer may reasonably request, in the
preservation or enhancement of Buyer's relationships with suppliers, customers,
employees and others having business relationships with Buyer in connection with
the Buyer's use of the Assets in the Business. In addition, Seller agrees to
promptly forward to Buyer all payments (other than in respect of Seller's
accounts receivable) or communications whatsoever (whether written, telephonic
or otherwise) related to the conduct of the Business following the Closing Date,
which come into the possession of Seller after the Closing Date regardless of
when such payments or communications are made.
11.15 PUBLICITY. None of the Parties shall issue any press release or
make any public statement regarding the transactions contemplated hereby without
the prior written approval of the other Party, except as shall be required by
applicable law. The Parties acknowledge that the parent company of each of the
Buyer and the Seller are each a public company which may be required to make one
or more public announcements of the transactions set forth herein or the
execution of this Agreement in a press release or in its respective filings with
the Securities and Exchange Commission, and that any such press release or
filings made upon the advice of counsel by such parent and upon at least 24
hours' notice to the other parties shall in no event be deemed to be a violation
of this provision.
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<PAGE>
EXECUTED in multiple counterparts effective as of the date first
written above.
MAXXIM MEDICAL, INC.
By: /s/ Kenneth W. Davidson
------------------------
Kenneth W. Davidson, Chairman
of the Board, President and
Chief Executive Officer
MDT DIAGNOSTIC COMPANY
By: /s/ Charles B. Swenson
-----------------------
Charles Swenson
President
MDT CORPORATION
By: /s/ Thomas M. Hein
-------------------
Thomas Hein
Vice President-Finance
36
<PAGE>
LIST OF SCHEDULES TO
AGREEMENT OF PURCHASE AND SALE OF ASSETS
DATED AS OF JUNE 4, 1995
BY AND AMONG MAXXIM MEDICAL, INC.,
MDT DIAGNOSTIC COMPANY
AND MDT CORPORATION/*/
________________________________
SCHEDULES:
-- Disclosure Letter
1.09 Product Listing
2.01(b) Inventory
2.01(c) Equipment
2.01(d) Licenses
2.01(e) Miscellaneous Assets
2.01(f) Intangible Property
2.01(g) Customer Contracts
2.01 Excluded Assets
2.04 Allocation Schedule
2.06 Procedures for Valuing Inventory Assets
3.02 Title to and Condition of Assets
3.04 Contracts
3.05 Equipment
3.06 Licenses
3.08 Compliance with Laws
3.09 Litigation
3.10 Conflicts
3.11 Authority
3.12 Personnel
3.14 Trade Names and Rights
3.15 Patents
3.16 Trade Secrets
3.17 Title to Inventory
3.18 Customers
3.20 Insurance
3.21 MDT Corporation Financial Statements
3.22 Certain Events
3.23 Consents and Approvals
3.24 Documents
3.28 Assets
4.08 Maxxim Financial Statements
5.03 Seller's Employees
- ---------------
/*/ MDT Corporation agrees to furnish supplementally a copy of any of the
omitted schedules to the Commission upon its request.
37
<PAGE>
LIST OF EXHIBITS TO
AGREEMENT OF PURCHASE AND SALE OF ASSETS
DATED AS OF JUNE 4, 1995
BY AND AMONG MAXXIM MEDICAL, INC.,
MDT DIAGNOSTIC COMPANY
AND MDT CORPORATION/**/
________________________________
EXHIBITS:
1.08 Form of Non-Competition Agreement
1.13 Form of Transition Services and Supply Agreement
-- Form of Escrow Agreement
- ------------
/**/ MDT Corporation agrees to furnish supplementally a copy of any of the
omitted exhibits to the Commission upon its request.
38
<PAGE>
EXHIBIT 3.2
BY-LAWS
(as Amended)
OF
MDT CORPORATION,
a Delaware corporation
ARTICLE I
OFFICES
-------
The principal office of this corporation shall be located in Torrance,
Los Angeles County, State of California. The corporation may have such other
offices, in the United States and elsewhere, as the business of the corporation
may require from time to time. The registered office of the corporation
required by the General Corporation Law of the State of Delaware to be
maintained in Delaware shall be The Corporation Trust Company, 1209 Orange
Street, Wilmington, County of New Castle, State of Delaware 19801.
ARTICLE II
STOCKHOLDERS
------------
Section 1. Time of annual meeting. The annual meeting of the
----------------------
stockholders shall be held on the third Friday of July of each year, beginning
with the year 1988, at the hour of 1:00 o'clock P.M., or such other date and
time as shall be designated in a resolution of the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held on
the day designated in the manner provided above for any annual meeting of
stockholders or any adjournment thereof, the Board of Directors shall cause the
election to be
<PAGE>
held at a special meeting of stockholders as soon thereafter as conveniently may
be arranged.
Section 2. Place of annual meeting. The Board of Directors may
-----------------------
designate any place, either within or without the State of Delaware, as the
place of meeting for any annual meeting of the stockholders. A waiver of notice
signed by all stockholders entitled to vote at the meeting may designate any
place, either within or without the State of Delaware, as the place for holding
such meeting. If no designation is made, the place of meeting shall be the
principal office of the corporation at Torrance, California.
Section 3. Special meetings. Special meetings of the stockholders
----------------
for any purpose or purposes may be called by the Chairman and the President,
acting together, or any number of stockholders whose holdings shall be 25% or
more of the outstanding common stock of the corporation.
Section 4. Notice of annual and special meetings. Written or printed
-------------------------------------
notice stating the date, hour, and place of the meeting and the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
nor more than 60 days before the date of the meeting to each stockholder of
record entitled to vote at such meeting. If mailed such notice shall be deemed
to be delivered when deposited in the United States mails with postage thereon
prepaid, addressed to the stockholder at his address as it appears in the stock
transfer record of the corporation.
2
<PAGE>
Section 5. Stockholder record date. For the purpose of determining
-----------------------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or stockholders entitled to the payment of any
dividends or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors of the corporation may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be not less than 10 and not more than 60 days prior to the date on
which a particular action requiring such determination of stockholders is to be
taken. If no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders or stockholders
entitled to receive payment of dividends, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided
herein, such determination shall apply to any adjournment thereof.
Section 6. Stockholder list. The Chairman or the President and the
----------------
Secretary of the corporation shall make, at least 10 days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order with the
address of and the number of shares held by each, which list for a period of 10
days prior to such meeting shall be kept on file
3
<PAGE>
at the principal office of the corporation in Torrance, California, and shall be
subject to inspection by any stockholder at any time during usual business
hours. Such list also shall be produced and kept open at the time and place of
the meeting and shall be subject to inspection of any stockholder during the
whole time of the meeting. The stock transfer record shall be prima facie
evidence as to the stockholders entitled to examine such list or stock transfer
record or to vote at any meeting of the stockholders.
Section 7. Quorum. A majority of outstanding shares of the
------
corporation entitled to vote represented in person or by proxy shall constitute
a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares are represented at the meeting, the majority of the shares so
represented may adjourn the meeting from time to time without further notice,
and at such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally noticed. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding withdrawal of
enough stockholders to leave less than a quorum. The act of a majority of the
shares of stock, represented in person or by proxy, present at a meeting at
which a quorum is present shall be the act of the meeting.
Section 8. Proxies. At all meetings stockholders may vote by proxy
-------
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with
4
<PAGE>
the Chairman, the President, or the Secretary of the corporation before or at
the time of the meeting.
Section 9. Voting. Each outstanding share entitled to vote shall be
------
entitled to one vote upon each matter submitted to a vote at any meeting of
stockholders. At each election for directors every stockholder entitled to vote
at such election shall have the right to vote, in person or by proxy, the number
of shares owned by him for each director to be elected. Cumulative voting shall
not be permitted.
Section 10. Voting of shares by certain holders. Shares outstanding
-----------------------------------
in the name of another corporation may be voted by such officer, agent, or proxy
as the by-laws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine. Shares
held by an administrator, executor, guardian, or conservator may be voted by him
either in person or by proxy without a transfer of such shares into his name.
Shares standing in the name of a trustee may be voted by him either in person or
by proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares of the corporation's own stock
belonging to the corporation or held by it in a fiduciary capacity shall not be
voted directly or indirectly at any meeting and shall not be counted in
determining the total outstanding shares at any given time.
5
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Responsibility. The business of the corporation shall be
--------------
the responsibility of the Board of Directors.
Section 2. Number, tenure and qualifications. The number of the
---------------------------------
Board of Directors shall be nine. Each director shall hold office until the
next annual meeting of the stockholders or until his successor shall be elected.
Directors need not be residents of the State of Delaware nor stockholders of the
corporation.
Section 3. Meetings. Meetings of the Board of Directors may be
--------
called by or at the request of the Chairman or the President or by a majority of
the directors. The person or persons authorized to call such meetings may fix
any place within or without the State of Delaware as the place for holding any
meeting of the Board of Directors called by him or them. Unless otherwise
provided in such notice, meetings of the Board of Directors shall be held at the
principal office of the corporation in Torrance, California. A meeting of the
Board of Directors for the purpose of electing officers of the corporation shall
be held each year immediately after the adjournment of the annual stockholders'
meeting. No notice of such meeting need be given. Other regular meetings of
the Board of Directors shall be held at such times as the Board of Directors may
determine.
Section 4. Notice. Notice of any meeting of the Board of Directors
------
shall be given at least ten days previously thereto
6
<PAGE>
by written notice delivered personally or mailed to each director's business
address. Any director may waive notice of any meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted nor the purpose of any meeting
of the Board of directors need be specified in the notice or waiver of notice of
such meeting.
Section 5. Quorum. A majority of the Board of Directors shall
------
constitute a quorum for the transaction of business at any meeting thereof. The
act of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. If less than a quorum is
present at a meeting, a majority of directors present may adjourn the meeting
from time to time without further notice.
Section 6. Vacancy. Whenever any vacancy shall occur in the Board of
-------
Directors, by reason of death, resignation, or increase in the number of
directors or otherwise, it may be filled by a majority of the remaining
directors, though less than a quorum, for the balance of the term except that,
in the case of an increase in the number of directors, such vacancy may be
filled only until the next annual meeting of stockholders, at which time the
vacancy shall be filled by vote of the stockholders.
7
<PAGE>
Section 7. Compensation. By resolution of the Board of Directors,
------------
each director may be paid his expenses of attendance at each meeting of the
Board of Directors, and each director who is not a fulltime employee of the
corporation or of one or more of its subsidiaries or of both, may be paid a
fixed sum for attendance at each meeting of the Board of Directors.
ARTICLE IV
OFFICERS
--------
Section 1. Identity. The officers of the corporation shall be a
--------
Chairman, a President, and one or more Vice Presidents, the number thereof to be
determined by the Board of Directors, a Secretary, and a Treasurer, each of whom
shall be elected by the Board of Directors. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors. Any two or more offices may be held by the same person except that
one person may not be at the same time President and Secretary.
Section 2. Election and term of office. The officers of the
---------------------------
corporation shall be elected by the Board of Directors at the first meeting of
the Board of Directors held after each annual meeting of the stockholders. If
the election of officers shall not be held at such meeting, such election shall
be held as soon thereafter as conveniently may be arranged. Each officer shall
hold office until his successor shall have been duly elected, or until his
death, or until he shall resign, or until he shall have been removed.
8
<PAGE>
Section 3. Removal. Any officer elected or appointed by the Board of
-------
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights of any person so removed.
Section 4. Vacancies. Any vacancy in any office because of death,
---------
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. Chairman. The duties of the Chairman shall be to preside
--------
at all meetings of the stockholders and of the Board of Directors. He shall
function in place of the President in the absence or disability of the
President.
Section 6. President. The president shall be the chief executive
---------
officer. He shall supervise and control all operations of the corporation. All
Vice-Presidents shall report directly to him in connection with the operations
of the corporation. He shall function in place of the Chairman in the absence
or disability of the Chairman.
Section 7. Vice-Presidents. In the absence of the Chairman and the
---------------
President or in the event of their death or refusal to act, the Vice-President,
or in the event there be more than one Vice-President, the Vice-Presidents in
the order designated at the time of their election or later, shall perform the
duties of the Chairman and the President, and when so acting shall have all
powers and be subject to all restrictions of the
9
<PAGE>
Chairman and the President. Any Vice-President shall perform such other duties
as from time to time are assigned him by the Chairman or the President.
Section 8. Secretary. The Secretary shall keep the minutes of the
---------
stockholders' and the Board of Directors' meetings in one or more books provided
for that purpose (unless another person is charged with such responsibilities by
the Board of Directors); insure that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; be custodian of the
corporate records and the seal of the corporation and determine that the seal of
the corporation is affixed to all documents the execution of which on behalf of
the corporation under its seal is duly authorized; keep a record of the post
office address of each stockholder which shall be furnished to the Secretary by
each stockholder; sign with the Chairman or the President certificates for
shares of the corporation issued or to be issued as authorized by the Board of
Directors; and in general perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the
Chairman or the President.
Section 9. Treasurer. If required by the Board of Directors the
---------
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall have charge and custody of and be responsible for all funds and securities
of the corporation, receive and give receipts for monies due and payable to the
corporation, deposit all such
10
<PAGE>
monies in the name of the corporation in such banks, trust companies, or other
depositories as shall be selected in accordance with Article V of these by-laws,
and in general perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the Chairman or
the President.
Section 10. Assistant Secretaries and Assistant Treasurers. The
----------------------------------------------
Assistant Secretaries may sign with the Chairman or the President certificates
for shares of the corporation and attest to such other documents of the
corporation as may have been authorized by resolution of the Board of Directors.
The Assistant Treasurers shall, if required by the Board of Directors, give bond
for the faithful discharge of their duties in such sums and with such surety or
sureties as the Board of Directors may determine. The Assistant Secretaries and
Assistant Treasurers, in general, shall perform such duties as shall be assigned
to them by the Secretary or the Treasurer, respectively, or by the Chairman or
the President.
Section 11. Compensation. The salaries of the officers shall be
------------
fixed from time to time by the Board of Directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 1. Contracts. The Board of Directors may authorize or
---------
approve any officer or officers, or agent or agents
11
<PAGE>
to enter into any contract or execute or deliver any instrument in the name of
and on behalf of the corporation and such authority or approval may be general
or confined to specific instances.
Section 2. Loans. No loan shall be contracted on behalf of the
-----
corporation and no evidence of indebtedness shall be issued in its name in
excess of $100,000 unless authorized by resolution of the Board of Directors.
Such authority may be general or confined to specific instances.
Section 3. Checks and drafts. All checks, drafts, or other orders
-----------------
for the payment of money, notes, or other evidence of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, or agent or
agents, of the corporation, and in such manner, as shall be from time to time
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies, or other depositories as the Board of Directors
may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
Section 1. Certificates for shares. Certificates representing shares
-----------------------
of the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman or the President
and by the Secretary or an Assistant Secretary. All certificates for shares
shall be consecutively numbered. The name and address of the
12
<PAGE>
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered in the stock transfer record of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed, or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
Section 2. Transfer of shares. Transfer of shares of the corporation
------------------
shall be made only on the stock transfer record of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Chairman or the President and
the Secretary of the corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares stand on the books
of the corporation shall be deemed by the corporation to be the owner thereof
for all purposes.
ARTICLE VII
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the first day of
April and end on the thirty-first day of March in each year.
13
<PAGE>
ARTICLE VIII
DIVIDENDS
---------
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law.
ARTICLE IX
SEAL
----
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
----------------
Whenever any notice is required to be given to any stockholder or
director of the corporation under the provisions of these by-laws, or under the
provisions of the Certificate of Incorporation, or under the provisions of the
General Corporation Law of the State of Delaware, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
14
<PAGE>
EXHIBIT 10.5.2
MDT CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
FISCAL YEAR 1996
ADDENDUM G
I. In accordance with the provisions of Section VIII of the Plan, the
Compensation Committee has determined that Income Before Taxes shall be the
major element to determine the degree of performance achievement and Plan payout
for Fiscal Year 1996.
II. For those in the below-listed positions, the Plan payout shall be based on
the Corporation's consolidated actual Income Before Taxes achieved measured
against the Corporation's consolidated planned Income Before Taxes (60%) and on
each Subsidiary Company's actual Income Before Taxes achieved measured against
each Company's planned Income Before Taxes (13.3% per Company).
Chairman, Chief Executive Officer, President (1)
Vice President, Finance, Treasurer and Assistant Secretary (1)
Vice President, Human Resources and Assistant Secretary (1)
Director, Management Information Systems (1)
Accounting and Consolidations Manager (1)
Credit Manager (1)
Financial Planning Manager (1)
Payroll and Retirement Plans Manager (1)
Microsystems Development Manager (1)
Data Center Manager (1)
Information Systems Supervisor (1)
Note: Figures in parentheses indicate anticipated number of incumbents in each
position or in identified group of plan participants.
<PAGE>
III. For those in the below-listed positions, the Plan payout shall be based on
the Corporation's consolidated actual Income Before Taxes achieved measured
against the Corporation's consolidated planned Income Before Taxes (60%) and on
the group's or in the division's actual bookings (or Operating Income) measured
against the group's or the division's planned bookings (or Operating Income)
(40%).
Vice President, Corporate,
Governmental and
International Group.(1)........ Corp Accts Bookings (10%)
Governmental Bookings (10%)
International Bookings (10%)
Operating Income (Canada) (10%)
Director, Canadian Operations.(1)... Equipment Bookings (20%)
Operating Income (20%)
Director, International Sales.(1)... Athens Bookings (13.3%)
Hong Kong Bookings (13.3%)
Other Int'l Bookings (13.3%)
Sr. Governmental Sales Manager.(1).. Governmental Bookings
Sr. Corporate Accounts Manager.(1).. Corporate Accounts Bookings
Corporate Accounts Manager.(2)...... Corporate Accounts Bookings
Sales Manager (Athens).(1).......... Athens Bookings
Sales Manager (Hong Kong).(1)....... Hong Kong Bookings
Int'l Administration Manager.(1).... International Bookings
Sr. Prod. Spt. Supv. (Canada).(3)... Branch Revenues
IV. a. For all MDT Biologic Company and MDT Diagnostic Company participants
in the Plan (76), excluding those in the position of Director, Sales, Senior
Sales Manager and Project Manager, the Plan payout shall be based on the
Company's actual Income Before Taxes achieved measured against the Company's
planned Income Before Taxes (40%) and on the Corporation's consolidated actual
Income Before Taxes achieved measured against the Corporation's consolidated
planned Income Before Taxes (60%).
2
<PAGE>
b. For those in the below-listed positions, the Plan payout shall be
based on the Company's actual Income Before Taxes achieved measured against the
Company's planned Income Before Taxes (20%), on the Corporation's consolidated
actual Income Before Taxes achieved measured against the Corporation's
consolidated planned Income Before Taxes (40%) and on the division's (or
region's) actual bookings measured against the division's (or region's) planned
bookings (40%).
Director, Sales.(1)................... Divisional Bookings
Hospital Division
MDT Biologic Company
Director, Sales.(1)................... Divisional Bookings
Hospital Division
MDT Diagnostic Company
Director, Sales.(1)................... Divisional Bookings
Medical Division
MDT Diagnostic Company
Director, Sales.(1)................... Divisional Bookings
Dental Division
MDT Diagnostic Company
Senior Sales Manager.(1).............. Divisional Bookings
Scientific Division
MDT Biologic Company
Senior Sales Manager.(4).............. Regional Bookings
Hospital Division
MDT Biologic Company
Product Manager.(4)................... Regional Bookings
Hospital Division
MDT Biologic Company
V. a. For all MDT Technionic Company participants in the Plan (6), excluding
Senior Product Support Managers and Senior Product Support Supervisors, the Plan
payout shall be based on the Company's actual Income Before Taxes achieved
measured against the Company's planned Income Before Taxes (40%) and on the
Corporation's consolidated actual Income Before Taxes achieved measured against
the Corporation's consolidated planned Income Before Taxes (60%).
3
<PAGE>
b. For those in the below-listed positions, the Plan payout shall be
based on the Company's actual Income Before Taxes achieved measured against the
Company's planned Income Before Taxes (20%), on the Corporation's consolidated
actual Income Before Taxes achieved measured against the Corporation's
consolidated planned Income Before Taxes (40%) and on the region's actual gross
margins measured against the region's planned gross margins (40%) (or on the
branch's actual revenues measured against the branch's planned revenues (40%)).
Senior Product Support Manager.(4)......... Regional Gross Margin
Senior Product Support Supervisor.(27)..... Branch Revenues
Service Center Manager/Supervisor.(2)...... Service Center Revenues
VI. a. A Plan participant's actual award shall consist of a percentage of the
participant's target award and shall be determined in accordance with the
following schedule:
PLAN PERCENTAGE OF
ACHIEVEMENT TARGET AWARD
80% 40%
85% 55%
90% 70%
95% 85%
100% 100%
105% 115%
110% 130%
115% 145%
120% 160%
b. The Plan Achievement percentage shall be determined by individually
calculating the percentages of plan achievement in each measurement category
(see example on following page). The percentages shall be rounded down to the
next lowest percentage (e.g. 82% Plan Achievement is rounded down to 80% which
results in a 40% payout of the target award).
VII. Income Before Taxes for purposes of the Plan is defined as Income Before
Taxes and before reorganization costs.
VIII. Planned Income Before Taxes results shall be realized after the inclusion
of Plan payouts are incorporated into the Income Statement for Plan payouts to
be realized by participants in the Plan.
4
<PAGE>
IX. Awards under the Plan may be paid in cash (50%) and in MDT Common Stock
(50%), at the election of the Compensation Committee of the Board of Directors.
X. This addendum supersedes the provisions of Addenda A, B and F. All other
provisions of the Management Incentive Compensation Plan, effective April 1,
1987, shall apply.
/s/ Clark D. Jones 4/26/95
- ----------------------------------------------- ----------------
Chairman - Compensation Committee Date
/s/ John S. Gilbertson 4/26/95
- ----------------------------------------------- ----------------
Member - Compensation Committee Date
/s/ John C. Shamy 4/26/95
- ----------------------------------------------- ----------------
Member - Compensation Committee Date
5
<PAGE>
EXAMPLE:
- -------
TARGET AWARD CALCULATION
Base Salary. . . . . .$80,000
Target Award Pct...... .20
Target Award..........$16,000
<TABLE>
<S> <C>
Element A represents 20% of Target Award:
----------------------------------------
Planned Company Income Before Taxes....... $ 3,000,000
Actual Company Income Before Taxes........ $ 2,700,000
Percent of Plan Achievement............... 90.0%
Target Award - Element A.................. $ 3,200
Percent Payout For 90% Achievement........ 70.0%
Payout - Element A........................ $ 2,240
Element B represents 40% of Target Award:
----------------------------------------
Planned Corporation Income Before Taxes... $ 6,000,000
Actual Corporation Income Before Taxes.... $ 4,998,000
Percent of Plan Achievement............... 83.3%
Target Award - Element B.................. $ 6,400
Percent Payout For 83.3% Achievement...... 40.0%
Payout - Element B........................ $ 2,560
Element C represents 40% of Target Award:
----------------------------------------
Planned Division Bookings................. $10,000,000
Actual Division Bookings.................. $ 8,500,000
Percent of Plan Achievement............... 85.0%
Target Award - Element C.................. $ 6,400
Percent Payout for 85.0% Achievement...... 55%
Payout - Element C........................ $ 3,520
TOTAL PAYOUT - ELEMENT A....................... $ 2,240
ELEMENT B....................... $ 2,560
ELEMENT C....................... $ 3,520
GRAND TOTAL................ $ 8,320
</TABLE>
6
<PAGE>
EXHIBIT 10.6.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1,
1995, is between MDT CORPORATION, a Delaware corporation ("Employer"), and J.
MILES BRANAGAN ("Employee").
WHEREAS Employer and Employee desire to enter into an agreement
setting forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the
three-year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1998,
subject to termination as provided in Paragraph 10 hereof.
2. Duties.
(a) Employer agrees to employ Employee as CHAIRMAN OF THE BOARD
OF DIRECTORS AND CHIEF EXECUTIVE OFFICER with responsibility for the duties
normally associated with such executive positions, and for such other
executive duties as the Employer's Board of Directors shall assign to him
from time to time, including those of President and Chief Operating
Officer, subject at all times to the direction of Employer's Board of
Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board Of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of
this Agreement he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any other
business activity for gain or profit or other pecuniary advantage; provided,
however,
<PAGE>
that this paragraph shall not limit or restrict Employee's rights to serve on
the boards of directors of noncompeting companies or to make and have personal
investments in such form or manner as will not require his active services in
the daily operations of the businesses in which such investments are made.
4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than $270,599, payable in semi-monthly
installments and subject to such deductions and withholdings as are
required to be made pursuant to applicable governmental laws, rules and
regulations.
(b) Employee shall be entitled to management incentive
compensation in an amount equivalent to FORTY-FIVE PERCENT (45%) of his
annual salary, subject to the criteria detailed in the provisions of
Employer's Management Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of six
(6) weeks duration, during which time his compensation shall be paid in
full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
(f) Upon the expiration of this Agreement pursuant to Paragraphs
1, 10(a)(i), 10(a)(ii) or 10(a)(iii), Employee, or his designated
beneficiary in the event of Employee's death, shall be eligible for
relocation to California or to any other location within the continental
limits of the United States in accordance with the terms of the Company's
relocation policy in effect at that time, provided that the relocation is
completed within two (2) years from the expiration of this Agreement.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by
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Employee in connection with the performance of his services under this
Agreement, upon presentation of such reasonably detailed expense statements,
vouchers or other supporting information as Employer may from time to time
request.
6. Confidentiality. Employee recognizes and acknowledges that
during his employment by Employer pursuant to this Agreement he may have access
to or may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential Information").
Employee further recognizes and acknowledges that all Confidential Information
which is now or may hereafter be in his possession is the property of Employer
and that protection of this Confidential Information against unauthorized
disclosure or use is of critical importance to Employer in order to protect
Employer from unfair competition. Employee therefore agrees that he will not at
any time, either while employed by Employer or afterwards, without the prior
written consent of the Board of Directors of Employer, make any independent use
of such Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer or
others who have a business relationship with Employer and who, in Employee's
judgement, have a business need to know (e.g. advisory board members), and
except on advice of counsel during testimony under subpoena in any court or
before any administrative agency having jurisdiction or during any authorized
governmental inquiry or investigation, provided that Employee shall cooperate
with Employer in taking all reasonable and appropriate steps to assure the
protection of such Confidential Information from unauthorized use or disclosure
outside of such action, proceeding, inquiry or investigation, or except to the
extent that any such Confidential Information shall be in the public domain
other than by reason of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and
thereafter turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials and
other valuable discoveries, whether patentable or not, which are conceived or
made by Employee solely or jointly with another during the period of employment,
on the time or property of Employer or otherwise, and which are related to the
business or activities of Employer or which Employee conceives as a result of
his employment by Employer. Employee hereby assigns and agrees to assign to
Employer or its nominee all his interests in any of the foregoing. Whenever
requested to do so by Employer, Employee shall execute any and all patent
applications, assignments or other transfer instruments which Employer shall
deem necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other
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applicable trade secret protection or to otherwise confirm and protect
Employer's interest in and ownership of all such inventions, improvements,
programs, systems, novel techniques, copyrightable materials and other
discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a
key executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to Employer
of the services of Employee for which Employer has contracted hereunder, and in
recognition of Employer's obligations hereunder, Employee covenants and agrees
as follows:
(a) During Employee's employment hereunder and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
(b) During Employee's employment hereunder and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business.
(c) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
As used herein, the term transacting business within "those
cities and counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated city or
county. The covenants contained in this paragraph shall be deemed to be a series
of separate covenants, for each city and county of each state where
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Employer is carrying on such business. If in any judicial proceeding a court
shall refuse to enforce all of the separate covenants deemed included in such
action, then such unenforceable covenants shall be deemed eliminated from the
provisions hereof for the purposes of such proceedings to the extent necessary
to permit the remaining separate covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach
of Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be subject to
irreparable injury therefrom. It is, therefore, agreed that Employer, in
addition to and without limiting any other remedy or right it may have, shall be
entitled to such equitable and injunctive relief as may be available to restrain
Employee from violation of any of said covenants, such right to injunctive and
equitable relief, however, to be cumulative and in addition to whatever other
remedies Employer may have in the premises, including the recovery of
consequential but not punitive damages from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder
shall terminate upon the occurrence of the first to occur of the following
events or conditions:
(i) the expiration of the term specified in Paragraph
1 hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six
consecutive months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer
to terminate Employee's employment for "cause", which shall mean
a determination by the Board of Directors of Employer, in the
exercise of its sole discretion, that there has been fraud,
misappropriation, embezzlement, gross and continuing inattention
to duty, or a substantial breach of this Agreement by Employee.
(v) the election of the Board of Directors of Employer
to terminate Employee's employment upon the entry of any final
non-appealable order for relief in respect of Employee under any
bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt or similar law of any jurisdiction now or hereafter in
effect if, in
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the good faith determination of the Board of Directors, such
entry of a final, non-appealable order for relief resulted from
the willful neglect, financial irresponsibility or moral
turpitude of Employee.
(vi) Employee's conviction of a crime involving moral
turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or
(ii) of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement
by Employee or by Employer pursuant to Subparagraph (a) of this Paragraph
10, Employer's sole obligation shall be to pay Employee or his estate any
compensation remaining unpaid through the effective date of termination.
In the case of the death of Employee, however, Employer's obligation shall
be to pay Employee's designated beneficiary or estate the Employee's salary
in effect at the time of his death, in semi-monthly installments, and to
provide Employee's designated beneficiary healthcare benefits on the same
basis as an active employee for 180 days; to pay the management incentive
compensation to which the Employee would otherwise have been entitled for
the fiscal year in which death occurs; and to pay to his designated
beneficiary or estate the life insurance, retirement and supplementary
retirement benefits to which they are entitled within 180 days. Upon the
termination of this Agreement by Employer without cause, and as the sole
and exclusive remedy against Employer for the exercise of its right under
this Agreement to terminate this Agreement without cause, Employer's sole
obligation shall be to pay Employee the salary in effect at the time of his
termination, in semi-monthly installments, to continue his participation in
the Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, without any further extensions of such term; provided,
however, that the amount of salary shall be reduced by the salary Employee
earns from reasonably comparable employment with another employer; and
provided further that Employer's obligation to continue healthcare and life
insurance benefits shall end when Employee is covered under reasonably
comparable benefit plans provided by another employer. The resignation of
Employee in response to a demand by Employer for the relocation of Employee
outside of the United States shall be
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deemed a termination by Employer without cause for purposes of this
Agreement.
(d) The respective rights and obligations of Employer and
Employee pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the
expiration or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee. Employee
agrees to take such steps and perform such acts as shall be necessary to assist
Employer in obtaining or maintaining in effect such bonds or insurance,
including the completion of the required applications and questionnaires, the
furnishing of any required references, and consenting, upon request, to any
required background, financial or other investigations. Any such required
information will be treated as confidential and will be returned promptly after
the completion of such investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and
be binding upon Employee, his legal representatives and testate or intestate
distributees, and Employer, its successors and assigns. This Agreement may not
be assigned by Employee.
13. Notices. Any notice or request required or permitted under
this Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to Employer or
to Employee at Employer's then principal place of business, with a copy to
Employee at his home address, as set forth on the records of Employer, or to
either party hereto at such other address or addresses as such party may from
time to time specify for the purpose in a notice similarly given to the other
party.
14. No Waiver or Modification. The waiver of the breach of any term
or condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition. No
amendment or modification of this Agreement shall be valid or binding unless
made in writing and signed by the other party against whom such waiver or
modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall
be brought by Employer or Employee in respect of an alleged breach by or default
in the performance of the other party hereto, the successful party in such suit
or proceeding (on the merits or otherwise) shall be entitled to reimbursement of
all reasonable expenses and charges incurred by it or him in connection
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with the defense or prosecution of such suit or proceeding, including but not
limited to the reasonable fees and expenses of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements, including, without limitation, the agreement
dated April 1, 1991, between Employer and Employee. No representation,
condition, provision or term related to or connected with this Agreement exists
except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to
Employer that he is not bound by any agreement or subject to any restriction
which would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any
paragraph or subparagraph of this Agreement shall not render invalid the
remainder of this Agreement or of any such paragraph or subparagraph.
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IN WITNESS WHEREOF, Employer and Employee have executed this Agreement
as of the date first written above.
"EMPLOYER"
MDT CORPORATION
By: /s/ Clark D. Jones
--------------------------------
Its: Chairman,
Compensation Committee
"EMPLOYEE"
J. MILES BRANAGAN
/s/ J. Miles Branagan [(3-26-95)]
--------------------------------
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EXHIBIT 10.6.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1, 1995, is
between MDT CORPORATION, a Delaware corporation ("Employer") and THOMAS M. HEIN
("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement setting
forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations hereinafter
set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the four-
year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1999,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional year, and (ii)
thereafter, when only two years of the term, as extended pursuant to clause
(i) or (ii) hereof, shall remain, the term hereof shall again be extended
for an additional year, such extensions continuing from year to year in the
same manner; provided, however, in each case that the term shall not be
extended, if prior to the date of such extension, Employer's Board of
Directors gives notice to Employee or Employee gives notice to Employer's
Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer
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approves an unsolicited bid by a single entity or group of affiliated
entities to acquire more than 50% of the voting stock of Employer issued
and outstanding immediately prior to the approval of such acquisition, and
such acquisition is consummated; (iii) the stockholders of Employer approve
the consummation of any merger of Employer or any sale or other disposition
of all or substantially all of its assets, if the stockholders of Employer
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of
the surviving or acquiring corporation; or (iv) a change in the majority of
the Board of Directors of Employer during any 24-month period without the
approval of a majority of directors in office at the beginning of such
period.
2. Duties.
(a) Employer agrees to employ Employee as VICE PRESIDENT, FINANCE,
TREASURER, AND ASSISTANT SECRETARY with responsibility for the duties
normally associated with such executive position, and for such other
executive duties as the Employer's Board of Directors shall assign to him
from time to time, subject at all times to the direction of Employer's
Board of Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of this
Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any
other business activity for gain or profit or other pecuniary advantage;
provided, however, that this paragraph shall not limit or restrict
Employee's rights to serve on the boards of directors of noncompeting
companies or to make and have personal investments in such form or manner
as will not require his active services in the daily operations of the
businesses in which such investments are made.
4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than
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$140,160, payable in semi-monthly installments and subject to such
deductions and withholdings as are required to be made pursuant to
applicable governmental laws, rules and regulations.
(b) Employee shall be entitled to management incentive compensation
in an amount equivalent to THIRTY-FIVE PERCENT (35%) of his annual salary,
subject to the criteria detailed in the provisions of Employer's Management
Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four (4)
weeks duration (unless under Employer's vacation policy, he is entitled to
additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection
with the performance of his services under this Agreement, upon
presentation of such reasonably detailed expense statements, vouchers or
other supporting information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that during his
employment by Employer pursuant to this Agreement he may have access to or
may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential
Information"). Employee further recognizes and acknowledges that all
Confidential Information which is now or may hereafter be in his possession
is the property of Employer and that protection of this Confidential
Information against unauthorized disclosure or use is of critical
importance to Employer in order to protect Employer from unfair
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competition. Employee therefore agrees that he will not at any time,
either while employed by Employer or afterwards, without the prior written
consent of the Board of Directors of Employer, make any independent use of
such Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer
or others who have a business relationship with Employer and who, in
Employee's judgment, have a business need to know (e.g. advisory board
members), and except on advice of counsel during testimony under subpoena
in any court or before any administrative agency having jurisdiction or
during any authorized governmental inquiry or investigation, provided that
Employee shall cooperate with Employer in taking all reasonable and
appropriate steps to assure the protection of such Confidential Information
from unauthorized use or disclosure outside of such action, proceeding,
inquiry or investigation, or except to the extent that any such
Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and thereafter
turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials
and other valuable discoveries, whether patentable or not, which are
conceived or made by Employee solely or jointly with another during the
period of employment, on the time or property of Employer or otherwise, and
which are related to the business or activities of Employer or which
Employee conceives as a result of his employment by Employer. Employee
hereby assigns and agrees to assign to Employer or its nominee all his
interests in any of the foregoing. Whenever requested to do so by
Employer, Employee shall execute any and all patent applications,
assignments or other transfer instruments which Employer shall deem
necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to
otherwise confirm and protect Employer's interest in and ownership of all
such inventions, improvements, programs, systems, novel techniques,
copyrightable materials and other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key
executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to
Employer of the services of Employee for which Employer has contracted
hereunder, and in recognition of Employer's obligations hereunder, Employee
covenants and agrees as follows:
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(a) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
Not-withstanding the foregoing, in the event of a "change in control", as
defined in Paragraph 1 hereof, the foregoing restriction shall apply only
with respect to the business in which MDT Corporation is engaged, the
cities or counties of the United States in which MDT Corporation transacted
business and the products or services provided by MDT Corporation
immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the
foregoing in the event of a "change in control", as defined in Paragraph 1
hereof, the foregoing restriction shall apply only with respect to the
business in which MDT Corporation is engaged and the cities or counties of
the United States in which MDT Corporation transacted business and the
products or services provided by MDT Corporation immediately prior to such
change in control.
(c) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
(d) Subparagraphs (a), (b) and (c) shall not apply in the event the
Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
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As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated
city or county. The covenants contained in this paragraph shall be deemed
to be a series of separate covenants, for each city and county of each
state where Employer is carrying on such business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants
deemed included in such action, then such unenforceable covenants shall be
deemed eliminated from the provisions hereof for the purposes of such
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach of
Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be
subject to irreparable injury therefrom. It is, therefore, agreed that
Employer, in addition to and without limiting any other remedy or right it
may have, shall be entitled to such equitable and injunctive relief as may
be available to restrain Employee from violation of any of said covenants,
such right to injunctive and equitable relief, however, to be cumulative
and in addition to whatever other remedies Employer may have in the
premises, including the recovery of consequential but not punitive damages
from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder shall
terminate upon the occurrence of the first to occur of the following events
or conditions:
(i) the expiration of the term specified in Paragraph 1 hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six consecutive
months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of its
sole discretion, that there has been fraud, misappropriation, embezzlement,
gross and continuing inattention to duty, or a substantial breach of this
Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the entry
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of any final non appealable order for relief in respect of Employee under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt or similar law of any jurisdiction now or hereafter in effect if, in
the good faith determination of the Board of Directors, such entry of a
final, non appealable order for relief resulted from the willful neglect,
financial irresponsibility or moral turpitude of Employee.
(vi) Employee's conviction of a crime involving moral turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or (ii)
of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement by
Employee or by Employer pursuant to Subparagraph (a) of this Paragraph 10,
other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further
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extensions of such term; provided, however, that the amount of salary shall
be reduced by the salary Employee earns from reasonably comparable
employment with another employer; and provided further that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. Upon the termination of this Agreement by Employer
without cause in connection with a "change in control," as such term is
defined in Paragraph 1 of this Agreement, and as the sole and exclusive
remedy against Employer for the exercise of its right under this Agreement
to terminate this Agreement without cause, Employer's sole obligation shall
be to pay Employee a lump sum, undiscounted cash payment equal to the
compensation payable through the remaining term of this Agreement, as such
term was reinstated under Paragraph 1, to continue his participation in the
Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand by
Employer for the relocation of Employee outside of the United States shall
be deemed a termination by Employer without cause for purposes of this
Agreement.
(d) The respective rights and obligations of Employer and Employee
pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the expiration
or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee.
Employee agrees to take such steps and perform such acts as shall be
necessary to assist Employer in obtaining or maintaining in effect such
bonds or insurance, including the completion of the required applications
and questionnaires, the furnishing of any required references, and
consenting, upon request, to any required background, financial or other
investigations. Any such required information will be treated as
confidential and will be returned promptly after the completion of such
investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and be
binding upon Employee, his legal representatives and testate or intestate
distributees, and
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Employer, its successors and assigns. This Agreement may not be assigned
by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to
Employer or to Employee at Employer's then principal place of business,
with a copy to Employee at his home address, as set forth on the records of
Employer, or to either party hereto at such other address or addresses as
such party may from time to time specify for the purpose in a notice
similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition.
No amendment or modification of this Agreement shall be valid or binding
unless made in writing and signed by the other party against whom such
waiver or modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall be
brought by Employer or Employee in respect of an alleged breach by or
default in the performance of the other party hereto, the successful party
in such suit or proceeding (on the merits or otherwise) shall be entitled
to reimbursement of all reasonable expenses and charges incurred by it or
him in connection with the defense or prosecution of such suit or
proceeding, including but not limited to the reasonable fees and expenses
of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement of
the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements between Employer and Employee. No
representation, condition, provision or term related to or connected with
this Agreement exists except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to Employer
that he is not bound by any agreement or subject to any restriction which
would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any paragraph or
subparagraph of this Agreement shall not render invalid the remainder of
this Agreement or of any such paragraph or subparagraph.
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IN WITNESS WHEREOF, Employer and Employee have executed this Agreement as of the
date first written above.
"EMPLOYER"
MDT CORPORATION
By: /s/ J. Miles Branagan
-----------------------------------
Its: President
"EMPLOYEE"
THOMAS M. HEIN
By: /s/ Thomas M. Hein
-----------------------------------
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EXHIBIT 10.6.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1, 1995, is
between MDT CORPORATION, a Delaware corporation ("Employer") and WILLIAM T.
HILVERT ("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement setting
forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations hereinafter
set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the four-
year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1999,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional year, and (ii)
thereafter, when only two years of the term, as extended pursuant to clause
(i) or (ii) hereof, shall remain, the term hereof shall again be extended
for an additional year, such extensions continuing from year to year in the
same manner; provided, however, in each case that the term shall not be
extended, if prior to the date of such extension, Employer's Board of
Directors gives notice to Employee or Employee gives notice to Employer's
Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer
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approves an unsolicited bid by a single entity or group of affiliated
entities to acquire more than 50% of the voting stock of Employer issued
and outstanding immediately prior to the approval of such acquisition, and
such acquisition is consummated; (iii) the stockholders of Employer approve
the consummation of any merger of Employer or any sale or other disposition
of all or substantially all of its assets, if the stockholders of Employer
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of
the surviving or acquiring corporation; or (iv) a change in the majority of
the Board of Directors of Employer during any 24-month period without the
approval of a majority of directors in office at the beginning of such
period.
2. Duties.
(a) Employer agrees to employ Employee as VICE PRESIDENT, HUMAN
RESOURCES AND ASSISTANT SECRETARY with responsibility for the duties
normally associated with such executive position, and for such other
executive duties as the Employer's Board of Directors shall assign to him
from time to time, subject at all times to the direction of Employer's
Board of Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of this
Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any
other business activity for gain or profit or other pecuniary advantage;
provided, however, that this paragraph shall not limit or restrict
Employee's rights to serve on the boards of directors of noncompeting
companies or to make and have personal investments in such form or manner
as will not require his active services in the daily operations of the
businesses in which such investments are made.
4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than
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$124,000, payable in semi-monthly installments and subject to such
deductions and withholdings as are required to be made pursuant to
applicable governmental laws, rules and regulations.
(b) Employee shall be entitled to management incentive compensation
in an amount equivalent to THIRTY PERCENT (30%) of his annual salary,
subject to the criteria detailed in the provisions of Employer's Management
Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four (4)
weeks duration (unless under Employer's vacation policy, he is entitled to
additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection
with the performance of his services under this Agreement, upon
presentation of such reasonably detailed expense statements, vouchers or
other supporting information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that during his
employment by Employer pursuant to this Agreement he may have access to or
may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential
Information"). Employee further recognizes and acknowledges that all
Confidential Information which is now or may hereafter be in his possession
is the property of Employer and that protection of this Confidential
Information against unauthorized disclosure or use is of critical
importance to Employer in order to protect Employer from unfair
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competition. Employee therefore agrees that he will not at any time,
either while employed by Employer or afterwards, without the prior written
consent of the Board of Directors of Employer, make any independent use of
such Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer
or others who have a business relationship with Employer and who, in
Employee's judgment, have a business need to know (e.g. advisory board
members), and except on advice of counsel during testimony under subpoena
in any court or before any administrative agency having jurisdiction or
during any authorized governmental inquiry or investigation, provided that
Employee shall cooperate with Employer in taking all reasonable and
appropriate steps to assure the protection of such Confidential Information
from unauthorized use or disclosure outside of such action, proceeding,
inquiry or investigation, or except to the extent that any such
Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and thereafter
turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials
and other valuable discoveries, whether patentable or not, which are
conceived or made by Employee solely or jointly with another during the
period of employment, on the time or property of Employer or otherwise, and
which are related to the business or activities of Employer or which
Employee conceives as a result of his employment by Employer. Employee
hereby assigns and agrees to assign to Employer or its nominee all his
interests in any of the foregoing. Whenever requested to do so by
Employer, Employee shall execute any and all patent applications,
assignments or other transfer instruments which Employer shall deem
necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to
otherwise confirm and protect Employer's interest in and ownership of all
such inventions, improvements, programs, systems, novel techniques,
copyrightable materials and other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key executive
and that the services to be rendered hereunder are of a critical nature to
the continued success of Employer. In view of the value to Employer of the
services of Employee for which Employer has contracted hereunder, and in
recognition of Employer's obligations hereunder, Employee covenants and
agrees as follows:
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(a) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
Not-withstanding the foregoing, in the event of a "change in control", as
defined in Paragraph 1 hereof, the foregoing restriction shall apply only
with respect to the business in which MDT Corporation is engaged, the
cities or counties of the United States in which MDT Corporation transacted
business and the products or services provided by MDT Corporation
immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the
foregoing in the event of a "change in control", as defined in Paragraph 1
hereof, the foregoing restriction shall apply only with respect to the
business in which MDT Corporation is engaged and the cities or counties of
the United States in which MDT Corporation transacted business and the
products or services provided by MDT Corporation immediately prior to such
change in control.
(c) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
(d) Subparagraphs (a), (b) and (c) shall not apply in the event the
Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
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<PAGE>
As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated
city or county. The covenants contained in this paragraph shall be deemed
to be a series of separate covenants, for each city and county of each
state where Employer is carrying on such business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants
deemed included in such action, then such unenforceable covenants shall be
deemed eliminated from the provisions hereof for the purposes of such
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach of
Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be
subject to irreparable injury therefrom. It is, therefore, agreed that
Employer, in addition to and without limiting any other remedy or right it
may have, shall be entitled to such equitable and injunctive relief as may
be available to restrain Employee from violation of any of said covenants,
such right to injunctive and equitable relief, however, to be cumulative
and in addition to whatever other remedies Employer may have in the
premises, including the recovery of consequential but not punitive damages
from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder shall
terminate upon the occurrence of the first to occur of the following events
or conditions:
(i) the expiration of the term specified in Paragraph 1 hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six consecutive
months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of its
sole discretion, that there has been fraud, misappropriation, embezzlement,
gross and continuing inattention to duty, or a substantial breach of this
Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the entry
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<PAGE>
of any final non appealable order for relief in respect of Employee under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt or similar law of any jurisdiction now or hereafter in effect if, in
the good faith determination of the Board of Directors, such entry of a
final, non appealable order for relief resulted from the willful neglect,
financial irresponsibility or moral turpitude of Employee.
(vi) Employee's conviction of a crime involving moral turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or (ii)
of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement by
Employee or by Employer pursuant to Subparagraph (a) of this Paragraph 10,
other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further
7
<PAGE>
extensions of such term; provided, however, that the amount of salary
shall be reduced by the salary Employee earns from reasonably comparable
employment with another employer; and provided further that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. Upon the termination of this Agreement by Employer
without cause in connection with a "change in control," as such term is
defined in Paragraph 1 of this Agreement, and as the sole and exclusive
remedy against Employer for the exercise of its right under this Agreement
to terminate this Agreement without cause, Employer's sole obligation shall
be to pay Employee a lump sum, undiscounted cash payment equal to the
compensation payable through the remaining term of this Agreement, as such
term was reinstated under Paragraph 1, to continue his participation in
the Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand
by Employer for the relocation of Employee outside of the United States
shall be deemed a termination by Employer without cause for purposes of
this Agreement.
(d) The respective rights and obligations of Employer and Employee
pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the expiration
or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee.
Employee agrees to take such steps and perform such acts as shall be
necessary to assist Employer in obtaining or maintaining in effect such
bonds or insurance, including the completion of the required applications
and questionnaires, the furnishing of any required references, and
consenting, upon request, to any required background, financial or other
investigations. Any such required information will be treated as
confidential and will be returned promptly after the completion of such
investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and be
binding upon Employee, his legal representatives and testate or intestate
distributees, and
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<PAGE>
Employer, its successors and assigns. This Agreement may not be assigned
by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to
Employer or to Employee at Employer's then principal place of business,
with a copy to Employee at his home address, as set forth on the records of
Employer, or to either party hereto at such other address or addresses as
such party may from time to time specify for the purpose in a notice
similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition.
No amendment or modification of this Agreement shall be valid or binding
unless made in writing and signed by the other party against whom such
waiver or modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall be
brought by Employer or Employee in respect of an alleged breach by or
default in the performance of the other party hereto, the successful party
in such suit or proceeding (on the merits or otherwise) shall be entitled
to reimbursement of all reasonable expenses and charges incurred by it or
him in connection with the defense or prosecution of such suit or
proceeding, including but not limited to the reasonable fees and expenses
of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement of
the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements between Employer and Employee. No
representation, condition, provision or term related to or connected with
this Agreement exists except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to Employer
that he is not bound by any agreement or subject to any restriction which
would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any paragraph or
subparagraph of this Agreement shall not render invalid the remainder of
this Agreement or of any such paragraph or subparagraph.
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IN WITNESS WHEREOF, Employer and Employee have executed this Agreement as of
the date first written above.
"EMPLOYER"
MDT BIOLOGIC COMPANY
By: /s/ J. Miles Branagan
-----------------------------------
Its: Chairman
"EMPLOYEE"
WILLIAM T. HILVERT
By: /s/ William T. Hilvert
-----------------------------------
Its: Chairman
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EXHIBIT 10.6.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1, 1995, is
between MDT BIOLOGIC COMPANY, a Delaware corporation ("Employer") and MELVIN K.
NERBY ("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement setting
forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations hereinafter
set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the four-
year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1999,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional year, and (ii)
thereafter, when only two years of the term, as extended pursuant to clause
(i) or (ii) hereof, shall remain, the term hereof shall again be extended
for an additional year, such extensions continuing from year to year in the
same manner; provided, however, in each case that the term shall not be
extended, if prior to the date of such extension, Employer's Board of
Directors gives notice to Employee or Employee gives notice to Employer's
Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer
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approves an unsolicited bid by a single entity or group of affiliated
entities to acquire more than 50% of the voting stock of Employer issued
and outstanding immediately prior to the approval of such acquisition, and
such acquisition is consummated; (iii) the stockholders of Employer approve
the consummation of any merger of Employer or any sale or other disposition
of all or substantially all of its assets, if the stockholders of Employer
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of
the surviving or acquiring corporation; or (iv) a change in the majority of
the Board of Directors of Employer during any 24-month period without the
approval of a majority of directors in office at the beginning of such
period.
(d) Upon the sale or divestiture of MDT Biologic Company,
notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such sale or divestiture.
2. Duties.
(a) Employer agrees to employ Employee as PRESIDENT with
responsibility for the duties normally associated with such executive
position, and for such other executive duties as the Employer's Board of
Directors shall assign to him from time to time, subject at all times to
the direction of Employer's Board of Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of this
Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any
other business activity for gain or profit or other pecuniary advantage;
provided, however, that this paragraph shall not limit or restrict
Employee's rights to serve on the boards of directors of noncompeting
companies or to make and have personal investments in such form or manner
as will not require his active services in the daily operations of the
businesses in which such investments are made.
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4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than $144,000, payable in semi-monthly
installments and subject to such deductions and withholdings as are
required to be made pursuant to applicable governmental laws, rules and
regulations.
(b) Employee shall be entitled to management incentive compensation
in an amount equivalent to THIRTY-FIVE PERCENT (35%) of his annual salary,
subject to the criteria detailed in the provisions of Employer's Management
Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four (4)
weeks duration (unless under Employer's vacation policy, he is entitled to
additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection
with the performance of his services under this Agreement, upon
presentation of such reasonably detailed expense statements, vouchers or
other supporting information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that during his
employment by Employer pursuant to this Agreement he may have access to or
may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential
Information"). Employee further recognizes and acknowledges that all
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Confidential Information which is now or may hereafter be in his possession
is the property of Employer and that protection of this Confidential
Information against unauthorized disclosure or use is of critical
importance to Employer in order to protect Employer from unfair
competition. Employee therefore agrees that he will not at any time,
either while employed by Employer or afterwards, without the prior written
consent of the Board of Directors of Employer, make any independent use of
such Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer
or others who have a business relationship with Employer and who, in
Employee's judgment, have a business need to know (e.g. advisory board
members), and except on advice of counsel during testimony under subpoena
in any court or before any administrative agency having jurisdiction or
during any authorized governmental inquiry or investigation, provided that
Employee shall cooperate with Employer in taking all reasonable and
appropriate steps to assure the protection of such Confidential Information
from unauthorized use or disclosure outside of such action, proceeding,
inquiry or investigation, or except to the extent that any such
Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and thereafter
turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials
and other valuable discoveries, whether patentable or not, which are
conceived or made by Employee solely or jointly with another during the
period of employment, on the time or property of Employer or otherwise, and
which are related to the business or activities of Employer or which
Employee conceives as a result of his employment by Employer. Employee
hereby assigns and agrees to assign to Employer or its nominee all his
interests in any of the foregoing. Whenever requested to do so by
Employer, Employee shall execute any and all patent applications,
assignments or other transfer instruments which Employer shall deem
necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to
otherwise confirm and protect Employer's interest in and ownership of all
such inventions, improvements, programs, systems, novel techniques,
copyrightable materials and other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key
executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to
Employer of the
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services of Employee for which Employer has contracted hereunder, and in
recognition of Employer's obligations hereunder, Employee covenants and
agrees as follows:
(a) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
Not-withstanding the foregoing, in the event of a "change in control", as
defined in Paragraph 1 hereof, the foregoing restriction shall apply only
with respect to the business in which MDT Corporation is engaged, the
cities or counties of the United States in which MDT Corporation transacted
business and the products or services provided by MDT Corporation
immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the
foregoing in the event of a "change in control", as defined in Paragraph 1
hereof, the foregoing restriction shall apply only with respect to the
business in which MDT Corporation is engaged and the cities or counties of
the United States in which MDT Corporation transacted business and the
products or services provided by MDT Corporation immediately prior to such
change in control.
(c) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
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(d) Subparagraphs (a), (b) and (c) shall not apply in the event the
Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated
city or county. The covenants contained in this paragraph shall be deemed
to be a series of separate covenants, for each city and county of each
state where Employer is carrying on such business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants
deemed included in such action, then such unenforceable covenants shall be
deemed eliminated from the provisions hereof for the purposes of such
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach of
Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be
subject to irreparable injury therefrom. It is, therefore, agreed that
Employer, in addition to and without limiting any other remedy or right it
may have, shall be entitled to such equitable and injunctive relief as may
be available to restrain Employee from violation of any of said covenants,
such right to injunctive and equitable relief, however, to be cumulative
and in addition to whatever other remedies Employer may have in the
premises, including the recovery of consequential but not punitive damages
from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder shall
terminate upon the occurrence of the first to occur of the following events
or conditions:
(i) the expiration of the term specified in Paragraph 1 hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six consecutive
months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of its
sole discretion, that
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there has been fraud, misappropriation, embezzlement, gross and continuing
inattention to duty, or a substantial breach of this Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the entry of any final non appealable
order for relief in respect of Employee under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt or similar
law of any jurisdiction now or hereafter in effect if, in the good faith
determination of the Board of Directors, such entry of a final, non
appealable order for relief resulted from the willful neglect, financial
irresponsibility or moral turpitude of Employee.
(vi) Employee's conviction of a crime involving moral turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or (ii)
of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement by
Employee or by Employer pursuant to Subparagraph (a) of this Paragraph 10,
other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
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participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further extensions of such term;
provided, however, that the amount of salary shall be reduced by the
salary Employee earns from reasonably comparable employment with another
employer; and provided further that Employer's obligation to continue
healthcare and life insurance benefits shall end when Employee is covered
under reasonably comparable benefit plans provided by another employer.
Upon the termination of this Agreement by Employer without cause in
connection with a "change in control," as such term is defined in Paragraph
1 of this Agreement, and as the sole and exclusive remedy against Employer
for the exercise of its right under this Agreement to terminate this
Agreement without cause, Employer's sole obligation shall be to pay
Employee a lump sum, undiscounted cash payment equal to the compensation
payable through the remaining term of this Agreement, as such term was
reinstated under Paragraph 1, to continue his participation in the
Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand
by Employer for the relocation of Employee outside of the United States
shall be deemed a termination by Employer without cause for purposes of
this Agreement.
(d) The respective rights and obligations of Employer and Employee
pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the expiration
or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee.
Employee agrees to take such steps and perform such acts as shall be
necessary to assist Employer in obtaining or maintaining in effect such
bonds or insurance, including the completion of the required applications
and questionnaires, the furnishing of any required references, and
consenting, upon request, to any required background, financial or other
investigations. Any such required information will be treated as
confidential
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and will be returned promptly after the completion of such investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and be
binding upon Employee, his legal representatives and testate or intestate
distributees, and Employer, its successors and assigns. This Agreement may
not be assigned by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to
Employer or to Employee at Employer's then principal place of business,
with a copy to Employee at his home address, as set forth on the records of
Employer, or to either party hereto at such other address or addresses as
such party may from time to time specify for the purpose in a notice
similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition.
No amendment or modification of this Agreement shall be valid or binding
unless made in writing and signed by the other party against whom such
waiver or modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall be
brought by Employer or Employee in respect of an alleged breach by or
default in the performance of the other party hereto, the successful party
in such suit or proceeding (on the merits or otherwise) shall be entitled
to reimbursement of all reasonable expenses and charges incurred by it or
him in connection with the defense or prosecution of such suit or
proceeding, including but not limited to the reasonable fees and expenses
of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement of
the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements between Employer and Employee. No
representation, condition, provision or term related to or connected with
this Agreement exists except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to Employer
that he is not bound by any agreement or subject
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to any restriction which would interfere with or prevent his entering into
and carrying out this Agreement.
19. Severability. The invalidity of all or any part of any paragraph or
subparagraph of this Agreement shall not render invalid the remainder of
this Agreement or of any such paragraph or subparagraph.
IN WITNESS WHEREOF, Employer and Employee have executed this Agreement as of the
date first written above.
"EMPLOYER"
MDT BIOLOGIC COMPANY
By: /s/ J. Miles Branagan
--------------------------------
Its: Chairman
"EMPLOYEE"
MELVIN K. NERBY
By: /s/ Melvin K. Nerby [2/21/95]
-----------------------------------
Its: Chairman
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EXHIBIT 10.6.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1, 1995, is
between MDT BIOLOGIC COMPANY, a Delaware corporation ("Employer") and MICHAEL L.
SCHNEIER ("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement setting
forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations hereinafter
set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the three-
year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1998,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional year, and (ii)
thereafter, when only one year of the term, as extended pursuant to clause
(i) or (ii) hereof, shall remain, the term hereof shall again be extended
for an additional year, such extensions continuing from year to year in the
same manner; provided, however, in each case that the term shall not be
extended, if prior to the date of such extension, Employer's Board of
Directors gives notice to Employee or Employee gives notice to Employer's
Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of three years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer
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approves an unsolicited bid by a single entity or group of affiliated
entities to acquire more than 50% of the voting stock of Employer issued
and outstanding immediately prior to the approval of such acquisition, and
such acquisition is consummated; (iii) the stockholders of Employer approve
the consummation of any merger of Employer or any sale or other disposition
of all or substantially all of its assets, if the stockholders of Employer
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of
the surviving or acquiring corporation; or (iv) a change in the majority of
the Board of Directors of Employer during any 24-month period without the
approval of a majority of directors in office at the beginning of such
period.
2. Duties.
(a) Employer agrees to employ Employee as VICE PRESIDENT, RESEARCH,
DEVELOPMENT AND COMPLIANCE with responsibility for the duties normally
associated with such executive position, and for such other executive
duties as the Employer's Board of Directors shall assign to him from time
to time, subject at all times to the direction of Employer's Board of
Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of this
Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any
other business activity for gain or profit or other pecuniary advantage;
provided, however, that this paragraph shall not limit or restrict
Employee's rights to serve on the boards of directors of noncompeting
companies or to make and have personal investments in such form or manner
as will not require his active services in the daily operations of the
businesses in which such investments are made.
4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than
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$112,294, payable in semi-monthly installments and subject to such
deductions and withholdings as are required to be made pursuant to
applicable governmental laws, rules and regulations.
(b) Employee shall be entitled to management incentive compensation
in an amount equivalent to TWENTY-FIVE PERCENT (25%) of his annual salary,
subject to the criteria detailed in the provisions of Employer's Management
Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four (4)
weeks duration (unless under Employer's vacation policy, he is entitled to
additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection
with the performance of his services under this Agreement, upon
presentation of such reasonably detailed expense statements, vouchers or
other supporting information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that during his
employment by Employer pursuant to this Agreement he may have access to or
may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential
Information"). Employee further recognizes and acknowledges that all
Confidential Information which is now or may hereafter be in his possession
is the property of Employer and that protection of this Confidential
Information against unauthorized disclosure or use is of critical
importance to Employer in order to protect Employer from unfair
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competition. Employee therefore agrees that he will not at any time,
either while employed by Employer or afterwards, without the prior written
consent of the Board of Directors of Employer, make any independent use of
such Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer
or others who have a business relationship with Employer and who, in
Employee's judgment, have a business need to know (e.g. advisory board
members), and except on advice of counsel during testimony under subpoena
in any court or before any administrative agency having jurisdiction or
during any authorized governmental inquiry or investigation, provided that
Employee shall cooperate with Employer in taking all reasonable and
appropriate steps to assure the protection of such Confidential Information
from unauthorized use or disclosure outside of such action, proceeding,
inquiry or investigation, or except to the extent that any such
Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and thereafter
turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials
and other valuable discoveries, whether patentable or not, which are
conceived or made by Employee solely or jointly with another during the
period of employment, on the time or property of Employer or otherwise, and
which are related to the business or activities of Employer or which
Employee conceives as a result of his employment by Employer. Employee
hereby assigns and agrees to assign to Employer or its nominee all his
interests in any of the foregoing. Whenever requested to do so by
Employer, Employee shall execute any and all patent applications,
assignments or other transfer instruments which Employer shall deem
necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to
otherwise confirm and protect Employer's interest in and ownership of all
such inventions, improvements, programs, systems, novel techniques,
copyrightable materials and other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key
executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to
Employer of the services of Employee for which Employer has contracted
hereunder, and in recognition of Employer's obligations hereunder, Employee
covenants and agrees as follows:
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(a) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
Not-withstanding the foregoing, in the event of a "change in control", as
defined in Paragraph 1 hereof, the foregoing restriction shall apply only
with respect to the business in which MDT Corporation is engaged, the
cities or counties of the United States in which MDT Corporation transacted
business and the products or services provided by MDT Corporation
immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the
foregoing in the event of a "change in control", as defined in Paragraph 1
hereof, the foregoing restriction shall apply only with respect to the
business in which MDT Corporation is engaged and the cities or counties of
the United States in which MDT Corporation transacted business and the
products or services provided by MDT Corporation immediately prior to such
change in control.
(c) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
(d) Subparagraphs (a), (b) and (c) shall not apply in the event the
Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
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As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated
city or county. The covenants contained in this paragraph shall be deemed
to be a series of separate covenants, for each city and county of each
state where Employer is carrying on such business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants
deemed included in such action, then such unenforceable covenants shall be
deemed eliminated from the provisions hereof for the purposes of such
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach of
Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be
subject to irreparable injury therefrom. It is, therefore, agreed that
Employer, in addition to and without limiting any other remedy or right it
may have, shall be entitled to such equitable and injunctive relief as may
be available to restrain Employee from violation of any of said covenants,
such right to injunctive and equitable relief, however, to be cumulative
and in addition to whatever other remedies Employer may have in the
premises, including the recovery of consequential but not punitive damages
from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder shall
terminate upon the occurrence of the first to occur of the following events
or conditions:
(i) the expiration of the term specified in Paragraph 1
hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six consecutive
months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of its
sole discretion, that there has been fraud, misappropriation, embezzlement,
gross and continuing inattention to duty, or a substantial breach of this
Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the entry
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of any final non appealable order for relief in respect of Employee under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt or similar law of any jurisdiction now or hereafter in effect if, in
the good faith determination of the Board of Directors, such entry of a
final, non appealable order for relief resulted from the willful neglect,
financial irresponsibility or moral turpitude of Employee.
(vi) Employee's conviction of a crime involving moral turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or (ii)
of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement by
Employee or by Employer pursuant to Subparagraph (a) of this Paragraph 10,
other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further
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extensions of such term; provided, however, that the amount of salary
shall be reduced by the salary Employee earns from reasonably comparable
employment with another employer; and provided further that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. Upon the termination of this Agreement by Employer
without cause in connection with a "change in control," as such term is
defined in Paragraph 1 of this Agreement, and as the sole and exclusive
remedy against Employer for the exercise of its right under this Agreement
to terminate this Agreement without cause, Employer's sole obligation shall
be to pay Employee a lump sum, undiscounted cash payment equal to the
compensation payable through the remaining term of this Agreement, as such
term was reinstated under Paragraph 1, to continue his participation in
the Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand
by Employer for the relocation of Employee outside of the United States
shall be deemed a termination by Employer without cause for purposes of
this Agreement.
(d) The respective rights and obligations of Employer and Employee
pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the expiration
or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee.
Employee agrees to take such steps and perform such acts as shall be
necessary to assist Employer in obtaining or maintaining in effect such
bonds or insurance, including the completion of the required applications
and questionnaires, the furnishing of any required references, and
consenting, upon request, to any required background, financial or other
investigations. Any such required information will be treated as
confidential and will be returned promptly after the completion of such
investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and be
binding upon Employee, his legal representatives and testate or intestate
distributees, and
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Employer, its successors and assigns. This Agreement may not be assigned
by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to
Employer or to Employee at Employer's then principal place of business,
with a copy to Employee at his home address, as set forth on the records of
Employer, or to either party hereto at such other address or addresses as
such party may from time to time specify for the purpose in a notice
similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition.
No amendment or modification of this Agreement shall be valid or binding
unless made in writing and signed by the other party against whom such
waiver or modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall be
brought by Employer or Employee in respect of an alleged breach by or
default in the performance of the other party hereto, the successful party
in such suit or proceeding (on the merits or otherwise) shall be entitled
to reimbursement of all reasonable expenses and charges incurred by it or
him in connection with the defense or prosecution of such suit or
proceeding, including but not limited to the reasonable fees and expenses
of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement of
the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements between Employer and Employee. No
representation, condition, provision or term related to or connected with
this Agreement exists except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to Employer
that he is not bound by any agreement or subject to any restriction which
would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any paragraph or
subparagraph of this Agreement shall not render invalid the remainder of
this Agreement or of any such paragraph or subparagraph.
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IN WITNESS WHEREOF, Employer and Employee have executed this Agreement as of the
date first written above.
"EMPLOYER"
MDT BIOLOGIC COMPANY
By: /s/ J. Miles Branagan
-----------------------------------
Its: Chairman
"EMPLOYEE"
MICHAEL L. SCHNEIER
By: /s/ Michael L. Schneier
-----------------------------------
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EXHIBIT 10.6.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1,
1995, is between MDT DIAGNOSTIC COMPANY, a Delaware corporation ("Employer") and
CHARLES B. SWENSON ("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement
setting forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obliga tions
hereinafter set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the
four-year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1999,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional year, and (ii)
thereafter, when only two years of the term, as extended pursuant to clause
(i) or (ii) hereof, shall remain, the term hereof shall again be extended
for an additional year, such extensions continuing from year to year in the
same manner; provided, however, in each case that the term shall not be
extended, if prior to the date of such extension, Employer's Board of
Directors gives notice to Employee or Employee gives notice to Employer's
Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer approves an
unsolicited bid
<PAGE>
by a single entity or group of affiliated entities to acquire more than 50%
of the voting stock of Employer issued and outstanding immediately prior to
the approval of such acquisition, and such acquisition is consummated;
(iii) the stockholders of Employer approve the consummation of any merger
of Employer or any sale or other disposition of all or substantially all of
its assets, if the stockholders of Employer immediately before such
transaction own, immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity
securities) possessing less than 50% of the voting power of the surviving
or acquiring corporation; or (iv) a change in the majority of the Board of
Directors of Employer during any 24-month period without the approval of a
majority of directors in office at the beginning of such period.
(d) Upon the sale or divestiture of MDT Diagnostic Company,
notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such sale or divestiture.
2. Duties.
(a) Employer agrees to employ Employee as PRESIDENT with
responsibility for the duties normally associated with such executive
position, and for such other executive duties as the Employer's Board of
Directors shall assign to him from time to time, subject at all times to
the direction of Employer's Board of Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of
this Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any other
business activity for gain or profit or other pecuniary advantage; provided,
however, that this paragraph shall not limit or restrict Employee's rights to
serve on the boards of directors of noncompeting companies or to make and have
personal investments in such form or manner as will not require his active
services in the daily operations of the businesses in which such investments are
made.
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4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than $144,000, payable in semi-monthly
installments and subject to such deductions and withholdings as are
required to be made pursuant to applicable governmental laws, rules and
regulations.
(b) Employee shall be entitled to management incentive
compensation in an amount equivalent to THIRTY-FIVE PERCENT (35%) of his
annual salary, subject to the criteria detailed in the provisions of
Employer's Management Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four
(4) weeks duration (unless under Employer's vacation policy, he is entitled
to additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection with the
performance of his services under this Agreement, upon presentation of such
reasonably detailed expense statements, vouchers or other supporting
information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that
during his employment by Employer pursuant to this Agreement he may have access
to or may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential Information").
Employee further recognizes and acknowledges that all Confidential Information
which is now or may
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hereafter be in his possession is the property of Employer and that protection
of this Confidential Information against unauthorized disclosure or use is of
critical importance to Employer in order to protect Employer from unfair
competition. Employee therefore agrees that he will not at any time, either
while employed by Employer or afterwards, without the prior written consent of
the Board of Directors of Employer, make any independent use of such
Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer or
others who have a business relationship with Employer and who, in Employee's
judgment, have a business need to know (e.g. advisory board members), and except
on advice of counsel during testimony under subpoena in any court or before any
administrative agency having jurisdiction or during any authorized governmental
inquiry or investigation, provided that Employee shall cooperate with Employer
in taking all reasonable and appropriate steps to assure the protection of such
Confidential Information from unauthorized use or disclosure outside of such
action, proceeding, inquiry or investigation, or except to the extent that any
such Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and
thereafter turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials and
other valuable discoveries, whether patentable or not, which are conceived or
made by Employee solely or jointly with another during the period of employment,
on the time or property of Employer or otherwise, and which are related to the
business or activities of Employer or which Employee conceives as a result of
his employment by Employer. Employee hereby assigns and agrees to assign to
Employer or its nominee all his interests in any of the foregoing. Whenever
requested to do so by Employer, Employee shall execute any and all patent
applications, assignments or other transfer instruments which Employer shall
deem necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to otherwise
confirm and protect Employer's interest in and ownership of all such inventions,
improvements, programs, systems, novel techniques, copyrightable materials and
other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key
executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to Employer
of the services of Employee for which Employer has contracted hereunder, and in
recognition of Employer's obligations hereunder, Employee covenants and agrees
as follows:
(a) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by
4
<PAGE>
Employer by reason of Employee's resignation or termination for cause,
Employee shall not, directly or indirectly, as employee, consultant,
officer, director, partner, or stockholder, solicit business for any
person, firm or entity engaged primarily in developing, manufacturing and
marketing medical or dental sterility assurance systems and examining and
operatory equipment, or in any other business in which Employer, from time
to time, shall be engaged in those cities or counties of the United States
in which Employer shall then be transacting business, from any client,
customer or account of Employer, or attempt to convert said persons or
entities to other methods of using the same or similar products or services
as provided by Employer. Notwithstanding the foregoing, in the event of a
"change in control", as defined in Paragraph 1 hereof, the foregoing
restriction shall apply only with respect to the business in which MDT
Corporation is engaged, the cities or counties of the United States in
which MDT Corporation transacted business and the products or services
provided by MDT Corporation immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stock holder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the foregoing
in the event of a "change in control", as defined in Paragraph 1 hereof,
the foregoing restriction shall apply only with respect to the business in
which MDT Corporation is engaged and the cities or counties of the United
States in which MDT Corporation transacted business and the products or
services provided by MDT Corporation immediately prior to such change in
control.
(c) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
(d) Subparagraphs (a), (b) and (c) shall not apply in the event
the Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
5
<PAGE>
As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located elsewhere
but which involves sales or any activity within the stipulated city or county.
The covenants contained in this paragraph shall be deemed to be a series of
separate covenants, for each city and county of each state where Employer is
carrying on such business. If in any judicial proceeding a court shall refuse
to enforce all of the separate covenants deemed included in such action, then
such unenforceable covenants shall be deemed eliminated from the provisions
hereof for the purposes of such proceedings to the extent necessary to permit
the remaining separate covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach
of Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be subject to
irreparable injury therefrom. It is, therefore, agreed that Employer, in
addition to and without limiting any other remedy or right it may have, shall be
entitled to such equitable and injunctive relief as may be available to restrain
Employee from violation of any of said covenants, such right to injunctive and
equitable relief, however, to be cumulative and in addition to whatever other
remedies Employer may have in the premises, including the recovery of
consequential but not punitive damages from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder
shall terminate upon the occurrence of the first to occur of the following
events or conditions:
(i) the expiration of the term specified in Paragraph 1
hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six
consecutive months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of
its sole discretion, that there has been fraud, misappropriation,
embezzlement, gross and continuing inattention to duty, or a
substantial breach of this Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the
6
<PAGE>
entry of any final non appealable order for relief in respect of
Employee under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt or similar law of any jurisdiction
now or hereafter in effect if, in the good faith determination of the
Board of Directors, such entry of a final, non appealable order for
relief resulted from the willful neglect, financial irresponsibility
or moral turpitude of Employee.
(vi) Employee's conviction of a crime involving moral
turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or
(ii) of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement
by Employee or by Employer pursuant to Subparagraph (a) of this Paragraph
10, other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further extensions of such term;
provided, however, that the amount of salary shall be reduced by the
7
<PAGE>
salary Employee earns from reasonably comparable employment with another
employer; and provided further that Employer's obligation to continue
healthcare and life insurance benefits shall end when Employee is covered
under reasonably comparable benefit plans provided by another employer.
Upon the termination of this Agreement by Employer without cause in
connection with a "change in control," as such term is defined in Paragraph
1 of this Agreement, and as the sole and exclusive remedy against Employer
for the exercise of its right under this Agreement to terminate this
Agreement without cause, Employer's sole obligation shall be to pay
Employee a lump sum, undiscounted cash payment equal to the compensation
payable through the remaining term of this Agreement, as such term was
reinstated under Paragraph 1, to continue his participation in the
Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand
by Employer for the relocation of Employee outside of the United States
shall be deemed a termination by Employer without cause for purposes of
this Agreement.
(d) The respective rights and obligations of Employer and
Employee pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the
expiration or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee. Employee
agrees to take such steps and perform such acts as shall be necessary to assist
Employer in obtaining or maintaining in effect such bonds or insurance,
including the completion of the required applications and questionnaires, the
furnishing of any required references, and consenting, upon request, to any
required background, financial or other investigations. Any such required
information will be treated as confidential and will be returned promptly after
the completion of such investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and
be binding upon Employee, his legal representatives and testate or intestate
distributees, and Employer, its successors and assigns. This Agreement may not
be assigned by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or
8
<PAGE>
made by hand delivery or registered or certified mail, return receipt requested,
addressed to Employer or to Employee at Employer's then principal place of
business, with a copy to Employee at his home address, as set forth on the
records of Employer, or to either party hereto at such other address or
addresses as such party may from time to time specify for the purpose in a
notice similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term
or condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition. No
amendment or modification of this Agreement shall be valid or binding unless
made in writing and signed by the other party against whom such waiver or
modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall
be brought by Employer or Employee in respect of an alleged breach by or default
in the performance of the other party hereto, the successful party in such suit
or proceeding (on the merits or otherwise) shall be entitled to reimbursement of
all reasonable expenses and charges incurred by it or him in connection with the
defense or prosecution of such suit or proceeding, including but not limited to
the reasonable fees and expenses of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement
of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements between Employer and Employee. No representation,
condition, provision or term related to or connected with this Agreement exists
except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to
Employer that he is not bound by any agreement or subject to any restriction
which would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any paragraph
or subparagraph of this Agreement shall not render invalid the remainder of this
Agreement or of any such paragraph or subparagraph.
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<PAGE>
IN WITNESS WHEREOF, Employer and Employee have executed this Agreement
as of the date first written above.
"EMPLOYER"
MDT DIAGNOSTIC COMPANY
By: /s/ J. Miles Branagan
-----------------------------
Its: Chairman
"EMPLOYEE"
CHARLES B. SWENSON
/s/ Charles B. Swenson
--------------------------------
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<PAGE>
EXHIBIT 10.6.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1,
1995, is between MDT TECHNIONIC COMPANY, a Delaware corporation ("Employer") and
RICHARD G. KINSEY ("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement
setting forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations hereinafter
set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the
three-year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1998,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional two years, and
(ii) thereafter, when only two years of the term, as extended pursuant to
clause (i) or (ii) hereof, shall remain, the term hereof shall again be
extended for an additional year, such extensions continuing from year to
year in the same manner; provided, however, in each case that the term
shall not be extended, if prior to the date of such extension, Employer's
Board of Directors gives notice to Employee or Employee gives notice to
Employer's Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer approves an
unsolicited bid by a single entity or group of affiliated entities to
acquire more than 50% of the voting stock of Employer issued and
<PAGE>
outstanding immediately prior to the approval of such acquisition, and such
acquisition is consummated; (iii) the stockholders of Employer approve the
consummation of any merger of Employer or any sale or other disposition of
all or substantially all of its assets, if the stockholders of Employer
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of
the surviving or acquiring corporation; or (iv) a change in the majority of
the Board of Directors of Employer during any 24-month period without the
approval of a majority of directors in office at the beginning of such
period.
(d) Upon the sale or divestiture of MDT Technionic Company,
notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such sale or divestiture.
2. Duties.
(a) Employer agrees to employ Employee as PRESIDENT with
responsibility for the duties normally associated with such executive
position, and for such other executive duties as the Employer's Board of
Directors shall assign to him from time to time, subject at all times to
the direction of Employer's Board of Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of
this Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any other
business activity for gain or profit or other pecuniary advantage; provided,
however, that this paragraph shall not limit or restrict Employee's rights to
serve on the boards of directors of noncompeting companies or to make and have
personal investments in such form or manner as will not require his active
services in the daily operations of the businesses in which such investments are
made.
4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than
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$132,500, payable in semi-monthly installments and subject to such
deductions and withholdings as are required to be made pursuant to
applicable governmental laws, rules and regulations.
(b) Employee shall be entitled to management incentive
compensation in an amount equivalent to THIRTY-FIVE PERCENT (35%) of his
annual salary, subject to the criteria detailed in the provisions of
Employer's Management Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four
(4) weeks duration (unless under Employer's vacation policy, he is entitled
to additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection with the
performance of his services under this Agreement, upon presentation of such
reasonably detailed expense statements, vouchers or other supporting
information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that
during his employment by Employer pursuant to this Agreement he may have access
to or may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential Information").
Employee further recognizes and acknowledges that all Confidential Information
which is now or may hereafter be in his possession is the property of Employer
and that protection of this Confidential Information against unauthorized
disclosure or use is of critical importance to Employer in order to protect
Employer from unfair competition. Employee therefore agrees that he will not at
any time, either while employed by
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Employer or afterwards, without the prior written consent of the Board of
Directors of Employer, make any independent use of such Confidential
Information, or knowingly disclose the same, directly or indirectly, to any
other person, firm, corporation or other entity, for any reason or purpose
whatsoever, except to professional advisors of Employer or others who have a
business relationship with Employer and who, in Employee's judgment, have a
business need to know (e.g. advisory board members), and except on advice of
counsel during testimony under subpoena in any court or before any
administrative agency having jurisdiction or during any authorized governmental
inquiry or investigation, provided that Employee shall cooperate with Employer
in taking all reasonable and appropriate steps to assure the protection of such
Confidential Information from unauthorized use or disclosure outside of such
action, proceeding, inquiry or investigation, or except to the extent that any
such Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and
thereafter turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials and
other valuable discoveries, whether patentable or not, which are conceived or
made by Employee solely or jointly with another during the period of employment,
on the time or property of Employer or otherwise, and which are related to the
business or activities of Employer or which Employee conceives as a result of
his employment by Employer. Employee hereby assigns and agrees to assign to
Employer or its nominee all his interests in any of the foregoing. Whenever
requested to do so by Employer, Employee shall execute any and all patent
applications, assignments or other transfer instruments which Employer shall
deem necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to otherwise
confirm and protect Employer's interest in and ownership of all such inventions,
improvements, programs, systems, novel techniques, copyrightable materials and
other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key
executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to Employer
of the services of Employee for which Employer has contracted hereunder, and in
recognition of Employer's obligations hereunder, Employee covenants and agrees
as follows:
(a) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
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engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
Notwithstanding the fore-going, in the event of a "change in control", as
defined in Paragraph 1 hereof, the foregoing restriction shall apply only
with respect to the business in which MDT Corporation is engaged, the
cities or counties of the United States in which MDT Corporation transacted
business and the products or services provided by MDT Corporation
immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the foregoing
in the event of a "change in control", as defined in Paragraph 1 hereof,
the foregoing restriction shall apply only with respect to the business in
which MDT Corporation is engaged and the cities or counties of the United
States in which MDT Corporation transacted business and the products or
services provided by MDT Corporation immediately prior to such change in
control.
(c) During Employee's employment hereunder, and for a period of
two (2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
(d) Subparagraphs (a), (b) and (c) shall not apply in the event
the Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located elsewhere
but which involves sales or any activity within the stipulated city or county.
The covenants contained in this paragraph shall be deemed to be a series of
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separate covenants, for each city and county of each state where Employer is
carrying on such business. If in any judicial proceeding a court shall refuse
to enforce all of the separate covenants deemed included in such action, then
such unenforceable covenants shall be deemed eliminated from the provisions
hereof for the purposes of such proceedings to the extent necessary to permit
the remaining separate covenants to be enforced in such proceed ings.
9. Relief. It is recognized that in the event of Employee's breach
of Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascer-tain, and that Employer would be subject
to irreparable injury therefrom. It is, therefore, agreed that Employer, in
addition to and without limiting any other remedy or right it may have, shall be
entitled to such equitable and injunctive relief as may be available to restrain
Employee from violation of any of said covenants, such right to injunctive and
equitable relief, however, to be cumulative and in addition to whatever other
remedies Employer may have in the premises, including the recovery of
consequential but not punitive damages from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder
shall terminate upon the occurrence of the first to occur of the following
events or conditions:
(i) the expiration of the term specified in Paragraph 1
hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six
consecutive months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of
its sole discretion, that there has been fraud, misappropriation,
embezzlement, gross and continuing inattention to duty, or a
substantial breach of this Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the entry of any final non
appealable order for relief in respect of Employee under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt or similar law of any jurisdiction now or hereafter in effect if,
in the good faith determination of the Board of Directors, such entry
of a final, non appealable order for relief
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resulted from the willful neglect, financial irresponsibility or moral
turpitude of Employee.
(vi) Employee's conviction of a crime involving moral
turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or
(ii) of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement
by Employee or by Employer pursuant to Subparagraph (a) of this Paragraph
10, other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further extensions of such term;
provided, however, that the amount of salary shall be reduced by the salary
Employee earns from reasonably comparable employment with another
employer; and provided further that Employer's obligation to continue
healthcare and life insurance benefits shall end when Employee is covered
under reasonably comparable benefit plans provided by another employer.
Upon the termination of this Agreement by Employer without cause in
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connection with a "change in control," as such term is defined in Paragraph
1 of this Agreement, and as the sole and exclusive remedy against Employer
for the exercise of its right under this Agreement to terminate this
Agreement without cause, Employer's sole obligation shall be to pay
Employee a lump sum, undiscounted cash payment equal to the compensation
payable through the remaining term of this Agreement, as such term was
reinstated under Paragraph 1, to continue his participation in the
Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand
by Employer for the relocation of Employee outside of the United States
shall be deemed a termination by Employer without cause for purposes of
this Agreement.
(d) The respective rights and obligations of Employer and
Employee pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the
expiration or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee. Employee
agrees to take such steps and perform such acts as shall be necessary to assist
Employer in obtaining or maintaining in effect such bonds or insurance,
including the completion of the required applications and questionnaires, the
furnishing of any required references, and consenting, upon request, to any
required background, financial or other investigations. Any such required
information will be treated as confidential and will be returned promptly after
the completion of such investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and
be binding upon Employee, his legal representatives and testate or intestate
distributees, and Employer, its successors and assigns. This Agreement may not
be assigned by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or registered
or certified mail, return receipt requested, addressed to Employer or to
Employee at Employer's then principal place of business, with a copy to Employee
at his home address, as set forth on the records of Employer, or to either party
hereto at such other address or
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addresses as such party may from time to time specify for the purpose in a
notice similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term
or condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition. No
amendment or modification of this Agreement shall be valid or binding unless
made in writing and signed by the other party against whom such waiver or
modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall
be brought by Employer or Employee in respect of an alleged breach by or default
in the performance of the other party hereto, the successful party in such suit
or proceeding (on the merits or otherwise) shall be entitled to reimbursement of
all reasonable expenses and charges incurred by it or him in connection with the
defense or prosecution of such suit or proceeding, including but not limited to
the reasonable fees and expenses of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement
of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements between Employer and Employee. No representation,
condition, provision or term related to or connected with this Agreement exists
except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to
Employer that he is not bound by any agreement or subject to any restriction
which would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any paragraph
or subparagraph of this Agreement shall not render invalid the remainder of this
Agreement or of any such paragraph or subparagraph.
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IN WITNESS WHEREOF, Employer and Employee have executed this Agreement
as of the date first written above.
"EMPLOYER"
MDT TECHNIONIC COMPANY
By: /s/ J. Miles Branagan
----------------------------
Its: Chairman
"EMPLOYEE"
RICHARD G. KINSEY
/s/ Richard G. Kinsey
-------------------------------
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EXHIBIT 10.6.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of APRIL 1, 1995, is
between MDT CORPORATION, a Delaware corporation ("Employer") and CREIGHTON A.
WHITE ("Employee").
WHEREAS, Employer and Employee desire to enter into an agreement setting
forth the terms and conditions upon which Employee shall be employed by
Employer;
WITNESSETH:
That in consideration of the mutual covenants and obligations hereinafter
set forth, the parties hereto agree as follows:
1. Employment and Term.
(a) Employer hereby employs Employee and Employee hereby accepts
employment with and agrees to serve Employer, in the capacities and subject
to and upon the terms and conditions hereinafter set forth.
(b) The term of Employee's employment hereunder shall be the three-
year period commencing on APRIL 1, 1995 and ending on MARCH 31, 1998,
subject to termination as provided in Paragraph 10 hereof. Notwithstanding
the foregoing, (i) on the second anniversary of this Agreement, the term
hereof shall automatically be extended for an additional two years, and
(ii) thereafter, when only two years of the term, as extended pursuant to
clause (i) or (ii) hereof, shall remain, the term hereof shall again be
extended for an additional year, such extensions continuing from year to
year in the same manner; provided, however, in each case that the term
shall not be extended, if prior to the date of such extension, Employer's
Board of Directors gives notice to Employee or Employee gives notice to
Employer's Board of Directors that the term shall not be so extended.
(c) Upon the occurrence of a change in control, as hereinafter
defined, notwithstanding the portion of the term hereof otherwise remaining
outstanding, the term hereof shall automatically be reinstated as a period
of four years, commencing upon the date of such change in control. A
"change in control" for purposes of the preceding sentence shall mean (i)
without prior approval of the Board of Directors of Employer, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of Employer issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of Employer
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approves an unsolicited bid by a single entity or group of affiliated
entities to acquire more than 50% of the voting stock of Employer issued
and outstanding immediately prior to the approval of such acquisition, and
such acquisition is consummated; (iii) the stockholders of Employer approve
the consummation of any merger of Employer or any sale or other disposition
of all or substantially all of its assets, if the stockholders of Employer
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of
the surviving or acquiring corporation; or (iv) a change in the majority of
the Board of Directors of Employer during any 24-month period without the
approval of a majority of directors in office at the beginning of such
period.
2. Duties.
(a) Employer agrees to employ Employee as VICE PRESIDENT, CORPORATE,
GOVERNMENTAL AND INTERNATIONAL GROUP with responsibility for the duties
normally associated with such executive position, and for such other
executive duties as the Employer's Board of Directors shall assign to him
from time to time, subject at all times to the direction of Employer's
Board of Directors.
(b) Employee agrees that so long as this Agreement continues in
effect, he shall devote his full business time and energies to the business
and affairs of Employer; use his best efforts, skills and abilities to
promote the interests of Employer; and faithfully perform the duties
described herein and such other executive duties as the Employer's Board of
Directors shall assign to him from time to time.
3. Covenant. Employee covenants and agrees that during the term of this
Agreement, he will not, directly or indirectly, either as owner, partner,
stockholder, broker, dealer, agent, employee or otherwise, engage in any
other business activity for gain or profit or other pecuniary advantage;
provided, however, that this paragraph shall not limit or restrict
Employee's rights to serve on the boards of directors of noncompeting
companies or to make and have personal investments in such form or manner
as will not require his active services in the daily operations of the
businesses in which such investments are made.
4. Compensation.
(a) Employer shall pay Employee, and Employee hereby agrees to
accept, as partial compensation for all services rendered hereunder, an
annual salary of not less than
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$132,000, payable in semi-monthly installments and subject to such
deductions and withholdings as are required to be made pursuant to
applicable governmental laws, rules and regulations.
(b) Employee shall be entitled to management incentive compensation
in an amount equivalent to THIRTY PERCENT (30%) of his annual salary,
subject to the criteria detailed in the provisions of Employer's Management
Incentive Compensation Plan.
(c) Employer shall also provide Employee with such health care
benefits, disability insurance and term life insurance as Employer provides
for its executive employees generally in amounts determined by and
appropriately adjusted for his compensation, length of service and other
such relevant criteria, subject to Employee's satisfaction of any
eligibility criteria for such insurance.
(d) Employee shall be entitled to annual vacation time of four (4)
weeks duration (unless under Employer's vacation policy, he is entitled to
additional vacation time because of his length of service with the
Company), during which time his compensation shall be paid in full.
(e) Employee shall be entitled to benefits under Employer's
Retirement Plan, as amended, Supplemental Executive Retirement Plan, as
amended, and the Post-Retirement Medical Insurance Plan in amounts
determined by and appropriately adjusted for compensation, length of
service and other such relevant criteria.
5. Expenses. Employer agrees to pay or reimburse Employee for all
reasonable travel and other expenses incurred by Employee in connection
with the performance of his services under this Agreement, upon
presentation of such reasonably detailed expense statements, vouchers or
other supporting information, as it may from time to time request.
6. Confidentiality. Employee recognizes and acknowledges that during his
employment by Employer pursuant to this Agreement he may have access to or
may obtain information of a secret, special and unique value to Employer
concerning customers, customer lists, processes, technologies, products,
formulas, devices, designs, inventions, discoveries, plans, strategies and
methods of operation (collectively and individually "Confidential
Information"). Employee further recognizes and acknowledges that all
Confidential Information which is now or may hereafter be in his possession
is the property of Employer and that protection of this Confidential
Information against unauthorized disclosure or use is of critical
importance to Employer in order to protect Employer from unfair
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competition. Employee therefore agrees that he will not at any time,
either while employed by Employer or afterwards, without the prior written
consent of the Board of Directors of Employer, make any independent use of
such Confidential Information, or knowingly disclose the same, directly or
indirectly, to any other person, firm, corporation or other entity, for any
reason or purpose whatsoever, except to professional advisors of Employer
or others who have a business relationship with Employer and who, in
Employee's judgment, have a business need to know (e.g. advisory board
members), and except on advice of counsel during testimony under subpoena
in any court or before any administrative agency having jurisdiction or
during any authorized governmental inquiry or investigation, provided that
Employee shall cooperate with Employer in taking all reasonable and
appropriate steps to assure the protection of such Confidential Information
from unauthorized use or disclosure outside of such action, proceeding,
inquiry or investigation, or except to the extent that any such
Confidential Information shall be in the public domain other than by reason
of Employee's breach of this Paragraph 6.
7. Ideas and Inventions. Employee shall disclose promptly and thereafter
turn over to Employer any and all concepts and ideas for inventions,
improvements, programs, systems, novel techniques, copyrightable materials
and other valuable discoveries, whether patentable or not, which are
conceived or made by Employee solely or jointly with another during the
period of employment, on the time or property of Employer or otherwise, and
which are related to the business or activities of Employer or which
Employee conceives as a result of his employment by Employer. Employee
hereby assigns and agrees to assign to Employer or its nominee all his
interests in any of the foregoing. Whenever requested to do so by
Employer, Employee shall execute any and all patent applications,
assignments or other transfer instruments which Employer shall deem
necessary to apply for and obtain Letters of Patent of the United States or
any foreign country or other applicable trade secret protection or to
otherwise confirm and protect Employer's interest in and ownership of all
such inventions, improvements, programs, systems, novel techniques,
copyrightable materials and other discoveries.
8. Restrictive Covenant. Employee acknowledges that he is a key
executive and that the services to be rendered hereunder are of a critical
nature to the continued success of Employer. In view of the value to
Employer of the services of Employee for which Employer has contracted
hereunder, and in recognition of Employer's obligations hereunder, Employee
covenants and agrees as follows:
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(a) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, solicit business for any person, firm or entity
engaged primarily in developing, manufacturing and marketing medical or
dental sterility assurance systems and examining and operatory equipment,
or in any other business in which Employer, from time to time, shall be
engaged in those cities or counties of the United States in which Employer
shall then be transacting business, from any client, customer or account of
Employer, or attempt to convert said persons or entities to other methods
of using the same or similar products or services as provided by Employer.
Not-withstanding the foregoing, in the event of a "change in control", as
defined in Paragraph 1 hereof, the foregoing restriction shall apply only
with respect to the business in which MDT Corporation is engaged, the
cities or counties of the United States in which MDT Corporation transacted
business and the products or services provided by MDT Corporation
immediately prior to such change in control.
(b) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, as employee, consultant, officer, director,
partner, or stockholder, engage in developing, manufacturing and marketing
medical or dental sterility assurance systems and examining and operatory
equipment or in any other business in which Employer, from time to time,
shall be engaged, in those cities or counties of the United States in which
Employer shall then be transacting business. Notwithstanding the
foregoing in the event of a "change in control", as defined in Paragraph 1
hereof, the foregoing restriction shall apply only with respect to the
business in which MDT Corporation is engaged and the cities or counties of
the United States in which MDT Corporation transacted business and the
products or services provided by MDT Corporation immediately prior to such
change in control.
(c) During Employee's employment hereunder, and for a period of two
(2) years after he ceases to be employed by Employer by reason of
Employee's resignation or termination for cause, Employee shall not,
directly or indirectly, solicit for employment or employ any employee of
Employer.
(d) Subparagraphs (a), (b) and (c) shall not apply in the event the
Employee resigns within one year following a "change in control", as
defined in Paragraph 1 hereof, that was not previously approved by the
Board of Directors of Employer.
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As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated
city or county. The covenants contained in this paragraph shall be deemed
to be a series of separate covenants, for each city and county of each
state where Employer is carrying on such business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants
deemed included in such action, then such unenforceable covenants shall be
deemed eliminated from the provisions hereof for the purposes of such
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced in such proceedings.
9. Relief. It is recognized that in the event of Employee's breach of
Paragraphs 6, 7, or 8, the damages resulting from such breach would be
difficult, if not impossible to ascertain, and that Employer would be
subject to irreparable injury therefrom. It is, therefore, agreed that
Employer, in addition to and without limiting any other remedy or right it
may have, shall be entitled to such equitable and injunctive relief as may
be available to restrain Employee from violation of any of said covenants,
such right to injunctive and equitable relief, however, to be cumulative
and in addition to whatever other remedies Employer may have in the
premises, including the recovery of consequential but not punitive damages
from Employee.
10. Termination.
(a) This Agreement and the employment of Employee hereunder shall
terminate upon the occurrence of the first to occur of the following events
or conditions:
(i) the expiration of the term specified in Paragraph 1 hereof.
(ii) the death of Employee.
(iii) the incapacity of Employee for a period of six consecutive
months to perform his duties hereunder.
(iv) the election of the Board of Directors of Employer to
terminate Employee's employment for "cause", which shall mean a
determination by the Board of Directors of Employer in the exercise of its
sole discretion, that there has been fraud, misappropriation, embezzlement,
gross and continuing inattention to duty, or a substantial breach of this
Agreement by Employee.
(v) the election of the Board of Directors of Employer to
terminate Employee's employment upon the entry
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of any final non appealable order for relief in respect of Employee under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt or similar law of any jurisdiction now or hereafter in effect if, in
the good faith determination of the Board of Directors, such entry of a
final, non appealable order for relief resulted from the willful neglect,
financial irresponsibility or moral turpitude of Employee.
(vi) Employee's conviction of a crime involving moral turpitude.
(b) Any termination of this Agreement pursuant to clauses (i) or (ii)
of Subparagraph (a) of this Paragraph 10 shall be effective on the
expiration date of this Agreement or the date of death, as the case may be.
Any termination pursuant to clauses (iii), (iv), (v) or (vi) of
Subparagraph (a) of this Paragraph 10 shall be effective immediately upon
delivery of notice of termination to Employee.
(c) Upon the expiration or earlier termination of this Agreement by
Employee or by Employer pursuant to Subparagraph (a) of this Paragraph 10,
other than in connection with a "change in control", as such term is
defined in Paragraph 1 of this Agreement, Employer's sole obligation shall
be to pay Employee or his estate any compensation remaining unpaid through
the effective date of termination. In the case of the death of Employee,
however, Employer's obligation shall be to pay Employee's designated
beneficiary or estate the Employee's salary in effect at the time of his
death, in semi-monthly installments, and to provide Employee's designated
beneficiary healthcare benefits on the same basis as an active employee for
180 days; to pay the management incentive compensation to which the
Employee would otherwise have been entitled for the fiscal year in which
death occurs; and to pay to his designated beneficiary or estate the life
insurance, retirement and supplementary retirement benefits to which they
are entitled within 180 days. Upon the termination of this Agreement by
Employer without cause, other than in connection with a "change in
control," as such term is defined in Paragraph 1 of this Agreement, and as
the sole and exclusive remedy against Employer for the exercise of its
right under this Agreement to terminate this Agreement without cause,
Employer's sole obligation shall be to pay Employee the salary in effect at
the time of his termination, in semi-monthly installments, to continue his
participation in the Management Incentive Compensation Plan, to provide
healthcare and life insurance benefits and to continue his participation in
the Retirement Plan, as amended, and the Supplemental Executive Retirement
Plan, as amended, on the same basis as an active employee for the remaining
term of this Agreement, without any further
7
<PAGE>
extensions of such term; provided, however, that the amount of salary
shall be reduced by the salary Employee earns from reasonably comparable
employment with another employer; and provided further that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. Upon the termination of this Agreement by Employer
without cause in connection with a "change in control," as such term is
defined in Paragraph 1 of this Agreement, and as the sole and exclusive
remedy against Employer for the exercise of its right under this Agreement
to terminate this Agreement without cause, Employer's sole obligation shall
be to pay Employee a lump sum, undiscounted cash payment equal to the
compensation payable through the remaining term of this Agreement, as such
term was reinstated under Paragraph 1, to continue his participation in
the Management Incentive Compensation Plan, to provide healthcare and life
insurance benefits and to continue his participation in the Retirement
Plan, as amended, and the Supplemental Executive Retirement Plan, as
amended, on the same basis as an active employee for the remaining term of
this Agreement, as such term was reinstated under Paragraph 1, without any
further extensions of such term; provided, however, that Employer's
obligation to continue healthcare and life insurance benefits shall end
when Employee is covered under reasonably comparable benefit plans provided
by another employer. The resignation of Employee in response to a demand
by Employer for the relocation of Employee outside of the United States
shall be deemed a termination by Employer without cause for purposes of
this Agreement.
(d) The respective rights and obligations of Employer and Employee
pursuant to Paragraphs 6, 7, 8 and 9 hereof, shall survive the expiration
or earlier termination of this Agreement.
11. Bonding. Employer may apply for and maintain fidelity bonds or
similar insurance with respect to the acts and omissions of Employee.
Employee agrees to take such steps and perform such acts as shall be
necessary to assist Employer in obtaining or maintaining in effect such
bonds or insurance, including the completion of the required applications
and questionnaires, the furnishing of any required references, and
consenting, upon request, to any required background, financial or other
investigations. Any such required information will be treated as
confidential and will be returned promptly after the completion of such
investigations.
12. Persons Bound. This Agreement shall inure to the benefit of and be
binding upon Employee, his legal representatives and testate or intestate
distributees, and
8
<PAGE>
Employer, its successors and assigns. This Agreement may not be assigned
by Employee.
13. Notices. Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to
Employer or to Employee at Employer's then principal place of business,
with a copy to Employee at his home address, as set forth on the records of
Employer, or to either party hereto at such other address or addresses as
such party may from time to time specify for the purpose in a notice
similarly given to the other party.
14. No Waiver or Modification. The waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of
any other or subsequent breach of the same of any other term or condition.
No amendment or modification of this Agreement shall be valid or binding
unless made in writing and signed by the other party against whom such
waiver or modification is to be enforced.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed in said State.
16. Disputes. In the event that any suit or other proceeding shall be
brought by Employer or Employee in respect of an alleged breach by or
default in the performance of the other party hereto, the successful party
in such suit or proceeding (on the merits or otherwise) shall be entitled
to reimbursement of all reasonable expenses and charges incurred by it or
him in connection with the defense or prosecution of such suit or
proceeding, including but not limited to the reasonable fees and expenses
of counsel retained by such party.
17. Entire Agreement. This Agreement represents the entire agreement of
the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements between Employer and Employee. No
representation, condition, provision or term related to or connected with
this Agreement exists except as specifically set forth herein.
18. Employee's Warranty. Employee represents and warrants to Employer
that he is not bound by any agreement or subject to any restriction which
would interfere with or prevent his entering into and carrying out this
Agreement.
19. Severability. The invalidity of all or any part of any paragraph or
subparagraph of this Agreement shall not render invalid the remainder of
this Agreement or of any such paragraph or subparagraph.
9
<PAGE>
IN WITNESS WHEREOF, Employer and Employee have executed this Agreement as of
the date first written above.
"EMPLOYER"
MDT CORPORATION
By: /s/ J. Miles Branagran
---------------------------------------
Its: President
"EMPLOYEE"
CREIGHTON A. WHITE
By: /s/ Creighton A. White
---------------------------------------
10
<PAGE>
EXHIBIT 10.7
LEASE
FOR
STRATFORD HALL, SUITE 200
LANDLORD: PETULA ASSOCIATES LTD., an Iowa corporation
TENANT: MDT CORPORATION, a Delaware corporation
<PAGE>
INDEX
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. PREMISES.............................................................. 1
2. TERM; MEASUREMENT OF SPACE; FAILURE TO DELIVER PREMISES............... 1
3. RENT.................................................................. 4
4 INCREASES IN OPERATING EXPENSES....................................... 5
5. OPTION TO EXTEND...................................................... 7
6. USE................................................................... 9
7. SERVICES BY LANDLORD.................................................. 10
8. TENANTS ACCEPTANCE AND MAINTENANCE OF PREMISES; LIENS................. 12
9. TENANT IMPROVEMENTS................................................... 13
10. CASUALTY DAMAGE....................................................... 15
11. ASSIGNMENT AND SUBLEASING............................................. 16
12. TENANT'S COMPLIANCE; INSURANCE REQUIREMENTS; WAIVER OF
SUBROGATION........................................................... 16
13. SUBORDINATION; ATTORNMENT............................................. 18
14. SIGNS................................................................. 19
15. ACCESS TO PREMISES.................................................... 19
16. DEFAULT............................................................... 19
17. INDEMNIFICATIONS...................................................... 21
18. CONDEMNATION.......................................................... 22
19. QUIET ENJOYMENT....................................................... 23
20. SECURITY DEPOSIT...................................................... 23
21. NOTICES............................................................... 23
22. [INTENTIONALLY OMITTED]............................................... 23
23. LANDLORD LIABILITY.................................................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
24. SURRENDER; HOLDING OVER............................................... 24
25. HAZARDOUS MATERIALS; ENVIRONMENTAL COMPLIANCE......................... 25
26. BROKERS COMMISSIONS................................................... 27
27. MISCELLANEOUS......................................................... 27
28. SPECIAL CONDITIONS, EXHIBITS AND ADDENDA.............................. 28
</TABLE>
ii
<PAGE>
STATE OF NORTH CAROLINA: LEASE
-----
COUNTY OF DURHAM:
THIS LEASE, made as of this [17th] day of February, 1995, by and
----------
between PETULA ASSOCIATES, LTD., an Iowa corporation, hereinafter "Landlord",
and MDT CORPORATION, a Delaware corporation hereinafter "Tenant".
WITNESSETH:
Upon the terms and conditions hereinafter set forth, the Landlord leases to
Tenant and Tenant leases from Landlord property hereinafter defined and referred
to as the Premises, all as follows;
1. PREMISES. The property hereby leased to Tenant is:
That area shown on Exhibit A-1 (Space Plan) which is known as Suite
200, consisting of approximately 6,006 rentable square feet currently
estimated and shall be located in the Stratford Hall Building (the
"Building") to be constructed, the above-described leased property
being herein referred to as the Premises, which is also indicated on
Exhibits A-2 (Floor Plan) and A-3 (Site Plan). The Building, to be
located at the Imperial Center, Research Triangle Park, Durham County,
North Carolina, shall be constructed on real property more
particularly described in that legal description attached as Exhibit
A-4. The rentable square feet area of the space occupied by Tenant
under this Lease shall be computed by multiplying the result of the
Building Owners and Managers Association (BOMA) method of measuring
space on a multi-tenant floor basis by 1.1416, the applicable core
area factor. Using this formula for calculating rentable square feet
for the Premises, a result of 6,006 rentable square feet is initially
estimated.
2. TERM; MEASUREMENT OF SPACE; FAILURE TO DELIVER PREMISES The term of
this Lease shall be for a period of seventy four (74) months and shall commence
on that date Landlord delivers to Tenant possession of the Premises in a
condition "suitable for occupancy" (as defined below), which date is projected
as June 1, 1995, (the "projected commencement date"). Accordingly, assuming
1
<PAGE>
a June 1, 1995 commencement date, this Lease shall expire and terminate (unless
extended as herein provided) at midnight on July 31, 2001. If for any reason
whatsoever, Landlord cannot deliver possession of the Premises to Tenant in a
condition "suitable for occupancy" as of the foregoing projected commencement
date, this Lease shall not be void or voidable (except as provided below); no
obligation of Tenant shall be affected thereby (unless Tenant duly exercises its
right of cancellation as provided below); and neither Landlord nor Landlord's
agents shall be liable to Tenant for any loss or damages resulting therefrom;
provided, however, that if possession of the Premises is not then delivered as
of August 1, 1995 to Tenant in a condition "suitable for occupancy" (except if
such late delivery is the result of "Tenant delay", as defined below) Landlord
shall pay to Tenant the sum of Seven Thousand Five Hundred Dollars ($7,500.00)
per month for a term not to exceed six (6) months (such amount to be pro-rated
in the event Landlord delivers possession after August 1, 1995 but on a day
which is not the first day of a month) until possession is delivered, or,
alternately, Tenant may, at its option, accept similar space in another building
of which this Landlord is landlord (or has a controlling interest in landlord)
under and pursuant to the same terms and conditions of this Lease, unless
otherwise modified by the mutual written agreement of Landlord and Tenant. In
the event that Landlord delivers possession of the Premises in a condition
"suitable for occupancy" after the projected commencement date, then the actual
commencement and expiration dates of this Lease and all other dates affected
thereby shall be revised to conform all affected dates under this Lease to the
date Landlord actually delivers possession of the Premises to Tenant. If with
Landlord's prior written approval, Tenant occupies the Premises prior to the
projected commencement date specified above, such occupancy by Tenant shall be
subject to all terms and conditions of this Lease, shall not advance the
expiration date, and Tenant shall pay prorated rent for such period of occupancy
at the initial monthly rates set forth below. Sums due Tenant pursuant to this
paragraph one of this Section 2 for late delivery shall, at Tenant's option, be
paid in cash when accrued or applied to rent next due under this Lease.
If upon Tenant's occupancy of the Premises, the actual amount of rentable
square feet for the Premises is determined to be greater or less than the amount
of currently estimated rentable square feet for the Premises (as stated above)
for whatever reason, including, without limitation, modifications in the
construction of the Building, then and in that event, the amount of rentable
square feet, as adjusted, together with resulting modifications of rent to be
paid hereunder, shall be set forth in an Acceptance of Premises Memorandum, the
form of which is attached as Exhibit B hereto, and which will be promptly
2
<PAGE>
(i.e., within ten business (10) days of Tenant's occupancy) executed by the
Landlord and Tenant, and upon such execution and delivery by the parties hereto,
made a part hereof.
If Landlord cannot deliver possession of the Premises to Tenant in a
condition "suitable for occupancy" as of the projected commencement date
referenced above, then subject to a grace provision period not to exceed ninety
(90) days from the projected commencement date (except that an event of force
majeure [not exceeding ninety (90) consecutive days in length] or a delay caused
by a Tenant delay either before or after the projected commencement date shall
be excluded in calculating such period on a per diem basis), and provided Tenant
is not then in default thereunder, Tenant may then, and in such an event only,
terminate this Lease by written notice to Landlord, whereupon neither party
shall have any further obligation or liability to the other, and further
provided that such written notice shall have no effect if given after Tenant
takes possession of the Premises, or any part thereof.
As used herein, the term "Landlord delivered to Tenant possession of the
Premises" and such similarly stated terms set forth above shall mean that the
Premises are "suitable for occupancy", but shall not include Tenant's entering
the Premises on a temporary basis for the purpose of measuring or inspecting the
Premises, or otherwise engaging in limited activity which does not constitute
occupancy (including, without limitation, the moving in of certain furnishings
or limited Tenant upfit subject to Landlord's consent which shall not be
unreasonably withheld or delayed, prior to the completion of Tenant
Improvements).
As used herein, the term "suitable for occupancy" shall mean that the
following conditions have been met: (a) a "Certificate of Occupancy," temporary
or final, has been issued by the appropriate governmental entity permitting
Tenant's use and occupancy of the Premises; (b) the Tenant Improvements have
been constructed and completed in all material respects for the Premises in
accordance with approved plans and specifications as certified by the architect
(subject only to an agreed to punch list); and (c) all means of access
(including, without limitation, corridors, elevators and stairways, heating and
ventilating, air-conditioning, sanitary sewer, water, parking, telephone access,
and electrical lighting and power facilities) have been installed, are in good
operating order, and are available to Tenant.
As used herein, the term "Tenant delay" shall mean an event of delay due
directly as the result of the conduct or fault of the Tenant, including Tenant's
failure to deliver Final Tenant
3
<PAGE>
Improvement Plans and Specifications on or before February 24, 1995, as required
pursuant to Section 9 hereof.
3. RENT. All rent payable by Tenant shall be without previous demand
therefor by Landlord, and without setoff or deduction (except as provided in
Section 16 below). Provided that Tenant is then not in default hereunder after
notice and the applicable cure period, if any, no rent shall be due from Tenant
for the first two (2) months. Thereafter, commencing as of the third month of
the term of this Lease, i.e. projected as August, 1995, the Minimum Rent for the
initial term shall be the sum of Six Hundred Three Thousand Six Hundred Three
and 00/100 ($603,603.00) Dollars, which rent shall be payable in advance in
equal monthly installments as follows:
<TABLE>
<CAPTION>
MONTHLY ANNUAL
MONTHS RATE PER RENTABLE S.F. RENT RENT
------ ---------------------- ---- ----
<S> <C> <C> <C>
3-38 $16.50 $8,258.25 $99,099.00
39-74 $17.00 $8,508.50 $102,102.00
Total Minimum Rent: $603,603.00
</TABLE>
Each monthly installment of rent shall be payable on or before the first day of
each calendar month during the term of this Lease, unless the term commences
other than on the first day of the month, in which event rent at the above rate
pro-rated until the end of that month shall be due and payable on the
commencement date. In addition to such remedies as may be provided under the
default provisions of this Lease, Landlord shall be entitled to a late charge of
four percent (4%) of the amount of the monthly rent if not received within five
(5) business days after the date due, and a charge of Twenty Dollars ($20.00) or
the maximum amount allowed by law, whichever is less, for any check given by
Tenant not paid when first presented by Landlord.
In the event of a default under the terms of this Lease after notice and
applicable cure period, if any, Landlord, in addition to any other right and
remedy available to Landlord, shall be entitled to recover from Tenant, and
Tenant shall immediately pay to Landlord upon Landlord's demand therefor, the
full amount of rent forgiven with respect to the first two (2) months of the
term of this Lease.
4
<PAGE>
4. INCREASES IN OPERATING EXPENSES. The Tenant agrees to pay to Landlord
as additional rent for each year (or portion hereof) during the term of this
Lease Tenant's Proportionate Share (as defined below) of the total of any
increases (the "Operating Expense Differential") in operating expenses incurred
on account of the operation or maintenance of the Building and adjoining common
areas (being shown in yellow on Exhibit A-3) above $4.80 ("Base Operating
Expense") per rentable square foot.
As used herein, the term "operating expense" shall include all direct costs
of operation and maintenance as determined by standard accounting practices and
shall include, by way of illustration, but is not limited to: costs of property
management services, ad valorem real and personal property taxes (but exclusive
of personal property taxes of a tenant), reasonable legal fees and other costs
incurred in connection with protesting any tax assessment, hazard and liability
insurance premiums, utilities, heat, air conditioning, janitorial and
maintenance services, landscaping, snow removal, common area asphalt and
pavement repair, labor, materials, supplies, equipment and tools (used in
connection with the Building or the common area), permits, licenses and
inspection fees. The term "operating expense" shall not include depreciation on
the Building in which the Premises is located or equipment therein (except for
the reasonable amortization of the costs for capital improvements or investment
items which are purchased or installed after the commencement date of the Lease
for the purpose of reducing "operating expenses"), interest, executive salaries,
real estate brokers commissions and other costs incurred to lease space in the
Building, costs to correct a Building defect, a violation of law or an
environmental condition relating to the Building not caused by the Tenant, costs
reimbursable to Landlord by third parties (including insurance proceeds), costs
(including utility costs) attributable to particular tenant(s) but not tenants
in general, costs to repair or reconstruct casualty damage or to restore the
Building in the event of condemnation, costs of defending litigation relating to
Landlord's ownership of the Building, and income taxes of Landlord.
If in the twelve (12) month period preceding the computation of each
Operating Expense Differential, the occupancy of the net rentable area of the
Building averages less than ninety-five percent (95%), then it is agreed that
the Operating Expense Differential will be adjusted for such year so that all
such operating expenses shall be computed as though the rentable area of the
Building had been ninety-five percent (95%) occupied for such lease year. All
such expense categories will be equitably accounted for, and reported for, and
in accordance with generally accepted accounting procedures.
5
<PAGE>
As used herein, the term "Tenant's Proportionate Share" of the Operating
Expense Differential shall mean that percentage found by dividing the rentable
square footage area of the Premises (i.e., approximately 6,006 rentable square
feet, subject to measurement pursuant to Section 2 above) by the rentable square
footage of the Building (i.e., approximately 75,983 rentable square feet,
subject to measurement). (For example, assuming currently estimated footages,
the "Tenant's Proportionate Share" computation is as follows: 6,006 rentable
square divided by 75,983 rentable square feet equals 7.904%). If at any time
during the term of this lease, the square footage of either the Premises or the
Building is materially adjusted, then and in that event, this definition of
"Tenant's Proportionate Share" shall be modified in accordance with its terms.
Statements showing the actual operating expenses of the Building and common
areas and Tenant's Proportionate Share thereof (hereinafter referred to as the
"Statement of Actual Operating Expense Adjustments") shall be delivered by
Landlord to Tenant within ninety (90) days after the end of each lease year in
which such sums as additional rent were paid by, or due from, Tenant under the
terms hereof. Within fifteen (15) days after Tenant's receipt of the Statement
of Actual Operating Expense Adjustments, Tenant shall pay to Landlord the amount
of any sums shown as being due and unpaid thereon, or alternately, Landlord
shall credit to Tenant the amount of any sums showed as overpaid by Tenant (or,
with respect to overpayments made by Tenant during the last year of the Lease
term, Landlord shall pay to Tenant in cash the amount of such overpayment,
provided that Tenant is not then in default hereunder after notice and the
applicable cure period, if any). The Statement of Annual Operating Expense
Adjustment (the "Statement") shall be available for audit by Tenant who at its
own expense may request and cause an audit to be performed of the Statement by a
qualified accountant. In the event that with respect to the Statement, Tenant's
audit establishes an error in excess of five percent (5%), then and in that
event, Landlord shall pay the reasonable costs of such audit upon Tenant's
request therefor.
Commencing with the first month of the second lease year, and each lease
year thereafter, there shall be added to Tenant's monthly payments an amount
equal to 1/12 of Tenant's Proportionate Share of the Operating Expense
Differential for the year in progress as estimated by Landlord. These monthly
payments (as estimated by Landlord) shall be paid as additional rent by Tenant
until such time as actual figures are available (after the end of the second and
successive lease years), when the monthly payments and future estimated monthly
payments shall be adjusted to reflect the prior year's experience.
6
<PAGE>
If the last year of this Lease should be less than a full twelve (12) month
period, the amount shown as due by Tenant on the Statement of Actual Operating
Expense Adjustments shall reflect a proration based on the proportion that the
number of days this Lease was in effect during such last year bears to the
number 360. Landlord's right to recover Tenant's Proportionate Share of the
Operating Expense Differential due, or Tenant's right to recover any
overpayment, shall survive the termination or expiration of this Lease.
Tenant also agrees to pay to Landlord as additional rent for each year
during the term of this Lease, Tenant's proportionate share of business park
(known as the "Imperial Center" as shown generally on Exhibit A-3) pass-through
costs, which means and includes the costs to Landlord arising from the operation
of business park amenities and common areas (for the nonexclusive benefit of
tenants at the business park) including, without limitation, property management
fees and other direct expense items as listed in the second full paragraph of
this Section 4, costs of maintenance for common area facilities (serving the
business park) and other business park amenities. Tenant's proportionate share
of business park pass-through costs shall be determined from a percentage found
by dividing the agreed to rentable square footage of the Premises by the
rentable square footage of all benefiting buildings within the business park
(which includes buildings owned by third parties). All provisions contained in
this Section 4, above, relating to the issuance of statements, reportings,
yearly reconciliations and the like, shall also apply to this obligation of
Tenant to business park pass-through costs.
5. OPTION TO EXTEND. Provided that Tenant is not then in default
hereunder (i.e., after Landlord's notice and Tenant's failure to cure within the
applicable cure period, if any), and provided further that Tenant gives Landlord
at least one hundred eighty (180) days prior written notice of Tenant's exercise
of this option to extend (failure to give such notice being an absolute bar to
any right on the part of Tenant to so extend), Landlord hereby gives to Tenant
the right to extend this Lease for a term of three (3) years, this extension
term to expire (unless sooner terminated pursuant to this Lease) with the
expiration date of such extended term (if exercised) to be set forth by
endorsement to the Acceptance of Premises Memorandum. All the terms and
conditions of this Lease shall remain and be in effect during the extension term
save and except that the rent to be paid by the Tenant during such extension
term shall be an amount equal to the then market rate equivalent for comparable
space in the Research Triangle Park, North Carolina area as calculated by
appraisal set forth below, or such other rate as
7
<PAGE>
may be mutually agreed upon by Landlord and Tenant. Landlord and Tenant agree to
establish the rent due for the extension term within thirty (30) days of
Tenant's exercise of the option herein granted. If the parties are unable to
agree as to rent to be paid for the extension term within the aforesaid thirty
(30) day period, then such rent shall be determined by process of directed
appraisal (as set forth below), provided nevertheless that in no event shall the
rent due for the extension term be less than the previously existing rate of
rent under this Lease. Subject to the aforesaid qualification and further
provided that upon appointment of the appraisers (as provided below) each of
Landlord and Tenant shall submit to the appraisers by sealed envelope their
numerical determination of the rent (i.e., term, annually and monthly) which in
the respective opinion of each party should be in effect for the extension term,
which numerical determinations by each of the parties shall set the absolute
range for rent during the extension term, otherwise the rent due for the
extension term shall be that amount which an unrelated party would be willing to
pay the Landlord for the Demised Premises pursuant to an arms-length
negotiation. In the event that rent for the extension term is not mutually
agreed upon within the aforesaid thirty (30) day period, then subject to the
aforesaid qualifications, each of Landlord and Tenant shall specify within five
(5) days after the expiration of such aforesaid thirty (30) day period, a
selection of a qualified appraiser by written notice to the other. Within
twenty (20) days after the selection of the last appraiser, the two (2)
appraisers (one selected by Landlord and the other selected by Tenant) shall
render a joint written determination of the rent payable for the extension term
(stated for each of the term, annually and monthly, and subject nevertheless to
the numerical range established by the parties). If the two (2) appraisers are
unable to agree upon a joint written determination within the aforesaid twenty
(20) day period and subject to the numerical range, each appraiser shall then
render his or her own determination and provided that each appraisal is within
twenty percent (20%) of the other, the two (2) appraisers shall select a third
appraiser within such twenty (20) day period. (If the two (2) appraisals as
aforesaid are not within twenty percent (20%) of each other, then and in that
event, the appraisal process shall be re-initiated by the parties choosing
different appraisers). Within ten (10) days after the appointment of a third
appraiser, the third appraiser shall select one of the determinations of the two
(2) appraisers originally selected, or if neither such appraisal represents that
value which a third party would be willing to pay the Landlord in a arms-length
negotiation, select a value which represents a number between the two (2)
appraisal values originally determined by the two (2) original appraisers but
still nevertheless subject to the numerical range initially established by the
parties. All
8
<PAGE>
appraisers selected pursuant to this Section 5 shall be unaffiliated and
disinterested appraisers having at least five (5) years prior experience in
making similar rent value appraisals in the Research Triangle Park area. If
either the Landlord or the Tenant fails or refuses to select an appraiser, the
other appraiser shall alone determine the rent for the extension term in
accordance with the terms hereof. Each party shall bear the fees and expenses of
their selected appraiser and, if necessary to select a third appraiser, the
parties hereto shall equally bear the fees and expenses of that third appraiser.
The appraised rent determined pursuant to this Section 5 shall be binding upon
the parties, except that Tenant may in good faith unilaterally reject the
appraised rent determined pursuant to this Section 5 by written notice to
Landlord given at least ninety (90) days prior to the expiration of the original
term of this Lease (failure to give such notice being an absolute bar to any
right on the part of Tenant to reject such appraised rent notwithstanding
whether or not the aforesaid appraisal process has been reinitiated) but,
nevertheless, provided always that in no event may Tenant reject the appraised
rent number in bad faith or if the appraised rent number is less than the number
initially determined by the appraiser appointed by Tenant. If Tenant timely
exercises its election to reject the appraised rent determined for the extension
term in accordance with the terms hereof, then and in that event, this Lease
shall expire absolutely as of its original expiration date as if Tenant had not
exercised the option herein granted.
6. USE. Tenant may use the Premises for general office purposes, but for
none other without Landlord's written consent first had and obtained. Tenant
shall not use or occupy nor permit the Premises to be used or occupied, nor do
or permit anything to be done in or on the Premises, in a manner which may (i)
make void or voidable any insurance in force with respect thereto; (ii) result
in any increase in the premiums charged for insurance, or cause Landlord to be
unable to obtain at regular rates fire or other insurance required to be
maintained; (iii) cause structural damage to the Premises, the Building, or any
part thereof; (iv) constitute a public or private nuisance; or (v) otherwise
violate any present or future law, ordinance, rule or regulation of any public
authority, including, without limitation, any law, ordinance, rule or
requirement concerning or relating to Tenant's use, occupancy, or alteration of
the Premises. If as the result of any act or neglect of Tenant, its employees,
agents, representatives, clients or visitors, or the manner in which business is
conducted at the Premises, any insurance rate shall be increased over the
existing rate and assessed against Landlord, then and in that event, Tenant
shall pay to Landlord on demand the amount of such increase as additional rent.
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So long as Tenant is not then in default under any term or condition hereof
after notice and the applicable cure period, if any, and provided further that
no permitted assignment or subleasing of this Lease to a third party has then
occurred, Landlord shall not lease any space in the Building to any "direct
competitor" of Tenant during the term of this Lease, or any extension thereof,
identified as Exhibit E, and by this reference, made a part hereof. As used
herein, the term "direct competitor" shall mean any company or firm listed in
Exhibit E hereto.
7. SERVICES BY LANDLORD. Provided that Tenant is not in default hereunder
(i.e., after Landlord's notice and Tenant's failure to cure within the
applicable cure period, if any), Landlord shall cause to be furnished to the
Premises in common with other tenants during "Standard Hours of Operation" (as
defined below), Monday through Saturday (excluding Holidays), the following
services: janitorial services (once per working day after normal weekday working
hours); water if available from city mains for drinking, lavatory and toilet
purposes; operatorless elevator service; electricity for general office space
use (including fluorescent lighting replacements); trash removal in accordance
with city schedules; and heating and air conditioning for reasonably comfortable
use and occupancy of the Premises, providing heating and cooling conforming to
any governmental regulation prescribing limitations thereon shall be deemed to
comply with this service. All additional costs resulting from Tenant's
extraordinary usage of heating, air conditioning or electricity which Landlord
shall document shall be paid by Tenant, and Tenant shall not install equipment
within the Premises with unusual demands for any of the foregoing without
Landlord's prior written consent which Landlord may withhold if it determines
that in its opinion such equipment may not be safely used in the Premises or
that electrical service is not adequate therefor. Landlord shall provide free
parking in the amount of four (4) parking spaces per 1,000 useable square feet
of Premises, in common with the other tenants, for Tenant's employees and
visitors. Tenant and its employees shall have access to the Premises twenty-four
(24) hours per day, seven (7) days per week and fifty-two (52) weeks per year.
So long as Landlord acts reasonably and in good faith, there shall be no
abatement or reduction of rent by reason of any of the foregoing services not
being continuously provided to Tenant.
Landlord agrees to provide heating and air conditioning after-hours (i.e.,
hours before or after the Standard Hours of Operation) at Tenant's request after
reasonable notice and if the area to be served is zoned for this purpose. The
cost of after-hours service of heating or air conditioning shall be additional
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rent payable monthly by Tenant at Landlord's actual cost plus ten percent (10%)
or $25.00 per hour, whichever is greater.
As used herein, "Standard Hours of Operation" shall mean and refer to those
hours of operation at the Building which are 7:30 a.m. to 6:30 p.m. Monday
through Friday and 8:00 a.m. through 1:00 p.m. on Saturday, except holidays.
Holidays shall mean and refer to each of the following days (on the day set
aside for observance): New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, Christmas Day and any other holiday(s) generally
recognized as such by landlords of office space in the Research Triangle Park
area office market, as reasonably determined by Landlord.
Landlord agrees to maintain and keep in good working order the Premises,
Building and common areas and any operating equipment contained therein,
including, without limitation the cooling and heating system, the electrical
system, roof, security system, the sprinkler system, exterior walls, and the
plumbing system, and agrees to pursue, to the extent actionable, any claim
against any and all contractors, subcontractors or other firms, or persons
providing services, equipment or materials for the construction of the Building,
Premises or the common areas, to the extent such services, equipment or
materials are defective, provided, however, that, under no circumstances, shall
Landlord be liable to Tenant for any damage caused to Tenant and its property
due to the Building or any part or appurtenance thereof being improperly
constructed or being or becoming out of repair, or arising from the leaking of a
pipe, facility or system for any utility (except that nothing contained in this
sentence shall be construed to be a waiver of Tenant's rights or remedies
available to it at law or in equity). To the extent that Landlord is held
liable to Tenant for damage caused to Tenant and its property due to the
Building or any part or appurtenance thereof being improperly constructed or
being or becoming out of repair, or arising from the leaking of a pipe, facility
or system for any utility, it is expressly agreed by the parties hereto that
Landlord shall be obligated to Tenant only to the extent of Tenant's actual
damages but not Tenant's special or consequential damages, including, without
limitation, loss of profits. Tenant shall immediately report to Landlord any
defective condition in or about the Premises known to Tenant.
The use and occupancy by the Tenant of the Premises shall include the use
in common with others entitled thereto of the common areas, including driveways,
parking areas, service roads, loading docks, sidewalks, corridors, exterior
facade, landscaped and planted areas, and all other improvements provided by
Landlord for the common use of the Building tenants as shown on the site plan
for the Building attached as Exhibit A-3, and any
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other common facility as may be designated from time to time by the Landlord,
subject, however, to the terms and conditions of this Lease and to the
reasonable rules and regulations for use therefor as prescribed from time to
time by the Landlord. Tenant, its employees, agents, customers and invitees
shall have the nonexclusive use (in common with other benefitting tenants) to
use the common areas for purposes intended. Tenant shall not at any time
interfere with the use of the common areas by Landlord, another tenant or any
other person entitled to use the same. Landlord reserves the right, from time
to time, to alter any of the common areas, to exercise control and management of
the same, and to establish, modify, change and enforce such reasonable rules and
regulations as Landlord in its discretion may deem desirable for the management
of the Building or the common areas, provided that such actions by Landlord do
not materially and adversely interfere with Tenant's operation of, or access to,
the Premises or result in a material alteration of the terms of this Lease
adverse to Tenant.
8. TENANTS ACCEPTANCE AND MAINTENANCE OF PREMISES; LIENS. Upon its
occupancy of the Premises, Tenant represents to the Landlord that Tenant has
examined and inspected the same, finds the Premises to be as represented by the
Landlord and satisfactory for Tenant's intended use, and evidences Tenant's
acceptance of the Premises on the date of such occupancy "where is" and "as is",
except for latent defects. Tenant shall maintain (and so deliver at the end of
the Lease) each and every part of the Premises (excluding portions of the
Premises which Landlord is obligated to maintain, exterior drives, walks and
parking areas and common areas in the Building to be maintained by Landlord) in
good repair and condition, excepting only ordinary wear and tear and damage to
the Building or the Premises not caused by Tenant. In addition, Tenant will
repair any damage occurring to the Premises as the result of Tenant's fault or
its removal of its trade fixtures or furnishings, shall make at Tenant's sole
cost and expense such restorations and repairs, in quality equivalent or better
than the original work restored or repaired, as may be required to so maintain
the same, ordinary wear and tear only excepted. Tenant, however, shall make no
structural or interior alterations of the Premises without Landlord's prior
written consent, and any work performed by Tenant shall be done in a good and
workmanlike manner, and so as not to disturb or inconvenience other Tenants in
the Building. Tenant shall not at any time permit any work to be performed on
the Premises except by duly licensed contractors or artisans, each of whom must
carry general public liability insurance, certificates of which shall be
furnished Landlord. At no time may Tenant do any work that results in a claim
of lien against Landlord, and if requested by Landlord on termination of the
Lease or vacation of the Premises by Tenant, Tenant shall restore
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at Tenant's sole expense the Premises to the same condition as existed at the
commencement of the term, ordinary wear and tear only excepted. Landlord,
however, may elect to require Tenant to leave alterations performed by it.
Tenant shall keep the Premises and the Building free from any liens arising out
of any work performed, materials ordered or obligations incurred by or on behalf
of Tenant, and Tenant hereby agrees to indemnify and hold Landlord, its agents,
employees, contractors, officers, directors, partners, and shareholders harmless
from any liability, cost or expense for such liens. Tenant shall cause any such
lien imposed to be released of record by payment or bonding upon terms
reasonably acceptable to Landlord within twenty (20) days after the earlier of
the imposition of the lien or a written request by Landlord therefor. If Tenant
fails to remove any lien within the prescribed twenty (20) day period, then
Landlord may do so at Tenant's expense, including costs and attorneys' fees,
which expense shall be due as additional rent hereunder.
9. TENANT IMPROVEMENTS. Final Tenant Improvement Plans and Specifications
showing tenant improvements to be constructed at the Premises (the "Tenant
Improvements") shall be delivered to Landlord for its review and approval on or
before February 24, 1995, and upon such Landlord approval, attached as Exhibit C
to this Lease and made a part hereof. Any and all Tenant Improvements and other
Tenant upfit of any kind whatsoever, and all plans and specifications relating
thereto, shall require the prior approval of the Landlord which approval shall
take into account the quality and first-class character of the Building, but
shall not be unreasonably withheld. At Tenant's cost and expense but
nevertheless subject to the Tenant Allowance as provided below, Landlord agrees
to cause the Tenant Improvements at the Premises to be substantially completed
on or before June 1, 1995, the projected commencement date (subject to the
aforementioned ninety (90) day grace period as set forth in Section 2, above,
and otherwise in accordance with the terms and conditions of that Section 2).
The parties hereto agree to cooperate fully in connection with the construction
of Tenant Improvements. Landlord agrees to procure at least two (2) competing
bids on a negotiated bid basis for the construction of the Tenant Improvements
at the Premises. Landlord will choose the lower cost estimate, unless Tenant
authorizes the Landlord to choose a higher bid. Landlord agrees to review all
bids received with Tenant. Landlord will then contract with a contractor
pursuant to a guaranteed maximum price contract, subject to adjustment in
contract price by change order only. As used herein, the term substantial
completion with respect to construction of the Tenant Improvements is that date
when the Premises is "suitable for occupancy," as defined in Section 2, above.
With respect to completed work of the Tenant Improvements
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at the Premises, the Premises shall be clean and free or any debris or
obstruction. Floors to receive carpeting are to be cleaned, leveled and sealed.
When Landlord determines the Tenant Improvements to be substantially complete,
the Landlord and Tenant will prepare a list of items to be corrected or
completed (i.e., the punch list), which punch list shall be completed within not
later then thirty (30) days of Tenant's occupancy of the Premises. If for any
reason, but nevertheless in accordance with the terms of Section 2, the Premises
together with the Tenant Improvements is delivered by Landlord after June 1,
1995, no rent shall be due until such time as the possession to the Premises is
delivered in a condition "suitable for occupancy." Upon such delivery of the
Premises by Landlord, Tenant shall be obligated to occupy the Premises within a
commercially reasonable period of its written notice from Landlord of the
availability of the Premises in a condition "suitable for occupancy," subject
only to Tenant's right of cancellation as set forth in Section 2.
Provided Tenant is not in default hereunder (after Landlord's notice and
Tenant's failure to cure within the applicable cure period), Landlord agrees to
provide Tenant an allowance of Fifteen and 50/100 Dollars ($15.50) per useable
square foot at the Premises [which tenant allowance if determined with reference
to currently estimated useable footage at the Premises is Eighty One Thousand
Five Hundred Forty-Six and 0/100 Dollars ($81,546.00)] (the "Tenant Allowance").
The Tenant Allowance may be used to offset the cost of Tenant Improvements
and/or any other Tenant cost arising during the term of this Lease after the
actual commencement date, as Tenant shall reasonably determine. The Tenant
Allowance shall be either credited by Landlord as against cost of the Tenant
Improvements or as invoices are presented by Tenant to Landlord for any other
permitted Tenant cost. Disbursement of the Tenant Allowance shall be subject to
the reasonable requirements of Landlord which requirements shall reasonably
relate to and concern the Tenant Improvements or Tenant's occupancy of the
Premises.
Landlord will charge Tenant fees not to exceed in total four percent (4%)
of the Tenant Improvement costs as a construction and overhead fee with respect
to the construction of Tenant Improvements. These Landlord fees chargeable to
Tenant may be deducted by Landlord from the Tenant Allowance, and if not so
deducted, are payable within thirty (30) days of substantial completion of the
Tenant Improvements.
No part of the Tenant Improvements shall be of such a nature that they will
require changes outside the Building. The plans and specifications for the
Tenant Improvements as approved by the parties or the resulting Tenant
Improvements shall not adversely affect the legality of use or occupancy of the
Building or result
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in increases cost of fire insurance for the Building, and shall comply with
applicable law as of the date of delivery.
Tenant and any of its representatives or consultants shall have access to
the Premises and Building during the construction of the Tenant Improvements and
any other Tenant upfit, and the right to inspect the same.
10. CASUALTY DAMAGE. If the Premises are destroyed by fire or other
casualty not resulting from the wrongful or negligent act of Tenant, either
Landlord or Tenant may by written notice given not later than thirty (30) days
after the date of such destruction, terminate this Lease, in which event rent
paid for the period beyond the date of destruction shall be refunded to Tenant.
If there is not total destruction and Tenant reasonably is required to close its
operations during repairs, rent shall abate while so closed, but if Tenant is
able to continue its operations during repairs, rent shall be adjusted and
prorated in the proportion which the area of unusable leased space bears to the
total Premises, provided that Landlord shall not in any event have any liability
for losses claimed by Tenant. If there is not total destruction, but if the
damages are such that subject to confirmation (at Tenant's written request
within five (5) business days of the date of damages) by a qualified unrelated
third party architect (mutually selected by the parties, but at Tenant's sole
cost and expense), Landlord concludes that restoration cannot be completed
within one hundred and twenty (120) days of the date on which the damages
occurred, Landlord or Tenant may, at their respective options, by written notice
given to the other not later then thirty (30) days after the date of such
damage, terminate this Lease. Subject to confirmation of the feasibility of
restoration of the Premises within one hundred twenty (120) days on the same
terms as aforesaid and subject nevertheless to the availability of adequate
insurance proceeds therefor, Landlord shall then undertake and complete the
restoration of damage to the Premises. If restoration as aforesaid is
undertaken, Landlord shall proceed with reasonable diligence and without delay
to cause the Premises or the Building, as the case may be, to be repaired and
restored within one hundred twenty (120) days of the date on which the damage
occurred to substantially the same condition in which it was prior to a fire or
other casualty. If such restoration or repair is not substantially completed
within such one hundred and twenty (120) day period, then provided that Landlord
has acted continuously and diligently to effect and complete such restoration
and repair, Landlord shall be entitled to a sixty (60) day grace period in which
time to complete the restoration or repair, and thereafter (or if Landlord has
not continuously and diligently acted to restore or repair within the aforesaid
one hundred twenty (120) day period), either party may elect
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promptly, i.e. within ten (10) business days of the last day of the aforesaid
sixty (60) day grace period or the aforesaid one hundred twenty (120) day
period, (as the case may be) to cancel this Lease by written notice to other
(and Landlord's lender, as the case may be). Notwithstanding any other
provision contained herein to the contrary, if the Premises are damaged by cause
due to fault or neglect of Tenant, its agents, employees, invitees, or
licensees, Landlord shall have no obligation to Tenant of any kind whatsoever
with respect to any duty to restore or repair the Premises, Landlord may proceed
to restore such damage without prejudice to its right to make claim against
Tenant, its agents, employees, invitees or licensees, to the extent that
Landlord's loss is not covered by insurance proceeds, and there shall be no
apportionment or abatement of rent.
11. ASSIGNMENT AND SUBLEASING. Tenant may not assign, transfer, mortgage
or encumber this Lease, and may not sublet any part or all of the Premises
without the written consent of Landlord first had and obtained, which consent
shall not be unreasonably withheld or delayed. Any assignment or sublease to
which Landlord may consent (one consent not being any basis to contend that
Landlord should consent to a further change) shall not relieve Tenant of any of
its obligations hereunder. The sale of Tenant to a third party shall be deemed
a voluntary assignment of this Lease and subject to the provisions of this
paragraph. Acceptance of rent by Landlord after any non-permitted transfer or
assignment shall not constitute approval thereof by Landlord. In no event shall
this Lease be assignable by operation of any law, and Tenant's rights hereunder
may not become, and shall not be listed by Tenant as an asset under any
bankruptcy, insolvency or reorganization proceedings. Tenant is not, may not
become, and shall never represent itself to be an agent of Landlord, and Tenant
expressly recognizes that Landlord's title is paramount, and that it can do
nothing to affect or impair Landlord's title. If this Lease shall be assigned
or the Premises or any portion thereof sublet by Tenant at a rental that exceeds
the rentals to be paid to Landlord hereunder, attributable to the Premises or
that portion thereof so assigned or sublet, as the case may be, then and in such
an event, one half of such excess rent shall be paid over to Landlord by Tenant
as additional rent hereunder.
12. TENANT'S COMPLIANCE; INSURANCE REQUIREMENTS; WAIVER OF SUBROGATION.
Tenant shall comply with all applicable laws, ordinances and regulations
affecting Tenant and Tenant's use of the Premises, including reasonable rules
for tenants as may be developed from time to time by Landlord and personally
delivered to Tenant at the Premises. Tenant shall maintain and care for its
personal property located in the Premises, fully insure such personal property,
and shall neither have nor make any claim against Landlord for any loss or
damage to the same except for
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any loss or damage suffered as a direct result of Landlord's gross negligence,
willful misconduct or Landlord's default under this Lease after written notice
from Tenant and the reasonable opportunity to cure, and then only to the extent
that such loss or damage is not covered by insurance proceeds. Throughout the
term of this Lease, Tenant shall, at its sole cost and expense, keep or cause to
be kept for the mutual benefit of Landlord and Tenant the following insurance:
(a) commercial general liability insurance naming the Landlord as an additional
insured against any and all claims for bodily injury and property damage
occurring in, or about the Premises, arising out of Tenant's use and occupancy
of the Premises, such insurance to have a combined single limit of not less than
$1,000,000 per occurrence with a $2,000,000 aggregate limit and excess umbrella
liability insurance in the amount of $2,000,000, and such insurance to be
primary and non-contributing to any insurance available to Landlord and
Landlord's insurance shall be in excess thereto, and in no event shall the
limits of such insurance be considered as limiting the liability of Tenant under
this Lease; (b) personal property insurance insuring all equipment, trade
fixtures, inventory, fixtures and personal property located on or in the
Premises for perils covered by the causes of loss--special form (all risk),
together with coverage for flood, earthquake and boiler and machinery (if
applicable), such insurance to be written on a replacement cost basis in an
amount equal to one hundred percent of the full replacement value of the
aggregate of the foregoing property; (c) workers' compensation insurance in
accordance with statutory law and employers' liability insurance with a limit of
not less than $100,000 per employee and $500,000 per occurrence; and (d) such
other necessary insurance as required by law or by customary commercial practice
locally applied. The policies required to be maintained by Tenant shall be with
companies rated AX or better in the most current issue of Best's Insurance
Reports. Insurers shall be licensed to do business in the State of North
Carolina and domiciled in the United States of America. Any deductible amounts
under any insurance policies required hereunder shall not exceed $15,000.00
except for $50,000.00 for flood casualty and 5% of value for earthquake
casualty. Certificates of Insurance (or certified copies of the policies if
required by Landlord) shall be delivered to Landlord prior to the commencement
date and thereafter at least thirty (30) days prior to the expiration date of
the old policy. Tenant shall have the right to provide insurance coverage which
it is obligated to carry pursuant to the terms hereof in a blanket policy,
provided such blanket policy expressly affords coverage to the Premises and to
Landlord directly as required by this Lease. Each policy of insurance shall
provide notification to Landlord at least thirty (30) days prior to any
cancellation or modification resulting in a reduction of insurance coverage.
Throughout the term of the
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Lease, Landlord shall carry (i) all-risk ninety percent (90%) replacement cost
fire and extended coverage insurance (including earthquake and flood coverage
under such extended coverage) on the Building and the common area facilities
used in connection with the Building (except that a full replacement cost
standard shall apply to any successor of Landlord), (ii) comprehensive general
liability insurance with respect to all common areas of the Building in an
amount not less than that required of Tenant with respect to the Premises; and
(iii) workers' compensation and employer's liability insurance in accordance
with statutory requirements. With respect to the Landlord's insurance, the same
deductible amounts as aforesaid shall apply. Notwithstanding anything in this
Lease to the contrary, to the extent covered by insurance, Landlord releases and
waives unto Tenant, its successors and assigns, and Tenant releases and waives
unto Landlord, its successors and assigns, all right to claim damages for any
injury, loss, cost, or damage to persons or to the Premises which is occasioned
by fire, explosion, accident, occurrence or condition in, or about the Premises
or any other casualty, as long as the amount of which injury, loss, cost or
damage has been paid either to Landlord, Tenant, or any other person, firm or
corporation, under the terms of any fire, extended coverage, public liability or
other policy of insurance, to the extent such releases or waivers are permitted
under applicable law. All policies of insurance carried or maintained pursuant
to this Lease shall contain or be endorsed to contain a provision whereby the
insurer waives all rights of subrogation against both Tenant and Landlord, as
the case may be, provided such a provision shall be obtainable. If insurance
policies with such waiver of subrogation provisions shall not be obtainable then
the provisions relating to waiver of subrogation as contained in this Section 12
shall have no effect during such time as such insurance policies with waiver of
subrogation provisions shall not be obtainable. If any provision relating to a
waiver of subrogation, as set forth in this Section 12 shall contravene any
present or future law with respect to exculpatory agreements, the liability of
the party affected shall be deemed not released but shall be secondary to the
other's insurer.
13. SUBORDINATION; ATTORNMENT. Tenant agrees that this Lease will either
be subordinate or superior to any mortgage heretofore or hereafter executed by
the Landlord covering the Premises, depending on the requirements of such
mortgagee. On request, Tenant will execute such agreements making this Lease
superior or subordinate as Landlord's mortgagee may request, and will agree to
attorn to said mortgagee providing the mortgagee agrees not to disturb Tenant's
possession hereunder so long as Tenant is in compliance with this Lease.
Landlord consents to Tenant's execution of Landlord's mortgagee's subordination,
attornment and non-disturbance agreement, and to be bound by the
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provisions thereof. Further Tenant agrees to execute within fifteen (15) days
of request therefor, and as often as reasonably requested, estoppel certificates
setting forth the facts with respect to date of occupancy, termination date of
this Lease, the amount of rent due and date to which rent is paid, whether or
not it has any known defense or offsets to the enforcement of the Lease or
knowledge of any default or breach by Landlord, and that this Lease is in full
force and effect except as to any modifications or amendments, copies of which
Tenant shall attach to such estoppel certificate. Tenant agrees to attorn to
any successor of Landlord.
14. SIGNS. Tenant may not erect, install or display any sign or
advertising material upon the Premises, the walls thereof, or in any window
therein, without the prior written consent of Landlord. Landlord shall furnish,
install and maintain a building directory at a convenient location in the lobby
listing the name of Tenant and the room number of Tenant's entrance office.
15. ACCESS TO PREMISES. After reasonable notice to Tenant except in the
case of an emergency, Landlord shall have the right, either itself or through
its authorized agents, to enter the Premises at all reasonable times to inspect
the same; to show them to prospective tenants (for the Premises or other space
in the Building); to allow inspection by a mortgagee; and to make such repairs,
alterations or changes as Landlord deems necessary. Tenant, its agents,
employees, invitees and guests shall have the right of ingress and egress to
common and public areas of the Building, provided Landlord by reasonable rules
may control such access for the comfort, convenience and protection of all
tenants in the Building. Tenant further agrees that Landlord may enter the
Premises at all reasonable times to post "For Rent" signs within six (6) months
prior to the expiration of the Lease term, which signs may not be removed by
Tenant.
16. DEFAULT. If Tenant: (a) fails to pay all rent as provided in this
Lease when due and such default shall continue for two (2) business days after
Tenant's receipt of written notice from Landlord to Tenant thereof; (b) breaches
any other agreement or obligation herein set forth and such breach shall
continue for thirty (30) days after the date of written notice from Landlord to
Tenant specifying the nature of the breach (or for such lesser period if
performance is required to be made within such lesser period due to a specific
provision of this Lease), provided nevertheless that Tenant shall not be in
default if Tenant shall in good faith have commenced the curing or remedying of
such breach within such thirty (30) days period (or shorter period with respect
to a breach requiring performance within a certain time under the terms of this
Lease) and
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thereafter shall diligently and continuously proceed therewith to completion in
full satisfaction of the breach; (c) files (or has filed against it) any
petition or action for relief under any creditor's law (including bankruptcy,
reorganization, or similar actions), either in state or federal court; or (d)
becomes insolvent, makes any transfer in fraud of creditors, has a receiver
appointed for its assets, or makes an assignment for benefit of creditors, then
in addition to any other lawful right or remedy which it may have, Landlord may
do the following: (A) declare the rent for the balance of the term immediately
due and payable, and collect the present value of the same (determined by
discounting the rent for the remainder of the term, using the discount rate of
the Federal Reserve Bank of Richmond, Virginia existing at such time and
nevertheless subject to Landlord's duty to mitigate Tenant's damages if required
under North Carolina law); (B) without obtaining any court authorization, lock
up the Premises and deny Tenant access thereto; (C) terminate this Lease; or (D)
repossess the Premises, and with or without terminating, relet the same at such
amount as Landlord deems reasonable but nevertheless subject to Landlord's duty
to mitigate its damages, and if the amount is less than Tenant's rent, Tenant
shall immediately pay the difference on demand to Landlord, but if in excess of
Tenant's rent, the entire amount shall belong to Landlord free of any claim of
Tenant thereto. All expenses of Landlord in repairing, restoring or altering
the Premises for reletting, together with leasing fees, all other expenses in
seeking and obtaining a new tenant, the unamortized portion of Landlord's paid
allowance for Tenant Improvements and other permitted Tenant costs, the
unamortized portion of any other upfit costs paid on account of this Lease by
Landlord, and other damages and costs, shall be charged to and a liability of
Tenant. Landlord's reasonable attorneys fees in pursuing any of the foregoing
remedies, or in collecting any rents due by Tenant hereunder, shall be paid by
Tenant. All rights and remedies of Landlord are cumulative, and the exercise of
any one shall not be an election excluding Landlord at any other time from
exercising a different or inconsistent remedy. No waiver by Landlord of any
covenant or condition shall be deemed to imply or constitute a further waiver of
the same at a later time, and acceptance of rent by Landlord even with knowledge
of a default by Tenant shall not constitute a waiver of such default.
If Landlord breaches any agreement or obligation in this Lease, and such
breach shall continue for a period of thirty (30) days after the later dates of
respective notice to each of Landlord and Landlord's lender (to the extent
Landlord has given Tenant written notice of any such lender and the address
thereof which as of the date hereof, includes ABN-AMRO Bank, N.V. and the
Principal Mutual Life Insurance Company, c/o Principal Financial
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Group, 711 High Street, Des Moines, Iowa 50392 Attn: Mr. Frank Schmitz,
Commercial Real Estate (Loan No. 750506)), provided nevertheless, that Landlord
shall not be in default if Landlord or Landlord's lender, as the case may be
(each having rights of cure hereunder) shall severally (but not necessarily
jointly) in good faith have commenced the curing or remedying of such breach
within such thirty (30) day period and thereafter shall diligently and
continuously proceed therewith to completion in full satisfaction of the breach,
then in addition to any other lawful right or remedy which it may have, Tenant
shall have the option of curing the default and deducting the reasonable costs
of cure from current and future rent due.
In the event that either Landlord or Tenant brings an action at law or in
equity for the enforcement of any provision of this Lease, the non-prevailing
party in such action shall pay to the prevailing party its reasonable attorney's
fees and costs.
17. INDEMNIFICATIONS. Except for claims caused by the negligence or
willful misconduct of Landlord, Tenant shall indemnify and hold harmless
Landlord, its agents, representatives, successors or assigns, from and against
any and all losses, damages, liabilities, claims, penalties, costs or expenses
(including attorney's fees), whether caused by Tenant or by its agents,
servants, employees, independent contractors or licensees, occasioned by,
arising or resulting from or growing out of (a) Tenant's use or occupancy of the
Premises, or from the conduct of Tenant's business, or from any activity, work
or things done, permitted or suffered by Tenant in or about the Premises; (b)
the breach or default in the performance of any obligation on Tenant's part to
be performed under the terms of this Lease or arising from any act or omission
of the Tenant; or (c) any violation of any Environmental Law (as defined below),
any unsafe or improper use or storage of any Hazardous Substance (as defined
below) or any condition created by or arising therefrom including any pollution
or contamination at or about the Premises or the Building, arising from any act
or omission of Tenant, its agents, servants, employees, contractors or
licensees, whether or not due to negligence, an omission or a willful act.
Tenant shall defend any suit, action or proceeding commenced or brought
against Landlord in connection with any indemnity or obligation of Tenant
contained in this Section regardless of any alleged fault or cause and Tenant
shall employ legal counsel reasonably satisfactory to Landlord to defend such
suits, actions or proceedings. Tenant shall deliver to Landlord copies of the
documents served in any such suit, action or proceeding and, whenever requested
by Landlord, shall advise as to the status of such suit, action or proceeding.
If Tenant
21
<PAGE>
fails to defend diligently any such suit, action or proceeding, or if Landlord
elects to defend by written notice to Tenant at any time, Landlord shall have
the right (but not the obligation) to defend the same at Tenant's expense.
Tenant shall not settle any such suit, action or proceeding without Landlord's
prior written consent. Tenant shall give timely notice of such suit, action or
proceeding and the claims thereof to Landlord and each insurer issuing an
insurance policy required under this Lease.
Except for claims caused by the negligence or willful misconduct of Tenant
or Tenant's agents, servants, employees, contractors, licensees or invitees,
Landlord shall indemnify and hold Tenant harmless from and against any claims
arising out of (i) any breach or default by Landlord in the performance of any
of its obligations under this Lease; or (ii) the negligence or willful
misconduct of Landlord or its agents; and in each case from and against any and
all damages, losses, liabilities, lawsuits, costs and expenses (including
reasonable attorneys' fees) arising or resulting therefrom. If such action is
brought against Tenant, Landlord upon notice from Tenant shall defend the same
through counsel selected by Landlord's insurer or other counsel in each case
acceptable to Tenant.
The indemnification provisions contained herein shall not be deemed to be
limited by the limits of any insurance policies required under this Lease and
shall survive the expiration or termination of this Lease.
18. CONDEMNATION. If all of the Premises or such part thereof or part of
the common areas (including those common areas within the Building), as will
make the Premises unusable for the purposes contemplated by this Lease, be taken
under the power of eminent domain (or a conveyance in lieu thereof), then this
Lease shall terminate as of the date possession is taken by the condemnor, and
rent shall be adjusted between Landlord and Tenant as of such date. If only a
portion of the Premises is taken and Tenant can continue use of the remainder,
then the Lease will not terminate, but rent shall abate in a just and
proportionate amount to the loss of use occasioned by the taking (and Landlord
shall repair any damage to the Premises and/or the Building caused by such
condemnation to the extent of the award received by Landlord). Tenant shall
have no right or claim to any part of any award made to or received by the
Landlord for any taking and no right or claim for any alleged value of the
unexpired portion of this Lease; provided, however, that Tenant shall not be
prevented from making a claim against the condemning party (but not against
Landlord) for any moving expenses, loss of profits, or taking of Tenant's
personal property (other than its leasehold interest) or improvements installed
in the Premises by Tenant to which Tenant may be entitled.
22
<PAGE>
19. QUIET ENJOYMENT. If Tenant promptly and punctually complies with each
of its obligations hereunder, it shall peacefully have and enjoy the possession
of the Premises during the term hereof; provided that no action of Landlord in
repairing or restoring the Premises or concerning work in other space of the
Building shall be deemed a breach of this covenant, or give Tenant any right to
modify this Lease either as to term, rent or sums payable, or other obligations
to be performed except as may be expressly set forth in other Sections of this
Lease.
20. SECURITY DEPOSIT. Landlord acknowledges receipt from Tenant of the
sum of Eight Thousand Two Hundred Fifty Eight and 25/100 Dollars ($8,258.25),
which sum Landlord shall retain as security for the performance by Tenant of
each of its obligations hereunder. If Tenant fails at any time to perform its
obligations, Landlord may at its option apply said deposit, or so much thereof
as is required, to cure Tenant's default, but if prior to the expiration or
termination of this Lease Landlord depletes said deposit in whole or in part,
Tenant shall immediately restore the amount so used by the Landlord. This
deposit shall not bear interest, and unless the Landlord uses the same to cure a
default of Tenant, or to restore the Premises to the condition that Tenant is
required to leave them at the conclusion of the term, Landlord shall within
thirty (30) days of the expiration of the Lease refund to Tenant so much of the
deposit as remains.
21. NOTICES. Any notices which Landlord or Tenant is required or desires
to give the other shall be deemed sufficiently given or rendered if, in writing,
is delivered personally or sent by regular mail, or if an event of default is
claimed, then either delivered personally or sent by certified or registered
mail, postage prepaid, to the address listed after the signature of the party to
be given notice, at the end of this Lease document. Any notice given herein
shall be deemed delivered when the return receipt therefore is signed, or
refusal to accept the mailing by the addressee is noted thereon by the postal
authorities.
22. [INTENTIONALLY OMITTED]
23. LANDLORD LIABILITY. Tenant agrees that Landlord shall not be liable
for (i) injury to Tenant's business or any loss of income therefrom or for any
damage to any goods, wares, merchandise, or other property of Tenant, or
Tenant's contractors, agents, employees, invitees, customers or any other person
in or about the Premises, except to the extent that such injury or damage is
caused by the gross negligence or willful misconduct of Landlord, its agents or
employees but subject nevertheless to the limitation that Tenant's measure of
damages
23
<PAGE>
shall be Tenant's actual damages, and not special or consequential damages,
including, without limitation, loss of profits, or (ii) injury to the person of
the Tenant or to the Tenant's contractors, agents, employees, invitees or
customers whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Building of which the Premises are a part or from other sources
or places, and regardless of whether the cause of such damage or injury or means
of repairing the same is inaccessible to Tenant except to the extent that such
injury or damage is caused by the gross negligence or willful misconduct of
Landlord, its agents or employees but subject nevertheless to the limitation
that Tenant's measure of damages shall be Tenant's actual damages, and not
special or consequential damages, including, without limitation, loss of
profits. Landlord shall not be liable for any loss or damages arising from any
act or neglect of any other tenant. The term "Landlord" as used in this Lease
so far as covenants or obligations on the part of Landlord are concerned shall
be limited to mean and include only the owner or owners of the Premises and
Building at the time in question, and in the event of any transfers or
conveyances the then grantor shall be automatically freed and released from all
liability as respects the performance of any covenant or obligation contained in
this Lease on the part of Landlord to be performed from and after the date of
such transfer or conveyance, and this Lease and its terms shall be binding on
the Landlord, its successors and assigns only during and in respect to their
respective successive periods of ownership. Notwithstanding any other provision
contained herein to the contrary, in the event of a breach hereof by Landlord or
the failure of Landlord to perform any of its obligations hereunder, Landlord
shall have no personal liability therefor, but Tenant shall look solely to
Landlord's interest in the Premises for satisfaction of any claim or loss.
24. SURRENDER; HOLDING OVER. Tenant will vacate and deliver up the
Premises and all improvements, additions and alterations thereto (except Tenant
equipment, personal property and trade fixtures installed by Tenant at its
expense which may be removed by Tenant) at the expiration or sooner termination
of this Lease, in a good, clean and tenantable condition as the same were at the
beginning of Tenant's occupancy, excepting reasonable wear, damage by fire and
other casualty or appropriation by eminent domain. All Tenant equipment,
personal property and trade fixtures necessary or convenient for Tenant's
business which shall have been supplied or installed at the expense of Tenant,
shall remain Tenant's property. Tenant may remove its
24
<PAGE>
equipment, personal property and trade fixtures installed by Tenant at its
expense which may be removed by Tenant) at the expiration or sooner termination
of this Lease, in a good, clean and tenantable condition as the same were at the
beginning of Tenant's occupancy, excepting reasonable wear, damage by fire and
other casualty or appropriation by eminent domain. All Tenant equipment,
personal property and trade fixtures necessary or convenient for Tenant's
business which shall have been supplied or installed at the expense of Tenant,
shall remain Tenant's property. Tenant may remove its equipment, personal
property and trade fixtures within five (5) days after the expiration or sooner
termination of this Lease, provided (a) Tenant is not then in default hereunder
after notice and the applicable cure period, if any; (b) removal of the Tenant
item can be accomplished without damage to the Premises, or such damage is
repaired in accordance with the terms of Section 8, above; and (c) Tenant
immediately repairs (or reimburses Landlord for the cost of repairing) any
resulting damage or defacement. Tenant shall not acquire any right or interest
in the Premises by remaining in possession after the expiration of this Lease.
Any such holding over shall not be deemed to be a renewal of this Lease but
shall be deemed to create a tenancy-at-sufferance under which Tenant occupies
the Premises without the consent of Landlord. By such holding over, however,
Tenant shall nevertheless be deemed to have agreed to be bound by all of the
terms and conditions of this Lease except those as to the term hereof and the
rent then due shall be payable at a rate equal to One Hundred and Fifty Percent
(150%) of the rate of rent existing at the end of this Lease, together with any
additional rent payable hereunder.
25. HAZARDOUS MATERIALS; ENVIRONMENTAL COMPLIANCE.
A. Tenant's Responsibility. Tenant shall not (either with or without
-----------------------
negligence) cause or permit the escape, disposal or release of any hazardous
substances or materials in, under or around the Premises, the Building or the
office park identified in Exhibit A-3. Tenant shall not allow the storage or
use of said substances or materials in any manner not sanctioned by law or by
the highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Building or the park
identified in Exhibit A-3 any such materials or substances except to use in the
ordinary course of Tenant's business, and then only after written notice is
given to Landlord of the identity of such substances or materials (except that
no such notice shall be required with respect to commonly used office supplies
and cleaning products). Tenant covenants and agrees that Tenant will for itself
and its agents, employees, servants, contractors or invitees (as used in this
Section 25, collectively the "Tenant") comply with all now existing or hereafter
enacted or issued statutes, laws, rules, ordinances, orders, permits, and
regulations of all state, federal, local, and other governmental and regulatory
authorities, agencies, and bodies applicable to the Premises, pertaining to
environmental matters, or regulating, prohibiting or otherwise having to do with
asbestos and all other toxic, radioactive, or hazardous wastes or materials
including, but not limited to, the Federal Clean Air Act, the Federal Water
Pollution Control Act, and the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as from time
25
<PAGE>
to time amended (all hereinbefore and hereinafter collectively called the
"Environmental Laws" or "Laws").
B. Tenant's Liability. In addition to the indemnifications contained in
------------------
Section 17 hereof, Tenant shall hold Landlord free, harmless, and indemnified
from any penalty, fine, claim, demand, liability, cost, or charge whatsoever
which Landlord shall incur, or which Landlord would otherwise incur, by reason
of Tenant's failure to comply with this Section 25, including, but not limited
to: (i) the cost of bringing the Premises into compliance with all Laws; (ii)
the reasonable cost of all appropriate tests and examinations of the Premises to
confirm that the Premises have been brought into compliance with all Laws; and
(iii) the reasonable fees and expenses of Landlord's attorneys, engineers, and
consultants incurred by Landlord in enforcing and confirming compliance with
Section 25.
C. Property. For the purposes of this Section 25, the Premises shall
--------
include the Premises identified in Section 1 above, together with the real
estate covered within the Site Plan, Exhibit A-3 and all structures and
improvements thereon; all personal property used in connection with the Premises
(including that owned by Tenant); and the soil, ground water, and surface water
of the Premises, as this term is defined in this Subsection 25(C).
D. Inspections by Landlord. Landlord and its engineers, technicians, and
-----------------------
consultants (collectively the "Auditors") may, from time to time as Landlord
reasonably deems appropriate but after notice during reasonable hours, conduct
periodic tests and examinations ("Audits") of the Premises to confirm and
monitor Tenant's compliance with this Section 25. Such Audits shall be
conducted in such manner as to minimize the interference with Tenant's permitted
activities on the Premises; however, in all cases, the Audits shall be of such
nature and scope as shall be reasonably required by then existing technology to
confirm Tenant's compliance with this Section 25. Tenant shall fully cooperate
with Landlord and its Auditors in the conduct of such Audits. The cost of such
Audits shall be paid by Landlord unless an Audit shall disclose a material
failure of Tenant to comply with this Section 25, in which case the cost of such
Audit, and the cost of all subsequent Audits made during the Lease term and
within thirty (30) days thereafter (not to exceed two (2) such Audits per
calendar year) shall be paid for on demand by Tenant.
E. Landlord's Liability. Provided, however, the foregoing covenants and
--------------------
undertakings of Tenant contained in this Section 25 shall not apply to any
condition or matter: (i) which existed prior to the commencement of Tenant's
use or occupancy of the Premises and was not caused, in whole or in part, by
Tenant or
26
<PAGE>
Tenant's agents, employees, officers, partners, contractors, representatives or
invitees; or (ii) to the extent such condition or matter is caused by, or
results from, the acts or neglects of Landlord or Landlord's agents, employees,
officers, partners, contractors, representatives or invitees, other tenants in
the Building, or third parties.
F. Tenant's Liability After Termination of Lease. The covenants contained
---------------------------------------------
in this Section 25 shall survive the expiration or termination of this Lease,
and shall continue for so long as Landlord and its successors and assigns may be
subject to any expense, liability, charge, penalty, or obligation against which
Tenant has agreed to indemnify Landlord under this Section 25.
26. BROKERS COMMISSIONS. Tenant represents and warrants that it has not
had dealings with any real estate broker, finder or other person, with respect
to this Lease in any manner, except Tri-Properties, Inc. and J.M. Kane & Co.,
whose address is Post Office Box 13163, Raleigh, North Carolina. Landlord shall
pay any commissions or fees that are payable to the above-named broker or finder
with respect to this Lease (and shall indemnify and hold Tenant harmless from
Landlord's failure to pay such fees). Tenant shall indemnify and hold Landlord
harmless from any and all damages resulting from any claims that may be asserted
against Landlord by any other broker, finder or other person, with whom Tenant
has or purportedly has dealt. The provisions of this Section 26 shall survive
the termination or expiration of this Lease.
27. MISCELLANEOUS. Headings of sections are for convenience only and
shall not be considered in construing the meaning of the contents of such
sections. The invalidity of any portion of this Lease shall not have any effect
on the balance hereof. This Lease shall be binding upon the respective parties
hereto and upon their heirs, executors, successors and assigns. This Lease
supersedes and cancels all prior negotiations between the parties, and changes
shall be in writing signed by the party affected by such change. Landlord
reserves the right to make and change from time to time rules it deems
appropriate for the common use and benefit of all tenants, with which rules
Tenant shall comply, but nevertheless provided that such rules change does not
materially and adversely alter the terms of this Lease. Landlord may sell the
Premises without affecting the obligations of Tenant hereunder. This Lease may
not be recorded without Landlord's prior written consent. The singular shall
include the plural, and the masculine, feminine or neuter includes the other.
Any agreed to measurement of space shall be done in accordance with Building
Owner and Managers Association ("BOMA") standards used to determine "rentable"
square feet for office building
27
<PAGE>
space (either on a single tenant or multi-tenant floor basis, as the case may
be). Each of the Landlord and Tenant respectively represent that each has the
lawful authority to enter into this Lease and by signing it in their name as set
forth below, to be legally bound in accordance with its terms and conditions. No
failure by Landlord to insist upon the strict performance or observance of any
term or condition of this Lease, or to seek redress or to exercise any right or
remedy after any such failure or breach hereof, shall constitute a waiver of any
such term, condition, obligation, right or remedy, or any such failure or breach
then or thereafter occurring. No term, condition or obligation of this Lease to
be performed or observed by Tenant shall be waived, altered or modified except
by a writing executed by Landlord. No waiver of any failure, breach or default
hereof shall affect or alter this Lease, but each and every term, condition and
obligation of this Lease shall continue in full force and effect with respect to
any other failure, breach or default. This Lease, and the rights and obligations
of each of the Landlord and Tenant hereunder shall be governed by and construed
in accordance with the laws of the State of North Carolina.
28. SPECIAL CONDITIONS, EXHIBITS AND ADDENDA. The following special
conditions, if any, shall apply, and where in conflict with earlier provisions
in this Lease shall control. If any Lease Exhibits or Addenda are noted below,
such exhibits and addenda are incorporated herein and made a part of this Lease.
If there are no special conditions, exhibits or addenda, the word NONE shall be
written in the blank below
Exhibit A-1 - Space Plan
Exhibit A-2 - Floor Plan
Exhibit A-3 - Site Plan
Exhibit A-4 - Legal Description of Real
Property
Exhibit B - Acceptance of Premises
Memorandum
Exhibit C - Tenant Improvements
Exhibit D - Rules and Regulations
Exhibit E - List of Tenant's Direct
Competitors
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
duplicate originals by their hands and seals affixed hereto, all as of the day
and year first above written.
LANDLORD: PETULA ASSOCIATES, LTD., an Iowa
[CORPORATE SEAL] corporation
28
<PAGE>
ATTEST:
/s/ Kurt D. Schaeffer By: /s/ Rod Vogel
- ------------------------- ------------------------------------------
_______________ Secretary _____________________ President
Kurt D. Schaeffer
Vice President & Secretary
By: /s/ Timothy E. Minton
------------------------------------------
Timothy E. Minton
Vice President & Secretary
TENANT: MDT CORPORATION, a Delaware
[CORPORATE SEAL] corporation
ATTEST:
/s/ Charles B. Swenson By: /s/ Thomas Hein
- ------------------------- ------------------------------------------
[Vice President] Vice President
Address: [2300 205th]
-------------------------------------
[Torrance]
-------------------------------------
[California 90501]
-------------------------------------
29
<PAGE>
(Landlord Acknowledgement)
STATE OF [IOWA] (Corporate Acknowledgment)
--------------------------
COUNTY OF [POLK]
-------------------------
I, [Lynn Blass] , a Notary Public in and for said County and
-------------------------
State, do certify that [Kurt D. Schaeffer] personally came before
---------------------------------
me this day and acknowledged that he/she is [Vice President &] Secretary of
--------------------
[Petula Associates Ltd.] , a Corporation, and that by authority duly given
- -----------------------------
and as the act of the corporation, the foregoing instrument was signed in its
name by its [Vice] President, sealed with its corporate seal, and attested by
--------
him/herself as its [Vice Pres. &] Secretary.
-----------------
WITNESS my hand and notarial seal this [1st] day of [March]
--------------- -------------
, 199[5].
---
/s/ Lynn Blass
----------------------------------------
Notary Public
My Commission Expires:
[11/2/95]
- -----------------------------------
(NOTARIAL SEAL OR STAMP)
(Tenant Acknowledgement)
STATE OF [CALIFORNIA] (Corporate Acknowledgment)
--------------------------
COUNTY OF [LOS ANGELES]
-------------------------
I, [Sharon R. Van Campen] , a Notary Public in and for said County
--------------------------------
and State, do certify that [Charles B. Swenson] personally came
---------------------------------
before me this day and acknowledged that he/she is [Vice President]
-----------------
of [MDT Corporation] , a Corporation, and that by authority duly given
--------------------------
and as the act of the corporation, the foregoing instrument was signed in its
name by its [Vice] President, sealed with its corporate seal, and attested by
--------
him/herself as its [Vice President] .
------------------------
WITNESS my hand and notarial seal this [17th] day of [February]
------------ ----------------
, 199[5].
---
/s/ Sharon R. Van Campen
----------------------------------------
30
<PAGE>
Notary Public
My Commission Expires:
[6/30/95]
- -----------------------------------
(NOTARIAL SEAL OR STAMP)
[STAMP]
31
<PAGE>
EXHIBIT A-1
-----------
SPACE PLAN
[Diagram of Space Plan appears here]
<PAGE>
EXHIBIT A-2
-----------
FLOOR PLAN
[Diagram of Floor Plan appears here]
<PAGE>
EXHIBIT A-3
-----------
SITE PLAN
[Diagram of Site Plan appears here]
<PAGE>
EXHIBIT A-4
-----------
LEGAL DESCRIPTION OF REAL PROPERTY
STRATFORD HALL
BEING all of Lot S-30, containing 4.374 Acres, more or less, as shown on map
entitled "Boundary Survey of Lot S-30 Imperial Center" prepared by Kenneth
Close, Inc., Land Surveying, recorded in Plat Book 132, Page 123, Durham County
Registry.
35
<PAGE>
EXHIBIT B
---------
MEMORANDUM OF ACCEPTANCE OF PREMISES
Acceptance of Premises Memorandum
Attached to and forming a part of the Lease dated
[FEBRUARY 17,] 1995, made by and between
------------------
PETULA ASSOCIATES, LTD., as Landlord,
and MDT CORPORATION
This Memorandum is made and executed as of the _____ day of
__________________, 1995 by and between PETULA ASSOCIATES, LTD., as Landlord,
and MDT CORPORATION, as Tenant.
RECITAL:
A. As provided in Section 2 Of the Lease, the parties hereto now execute
this Memorandum within ten (10) days of Tenant's occupancy of the Premises.
B. In accordance with the terms of the Lease, this Memorandum is intended
to form part of the Lease, and as may be necessary in accordance with the terms
of the Lease, be modified or adjusted from time to time during the Term of the
Lease.
NOW, THEREFORE, Landlord and Tenant, each intending to be legally bound
hereby, agree as follows:
1. Tenant hereby accepts the Premises in accordance with the terms of
Section 8 of the Lease and agrees that the Premises are "suitable for occupancy"
as this term is defined in Section 2 of the Lease.
2. The Commencement Date of the Lease is hereby agreed to be the _____
day of ________________________, 199_.
3. The Expiration Date of the Lease is hereby agreed to be the ____ day
of _____________________________, 200_, which is seventy-four (74) months from
the aforesaid Commencement Date.
4. As of the date of this Memorandum, the Premises are hereby agreed to
contain _______ rentable square feet located on the following floor:
Floor 2 _______ rentable square feet (partially occupied)
5. The Building is hereby agreed to contain ______ rentable square feet,
and as the date of this Memorandum,
36
<PAGE>
Tenant's proportionate share of the Operating Expense Differential (as defined
in Section 4) and other costs payable under the terms of the Lease (for which,
except for nonexclusive business park pass-through costs, the following
proration is required) is ____ percent, which represents a percentage found by
dividing of rentable square feet of the Premises over the rentable square feet
of the Building. With respect to the business park pass-through costs, Tenant's
proportionate share is _____ percent, which represents a percentage found by
dividing the rentable square footage of the Premises by the rentable square
footage of all benefiting buildings within the business park.
6. Additional provisions.
Any capitalized term used herein shall have the same meaning as that set
forth in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum in
duplicate originals and have hereto affixed their seals, intending this to be a
sealed instrument all as of the day and year first above written.
[CORPORATE SEAL] LANDLORD: PETULA ASSOCIATES, LTD.,
an Iowa Corporation
ATTEST:
____________________________ By:
__________________________________________
By:__________________________________________
[CORPORATE SEAL] TENANT: MDT CORPORATION,
a Delaware Corporation
ATTEST:
____________________________ By:__________________________________________
Secretary President
37
<PAGE>
EXHIBIT B
---------
ACCEPTANCE OF PREMISES MEMORANDUM
38
<PAGE>
EXHIBIT C
---------
TENANT IMPROVEMENTS
[FINAL TENANT IMPROVEMENTS PLANS AND SPECIFICATIONS]
[To be attached on or before February 24, 1995]
39
<PAGE>
EXHIBIT C
---------
TENANT IMPROVEMENTS
Up-fit Improvements are described as follows:
[Diagram of Up-Fit Improvements appears here]
<PAGE>
EXHIBIT D
---------
RULES AND REGULATIONS
Up-fit Improvements are described as follows:
The following rules and regulations have been adopted by the Landlord for
the care, protection and benefit of the Building and for the general comfort and
welfare of the tenants:
1. The sidewalks, entrances, halls, passages, elevators and stairways
shall not be obstructed by the Tenant or used by him for any other purpose than
for ingress and egress.
2. Toilet rooms and other water apparatus shall not be used for any
purpose other than those for which they are constructed.
3. The Tenant shall not do anything in the Premises, or bring or keep
anything therein, which shall in any way conflict with any law, ordinance, rule
or regulation affecting the occupancy and use of the Premises, which are or may
hereafter be enacted or promulgated by any public authority or by the Board of
Fire Underwriters.
4. In order to insure proper use and care of the Premises, neither the
Tenant nor agent nor employee of the Tenant shall:
(a) Allow any furniture, packages or articles of any kind to remain in
corridors except for short periods incidental to moving same in or out of
Building or to cleaning or rearranging occupancy of leased space.
(b) Maintain or utilize bicycles or other vehicles in the Building.
(c) Mark or defile elevators, toilet rooms, walls, windows, doors or any
part of the building.
(d) Keep animals or birds on the Premises.
(e) Deposit waste paper, dirt or other substances in corridors, stairways,
elevators, toilets, restrooms, or any other part of the Building not leased to
him.
(f) Except for properly hung pictures, fasten any article, drill holes,
drive nails or screws into walls, floors, doors, or partitions or otherwise mar
or deface any of them by paint, papers or otherwise, unless written consent is
first obtained from the Landlord.
41
<PAGE>
(g) Operate any machinery within the Building except customary office
equipment, such as personal computers, photocopiers, telecopy machines,
dictaphones, calculators, electric typewriters, and the like. Special equipment
or machinery used in the trade or profession of the Tenant may be operated only
with the prior written consent of the Landlord.
(h) Tamper or interfere in any way with windows, doors, locks, air
conditioning controls, heating, lighting, electric or plumbing fixtures.
(i) Leave Premises unoccupied without locking all doors, extinguishing
lights and turning off all water outlets.
(j) Install or operate vending machines of any kind in the Premises
without written consent of Landlord.
5. The Landlord shall have the right to prohibit any advertising by the
Tenant which, in their opinion, tends to damage the reputation of the Building
or its desirability, and upon written notice from Landlord, the Tenant shall
discontinue any such advertising.
6. Except for regular mail and overnight courier services, Landlord
reserves the right to designate the time when and method whereby freight,
furniture, safes, goods, merchandise and other articles may be brought into,
moved or taken from the Building and the Premises leased by the Tenant; and
workmen employed, designated or approved by the Landlord must be employed by
Tenants for repairs, painting, material moving and other similar work that may
be done on the Premises.
7. The Tenant will reimburse the Landlord for the cost of repairing any
damage to the Premises or other parts of the Building caused by the Tenant or
the agents or employees of the Tenant, including replacing any glass broken.
8. The Landlord shall furnish a reasonable number of door keys for the
needs of the Tenant, which shall be surrendered on expiration of the Lease, and
reserves the right to require a deposit to insure their return at expiration of
Lease. The Tenant shall obtain keys only from the Landlord, shall not obtain
duplicate keys from any outside source, and shall not alter the locks or effect
any substitution.
9. The Tenant shall not install in the Premises any metal safes or permit
any concentration of excessive weight in any portion thereof without first
having obtained the written permission of Landlord.
42
<PAGE>
10. The Landlord reserves the right at all times to exclude newsboys,
loiterers, vendors, solicitors and peddlers, from the Building and to require
registration, satisfactory identification and credentials from all persons
seeking access to any part of the Building outside of ordinary business hours.
Ordinary business hours shall mean Monday through Friday, 7:30 a.m. to 6:30 p.m.
and on Saturday, 8:00 a.m. to 1:00 p.m., except on legal holidays. The Landlord
will exercise its best judgement in the execution of such control but shall not
be held liable for the granting or refusal of such access. The Landlord
reserves the right to exclude the general public from the building after
ordinary Business hours and on weekends and holidays.
11. The attaching of wires to the outside of the Building is absolutely
prohibited, and no wires shall be run or installed in any part of the Building
without the Landlord's permission and direction.
12. Requests for services of janitors or other Building employees must be
made to the Landlord. Agents or employees of Landlord shall not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord.
13. Signs or any other tenant identification shall be in accordance with
building standard signage. No signs of any nature shall be placed in the
windows so as to be visible from the exterior of the Building. All signs not
approved in writing by the Landlord shall be subject to removal without notice.
14. Any improvements or alterations to the Premises by Tenant shall be
approved in advance by the Landlord and all such work, if approved, shall be
done at the Tenant's sole expense under the supervision of the Landlord.
15. Tenant shall have a non-exclusive right to use of all driveways and
parking areas designated for Tenant and Tenant's employees.
16. If additional drapes or window decorations are desired by Tenant, they
shall be approved by Landlord and installed at the Tenant's expense under the
direction of the Landlord. Lining on drapes visible from the exterior shall be
of a color approved by Landlord.
Provided that no rule change shall materially and adversely conflict with a
term, condition or provision of the Lease, the Landlord shall have the right to
make such other and further reasonable rules and regulations as, in the
reasonable judgment of the Landlord, may from time to time be necessary for the
43
<PAGE>
safety, care and cleanliness of the Premises, the Building or adjacent areas,
and for the preservation of good order therein, effective five (5) days after
all tenants have been given written notice thereof. To the extent that any term
or condition of the foregoing rules and regulations shall conflict with, or be
inconsistent with, any term or condition of the Lease, the latter shall control.
44
<PAGE>
EXHIBIT E
---------
List of Tenant's Direct Competitors
-----------------------------------
The following are "direct competitors" of Tenant for the purpose of
construing the second paragraph of Section 6 of the Lease. "Direct competitors"
include:
AMSCO International and its following named subsidiaries:
American Sterilizer Company
AMSCO Sterile Recoveries, Inc.
AMSCO Europe, Inc.
AMSCO Asia Pacific, Inc.
AMSCO Latin America, Inc.
Finn-AQUA
Basil
Midmark, Inc.
Steris, Corporation
Pelton & Crane (a division of Seimens Medical Systems, Inc.)
Seimens Medical Systems, Inc.
Skytron
Dentsply International
Getinge
Tuttnauer
Kavo
45
<PAGE>
EXHIBIT 10.8.1
A G R E E M E N T
STATE OF SOUTH CAROLINA )
)
COUNTY OF CHARLESTON )
THIS AGREEMENT, entered into this [9th] day of [August]
-------------- --------------------,
1994, by and between ASHLEY INDUSTRIAL DEVELOPERS, a partnership, Charleston,
South Carolina, party of the first part (hereinafter called "Lessor") and MDT
DIAGNOSTIC COMPANY, party of the second part (hereinafter called "Lessee").
W I T N E S S E T H
-------------------
1.
LEASED PREMISES
---------------
Lessor hereby leases to Lessee and Lessee (Tenant) rents from Lessor
(Landlord) real property at 7370-B SPARTAN BOULEVARD EAST, in the City of North
Charleston, County of Charleston, and State of South Carolina, which is more
fully described in Exhibit "A" (Plat of Tract C-2); together with the
improvements located on such real property as shown on Exhibit "B" (Drawing of
building as it presently exists); all attached hereto and made a part hereof,
together with all the easements, restrictions, conditions, and covenants of
public record, including aviation easements and glide path rights, if any,
heretofore granted to the United States Government or its instrumentalities.
2.
AGREEMENT TO LEASE AND TERM
---------------------------
(a) Lessor agrees to lease and rent the premises to said Lessee upon the
terms and conditions herein contained, and Lessee agrees to lease and take said
premises from Lessor upon the terms and conditions herein contained.
(b) The term of this lease shall commence [1 September 1994] , and
-----------------------
shall end on 31 December 1995, after which the term will be automatically
extended for consecutive periods of ninety (90) days each until such time as
Lessee delivers written notice to Lessor that Lessee will terminate such lease
and vacate such premises, which notice shall set forth the date of such
termination (which date shall be at least ninety (90) days after the date of
such notice), and this lease thereafter shall terminate on the date set forth in
such notice, on which date Lessee shall vacate the premises.
TRACT "C-2(B)"
1
<PAGE>
3.
RENT
----
(a) Except as otherwise specifically provided herein, Lessee agrees as of
1 September 1994, without demand to pay to Lessor as rental for the leased
premises during the term of this lease the sum of Seventy-Two Thousand and
No/100 ($72,000.00) Dollars per year, prorated based upon the actual portion of
any year in which this lease is in effect; payable in equal monthly installments
of Six Thousand and No/100 ($6,000.00) Dollars due in advance on the first (1st)
day of each month; further, provided that the base rental set forth in Paragraph
3 shall be adjusted in the manner set forth in Paragraphs 14 and 15.
(b) A security deposit in the amount of Twelve Thousand and No/100
($12,000.00) Dollars shall be made and said deposit shall be applied to the last
two (2) months rental under this Agreement.
(c) All payments shall be made at, or mailed by United States Mail, to the
following address: 3045 Ashley Phosphate Road, North Charleston, South Carolina
29418, or such other address as Lessor may from time to time designate to Lessee
in writing.
(d) Lessee shall pay documentary stamp tax, if applicable, or any tax
levied on the rental, leasing, or letting of the premises whether local, state,
or federal, required to be paid due to the execution hereof.
4.
LESSOR'S IMPROVEMENTS
---------------------
NOT APPLICABLE
5.
USE OF PREMISES
---------------
Lessee shall have the right to occupy and use the premises for the purpose of
manufacture, warehouse, outside storage and office functions common to Lessee's
business and agrees that it will use the premises in a safe, lawful and
reasonable manner, and commit no waste upon the premises.
TRACT "C-2(B)"
2
<PAGE>
6.
ALTERATIONS AND IMPROVEMENTS BY LESSEE
--------------------------------------
Lessee shall be privileged to make interior nonstructural alterations to the
premises, without the consent of the Lessor, provided that the alterations do
not violate any building code or insurance regulation. In the event of such
interior nonstructural alterations, Lessee shall remove such alteration and
restore the premises to their original conditions at the expiration of the
lease. Except as hereinabove provided, Lessee shall make no alterations,
additions or improvements to the leased premises, except such as may be
specifically provided for in this lease, without the prior written consent of
Lessor which the Lessor shall not unreasonably withhold.
Lessee shall hold Lessor harmless on account of any and all claims in
connection with any alterations, additions, or improvements made by Lessee to
the leased premises to which Lessor has given its consent and shall take
reasonable steps to remove any and all liens resulting therefrom. Any increase
in taxes or insurance occasioned by such alterations or improvements shall be
the responsibility of the Lessee.
7.
LESSEE'S PROPERTY AND TRADE FIXTURES
------------------------------------
Any and all property, goods, chattels and fixtures, including trade fixtures,
placed in or upon and/or affixed to the leased premises by Lessee shall remain
the exclusive property of Lessee, and Lessor shall have no interest of any kind
therein. Lessee shall have the right to remove any or all such property, goods,
chattels and fixtures, including trade fixtures, at any time, during the term of
this lease, and/or at the termination thereof.
8.
MAINTENANCE BY LESSEE
---------------------
(a) Lessee, at its sole cost and expense, shall be responsible for, but not
limited to, the maintenance and repairs of the ventilation, plumbing,
electrical, heating systems, doors, windows, interior walls and ceilings, during
the term of the herein Lease Document. The Lessor warrants that all systems and
equipment shall be in satisfactory working condition at the time that the lease
commences. Lessee covenants to keep the premises, including parking lot,
landscaping and sidewalk in a clean and orderly condition, free of dirt,
rubbish, waste, snow and ice.
(b) Lessor agrees at its sole cost and expense to keep and maintain the
foundation, floors, roof areas, exterior walls, and sprinkler system of the
premises in good condition excepting
TRACT "C-2(B)"
3
<PAGE>
damage or destruction caused by the Tenant or major damage or destruction to the
premises, which shall be controlled by Paragraph 16.
9.
RESTORATION OF PROPERTY AT TERMINATION OF LEASE
-----------------------------------------------
Lessee shall, at the termination of this lease, restore the leased premises
to their condition at the commencement of the term of this lease, excepting,
however, reasonable wear and tear, alterations, additions and improvements
consented to by Lessor, damage or destruction from happenings and circumstances,
including, but not limited to, fire, earthquake and acts of God, beyond the
reasonable control and without the negligence of Lessee, and damage or
destruction, notwithstanding any negligence of Lessee, caused by perils
ordinarily covered under fire and extended coverage insurance policies, as set
forth in Article 14 hereof. Lessor agrees to provide Lessee with copies of fire
and extended coverage insurance policies.
10.
RULES AND REGULATIONS
---------------------
Lessee, its officers, employees, agents and representatives shall comply with
the rules and regulations promulgated by Lessor to govern the use and occupancy
of the leased premises, to the extent such rules and regulations do not conflict
with the provisions of this lease. Lessor shall not, however, put into effect
or enforce any such rule or regulation which shall have the effect of impeding
the reasonable use by Lessee of the leased premises.
11.
LESSEE'S CONDUCT
----------------
Lessee shall pay all increases in Lessor's insurance premiums which may be
caused by any use which said Lessee shall make of the leased premises which was
not contemplated by Lessor and Lessee at the time of execution of this lease.
Lessee shall not deface or injure the leased premises, or do anything or permit
anything to be done upon the leased premises which shall create a nuisance.
12.
UTILITIES
---------
Lessee shall pay for all utilities and services used or consumed by Lessee
upon the premises and shall pay any charges made for the installation of new or
additional connections or
TRACT "C-2(B)"
4
<PAGE>
modification in such services made during the term hereof. Lessee shall pay
Charleston County Solid Waste Disposal Fees incurred during Lessee's tenancy.
13.
LESSOR'S ACCESS TO PREMISES
---------------------------
Lessor's employees, agent and representatives, as the case may be, shall have
the right of entering the premises to make such repairs and alterations as may
reasonably be required for the safety, care or preservation of the leased
premises, to place "For Rent" signs of reasonable number and size on the leased
premises for a period of sixty (60) days prior to the termination of this lease,
or to show the leased premises to prospective tenants on a scheduled
noninterference basis during the last 180 days period of the lease.
14.
RELEASE FROM LIABILITY AND WAIVER OF SUBROGATION
------------------------------------------------
Lessor hereby releases Lessee from all liability arising out of loss of or
damage to the leased premises caused by perils ordinarily covered under fire and
extended coverage insurance policies (including, without limitation, any such
loss or damage caused by the negligent or wrongful act or failure to act of
Lessee, its officers, employees, agents and/or representatives). Lessor, with
the consent of its insurance carriers, hereby waives all rights of subrogation
of its insurance carriers in connection with such loss or damage, and agrees to
obtain written evidence of such consent to waiver from its insurance carriers
and to supply same to Lessee on request. Lessee hereby releases Lessor from all
liability arising out of loss or damage to property of Lessee located on the
leased premises caused by perils ordinarily covered under fire and extended
coverage insurance policies (including, without limitation, any such loss or
damage caused by the negligent or wrongful act or failure to act of the Lessor,
its employees, agents and/or representatives). Lessee, with the consent of its
insurance carriers in connection with such loss or damage, hereby waives all
rights of subrogation of its insurance carriers in connection with such loss or
damage, and agrees to obtain written evidence of such consent to waiver from its
insurance carriers and to supply same to Lessor on request.
Fire and extended coverage insurance is to be obtained by Lessor and the cost
in excess of Nine Hundred Ninety-Seven and 11/100 ($997.11) Dollars for annual
coverage shall be paid by Lessee in addition to the rental provided for under
Article 3 hereof.
15.
TAXES
-----
TRACT "C-2(B)"
5
<PAGE>
Lessee shall pay in addition to the rental provided for under Article 3
hereof all real property taxes and assessments levied against or assessed upon
personal and/or real property belonging to Lessor and located at or upon the
leased premises, to the extent that such real property taxes and assessments
exceed Two Thousand Eight Hundred Eighty-Five and 10/100 ($2,885.10) Dollars per
year. Lessee shall pay all personal property taxes and assessments levied
against or assessed upon personal property belonging to Lessee and located at or
upon the leased premises. The real property taxes for the last year of occupancy
or partial occupancy by Lessee shall be paid by Lessee at 100% of total cost for
the actual period of occupancy, and Lessee also shall pay to Lessor an amount
equal to the difference between the 6% (the assessment rate, which would have
applied to the premises if this lease was not in effect on January 1st) and
10.5% (the assessment rate applicable to the premises as a result of this lease)
property tax assessment incurred by Lessor for the balance of the year.
16.
DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
If, during the term of this lease, the leased premises shall be destroyed or
damaged, or partially destroyed or damaged, to such a limited extent that the
repair of such destruction or damage and restoration of said premises to the
operable condition for which the said premises were being used at the time of
the destruction or damage can be accomplished with reasonable diligence, within
ninety (90) days after such destruction or damage, Lessor shall promptly repair
such destruction or damage and first cause said premises to be restored to the
operable condition for which the said premises were being used at the time of
the destruction or damage and second to substantially return the premises to
their condition prior to the event causing the destruction or damage, provided,
however, if such repair and restoration cannot be accomplished, with reasonable
diligence, in time for the term of the lease to have at least one year to run
upon completion of such repair and restoration, then the Lessor shall be
privileged to elect not to so repair and restore, or Lessee shall be privileged
to elect to terminate this lease as of the date of such damage. If, during the
term of this lease, the leased premises shall be destroyed or damaged, or
partially destroyed or damaged, to such an extent that the repair of such
destruction or damage and the restoration of said premises to the operable
condition for which the said premises were being used at the time of the
destruction of damage cannot be accomplished, with reasonable diligence, within
ninety (90) days after such destruction or damage, then Lessor shall promptly
notify Lessee in writing of such fact, and Lessee shall have the sole right,
during a period of thirty (30) days following such notification, to terminate
this lease by written notice to Lessor declaring this lease to be terminated
upon receipt by Lessor of such notice. For purposes of rental payments, such
termination shall be deemed to be retroactive to the date of such destruction or
damage, and any rental payments made thereafter shall be returned to Lessee.
Unless such notice of immediate termination shall be given by Lessee to Lessor
within such period, this lease shall continue in full force and effect. In the
event the Lessee shall fail to give written notice to the Lessor of its election
to terminate this lease within the thirty (30)
TRACT "C-2(B)"
6
<PAGE>
day period as hereinabove provided or shall notify the Lessor in writing of its
election not to terminate this lease, then the Lessor shall promptly repair such
destruction or damage and cause said premises to be restored to substantially
their condition prior to the event causing the destruction or damage, provided,
however, if such repair and restoration cannot be accomplished in time for the
term of the lease to have at least one (1) year to run upon completion of such
repair and restoration, then the Lessor shall provide written notice to Lessee
and then Lessor shall be privileged to elect not to so repair and restore, or
Lessee shall be privileged to elect to terminate this lease as of the date of
such destruction or damage. In the event that the extent of damages are such
that the Lessor cannot repair them within a period of ninety (90) days, either
party shall be privileged to cancel the within lease. If this lease shall
terminate as provided in this Article, Lessor shall refund to Lessee all sums
received by Lessor as rent or deposit under this lease in excess of rent due
through the date of such termination, which rent due for any part of a month to
be determined by prorating rent due for a full month on a daily basis.
During any period of time that repairs are being made as aforesaid, and
Lessee is unable to use the premises for the purposes intended, the rental
payments due during the period of such repairs shall be abated in proportion to
the loss of use of the premises by Lessee. Lessee's reasonable determination in
this respect shall be final. If this lease shall terminate as provided in this
Article, Lessor shall refund to Lessee all sums received by Lessor as rent or
deposit under this lease in excess of rent due through the date of such
termination, which rent due for any part of a month to be determined by
prorating rent due for a full month on a daily basis.
17.
CONDEMNATION
------------
If the whole of the leased premises or the whole of the building erected
thereon shall be taken or condemned by any competent authority for any public or
quasi-public use or purpose, then this lease shall terminate on the date when
the possession of the premises shall be required for such use or purpose. If
any part of the building less than the whole erected on the premises shall be
taken or condemned by any competent authority for any public of quasi-public use
or purpose and the part so taken cannot be replaced at some other location on
the leased premises, within ninety (90) days after such taking, by the exercise
of reasonable diligence by the Lessor, so as to render the leased premises,
after replacing the part of the building so taken at the new location of the
leased premises, suitable for use by the Lessee for the purpose for which the
said premises were being used at the time of the taking or condemnation, then
Lessee shall have the sole right to terminate this lease on the date when the
possession of the part so taken shall be required for such use or purpose. If
the leased premises other than the building or any part of the leased premises
other than the building shall be taken or condemned by any competent authority
for any public or quasi-public use or purpose so as to render the remaining
portion of the leased premises unsuitable for use by the Lessee for the purpose
for which the said premises
TRACT "C-2(B)"
7
<PAGE>
were being used at the time of the taking or condemnation, then Lessee shall
have the sole right to terminate this lease on the date when the possession of
the part so taken shall be required for such use or purpose.
The taking or condemning of a portion of the leased premises adjoining the
street or road upon which the leased premises abut for the widening of said
street or road, the effect of which will be to diminish the size of the area
available for parking vehicles, shall not be construed as rendering the
remaining portion of the leased premises unsuitable for use by the Lessee for
the purpose for which the said premises were or condemnation, if Lessor shall
make suitable replacement parking available to Lessee, within a reasonable
distance, from the leased premises at no expense to Lessee. The taking or
condemning of easements upon, in, over, and under the premises for the
installation, operation and maintenance of which will not adversely affect the
use of the buildings on the leased premises, shall likewise not be construed as
rendering the remaining portion of the leased premises unsuitable for the use of
the Lessee for the purpose for which the said premises were being used at the
time of the taking or condemnation and there shall be no reduction in rent
because of said taking. The taking or condemnation of easements upon or over
the premises for aviation purposes, which do not affect the use of the buildings
on the leased premise shall not be construed as rendering the remaining portion
of the leased premises unavailable for the use by the Lessee for the purpose for
which the said premises were being used at the time of the taking or
condemnation and there shall be no reduction in rent because of said taking.
If this lease shall terminate as provided in this Article, Lessor shall
refund to Lessee all sums received by Lessor as rent or deposit under this lease
in excess of rent due through the date of such termination, which rent due for
any part of a month to be determined by prorating rent due for a full month on a
daily basis. Such termination, however, shall be without prejudice to the rights
of either Lessor or Lessee to recover compensation and damage caused by
condemnation from the condemnor. It is further understood and agreed that
neither the Lessee nor Lessor shall have any rights in any award made to the
other by any condemnation authority.
18.
BANKRUPTCY OF LESSEE
--------------------
In the event a voluntary or involuntary petition in bankruptcy is filed
against Lessee and said petition is approved in the court in which filed, or a
receiver is appointed upon adverse petition and the appointment of such receiver
is not vacated within thirty (30) days, or in the event Lessee makes an
assignment for the benefit of creditors, Lessor reserves the right to terminate
this lease forthwith and without notice if rental payments are not current.
19.
TRACT "C-2(B)"
8
<PAGE>
ASSIGNMENT AND SUBLETTING
-------------------------
Lessee shall have the right to assign this lease and to sublet the leased
premises, in whole or in part, but shall remain primarily liable to the Lessor
for Lessee's obligation to make rental payments under this lease.
20.
HOLDING OVER
------------
NOT APPLICABLE
21.
QUIET POSSESSION
----------------
Lessor covenants that Lessee, upon paying the rent and complying with the
terms, covenants and conditions of this lease, shall and may peaceably and
quietly have, hold, and enjoy the leased premises for the term provided for in
Article 2 hereof, and including any periods of holding over pursuant to Article
2(b) hereof.
22.
LESSOR'S REMEDIES UPON LESSEE'S DEFAULT
---------------------------------------
In the event of default at any time by Lessee in the payment of the rent
herein provided for or in the performance of any other of its agreements herein
contained, Lessor shall have the right, after thirty (30) days notice in writing
to Lessee, to either:
(1) declare the term of this lease ended and re-enter and take possession
of the leased premises, and Lessor will use its best efforts to release in a
manner to mitigate Lessee's damages, or;
(2) pursue any remedy whatsoever provided for by law, or;
(3) re-enter the leased premises and use its best efforts to relet the same
for and on account of Lessee for the then full remaining portion of the term of
this lease or for any shorter period, and to collect and receive payment of rent
therefor and apply any and all monies so received as rent to the credit of
Lessee for the rent accruing under the term of this lease, but no such reletting
shall be construed as a termination of this lease or as a release of Lessee from
Lessee's obligation to pay rent provided during the full term of this lease, or
from Lessee's obligation to
TRACT "C-2(B)"
9
<PAGE>
perform any other covenant herein contained, it being expressly understood and
agreed that in the event of any re-entry by Lessor, such re-entry shall not
operate to terminate this lease in any particular or alter the obligation of
Lessee to perform its covenants to pay rent pursuant to the terms hereof unless
Lessor expressly so elects pursuant to "(1)" or "(2)" above.
23.
WAIVER OF BREACH AND TIME OF ESSENCE
------------------------------------
No waiver of any breach of breaches of any provision, covenant or condition
of this lease shall be construed to be a waiver of any succeeding breach of such
provision, covenant or condition, or of any other provision, covenant and
condition, and time is of the essence for each and every provision, covenant and
condition herein contained and on the part of either Lessor or Lessee to be done
and performed.
24.
NOTICES
-------
All notices, demands or communications of any kind which may be required or
desired to be served, given or made by Lessee upon or to Lessor, under the terms
of or in connection with this lease, shall be sufficiently served, given or made
(as an alternative to personal service upon Lessor) if sent by certified or
registered United States Mail, Return Receipt Requested, addressed to 3045
Ashley Phosphate Road, North Charleston, South Carolina 29418 (or to such other
address as may hereafter from time to time be designated for this purpose by
Lessor to Lessee in writing). All notices, demands or communications of any
kind which may be required or desired to be served, given or made by Lessor upon
or to Lessee, under the terms of or in connection with this lease, shall be
sufficiently served, given or made (as an alternative to personal service upon
Lessee) if sent by certified or registered United States Mail, Return Receipt
Requested, to MDT Diagnostic Company at the premises or at such other address or
addresses as may be specified from time to time, in writing, to other party.
25.
SUCCESSORS TO PARTIES AND ENTIRE AGREEMENT
------------------------------------------
Each of the provisions, covenants and conditions of this lease shall extend
to and bind and inure to the benefit of, as the case may be, not only the
parties hereto, but each and every one of the heirs, personal representatives,
legatees, successors and assigns of the respective parties hereto, and whenever
in this lease a reference to either of said parties is made, such reference
shall be deemed to include also, wherever applicable, a reference to the heirs,
personal
TRACT "C-2(B)"
10
<PAGE>
representatives, legatees, successors and assigns of said parties, the same as
if in every case so expressed.
26.
LANDLORD - TENANT RELATIONSHIP
------------------------------
NOT APPLICABLE
27.
SOUTH CAROLINA CONTRACT
-----------------------
The laws of the State of South Carolina shall govern the construction of the
provisions of this lease and this lease contains the entire agreement of the
parties hereto and no representations, inducements, promises, or agreements,
oral or otherwise, between the parties, not embodied herein, shall be of any
force or effect.
IN WITNESS WHEREOF, [CAROLINA] INDUSTRIAL DEVELOPERS, a partnership, has
caused this instrument to be executed and delivered in its name by C. Ronald
Coward, one of its partners, and MDT DIAGNOSTIC COMPANY by J. Miles Branagan,
its Chairman, President, has caused this instrument to be executed and delivered
in its name and its corporate seal to be hereunto affixed, all of which has been
done in duplicate original the day and year first above written.
SIGNED, SEALED AND DELIVERED CAROLINA INDUSTRIAL DEVELOPERS,
IN THE PRESENCE OF: a Partnership:
/s/ Roger L. Eggena By:/s/ C. Ronald Coward
- ------------------------ ---------------------------------------
C. Ronald Coward
One of its Partners (Lessor)
/s/ Gary F. Caccamise
- ------------------------
As to Lessor
TRACT "C-2(B)"
11
<PAGE>
MDT DIAGNOSTIC COMPANY:
By:/s/ J. Miles Branagan
--------------------------------------------
J. Miles Branagan
Chairman, President (Lessee)
/s/ Roger L. Eggena
- ----------------------------
/s/ Gary F. Caccamise
- ----------------------------
As to Lessee
TRACT "C-2(B)"
12
<PAGE>
STATE OF SOUTH CAROLINA )
COUNTY OF CHARLESTON )
PERSONALLY appeared before me [Roger L. Eggena]
----------------------------------------------,
and made oath that (s)he saw the within named [CAROLINA] INDUSTRIAL
DEVELOPERS, a Partnership, by C. Ronald Coward, one of its Partners, sign, seal
and as its act and deed, deliver the within written instrument; and that
deponent with [Gary F. Caccamise]
----------------------------------------------------------------,
witnessed the execution thereof.
/s/ Roger L. Eggena
-----------------------------------
SWORN to before me, this [9th]
------------
day of [August] , 199[4] .
-------------------- ------
/s/ Janet M. Hall
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: [My commission expires July 11, 2001]
-------------------------------------
STATE OF [SOUTH CAROLINA] )
COUNTY OF [CHARLESTON] )
PERSONALLY appeared before me [Roger L. Eggena]
---------------------------------------------,
and made oath that (s)he saw the within named MDT DIAGNOSTIC COMPANY by J.
Miles Branagan, its Chairman, President, sign, the within instrument, and the
said corporation, by said officers,
TRACT "C-2(B)"
13
<PAGE>
seal said instrument, and, as its act and deed, deliver the same; and that
deponent with [Gary F. Caccamise] , witnessed the execution
---------------------------------------
thereof.
/s/ Roger L. Eggena
------------------------------------
SWORN to before me, this [9th]
-------------------
day of [August] , 199[4] .
------------------ --------
/s/ Janet M. Hall
- --------------------------------------------
Notary Public for [South Carolina]
My Commission Expires: [My commission expires July 11, 2001]
-------------------------------------
TRACT "C-2(B)"
14
<PAGE>
EXHIBIT A
---------
[PLOT OF TRACT C-2 APPEARS HERE]
<PAGE>
EXHIBIT B
---------
[DRAWING OF BUILDING APPEARS HERE]
<PAGE>
EXHIBIT 10.8.2
A G R E E M E N T
STATE OF SOUTH CAROLINA )
)
COUNTY OF CHARLESTON )
THIS AGREEMENT, entered into this [9] day of [August] ,
-------------- -----------------
1994, by and between CAROLINA INDUSTRIAL DEVELOPERS, a partnership, Charleston,
South Carolina, party of the first part (hereinafter called "Lessor") and MDT
DIAGNOSTIC COMPANY, party of the second part (hereinafter called "Lessee").
W I T N E S S E T H
-------------------
1.
LEASED PREMISES
---------------
Lessor hereby leases to Lessee and Lessee (Tenant) rents from Lessor
(Landlord) real property at 3074 ASHLEY PHOSPHATE ROAD, in the City of North
Charleston, County of Charleston, and State of South Carolina, which is more
fully described in Exhibit "A" (Plat of Tract B-2 and B-3); together with the
improvements located on such real property as shown on Exhibit "B" (Drawing of
building as it presently exists); all attached hereto and made a part hereof,
together with all the easements, restrictions, conditions, and covenants of
public record, including aviation easements and glide path rights, if any,
heretofore granted to the United States Government or its instrumentalities.
2.
AGREEMENT TO LEASE AND TERM
---------------------------
(a) Lessor agrees to lease and rent the premises to said Lessee upon the
terms and conditions herein contained, and Lessee agrees to lease and take said
premises from Lessor upon the terms and conditions herein contained.
(b) The term of this lease shall commence 1 January 1995, and shall end on
31 December 1995, after which the term will be automatically extended for
consecutive periods of ninety (90) days each until such time as Lessee delivers
written notice to Lessor that Lessee will terminate such lease and vacate such
premises, which notice shall set forth the date of such termination (which date
shall be at least ninety (90) days after the date of such notice), and this
lease thereafter shall terminate on the date set forth in such notice, on
TRACT "B-2"
1
<PAGE>
which date Lessee shall vacate the premises.
3.
RENT
----
(a) Except as otherwise specifically provided herein, Lessee agrees as of
1 January 1995, without demand to pay to Lessor as rental for the leased
premises during the term of this lease the sum of One Hundred Seventy-Four
Thousand Five Hundred Twelve and 16/100 ($174,512.16) Dollars per year, prorated
based upon the actual portion of any year in which this lease is in effect;
payable in equal monthly installments of Fourteen Thousand Five Hundred Forty-
Two and 68/100 ($14,542.68) Dollars due in advance on the first (1st) day of
each month; further, provided that the base rental set forth in Paragraph 3
shall be adjusted in the manner set forth in Paragraphs 14 and 15.
(b) A security deposit in the amount of Twenty-Seven Thousand and No/100
($27,000.00) Dollars has been made and said deposit shall be applied to the last
two (2) months rental under this Agreement. Any unapplied balance of the
deposit will be returned to Lessee if either Lessor or Lessee exercises any
right to terminate this Agreement early where Lessee is not at fault.
(c) All payments shall be made at, or mailed by United States Mail, to the
following address: 3045 Ashley Phosphate Road, North Charleston, South Carolina
29418, or such other address as Lessor may from time to time designate to Lessee
in writing.
(d) Lessee shall pay documentary stamp tax, if applicable, or any tax
levied on the rental, leasing, or letting of the premises whether local, state,
or federal, required to be paid due to the execution hereof.
4.
LESSOR'S IMPROVEMENTS
---------------------
NOT APPLICABLE
TRACT "B-2"
2
<PAGE>
5.
USE OF PREMISES
---------------
Lessee shall have the right to occupy and use the premises for the purpose
of manufacture, warehouse, outside storage and office functions common to
Lessee's business and agrees that it will use the premises in a safe, lawful and
reasonable manner, and commit no waste upon the premises.
6.
ALTERATION AND IMPROVEMENTS BY LESSEE
-------------------------------------
Lessee shall be privileged to make interior nonstructural alterations to
the premises, without the consent of the Lessor, provided that the alterations
do not violate any building code or insurance regulation. In the event of such
interior nonstructural alterations, Lessee shall remove such alteration and
restore the premises to their original conditions at the expiration of the
lease. Except as hereinabove provided, Lessee shall make no alterations,
additions or improvements to the leased premises, except such as may be
specifically provided for in this lease, without the prior written consent of
Lessor which the Lessor shall not unreasonably withhold.
Lessee shall hold Lessor harmless on account of any and all claims in
connection with any alterations, additions, or improvements made by Lessee to
the leased premises to which Lessor has given its consent and shall take
reasonable steps to remove any and all liens resulting therefrom. Any increase
in taxes or insurance occasioned by such alterations or improvements shall be
the responsibility of the Lessee.
7.
LESSEE'S PROPERTY AND TRADE FIXTURES
------------------------------------
Any and all property, goods, chattels and fixtures, including trade
fixtures, placed in or upon and/or affixed to the leased premises by Lessee
shall remain the exclusive property of Lessee, and Lessor shall have no interest
of any kind therein. Lessee shall have the right to remove any or all such
property, goods, chattels and fixtures, including trade fixtures, at any time,
during the term of this lease, and/or at the termination thereof.
TRACT "B-2"
3
<PAGE>
8.
MAINTENANCE OF LESSEE
---------------------
(a) Lessee, at its sole cost and expense, shall be responsible for, but
not limited to, the maintenance and repairs of the ventilation, plumbing,
electrical, heating systems, doors, windows, interior walls and ceilings, during
the term of the herein Lease Document. The Lessor warrants that all systems and
equipment shall be in satisfactory working condition at the time that the lease
commences. Lessee covenants to keep the premises, including parking lot,
landscaping and sidewalk in a clean and orderly condition, free of dirt,
rubbish, waste, snow and ice.
(b) Lessor agrees at its sole cost and expense to keep and maintain the
foundation, floors, roof areas, exterior walls, and sprinkler system of the
premises in good condition excepting damage or destruction caused by the Tenant
or major damage or destruction to the premises, which shall be controlled by
Paragraph 16.
9.
RESTORATION OF PROPERTY AT TERMINATION OF LEASE
-----------------------------------------------
Lessee shall, at the termination of this lease, restore the leased premises
to their condition at the commencement of the term of this lease, excepting,
however, reasonable wear and tear, alterations, additions and improvements
consented to by Lessor, damage or destruction from happenings and circumstances,
including, but not limited to, fire, earthquake and acts of God, beyond the
reasonable control and without the negligence of Lessee, and damage or
destruction, notwithstanding any negligence of Lessee, caused by perils
ordinarily covered under fire and extended coverage insurance policies, as set
forth in Article 14 hereof. Lessor agrees to provide Lessee with copies of fire
and extended coverage insurance policies.
10.
RULES AND REGULATIONS
---------------------
Lessee, its officers, employees, agents and representatives shall comply
with the rules and regulations promulgated by Lessor to govern the use and
occupancy of the leased premises, to the extent such rules and regulations do
not conflict with the provisions of this lease. Lessor shall not, however, put
into effect or enforce any such rule or regulation which shall have the effect
of impeding the reasonable use by Lessee of the leased premises.
TRACT "B-2"
4
<PAGE>
11.
LESSEE'S CONDUCT
----------------
Lessee shall pay all increases in Lessor's insurance premiums which may be
caused by any use which said Lessee shall make of the leased premises which was
not contemplated by Lessor and Lessee at the time of execution of this lease.
Lessee shall not deface or injure the leased premises, or do anything or permit
anything to be done upon the leased premises which shall create a nuisance.
12.
UTILITIES
---------
Lessee shall pay for all utilities and services used or consumed by Lessee
upon the premises and shall pay any charges made for the installation of new or
additional connections or modification in such services made during the term
hereof. Lessee shall pay Charleston County Solid Waste Disposal Fees incurred
during Lessee's tenancy.
13.
LESSOR'S ACCESS TO PREMISES
---------------------------
Lessor's employees, agent and representatives, as the case may be, shall
have the right of entering the premises to make such repairs and alterations as
may reasonably be required for the safety, care or preservation of the leased
premises, to place "For Rent" signs of reasonable number and size on the leased
premises for a period of sixty (60) days prior to the termination of this lease,
or to show the leased premises to prospective tenants on a scheduled
noninterference basis during the last 180 days period of the lease.
14.
RELEASE FROM LIABILITY AND WAIVER OF SUBROGATION
------------------------------------------------
Lessor hereby releases Lessee from all liability arising out of loss
of or damage to the leased premises caused by perils ordinarily covered under
fire and extended coverage insurance policies (including, without limitation,
any such loss or damage caused by the negligent or wrongful act or failure to
act of Lessee, its officers, employees, agents and/or representatives). Lessor,
with the consent of its insurance carriers, hereby waives all rights
TRACT "B-2"
5
<PAGE>
or subrogation of its insurance carriers in connection with such loss or damage,
and agrees to obtain written evidence of such consent to waiver from its
insurance carriers and to supply same to Lessee on request. Lessee hereby
releases Lessor from all liability arising out of loss or damage to property of
Lessee located on the leased premises caused by perils ordinarily covered under
fire and extended coverage insurance policies (including, without limitation,
any such loss or damage caused by the negligent or wrongful act or failure to
act of the Lessor, its employees, agents and/or representatives). Lessee, with
the consent of its insurance carriers in connection with such loss or damage,
hereby waives all rights of subrogation of its insurance carriers in connection
with such loss or damage, and agrees to obtain written evidence of such consent
to waiver from its insurance carriers and to supply same to Lessor on request.
Fire and extended coverage insurance is to be obtained by Lessor and the
cost in excess of One Thousand Eight Hundred Seventy-Eight and No/100
($1,878.00) Dollars for annual coverage shall be paid by Lessee in addition to
the rental provided for under Article 3 hereof.
15.
TAXES
-----
Lessee shall pay in addition to the rental provided for under Article 3
hereof all real property taxes and assessments levied against or assessed upon
personal and/or real property belonging to Lessor and located at or upon the
leased premises, to the extent that such real property taxes and assessments
exceed Ten Thousand Seven Hundred Forty-Three and 26/100 ($10,743.26) Dollars
per year. Lessee shall pay all personal property taxes and assessments levied
against or assessed upon personal property belonging to Lessee and located at or
upon the leased premises. The real property taxes for the last year of occupancy
or partial occupancy by Lessee shall be paid by Lessee at 100% of total cost for
the actual period of occupancy, and Lessee also shall pay to Lessor an amount
equal to the difference between the 6% (the assessment rate, which would have
applied to the premises if this lease was not in effect on January 1st) and
10.5% (the assessment rate applicable to the premises as a result of this lease)
property tax assessment incurred by Lessor for the balance of the year.
16.
DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
If, during the term of this lease, the leased premises shall be destroyed
or damaged,
TRACT "B-2"
6
<PAGE>
or partially destroyed or damaged, to such a limited extent that the repair of
such destruction or damage and restoration of said premises to the operable
condition for which the said premises were being used at the time of the
destruction or damage can be accomplished with reasonable diligence, within
ninety (90) days after such destruction or damage, Lessor shall promptly repair
such destruction or damage and first cause said premises to be restored to the
operable condition for which the said premises were being used at the time of
the destruction or damage and second to substantially return the premises to
their condition prior to the event causing the destruction or damage, provided,
however, if such repair and restoration cannot be accomplished, with reasonable
diligence, in time for the term of the lease to have at least one year to run
upon completion of such repair and restoration, then the Lessor shall be
privileged to elect not to so repair and restore, or Lessee shall be privileged
to elect to terminate this lease as of the date of such damage. If, during the
term of this lease, the leased premises shall be destroyed or damaged, or
partially destroyed or damaged, to such an extent that the repair of such
destruction or damage and the restoration of said premises to the operable
condition for which the said premises were being used at the time of the
destruction of damage cannot be accomplished, with reasonable diligence, within
ninety (90) days after such destruction or damage, then Lessor shall promptly
notify Lessee in writing of such fact, and Lessee shall have the sole right,
during a period of thirty (30) days following such notification, to terminate
this lease by written notice to Lessor declaring this lease to be terminated
upon receipt by Lessor of such notice. For purposes of rental payments, such
termination shall be deemed to be retroactive to the date of such destruction or
damage, and any rental payments made thereafter shall be returned to Lessee.
Unless such notice of immediate termination shall be given by Lessee to Lessor
within such period, this lease shall continue in full force and effect. In the
event the Lessee shall fail to give written notice to the Lessor of its election
to terminate this lease within the thirty (30) day period as hereinabove
provided or shall notify the Lessor in writing of its election not to terminate
this lease, then the Lessor shall promptly repair such destruction or damage and
cause said premises to be restored to substantially their condition prior to the
event causing the destruction or damage, provided, however, if such repair and
restoration cannot be accomplished in time for the term of the lease to have at
least one (1) year to run upon completion of such repair and restoration, then
the Lessor shall provide written notice to Lessee and then the Lessor shall be
privileged to elect not to so repair and restore, or Lessee shall be privileged
to elect to terminate this lease as of the date of such destruction or damage.
In the event that the extent of damages are such that the Lessor cannot repair
them within a period of ninety (90) days, either party shall be privileged to
cancel the within lease.
During any period of time that repairs are being made as aforesaid, and
Lessee is unable to use the premises for the purposes intended, the rental
payments due during the period of such repairs shall be abated in proportion to
the loss of use of the premises by Lessee. Lessee's reasonable determination in
this respect shall be final. If this lease shall terminate as provided in this
article, Lessor shall refund to Lessee all sums received by
TRACT "B-2"
7
<PAGE>
Lessor as rent or deposit under this lease in excess of rent due through the
date of such termination, which rent due for any part of a month to be
determined by prorating rent due for a full month on a daily basis.
17.
CONDEMNATION
------------
If the whole of the leased premises or the whole of the building erected
thereon shall be taken or condemned by any competent authority for any public or
quasi-public use or purpose, then this lease shall terminate on the date when
the possession of the premises shall be required for such use or purpose. If any
part of the building less than the whole erected on the premises shall be taken
or condemned by any competent authority for any public of quasi-public use or
purpose and the part so taken cannot be replaced at some other location on the
leased premises, within ninety (90) days after such taking, by the exercise of
reasonable diligence by the Lessor, so as to render the leased premises, after
replacing the part of the building so taken at the new location of the leased
premises, suitable for use by the Lessee for the purpose for which the said
premises were being used at the time of the taking or condemnation, then Lessee
shall have the sole right to terminate this lease on the date when the
possession of the part so taken shall be required for such use or purpose. If
the leased premises other than the building or any part of the leased premises
other than the building shall be taken or condemned by any competent authority
for any public or quasi-public use or purpose so as to render the remaining
portion of the leased premises unsuitable for use by the Lessee for the purpose
for which the said premises were being used at the time of the taking or
condemnation, then Lessee shall have the sole right to terminate this lease on
the date when the possession of the part so taken shall be required for such use
or purpose.
The taking or condemning of a portion of the leased premises adjoining the
street or road upon which the leased premises abut for the widening of said
street or road, the effect of which will be to diminish the size of the area
available for parking vehicles, shall not be construed as rendering the
remaining portion of the leased premises unsuitable for use by the Lessee for
the purpose for which the said premises were or condemnation, if Lessor shall
make suitable replacement parking available to Lessee, within a reasonable
distance, from the leased premises at no expense to Lessee. The taking or
condemning of easements upon, in, over, and under the premises for the
installation, operation and maintenance of which will not adversely affect the
use of the buildings on the leased premises, shall likewise not be construed as
rendering the remaining portion of the leased premises unsuitable for the use of
the Lessee for the purpose for which the said premises were being used at the
time of the taking or condemnation and there shall be no reduction in rent
because of said taking. The taking or condemnation of easements upon or over the
TRACT "B-2"
8
<PAGE>
premises for aviation purposes, which do not affect the use of the buildings on
the leased premise shall not be construed as rendering the remaining portion of
the leased premises unavailable for the use by the Lessee for the purpose for
which the said premises were being used at the time of the taking or
condemnation and there shall be no reduction in rent because of said taking.
If this lease shall terminate as provided in this Article, Lessor shall
refund to Lessee all sums received by Lessor as rent or deposit under this lease
in excess of rent due through the date of such termination, which rent due for
any part of a month to be determined by prorating rent due for a full month on a
daily basis. Such termination, however, shall be without prejudice to the rights
of either Lessor or Lessee to recover compensation and damage caused by
condemnation from the condemnor. It is further understood and agreed that
neither the Lessee nor Lessor shall have any rights in any award made to the
other by any condemnation authority.
18.
BANKRUPTCY OF LESSEE
--------------------
In the event a voluntary or involuntary petition in bankruptcy is filed
against Lessee and said petition is approved in the court in which filed, or a
receiver is appointed upon adverse petition and the appointment of such receiver
is not vacated within thirty (30) days, or in the event Lessee makes an
assignment for the benefit of creditors, Lessor reserves the right to terminate
this lease forthwith and without notice if rental payments are not current.
19.
ASSIGNMENT AND SUBLETTING
-------------------------
Lessee shall have the right to assign this lease and to sublet the leased
premises, in whole or in part, but shall remain primarily liable to the Lessor
for Lessee's obligation to make rental payments under this lease.
20.
HOLDING OVER
------------
Not Applicable
TRACT "B-2"
9
<PAGE>
21.
QUIET POSSESSION
----------------
Lessor covenants that Lessee, upon paying the rent and complying with the
terms, covenants and conditions of this lease, shall and may peaceably and
quietly have, hold, and enjoy the leased premises for the term provided for in
Article 2 hereof, and including any periods of holding over pursuant to Article
2(b) hereof.
22.
LESSOR'S REMEDIES UPON LESSEE'S DEFAULT
---------------------------------------
In the event of default at any time by Lessee in the payment of the rent
herein provided for or in the performance of any other of its agreements herein
contained, Lessor shall have the right, after thirty (30) days notice in
writing to Lessee, to either:
(1) declare the term of this lease ended and re-enter and take possession
of the leased premises, and Lessor will use its best efforts to release in a
manner to mitigate Lessee's damages, or;
(2) pursue any remedy whatsoever provided for by law, or;
(3) re-enter the leased premises and use its best efforts to relet the
same for and on account of Lessee for the then full remaining portion of the
term of this lease or for any shorter period, and to collect and receive payment
of rent therefor and apply any and all monies so received as rent to the credit
of Lessee for the rent accruing under the term of this lease, but no such
reletting shall be construed as a termination of this lease or as a release of
Lessee from Lessee's obligation to pay rent provided during the full term of
this lease, or from Lessee's obligation to perform any other covenant herein
contained, it being expressly understood and agreed that in the event of any re-
entry by Lessor, such re-entry shall not operate to terminate this lease in any
particular or alter the obligation of Lessee to perform its covenants to pay
rent pursuant to the terms hereof unless Lessor expressly so elects pursuant to
"(1)" or "(2)" above.
TRACT "B-2"
10
<PAGE>
23.
WAIVER OF BREACH AND TIME OF ESSENCE
------------------------------------
No waiver of any breach of breaches of any provision, covenant or
condition of this lease shall be construed to be a waiver of any succeeding
breach of such provision, covenant or condition, or of any other provision,
covenant and condition, and time is of the essence for each and every provision,
covenant and condition herein contained and on the part of either Lessor or
Lessee to be done and performed.
24.
NOTICES
-------
All notices, demands or communications of any kind which may be required or
desired to be served, given or made by Lessee upon or to Lessor, under the terms
of or in connection with this lease, shall be sufficiently served, given or made
(as an alternative to personal service upon Lessor) if sent by certified or
registered United States Mail, Return Receipt Requested, addressed to 3045
Ashley Phosphate Road, North Charleston, South Carolina 29418 (or to such other
address as may hereafter from time to time be designated for this purpose by
Lessor to Lessee in writing). All notices, demands or communications of any kind
which may be required or desired to be served, given or made by Lessor upon or
to Lessee, under the terms of or in connection with this lease, shall be
sufficiently served, given or made (as an alternative to personal service upon
Lessee) if sent by certified or registered United States Mail, Return Receipt
Requested, to MDT Diagnostic Company at the premises or at such other address or
addresses as may be specified from time to time, in writing, to other party.
25.
SUCCESSORS TO PARTIES AND ENTIRE AGREEMENT
------------------------------------------
Each of the provisions, covenants and conditions of this lease shall extend
to and bind and inure to the benefit of, as the case may be, not only the
parties hereto, but each and every one of the heirs, personal representatives,
legatees, successors and assigns of the respective parties hereto, and whenever
in this lease a reference to either of said parties is made, such reference
shall be deemed to include also, wherever applicable, a reference to the heirs,
personal representatives, legatees, successors and assigns of said parties, the
same as if in every case so expressed.
TRACT "B-2"
11
<PAGE>
26.
LANDLORD - TENANT RELATIONSHIP
------------------------------
NOT APPLICABLE
27.
SOUTH CAROLINA CONTRACT
-----------------------
The laws of the State of South Carolina shall govern the construction of
the provisions of this lease and this lease contains the entire agreement of the
parties hereto and no representations, inducements, promises, or agreements,
oral or otherwise, between the parties, not embodied herein, shall be of any
force or effect.
IN WITNESS WHEREOF, CAROLINA INDUSTRIAL DEVELOPERS, a partnership, has
caused this instrument to be executed and delivered in its name by C. RONALD
COWARD, one of its partners and MDT DIAGNOSTIC COMPANY by J. MILES BRANAGAN, its
Chairman, President, has caused this instrument to be executed and delivered in
its name and its corporate seal to be hereunto affixed, all of which has been
done in duplicate original the day and year first above written.
SIGNED, SEALED AND DELIVERED CAROLINA INDUSTRIAL DEVELOPERS,
IN THE PRESENCE OF: a Partnership:
/s/ Roger L. Eggena By: /s/ C. Ronald Coward
- -------------------------------- ---------------------------------
C. Ronald Coward
One of its Partners (Lessor)
/s/ Gary F. Caccamise
- --------------------------------
As to Lessor
TRACT "B-2"
12
<PAGE>
MDT DIAGNOSTIC COMPANY:
/s/ Roger L. Eggena By: /s/ J. Miles Branagan
- ------------------------- --------------------------------
J. Miles Branagan
Chairman, President (Lessee)
/s/ Gary F. Caccamise
- -------------------------
As to Lessee
STATE OF SOUTH CAROLINA )
COUNTY OF CHARLESTON )
PERSONALLY appeared before me [Roger L. Eggena]
---------------------------------------------
and made oath that (s)he saw the within named CAROLINA INDUSTRIAL DEVELOPERS, a
Partnership, by C. RONALD COWARD, one of its Partners, sign, seal and as its act
and deed, deliver the within written instrument; and that deponent with
[Gary I. Caccamise] witnessed the execution thereof.
- -----------------------------------------------
/s/ Roger L. Eggena
------------------------------------
SWORN to before me, this [9th]
--------------------
day of [August] , 1994
-------------------------- ----
/s/ Janet M. Hall
- ------------------------------------------
Notary Public for South Carolina
My Commission Expires: [My commission expires July 11, 2001]
-------------------------------------
TRACT "B-2"
13
<PAGE>
STATE OF [SOUTH CAROLINA] )
COUNTY OF [CHARLESTON] )
PERSONALLY appeared before me [Roger L. Eggena]
---------------------------------------------
and made oath that (s)he saw the within named MDT DIAGNOSTIC COMPANY, by J.
Miles Branagan, its Chairman, President, the within instrument, and the said
corporation, by said officers, seal said instrument, and, as its act and deed,
deliver the same; and that deponent with [Gary F. Caccamise]
---------------------------------------
witnessed the execution thereof.
/s/ Roger L. Eggena
------------------------------------
SWORN to before me, this [9th]
--------
day of [August] , 199[4]
------------- --------
/s/ Janet M. Hall
- ---------------------------------
Notary Public for South Carolina
My Commission Expires: [My commission expires July 11, 2001]
-------------------------------------
TRACT "B-2"
14
<PAGE>
EXHIBIT A
---------
[PLOT OF TRACT B-2 AN B-3 APPEARS HERE]
<PAGE>
EXHIBIT B
---------
[DRAWING OF BUILDING APPEARS HERE]
<PAGE>
EXHIBIT 10.8.3
A G R E E M E N T
STATE OF SOUTH CAROLINA )
)
COUNTY OF CHARLESTON )
THIS AGREEMENT, entered into this [9] day of [August] ,
----------------- ---------------
1994, by and between CAROLINA INDUSTRIAL DEVELOPERS, a partnership, Charleston,
South Carolina, party of the first part (hereinafter called "Lessor") and MDT
DIAGNOSTIC COMPANY, party of the second part (hereinafter called "Lessee").
W I T N E S S E T H
-------------------
1.
LEASED PREMISES
---------------
Lessor hereby leases to Lessee and Lessee (Tenant) rents from Lessor
(Landlord) real property at 7371 SPARTAN BOULEVARD EAST, in the City of North
Charleston, County of Charleston, and State of South Carolina, which is more
fully described in Exhibit "A" (Plat of Tract C-8); together with the
improvements located on such real property as shown on Exhibit "B" (Drawing of
building as it presently exists); all attached hereto and made a part hereof,
together with all the easements, restrictions, conditions, and covenants of
public record, including aviation easements and glide path rights, if any,
heretofore granted to the United States Government or its instrumentalities.
2.
AGREEMENT TO LEASE AND TERM
---------------------------
(a) Lessor agrees to lease and rent the premises to said Lessee upon the
terms and conditions herein contained, and Lessee agrees to lease and take said
premises from Lessor upon the terms and conditions herein contained.
(b) The term of this lease shall commence 1 January 1995, and shall end on 31
December 1995, after which the term will be automatically extended for
consecutive periods of ninety (90) days each until such time as Lessee delivers
written notice to Lessor that Lessee will terminate such lease and vacate such
premises, which notice shall set forth the date of such termination (which date
shall be at least ninety (90) days after the date of such notice), and this
lease thereafter shall terminate on the date set forth in such notice, on which
date Lessee shall vacate the premises.
TRACT "C-8"
1
<PAGE>
3.
RENT
----
(a) Except as otherwise specifically provided herein, Lessee agrees as of
1 January 1995, without demand to pay to Lessor as rental for the leased
premises during the term of this lease the sum of One Hundred Fourteen Thousand
and No/100 ($114,000.00) Dollars per year, prorated based upon the actual
portion of any year in which this lease is in effect; payable in equal monthly
installments of Nine Thousand Five Hundred and No/100 ($9,500.00) Dollars due in
advance on the first (1st) day of each month; further, provided that the base
rental set forth in Paragraph 3 shall be adjusted in the manner set forth in
Paragraphs 14 and 15.
(b) A security deposit in the amount of Fifteen Thousand Eight Hundred
Seven and 44/100 ($15,807.44) Dollars has been made and said deposit shall be
applied to the last two (2) months rental under this Agreement.
Any unapplied balance of the deposit will be returned to Lessee if either Lessor
or Lessee exercises any right to terminate this Agreement early where Lessee is
not at fault.
(c) All payments shall be made at, or mailed by United States Mail, to the
following address: 3045 Ashley Phosphate Road, North Charleston, South Carolina
29418, or such other address as Lessor may from time to time designate to Lessee
in writing.
(d) Lessee shall pay documentary stamp tax, if applicable, or any tax
levied on the rental, leasing, or letting of the premises whether local, state,
or federal, required to be paid due to the execution hereof.
4.
LESSOR'S IMPROVEMENTS
---------------------
NOT APPLICABLE
5.
USE OF PREMISES
---------------
Lessee shall have the right to occupy and use the premises for the purpose of
manufacture, warehouse, outside storage and office functions common to Lessee's
business and agrees that it will use the premises in a safe, lawful and
reasonable manner, and commit no waste upon the premises.
TRACT "C-8"
2
<PAGE>
6.
ALTERATIONS AND IMPROVEMENTS BY LESSEE
--------------------------------------
Lessee shall be privileged to make interior nonstructural alterations to the
premises, without the consent of the Lessor, provided that the alterations do
not violate any building code or insurance regulation. In the event of such
interior nonstructural alterations, Lessee shall remove such alteration and
restore the premises to their original conditions at the expiration of the
lease. Except as hereinabove provided, Lessee shall make no alterations,
additions or improvements to the leased premises, except such as may be
specifically provided for in this lease, without the prior written consent of
Lessor which the Lessor shall not unreasonably withhold.
Lessee shall hold Lessor harmless on account of any and all claims in
connection with any alterations, additions, or improvements made by Lessee to
the leased premises to which Lessor has given its consent and shall take
reasonable steps to remove any and all liens resulting therefrom. Any increase
in taxes or insurance occasioned by such alterations or improvements shall be
the responsibility of the Lessee.
7.
LESSEE'S PROPERTY AND TRADE FIXTURES
------------------------------------
Any and all property, goods, chattels and fixtures, including trade fixtures,
placed in or upon and/or affixed to the leased premises by Lessee shall remain
the exclusive property of Lessee, and Lessor shall have no interest of any kind
therein. Lessee shall have the right to remove any or all such property, goods,
chattels and fixtures, including trade fixtures, at any time, during the term of
this lease, and/or at the termination thereof.
8.
MAINTENANCE BY LESSEE
---------------------
(a) Lessee, at its sole cost and expense, shall be responsible for, but not
limited to, the maintenance and repairs of the ventilation, plumbing,
electrical, heating systems, doors, windows, interior walls and ceilings, during
the term of the herein Lease Document. The Lessor warrants that all systems and
equipment shall be in satisfactory working condition at the time that the lease
commences. Lessee covenants to keep the premises, including parking lot,
landscaping and sidewalk in a clean and orderly condition, free of dirt,
rubbish, waste, snow and ice.
(b) Lessor agrees at its sole cost and expense to keep and maintain the
foundation, floors, roof areas, exterior walls, and sprinkler system of the
premises in good condition excepting
TRACT "C-8"
3
<PAGE>
damage or destruction caused by the Tenant or major damage or destruction to the
premises, which shall be controlled by Paragraph 16.
9.
RESTORATION OF PROPERTY AT TERMINATION OF LEASE
-----------------------------------------------
Lessee shall, at the termination of this lease, restore the leased premises
to their condition at the commencement of the term of this lease, excepting,
however, reasonable wear and tear, alterations, additions and improvements
consented to by Lessor, damage or destruction from happenings and circumstances,
including, but not limited to, fire, earthquake and acts of God, beyond the
reasonable control and without the negligence of Lessee, and damage or
destruction, notwithstanding any negligence of Lessee, caused by perils
ordinarily covered under fire and extended coverage insurance policies, as set
forth in Article 14 hereof. Lessor agrees to provide Lessee with copies of fire
and extended coverage insurance policies.
10.
RULES AND REGULATIONS
---------------------
Lessee, its officers, employees, agents and representatives shall comply with
the rules and regulations promulgated by Lessor to govern the use and occupancy
of the leased premises, to the extent such rules and regulations do not conflict
with the provisions of this lease. Lessor shall not, however, put into effect
or enforce any such rule or regulation which shall have the effect of impeding
the reasonable use by Lessee of the leased premises.
11.
LESSEE'S CONDUCT
----------------
Lessee shall pay all increases in Lessor's insurance premiums which may be
caused by any use which said Lessee shall make of the leased premises which was
not contemplated by Lessor and Lessee at the time of execution of this lease.
Lessee shall not deface or injure the leased premises, or do anything or permit
anything to be done upon the leased premises which shall create a nuisance.
12.
UTILITIES
---------
Lessee shall pay for all utilities and services used or consumed by Lessee
upon the premises and shall pay any charges made for the installation of new or
additional connections or
TRACT "C-8"
4
<PAGE>
modification in such services made during the term hereof. Lessee shall pay
Charleston County Solid Waste Disposal Fees incurred during Lessee's tenancy.
13.
LESSOR'S ACCESS TO PREMISES
---------------------------
Lessor's employees, agent and representatives, as the case may be, shall have
the right of entering the premises to make such repairs and alterations as may
reasonably be required for the safety, care or preservation of the leased
premises, to place "For Rent" signs of reasonable number and size on the leased
premises for a period of sixty (60) days prior to the termination of this lease,
or to show the leased premises to prospective tenants on a scheduled
noninterference basis during the last 180 days period of the lease.
14.
RELEASE FROM LIABILITY AND WAIVER OF SUBROGATION
------------------------------------------------
Lessor hereby releases Lessee from all liability arising out of loss of or
damage to the leased premises caused by perils ordinarily covered under fire and
extended coverage insurance policies (including, without limitation, any such
loss or damage caused by the negligent or wrongful act or failure to act of
Lessee, its officers, employees, agents and/or representatives). Lessor, with
the consent of its insurance carriers, hereby waives all rights of subrogation
of its insurance carriers in connection with such loss or damage, and agrees to
obtain written evidence of such consent to waiver from its insurance carriers
and to supply same to Lessee on request. Lessee hereby releases Lessor from all
liability arising out of loss or damage to property of Lessee located on the
leased premises caused by perils ordinarily covered under fire and extended
coverage insurance policies (including, without limitation, any such loss or
damage caused by the negligent or wrongful act or failure to act of the Lessor,
its employees, agents and/or representatives). Lessee, with the consent of its
insurance carriers in connection with such loss or damage, hereby waives all
rights of subrogation of its insurance carriers in connection with such loss or
damage, and agrees to obtain written evidence of such consent to waiver from its
insurance carriers and to supply same to Lessor on request.
Fire and extended coverage insurance is to be obtained by Lessor and the cost
in excess of One Thousand Sixty-Two and 60/100 ($1,062.60) Dollars for annual
coverage shall be paid by Lessee in addition to the rental provided for under
Article 3 hereof.
TRACT "C-8"
5
<PAGE>
15.
TAXES
-----
Lessee shall pay in addition to the rental provided for under Article 3
hereof all real property taxes and assessments levied against or assessed upon
personal and/or real property belonging to Lessor and located at or upon the
leased premises, to the extent that such real property taxes and assessments
exceed Nineteen Thousand Four Hundred and 85/100 (19,400.85) Dollars per year.
Lessee shall pay all personal property taxes and assessments levied against or
assessed upon personal property belonging to Lessee and located at or upon the
leased premises. The real property taxes for the last year of occupancy or
partial occupancy by Lessee shall be paid by Lessee at 100% of total cost for
the actual period of occupancy, and Lessee also shall pay to Lessor an amount
equal to the difference between the 6% (the assessment rate, which would have
applied to the premises if this lease was not in effect on January 1st) and
10.5% (the assessment rate applicable to the premises as a result of this lease)
property tax assessment incurred by Lessor for the balance of the year.
16.
DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
If, during the term of this lease, the leased premises shall be destroyed or
damaged, or partially destroyed or damaged, to such a limited extent that the
repair of such destruction or damage and restoration of said premises to the
operable condition for which the said premises were being used at the time of
the destruction or damage can be accomplished with reasonable diligence, within
ninety (90) days after such destruction or damage, Lessor shall promptly repair
such destruction or damage and first cause said premises to be restored to the
operable condition for which the said premises were being used at the time of
the destruction or damage and second to substantially return the premises to
their condition prior to the event causing the destruction or damage, provided,
however, if such repair and restoration cannot be accomplished, with reasonable
diligence, in time for the term of the lease to have at least one year to run
upon completion of such repair and restoration, then the Lessor shall be
privileged to elect not to so repair and restore, or Lessee shall be privileged
to elect to terminate this lease as of the date of such damage. If, during the
term of this lease, the leased premises shall be destroyed or damaged, or
partially destroyed or damaged, to such an extent that the repair of such
destruction or damage and the restoration of said premises to the operable
condition for which the said premises were being used at the time of the
destruction of damage cannot be accomplished, with reasonable diligence, within
ninety (90) days after such destruction or damage, then Lessor shall promptly
notify Lessee in writing of such fact, and Lessee shall have the sole right,
during a period of thirty (30) days following such notification, to terminate
this lease by written notice to Lessor declaring this lease to be terminated
upon receipt by Lessor of such notice. For
TRACT "C-8"
6
<PAGE>
purposes of rental payments, such termination shall be deemed to be retroactive
to the date of such destruction or damage, and any rental payments made
thereafter shall be returned to Lessee. Unless such notice of immediate
termination shall be given by Lessee to Lessor within such period, this lease
shall continue in full force and effect. In the event the Lessee shall fail to
give written notice to the Lessor of its election to terminate this lease within
the thirty (30) day period as hereinabove provided or shall notify the Lessor in
writing of its election not to terminate this lease, then the Lessor shall
promptly repair such destruction or damage and cause said premises to be
restored to substantially their condition prior to the event causing the
destruction or damage, provided, however, if such repair and restoration cannot
be accomplished in time for the term of the lease to have at least one (1) year
to run upon completion of such repair and restoration, then the Lessor shall
provide written notice to Lessee and then the Lessor shall be privileged to
elect not to so repair and restore, or Lessee shall be privileged to elect to
terminate this lease as of the date of such destruction or damage. In the event
that the extent of damages are such that the Lessor cannot repair them within a
period of ninety (90) days, either party shall be privileged to cancel the
within lease.
During any period of time that repairs are being made as aforesaid, and
Lessee is unable to use the premises for the purposes intended, the rental
payments due during the period of such repairs shall be abated in proportion to
the loss of use of the premises by Lessee. Lessee's reasonable determination in
this respect shall be final. If this lease shall terminate as provided in this
Article, Lessor shall refund to Lessee all sums received by Lessor as rent or
deposit under this lease in excess of rent due through the date of such
termination, which rent due for any part of a month to be determined by
prorating rent due for a full month on a daily basis.
17.
CONDEMNATION
------------
If the whole of the leased premises or the whole of the building erected
thereon shall be taken or condemned by any competent authority for any public or
quasi-public use or purpose, then this lease shall terminate on the date when
the possession of the premises shall be required for such use or purpose. If any
part of the building less than the whole erected on the premises shall be taken
or condemned by any competent authority for any public of quasi-public use or
purpose and the part so taken cannot be replaced at some other location on the
leased premises, within ninety (90) days after such taking, by the exercise of
reasonable diligence by the Lessor, so as to render the leased premises, after
replacing the part of the building so taken at the new location of the leased
premises, suitable for use by the Lessee for the purpose for which the said
premises were being used at the time of the taking or condemnation, then Lessee
shall have the sole right to terminate this lease on the date when the
possession of the part so taken shall be required for such use or purpose. If
the leased premises other than the building or any part of the leased premises
other than the building shall be taken or condemned by any competent authority
for any public or quasi-public use or purpose so as to render the remaining
portion of
TRACT "C-8"
7
<PAGE>
the leased premises unsuitable for use by the Lessee for the purpose for which
the said premises were being used at the time of the taking or condemnation,
then Lessee shall have the sole right to terminate this lease on the date when
the possession of the part so taken shall be required for such use or purpose.
The taking or condemning of a portion of the leased premises adjoining the
street or road upon which the leased premises abut for the widening of said
street or road, the effect of which will be to diminish the size of the area
available for parking vehicles, shall not be construed as rendering the
remaining portion of the leased premises unsuitable for use by the Lessee for
the purpose for which the said premises were or condemnation, if Lessor shall
make suitable replacement parking available to Lessee, within a reasonable
distance, from the leased premises at no expense to Lessee. The taking or
condemning of easements upon, in, over, and under the premises for the
installation, operation and maintenance of which will not adversely affect the
use of the buildings on the leased premises, shall likewise not be construed as
rendering the remaining portion of the leased premises unsuitable for the use of
the Lessee for the purpose for which the said premises were being used at the
time of the taking or condemnation and there shall be no reduction in rent
because of said taking. The taking or condemnation of easements upon or over
the premises for aviation purposes, which do not affect the use of the buildings
on the leased premise shall not be construed as rendering the remaining portion
of the leased premises unavailable for the use by the Lessee for the purpose for
which the said premises were being used at the time of the taking or
condemnation and there shall be no reduction in rent because of said taking.
If this lease shall terminate as provided in this Article, Lessor shall
refund to Lessee all sums received by Lessor as rent or deposit under this lease
in excess of rent due through the date of such termination, which rent due for
any part of a month to be determined by prorating rent due for a full month on a
daily basis. Such termination, however, shall be without prejudice to the rights
of either Lessor or Lessee to recover compensation and damage caused by
condemnation from the condemnor. It is further understood and agreed that
neither the Lessee nor Lessor shall have any rights in any award made to the
other by any condemnation authority.
18.
BANKRUPTCY OF LESSEE
--------------------
In the event a voluntary or involuntary petition in bankruptcy is filed
against Lessee and said petition is approved in the court in which filed, or a
receiver is appointed upon adverse petition and the appointment of such receiver
is not vacated within thirty (30) days, or in the event Lessee makes an
assignment for the benefit of creditors, Lessor reserves the right to terminate
this lease forthwith and without notice if rental payments are not current.
TRACT "C-8"
8
<PAGE>
19.
ASSIGNMENT AND SUBLETTING
-------------------------
Lessee shall have the right to assign this lease and to sublet the leased
premises, in whole or in part, but shall remain primarily liable to the Lessor
for Lessee's obligation to make rental payments under this lease.
20.
HOLDING OVER
------------
Not Applicable
21.
QUIET POSSESSION
----------------
Lessor covenants that Lessee, upon paying the rent and complying with the
terms, covenants and conditions of this lease, shall and may peaceably and
quietly have, hold, and enjoy the leased premises for the term provided for in
Article 2 hereof, and including any periods of holding over pursuant to Article
2(b) hereof.
22.
LESSOR'S REMEDIES UPON LESSEE'S DEFAULT
---------------------------------------
In the event of default at any time by Lessee in the payment of the rent
herein provided for or in the performance of any other of its agreements herein
contained, Lessor shall have the right, after thirty (30) days notice in writing
to Lessee, to either:
(1) declare the term of this lease ended and re-enter and take possession
of the leased premises, and Lessor will use its best efforts to release in a
manner to mitigate Lessee's damages, or;
(2) pursue any remedy whatsoever provided for by law, or;
(3) re-enter the leased premises and use its best efforts to relet the same
for and on account of Lessee for the then full remaining portion of the term of
this lease or for any shorter period, and to collect and receive payment of rent
therefor and apply any and all monies so received as rent to the credit of
Lessee for the rent accruing under the term of this lease, but no such reletting
shall be construed as a termination of this lease or as a release of Lessee from
Lessee's
TRACT "C-8"
9
<PAGE>
obligation to pay rent provided during the full term of this lease, or from
Lessee's obligation to perform any other covenant herein contained, it being
expressly understood and agreed that in the event of any re-entry by Lessor,
such re-entry shall not operate to terminate this lease in any particular or
alter the obligation of Lessee to perform its covenants to pay rent pursuant to
the terms hereof unless Lessor expressly so elects pursuant to "(1)" or "(2)"
above.
23.
WAIVER OF BREACH AND TIME OF ESSENCE
------------------------------------
No waiver of any breach of breaches of any provision, covenant or condition
of this lease shall be construed to be a waiver of any succeeding breach of such
provision, covenant or condition, or of any other provision, covenant and
condition, and time is of the essence for each and every provision, covenant and
condition herein contained and on the part of either Lessor or Lessee to be done
and performed.
24.
NOTICES
-------
All notices, demands or communications of any kind which may be required or
desired to be served, given or made by Lessee upon or to Lessor, under the terms
of or in connection with this lease, shall be sufficiently served, given or made
(as an alternative to personal service upon Lessor) if sent by certified or
registered United States Mail, Return Receipt Requested, addressed to 3045
Ashley Phosphate Road, North Charleston, South Carolina 29418 (or to such other
address as may hereafter from time to time be designated for this purpose by
Lessor to Lessee in writing). All notices, demands or communications of any
kind which may be required or desired to be served, given or made by Lessor upon
or to Lessee, under the terms of or in connection with this lease, shall be
sufficiently served, given or made (as an alternative to personal service upon
Lessee) if sent by certified or registered United States Mail, Return Receipt
Requested, to MDT Diagnostic Company at the premises or at such other address or
addresses as may be specified from time to time, in writing, to other party.
25.
SUCCESSORS TO PARTIES AND ENTIRE AGREEMENT
------------------------------------------
Each of the provisions, covenants and conditions of this lease shall extend
to and bind and inure to the benefit of, as the case may be, not only the
parties hereto, but each and every one of the heirs, personal representatives,
legatees, successors and assigns of the respective parties hereto, and whenever
in this lease a reference to either of said parties is made, such reference
shall be deemed to include also, wherever applicable, a reference to the heirs,
personal
TRACT "C-8"
10
<PAGE>
representatives, legatees, successors and assigns of said parties, the same as
if in every case so expressed.
26.
LANDLORD - TENANT RELATIONSHIP
------------------------------
Not Applicable
27.
SOUTH CAROLINA CONTRACT
-----------------------
The laws of the State of South Carolina shall govern the construction of the
provisions of this lease and this lease contains the entire agreement of the
parties hereto and no representations, inducements, promises, or agreements,
oral or otherwise, between the parties, not embodied herein, shall be of any
force or effect.
IN WITNESS WHEREOF, CAROLINA INDUSTRIAL DEVELOPERS, a partnership, has caused
this instrument to be executed and delivered in its name by C. Ronald Coward,
one of its partners and MDT DIAGNOSTIC COMPANY by J. Miles Branagan, its
Chairman, President, has caused this instrument to be executed and delivered in
its name and its corporate seal to be hereunto affixed, all of which has been
done in duplicate original the day and year first above written.
SIGNED, SEALED AND DELIVERED CAROLINA INDUSTRIAL DEVELOPERS,
IN THE PRESENCE OF: a Partnership:
/s/ Roger L. Eggena By:/s/ C. Ronald Coward
- -------------------------- --------------------------------
C. Ronald Coward
One of its Partners (Lessor)
/s/ Gary F. Caccamise
- --------------------------
As to Lessor
TRACT "C-8"
11
<PAGE>
MDT DIAGNOSTIC COMPANY:
By:/s/ J. Miles Branagan
--------------------------------------
J. Miles Branagan
Chairman, President (Lessee)
/s/ Roger L. Eggena
- -------------------------------
/s/ Gary F. Caccamise
- -------------------------------
As to Lessee
TRACT "C-8"
12
<PAGE>
STATE OF SOUTH CAROLINA )
COUNTY OF CHARLESTON )
PERSONALLY appeared before me [Roger L. Eggena] ,
-------------------------------------------
and made oath that (s)he saw the within named CAROLINA INDUSTRIAL DEVELOPERS, a
Partnership, by C. Ronald Coward, one of its Partners, sign, seal and as its act
and deed, deliver the within written instrument; and that deponent with [Gary
---------
F. Caccamise] , witnessed the execution thereof.
- ------------------------------------
/s/ Roger L. Eggena
------------------------------------
SWORN to before me, this [9th]
-------------------
day of [August] , 199[4] .
----------------------- ----------
/s/ Janet M. Hall
- --------------------------------------------
Notary Public for South Carolina
My Commission Expires: [My commission expires July 11, 2001]
-------------------------------------
STATE OF [SOUTH CAROLINA] )
COUNTY OF [CHARLESTON] )
PERSONALLY appeared before me [Roger L. Eggena] ,
---------------------------------------------
and made oath that (s)he saw the within named MDT DIAGNOSTIC COMPANY by J. Miles
Branagan, its Chairman, President, sign, the within instrument, and the said
corporation, by said officers,
TRACT "C-8"
13
<PAGE>
seal said instrument, and, as its act and deed, deliver the same; and that
deponent with [Gary F. Caccamise], witnessed the execution thereof.
/s/ Roger L. Eggena
--------------------------------------
SWORN to before me, this [9th]
----------------
day of [August] , 199[4] .
------------------ -----------
/s/ Janet M. Hall
- -----------------------------------------
Notary Public for California
My Commission Expires: [My commission expires July 11, 2001]
-------------------------------------
TRACT "C-8"
14
<PAGE>
EXHIBIT A
---------
[PLOT OF TRACT C-8 APPEARS HERE]
<PAGE>
EXHIBIT B
---------
[DRAWING OF BUILDING APPEARS HERE]
<PAGE>
EXHIBIT 10.8.4
COMMERCIAL LEASE AND DEPOSIT RECEIPT
<TABLE>
<CAPTION>
<S> <C>
TENANT: MDT, Inc. TERM: Eighteen months
DATE SIGNED: June 1, 1995 INITIAL MONTHLY RENT: $2650.00
EFFECTIVE DATE: June 1, 1995 RENEWAL DATE: December 1, 1996
================================================================================
</TABLE>
RECEIVED FROM MDT, Inc.
------------------------------------------------------------------
hereinafter referred to as Tenant, the sum of $ 5,300.00 (five thousand
---------- --------------
and three hundred-------------------DOLLARS), evidenced by ___________________,
- ------------------------------------
as a deposit which, shall be applied as follows:
<TABLE>
<CAPTION>
RECEIVED PAYABLE PRIOR TO OCCUPANCY
---------- --------------------------
<S> <C> <C>
Rent for the period from 6/1/95 to 6/30/95 $2,650.00 $
---------------- ------------------------ ------------- -----------------------
Last month's rental................................................. $2,650.00 $
------------- -----------------------
Security deposit.................................................... $ $
------------- -----------------------
Key deposit......................................................... $ $
------------- -----------------------
Cleaning charge..................................................... $ $
------------- -----------------------
Other............................................................... $ $
------------- -----------------------
TOTAL.............................................................. $5,300.00 $
------------- -----------------------
</TABLE>
STATE OF SOUTH CAROLINA, COUNTY OF Dorchester
--------------------------------------------
THIS AGREEMENT entered into this 5th day of April , 1995
---------- --------------- ---
between MDT, Inc. , hereinafter referred to as
------------------------------------------
Tenant, and D.E. Gressette , hereinafter
----------------------------------------------------
referred to as Landlord.
WITNESSETH:
1. PREMISES. That Landlord, in consideration of rents, covenants and conditions
mentioned herein, to be paid, kept, performed and observed by Tenant does hereby
demise, lease and let unto Tenant, and Tenant does hereby hire and take from
Landlord the premises known as:
7277 Peppermill Parkway, N. Charleston, SC
11,400 s.f. office/warehouse building
2. TERM. To have and to hold said leased premises for the term of
------
eighteen months beginning June
- ---------------------------------------------------------- ---------
1, 1995 and ending December 1, 1996
- ----------------------------------- --------------------------------
.
Tenant is hereby granted two (2) options to renew in six (6) month intervals.
Tenant must give ninety (90) days' written notice to exercise any option period.
Said notice to be delivered to Landlord or Landlord's agent in writing.
3. RENT. Tenant shall pay to the Landlord, a Monthly Base Rental and Additional
Rent as follows:
(A) MONTHLY BASE RENTAL. Tenant shall pay a Monthly Base Rental to
Landlord for each calendar month during the term of this lease or any
renewal thereof, in advance on or before the first day of each succeeding
month. The amount of the Monthly Base Rental for the first year of this
lease shall be two thousand six hundred and fifty-----------------------
----------------------------------------------------------
Dollars ($ 2,650.00 ). The rental for the first month of the term
-----------------
of this lease shall be paid at the date of the execution hereof. If such
date be other than the first day of the calendar month, such first rental
payment shall be prorated for the period between the effective date of this
lease and the first day of the following month.
<PAGE>
(1) MONTHLY BASE RENTAL ADJUSTMENTS. The Monthly Base Rental shall be
subject to an annual accumulative adjustment upward on each
anniversary date of this lease for the succeeding twelve months. Said
annual rental adjustment shall be determined by increasing the Monthly
Base Rental an amount equal to the sum of subparagraphs C below
-------
applied to the previous 12 months of this lease, or any renewal
thereof.
(a) STEP UP. The Monthly Base Rental shall be increased annually
as follows:
(b) COST OF LIVING INCREASE. The Monthly Base Rental shall be
increased annually by an amount equal to any percentage increase
during the previous 12 months in the Consumer Price Index for all
Urban Consumers, as shown by the most recent published CPI
proceeding each anniversary date of this lease.
(c) INSURANCE. The rent shall be increased annually by an
amount equal to the annual cost of fire and extended coverage
insurance for the leased premises.
(d) UTILITIES. The minimum Monthly Base Rental shall be
increased annually by the amount of any increase during the
previous 12 months in the average monthly cost of utility and
scavenger services paid or payable by Landlord, whether by reason
of increases in rates or by increase in service or consumption.
Said cost of services includes cost of all such services not paid
by Tenants for such items as electricity, gas, water, sewer,
garbage collection, etc.
(B) ADDITIONAL RENT. In addition to the Monthly Base Rental and its annual
accumulative adjustments, Tenant shall pay Additional Rent as indicated
herein below in subparagraphs 1 and 2 .
------------
(1) TAX INCREASE. Tenant shall pay annually a sum equal to any real
estate taxes (ad valorem, special assessments, or any other government
charges) on a pro rata basis. Presentation of copies of tax bills
shall constitute sufficient evidence of Additional Rent due and shall
be payable within 15 days after receipt thereof. Tenant shall be
charged Additional Rent only for that portion of the calendar year
during which the lease was in effect.
(2) Landlord agrees to install 20 ton of AC in warehouse for which
Tenant will pay $666.67 per month in additional rent. Total value of
AC is estimated between $18,000.00 and $24,000.00.
(C) PRORATION OF CHARGES. If the lease premises described herein are less
than the entire property, the increases in Monthly Base Rental adjustments,
Additional Rent and all other charges required by this lease shall be
determined by proration on the same ratio that the rentable floor area of
the leased premises bears to the rentable floor areas of the entire
property. It is agreed that the leased premises contains 11,400
--------------
square feet of rentable area of the entire property which is 11,400
--------------
square feet, resulting in a percentage ratio factor of one hundred--------
-------------------
------ percent ( 100 %).
------ --------
(D) ADDITIONAL CHARGES. Any charges due Landlord by Tenant, including but
not limited to damage to premises, legal fees, cost of default by remedies,
and past due charges for utilities, insurance, cleaning, maintenance and
repairs, etcetera or for work done on the premises by order of Tenant,
shall be considered as Additional Rent due (in addition to all other rent
payable) and shall be included in any lien for rent. In the event any
documentary stamp tax, or tax levied on rental or leasing of the premises
is required the cost shall be paid by the Tenant upon demand. The cost of
a credit report on the Tenant, which may be requested at the Landlord's
option shall be paid by the Tenant.
4. SECURITY DEPOSIT. Any security deposit required by Landlord and paid by
Tenant shall be retained as security (interest free) for the faithful
performance by Tenant of all terms, covenants, and conditions herein. Landlord
may at any time apply said deposit or any part thereof against default by Tenant
of any of the terms, covenants and conditions of this lease. In such event,
Tenant shall upon demand deposit with Landlord the amount so applied that
Landlord shall have the full amount of the deposit on hand at all times during
the terms of this lease. Upon the expiration of this lease the Tenant shall
surrender possession of the leased premises as required in paragraph 25 herein.
Landlord is given permission to deduct from said security deposit the cost of
any unusual cleaning or repairs to the property, upon vacating of Tenant.
Security deposit is not a part of the rental and subsequently cannot be deducted
from the rent of the last month of this tenancy. Security deposit or any
remaining portion will be returned within 15 days after the termination of this
tenancy or completion of the repairs necessitated by Tenant's misuse of the
premises. In the event the security deposit is not sufficient to pay all
charges due, Tenant shall pay said charges within three days after receiving
written notice from the Landlord or the Agent.
5. TENANT'S UTILITIES. Tenant shall pay all charges or bills for all utilities
and scavenger services used by Tenant, EXCEPT:
<PAGE>
6. USE OF PREMISES. Tenant agrees to use entire leased premises for office,
-------
warehouse, assembly and repair facility and for no other purposes.
- ------------------------------------------------
Pets, animals, or birds may not be kept on the premises without the Landlord's
permission. These premises may not be used for sleeping quarters or apartments,
for games of chance of any form of gambling, immoral conduct or any other
illegal activity.
7. EXAMINATION OF PREMISES. Tenant has examined the leased premises and is
familiar with their present condition. Tenant, relying solely on said
examination, agrees to accept premises in their present condition except for
specific items listed herein or itemized on attached check-in list.
8. DELAY OF POSSESSION. If Landlord is unable to deliver possession of leased
premises on the effective date of this lease, by reason of the holding over of a
prior Tenant or for any other reason, this lease shall not be affected or
impaired in any way and Landlord shall not be liable to Tenant for any loss or
damage resulting therefrom. The effective date of this lease, however, shall
not begin until the delivery of possession. If Landlord, however, is unable to
deliver possession of the premises to Tenant by June 1
-------------------------
, 1995 , Tenant shall have the right to cancel this lease upon written
------
notice delivered to Landlord and upon such cancellation Landlord and Tenant
shall each be released and discharged from all liability under this lease. In
such case, any deposit or prepaid rent shall be promptly returned to the Tenant.
9. TENANT'S PARKING. Parking of vehicles owned or operated by Tenant or
Tenant's employees is hereby limited, restricted or prohibited, as follows:
No restrictions
10. LIABILITY INSURANCE. Tenant shall not carry any stock of goods or do
anything in or about the leased premises which will in any way restrict or
invalidate any insurance coverage of the leased premises. Tenant agrees to pay
upon demand as Additional Rent any increase in premiums of insurance carried by
the Landlord on the leased premises resulting from the Tenant's use or
occupancy. Tenant shall keep in full force and effect, at Tenant's expense,
insurance for plate glass, personal property, trade fixtures, and property
damages, as well as a public liability policy in which both Tenant and Landlord
shall be named as the insured with the following minimum coverage:
$1,000,000.00
11. MAINTENANCE AND REPAIRS. Landlord shall repair and maintain the foundation,
roof, outer walls and structural members of the leased premises. Tenant shall,
at Tenant's sole expense, make all of the repairs necessary to maintain the
leased premises, both interior and exterior, ordinary and extraordinary,
including window glass, plate glass, storefronts, doors, windows, screens,
awnings, locks, keys, weather stripping and thresholds, as well as all interior
walls, floors, ceilings, and floor coverings. Tenant's responsibility to
maintain the premises shall also include the servicing, repair, maintenance, and
if caused by Tenant's neglect, replacement of the plumbing, electrical,
ventilating, heating and air conditioning systems, including all pipes, wiring,
fixtures, filters, equipment, machinery, boilers, furnaces, compressors and
appliances. Tenant shall also repair and be responsible for any damage caused
by stoppage, breakage, leakage, overflow, discharge or freezing of plumbing
pipes, soil lines, or fixtures. If any part of the leased premises is damaged
by the Tenant, or Tenant's employees, agents or invitees or by any breakage and
entering of said premises, or by any attempt to break and enter leased premises,
Tenant shall provide Landlord with immediate written notification of all damages
to the property. After notification and approval of the Landlord, repairs shall
be made promptly at Tenant's expense so as to restore said premises to its
previous condition. If Tenant refuses or neglects to commence necessary repairs
within 10 days after written demand, or does not complete such repairs within a
reasonable time thereafter, Landlord may make said repairs without liability to
Tenant for any loss or damage that may accrue to Tenant's stock, business or
fixtures by reason thereof, and if Landlord makes such repairs, Tenant shall pay
to Landlord, on demand, as Additional Rent, the cost thereof. Tenant's failure
to pay shall constitute a default of this lease. Repairs that are the
Landlord's responsibility shall be made within a reasonable time after written
notice from the Tenant. Tenant's failure to give or unreasonable delay in
giving notice of needed repairs or defects shall make Tenant liable for any loss
or damage resulting from delay of needed repairs.
12. REGULATIONS AND SANITATION. Tenant shall keep the leased premises clean,
safe, sanitary and in compliance with laws, ordinances and requirements of any
legally constituted public authority. Tenant shall keep broom clean all areas
in and around lease premises that are not included in common area maintenance,
such as front sidewalks and area behind building. Cleaning includes removing of
any trash or refuse deposited on the leased premises or adjacent public area by
Tenant, Tenant's customers, or anyone else. In the event of non-compliance by
Tenant, Landlord shall have the right to have said areas cleaned, trash and
refuse removed and charge the expense to Tenant as Additional Rent which shall
be due sand payable upon demand. Nonpayment of which shall constitute default
of the lease. Tenant shall employ if Landlord determines it is necessary, a
reputable pest extermination company
<PAGE>
at regular intervals.
13. ALTERATIONS. Tenant shall make no alterations, additions, improvements, or
rewiring in or to the leased premises without the consent of the Landlord. All
additions, or improvements to the building including carpeting, tile, other
floor covering, wall covering, ceiling tile, etcetera, made with or without the
Landlord's written consent shall become part of the premises, and the property
of the Landlord upon installation. Trade fixtures and office furniture shall be
installed so as to be readily removable without injury to the premises any
injury caused by said removal shall be repaired forthwith at Tenant's expense.
Said trade fixtures shall be removed from the premises before the end of this
lease or shall become part of the premises and the property of the Landlord.
Tenant shall not install or maintain any equipment, partitions, furniture,
etcetera, which the weight or operation thereof would tend to injure or be
detrimental to the leased premises. or would unreasonably annoy or disturb other
Tenants.
14. ASSIGNMENT OR SUBLEASE. Tenant shall not, without written consent of the
Landlord, in each case, assign, transfer, mortgage, pledge or otherwise encumber
or dispose of this lease, or sublet the lease premises or any part thereof or
permit the premises to be occupied by other persons. Such consent shall not be
unreasonably withheld. If this lease be assigned, or if the leased premises or
any part thereof be sublet or occupied by any other person, firm, office or
corporation with or without written permission of Landlord, it will not relieve
the Tenant of any obligations under the terms of this lease, and if sublet,
assigned or occupied without the Landlord's permission, this lease may, at the
option of the Landlord, be terminated by a seven day written notice. In the
event Tenant shall sublease the leased premises in accordance herewith for
rentals in excess of those rentals payable hereunder, Tenant shall pay to
Landlord monthly in advance as Additional Rent hereunder, one half of all such
excess rent. Any proposed assignee that proposes to assume Tenant's obligations
hereunder shall execute a satisfactory assumption agreement before consent shall
be given.
15. SIGNS OR AWNINGS. Tenant shall place no signs, notices, pictures, or
advertising matter upon the exterior of the leased premises except with the
written consent of the Landlord. Any and all signs placed on the leased
premises by Tenant shall be maintained in compliance with rules and regulations
governing such signs. The Tenant shall be responsible to Landlord for any
damages by installation, use, maintenance or removal of said signs. Any
electrical service needed for signs shall be installed at the Tenant's expense.
16. WAIVER OF RIGHTS. No failure of Landlord to exercise any power given
Landlord hereunder, or to insist upon Tenant's strict compliance with Tenant's
obligations hereunder and no custom or practice of the parties of variance with
the terms hereof shall constitute a waiver of the Landlord's right to demand
exact compliance with the terms of this lease at a future time. The rights and
remedies created by this lease are cumulative and the use of one remedy shall
not be taken to exclude the right to the use of another.
17. RULES AND REGULATIONS. Landlord reserves the right at any time to make
further rules and regulations as in Landlord's judgement may be necessary for
the safety, care, appearance, and cleanliness of the premises and the
preservation of good order therein, and such other rules and regulations shall
be binding upon the parties hereto with the same force and effect as if they had
been contained herein at the time of execution hereof.
18. RIGHT OF ENTRY. Landlord without being liable for trespass or damages,
shall have the right to enter leased premises during reasonable hours to examine
same or to make repairs, additions, or alterations as Landlord may deem
necessary for the safety, comfort, appearance, or preservation thereof, or to
exhibit said premises. Entry shall also be allowed to post "FOR RENT" notice,
during the thirty days before the expiration of this lease. Said right of entry
shall likewise exist for the purpose of removing placards, signs, fixtures,
alterations or additions which do not conform to this agreement. In accordance
with this right, Tenant shall give Landlord a key to any and all locks, security
systems and burglar alarms. Tenant shall not change or install new locks or
security systems without the written consent of the Landlord.
19. LIENS. Tenant shall not create any liens or labor or materials against
Landlord's interest in the leased premises. All persons contracting with the
Tenant for the erection, installation, alteration, repair or demolition of any
building or other improvements on the leased premises, and all material
suppliers, contractors, mechanics, and laborers are hereby charged with notice
that they must look to the Tenant and to the Tenant's interests only in the
leased premises to secure the payment of any bill for work done or material
furnished during the rental period created by this lease. In the event that
liens are place on record against the leased premises by contractors, mechanics,
laborers, material suppliers, etcetera because of action by Tenant it will
constitute a default of this lease.
20. DAMAGE OR DESTRUCTION OF PREMISES. If premises are totally destroyed by
fire or other casualty, this lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If premises are damaged but not wholly destroyed by fire or other
casualty, rental shall abate in such proportion as use of premises has been lost
to the Tenant. Landlord shall restore premises to substantially the same
condition as prior to damage as speedily as practicable, whereupon full rental
shall commence.
21. DAMAGE TO PERSONAL PROPERTY. All personal property, merchandise, fixtures
and equipment placed or moved into the leased premises shall be at the risk of
Tenant or the owners thereof, and Landlord shall not be liable for any damages,
loss of theft
<PAGE>
of said personal property, merchandise, fixtures, or equipment, from any cause
whatsoever.
22. CONDEMNATION. If the whole of the leased premises, or such portion thereof
as will make said premises unusable for the purpose herein leased, be condemned
by any legally constituted authority, this lease shall terminate on the date
when possession thereof is taken by public authorities, and rental shall be
accounted for as between Landlord and Tenant as of that date. Such termination,
however, shall be without prejudice to the rights of either Landlord or Tenant
to recover from the public authority compensation for damage caused by
condemnation. Neither the Tenant nor the Landlord shall have any rights in any
award made to the other by any condemnation authority. In the event only such
portion of the leased premises is acquired by condemnation as will leave the
remaining premises, after alteration and repairs, in condition suitable for use
by Tenant, the monthly rental payments from the day of such acquisition to the
end of the original or any extended term of this lease shall be reduced in
proportion to the resulting loss of use of leased premises by Tenant. In the
event of such partial acquisition and reduction in rent, Landlord shall make
promptly at Landlord's expense, all necessary alterations and repairs which
shall be required, to restore the premises to a safe and usable condition.
23. INDEMNITY AND LIABILITY. Tenant shall indemnify and hold Landlord harmless
from any and all claims, damages, costs, and expenses, including reasonable
attorney's fees arising from the management of the business conducted by Tenant
on the leased premises, Landlord shall not be liable, and Tenant waives all
claims for damage to person or property sustained by Tenant, its employees or
agents, resulting from the condition of, the leased premises,or any equipment of
such as may result from any accident in or about the leased premises or which
may result directly or indirectly from any act of neglect of any other Tenant of
the property of which the leased premises is a part.
24. REVERSION. Tenant shall surrender to Landlord at the end of the term of
this lease or upon cancellation of this lease, said leased premises broom clean
and in as good condition as the leased premises were at the beginning of the
term of this lease, ordinary wear and tear and damage by fire and windstorm or
other acts of God excepted, or Tenant will pay Landlord all damages that
Landlord may suffer because of Tenant's failure to do so. Tenant will indemnify
and save Landlord harmless from and against all claims made by any succeeding
Tenant of said premises against Landlord because of delay in delivering
possession of leased premises, so far as such delay is occasioned by failure of
Tenant to so surrender leased premises. Security deposit may be withheld as
payment or partial payment of repairs or unusual cleaning needed after Tenant
vacates.
25. EFFECTIVE DATE OF LEASE. This lease shall become effective as a binding
agreement only upon the execution and delivery thereof by both Landlord and
Tenant. If this lease is signed by one party and submitted to the other party,
then it shall constitute an offer to lease which is subject to revocation at any
time prior to execution by the other party and delivery of a fully executed copy
to the submitting party.
26. NOTICES. Tenant hereby appoints as Tenant's agent to receive service of all
notices required under this lease as well as all dispossessory distraint
notices, the person in charge of leased premises or occupying said premises, at
the time notice is delivered. If no person is in charge, or occupying said
premises, the service of such notice may be made by attaching the same in the
main entrance to said premises. A copy of all notices under this lease shall
also be sent to Tenant's last known address, if different from said premises.
27. BANKRUPTCY. If Tenants shall be adjudicated bankrupt or as insolvent or
take the benefit of any Federal reorganization or make a general assignment or
take the benefit of any insolvent law, or if a Trustee in bankruptcy or a
receiver be appointed or elected for Tenant, under Federal or State Law, this
lease at the option of the Landlord shall expire and end seven (7) days after
Landlord gives Tenant written notice. UNLESS, the Tenant's Trustee immediately
cures any default of Tenant hereunder and provides (in compliance with Federal
and State laws) adequate assurance of future performance of Tenant's obligations
hereunder.
28. BEYOND LANDLORD'S CONTROL. None of the acts, promises, covenants, or
obligations on the part of the Tenant to be kept, performed or not performed as
the case may be, nor the obligation of the Tenant to pay rent, Additional Rent
or other charges or payments shall be in anywise waived, excused or affected by
reason of the Landlord being unable at any time during the term of this lease,
to supply, or to delay in supplying heat, light, elevator service or any other
service expressed or implied on the part of the Landlord to be supplied; or by
reason of the Landlord being unable to make alterations, repairs, or
decorations, or to supply any equipment or fixtures, or any other promise,
covenant, or obligations on the part of the Landlord to be performed, if the
Landlord's inability or delay is caused by circumstances or events beyond the
Landlord's control.
29. KEYS. Landlord shall provide Tenant with one key per lock, and the Tenant
is responsible for accounting for all keys provided or duplicated and shall
return all keys of leased premises to the Landlord upon termination or
cancellation of this lease and/or Tenant's vacating said premises. Landlord
shall have the right, if in the Landlord's sole judgement it is necessary, to
require the Tenant at Tenant's expense to replace locks, and to supply Landlord
with one key to the new locks. The Landlord shall retain a master key or pass
key to the premises, including all security locks and systems. Tenant shall not
change or install new locks or security systems without written approval from
the Landlord.
<PAGE>
30. ESTOPPEL CERTIFICATES. Tenant shall from time to time, within ten (10) days
following written notice from the Landlord, execute, acknowledge and deliver to
the Landlord a written statement certifying that this lease is in full force and
effect. This statement should also state whether or not the Landlord is in
default in performance of any covenant or condition of this lease. The failure
of the Tenant to execute, acknowledge and deliver to the Landlord a statement in
accordance with this covenant shall constitute an acknowledgement by the Tenant
that this lease is unmodified and in full force and effect, an shall constitute
a waiver of any defaults by the Landlord which may have existed prior to the
date of such notice.
31. PEACEFUL POSSESSION. Subject to the terms, covenants and conditions of this
lease, the Tenant shall have, hold, and enjoy possession of the leased premises,
subject to the rights of the holders of any mortgage which now covers said
premises or which may hereinafter be placed on leased premises by Landlord.
Tenant's rights are also subject to any underlying lease now or later covering
the entire property of which the leased property is part. Tenant shall execute
any necessary lease subordination agreement at the Landlord's request.
32. DEFAULT. If Tenant fails to pay rent, including Additional Rent on or
before the due dates as herein stated (TIME IS OF THE ESSENCE) this lease shall
be in default. If Tenant fails to cure such default within five (5) days after
written notice from Landlord; or if Tenant shall be in default in performing any
of the terms, covenants and conditions of this lease other than the provision
requiring the payment of rent, and fails to cure such default within thirty (30)
days after the receipt of written notice of default from Landlord; or if leased
premises shall be abandoned or deserted for fifteen (15) days, of if this lease
is assigned to any other person, firm, office or corporation, without the
permission of Landlord as required in paragraph 15 herein, this lease at the
Landlord's option shall expire and terminate seven (7) days after the Landlord
delivers written notice to Tenant of such condition or default and Tenant shall
immediately quit and surrender said premises to Landlord. In the event of any
such default or breach of performance, the Landlord without any further notice
or demand of any kind to the Tenant, may terminate this lease and re-enter and
forthwith repossess the entire premises and without being liable for trespass or
damage shall re-let, lease or demise the premises to another Tenant without any
hindrance or prejudice to Landlord's right to distrain for any past due rent,
Additional Rent, and rent from the time of such default or termination until the
premises were leased or rented to another Tenant. The collection by Landlord of
rent for the unexpired term shall entitle Tenant to all Tenant's rights of this
lease during the period for which the rent may have been collected.
33. ASSIGNMENT OF CHATTELS. Tenant hereby pledges and assigns to Landlord all
the furniture, fixtures, goods, equipment and chattels of Tenant which shall or
may be brought or put on said premises as security for the payment of said rent,
and Tenant agrees that said lien may be enforced by distraint or foreclosure at
the election of the Landlord. It is understood and agreed that any merchandise,
fixtures, furniture, or equipment left in the premises when Tenant vacates shall
be deemed to have been abandoned by Tenant and by such abandonment, Tenant
relinquishes any right or interest therein and Landlord is authorized to sell,
dispose of or destroy same.
34. ATTORNEY'S FEE. In the event Landlord successfully defends any action by
the Tenant, or if it is necessary for Landlord to employ an attorney for the
collection of rent or any other sum due hereunder, or to enforce any covenant of
this lease, or the termination of this lease, or for the possession of the
leased premises or any part thereof, the Tenant shall pay all costs, including
reasonable attorney's fees.
35. AGENT. Tenant acknowledges that the aforementioned Robert L. Pratt,
--------------------
CCIM is the managing agent
- -------------------------------------------------------
for the owner(s) of the leased premises. Tenant shall pay all rent payable
under this lease to said agent. The right to collect said rentals shall be
governed by the written agreement between Landlord and agent for the management
of the leased premises and shall terminate with the expiration of said
management agreement or any renewal thereof.
36. DEFINITIONS. "Landlord" as used in this lease shall include the owner or
owners of the property and/or the aforementioned managing agents as well as the
Landlord's heirs, representatives, assigns and successors in title to premises.
"Tenant" shall include Tenant, Tenant's heirs and representatives, and if this
lease shall be assigned or sublet, shall include also Tenant assignees or
subleases, as to premises covered by such assignment or sublease. "Agent" shall
include partnership or individual, as may fit the particular parties.
37. SPECIAL STIPULATIONS. Insofar as the following stipulations conflict with
any of the provisions herein, the following stipulations shall control:
a. Tenant agrees to pay all real estate property taxes and hazard insurance.
b. Landlord agrees to clean up building in broom swept condition, repair low
area in backyard, make loading dock in good condition. All mechanics including
electrical and plumbing to be in good working order at Tenant occupancy.
c. There will be a 10% late fee for any rent monies received after the 5th of
the month.
<PAGE>
d. It is understood and agreed that Robert L. Pratt of Re/Max Professional
Realty is the leasing agent for this lease and all renewals and will be paid a
commission as is customary between D.E. Gressette and Robert L. Pratt per the
existing leasing agreement.
38. NOTICES. Realtor: Re/Max Professional Realty, 8761 Dorchester Road,
Charleston, SC 29420
Landlord: D. E. Gressette, P.O. Box 60340,
N. Charleston, SC 29419-0340
Tenant: MDT, Inc., P.O. Box 10668, 7371-B Spartan Blvd, East,
N. Charleston, SC 29418 (803) 552-8652
39. ENTIRE AGREEMENT. This lease contains the entire agreement between the
parties hereto and all previous negotiations leading thereto, and it may be
modified only by a dated written agreement signed by both Landlord and Tenant.
No surrender of the leased premises or of the remainder of thee term of this
lease shall be valid unless accepted by Landlord in writing. TIME IS OF THE
ESSENCE IN THE AGREEMENT.
THIS IS A LEGALLY BINDING CONTRACT. TENANT IS ADVISED TO SEEK FURTHER
- ----------------------------------------------------------------------
ASSISTANCE IF THE CONTENTS ARE NOT UNDERSTOOD. TENANT ACKNOWLEDGES THE RECEIPT
- -------------------------------------------------------------------------------
OF A COPY OF THIS AGREEMENT.
- ----------------------------
IN WITNESS WHEREOF Landlord and Tenant have executed these premises, the day and
year first above written.
____________________________________________ __________________________
WITNESS AS TO TENANT TENANT
____________________________________________ __________________________
WITNESS AS TO TENANT TENANT
____________________________________________ __________________________
WITNESS AS TO LANDLORD (OR AGENT) LANDLORD (OR AGENT)
____________________________________________ __________________________
WITNESS AS TO LANDLORD (OR AGENT) LANDLORD (OR AGENT)
<PAGE>
EXHIBIT 11
MDT CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
Year Ended March 31, 1995
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of
common shares outstanding
during the year 6,274,000 6,656,000 6,745,000
Number of common equivalent
shares (determined using the
Treasury stock method)
related to stock options and
warrants outstanding at the
year ended 19,000 125,000 30,000
---------- ---------- ----------
Weighted average number of
common and common equivalent
shares outstanding 6,293,000 6,781,000 6,775,000
========== ========== ==========
Income before cumulative effect
of change in accounting method $2,376,000 $1,243,000 $ 276,000
Cumulative effect of change in
accounting method -- 699,000 --
---------- ---------- ----------
Net Income $2,376,000 $1,942,000 $ 276,000
========== ========== ==========
Earnings per share:
Income before cumulative effect
of change in accounting method 0.38 0.18 0.04
Cumulative effect of change in
accounting method -- 0.11 --
---------- ---------- ----------
Net Income $ 0.38 $ 0.29 $ 0.04
========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 21
MDT CORPORATION
List of Subsidiaries
MDT Biologic Company, a Delaware corporation.
MDT Diagnostic Company, a Delaware corporation.
MDT Canada Limited, an Ontario Canada corporation.
MDT Asia Limited, a Hong Kong corporation.
MDT International Limited, a Greece corporation.
Consolidated Equipment Supply Corporation, a Pennsylvania corporation.
MDT Technionic Company, a Delaware corporation.
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
MDT Corporation:
We consent to incorporation by reference in the registration statements, No.
33-30613 on Form S-8; No. 33-18062 on Forms S-8; No. 33-20326 on Form S-8; and
No. 33-23906 on Form S-8, of MDT Corporation of our report dated May 16, 1995,
relating to the consolidated balance sheets of MDT Corporation and subsidiaries
as of March 31, 1995 and 1994, and the related consolidated statements of
earnings, retained earnings and cash flows for each of the years in the
three-year period ended March 31, 1995, and the related schedule, which report
appears in the March 31, 1995 annual report on Form 10-K of MDT Corporation.
Our report refers to changes in accounting for inventories.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
June 27, 1995
<PAGE>
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors
MDT Corporation:
We consent to incorporation by reference in the registration statements (No.
33-20326 and No.33-23906) on Forms S-8 of MDT Corporation of our reports dated
May 19, 1995, relating to the statements of net assets available for plan
benefits of MDT Corporation Savings and Thrift Plan for Salaried Employees, MDT
Corporation Savings and Thrift Plan for Hourly Employees, and MDT Corporation
Savings and Thrift Plan for Union Employees as of December 31, 1994 and 1993,
the related statements of changes in net assets available for plan benefits for
the years then ended, and the related schedules of assets held for investment
purposes at December 31, 1994 and reportable transactions for the year ended
December 31, 1994, which reports appear in the March 31, 1995 Annual Report on
Form 10-K of MDT Corporation.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
June 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the registrant's annual report on Form 10-K for
the fiscal year ended March 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 1,962
<SECURITIES> 0
<RECEIVABLES> 30,958
<ALLOWANCES> (531)
<INVENTORY> 37,061
<CURRENT-ASSETS> 72,631
<PP&E> 48,207
<DEPRECIATION> (20,075)
<TOTAL-ASSETS> 105,349
<CURRENT-LIABILITIES> 49,204
<BONDS> 5,684
<COMMON> 8,462
0
0
<OTHER-SE> 36,999
<TOTAL-LIABILITY-AND-EQUITY> 105,349
<SALES> 135,462
<TOTAL-REVENUES> 135,462
<CGS> 92,564
<TOTAL-COSTS> 92,564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 117
<INTEREST-EXPENSE> 3,514
<INCOME-PRETAX> 681
<INCOME-TAX> 405
<INCOME-CONTINUING> 276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
<PAGE>
EXHIBIT 99.1
MDT CORPORATION SAVINGS AND
THRIFT PLAN FOR HOURLY EMPLOYEES
Financial Statements and Schedules
December 31, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
----------------------------
The MDT Corporation Employee Benefits Committee
and Participants in the MDT Corporation Savings
and Thrift Plan for Hourly Employees:
We have audited the accompanying statements of net assets available for plan
benefits of the MDT Corporation Savings and Thrift Plan for Hourly Employees as
of December 31, 1994 and 1993, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan'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, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the MDT
Corporation Savings and Thrift Plan for Hourly Employees at December 31, 1994
and 1993, and the changes in those net assets available for plan benefits for
the years then ended, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of expressing an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statements of net assets available for plan benefits and the statements of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
May 19, 1995
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1994
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------
Open End MDT U.S.
Guaranteed Equity Index Stock Government
Assets Income Fund II Fund II Fund Fund
------ -------------- ------------ ----- ----------
<S> <C> <C> <C> <C>
Investment in employees' loans $ - - - -
Investment in Master Trust 387,715 54,301 43,238 3,013
Receivables:
Employer contributions 727 - 231 8
Employees' contributions 2,132 - 600 19
Other - (238) - -
-------- ------ ------ -----
2,859 (238) 831 27
Due from (to) other funds 1,184 185 161 -
-------- ------ ------ -----
Net assets available
for plan benefits $391,758 54,248 44,230 3,040
======== ====== ====== =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
---------------------
Asset
Management Loan
Assets Fund II Fund Total
------ ---------- ------ -----
<S> <C> <C> <C>
Investment in employees' loans - 61,443 61,443
Investment in Master Trust 17,811 - 506,078
Receivables:
Employer contributions - - 966
Employees' contributions - - 2,751
Other (314) 307 (245)
-------- ------ -------
(314) 307 3,472
Due from (to) other funds - (1,530) -
------ ------ -------
Net assets available
for plan benefits 17,497 60,220 570,993
====== ====== =======
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1993
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Assets Income Fund II Fund II Fund Bond Fund II Fund II Total
------ -------------- ------------ ------ ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Investments in Master Trust $327,323 38,272 30,662 1,677 8,142 406,076
Receivables:
Employer contributions 668 73 83 2 15 841
Employees' contributions 1,913 210 238 7 42 2,410
-------- ------ ------ ----- ----- -------
Net assets available
for plan benefits $329,904 38,555 30,983 1,686 8,199 409,327
======== ====== ====== ===== ===== =======
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1994
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------
Open End Equity MDT U.S.
Guaranteed Index Stock Government
Income Fund II Fund II Fund Fund
---------------- ---------- ------- -----------
<S> <C> <C> <C> <C>
Contributions:
Employer $ 26,722 6,306 5,055 554
Employees' 91,297 22,284 15,081 1,846
-------- ------ ------ -----
118,019 28,590 20,136 2,400
Net income (loss) from
Master Trust investments,
net of administrative
expenses 23,292 639 2,303 (60)
Interest income on
employees' loans - - - -
-------- ------ ------ -----
Total additions 141,311 29,229 22,439 2,340
Benefit payments (28,043) (6,805) (4,479) (969)
Transfers among funds (49,117) (6,302) (4,542) (17)
Transfer to MDT Corporation
Savings and Thrift Plan
for Salaried Employees (2,297) (429) (171) -
-------- ------ ------ -----
Net increase 61,854 15,693 13,247 1,354
Net assets available
for plan benefits:
Beginning of year 329,904 38,555 30,983 1,686
-------- ------ ------ -----
End of year $391,758 54,248 44,230 3,040
======== ====== ====== =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
--------------------
Asset
Management Loan
Fund II Fund Total
---------- ----- -----
<S> <C> <C> <C>
Contributions:
Employer 1,938 - 40,575
Employees' 11,114 - 141,622
------ ------ -------
13,052 - 182,197
Net income (loss) from
Master Trust investments,
net of administrative
expenses (330) - 25,844
Interest income on
employees' loans - 1,135 1,135
------ ------ -------
Total additions 12,722 1,135 209,176
Benefit payments (2,929) (1,388) (44,613)
Transfers among funds (495) 60,473 -
Transfer to MDT Corporation
Savings and Thrift Plan
for Salaried Employees - - (2,897)
------ ------ -------
Net increase 9,298 60,220 161,666
Net assets available
for plan benefits:
Beginning of year 8,199 - 409,327
------ ------ -------
End of year 17,497 60,220 570,993
====== ====== =======
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1993
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------
Intermediate
Open End MDT and Long Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
--------------- ------------- -------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 36,277 18,770 5,720 398 3,457 64,622
Employees' 77,933 12,244 18,186 1,449 4,143 113,955
-------- ------- ------- ----- ----- -------
114,210 31,014 23,906 1,847 7,600 178,577
Net income (loss) from
Master Trust investments,
net of administrative
expenses 18,054 1,856 (16,413) 12 145 3,654
-------- ------- ------- ----- ----- -------
Total additions 132,264 32,870 7,493 1,859 7,745 182,231
Benefit payments (39,553) (12,149) (11,436) (173) (299) (63,610)
Transfers among funds 188 (941) - - 753 -
-------- ------- ------- ----- ----- -------
Net increase (decrease) 92,899 19,780 (3,943) 1,686 8,199 118,621
Net assets available
for plan benefits:
Beginning of year 237,005 18,775 34,926 - - 290,706
-------- ------- ------- ----- ----- -------
End of year $329,904 38,555 30,983 1,686 8,199 409,327
======== ======= ======= ===== ===== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 1994
(1) Description of the Plan
-----------------------
The following description of the MDT Corporation Savings and Thrift Plan
for Hourly Employees (the Plan) provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
The Plan is a defined contribution plan covering substantially all MDT
Corporation (Corporation) hourly employees who are not covered under a
collective bargaining agreement. Hourly employees of the Corporation who
are not covered under a collective bargaining agreement may elect to
participate in the Plan commencing the first calendar quarter following
completion of one hour of service.
The Plan provides that participants may elect to make a basic contribution
of up to 6% of their total annual compensation. The Corporation makes a
matching contribution equal to 30% of the first 2%, 40% of the next 2%, and
50% of the final 2% of a participant's basic contribution. In addition,
participants who contribute the maximum basic contribution may make a
supplemental contribution in tax-deferred dollars, taxed dollars, or a
combination which, when added to the basic contribution, cannot exceed 18%,
16%, and 25%, respectively, of their total annual compensation. The
supplemental contribution is not matched by the Corporation.
Separate employee and Corporation contribution accounts are maintained for
each participant. Participants have a 100% nonforfeitable vested interest
in their basic and supplemental contributions at all times. Employees vest
in the Corporation contributions at a rate of 20% after one year of service
and an additional 20% each year thereafter until five years of service are
completed. Forfeitures arising under the Plan are used to reduce the
Corporation's contribution to the Plan.
Distributions made upon termination, death, or permanent disability may at
the employee's election be in the form of a lump sum or in installments
over a period not to exceed ten years.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following are the significant accounting policies followed by the Plan:
Basis of Presentation
---------------------
The accompanying financial statements have been prepared on an accrual
basis and present the net assets available for plan benefits and changes in
those net assets.
(Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
------------------------------------------
Investments
-----------
The Plan's interest in the Master Trust is valued based on the fair value
of the underlying assets of the Master Trust. The employer identification
number under which the Master Trust has been filed is 161326160.
The accounting policies of the Master Trust operated under the MDT
Corporation Savings and Thrift Master Trust Agreement (Master Trust) are as
follows:
Marketable securities are valued at the last reported sales price on the
last business day of the year. Quotations are obtained from national
securities exchanges or, in instances where securities are not listed on
any of the exchanges, quotations are obtained from brokerage firms.
The Open End Guaranteed Income Fund II invests in benefit responsive fixed
and variable payment guaranteed investment contracts (GICs) and bank
investment contracts (BICs). The GIC and BIC investments are carried at
contract value which approximates fair value.
Purchases and sales of securities are recorded on the trade date. Dividend
income is recorded on the ex-dividend date. Interest is recognized on the
accrual basis.
(3) Plan Amendments
---------------
In 1994, the Plan was amended to include a loan fund for participants.
Participants are permitted to borrow from their savings accounts subject to
certain limitations. The loans are payable over terms up to nine years and
bear interest at the commercial prime rate in effect at the time the loan
is made plus 1%. Principal and interest payments on the loans are
redeposited into the participants' accounts based on their current
investment allocation elections. At December 31, 1994, market value of
loans approximates fair value.
(4) Investments
-----------
Participants may elect to invest their contributions in the Open End
Guaranteed Income Fund II, the Equity Index Fund II, the MDT Corporation
Stock Fund, the U.S. Government Fund (formerly the Intermediate and Long
Term Bond Fund II), and the Asset Management Fund II
-2- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
in multiples of 10%. Income from investments is allocated to a
participant's account monthly in the proportion that the individual account
bears to the total of all accounts.
The investments of the Plan are held by Bankers Trust as trustee under the
Master Trust. Plans participating in the Master Trust are the Plan, the MDT
Corporation Savings and Thrift Plan for Salaried Employees (Salaried Plan)
and the MDT Corporation Savings and Thrift Plan for Union Employees (Union
Plan).
Except for the loan fund, which is participant specific, investments and
certain related accounts in the statements of net assets available for plan
benefits at December 31, 1994 and 1993 and statements of changes in net
assets available for plan benefits for the years then ended represent
allocations of the assets of the Master Trust based upon proportionate
interest of the Plan in individual Master Trust investment funds.
The following information is presented for the Master Trust and each of the
Master Trust investment accounts:
-3- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of net assets of the Master Trust as of December 31, 1994:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Assets Income Fund II Fund II Fund Fund Fund II Total
------ -------------- ------------ ---------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Directed cash account fund $ - - 11,591 - - 11,591
Investments at fair value:
MDT Corp. common stock - - 1,153,088 - - 1,153,088
U.S. Government securities - - - 150,092 - 150,092
Other marketable securities - 4,962,264 - - 1,811,312 6,773,576
Investments at contract value:
Guaranteed income group
annuity contracts 19,817,020 - - - - 19,817,020
----------- --------- --------- -------- --------- ----------
19,817,020 4,962,264 1,164,679 150,092 1,811,312 27,905,367
Receivables:
Interest and dividends 108,963 5 36 - 2 109,006
Investments sold - 84,565 - - - 84,565
----------- --------- --------- -------- --------- ----------
108,963 84,570 36 - 2 193,571
----------- --------- --------- -------- --------- ----------
Total assets 19,925,983 5,046,834 1,164,715 150,092 1,811,314 28,098,938
Liabilities
-----------
Accounts payable for
investments purchased - - 84,565 - - - - 84,565
----------- --------- --------- -------- --------- ----------
Net assets $19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
=========== ========= ========= ======== ========= ==========
</TABLE>
-4- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------------------
Statement of net assets of the Master Trust as of December 31, 1993:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Assets Income Fund II Fund II Fund Bond Fund II Fund II Total
------ -------------- ------------ ------ -------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Directed cash account fund $ - - 50,470 289 4,246 55,005
Investments at fair value:
MDT Corp. common stock - - 826,597 - - 826,597
Other marketable securities - 4,221,950 - 130,941 1,524,187 5,877,078
Investments at contract value:
Guaranteed income group
annuity contracts 18,909,794 - - - - 18,909,794
----------- --------- -------- ------- --------- ----------
18,909,794 4,221,950 877,067 131,230 1,528,433 25,668,474
Receivables:
Interest and dividends 36,474 9 62 - 6 36,551
Investments sold 84,038 - - - - 84,038
----------- --------- -------- ------- --------- ----------
120,512 9 62 - 6 120,589
Due from (to) other funds (159,344) 72,425 12,716 9,686 64,517 -
----------- --------- -------- ------- --------- ----------
Total assets 18,870,962 4,294,384 889,845 140,916 1,592,956 25,789,063
Liabilities
-----------
Accounts payable for
investments purchased - 84,038 - - 45,000 - - - 129,038
----------- --------- -------- ------- --------- ----------
Net assets $18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
=========== ========= ======== ======= ========= ==========
</TABLE>
-5- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Investment in Master Trust for each participating plan as of December 31,
1994 is as follows:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------ ----- ---------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $16,350,440 4,426,096 918,866 142,573 1,698,399 23,536,374
Union Plan 3,187,828 481,872 202,611 4,506 95,104 3,971,921
Hourly Plan 387,715 54,301 43,238 3,013 17,811 506,078
----------- --------- --------- ------- --------- ----------
Net assets $19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
=========== ========= ========= ======= ========= ==========
</TABLE>
Investment in Master Trust for each participating plan as of
December 31, 1993 is as follows:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------ ------ ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $15,149,546 3,864,742 632,466 131,119 1,522,908 21,300,781
Union Plan 3,310,055 391,370 181,717 8,120 61,906 3,953,168
Hourly Plan 327,323 38,272 30,662 1,677 8,142 406,076
----------- --------- -------- ------- --------- ----------
Net assets $18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
=========== ========= ======== ======= ========= ==========
</TABLE>
-6- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
--------------- ------------- ---------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment earnings:
Interest $ 1,322,638 4,375 1,184 4,932 1,706 1,334,835
Dividends - 150,918 - - 52,016 202,934
Net appreciation
(depreciation)
in fair value - (100,021) 88,792 (8,854) (99,722) (119,805)
----------- --------- --------- ------- --------- ----------
Total invest-
ment earnings
(losses) 1,322,638 55,272 89,976 (3,922) (46,000) 1,417,964
Administrative expenses (73,870) (17,281) (3,586) (769) (6,312) (101,818)
----------- --------- --------- ------- --------- ----------
Net investment
earnings
(losses) 1,248,768 37,991 86,390 (4,691) (52,312) 1,316,146
Net transfers in (out) (9,873) 529,134 97,978 54,574 366,389 1,038,202
Transfers among funds (99,836) 100,760 135,502 (40,707) (95,719) -
----------- --------- --------- ------- --------- ----------
Net increase on
net assets 1,139,059 667,885 319,870 9,176 218,358 2,354,348
Net assets:
Beginning of year 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
----------- --------- --------- ------- --------- ----------
End of year $19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
=========== ========= ========= ======= ========= ==========
</TABLE>
-7- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1993:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
--------------- ------------- ---------- ------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment earnings:
Interest $ 1,403,244 230 443 8 132 1,404,057
Net appreciation
(depreciation)
in fair value - 345,612 (438,052) 3,495 63,828 (25,117)
----------- --------- --------- ------- --------- ----------
Total investment
earnings (losses) 1,403,244 345,842 (437,609) 3,503 63,960 1,378,940
Administrative expenses (96,522) (14,609) (3,238) (808) (2,806) (117,983)
----------- --------- --------- ------- --------- ----------
Net investment
earnings (losses) 1,306,722 331,233 (440,847) 2,695 61,154 1,260,957
Net transfers in 1,417,934 539,950 159,215 25,713 284,228 2,427,040
Transfers among funds (1,967,336) 501,009 106,245 112,508 1,247,574 -
----------- --------- --------- ------- --------- ----------
Net increase (decrease)
in net assets 757,320 1,372,192 (175,387) 140,916 1,592,956 3,687,997
Net assets:
Beginning of year 18,029,604 2,922,192 1,020,232 - - 21,972,028
----------- --------- --------- ------- --------- ----------
End of year $18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
=========== ========= ========= ======= ========= ==========
</TABLE>
-8- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Net income (loss) from the Master Trust investments (net of administrative
expenses) for each participating plan for the year ended December 31, 1994
are as follows:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
--------------- ------------ ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 1,016,857 34,704 63,391 (4,386) (48,805) 1,061,761
Union Plan 208,619 2,648 20,696 (245) (3,177) 228,541
Hourly Plan 23,292 639 2,303 (60) (330) 25,844
------------ -------- -------- ------- -------- ----------
Net investment
earnings
(losses) $ 1,248,768 37,991 86,390 (4,691) (52,312) 1,316,146
============ ======== ======== ======= ======== ==========
</TABLE>
Net income (loss) from the Master Trust investments (net of administrative
expenses) for each participating plan for the year ended December 31, 1993
are as follows:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
--------------- ------------ ------- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 1,058,949 298,727 (333,480) 2,567 58,769 1,085,532
Union Plan 229,719 30,650 (90,954) 116 2,240 171,771
Hourly Plan 18,054 1,856 (16,413) 12 145 3,654
------------ --------- --------- ------- -------- ---------
Net investment
earnings
(losses) $ 1,306,722 331,233 (440,847) 2,695 61,154 1,260,957
============ ========= ========= ======= ======== =========
</TABLE>
-9- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(5) Federal Income Taxes
--------------------
Participants are not taxed currently on employer contributions to the Plan
or on income earned by the Plan. Distributions of benefits to employees,
unless appropriately transferred to another qualified plan, generally are
subject to federal income tax.
The Internal Revenue Service issued its latest determination letter on
August 24, 1993 which stated that the Plan and the related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter; however, the Plan administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
(6) Plan Termination
----------------
Although it has not expressed any intent to do so, MDT Corporation has the
right under Article II of the Savings and Thrift Plan for Hourly Employees
to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of plan termination,
participants will become 100% vested in their accounts.
-10-
<PAGE>
Schedule 1
----------
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Description of investment, including
Identity of issuer, borrower, maturity date, rate of interest, Historical Current
lessor, or similar party collateral, par or maturity value Cost Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment in MDT Corporation
Master Trust No. 161326160 (1) $511,953 506,078
- ------------------------------------------------------------------------------------------------------------
Investment in Employees' Loans Loans to plan participants, maturity
dates through 2004, interest rates
from 7.25% to 8.75% per annum - 61,443
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See note 4 to financial statements.
<PAGE>
Schedule 2
----------
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Form 5500, Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) Description (c) Purchase (d) Selling (e) Lease (f) Expense (g) Cost (h) Current value (i) Net gain
of asset Price Price Rental incurred with of of asset on or (loss)
(include transaction asset transaction
interest rate date
and maturity
in case of a
loan)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MDT Acquisition of
Corporation Interests in
Master Trust
-Employee and
Employer
Contributions - - - - - $ 182,197 -
- ------------------------------------------------------------------------------------------------------------------------------------
MDT Divestiture of
Corporation Interests in
Master Trust
-Benefit
Payments - - - $ 44,613 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.2
MDT CORPORATION SAVINGS AND
THRIFT PLAN FOR SALARIED EMPLOYEES
Financial Statements and Schedules
December 31, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
----------------------------
The MDT Corporation Employee Benefits Committee
and Participants in the MDT Corporation Savings
and Thrift Plan for Salaried Employees:
We have audited the accompanying statements of net assets available for plan
benefits of the MDT Corporation Savings and Thrift Plan for Salaried Employees
as of December 31, 1994 and 1993, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan'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, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the MDT
Corporation Savings and Thrift Plan for Salaried Employees at December 31, 1994
and 1993, and the changes in those net assets available for plan benefits for
the years then ended, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of expressing an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statements of net assets available for plan benefits and the statements of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
May 19, 1995
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1994
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------
Open End MDT U.S.
Guaranteed Equity Index Stock Government
Assets Income Fund II Fund II Fund Fund
------ -------------- ------------ ----- ----------
<S> <C> <C> <C> <C>
Investment in employees' loans $ - - - -
Investment in Master Trust 16,350,440 4,426,096 918,866 142,573
Receivables:
Employer contributions 11,273 6,508 1,502 491
Employees' contributions 38,644 23,251 4,627 1,542
Other - - - -
---------- --------- ------- -------
49,917 29,759 6,129 2,033
Due from (to) other funds 7,523 1,998 552 10
---------- --------- ------- -------
Net assets available
for plan benefits $16,407,880 4,457,853 925,547 144,616
========== ========= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
-----------------------
Asset
Management Loan
Assets Fund II Fund Total
------ ---------- ---- -----
<S> <C> <C> <C>
Investment in employees' loans - 470,055 470,055
Investment in Master Trust 1,698,399 - 23,536,374
Receivables:
Employer contributions 3,139 - 22,913
Employees' contributions 11,264 - 79,328
Other - 2,473 2,473
--------- ------- ----------
14,403 2,473 104,714
Due from (to) other funds 240 (10,323) -
--------- ------- ----------
Net assets available
for plan benefits 1,713,042 462,205 24,111,143
========= ======= ==========
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1993
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Assets Income Fund II Fund II Fund Bond Fund II Fund II Total
------ -------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment in Master Trust $ 15,149,546 3,864,742 632,466 131,119 1,522,908 21,300,781
Receivables:
Employer contributions 7,703 4,039 831 136 1,646 14,355
Employees' contributions 71,106 14,805 3,046 497 6,032 95,486
---------- --------- ------- ------- --------- ----------
Net assets available for
plan benefits $ 15,228,355 3,883,586 636,343 131,752 1,530,586 21,410,622
========== ========= ======= ======= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1994
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------
Open End MDT U.S.
Guaranteed Equity Index Stock Government
Income Fund II Fund II Fund Fund
-------------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Contributions:
Employer $ 282,597 140,298 36,983 11,242
Employees' 1,098,001 553,392 126,936 43,918
---------- --------- ------- -------
1,380,598 693,690 163,919 55,160
Net income (loss) from
Master Trust investments,
net of administrative
expenses 1,016,857 34,704 63,391 (4,386)
Interest income on employees'
loans - - - -
---------- --------- ------- -------
Total additions 2,397,455 728,394 227,310 50,774
Benefit payments (879,299) (122,236) (28,986) (1,144)
Transfers among funds (340,928) (32,320) 90,709 (36,766)
Transfer from MDT Corporation
Savings and Thrift Plan for
Hourly Employees 2,297 429 171 -
---------- --------- ------- -------
Net increase 1,179,525 574,267 289,204 12,864
Net assets available
for plan benefits:
Beginning of year 15,228,355 3,883,586 636,343 131,752
---------- --------- ------- -------
End of year $ 16,407,880 4,457,853 925,547 144,616
========== ========= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
------------------------------
Asset
Management Loan
Fund II Fund Total
---------- ---- -----
<S> <C> <C> <C>
Contributions:
Employer 71,787 - 542,907
Employees' 306,189 - 2,128,436
--------- -------- ---------
377,976 - 2,671,343
Net income (loss) from
Master Trust investments,
net of administrative
expenses (48,805) - 1,061,761
Interest income on employees'
loans - 9,746 9,746
--------- -------- ---------
Total additions 329,171 9,746 3,742,850
Benefit payments (13,561) - (1,045,226)
Transfers among funds (133,154) 452,459 -
Transfer from MDT Corporation
Savings and Thrift Plan for
Hourly Employees - - 2,897
--------- ------- ---------
Net increase 182,456 462,205 2,700,521
Net assets available
for plan benefits:
Beginning of year 1,530,586 - 21,410,622
--------- ------- ---------
End of year 1,713,042 462,205 24,111,143
========= ======= ==========
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1993
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------------
Intermediate
Open End MDT and Long Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------ ------ ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 351,884 96,440 34,939 4,029 33,543 520,835
Employees' 1,252,433 488,862 136,572 22,377 282,052 2,182,296
---------- --------- ------- ------- --------- ----------
1,604,317 585,302 171,511 26,406 315,595 2,703,131
Net income (loss) from
Master Trust investments,
net of administrative
expenses 1,058,949 298,727 (333,480) 2,567 58,769 1,085,532
---------- --------- ------- ------- --------- ----------
Total additions 2,663,266 884,029 (161,969) 28,973 374,364 3,788,663
Benefit payments (623,216) (78,413) (20,112) (43) (14,892) (736,676)
Transfers among funds
(1,722,209) 439,887 8,386 102,822 1,171,114 -
---------- --------- ------- ------- --------- ----------
Net increase
(decrease) 317,841 1,245,503 (173,695) 131,752 1,530,586 3,051,987
Net assets available
for plan benefits:
Beginning of year 14,910,514 2,638,083 810,038 - - 18,358,635
---------- --------- ------- ------- --------- ----------
End of year $15,228,355 3,883,586 636,343 131,752 1,530,586 21,410,622
========== ========= ======= ======= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
December 31, 1994
(1) Description of the Plan
-----------------------
The following description of the MDT Corporation Savings and Thrift Plan
for Salaried Employees (the Plan) provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
The Plan is a defined contribution plan covering substantially all MDT
Corporation (Corporation) salaried employees. Salaried employees of the
Corporation may elect to participate in the Plan commencing the first
calendar quarter following completion of one hour of service.
The Plan provides that participants may elect to make a basic contribution
of up to 6% of their total annual compensation. The Corporation makes a
matching contribution equal to 30% of the first 2%, 40% of the next 2%, and
50% of the final 2% of a participant's basic contribution. In addition,
participants who contribute the maximum basic contribution may make a
supplemental contribution in tax-deferred dollars, taxed dollars, or a
combination which, when added to the basic contribution, cannot exceed 18%,
16%, and 25%, respectively, of their total annual compensation. The
supplemental contribution is not matched by the Corporation.
Separate employee and Corporation contribution accounts are maintained for
each participant. Participants have a 100% nonforfeitable vested interest
in their basic and supplemental contributions at all times. Employees vest
in the Corporation contributions at a rate of 20% after one year of service
and an additional 20% each year thereafter until five years of service are
completed. Forfeitures arising under the Plan are used to reduce the
Corporation's contribution to the Plan.
Distributions made upon termination, death, or permanent disability may at
the employee's election be in the form of a lump sum or in installments
over a period not to exceed ten years.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following are the significant accounting policies followed by the Plan:
Basis of Presentation
---------------------
The accompanying financial statements have been prepared on an accrual
basis and present the net assets available for plan benefits and changes in
those net assets.
(Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
------------------------------------------
Investments
-----------
The Plan's interest in the Master Trust is valued based on the fair value
of the underlying assets of the Master Trust. The employer identification
number under which the Master Trust has been filed is 161326160.
The accounting policies of the Master Trust operated under the MDT
Corporation Savings and Thrift Master Trust Agreement (Master Trust) are as
follows:
Marketable securities are valued at the last reported sales price on the
last business day of the year. Quotations are obtained from national
securities exchanges or, in instances where securities are not listed on
any of the exchanges, quotations are obtained from brokerage firms.
The Open End Guaranteed Income Fund II invests in benefit responsive fixed
and variable payment guaranteed investment contracts (GICs) and bank
investment contracts (BICs). The GIC and BIC investments are carried at
contract value which approximates fair value.
Purchases and sales of securities are recorded on the trade date. Dividend
income is recorded on the ex-dividend date. Interest is recognized on the
accrual basis.
(3) Plan Amendments
---------------
In 1994, the Plan was amended to include a loan fund for participants.
Participants are permitted to borrow from their savings accounts subject to
certain limitations. The loans are payable over terms up to nine years and
bear interest at the commercial prime rate in effect at the time the loan
is made plus 1%. Principal and interest payments on the loans are
redeposited into the participants' accounts based on their current
investment allocation elections. At December 31, 1994, market value of
loans approximates fair value.
(4) Investments
-----------
Participants may elect to invest their contributions in the Open End
Guaranteed Income Fund II, the Equity Index Fund II, the MDT Corporation
Stock Fund, the U.S. Government Fund (formerly the Intermediate and Long
Term Bond Fund II), and the Asset Management Fund II
-2- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
in multiples of 10%. Income from investments is allocated to a
participant's account monthly in the proportion that the individual account
bears to the total of all accounts.
The investments of the Plan are held by Bankers Trust as trustee under the
Master Trust. Plans participating in the Master Trust are the Plan, the MDT
Corporation Savings and Thrift Plan for Hourly Employees (Hourly Plan) and
the MDT Corporation Savings and Thrift Plan for Union Employees (Union
Plan).
Except for the loan fund, which is participant specific, investments and
certain related accounts in the statements of net assets available for plan
benefits at December 31, 1994 and 1993 and statements of changes in net
assets available for plan benefits for the years then ended represent
allocations of the assets of the Master Trust based upon proportionate
interest of the Plan in individual Master Trust investment funds.
The following information is presented for the Master Trust and each of the
Master Trust investment accounts:
-3- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of net assets of the Master Trust as of December 31, 1994:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Assets Income Fund II Fund II Fund Fund Fund II Total
------ -------------- ------------ ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Directed cash account fund $ - - 11,591 - - 11,591
Investments at fair value:
MDT Corp. common stock - - 1,153,088 - - 1,153,088
U.S. Government securities - - - 150,092 - 150,092
Other marketable securities - 4,962,264 - - 1,811,312 6,773,576
Investments at contract value:
Guaranteed income group
annuity contracts 19,817,020 - - - - 19,817,020
---------- --------- --------- ------- --------- ----------
19,817,020 4,962,264 1,164,679 150,092 1,811,312 27,905,367
Receivables:
Interest and dividends 108,963 5 36 - 2 109,006
Investments sold - 84,565 - - - 84,565
---------- --------- --------- ------- --------- ----------
108,963 84,570 36 - 2 193,571
---------- --------- --------- ------- --------- ----------
Total assets 19,925,983 5,046,834 1,164,715 150,092 1,811,314 28,098,938
Liabilities
-----------
Accounts payable for
investments purchased - - 84,565 - - - - 84,565
---------- --------- --------- ------- --------- ----------
Net assets $ 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
========== ========= ========= ======= ========= ==========
</TABLE>
-4- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of net assets of the Master Trust as of December 31, 1993:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Assets Income Fund II Fund II Fund Bond Fund II Fund II Total
------ -------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Directed cash account fund $ - - 50,470 289 4,246 55,005
Investments at fair value:
MDT Corp. common stock - - 826,597 - - 826,597
Other marketable securities - 4,221,950 - 130,941 1,524,187 5,877,078
Investments at contract value:
Guaranteed income group
annuity contracts 18,909,794 - - - - 18,909,794
---------- --------- ------- ------- --------- ----------
18,909,794 4,221,950 877,067 131,230 1,528,433 25,668,474
Receivables:
Interest and dividends 36,474 9 62 - 6 36,551
Investments sold 84,038 - - - - 84,038
---------- --------- ------- ------- --------- ----------
120,512 9 62 - 6 120,589
Due from (to) other funds (159,344) 72,425 12,716 9,686 64,517 -
---------- --------- ------- ------- --------- ----------
Total assets 18,870,962 4,294,384 889,845 140,916 1,592,956 25,789,063
Liabilities
-----------
Accounts payable for
investments purchased - 84,038 - - 45,000 - - - 129,038
---------- --------- ------- ------- --------- ----------
Net assets $ 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
========== ========= ======= ======= ========= ==========
</TABLE>
-5- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Investment in Master Trust for each participating plan as of December 31,
1994 is as follows:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------ ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 16,350,440 4,426,096 918,866 142,573 1,698,399 23,536,374
Union Plan 3,187,828 481,872 202,611 4,506 95,104 3,971,921
Hourly Plan 387,715 54,301 43,238 3,013 17,811 506,078
---------- --------- --------- ------- --------- ----------
Net assets $ 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
========== ========= ========= ======= ========= ==========
</TABLE>
Investment in Master Trust for each participating plan as of December 31,
1993 is as follows:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 15,149,546 3,864,742 632,466 131,119 1,522,908 21,300,781
Union Plan 3,310,055 391,370 181,717 8,120 61,906 3,953,168
Hourly Plan 327,323 38,272 30,662 1,677 8,142 406,076
---------- --------- --------- ------- --------- ----------
Net assets $ 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
========== ========= ========= ======= ========= ==========
</TABLE>
-6- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------ ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment earnings:
Interest $ 1,322,638 4,375 1,184 4,932 1,706 1,334,835
Dividends - 150,918 - - 52,016 202,934
Net appreciation
(depreciation)
in fair value - (100,021) 88,792 (8,854) (99,722) (119,805)
---------- --------- --------- ------- --------- ----------
Total invest-
ment earnings
(losses) 1,322,638 55,272 89,976 (3,922) (46,000) 1,417,964
Administrative expenses (73,870) (17,281) (3,586) (769) (6,312) (101,818)
---------- --------- --------- ------- --------- ----------
Net investment
earnings
(losses) 1,248,768 37,991 86,390 (4,691) (52,312) 1,316,146
Net transfers in (out) (9,873) 529,134 97,978 54,574 366,389 1,038,202
Transfers among funds (99,836) 100,760 135,502 (40,707) (95,719) -
---------- --------- --------- ------- --------- ----------
Net increase on
net assets 1,139,059 667,885 319,870 9,176 218,358 2,354,348
Net assets:
Beginning of year 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
---------- --------- --------- ------- --------- ----------
End of year $ 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
========== ========= ========= ======= ========= ==========
</TABLE>
-7- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
(4) Investments (continued)
-----------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1993:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment earnings:
Interest $ 1,403,244 230 443 8 132 1,404,057
Net appreciation
(depreciation)
in fair value - 345,612 (438,052) 3,495 63,828 (25,117)
---------- --------- --------- -------- --------- ----------
Total investment
earnings (losses) 1,403,244 345,842 (437,609) 3,503 63,960 1,378,940
Administrative expenses (96,522) (14,609) (3,238) (808) (2,806) (117,983)
---------- --------- --------- -------- --------- ----------
Net investment
earnings (losses) 1,306,722 331,233 (440,847) 2,695 61,154 1,260,957
Net transfers in 1,417,934 539,950 159,215 25,713 284,228 2,427,040
Transfers among funds (1,967,336) 501,009 106,245 112,508 1,247,574 -
---------- --------- --------- -------- --------- ----------
Net increase (decrease)
in net assets 757,320 1,372,192 (175,387) 140,916 1,592,956 3,687,997
Net assets:
Beginning of year 18,029,604 2,922,192 1,020,232 - - 21,972,028
---------- --------- --------- -------- --------- ----------
End of year $ 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
========== ========= ========= ======== ========= ==========
</TABLE>
-8- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Net income (loss) from the Master Trust investments (net of administrative
expenses) for each participating plan for the year ended December 31, 1994
are as follows:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 1,016,857 34,704 63,391 (4,386) (48,805) 1,061,761
Union Plan 208,619 2,648 20,696 (245) (3,177) 228,541
Hourly Plan 23,292 639 2,303 (60) (330) 25,844
--------- ------ ------ ------ ------ ---------
Net investment
earnings
(losses) $ 1,248,768 37,991 86,390 (4,691) (52,312) 1,316,146
========= ====== ====== ====== ====== =========
</TABLE>
Net income (loss) from the Master Trust investments (net of administrative
expenses) for each participating plan for the year ended December 31, 1993
are as follows:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 1,058,949 298,727 (333,480) 2,567 58,769 1,085,532
Union Plan 229,719 30,650 (90,954) 116 2,240 171,771
Hourly Plan 18,054 1,856 (16,413) 12 145 3,654
--------- ------- ------- ----- ------ ---------
Net investment
earnings
(losses) $ 1,306,722 331,233 (440,847) 2,695 61,154 1,260,957
========= ======= ======== ===== ====== =========
</TABLE>
-9- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(5) Federal Income Taxes
--------------------
Participants are not taxed currently on employer contributions to the Plan
or on income earned by the Plan. Distributions of benefits to employees,
unless appropriately transferred to another qualified plan, generally are
subject to federal income tax.
The Internal Revenue Service issued its latest determination letter on
August 24, 1993 which stated that the Plan and the related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter; however, the Plan administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
(6) Plan Termination
----------------
Although it has not expressed any intent to do so, MDT Corporation has the
right under Article II of the Savings and Thrift Plan for Salaried
Employees to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants will become 100% vested in their accounts.
-10-
<PAGE>
Schedule 1
----------
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Description of investment, including
Identity of issuer, borrower, maturity date, rate of interest, Historical Current
lessor, or similar party collateral, par or maturity value Cost Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment in MDT Corporation
Master Trust No. 161326160 (1) $23,631,419 23,536,374
- ------------------------------------------------------------------------------------------------------
Investment in Employees' Loans Loans to plan participants, maturity
dates through 2004, interest rates
from 7.25% to 8.75% per annum - 470,055
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) See note 4 to financial statements.
<PAGE>
Schedule 2
----------
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Form 5500, Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1994
<TABLE>
<CAPTION>
(a) (b) Description (c) Purchase (d) Selling (e) Lease (f) Expense (g) Cost (h) Current (i) Net gain
of asset Price Price Rental incurred of value of or (loss)
(include with asset asset on
interest rate transaction transaction
and maturity date
in case of a
loan)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MDT Corporation Acquisition of
Interests in
Master Trust
-Employee and
Employer
Contributions $ - - - - - $2,671,343 -
- -----------------------------------------------------------------------------------------------------------------------------------
MDT Corporation Divestiture of
Interests in
Master Trust
-Benefit
Payments - - - $1,045,226 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.3
MDT CORPORATION SAVINGS AND
THRIFT PLAN FOR UNION EMPLOYEES
Financial Statements and Schedules
December 31, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
----------------------------
The MDT Corporation Employee Benefits Committee
and Participants in the MDT Corporation Savings
and Thrift Plan for Union Employees:
We have audited the accompanying statements of net assets available for plan
benefits of the MDT Corporation Savings and Thrift Plan for Union Employees as
of December 31, 1994 and 1993, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan'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, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the MDT
Corporation Savings and Thrift Plan for Union Employees at December 31, 1994 and
1993, and the changes in those net assets available for plan benefits for the
years then ended, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of expressing an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statements of net assets available for plan benefits and the statements of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ KPMG Peat Marwick
Los Angeles, California
May 19, 1995
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1994
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------
Open End Equity MDT U.S.
Guaranteed Index Stock Government
Assets Income Fund II Fund II Fund Fund
- ------ -------------- -------- ------ ----------
<S> <C> <C> <C> <C>
Investment in employees' loans $ - - - -
Investment in Master Trust 3,187,828 481,872 202,611 4,506
Receivables:
Employer contributions 2,586 - - -
Employees' contributions 10,565 124 4 -
Other - (239) (100) (280)
---------- ------- ------- -----
13,151 (115) (96) (280)
Due from (to) other funds 7,327 1,149 819 34
---------- ------- ------- -----
Net assets available
for plan benefits $3,208,306 482,906 203,334 4,260
========== ======= ======= =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------
Asset
Management Loan
Assets Fund II Fund Total
- ------ ---------- ---- -----
<S> <C> <C> <C>
Investment in employees' loans - 401,769 401,769
Investment in Master Trust 95,104 - 3,971,921
Receivables:
Employer contributions - - 2,586
Employees' contributions - - 10,693
Other (1,819) 2,111 (327)
------- ------- ---------
(1,819) 2,111 12,952
372 (9,701) -
Due from (to) other funds ------- ------- ---------
Net assets available
for plan benefits 93,657 394,179 4,386,642
======= ======= =========
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1993
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Assets Income Fund II Fund II Fund Bond Fund II Fund II Total
------ -------------- ------------ ------- ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment in Master Trust $3,310,055 391,370 181,717 8,120 61,906 3,953,168
Receivables:
Employer contributions 1,840 235 105 4 32 2,216
Employees' contributions 6,396 817 366 15 113 7,707
--------- ------- ------- ----- ------ ---------
Net assets available
for plan benefits $3,318,291 392,422 182,188 8,139 62,051 3,963,091
========= ======= ======= ===== ====== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1994
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------
Open End MDT U.S.
Guaranteed Equity Index Stock Government
Income Fund II Fund II Fund Fund
-------------- ------------ ----- ----------
<S> <C> <C> <C> <C>
Contributions:
Employer $ 73,796 15,781 4,582 695
Employees' 271,200 67,103 15,455 2,113
---------- ------- ------- -----
344,996 82,884 20,037 2,808
Net income (loss) from
Master Trust investments,
net of administrative
expenses 208,619 2,648 20,696 (245)
Interest income on employees'
loans - - - -
---------- ------- ------- -----
Total additions 553,615 85,532 40,733 2,563
Benefit payments (272,825) (626) (15,673) -
Transfers among funds (390,775) 5,578 (3,914) (6,442)
---------- ------- ------- -----
Net increase (decrease) (109,985) 90,484 21,146 (3,879)
Net assets available
for plan benefits:
Beginning of year 3,318,291 392,422 182,188 8,139
---------- ------- ------- -----
End of year $3,208,306 482,906 203,334 4,260
========== ======= ======= =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------
Asset
Management Loan
Fund II Fund Total
---------- ---- -----
<S> <C> <C> <C>
Contributions:
Employer 5,197 - 100,051
Employees' 18,140 - 374,011
------ ---------
23,337 - 474,062
Net income (loss) from
Master Trust investments,
net of administrative
expenses (3,177) - 228,541
Interest income on employees'
loans - 10,105 10,105
------ ------- ---------
Total additions 20,160 10,105 712,708
Benefit payments (33) - (289,157)
Transfers among funds 11,479 384,074 -
------ ------- ---------
Net increase (decrease) 31,606 394,179 423,551
Net assets available
for plan benefits:
Beginning of year 62,051 - 3,963,091
------ ------- ---------
End of year 93,657 394,179 4,386,642
====== ======= =========
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1993
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------
Intermediate
Open End MDT and Long Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 69,896 15,873 5,568 414 4,658 96,409
Employees' 247,240 69,304 30,330 7,609 44,078 398,561
---------- ------- ------- ----- ------ ---------
317,136 85,177 35,898 8,023 48,736 494,970
Net income (loss) from
Master Trust investments,
net of administrative
expenses 229,719 30,650 (90,954) 116 2,240 171,771
---------- ------- ------- ----- ------ ---------
Total additions 546,855 115,827 (55,056) 8,139 50,976 666,741
Benefit payments (112,909) (20,146) (12,121) - (115) (145,291)
Transfers among funds (88,853) 21,647 56,016 - 11,190 -
---------- ------- ------- ----- ------ ---------
Net increase (decrease) 345,093 117,328 (11,161) 8,139 62,051 521,450
Net assets available
for plan benefits:
Beginning of year 2,973,198 275,094 193,349 - - 3,441,641
---------- ------- ------- ----- ------ ---------
End of year $3,318,291 392,422 182,188 8,139 62,051 3,963,091
========== ======= ======= ===== ====== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
December 31, 1994
(1) Description of the Plan
-----------------------
The following description of the MDT Corporation Savings and Thrift Plan
for Union Employees (the Plan) provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
The Plan is a defined contribution plan covering substantially all MDT
Corporation (Corporation) union employees. Union employees of the
Corporation may elect to participate in the Plan commencing the first
calendar quarter following completion of one hour of service.
The Plan provides that participants may elect to make a basic contribution
of up to 6% of their total annual compensation. The Corporation makes a
matching contribution equal to 30% of the first 2%, 40% of the next 2%, and
50% of the final 2% of a participant's basic contribution. In addition,
participants who contribute the maximum basic contribution may make a
supplemental contribution in tax-deferred dollars, taxed dollars, or a
combination which, when added to the basic contribution, cannot exceed 18%,
16%, and 25%, respectively, of their total annual compensation. The
supplemental contribution is not matched by the Corporation.
Separate employee and Corporation contribution accounts are maintained for
each participant. Participants have a 100% nonforfeitable vested interest
in their basic and supplemental contributions at all times. Employees vest
in the Corporation contributions at a rate of 20% after one year of service
and an additional 20% each year thereafter until five years of service are
completed. Forfeitures arising under the Plan are used to reduce the
Corporation's contribution to the Plan.
Distributions made upon termination, death, or permanent disability may at
the employee's election be in the form of a lump sum or in installments
over a period not to exceed ten years.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following are the significant accounting policies followed by the Plan:
Basis of Presentation
---------------------
The accompanying financial statements have been prepared on an accrual
basis and present the net assets available for plan benefits and changes in
those net assets.
(Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
------------------------------------------
Investments
-----------
The Plan's interest in the Master Trust is valued based on the fair value
of the underlying assets of the Master Trust. The employer identification
number under which the Master Trust has been filed is 161326160.
The accounting policies of the Master Trust operated under the MDT
Corporation Savings and Thrift Master Trust Agreement (Master Trust) are as
follows:
Marketable securities are valued at the last reported sales price on the
last business day of the year. Quotations are obtained from national
securities exchanges or, in instances where securities are not listed on
any of the exchanges, quotations are obtained from brokerage firms.
The Open End Guaranteed Income Fund II invests in benefit responsive fixed
and variable payment guaranteed investment contracts (GICs) and bank
investment contracts (BICs). The GIC and BIC investments are carried at
contract value which approximates fair value.
Purchases and sales of securities are recorded on the trade date. Dividend
income is recorded on the ex-dividend date. Interest is recognized on the
accrual basis.
(3) Plan Amendments
---------------
In 1994, the Plan was amended to include a loan fund for participants.
Participants are permitted to borrow from their savings accounts subject to
certain limitations. The loans are payable over terms up to nine years and
bear interest at the commercial prime rate in effect at the time the loan
is made plus 1%. Principal and interest payments on the loans are
redeposited into the participants' accounts based on their current
investment allocation elections. At December 31, 1994, market value of
loans approximates fair value.
(4) Investments
-----------
Participants may elect to invest their contributions in the Open End
Guaranteed Income Fund II, the Equity Index Fund II, the MDT Corporation
Stock Fund, the U.S. Government Fund (formerly the Intermediate and Long
Term Bond Fund II), and the Asset Management Fund II
(Continued)
-2-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
in multiples of 10%. Income from investments is allocated to a
participant's account monthly in the proportion that the individual account
bears to the total of all accounts.
The investments of the Plan are held by Bankers Trust as trustee under the
Master Trust. Plans participating in the Master Trust are the Plan, the MDT
Corporation Savings and Thrift Plan for Hourly Employees (Hourly Plan) and
the MDT Corporation Savings and Thrift Plan for Salaried Employees
(Salaried Plan).
Except for the loan fund, which is participant specific, investments and
certain related accounts in the statements of net assets available for plan
benefits at December 31, 1994 and 1993 and statements of changes in net
assets available for plan benefits for the years then ended represent
allocations of the assets of the Master Trust based upon proportionate
interest of the Plan in individual Master Trust investment funds.
The following information is presented for the Master Trust and each of the
Master Trust investment accounts:
(Continued)
-3-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------------------
Statement of net assets of the Master Trust as of December 31, 1994:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Assets Income Fund II Fund II Fund Fund Fund II Total
------ -------------- ------------ ----- ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Directed cash account fund $ - - 11,591 - - 11,591
Investments at fair value:
MDT Corp. common stock - - 1,153,088 - - 1,153,088
U.S. Government securities - - - 150,092 - 150,092
Other marketable securities - 4,962,264 - - 1,811,312 6,773,576
Investments at contract value:
Guaranteed income group
annuity contracts 19,817,020 - - - - 19,817,020
----------- --------- --------- -------- --------- ----------
19,817,020 4,962,264 1,164,679 150,092 1,811,312 27,905,367
Receivables:
Interest and dividends 108,963 5 36 - 2 109,006
Investments sold - 84,565 - - - 84,565
----------- --------- --------- -------- --------- ----------
108,963 84,570 36 - 2 193,571
----------- --------- --------- -------- --------- ----------
Total assets 19,925,983 5,046,834 1,164,715 150,092 1,811,314 28,098,938
Liabilities
-----------
Accounts payable for
investments purchased - 84,565 - - - 84,565
----------- --------- --------- -------- --------- ----------
Net assets $19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
=========== ========= ========= ======== ========= ==========
</TABLE>
(Continued)
-4-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of net assets of the Master Trust as of December 31, 1993:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Assets Income Fund II Fund II Fund Bond Fund II Fund II Total
------ -------------- ------------ ------- ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Directed cash account fund $ - - 50,470 289 4,246 55,005
Investments at fair value:
MDT Corp. common stock - - 826,597 - - 826,597
Other marketable securities - 4,221,950 - 130,941 1,524,187 5,877,078
Investments at contract value:
Guaranteed income group
annuity contracts 18,909,794 - - - - 18,909,794
---------- ---------- ------- ------- --------- ----------
18,909,794 4,221,950 877,067 131,230 1,528,433 25,668,474
Receivables:
Interest and dividends 36,474 9 62 - 6 36,551
Investments sold 84,038 - - - - 84,038
---------- ---------- ------- ------- --------- ----------
120,512 9 62 - 6 120,589
Due from (to) other funds (159,344) 72,425 12,716 9,686 64,517 -
---------- ---------- ------- ------- --------- ----------
Total assets 18,870,962 4,294,384 889,845 140,916 1,592,956 25,789,063
Liabilities
------------
Accounts payable for
investments purchased 84,038 - 45,000 - - 129,038
---------- ---------- ------- ------- --------- ----------
Net assets $18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
========== ========== ======= ======= ========= ==========
</TABLE>
(Continued)
-5-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------------------
Investment in Master Trust for each participating plan as of
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 16,350,440 4,426,096 918,866 142,573 1,698,399 23,536,374
Union Plan 3,187,828 481,872 202,611 4,506 95,104 3,971,921
Hourly Plan 387,715 54,301 43,238 3,013 17,811 506,078
---------- --------- ------- ------- --------- ----------
Net assets $ 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
=========== ========= ========= ======= ========= ==========
</TABLE>
Investment in Master Trust for each participating plan as of December 31,
1993 is as follows:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------- ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 15,149,546 3,864,742 632,466 131,119 1,522,908 21,300,781
Union Plan 3,310,055 391,370 181,717 8,120 61,906 3,953,168
Hourly Plan 327,323 38,272 30,662 1,677 8,142 406,076
---------- --------- ------- ------- --------- ----------
Net assets $ 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
========== ========= ======= ======= ========= ==========
</TABLE>
(Continued)
-6-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------------------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------ ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment earnings:
Interest $ 1,322,638 4,375 1,184 4,932 1,706 1,334,835
Dividends - 150,918 - - 52,016 202,934
Net appreciation
(depreciation)
in fair value - (100,021) 88,792 (8,854) (99,722) (119,805)
----------- --------- --------- ------- --------- ----------
Total invest-
ment earnings
(losses) 1,322,638 55,272 89,976 (3,922) (46,000) 1,417,964
Administrative expenses (73,870) (17,281) (3,586) (769) (6,312) (101,818)
----------- --------- --------- ------- --------- ----------
Net investment
earnings
(losses) 1,248,768 37,991 86,390 (4,691) (52,312) 1,316,146
Net transfers in (out) (9,873) 529,134 97,978 54,574 366,389 1,038,202
Transfers among funds (99,836) 100,760 135,502 (40,707) (95,719) -
----------- --------- --------- ------- --------- -----------
Net increase on
net assets 1,139,059 667,885 319,870 9,176 218,358 2,354,348
Net assets:
Beginning of year 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
----------- --------- --------- ------- --------- ----------
End of year $19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
=========== ========= ========= ======= ========= ==========
</TABLE>
(Continued)
-7-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1993:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------- ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment earnings:
Interest $ 1,403,244 230 443 8 132 1,404,057
Net appreciation
(depreciation)
in fair value - 345,612 (438,052) 3,495 63,828 (25,117)
---------- --------- --------- ------- --------- ----------
Total investment
earnings (losses) 1,403,244 345,842 (437,609) 3,503 63,960 1,378,940
Administrative expenses (96,522) (14,609) (3,238) (808) (2,806) (117,983)
---------- --------- --------- ------- --------- ----------
Net investment
earnings (losses) 1,306,722 331,233 (440,847) 2,695 61,154 1,260,957
Net transfers in 1,417,934 539,950 159,215 25,713 284,228 2,427,040
Transfers among funds (1,967,336) 501,009 106,245 112,508 1,247,574 -
---------- --------- --------- ------- --------- ----------
Net increase (decrease)
in net assets 757,320 1,372,192 (175,387) 140,916 1,592,956 3,687,997
Net assets:
Beginning of year 18,029,604 2,922,192 1,020,232 - - 21,972,028
---------- --------- --------- ------- --------- ----------
End of year $ 18,786,924 4,294,384 844,845 140,916 1,592,956 25,660,025
========== ========= ========= ======= ========= ==========
</TABLE>
-8- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Net income (loss) from the Master Trust investments (net of administrative
expenses) for each participating plan for the year ended December 31, 1994
are as follows:
<TABLE>
<CAPTION>
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 1,016,857 34,704 63,391 (4,386) (48,805) 1,061,761
Union Plan 208,619 2,648 20,696 (245) (3,177) 228,541
Hourly Plan 23,292 639 2,303 (60) (330) 25,844
--------- ------ ------ ----- ------ ---------
Net investment
earnings
(losses) $ 1,248,768 37,991 86,390 (4,691) (52,312) 1,316,146
========= ====== ====== ===== ====== =========
</TABLE>
Net income (loss) from the Master Trust investments (net of administrative
expenses) for each participating plan for the year ended December 31, 1993
are as follows:
<TABLE>
<CAPTION>
Long and
Open End MDT Intermediate Asset
Guaranteed Equity Index Stock Term Management
Income Fund II Fund II Fund Bond Fund II Fund II Total
-------------- ------------- ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaried Plan $ 1,058,949 298,727 (333,480) 2,567 58,769 1,085,532
Union Plan 229,719 30,650 (90,954) 116 2,240 171,771
Hourly Plan 18,054 1,856 (16,413) 12 145 3,654
---------- ------- ------- ----- ------ ---------
Net investment
earnings
(losses) $ 1,306,722 331,233 (440,847) 2,695 61,154 1,260,957
========== ======= ======= ===== ====== =========
</TABLE>
-9- (Continued)
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(5) Federal Income Taxes
--------------------
Participants are not taxed currently on employer contributions to the Plan
or on income earned by the Plan. Distributions of benefits to employees,
unless appropriately transferred to another qualified plan, generally are
subject to federal income tax.
The Internal Revenue Service issued its latest determination letter on
August 24, 1993 which stated that the Plan and the related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter; however, the Plan administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
(6) Plan Termination
----------------
Although it has not expressed any intent to do so, MDT Corporation has the
right under Article II of the Savings and Thrift Plan for Union Employees
to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of plan termination,
participants will become 100% vested in their accounts.
-10-
<PAGE>
Schedule 1
----------
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1994
<TABLE>
<CAPTION>
Description of investment, including
Identity of issuer, borrower, maturity date, rate of interest, Historical Current
lessor, or similar party collateral, par or maturity value Cost Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment in MDT Corporation
Master Trust No. 161326160 (1) $3,985,921 3,971,921
---------------------------------------------------------------------------------------------------------
Investment in Employees' Loans Loans to plan participants, maturity
dates through 2004, interest rates
from 7.25% to 8.75% per annum -- 401,769
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) See note 4 to financial statements.
<PAGE>
Schedule 2
----------
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Form 5500, Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) Description (c) Purchase (d) Selling (e) Lease (f) Expense (g) Cost (h) Current value (i) Net gain
of asset Price Price Rental incurred with of of asset on or (loss)
(include transaction asset transaction
interest rate date
and maturity
in case of a
loan)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MDT Acquisition of
Corporation Interests in
Master Trust
-Employee and
Employer
Contributions $ - - - - - $ 2,671,343 -
- ------------------------------------------------------------------------------------------------------------------------------------
MDT Divestiture of
Corporation Interests in
Master Trust
-Benefit
Payments - - - $ 1,045,226 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
