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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________
Commission file number: 0-15308
MDT CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 87-0287585
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
Stratford Hall, Suite 200
1009 Slater Road
Durham, North Carolina 27703
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (919) 941-9745
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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 June 14, 1996, was
approximately $30,839,000.
The number of shares outstanding of the Registrant's common stock, as of June
14, 1996, was 6,769,431.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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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, MDT Diagnostic Company, which produces and sells
Examining and Operatory Equipment, and 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
Sterility Assurance Systems and Examining and Operatory Equipment. The Company
also operates several 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 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 45% and 19% of its revenues
from sales of Sterility Assurance Systems and Examining and Operatory
Equipment, respectively, and approximately 36% 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 18.5% of the Company's revenues. Financial
information can be found in Items 6, 7 and 8 of this Annual Report.
MDT intends to maintain and, where and when possible, expand its
healthcare products and service business through the internal development of
new products and services complementary to its current activities. See
"Business --Product Development." The Company anticipates that expansion may
also take place, both domestically and internationally, through the
development of new manufacturing, distribution, sales and other strategic
relationships with third parties. See "Business -- Products" and "Business --
Marketing."
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; a perceived market need to
switch from ethylene oxide sterilizers to newer technology plasma units; 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 (hospital-based, surgery center and
medical offices) will approach 31 million in 1996. This is an increase of
almost 41% from the 22 million performed in 1985. During this same period, the
proportion of procedures performed in an outpatient setting has increased from
just under 40% in 1985 to a predicted level of almost 70% in 1996. 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 hospital and
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
increasing industry efficiencies and strengthening 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 and services.
Recent Company Events
Getinge Transaction
On May 12, 1996, the Company announced that it had entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which it is
proposed to be acquired by Getinge Industrier AB, a Swedish manufacturer of
hospital and scientific equipment. On May 17, 1996, Getinge commenced a tender
offer for all outstanding shares of the Company's common stock for a cash
price of $4.50 per share. On July 12, 1996, Getinge announced an extension of
its tender offer until July 25, 1996 and an increase in the offer price to
$5.50 per share. Consummation of the tender offer is subject to certain terms
and conditions set forth in the Merger Agreement, including the approval of
the holders of two-thirds of the shares to be acquired and certain regulatory
approvals. If the tender offer is consummated, those shares not acquired in
the tender offer will be converted into $5.50 in cash pursuant to a merger to
be effected following completion of the tender offer.
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Environmental Remediation
In connection with Getinge's investigation of the Company, the conduct of
environmental tests revealed previously undiscovered soil and groundwater
contamination at the Company's manufacturing facilities in Henrietta, New York
and North Charleston, South Carolina. The Company estimates that the cost of
remediating such contamination will range from $1,350,000 to $2,700,000, and a
reserve of $1,350,000 was established in the fourth quarter of fiscal year
1996 to meet anticipated remediation obligations. See Item 2 -"Properties."
Bank Matters
The Company's operating results for the quarter and year ended March 31,
1996 have caused the Company to be in default under certain financial
covenants contained in its amended bank credit agreement with Wells Fargo
Bank, National Association, and Chase Bank, National Association. The Company
and the banks are negotiating a forbearance agreement pursuant to which the
banks would agree to refrain for a limited time period from exercising their
remedies under the amended bank credit agreement and related loan documents.
If the Getinge transaction is consummated, Getinge has advised the Company
that Getinge has obtained commitements from its lenders sufficient to retire
the loans outstanding under the Company's amended bank credit agreement. If
the Getinge transaction is not consummated, the Company has received a
proposal and is pursuing a commitment from Congress Financial Corporation to
refinance the Company's existing bank credit facility with a three-year,
secured line of credit up to $37,500,000. No assurance can be given, however,
that a forberance agreement or alternative financing will be obtained. See
Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
First Quarter Operating Results
On July 10, 1996, the Company announced that bookings for the first
quarter ended June 30, 1996, were $28,844,000 compared to $32,844,000 in the
same quarter a year earlier, a decrease of 12.2%, reflecting ongoing weak
domestic demand for hospital capital equipment and a decline in service
bookings. The backlog of orders at June 30, 1996 was $24,649,000 compared to
$28,496,000 a year earlier, a decrease of 13.5%. Revenues were $28,035,000
during the first quarter, compared to $30,899,000 in the first quarter a year
earlier, representing a decrease of 9.3%. The Company expects to
report a loss for the first quarter, before costs related to further
organizational changes, the Getinge transaction and refinancings, of
approximately $1,200,000, or $.18 a share. After such costs, the quarter is
expected to result in a loss of approximately $1,800,000, or $.27 a share.
Should the pending transaction with Getinge not be consummated, the
Company anticipates that it will consider selling or liquidating certain
product lines and related assets and instituting further cost reduction
measures. Significant charges may be incurred in connection with such
actions, some of which might be recorded as of June 30, 1996. In that case,
the loss experienced for the first quarter would be greater than that
estimated above.
Products
The Company's products are organized into three product groups, Sterility
Assurance Systems, Examining and Operatory Equipment, and parts, service and
consumable products. The following table sets forth the sales attributable to
each for the periods indicated:
<TABLE>
<CAPTION>
(Dollars in thousands) Fiscal Year Ended March 31,
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1996 1995 1994
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<S> <C> <C> <C>
Sterility Assurance Systems............. $ 58,716 $ 62,591 $ 66,486
Examining and Operatory Equipment....... 24,302 25,546 27,453
Parts, service and consumable products.. 47,121 46,695 42,129
Other items............................. 1,041 630 407
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Total................................. $131,188 $135,462 $136,475
==============================
</TABLE>
Sterility Assurance Systems. MDT is one of the 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 products are marketed under the Castle
and
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Harvey 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 are available.
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
rapidly process while reducing the possibility of 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.
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, McKesson and Wilson brand names. The major product lines
are examination, treatment and surgical tables and lighting systems, dental x-
ray machines and dental chairs, instrument delivery systems and stainless
steel accessory products. In addition, the Company has an agreement with
Kreuzer GmbH, located in Puchheim, Germany, under which the Company acts as an
exclusive distributor of Kreuzer operating room systems in the United States
and Canada. The Kreuzer systems, which deliver and control gases, oxygen and
power for anesthesia, diagnostic and monitoring equipment, are complementary
to and compatible with operating room tables, lights and related accessories
presently manufactured and marketed by the Company. Such systems are also
installed and serviced by MDT Technionic Company.
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 both in the field and in two service centers within
the United States 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.
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Should the pending Getinge transaction not be consummated, the Company has
under consideration the disposition or discontinuance of certain product lines
together with the consolidation of related channels of distribution. These
measures are a continuation of the Company's efforts to improve profitability.
The implementation of these measures could result in reserves being taken for
inventory, severance and asset impairment, some of which might be recorded as
of June 30, 1996.
Warranties. The Company generally provides a one-year limited warranty to
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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 carry 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 15 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. With the exception of the hospital sales force in fiscal year
1996, 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). In
fiscal year 1996, the Company, as part of its business unit reorganization,
split the hospital sales force between MDT Biologic Company and MDT Diagnostic
Company. In fiscal 1997, the Company has re-combined the hospital sales force
with the expectation of achieving broader coverage at lower cost. 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,
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1996 1995 1994
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Equipment (both product groups):
<S> <C> <C> <C>
Hospital.............................. 24.4% 29.4% 32.9%
Medical............................... 5.2 6.2 3.8
Dental................................ 7.0 7.0 7.3
Governmental.......................... 4.7 4.3 6.2
Scientific............................ 3.8 3.1 3.4
International......................... 16.3 13.1 13.3
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61.4% 63.1% 66.9%
Parts, service and consumable products.. 38.6 36.9 33.1
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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 (which range from one to three
years in duration) with national and regional hospital accounts and group
purchasing organizations.
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
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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.
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 1996, 1995 or 1994, and no material part of the business is
dependent upon a single customer or a few customers.
Product Development
MDT expended $4,519,000, $4,451,000 and $4,692,000 on product development
in the fiscal years ended March 31, 1996, 1995 and 1994, respectively. Since
March 31, 1993, 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, systems 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 advanced versions of Shampaine surgical tables, 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.
The Company's research and development program in the field of chemical
sterilization of temperature, moisture and pressure sensitive instruments
continued in fiscal 1996, as it will in fiscal
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1997. The Company has acquired an option to purchase certain patents and
related rights covering sterilization of 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 had initially expected to seek FDA approval and
to market a product incorporating this technology during 1996. However, this
timetable has been delayed due in part to the Company's discovery during
product testing of the incompatibility of certain materials proposed for use
in the manufacture of the product. The Company now expects to market a
product based on these patents in 1997, although significant further
investment as well as regulatory approval 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 may in the
future seek appropriate opportunities to enter into manufacturing,
distribution, sales and other strategic relationships with third parties, both
domestically and internationally.
The foregoing statements regarding the introduction and marketing of new
products and product enhancements constitute forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and as such, are subject to certain risks and uncertainties. The ability of
the Company to develop and market new products and enhancements within the
specified time periods depends upon a number of factors, including the
investment of additional capital, successful completion of product testing in
accordance with current protocols and the receipt of applicable regulatory
approvals.
Manufacturing
MDT's production facilities utilize numerically controlled and robotic
tools and contain sections for machining, metal fabricating, welding and
brazing, painting and finishing, buffing, assembling, 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, 1996 and 1995, were approximately
$23.8 million and $27.1 million, respectively, of which approximately $18.5
million and $21.2 million, respectively, were for Sterility Assurance Systems
and approximately $5.3 million and $5.9 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 1997, with the remainder to be
filled in fiscal 1998.
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 AMSCO International, Inc., a
subsidiary of Steris Corporation; Getinge Industrier AB; and, in the tabletop
sterilizer market, with several private companies. On May 12, 1996, the
Company entered into an agreement pursuant to which it is proposed to be
acquired by Getinge Industrier AB. See "Business -- Recent Company Events."
Product features, reliability,
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operating costs, after-sales service, and price are the most prevalent
competitive factors with respect to these products, with price becoming an
increasingly important factor.
The Company competes in Examining and Operatory Equipment primarily with
AMSCO International, Inc., ALM, 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.
The Company competes in the service business with AMSCO International,
Inc., large bio-med groups such as Cohr, Inc. and National M.D., as well as
large in-house hospital bio-med groups. The size of the installed based of
MDT equipment, price, and the desire to consolidate vendors are the most
prevalent competitive factors.
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, three of
which were issued during the fiscal year ended March 31, 1996. 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, Unispore, Chemitest and Sani-Jet.
Registered marks used in connection with Examining and Operatory Equipment
include MDT, Castle, Shampaine, Radi-Op, McKesson, Steri-grip and Wilson.
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
advertising claims. Some of the Company's sterilizers and sterilization
products also may 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 toxicants 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 into the environment of substances which may be
carcinogenic or reproductive toxicants. 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 into 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
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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").
In February 1996, after internal quality control tests revealed that
certain quantities of Vapo-Steril manufactured by the Company contained non-
standard concentrations of that sterilant, the Company voluntarily commenced a
recall of approximately 80,000 bottles of Vapo-Steril previously sold to
dealers. The Company annually produces a total of approximately 930,000
bottles of Vapo-Steril. The Company subsequently notified the FDA and the EPA
of the defective Vapo-Steril and the voluntary recall. The FDA acknowledged
the Company's notification and ordered the Company to proceed with its recall.
To date, approximately 45% of the dealers notified of the recall have
responded with their findings, encompassing about 65% of the bottles subject
to the recall. The Company has provided replacement bottles at no charge to
all customers returning or destroying the defective Vapo-Steril. If and when a
sufficient number of dealers have responded to the recall, the Company intends
to request that the FDA formally cancel its recall order.
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 by 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 was banned effective January 1, 1996, 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
modification kits with which its installed base of ethylene oxide sterilizers
can be retrofitted for use with 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 for use in the
prevention 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 known as "Good Manufacturing Practices" for
manufacturers of medical devices. Each manufacturing facility of the Company
must be registered annually and is subject to recurring 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.
9
<PAGE>
Product Liability and Litigation
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 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 to
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.
During 1995, the United States District Court for the District of
Massachusetts found that (i) the plasma sterilization testing and development
work by MDT did not infringe the patent asserted by AbTox, (ii) the Exitron
patents being asserted are not unenforceable due to inequitable conduct, and
(iii) AbTox's plasma sterilizer does not infringe the Exitron patents asserted
by MDT. MDT has appealed the court's finding that the AbTox plasma sterilizer
does not infringe the Exitron patents, and AbTox has filed a cross-appeal with
respect to the court's finding that the testing and development work performed
by MDT did not infringe the patent asserted by AbTox. In addition, AbTox has
filed motions with the court in Canada to seek findings that the Exitron
patents are invalid and that its plasma sterilizer does not infringe on the
Exitron patents. MDT intends vigorously to pursue its infringement claims and
to oppose the AbTox claims.
10
<PAGE>
Employees
At March 31, 1996, MDT employed 1,089 persons full-time in the following
areas: manufacturing, engineering and quality assurance (538); marketing and
sales (173); product support (270); administration (58); and research,
development and compliance (50). 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 (which has, effective as of July 1, 1996, been renamed the
Retirement Savings Plan for Hourly Employees) covering its nonunion hourly
employees and the MDT Biologic Company Union Thrift Plan covering its union
members. These plans are similar to the MDT Corporation Savings and Thrift
Plan for Salaried Employees, except that the union plan does not provide
retirement contributions similar to those previously set forth in the MDT
Corporation Retirement Plan. Effective as of July 1, 1996, the MDT Corporation
Retirement Plan was merged with two other Company employee benefit plans. See
Item 7, "Executive Compensation -- Employee Benefit Plans -- Retirement Plan."
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 several 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 Henrietta and Rancho Dominguez properties are part of
the security for the Company's amended bank credit agreement having an
aggregate outstanding principal balance of $33,300,000 as of March 31, 1996.
The Company is currently in default under certain financial covenants
contained in the amended bank credit agreement. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and Note 8 and Note 9 to Consolidated
Financial Statements. The Company owns 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 $236,000 as of March
31, 1996. See Note 9 of Notes to Consolidated Financial Statements.
The Company occupies four leased facilities in North Charleston, South
Carolina, under the terms of three coterminous leases. These facilities house
the Company's third operating subsidiary, MDT Diagnostic Company, and a
service center for MDT Technionic Company. The Company owns 15 acres of land
in Summerville, South Carolina (adjacent to North Charleston), on which it
intended to construct and occupy a new manufacturing and engineering facility.
Due to the present business climate and financial results, the Company has
listed the real property for sale.
The Company occupies its corporate headquarters in Durham, North Carolina
under the terms of a lease which expires August 11, 2001. The Company also
leases a government sales office in Arnold, Maryland and sales and service
offices in Athens, Greece and Hong Kong. Warehouse facilities as well as sales
and service offices are leased in Mississauga, Ontario, and Montreal, Quebec,
Canada. As part of its reorganization, the Company closed during fiscal 1996,
extending to the first quarter of fiscal 1997, the Plano, Texas, warehouse
facility and three domestic sales and service offices.
11
<PAGE>
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 Durham,
North Carolina, and leased sales and service offices and warehouse facilities
in the United States and Canada and in Athens, Greece and Hong Kong, totaling
approximately 30,000 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 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 1996, but include up to four annual renewal options in favor of
the Company. The lease pertaining to the fourth facility (comprising
11,400 square feet) expires in December 1996.
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of investigation, removal or remediation of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow money using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of a release of such substances at a disposal treatment facility,
whether or not such facility is owned or operated by such person. In
connection with the ownership, leasing or operation of real properties, and
the conduct of manufacturing activities thereon, the Company may be considered
an owner or operator of such properties or as having arranged for the disposal
or treatment of hazardous or toxic substances and therefore, potentially
liable for removal or remediation costs, as well as certain other related
costs, including governmental fines and costs associated with injuries to
persons and property.
In connection with Getinge's investigation of the Company (see Item 1,
"Business -- Recent Company Events"), the conduct of environmental tests
revealed previously undiscovered soil and groundwater contamination by
industrial solvents at the Company's manufacturing facility in Henrietta, New
York and by industrial solvents and petroleum constituents at the Company's
manufacturing facility in North Charleston, South Carolina. Some of the
contaminants in the groundwater may have migrated to the facilities from an
offsite source. The costs of remediating such contamination is currently
estimated to range from $1,350,000 to $2,700,000, and a reserve of $1,350,000
was established in the fourth quarter of fiscal year 1996 to meet anticipated
remediation obligations. The ultimate cost, however, will depend on the
extent of the contamination found as the remediation project progresses and
the cleanup standards that the Company is required to meet.
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.
12
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
None.
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, 1995, as reported by the NASDAQ National Market
System.
<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C>
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 1996
First Quarter............................ 7 1/8 5 3/8
Second Quarter........................... 8 5 7/8
Third Quarter............................ 6 1/2 4 1/2
Fourth Quarter........................... 5 1/4 4 1/4
Fiscal 1997
First Quarter (through June 14, 1996).. 5 1/4 4 1/4
</TABLE>
The last sale price on June 14, 1996, as reported by the NASDAQ National
Market System, was 4 13/16 per share. On June 14, 1996 there were 475 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
Chase Bank, National Association, 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 amended credit agreement are
outstanding.
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, 1996. 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, 1996 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.
13
<PAGE>
Income Statement Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales........................ $131,188 $135,462 $136,475 $133,947 $119,204
Cost of sales................ 94,449 92,564 92,728 89,673 82,957
-------- -------- -------- -------- --------
Gross profit................. 36,739 42,898 43,747 44,274 36,247
Operating expenses:
Marketing and sales....... 23,797 24,238 24,574 23,492 20,659
Administration............ 10,027 8,666 9,365 9,329 7,823
Product development....... 4,519 4,451 4,692 4,428 3,887
-------- -------- -------- -------- --------
38,343 37,355 38,631 37,249 32,369
Reorganization costs......... 2,035/(a)/ 1,235/(a)/ -- -- --
-------- -------- -------- -------- --------
Operating income (loss)...... (3,639) 4,308 5,116 7,025 3,878
Interest expense............. 3,443 3,514 2,803 2,756 2,963
Other (income) expense....... 1,709 113 169 177 119
-------- -------- -------- -------- --------
Income (loss) before income
taxes and accounting changes (8,791) 681 2,144 4,092 796
Income taxes (benefit)....... (2,725) 405 901 1,716 451
-------- -------- -------- -------- --------
Income (loss) before
accounting
changes.................... (6,066) 276 1,243 2,376 345
Accounting changes........... -- -- 699/(b)/ -- --
-------- -------- -------- -------- --------
Net income (loss)............ $ (6,066) $ 276 $ 1,942 $ 2,376 $ 345
======== ======== ======== ======== ========
Earnings (loss) per Share:
Income (loss) before
accounting changes...... $(.90) $.04 $.18 $.38 $.05
Accounting changes........ -- -- .11/(b)/ -- --
-------- -------- -------- -------- --------
Net income (loss)............ $(.90) $.04 $.29 $.38 $.05
======== ======== ======== ======== ========
Weighted average common and
common equivalent shares
outstanding................ 6,769 6,775 6,781 6,293 6,319
</TABLE>
_________________
(a) Reorganization costs, reflecting employee severance payments, lease
termination costs and recruitment and relocation costs which were $2,035
in fiscal 1996 and $1,235 in fiscal 1995.
(b) Cumulative effect of change in accounting method at April 1, 1993 to
reflect the change in applying overhead costs to inventory.
14
<PAGE>
Balance Sheet Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets................... $100,528 $105,349 $105,652 $100,772 $88,912
Working Capital................ 13,466 23,427 26,636 23,957 26,827
Long-term Debt................. 496 5,684 8,838 7,919 8,634
Stockholders' Equity........... 39,395 45,461 45,022 39,639 37,247
Stockholders' Equity Per Share. 5.82 6.72 6.68 6.32 5.94
</TABLE>
Financial Ratios
<TABLE>
<CAPTION>
March 31,
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Current Ratio......................... 1.2:1 1.5:1 1.6:1 1.5:1 1.7:1
Total Liabilities to Stockholders'
Equity Ratio......................... 1.6:1 1.3:1 1.3:1 1.5:1 1.4:1
Long-term Debt to Stockholders'
Equity Ratio......................... 0:1 .1:1 .2:1 .2:1 .2:1
Return on Average Stockholders' Equity (14.3%) .6% 4.6% 6.2% .9%
</TABLE>
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, 1996,
1995, and 1994, the Company's Consolidated Statements of Income expressed as a
percent of sales and the period-to-period percent changes in the dollar
amounts of the respective line items.
15
<PAGE>
<TABLE>
<CAPTION>
1996 1995
Percent of Net Sales over over
Fiscal Year Ended March 31, (under) (under)
----------------------------
1996 1995 1994 1995 1994
--------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales.......................... 100.0% 100.0% 100.0% (3.2)% (0.7)%
------- ------- -------
Cost of sales.................. 72.0 68.3 67.9 2.0 (0.2)
------- ------- -------
Gross profit................... 28.0 31.7 32.1 (14.4) (1.9)
Operating expenses:
Marketing and sales......... 18.1 17.9 18.0 (1.8) (1.4)
Administration.............. 7.6 6.4 6.9 15.7 (7.5)
Product development......... 3.4 3.3 3.4 1.5 (5.1)
------- ------- -------
29.2 27.6 28.3 2.6 (3.3)
Reorganization costs........... 1.6 0.9 -- 64.8 --
------- ------- -------
Operating income (loss)........ (2.8) 3.2 3.8 (184.5) (15.8)
Interest expense............... 2.6 2.6 2.1 (2.0) 25.4
Other expense.................. 1.3 0.1 0.1 1412.4 (33.1)
------- ------- -------
Income (loss) before income
taxes and cumulative effect of
change in accounting method... (6.7) 0.5 1.6 (1390.9) (68.2)
Income taxes (benefit)......... (2.1) 0.3 0.7 (772.8) (55.0)
------- ------- -------
Income (loss) before
cumulative effect of change in
accounting method............. (4.6) 0.2 0.9 (2297.8) (77.8)
Cumulative effect of change in
accounting method for
valuation of inventory, net of
income taxes.................. -- -- 0.5 -- --
------- ------- -------
Net Income (loss) (4.6)% 0.2% 1.4% (2297.8)% (85.8)%
======= ======= =======
</TABLE>
The following table summarizes the sales contribution of each product group
for the fiscal years ended March 31, 1996, 1995 and 1994.
16
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
-------------------------------
(Dollars in thousands) 1996 1995 1994
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
MDT Biologic Company
Sterility Assurance Systems Group $ 58,716 $ 62,591 $ 66,486
MDT Diagnostic Company
Examining and Operatory Equipment Group 24,302 25,546 27,453
MDT Technionic Company
Products Support Group 47,121 46,695 42,129
Other Items 1,041 630 407
-------- -------- --------
Total Sales $131,188 $135,462 $136,475
======== ======== ========
</TABLE>
Fiscal year ended March 31, 1996, as compared to fiscal year ended March 31,
1995.
Sales for the fiscal year ended March 31, 1996, of $131,188,000 were
$4,274,000 below sales for fiscal year 1995, a decrease of 3.2%. Sales of
parts, service and consumables by MDT Technionic were up 0.9% for the year
compared to the prior year, while sales of sterility equipment by MDT Biologic
were down 6.2% and sales of examining and operatory equipment by MDT
Diagnostic were down 4.9% compared to the prior year. Good overall
performance in international markets was offset by lower domestic equipment
sales resulting in part from continuing buyer uncertainty in domestic
healthcare markets related to healthcare reform and industry consolidation and
retrenchment. Slightly higher sales by MDT Technionic reflect customer
resolve to extend the utilization of existing equipment in the current
environment.
Incoming orders of $127,919,000 for the recent fiscal year were
$6,615,000, or 4.9%, lower when compared to incoming orders of $134,534,000 in
the prior fiscal year. Stronger orders in the international and service
markets were offset by weaker orders in the domestic healthcare markets.
Backlog was $23,840,000 at March 31, 1996, compared to a backlog of
$27,145,000 a year earlier.
Gross profit of $36,739,000 was $6,159,000, or 14.4%, lower in fiscal 1996
compared to fiscal 1995, while gross profit as a percentage of sales was 28.0%
in the current fiscal year versus 31.7% in the prior fiscal year. Current
year gross profit and gross profit margin were reduced by fourth quarter
adjustments which included inventory adjustments totaling $2,425,000,
including a write-down of approximately $489,000 in connection with inventory
purchased from a supplier who failed to maintain necessary compliance with FDA
manufacturing standards; a write-off of approximately $1,082,000 relating to
products whose sales are being discontinued by the Company; additional
reserves for excess and obsolete inventory of approximately $855,000, relating
primarily to the identification of slower-moving products and parts
inventories; and higher LIFO reserves of approximately $133,000. Gross
margins were also decreased by $562,000 for increased warranty reserves of
$260,000 and increased reserves for projected workers compensation expense of
$302,000. The decrease in gross profit and gross margin from the prior year
(excluding the aforementioned) was also impacted by the additional combined
effects of lower domestic sales, higher manufacturing costs resulting from
reduced production levels, lower pricing and a relatively higher mix of
international sales yielding generally lower margins. These negative factors
were partially offset by cost reductions implemented during the current and
prior fiscal year.
Operating expenses of $38,343,000 increased $988,000, or 2.6%, in fiscal
1996 compared to fiscal 1995. The increase in operating expenses reflects an
increase of $424,000 for costs associated with patent litigation defense fees,
approximately $179,000 to amortize assets relating to the Company's
17
<PAGE>
plasma sterilizer program and an increase of approximately $120,000 in
expenditures to market to national accounts and group purchasing organizations
combined with related higher administrative fees. Overall, operating expenses
as a percentage of sales increased to 29.2% in fiscal 1996 from 27.6% in
fiscal 1995.
Reorganization costs, reflecting employee severance payments and
relocation costs related to the reorganization of the Company into three
business units (including the relocation of the corporate office from
Torrance, California, to Durham, North Carolina), totaling $2,035,000 were
recorded in fiscal 1996. These costs are associated with the Company's efforts
to lower its break-even point in the face of lower sales while at the same
time improve the effectiveness of its operations, organization and structure.
At March 31, 1996, the balance of reorganization costs accrued but not yet
paid was $830,000. Further measures to reduce costs are being implemented by
the Company. A reserve of approximately $315,000 to reflect costs incurred to
effect such reductions, principally severance costs, is expected to be
recorded in the first quarter of fiscal 1997. Further, the Company has under
consideration the sale or discontinuance of certain product lines and related
assets and the contraction or closure of certain distribution channels, which
could result in further reserves and cost for inventory, severance and asset
impairments. See Item 1 -- "Business -- Recent Company Events -- First Quarter
Operating Results."
The operating loss of $3,639,000 in fiscal 1996 was $7,947,000, or 184.5%,
below the operating income of $4,308,000 in fiscal 1995, reflecting lower
gross profit, higher operating expenses and higher reorganization costs.
Interest expense decreased $71,000 in fiscal 1996 to $3,443,000. The
decrease was due primarily to lower average borrowings.
Other expenses increased $1,596,000 to $1,709,000. The increase includes
a reserve for environmental remediation costs of $1,350,000 related to soil
and ground water contamination at two of the Company's manufacturing
facilities, approximately $410,000 for costs incurred in connection with the
Getinge transaction and costs incurred in connection with the negotiation and
amendment of the Company's bank credit agreement and a write-off of land
improvement cost of $349,000 related to abandoned plans to construct a new
manufacturing facility in South Carolina. These costs were offset by a pre-
tax gain of $518,000 from the sale of the Bovie product line of
electrosurgical products.
Income tax (benefit) is based upon an estimated rate of 31% for fiscal
year 1996. The tax rate used for the prior fiscal year was 59%.
Net loss of $6,066,000, or $.90 per share, for fiscal 1996 compares to a
net income of $276,000, or $.04 per share, for the same period in 1995,
reflecting the above noted factors.
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 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% 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 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 fiscal 1995 versus 32.1% in the prior year. Fiscal 1995 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
18
<PAGE>
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, 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 fiscal 1995, the favorable gross profit
impact of which was first realized during the fourth quarter of fiscal 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 year
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 were associated with the Company's
efforts to lower its break-even point in the face of market uncertainties
while at the same time improve the effectiveness of its operations,
organization and structure. 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 Durham, North Carolina,
$287,000.
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.
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 was 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
reflects primarily 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 year 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.
19
<PAGE>
Liquidity and Capital Resources
During fiscal 1996, net cash provided by operating activities of $419,000
was combined with proceeds from the sale of the Bovie product line of
$2,631,000 to finance capital expenditures of $2,292,000 and net payments on
borrowings of $730,000.
At March 31, 1996, the Company's current ratio was 1.2 to 1 and working
capital was $13,466,000. This compares to a current ratio of 1.5 to 1 and
working capital of $23,427,000 at March 31, 1995. The decrease in working
capital reflects the reclassification of bank term debt from long-term to
current based on the Company's default under certain financial covenants
contained in its amended bank credit agreement with Well Fargo Bank, National
Association and Chase Bank, National Association, discussed below; adjustments
to reduce the values of inventories; and increases in accrued liabilities
discussed above in Results of Operations. At March 31, 1996, Stockholders'
Equity per share was $5.82 compared to $6.72 at March 31, 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 relating to the Bovie line of electrosurgical products,
which resulted in a pre-tax gain of $518,000.
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. 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 $911,000 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 1996, MDT spent $893,000 on legal and professional
fees related to this matter. MDT expects to expend further amounts in fiscal
1997 to commercialize the technology and to protect its patent position.
Reorganization costs, reflecting employee severance payments and
relocation costs related to the reorganization of the Company into three
business units (including the relocation of the corporate office from
Torrance, California, to Durham, North Carolina), totaling $2,035,000 were
recorded in fiscal 1996. These costs are associated with the Company's
efforts to lower its break-even point in the face of lower sales while at the
same time improve the effectiveness of its operations, organization and
structure. At March 31, 1996, the balance of reorganization costs accrued but
not yet paid was $830,000. Further measures to reduce costs are being
implemented by the Company. A reserve of approximately $315,000 to reflect
costs incurred to effect such reductions, principally severance costs, is
expected to be recorded in the first quarter of fiscal 1997. Further, the
Company has under consideration the sale or discontinuance of certain product
lines and related assets and the contraction or closure of certain
distribution channels, which could result in reserves for inventory and costs
for severance and asset impairment.
The Company made capital expenditures of $2,292,000 in fiscal 1996
compared to $3,067,000 in fiscal 1995. Capital expenditures are anticipated
to total approximately $2,000,000 in fiscal 1997, for production machinery and
equipment, tooling and molds. Total committed capital expenditures were
approximately $568,000 as of March 31, 1996. The Company owns 15 acres of
land in Summerville, South Carolina (adjacent to North Charleston), on which
it intended to construct and occupy a new manufacturing and engineering
facility. Due to the present business climate and financial results, the
Company has listed the real property for sale.
20
<PAGE>
On May 12, 1996, the Company announced that it had entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which it is
proposed to be acquired by Getinge Industrier AB, a Swedish manufacturer of
hospital and scientific equipment . On May 17, 1996, Getinge commenced a
tender offer for all outstanding shares of the Company's common stock for a
cash price of $4.50 per share. On July 12, 1996, Getinge announced an
extension of its tender offer until 5:00 p.m. EDT on July 25, 1996 and an
increase in the offer price to $5.50 per share. Consummation of the tender
offer is subject to certain terms and conditions set forth in the Merger
Agreement, including the approval of the holders of two-thirds of the shares
to be acquired and certain regulatory approvals. If the tender offer is
consummated, those shares not acquired in the tender offer will be converted
into $5.50 per share in cash pursuant to a merger to be effected following
completion of the tender offer.
The Company's operating results for the quarter and year ended March 31,
1996 have caused the Company to be in default under certain financial
covenants contained in its amended bank credit agreement with Wells Fargo
Bank, National Association, and Chase Bank, National Association. The Company
and the banks are negotiating a forbearance agreement pursuant to which the
banks would agree to refrain for a limited period of time from exercising
their remedies with respect to the covenant defaults. If entered into beween
the Company and the banks, the forbearance agreement would also provide that,
effective May 12, 1996, the interest rate charged to the Company on all loans
outstanding under the amended credit agreement would be increased from the
prime rate plus 0.5% on the line of credit and the prime rate plus 0.75% on
----
the term loan to the prime rate plus 2% on both loans. No assurance can be
----
given, however, that a forbearance agreement will be obtained.
In connection with the Getinge transaction, the Company is advised that
Getinge has received a commitment from its lenders sufficient to retire the
loans outstanding under the amended bank credit agreement, although Getinge
may also attempt to reach mutually agreeable terms with the Company's existing
bank lenders. If the Getinge transaction is not consummated, the Company has
received a proposal from Congress Financial Corporation to refinance the
Company's existing bank credit facility. The proposal, which has been approved
by Congress Financial's credit committee, is subject to legal documentation
and other requirements and is for a three-year, secured line of credit up to
$37,500,000. Availability under the proposed line would be determined from
time to time on the basis of various lending formulae tied to the Company's
accounts receivable and inventories. Loans under the proposed line would bear
interest at one percent (1%) per annum above the prime rate charged by
CoreStates Bank, N.A., or, at the Company's option, 3.25% above the adjusted
Eurodollar rate. Proceeds from the proposed facility would be used to repay
the Company's existing loans with Wells Fargo Bank and Chase Bank. No
assurance can be given, however, that alternative financing will be obtained.
In connection with Getinge's investigation of the Company, environmental
tests revealed previously undiscovered soil and groundwater contamination at
two of the Company's manufacturing facilities. See Item 2 - "Properties." The
costs of remediating such contamination are currently estimated to range from
$1,350,000 to $2,700,000 extended over three to five years. A reserve of
$1,350,000 was established to meet anticipated remediation obligations.
The Company expects to receive income tax refunds of approximately
$1,300,000 as recovery of fiscal year 1996 estimated payments and as a
carryback of net operating losses to prior years. Appropriate filings have or
are in the process of being made.
The Company finances its working capital and capital expenditure needs
from cash provided by operating activities and borrowings under the Company's
bank credit agreement. The line of credit portion of the bank credit agreement
totalling $22,700,000 at June 30, 1996, matures and is to be repaid in full
with all accrued interest on August 1, 1996. Further, as discussed above, the
Company is in default under certain financial covenants contained in its bank
credit agreement. At June 30, 1996, the total outstanding balance of the bank
credit agreement was $32,700,000. Going forward, the Company intends to
finance its working capital and capital expenditure needs from cash provided
by operating activities and from financing provided by Getinge (should the
merger be consummated) or from new financing the Company is seeking from
Congress Financial Corporation to replace its existing bank credit facility.
No assurance can be given that the merger with Getinge will be consummated or
that alternative financing will be obtained.
21
<PAGE>
Healthcare reform, both in the public and private sectors, has resulted in
customer uncertainty, lower sales and pricing pressures. Independent of
healthcare reform proposals, healthcare consolidations, alliances and buying
groups 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 have had a negative impact on
the Company. However, management anticipates that ultimately certain other
longer-term trends in the healthcare industry will contribute to recovery 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 increased 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.
22
<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, 1996 and 1995 and the related consolidated
statements of income (loss), stockholders' equity and cash flows for each of the
years in the three-year period ended March 31, 1996. 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, 1996 and 1995 and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 1996, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company incurred a net
loss of $6,066,000 in fiscal 1996 and therefore was not in compliance with
certain covenants contained in its bank credit agreement. Accordingly,
borrowings under the Company's credit facilities are reflected as current
liabilities in the accompanying consolidated balance sheet. As more fully
described in note 17, the Company has agreed to be acquired by Getinge
Industrier AB ("Getinge") pursuant to a tender offer of $5.50 per share which
expires on July 25, 1996, and which indicates that Getinge is considering the
repayment of such borrowings for which a funding commitment has been obtained,
subject to certain terms and conditions. Additionally, as more fully
described in note 9, the Company has received a proposal from a new lender for
the repayment in full of such borrowings and for supplemental financing for the
Company. There can be no assurance that either of these transactions will be
consummated. The status of the existing credit facilities and the need for
borrowing capacity during fiscal 1997 raise substantial doubt about the
Company's ability to continue as a going concern. These matters and management's
plans are discussed further in notes 9 and 17. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Raleigh, North Carolina
May 17, 1996, except as to
the third paragraph of note 9
and the second paragraph of
note 17, which are as of July 12, 1996
23
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
---------- ----------
<S> <C> <C>
Current assets:
Cash $1,990,000 $1,962,000
Receivables (note 8):
Trade accounts 30,000,000 30,958,000
Other receivables 2,143,000 605,000
Less allowances for doubtful
accounts (692,000) (531,000)
---------- ----------
31,451,000 31,032,000
========== ==========
Inventories (notes 5 and 8) 33,872,000 37,061,000
Prepaid expenses 2,489,000 2,576,000
---------- ----------
Total current assets 69,802,000 72,631,000
Property, plant and equipment, less
accumulated depreciation and
amortization (notes 6 and 8) 26,580,000 28,132,000
Other assets, less accumulated
amortization (notes 7 and 8) 4,146,000 4,586,000
---------- ----------
$100,528,000 $105,349,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Note payable (note 8) $22,700,000 $25,600,000
Current installments of long-term
debt (note 9) 10,991,000 3,617,000
Accounts payable 11,338,000 11,432,000
Accrued liabilities:
Compensation, payroll taxes and
benefits 1,450,000 1,002,000
Warranty, litigation and
other 8,086,000 4,550,000
Deferred income 1,771,000 1,922,000
Deferred income taxes (note 13) - 1,081,000
---------- ----------
Total current liabilities 56,336,000 49,204,000
Long-term debt, less current
installments (note 9) 496,000 5,684,000
Accrued postretirement benefits
(note 14) 2,191,000 2,266,000
Deferred income taxes
(note 13) 2,110,000 2,734,000
---------- ----------
Total liabilities 61,133,000 59,888,000
========== ==========
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,
1996 and 1995 8,462,000 8,462,000
Additional paid-in capital 27,264,000 27,264,000
Retained earnings 3,669,000 9,735,000
----------- -----------
Total stockholders' equity 39,395,000 45,461,000
Commitments and contingencies (notes 10,
11, 12 and 14)
----------- -----------
$100,528,000 $105,349,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Loss)
Years ended March 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 131,188,000 $ 135,462,000 $ 136,475,000
Cost of sales 94,449,000 92,564,000 92,728,000
------------ ------------ ------------
Gross profit 36,739,000 42,898,000 43,747,000
------------ ------------ ------------
Operating expenses:
Marketing and sales 23,797,000 24,238,000 24,574,000
Administration 10,027,000 8,666,000 9,365,000
Product development 4,519,000 4,451,000 4,692,000
------------ ------------ ------------
38,343,000 37,355,000 38,631,000
Reorganization costs (note 3) 2,035,000 1,235,000 -
------------ ------------ ------------
Operating income (loss) (3,639,000) 4,308,000 5,116,000
Interest expense 3,443,000 3,514,000 2,803,000
Other expense (note 10) 1,709,000 113,000 169,000
------------ ------------ ------------
Income (loss) before income taxes (benefit) and
cumulative effect of change in accounting
method (8,791,000) 681,000 2,144,000
Income taxes (benefit) (note 13) (2,725,000) 405,000 901,000
------------ ------------ ------------
Income (loss) before cumulative effect of change
in accounting method (6,066,000) 276,000 1,243,000
Cumulative effect of change in accounting
method for valuation of inventory, net of
income taxes (note 2) - - 699,000
------------ ------------ ------------
Net income (loss) $ (6,066,000) $ 276,000 $ 1,942,000
============ ============ ============
Earnings (loss) per share (note 1):
Income (loss) before cumulative effect of
change in accounting method $ (.90) $ .04 $ .18
Cumulative effect of change in accounting
method - - .11
------------ ------------ ------------
Net income (loss) $ (.90) $ .04 $ .29
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1996, 1995 and 1994
<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,
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-
management incentive
compensation plan 20,228 26,000 149,000 - 175,000
Tax benefit from
conversion 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
Net loss - - - (6,066,000) (6,066,000)
--------- ---------- ----------- ----------- -----------
Balances at March 31,
1996 6,769,431 $8,462,000 $27,264,000 $ 3,669,000 $39,395,000
========= ========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,066,000) $ 276,000 $ 1,942,000
------------- ------------ ------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,838,000 3,961,000 3,925,000
Provision for losses on accounts receivable 271,000 117,000 368,000
Gain on sale of Bovie product line (512,000) - -
Loss on disposal of fixed assets 351,000 26,000 2,000
Cumulative effect of change in accounting method - - (699,000)
Changes in assets and liabilities net of effects
from sale of Bovie product line:
Receivables (691,000) (1,627,000) 1,285,000
Inventories 1,157,000 2,983,000 (2,523,000)
Prepaid expenses 87,000 321,000 84,000
Other assets 26,000 (942,000) (617,000)
Accounts payable and other accrued liabilities 1,958,000 1,325,000 (3,182,000)
------------- ------------ ------------
Net cash provided by operating activities 419,000 6,440,000 585,000
------------- ------------ ------------
Cash flows from investing activities:
Payment for purchase of specified assets of Hamilton - - (2,400,000)
Proceeds from sale of Bovie product line 2,631,000 - -
Capital expenditures (2,292,000) (3,067,000) (2,989,000)
------------- ------------ ------------
Net cash provided by (used in) investing
activities 339,000 (3,067,000) (5,389,000)
------------- ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 4,300,000 6,000,000 11,700,000
Principal payments on notes payable (7,200,000) (5,000,000) (9,800,000)
Proceeds from issuance of long-term note payable 6,000,000 - 10,000,000
Net proceeds from issuance of common stock - 163,000 19,000
Principal payments on long-term debt (3,830,000) (3,429,000) (7,502,000)
------------- ------------ ------------
Net cash provided by (used in) financing
activities (730,000) (2,266,000) 4,417,000
------------- ------------ ------------
Increase (decrease) in cash 28,000 1,107,000 (387,000)
Cash, beginning of year 1,962,000 855,000 1,242,000
------------- ------------ ------------
Cash, end of year $ 1,990,000 $ 1,962,000 $ 855,000
============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------- -------------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 3,374,000 $ 3,157,000 $ 2,357,000
Income taxes 639,000 879,000 2,177,000
============= ============ ============
Supplemental Disclosures of Noncash Investing
and Financing Activities:
Accounts receivable written off against the allowance
for doubtful accounts $ 110,000 $ 391,000 $ 207,000
Capital lease obligations incurred for equipment
purchases 17,000 362,000 48,000
Subordinated note payable - conversion to common
stock (note 4) - - 3,000,000
============= ============ ============
Acquisitions of Specified Assets of Hamilton
Inventories, equipment and intangibles $ - $ - $ 2,799,000
Accounts payable, accrued liabilities and long-term
debt - - (399,000)
------------- ------------ ------------
Cash paid in acquisition of specified assets of
Hamilton $ - $ - $ 2,400,000
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(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). The
cost of substantially all of the Company's inventories is determined using
the last-in, first-out (LIFO) method.
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
agreements, consulting and licensing agreements and goodwill, are being
amortized using the straight-line method over the shorter of their legal
or estimated useful lives. Periodically, the Company assesses the
recoverability of intangible assets and adjusts those assets based on the
estimated future financial benefits.
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.
28
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
The allowance for doubtful accounts is determined through analysis of
various factors including the age of receivables and past write-offs.
Earnings per Share
Earnings per share are based upon weighted average common and common
equivalent shares outstanding, amounting to 6,769,000, 6,775,000, and
6,781,000 shares for each of the three years ended March 31, 1996, 1995
and 1994, 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.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
the Fair Value of Financial Instruments" (Statement 107) requires the
disclosure of fair value information about financial instruments, whether
or not recognized on the balance sheet, for which it is practicable to
estimate the value. In cases where quoted market prices are not readily
available, fair values are based on quoted market prices of comparable
instruments. The carrying amount of cash and equivalents, accounts
receivable and payable, accrued expenses and deferred income approximates
fair value because of the short maturity of those instruments. The
carrying amount of the long-term debt is considered to be representative
of the fair value as the interest rates are based on market rates.
29
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(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 with related 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).
(3) Reorganization Costs
During fiscal 1996 and 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 1996 restructuring program involves the reduction of 53 employees and
consolidations of offices (including the relocation of the Corporate
office from Torrance, California to Durham, North Carolina) and the
reorganization of the Company into three business units. The March 31,
1996 consolidated statement of income (loss) includes $2,035,000 of pre-
tax charges related to the aforementioned employee terminations, office
closures and relocations of which $854,000 had been accrued during fiscal
year 1996. At March 31, 1996, $830,000, relating to severance and lease
termination costs, remained in accrued liabilities for the 1996 and 1995
restructuring programs. During 1996, $264,000 related to employee
severance and facility closures for the 1996 and 1995 restructuring
programs were paid and charged to accrued liabilities.
The 1995 restructuring program involved the reduction of 70 employees and
consolidations of offices and facilities. The March 31, 1995 consolidated
statement of income includes $1,235,000 of pre-tax charges related to the
aforementioned employee terminations and facility closures. At March 31,
1995, $240,000 of this amount, relating to severance and lease termination
costs, remained in accrued liabilities.
(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.
30
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
(5) Inventories
<TABLE>
<CAPTION>
Inventories at March 31, 1996 and 1995 consist of the following:
1996 1995
----------- -----------
<S> <C> <C>
Raw materials $20,337,000 $22,843,000
Work-in-process 3,985,000 3,901,000
Finished goods 9,550,000 10,317,000
----------- -----------
$33,872,000 $37,061,000
============ ===========
</TABLE>
Prior year inventory amounts have been reclassified to conform with 1996
year end reporting. Certain inventories are valued using the LIFO method
and comprise approximately 97% of consolidated inventories. Incremental
LIFO reserves of $1,052,000 were recorded in fiscal 1996. Inventories
valued using the LIFO method would be $3,847,000 and $2,795,000 greater at
March 31, 1996 and 1995, 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, 1996 and 1995,
LIFO inventories for book purposes exceeded those for tax purposes by
$8,055,000 and $8,170,000, respectively.
Because of the rapidly changing health care market, some portions of the
Company's inventory of certain products may exceed near term demand.
Management is continuing to refine the Company's methodology for assessing
these circumstances. No estimate can be made of a range of amounts of loss
that are reasonably possible should supply exceed near term demand for
certain products.
31
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Property, Plant and Equipment
Property, plant and equipment at March 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
Estimated
1996 1995 useful lives
------------ ------------ ---------------
<S> <C> <C> <C>
Land $ 3,824,000 $ 3,824,000 -
Buildings and improvements 12,995,000 12,845,000 20 to 40 years
Leasehold improvements 1,069,000 1,077,000 Term of leases
Machinery and equipment 24,664,000 24,114,000 10 to 20 years
Computers, office equipment and
furniture 7,086,000 6,347,000 5 to 12 years
------------ ------------
49,638,000 48,207,000
Less accumulated depreciation and
amortization 23,058,000 20,075,000
------------ ------------
$ 26,580,000 $ 28,132,000
============ ============
</TABLE>
(7) Other Assets
Other assets at March 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
Amortization
1996 1995 period
------------ ------------ --------------
<S> <C> <C> <C>
Patents, trademarks, and goodwill $ 5,205,000 $ 4,834,000 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 307,000 381,000 -
------------ ------------
11,000,000 10,703,000
Less accumulated amortization 6,854,000 6,117,000
------------ ------------
$ 4,146,000 $ 4,586,000
============ ============
</TABLE>
(8) Notes Payable
The Company has a secured line of credit as part of a credit agreement
with two commercial banks. The secured line of credit provides for
advances up to 80% of eligible accounts receivable and 35% of eligible
inventory not to exceed $25,800,000 at .5% above the banks' prime rate of
interest (aggregate of 8.75% at March 31, 1996). In addition, the Company
pays a quarterly commitment fee of .25% per annum on the average unused
amount. The Company is not in compliance with certain financial covenants
contained in the credit agreement (see note 9). The line is to be repaid
in full, with all accrued interest, on August 1, 1996 unless renewed or
extended. The line is secured by inventories, accounts receivable,
equipment and intangible assets.
32
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Long-Term Debt
Long-term debt at March 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Secured term-loan payable to two commercial banks in monthly principal
installments of $200,000, due August 1, 2000, at the bank's prime rate
plus 3/4% (9% at March 31, 1996). A separate interest agreement covering
$4,833,000 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. $ 10,600,000 $ 6,833,000
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. - 1,000,000
Secured equipment leases payable in monthly or quarterly installments
ranging from $1,000 to $33,000, including interest at rates ranging from
9.9% to 14.5% due through July 1999. 588,000 1,001,000
Subordinated note payable in quarterly installments of $31,576, due
September 30, 1996, with the balance bearing interest at prime plus 2%
(10.25% at March 31, 1996). 63,000 189,000
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, 1996) 104,000 137,000
Pennsylvania Industrial Development Authority Loan payable in monthly
installments of $1,545, due in January 2006, with the balance bearing
interest at 7.0%. 132,000 141,000
-------------- -------------
11,487,000 9,301,000
Less current installments 10,991,000 3,617,000
-------------- -------------
$ 496,000 $ 5,684,000
============== =============
</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. The Company is not in
compliance with certain financial covenants contained in the credit
agreement. The Company is negotiating a forbearance agreement with the
banks related to this non-compliance that would be in effect until the
proposed transaction with Getinge Industrier AB ("Getinge") is closed (see
note 17). The Company is advised that
33
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Getinge has received a commitment from its lenders sufficient to retire
the loans outstanding under the credit agreement, although Getinge may
also attempt to reach mutually agreeable terms with the Company's existing
bank lenders. Should the proposed transaction not be concluded, the
Company would seek to negotiate a new credit agreement with Congress
Financial Corporation from whom the Company has received a proposal to
refinance the Company's existing bank credit agreement. The term-loan
agreement is secured by inventories, accounts receivable, equipment and
intangible assets.
Given the debt covenant violations related to the secured term-loan
payable and the fact that a waiver for the next fiscal year has not been
obtained, the $10,600,000 due under this loan has been classified as due
in fiscal 1997. Based on this classification, the aggregate maturities of
long-term debt for fiscal years subsequent to March 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997 $ 10,991,000
1998 287,000
1999 90,000
2000 29,000
2001 13,000
Thereafter 77,000
--------------
$ 11,487,000
==============
</TABLE>
(10) Commitments and Contingent Liabilities
Litigation
The Company is involved in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, based upon the
advice of counsel, the ultimate disposition of these matters will not have
a material adverse effect on the financial position or results of
operations of the Company.
Operating Leases
The Company occupies manufacturing, warehousing and office facilities
under terms of operating leases which expire at various dates through July
2001. The annual minimum lease payments thereunder for the years
subsequent to March 31, 1996 are as follows: 1997, $572,000; 1998,
$155,000; 1999, $140,000; 2000, $117,000; 2001, $106,000 and thereafter,
$51,000. Lease expense totaled $1,106,000, $1,076,000, and $942,000 for
each of the three years ended March 31, 1996, 1995 and 1994, 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 $117,000, $144,000, and
$185,000 in 1996, 1995 and 1994, respectively.
34
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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
policy 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.
Environmental Liability
The Company is subject to laws and regulations relating to the protection
of the environment. Accruals for environmental matters are recorded when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated.
During 1996, in connection with the proposed acquisition by Getinge (see
note 17), Getinge engaged environmental consultants. The conduct of
environmental tests revealed previously undiscovered soil and ground water
contamination at two of the Company's facilities. Based on cost estimates
provided by the consultants, the Company believes remediation costs will
range from $1,350,000 to $2,700,000 and at March 31, 1996, the Company
accrued $1,350,000. The ultimate cost, however, will depend on the extent
of contamination found as the remediation project progresses. The Company
expects remediation to be substantially complete within five years.
(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.
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, 1996, the Company has 1,692,358 shares of
common stock reserved for the Rights.
35
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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, 1996, options for 768,266 shares were outstanding, of which
693,266 shares were exercisable. At that date, 178,770 shares remained
available for future grant under the plan. The aggregate option price for
outstanding options at March 31, 1996, 1995 and 1994 was $4,517,000,
$4,268,000, and $4,882,000, respectively.
Transactions and other information relating to stock options for each of
the three years ended March 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Number of Option price
shares per share
-------------- --------------
<S> <C> <C>
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
Options granted 75,000 4.97 - 6.44
Options exercised - -
Options cancelled or expired (31,500) 5.44 - 8.56
-------------- --------------
Options outstanding at March 31, 1996 768,266 4.97 - 8.81
============== ==============
</TABLE>
36
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Income Taxes
The domestic and foreign components of income (loss) before income taxes
and accounting changes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
United States $ (8,741,000) $ 728,000 $ 2,578,000
Foreign (50,000) (47,000) (434,000)
-------------- -------------- --------------
Income (loss) before income taxes
and accounting changes $ (8,791,000) $ 681,000 $ 2,144,000
============== ============== ==============
</TABLE>
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>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Computed "expected" tax expense $ (2,989,000) $ 232,000 $ 729,000
(benefit)
Earnings of foreign subsidiaries (6,000) (6,000) (42,000)
Meals and entertainment 96,000 94,000 42,000
State tax expense (benefit) (net
of Federal income tax benefit) (271,000) 108,000 187,000
Other 445,000 (23,000) (15,000)
-------------- -------------- --------------
$ (2,725,000) $ 405,000 $ 901,000
============== ============== ==============
</TABLE>
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Allocated to
accounting
changes
Current Other (note 2) Total
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
1996:
Federal $ (584,000) $ (1,706,000) $ - $ (2,290,000)
State 84,000 (495,000) - (411,000)
Foreign (24,000) - - (24,000)
------------- -------------- -------------- --------------
$ (524,000) $ (2,201,000) $ - $ (2,725,000)
============= ============== ============== ==============
</TABLE>
37
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<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
============= ============== ============== ==============
</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 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.
38
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at March 31, 1996 and 1995
are presented below:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 306,000 $ 238,000
Intangible assets, principally due to amortization 348,000 256,000
Severance accrual 234,000 86,000
Warranty accrual 798,000 670,000
Product liability self-insurance accrual 328,000 270,000
Deferred income 119,000 169,000
Postretirement benefit 960,000 976,000
Environmental liability 540,000 -
Other 115,000 7,000
------------ -------------
Total deferred tax assets 3,748,000 2,672,000
------------ -------------
1996 1995
------------ -------------
Deferred tax liabilities:
Inventories $ 1,109,000 2,332,000
Prepaid commission 136,000 190,000
Property, plant and equipment 1,947,000 1,947,000
Accumulated depreciation 1,664,000 1,670,000
Intangible assets 348,000 348,000
Other 158,000 -
------------ -------------
Total deferred liabilities 5,362,000 6,487,000
------------ -------------
Net deferred tax liability (1,614,000) (3,815,000)
Less current deferred tax asset (liability) 496,000 (1,081,000)
------------ -------------
Long-term deferred income tax liability $ (2,110,000) $ (2,734,000)
============ =============
</TABLE>
A valuation allowance was deemed unnecessary at March 31, 1996, 1995 and
1994. It is more likely than not that the results of future operations will
generate sufficient taxable income to realize the deferred tax assets.
39
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 168,000 $ 173,000 $ 154,000
Interest cost on projected benefit
obligation 544,000 519,000 479,000
Actual return on plan assets (1,184,000) (408,000) (4,000)
Net amortization and deferral 655,000 (120,000) (561,000)
------------ ------------ ------------
Net periodic pension cost $ 183,000 $ 164,000 $ 68,000
============ ============ ============
</TABLE>
For determining net periodic pension cost, the 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, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 6,465,000 $ 5,731,000
Nonvested benefit obligation 1,014,000 985,000
------------ ------------
Accumulated benefit obligation $ 7,479,000 $ 6,716,000
============ ============
Projected benefit obligation $ 7,479,000 $ 6,716,000
Plan assets at fair value (principally equity and debt
securities) 7,486,000 6,722,000
------------ ------------
Plan assets in excess of projected benefit
obligation 7,000 6,000
Unrecognized net loss 16,000 155,000
Unrecognized net transition asset at April 1, 1988,
amortized over 15 years (482,000) (550,000)
Unrecognized prior service cost 628,000 690,000
------------ ------------
Pension asset recognized in the consolidated
balance sheets $ 169,000 $ 301,000
</TABLE>
40
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The weighted average discount rate used in determining the projected
benefit obligation was 7.85% and 8.5% in 1996 and 1995, respectively.
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 $967,000,
$1,049,000, and $1,069,000 for the years ended March 31, 1996, 1995 and
1994, 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 $732,000, $708,000, and
$704,000 for the years ended March 31, 1996, 1995 and 1994, respectively.
Supplemental Executive Retirement Plan
The Company has a Supplemental Executive Retirement Plan (SERP) for
officers of the Company. 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 $129,000, $106,000, and
$87,000 for the years ended March 31, 1996, 1995 and 1994, 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.
41
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees at age 65 $ 851,000 $ 934,000
Retirees at ages 62-65 436,000 293,000
Active employees 1,085,000 976,000
------------ ------------
2,372,000 2,203,000
Plus actuarial gain 37,000 246,000
Less prior service cost (9,000) (10,000)
Plan assets at fair value - -
------------ ------------
Accrued postretirement benefit obligation 2,400,000 2,439,000
Less current portion 209,000 173,000
------------ ------------
Accrued postretirement benefit liability $ 2,191,000 $ 2,266,000
============ ============
</TABLE>
Net periodic postretirement benefit cost for the years ended March 31,
1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Service cost - benefits attributed to service
during the period $ 74,000 $ 63,000 $ 65,000
Interest cost on accumulated postretirement
benefit obligation 178,000 184,000 186,000
Actual return on plan assets - - -
Amortization and deferral - - -
------------ ------------ ------------
Net periodic postretirement benefit cost $ 252,000 $ 247,000 $ 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 1996; 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, 1996 by $47,000 and the aggregate net periodic
postretirement benefit cost for the year ended March 31, 1996 would remain
approximately equal. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was 7.85%,
8.5% and 8.0% in 1996, 1995 and 1994, respectively.
42
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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, 1996, 1995 and
1994 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>
1996 $ 106,893 $ 7,941 $ 10,094 $ 1,891 $ 4,369 $ 131,188
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
</TABLE>
(16) Quarterly Financial Information (Unaudited)
The following table summarizes financial information by quarter for the
two years ended March 31, 1996 and 1995 (in thousands, except per share
data):
<TABLE>
<CAPTION>
Net
Income
Net Income (loss) per
Net sales Gross profit (loss) share
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
1996:
First quarter $ 30,899 $ 10,068 $ 448 $ .07
Second quarter 33,303 9,914 (355) (.05)
Third quarter 32,965 9,230 (1,633) (.24)
Fourth quarter 34,021 7,527 (4,526) (.68)
----------- ------------ ---------- ----------
$ 131,188 $ 36,739 $ (6,066) $ (.90)
=========== ============ ========== ==========
</TABLE>
Fourth quarter results were impacted by adjustments as follows: inventory
adjustments totaling $2,425,000, including a write-down of approximately
$489,000 in connection with inventory purchased from a supplier who failed
to maintain necessary compliance with FDA manufacturing standards; a
write-off of approximately $1,082,000 relating to products whose sales are
being discontinued by the Company, including approximately $724,000
attributable to nutrition and ice stations and $358,000 attributable to
certain tabletop sterilizers; additional reserves for excess and obsolete
inventory of approximately $855,000, relating primarily to the
identification of slower-moving products and parts inventories; higher
LIFO reserves of approximately $133,000; increased warranty reserves of
$260,000; and increased reserves for projected workers compensation
expense of $302,000.
43
<PAGE>
MDT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Income
Net Income (loss) per
Net sales Gross profit (loss) share
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
1995:
First quarter $ 32,194 $ 10,664 $ (237) $ (.04)
Second quarter 33,818 10,417 248 .04
Third quarter 34,049 10,207 122 .02
Fourth quarter 35,401 11,610 143 .02
----------- ------------ ---------- ----------
$ 135,462 $ 42,898 $ 276 $ .04
=========== ============ ========== ==========
</TABLE>
Certain reclassifications have been made to the previously released 1995
quarterly information to conform with the year-end reporting.
(17) Pending Acquisition
On May 12, 1996, MDT agreed to be acquired by Getinge Industrier AB
("Getinge"), a Swedish manufacturer of hospital and scientific equipment.
A definitive merger agreement was signed pursuant to which Getinge will
acquire all outstanding shares of MDT common stock by commencing a tender
offer for such shares at a cash price of $4.50 per share. If certain
conditions are met those shares not acquired in the tender offer will be
converted into $4.50 in cash pursuant to a merger to be effected following
completion of the tender offer. Consummation of the tender offer and the
merger is subject to certain terms and conditions, including approval of
the holders of two-thirds of the shares to be acquired and regulatory
approvals.
The tender offer was initially scheduled to expire on June 28, 1996, but
has since been extended by Getinge until 5 p.m. EDT on July 12, 1996. On
July 12, 1996, Getinge announced the extension of its tender offer at a
price of $5.50 per share, a $1.00 increase over the previous tender offer
price of $4.50 per share. The tender offer will now expire at 5 p.m. EDT
on July 25, 1996. Other terms and conditions of the original tender offer
remain intact, except that, if certain conditions are met those shares not
acquired in the tender offer will be converted into $5.50 in cash
pursuant to a merger to be effected following completion of the tender
offer.
44
<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
Board of Directors
The following listing provides certain information concerning the
directors of the Company and their principal occupations:
J. Miles Branagan, age 63, has been a director since 1971 and is a co-
founder of the Company. He has served as Chairman of the Board of Directors
since 1983, President since 1971, and as Chief Executive Officer since 1978.
In addition, he served as Co-Executive Officer from 1971 to 1978, Chief
Financial Officer from 1971 to 1988, and Chief Operating Officer from 1988 to
1995. Prior to joining the Company, Mr. Branagan was a partner in a national
public accounting firm. Mr. Branagan also serves on the Board of Trustees of
the Van Kampen American Capital Group of Open-End Mutual Funds.
LaMoyne H. Fleming, D.D.S., age 68, has been a director since 1986. From
1952 to 1985, Dr. Fleming served as a Dental Officer in the United States Air
Force. From 1982 to his retirement with the rank of Colonel in 1985, he
served as Special Assistant for Dental Affairs, Office of the Secretary of
Defense, representing the Army, Navy and Air Force. Dr. Fleming is retired.
Charles A. French, age 53, has been a director since February 1995. From
1986 to 1989, Mr. French served as Chief Operating Officer and as a director
of Spectramed, Inc., a manufacturer of medical devices based in Newport Beach,
California. Prior to joining Spectramed, Mr. French held various senior
management positions with other companies in the health care industry. He has
been an investor in and consultant to various health care companies since
1989. Mr. French is also a director of Qualmart Corporation.
John S. Gilbertson, age 52, has been a director since February 1995. From
1992 to the present, Mr. Gilbertson has served as Executive Vice President,
and from 1994 to the present he has served as Chief Operating Officer of AVX
Corporation, an international electronics manufacturing concern headquartered
in Myrtle Beach, South Carolina. He is also a director of AVX Corporation and
Kyocera Corporation. Prior to joining AVX, Mr. Gilbertson held various
positions with Corning Glass Company and served as an officer in the United
States Air Force.
Charles E. Johnson, age 60, has been a director since 1993. Mr. Johnson
is Chief of Staff of the Governor's Office for the State of Utah. Prior to
being named Chief of Staff, Mr. Johnson served as Director of the Office of
Planning and Budget for the State of Utah from July 1991 to December 1992.
Mr. Johnson is a Certified Public Accountant and spent 31 years in the
practice of public accounting, most recently as the Managing Partner of the
Salt Lake City office of KPMG Peat Marwick LLP from 1987
45
<PAGE>
to 1991. While with KPMG Peat Marwick LLP, Mr. Johnson served on that firm's
board of directors and in various other capacities.
Clark D. Jones, age 61, has been a director since 1986. Mr. Jones
currently serves as a Commissioner with the Utah Public Service Commission.
In addition, he has served as Chairman of the Board of Summit Family
Restaurants, Inc. (formerly known as JB's Restaurants, Inc.) since 1987. Mr.
Jones served as Chief Executive Officer from 1981 to 1991 and President from
1981 to 1987 and was employed by that company in various other positions from
1970 to 1980.
James B.D. Mark, M.D., age 66, has been a director since July, 1995. From
1972 to the present, Dr. Mark has been head of the Division of Thoracic
Surgery and, from 1978 to the present, has been the Johnson and Johnson
Professor of Surgery at Stanford University Medical Center in Stanford,
California. During the past 30 years, Dr. Mark has served in a variety of
positions within the Stanford University Medical Center, including, most
recently, as Chief of Staff, Stanford University Hospital (1988-1992);
Associate Dean for Clinical Affairs (1988-1992); and as Acting Chairman,
Department of Surgery (1974-1977).
Katherine A. Schipper, Ph.D., age 46, has been a director since February
1995. From 1993 to the present, Dr. Schipper has been the Eli B. and Harriet
B. Williams Professor of Accounting and KPMG Peat Marwick Faculty Research
Scholar and, from 1991 to the present, Director of the Institute of
Professional Accounting at the Graduate School of Business of the University
of Chicago. From 1993 to the present, Dr. Schipper has served as a director
of Hong Kong Card Funding Corporation, a wholly-owned subsidiary of Manhattan
Card Co. Ltd., a credit card issuer based in Hong Kong.
John C Shamy, age 68, has been a director since 1971. He has served as
Secretary of the Company since 1985, as Treasurer from 1985 to 1988, and as
Assistant Treasurer since 1988. Prior to his retirement on December 31, 1995,
he had been President and director of Fund Management and Research
Corporation, an investment advisory firm, since 1963; of Foundation Growth
Stock Fund, Inc., an open-end mutual fund, since 1964; and of Continental
Mutual Investment Fund, Inc., an open-end mutual fund, since 1969.
There are no family relationships between any directors or executive
officers of the Company.
Executive Officers
The following table sets forth certain information regarding the executive
officers of the Company:
46
<PAGE>
<TABLE>
<CAPTION>
OFFICER OFFICER SINCE POSITION
------- ------------- --------
<S> <C> <C>
J. Miles Branagan.......... 1971 Chairman of the Board of Directors,
Chief Executive
Officer and President
John C Shamy............... 1985 Secretary, Assistant Treasurer and
Director
Thomas M. Hein............. 1988 Vice President, Finance, Treasurer
and Assistant Secretary
William T. Hilvert......... 1987 Vice President, Human Resources,
and Assistant Secretary
Richard G. Kinsey.......... 1995 President, MDT Technionic Company
and Vice President,
Product Support Group
Melvin K. Nerby............ 1987 President, MDT Biologic Company,
and Vice President,
Sterility Assurance Systems Group
Charles B. Swenson......... 1983 President, MDT Diagnostic Company,
and Vice President, Examining and
Operatory Equipment Group
Creighton A. White......... 1995 Vice President, Marketing and Sales
</TABLE>
Biographical information concerning Messrs. Branagan and Shamy is given
under the caption "Board of Directors" above.
Thomas M. Hein, C.P.A., age 48, has served as Vice President, Finance,
Chief Financial Officer, Treasurer and Assistant Secretary since 1988. From
1983 to 1988, he was Vice President, Finance and Administration, and Chief
Financial Officer of Metheus Corporation, a manufacturer of computer graphics
equipment. From 1977 to 1983, Mr. Hein was employed by Memorex Corporation,
where he held several finance positions, most recently as Director of Finance
for the Communications Group.
William T. Hilvert, age 59, was named Vice President, Human Resources, in
July 1987, and Assistant Secretary in April 1995. Mr. Hilvert was Vice
President, Human Resources, at Castle Company from 1985 until Castle was
acquired by the Company in 1987. Prior to joining Castle Company, Mr. Hilvert
was employed for seven years by Patterson Dental Company, a national
distributor of dental equipment and consumables, most recently as Vice
President, Division General Manager, and previously as Vice President,
Personnel. He has also been employed by divisions of American Hospital Supply
Corporation and General Motors Corporation in the areas of personnel and
administration.
Richard G. Kinsey, age 53, joined the Company in January 1995 and was
named President, MDT Technionic Company, and Vice President, Product Support
Group, effective in April 1995. Previously, Mr. Kinsey was employed by Ohmeda
Company, a division of BOC Corporation, as Director of Ohmeda's Customer
Support Center from 1993 to 1994, and as Vice President, North American Field
Operations from 1988 to 1992. Prior to joining Ohmeda, Mr. Kinsey held
various management positions with American Hospital Supply Corporation and
Baxter International.
Melvin K. Nerby, age 58, was named President, MDT Biologic Company, and
Vice President, Sterility Assurance Systems Group, in April 1995. Previously,
he was employed by the Company as Vice President, Product Support, from 1987
to 1995. He joined Castle Company in 1986 as the North American Service
Manager. Prior to 1986, he had been employed by the Midwest Division of
Sybron Corporation for 31 years, holding a variety of positions including
Manufacturing Engineering Manager,
47
<PAGE>
Plant Manager and Vice President, Dental Operations, for U.S. and European
facilities, Manufacturing Manager, Operations Manager and Vice President of
Regulatory Affairs and Quality Assurance.
Charles B. Swenson, age 55, was named President, MDT Diagnostic Company,
and Vice President, Examining and Operatory Equipment Group, in April 1995.
Mr. Swenson had been employed by the Company since 1983 as Vice President,
Marketing and Sales. Prior to joining the Company he was employed for 19
years by Patterson Dental Company, a national distributor of dental equipment
and consumables, most recently as that company's Vice President of Marketing
and Sales.
Creighton A. White, age 39, was named Vice President, Marketing and Sales,
in April 1996. Mr. White joined the Company in January 1995 and was named
Vice President, Corporate, Governmental and International Group effective in
April 1995. Previously, Mr. White was employed by AMSCO International, Inc.
as Vice President/Managing Director, Sterility Assurance and Surgical Products
during 1994 and as Vice President, General Manager, Sterility Assurance
Products, from 1992 to 1993. He was employed by AMSCO Scientific as Vice
President of Marketing from 1991 to 1992 and Director of Marketing from 1989
to 1991. Prior to joining AMSCO, Mr. White held various management positions
with American Hospital Supply Corporation and Baxter International.
Section 16 Compliance
Based solely upon its review of Forms 3, 4 and 5 and any amendments
thereto furnished to the Company, or written representations from certain
reporting persons that no other reports were required, the Company does not
know of any person who failed to file on a timely basis any reports required
under Section 16(a) of the Securities Exchange Act of 1934, as amended, except
for the inadvertent failure of Mr. Gilbertson to timely report on Form 4 the
purchase of 15,000 shares of the Company's common stock. The Company expects
that Mr. Gilbertson's purchase will be reported on a Form 4 to be filed
shortly with the Securities and Exchange Commission.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth information regarding compensation from the
Company for each of the fiscal years ended March 31, 1996, 1995 and 1994 as to
the Chief Executive Officer and each of the next five most highly compensated
executive officers of the Company during the last completed fiscal year
(collectively, the "Named Executive Officers").
48
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------ -----------------------
Other All
Annual Securities Other
Compen- Underlying Compen-
Fiscal Salary Bonus sation Options sation
Name and Principal Position Year ($)(A) ($) ($)(B) (#)(C) ($)(D)
- - ------------------------------------------------ ---- -------- ------------ ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
J. Miles Branagan............................... 1996 $270,599 -- $83,870 -- $75,674
Chairman of the Board of Directors,.......... 1995 220,000 -- -- 10,000 62,181
Chief Executive Officer and President........ 1994 220,000 -- -- -- 64,596
Thomas M. Hein.................................. 1996 140,160 -- 91,459 -- 35,497
Vice President, Finance,..................... 1995 120,712 -- -- 5,000 7,643
Treasurer and Assistant Secretary............ 1994 120,712 -- -- -- 9,056
Richard G. Kinsey............................... 1996 132,500 -- 93,709 -- 20,216
President, MDT Technionic Company............ 1995 27,604 -- -- 40,000 --
and Vice President, Product Support Group (E)
Melvin K. Nerby................................. 1996 144,000 -- -- -- 29,246
President, MDT Biologic Company,............. 1995 111,767 -- -- 15,000 18,570
and Vice President, Sterility................ 1994 111,767 -- -- -- 19,653
Assurance Systems Group
Charles B. Swenson.............................. 1996 144,000 -- 54,328 -- 18,141
President, MDT Diagnostic.................... 1995 129,363 -- -- 15,000 15,971
Company, and Vice President,................. 1994 129,363 -- -- -- 17,433
Examining and Operatory Equipment Group
Creighton A. White.............................. 1996 132,000 39,800 -- -- 10,157
Vice President, Corporate,................... 1995 30,250 -- -- 30,000 -
Governmental and International Group (F)
</TABLE>
- - ----------------
(A) Amounts shown reflect cash and non-cash compensation earned by the Named
Executive Officers.
(B) Amounts shown represent expenses paid or reimbursed by the Company in
connection with the relocation of the Named Executive Officer to Durham,
North Carolina (in the case of Messrs. Branagan and Hein), Henrietta, New
York (in the case of Mr. Kinsey) and Charleston, South Carolina (in the
case of Mr. Swenson) during the 1996 fiscal year.
(C) Amounts shown reflect five-year stock options granted to the Named
Executive Officers under the Company's 1987 Amended and Restated Stock
Option Plan.
(D) The amounts shown for the 1996 fiscal year were derived from the following
items: J. M. Branagan: $4,000--Company Savings Plan match; $8,052--Company
payment to Retirement Plan; $61,452--Company payment to SERP; $2,171--
Imputed Value-Life Insurance. T. M. Hein: $2,780--Company Savings Plan
match; $6,574--Company payment to Retirement Plan; $968--Company payment to
SERP; $175--Imputed Value-Life Insurance; $25,000--Forgiveness of
indebtedness owed to the Company (see "Certain Transactions"). M. K. Nerby:
$3,456--Company Savings Plan match; $6,804--Company payment to Retirement
Plan; $18,548--Company payment to SERP; $438--Imputed Value-Life Insurance.
C. B. Swenson: $2,552--Company Savings Plan match; $6,804-Company payment
to Retirement Plan; $8,324--Company payment to SERP; $461-Imputed Value-
Life Insurance. C.A. White: $2,105--Company Savings Plan match; $8,052--
Company payment to Retirement Plan. R.G. Kinsey $3,180--Company Savings
Plan match;
49
<PAGE>
$6,114--Company payment to Retirement Plan; $10,440--Company payment to
SERP; $428--Imputed Value-Life Insurance. Effective as of July 1, 1996, the
Retirement Plan was merged with two other Company employee benefit plans,
with the assets and administration of the Retirement Plan with respect to
salaried employees transferred to the Retirement Savings Plan for Salaried
Employees and that plan re-named the Retirement Savings Plan for Salaried
Employees. See "Employee Benefits -- Retirement Plan".
(E) Mr. Kinsey joined the Company in January, 1995 and became an executive
officer effective April 1, 1995.
(F) Mr. White joined the Company in January, 1995 and became an executive
officer effective April 1, 1995. The amount of bonus compensation shown Mr.
White during the 1996 fiscal year represents a signing bonus of $20,000 and
a guaranteed bonus of $19,800 under the Company's Management Incentive
Compensation Plan ("MICP"). The Board of Directors of the Company
terminated the MICP effective April 1, 1996.
Employment Agreements
The Company has entered into separate employment agreements with Messrs.
Branagan, Hein and White which respectively provide for annual salaries of not
less than $270,599, $140,160 and $132,000 for such individuals or, in each
case, such larger amount as the Board of Directors in its discretion
determines. In addition, MDT Biologic has entered into an employment agreement
with Mr. Nerby, MDT Diagnostic Company has entered into an employment
agreement with Mr. Swenson, and MDT Technionic Company has entered into an
employment agreement with Mr. Kinsey, which agreements respectively provide
for annual salaries of not less than $144,000, $144,000 and $132,500 for such
individuals or, in each case, such larger amount as the Board of Directors in
its discretion determines. All such agreements require the Company to provide
the executive officer with various health, disability and life insurance
benefits and the opportunity for incentive compensation based on the criteria
set forth in the Company's MICP. (The Board of Directors of the Company
terminated the MICP effective April 1, 1996.) All such agreements are
effective as of April 1, 1995 and in each case supersede and replace any and
all earlier employment agreements with such individuals.
The agreements with Messrs. Branagan, Kinsey and White respectively
provide that each executive officer will serve in his respective position for
a three-year period. Each of the agreements with Messrs. Hein, Nerby and
Swenson respectively provides that each executive officer will serve in his
respective position for a four-year period. Each of the agreements with
Messrs. Hein, Kinsey, Nerby, Swenson and White provides that, on the second
anniversary of such agreement, the term of such agreement automatically will
be extended for an additional year (or, in the case of Mr. Kinsey and Mr.
White, an additional two years), and, thereafter, when only two years of such
term as extended remain, the term of such agreement will again be extended for
an additional year, such extensions continuing from year to year in the same
manner, subject to the discretion of the Board of Directors not to so extend
the term of any such agreement by prior written notice to the executive
officer to which any such non-extended agreement pertains.
Upon the occurrence of a change in control of the Company, the term of the
agreements with each of Messrs. Hein, Nerby and Swenson is automatically
reinstated to the four-year period provided for in each such agreement (and in
the case of Mr. Kinsey and Mr. White, an additional four-year period),
commencing upon the date of the change in control. Except for the agreement
with Mr. Branagan, each of the agreements also provides for lump-sum,
undiscounted cash payments and the continuation of certain other benefits
following termination of the executive officer covered thereby without cause
in connection with a change in control, which payments and benefits are to be
equal to the then current rate of compensation and benefits provided for in
any such agreement so terminated for the remaining term of any such agreement.
For purposes of the agreements, a "change in control" is defined to mean
(i) without prior approval of the Board of Directors of the Company, a single
entity or group of affiliated entities acquires more than 50% of the voting
stock of the Company issued and outstanding immediately prior to such
50
<PAGE>
acquisition; (ii) the Board of Directors of the Company approves an
unsolicited bid by a single entity or group of affiliated entities to acquire
more than 50% of the voting stock of the Company issued and outstanding
immediately prior to the approval of such acquisition, and such acquisition is
consummated; (iii) the stockholders of the Company approve the consummation of
any merger of the Company or any sale or other disposition of all or
substantially all of its assets, if the stockholders of the Company
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 the Company during any 24-month period without the
approval of a majority of directors in office at the beginning of such period.
In connection with the Getinge transaction, the Board of Directors of the
Company has determined that the consummation of the tender offer would
constitute a change in control for purposes of the employment agreements with
the Company's executive officers. The cash amounts and other benefits payable
by the Company to such officers following any termination of employment in
connection with the change in control may not be fully deductible to the
Company to the extent such payments and benefits exceed the limitations
contained in Section 280G of the Internal Revenue Code. Each of the employment
agreements was recently amended to permit the executive officer to refuse all
or any portion of such payments and benefits to the extent that receipt of
such amounts may result in adverse tax consequences to the executive officer.
Under such amendments, the Company is relieved of the obligation to pay any
amount which the executive officer so refuses in writing.
Employee Benefit Plans
The material which follows in this section describes certain provisions
made by the Company pursuant to certain stock option, employee savings and
retirement plans, now in effect, that provide for severance, termination or
change in control benefits to employees, including the Named Executive
Officers, other than group life and accident insurance, group hospitalization
and similar group payments and benefits.
Stock Option Plan. Members of the Board of Directors, officers and other
key employees of the Company are eligible to receive options to purchase up to
an aggregate of 1,200,000 shares of the Company's Common Stock under the MDT
Corporation Amended and Restated 1987 Stock Option Plan (the "Stock Option
Plan"), which is administered by the Compensation Committee of the Board
of Directors. The exercise price of each option granted must be at least the
fair market value of the Common Stock at the date of grant (except that, with
respect to 10% stockholders, the exercise price must be at least 110% of the
fair market value), and no option may be exercised earlier than one year from
the date of grant. Under the Stock Option Plan, in the event that a change in
control occurs or, with respect to options awarded to officers and employees
of the Company (other than Mr. Shamy), the Board of Directors determines in
good faith that a change in control is about to occur, all outstanding options
will be immediately exercisable by the option holder for the total remaining
number of shares covered by options.
For purposes of the Stock Option Plan, a "change in control" is defined to
mean (i) without prior approval of the Board of Directors of the Company, a
single entity or group of affiliated entities acquires more than 50% of the
stock of the Company issued and outstanding immediately prior to such
acquisition; (ii) the stockholders of the Company approve the consummation of
any merger of the Company or any sale or other disposition of all or
substantially all of its assets, if the stockholders of the Company
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 (iii) a change in the majority of the
Board of Directors of the Company during any 24-month period without the
approval of a majority of directors in office at the beginning of such period.
51
<PAGE>
In connection with the Getinge transaction, the Board of Directors
determined that, for purposes of the Stock Option Plan, a change in control
was about to occur and, consequently, all options outstanding under the Stock
Option Plan thereupon became immediately exercisable by the option holder. Any
options remaining unexercised at the expiration of the tender offer period
(currently scheduled for 5:00 p.m. EDT on July 25, 1996) shall terminate
unless the tender offer is not successfully consummated (in which case such
unexercised options will be treated as if no change in control occurred and
will be governed by their original terms). Pursuant to the Merger Agreement,
the Stock Option Plan will terminate at the effective time of the merger with
Getinge.
Supplemental Executive Retirement Plan. Certain officers of the Company
(except Mr. Shamy) and its subsidiaries also participate in the Company's
Supplemental Executive Retirement Plan (the "SERP"). Except as provided below,
the SERP provides a lump sum benefit at age 65 equal to the present value of
annual payments for life equal to a "replacement percentage" of the
participant's final base salary. Participants may also elect installment
payments. The replacement percentage equals 50% (reduced for individuals who
became officers on or after age 50) plus one-half of 1% for each year of
service as an officer in excess of ten. This amount is reduced by the present
value of the participant's social security benefit and the benefits payable
from the Retirement Plan and the Savings and Thrift Plan. This resulting
amount is then multiplied by the participant's vested percentage; a
participant vests at the rate of 20% for each year of service as an officer
after his second year of service as an officer. The SERP benefits are also
payable after age 55 if the participant is vested (with a 5% reduction for
each year that retirement precedes age 65). The Company has established a
trust as a source of benefits to participants. The SERP states that the
Company shall contribute no more than 20% of the participant's annual base
salary on behalf of the participant plus the additional amounts that would
have been contributed to the Retirement Plan and/or the Savings and Thrift
Plan (described below) if the $150,000 compensation limit were not applicable.
The Company's contributions to the SERP are voluntary. The participant's
retirement benefit shall equal the amount contributed on behalf of the
participant plus or minus any earnings or losses. Such contributions are shown
in the Summary Compensation Table in this Annual Report.
Subject to the foregoing trust provisions, unless the Board of Directors
of the Company otherwise determines, SERP benefits are also paid if there is a
change in control and, within two years, the participant is involuntarily
terminated, suffers a significant diminution of duties and responsibilities,
has a downward change of title or is forced to relocate thereby resulting in
his resignation. In this case, the participant is 100% vested and there is no
early retirement reduction. For this purpose, a "change in control" is defined
to mean (i) without prior approval of the Board of Directors of the Company, a
single entity or group of affiliated entities acquires more than 50% of the
stock of the Company issued and outstanding immediately prior to such
acquisition; (ii) the Board of Directors of the Company approves an
unsolicited bid by a single entity or group of affiliated entities to acquire
more than 50% of the stock of the Company issued and outstanding immediately
prior to the approval of such acquisition, and such acquisition is
consummated; (iii) the stockholders of the Company approve the consummation of
any merger of the Company or any sale or other disposition of all or
substantially all of its assets, of the stockholders of the Company
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 the Company during any 24-month period without the
approval of a majority of directors in office at the beginning of such period.
The Board of Directors has determined, and the SERP has been amended to
provide, that these additional SERP benefits shall not be paid as a result of
any transactions involving Getinge (including any change in a majority of the
Board of Directors of the Company).
Retirement Plan. The MDT Corporation Retirement Plan (the "Retirement
Plan") is a profit sharing plan that covers all United States nonunion
employees of the Company and its domestic subsidiaries. The Company's
contributions to the Retirement Plan amount to three percent of each
participant's compensation plus three percent of each participant's
compensation in excess of the Social Security wage base. Compensation for this
purpose is limited to $150,000. Amounts allocated to a participant's
52
<PAGE>
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, with 100% vesting after five years. Bankers Trust Company acts as
trustee for the Retirement Plan. Vested amounts allocated to their accounts
will be payable at retirement or other termination of service. The Company has
no mandatory retirement age. Effective as of July 1, 1996, the Retirement
Plan was terminated, with the assets and administration of such plan with
respect to hourly employees transferred to the MDT Corporation Savings and
Thrift Plan for Hourly Employees (and that plan re-named the Retirement
Savings Plan for Hourly Employees) and the assets and administration with
respect to salaried employees transferred to the MDT Corporation Savings and
Thrift Plan for Salaried Employees (and that plan re-named the Retirement
Savings Plan for Salaried Employees). The contributions, terms and conditions
applicable under the former Retirement Plan (as described in this paragraph)
will continue to apply under the Retirement Savings Plan for Hourly Employees
and the Retirement Savings Plan for Salaried Employees, except that plan
participants will now be able to direct the investment of these retirement
funds.
Retirement Savings Plan. Salaried employees of the Company, including
officers, are eligible to participate in the MDT Corporation Savings and
Thrift Plan for Salaried Employees (which has as of July 1, 1996, been renamed
the Retirement Savings Plan for Salaried Employees). Participants may
contribute up to 6% of their compensation on a before-tax and/or after-tax
basis. Compensation for this purpose is limited to $150,000. A participant
will receive matching contributions from the Company of up to 50% of these
contributions. Subject to certain limitations, participants may make
additional contributions, which are not matched by the Company, equal to 10%
of compensation on an after-tax basis or 12% of compensation on a before-tax
basis. Contributions may be invested, at the election of the participant, in a
guaranteed income fund, a balanced asset fund, a diversified equity fund, a
bond fund or the Company's Common Stock. Company contributions vest at the
rate of 20% after the first year of service and 20% for each subsequent year
of service with 100% vesting at the end of five years. Company contributions
are automatically vested upon the participant's death, total and permanent
disability or attainment of age 65. Benefits under the Retirement Savings Plan
for Salaried Employees become distributable to a participant or his
beneficiary (in the case of death) upon termination of employment by reason of
resignation, discharge, retirement, disability or death.
Stock Options
The Company did not grant stock options or SARs to any of the Named
Executive Officers during the fiscal year ended March 31, 1996, nor did any of
the Named Executive Officers exercise any stock options during such fiscal
year or hold any "in-the-money" options as of the end of such fiscal year.
The following table sets forth information concerning the number of
unexercised options held by each of the Named Executive Officers on March 31,
1996.
FISCAL YEAR-END OPTION HOLDINGS
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at FY-End (#)
----------------------
Exercisable/
Name Unexercisable
---- ----------------------
<S> <C>
J. Miles Branagan.... 69,653/10,347
Thomas M. Hein....... 20,797/19,203
Melvin K. Nerby...... 50,000/0
Charles B. Swenson... 50,000/0
Creighton A. White... 15,384/14,616
Richard G. Kinsey ... 15,384/24,616
</TABLE>
53
<PAGE>
In connection with the Getinge transaction, all outstanding options became
immediately exercisable and will remain so until the expiration of the tender
offer period. See "Employee Benefit Plans -- Stock Option Plan".
Compensation Committee Interlocks and Insider Participation
During the last completed fiscal year, the Compensation Committee
consisted of Messrs. Jones, Gilbertson and Shamy. Mr. Shamy is Secretary of
the Company and its subsidiaries. Mr. Shamy is paid a fee of $1,000 per month
for his services as Secretary. He was not eligible to receive bonus
compensation under the MICP (which was terminated by the Board of Directors
effective on April 1, 1996).
Directors Compensation
Each of the directors, other than Mr. Branagan, receives a retainer fee of
$1,500 per month and fees of $1,000 for each meeting of the Board of Directors
and (except as set forth below with respect to meetings of, among other
committees, the Negotiating Committee) $500 for each meeting of a committee of
the Board of Directors that the director attends. Each director who chairs a
committee of the Board of Directors receives an additional fee of $250 for
each meeting of the committee which the director attends and chairs. Directors
are reimbursed for travel and other expenses related to attendance at Board
and committee meetings. In connection with the Getinge Transaction and the
negotiation of the Merger Agreement, the Board of Directors appointed a
special Negotiating Committee consisting of Messrs. Branagan, Johnson and
French. Messrs. Johnson and French may receive additional compensation for
their service on such committee in an amount to be determined by the Board of
Directors. Such compensation is expected to be paid at a rate of $250 per hour
($1,000 per day maximum) for participation in any meeting which has as its
subject the business of the Negotiating Committee.
Non-employee directors of the Company (including, for these purposes, Mr.
Shamy) are also automatically entitled to receive grants of nonqualified stock
options under the Company's Stock Option Plan. Each non-employee who becomes a
director after the 1993 Annual Meeting of Stockholders is automatically
granted upon his or her initial election or appointment to the Board of
Directors an option to purchase 5,000 shares of the Company's Common Stock.
Following his election as a director in 1995, Dr. Mark received an option to
purchase 5,000 shares of the Company's Common Stock at an exercise price of
$6.625 per share. Annually, but subject to certain limitations described
below, each non-employee director is also automatically granted an option to
purchase the nearest number of whole shares of Common Stock (up to a maximum
of 1,500 shares per director per year) determined by dividing the non-employee
directors' average annual compensation (i.e., the average of the aggregate
amount of fixed retainer and attendance fees that all nonemployee directors
received for serving as directors of the Company in the immediately preceding
year) by the fair market value per share of the Company's Common Stock on the
grant date, which is the fifth business day following the date of the public
release by the Company of its annual statement of sales and earnings.
Notwithstanding the foregoing, (a) no annual grants of options shall be made
to non-employee directors for any fiscal year unless the Company's earnings
per share for such fiscal year are equal to or greater than the average of the
Company's earnings per share for the immediately preceding three fiscal years,
(b) the maximum number of shares which may be granted to any individual non-
employee director under the Stock Option Plan shall not exceed 1% of the
Company's total issued and outstanding Common Stock, and (c) the maximum
number of shares which may be granted to all directors of the Company shall
not exceed in the aggregate one-half of the total shares issuable under the
Stock Option Plan. Annual option grants that would otherwise exceed the limits
described in (b) and (c) above shall be prorated within such limitations. None
of the directors received an option grant pursuant to this formula with
respect to Fiscal Year 1994, Fiscal Year 1995 or Fiscal Year 1996.
54
<PAGE>
The purchase price per share of Common Stock covered by any option granted
to a non-employee director pursuant to the Stock Option Plan is payable in
cash and/or shares and equals the fair market value per share of the Common
Stock on the grant date. The options become exercisable 12 months after the
grant date and, unless earlier terminated, terminate on the date which is the
earlier of (i) five years from the grant date, or (ii) the date of adoption by
the Board of Directors of a plan of complete liquidation of the Company's
assets. The Board of Directors, subject to plan limits, retains discretion to
modify the terms of outstanding options and to reprice the options.
In the event a non-employee director's services as a Board member are
terminated for any reason other than fraud, dishonesty or death, then any
options granted to the non-employee director pursuant to the Stock Option
Plan, to the extent such options had become exercisable on the date of such
termination, continue to be exercisable for a period of three months
thereafter or the balance of the option term, whichever period is shorter. If
the holder of the option dies while serving as a director of the Company, or
within not more than three months after the termination of such status, then
any such options, to the extent they had become exercisable on the date of
death, continue to be exercisable by the director's descendants, heirs or
personal representatives for a period of 12 months after the date of death or
the balance of the option term, whichever period is shorter. In the event the
option holder's directorship is terminated for fraud or dishonesty, all of the
holder's unexercised options expire as of the date of termination.
The Stock Option Plan contains provisions relating to adjustments for
changes in the Company's Common Stock upon certain specified events, including
mergers, reorganizations, recapitalizations, stock splits, stock dividends and
similar events. In addition, the Stock Option Plan provides that each option
granted to a non-employee director will become immediately exercisable for a
period of 30 days following any "change in control" of the Company as defined
in the Stock Option Plan (see "Employee Benefit Plans -- Stock Option Plan").
In connection with the Getinge transaction and the proposed merger, the Board
of Directors determined that, for purposes of the Stock Option Plan, a change
in control was about to occur and, consequently, all options outstanding under
the Stock Option Plan thereupon became immediately exercisable by the option
holder. Each non-employee director has acknowledged to the Company that any
options remaining unexercised at the expiration of the tender offer period
(currently scheduled for 5:00 p.m. EDT on July 25, 1996) shall terminate
unless the tender offer is not successfully consummated (in which case such
unexercised options will be treated as if no change in control occurred and
will be governed by their original terms). Pursuant to the Merger Agreement,
the Stock Option Plan will terminate at the effective time of the merger with
Getinge.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Beneficial Ownership of Common Stock
The following table sets forth certain information as of June 14, 1996
(except as otherwise noted) with respect to the beneficial ownership of the
Company's Common Stock by (i) each person or entity known by the Company to be
the beneficial owner of more than five percent of the Company's Common Stock,
(ii) each director, (iii) each executive officer named in the Summary
Compensation Table set forth under the caption "Executive Compensation" above,
and (iv) all directors and officers as a group. Except as provided under state
marital property laws and except as otherwise indicated, each person or entity
listed below has sole voting and investment power with respect to the shares
listed. Any reference to stock options held by any person or entity refers to
stock options which are (by reason of the Getinge transaction or otherwise)
currently exercisable or exercisable within 60 days of June 14, 1996.
55
<PAGE>
<TABLE>
<CAPTION>
Shares of Percent of
Common Class
Beneficial Owner Stock Owned*
- - ---------------- ------------ -------
<S> <C> <C>
Heartland Advisors, Inc............................. 1,313,500(a) 19.4%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Lawndale Capital Management, Inc.................... 499,700(b) 7.4%
One Sansome Street
Suite 3900
San Francisco, California 94104
The TCW Group, Inc.................................. 486,500(c) 7.2%
865 South Figueroa Street
Los Angeles, California 90017
J. Miles Branagan................................... 361,059(d) 5.3%
Stratford Hall, Suite 200
1009 Slater Road
Durham, North Carolina 27703
LaMoyne H. Fleming, D.D.S........................... 14,551(e) **
Charles A. French................................... 5,000(f) **
John S. Gilbertson.................................. 20,000(g) **
Charles E. Johnson.................................. 7,000(h) **
Clark D. Jones...................................... 8,544(i) **
James B.D. Mark, M.D................................ 7,000(j) **
John C Shamy........................................ 44,099(k) **
Katherine A. Schipper, Ph.D......................... 5,000(l) **
Thomas M. Hein...................................... 43,162(m) **
Richard G. Kinsey................................... 40,000(n) **
Melvin K. Nerby..................................... 54,138(o) **
Charles B. Swenson.................................. 65,256(p) **
Creighton A. White.................................. 30,000(q) **
All directors and officers as a group (16 persons).. 779,565(r) 10.7%
- - -------------------
</TABLE>
* Pursuant to Rule 13d-3 (d) (1) under the Securities Exchange Act of 1934,
as amended, any shares of Common Stock not outstanding which are subject
to options or conversion rights held by a person named in the preceding
table are deemed to be outstanding for the purpose of computing the
percentage of outstanding shares of Common Stock owned by such person but
are not deemed to be outstanding for the purpose of computing the
percentage owned by any other person.
** Less than 1%
(a) According to the amended Schedule 13G filed with the Securities and
Exchange Commission, dated June 5, 1996.
(b) According to the amended Schedule 13D filed with the Securities and
Exchange Commission, dated May 24, 1996. Includes 5,100 shares as to which
Andrew E. Shapiro, the sole director and officer of Lawndale Capital
Management, Inc., exercises sole voting and dispositive power.
(c) According to the amended Schedule 13G filed with the Securities and
Exchange Commission, dated February 12, 1996.
(d) Includes 265,092 shares held jointly with Mr. Branagan's spouse, 480
shares held jointly with Mr. Branagan's mother, 15,487 shares held by the
Trustee of the MDT Corporation Savings and Thrift
56
<PAGE>
Plan for Salaried Employees (re-named the Retirement Savings Plan for
Salaried Employees -- see "Employee Benefit Plans -- Retirement Plan"),
and 80,000 shares covered by options.
(e) Includes 6,000 shares covered by options.
(f) Represents 5,000 shares covered by options.
(g) Includes 5,000 shares covered by options.
(h) Includes 5,000 shares covered by options.
(i) Includes 1,500 shares covered by options.
(j) Includes 5,000 shares covered by options.
(k) Includes 6,000 shares covered by options.
(l) Represents 5,000 shares covered by options.
(m) Includes 2,191 shares held by the Trustee of the MDT Corporation Savings
and Thrift Plan for Salaried Employees (re-named the Retirement Savings
Plan for Salaried Employees -- see "Employee Benefits Plans -- Retirement
Plan"), 971 shares held by Mr. Hein individually, and 40,000 shares
covered by options.
(n) Represents 40,000 shares covered by options.
(o) Includes 1,867 shares held jointly with Mr. Nerby's spouse, 2,271 shares
held by the Trustee of the MDT Corporation Savings and Thrift Plan for
Salaried Employees (re-named the Retirement Savings Plan for Salaried
Employees -- see "Employee Benefits Plans -- Retirement Plan"), and 50,000
shares covered by options.
(p) Includes 50,000 shares covered by options.
(q) Represents 30,000 shares covered by options.
(r) Includes 21,347 shares held by the Trustee of the MDT Corporation Savings
and Thrift Plan for Salaried Employees (re-named the Retirement Savings
Plan for Salaried Employees -- see "Employee Benefits Plans -- Retirement
Plan") and 398,500 shares covered by options.
Changes of Control
On May 12, 1996, the Company announced that it had entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which it is
proposed to be acquired by Getinge Industries AB, a Swedish manufacturer of
hospital and scientific equipment. Getinge commenced a tender offer on May 17,
1996, for all outstanding shares of the Company Common Stock for a cash price
of $4.50 per share. On July 12, 1996, Getinge announced an extension of its
tender offer until July 25, 1996 and an increase in the offer price to $5.50
per share. Consummation of the tender offer and the merger is subject to
certain terms and conditions set forth in the Merger Agreement, including
approval of the holders of two-thirds of the shares to be acquired and
regulatory approvals. If the tender offer is consummated, those shares not
acquired in the tender offer will be converted into $5.50 in cash pursuant to
a merger to be effected following completion of the tender offer.
57
<PAGE>
Item 13. Certain Relationships and Related Transactions
Certain Transactions
Upon commencement of his employment by the Company on July 11, 1988, Mr.
Hein, the Company's Vice President, Finance, Chief Financial Officer and
Treasurer, received interest-free loans in the aggregate amount of $75,000 to
assist him in purchasing a home in the Los Angeles area. In connection with
Mr. Hein's relocation to Raleigh, North Carolina, the Compensation Committee
agreed to forgive $25,000 of the balance on such loans on each of July 1,
1995, July 1, 1996 and July 1, 1997, subject to his being employed by the
Company on such dates. As of July 1, 1996, Mr. Hein's outstanding balance owed
on such loans was $25,000. Any outstanding loan is immediately due and payable
upon termination of Mr. Hein's employment with the Company for any reason.
In connection with Mr. Swenson's relocation to Charleston, South Carolina,
the Company provided Mr. Swenson with an interest-free loan in the amount of
$100,000 to assist him in purchasing a home in the Charleston area. Such loan
is immediately due and payable upon the first to occur of (i) the sale of Mr.
Swenson's existing residence in Southern California, or (ii) the third
anniversary of the date such loan is made. The loan is immediately due and
payable upon termination of Mr. Swenson's employment with MDT Diagnostic
Company for any reason.
58
<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, 1996 and 1995.
Consolidated Statements of Income (Loss) - Years ended March 31,
1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity - Years ended March
31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years ended March 31, 1996,
1995 and 1994.
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 Salaried Employees, the MDT
Corporation Savings and Thrift Plan for Hourly Employees and the MDT
Biologic Company Union Thrift Plan. These financial statements and
the report of independent auditors are attached hereto as Exhibit 99
and are incorporated in this Annual Report on Form 10-K by
reference.
2. Consolidated Financial Statement Schedules
The following Schedule to Consolidated Financial Statements is
included herein:
Schedule II Valuation and Qualifying Accounts, page 62, together
with Independent Auditors' Report on Supporting Schedule, page 62.
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, 1996, the Company filed no
Current Reports on Form 8-K.
59
<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: July 15, 1996 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.
Signature Title Date
--------- ----- ----
/s/ J. Miles Branagan
_________________________ Chairman of the Board of July 15, 1996
J. Miles Branagan Directors and Chief Executive
Officer and President (Principal
Executive Officer)
/s/ LaMoyne H. Fleming
_________________________ Director July 15, 1996
LaMoyne H. Fleming
/s/ Charles A. French
_________________________ Director July 15, 1996
Charles A. French
/s/ John S. Gilbertson
_________________________ Director July 15, 1996
John S. Gilbertson
/s/ Thomas M. Hein
_________________________ Vice President, Finance, Chief July 15, 1996
Thomas M. Hein Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Charles E. Johnson
_________________________ Director July 15, 1996
Charles E. Johnson
/s/ Clark D. Jones
_________________________ Director July 15, 1996
Clark D. Jones
/s/ James B.D. Mark
_________________________ Director July 15, 1996
James B.D. Mark
/s/ Katherine A. Schipper
_________________________ Director July 15, 1996
Katherine A. Schipper
/s/ John C. Shamy
_________________________ Director July 15, 1996
John C Shamy
S-1
<PAGE>
[Letterhead of KPMG PEAT MARWICK]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
MDT Corporation:
Under date of May 17, 1996, except as to the third paragraph of Note 9 and the
second paragraph of Note 17, which are as of July 12, 1996, we reported on the
consolidated balance sheets of MDT Corporation and subsidiaries as of March 31,
1996 and 1995, and the related consolidated statements of income (loss),
stockholders' equity, and cash flows for each of the years in the three-year
period ended March 31, 1996. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form 10-K
for the year 1996. Our report contains an explanatory paragraph that states that
the status of the Company's existing credit facilities and the need for
borrowing capacity during fiscal 1997 raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. In connection with our audits of the aforementioned
consolidated financial statements, we have also audited the related financial
statement schedule 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
May 17, 1996
60
<PAGE>
SCHEDULE II
MDT CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended March 31, 1996, 1995 and 1994
<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, 1996:
allowance for doubtful accounts.. $531,000 $271,000 $110,000 $692,000
--------- -------- ---------- --------
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
--------- -------- ---------- --------
</TABLE>
_____________________
(1) Bad debts written off net of recoveries.
61
<PAGE>
EXHIBIT INDEX
-------------
Sequentially
Numbered
Exhibit No. Description Page
- - ----------- ------------------------------------------- ------------
2.1 Agreement and Plan of Merger, dated as of May
12, 1996, among Getinge Industries AB, Getinge
Acquisition Corporation and MDT Corporation
(incorporated by reference to Exhibit (c)(1)
to the Solicitation/Recommendation Statement
on Schedule 14D-9 filed by the Company with the
Securities and Exchange Commission on or about
May 17, 1996).*
2.2 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")).*
2.3 Agreement of Purchase and Sale of Assets, dated
as of June 4, 1995, by and among Maxim Medical,
Inc., MDT Diagnostic Company and MDT Corporation
(incorporated by reference to Exhibit 2.2 of the
Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 (File No. 0-15308) (the
"1995 Form 10-K")).*
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
(incorporated by reference to Exhibit 3.2 of the
1995 Form 10-K).*
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 it subsidiaries, the authorized
principal amount of which does not exceed 10% of
the consolidated assets of the Company and its
subsidiaries.
10.1.1 MDT Corporation Amended and Restated 1987 Stock
Option Plan (the "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")).*
_______________
* Incorporated by reference.
62
<PAGE>
Sequentially
Numbered
Exhibit No. Description Page
- - ----------- ------------------------------------------- ------------
10.1.2 Acknowledgement of J. Miles Branagan, dated
May 10, 1996, of certain modifications to his
rights with respect to options awarded to Mr.
Branagan under the 1987 Stock Option Plan.
10.1.3 List of omitted Acknowledgements of Directors
of MDT Corporation respecting options awarded
under the 1987 Stock Option Plan.
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 Employee
(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).*
10.4.1 MDT Corporation Supplemental Executive Retirement
Plan, as amended through April 1, 1996 (the
"SERP") (incorporated by reference to Exhibit 10.4
of the 1994 Form 10-K).*
10.4.2 Amendment III to the SERP, dated May 12, 1996.
10.5.1 Employment Agreement between MDT Corporation and
J. Miles Branagan, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.1 of
the 1995 Form 10-K).*
_______________
* Incorporated by reference.
63
<PAGE>
Sequentially
Numbered
Exhibit No. Description Page
- - ----------- ------------------------------------------- ------------
10.5.2 Employment Agreement between MDT Corporation and
Thomas M. Hein, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.2 of
the 1995 Form 10-K).*
10.5.3 Employment Agreement between MDT Corporation and
William T. Hilvert, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.3 of
the 1995 Form 10-K).*
10.5.4 Employment Agreement between MDT Biologic Company
and Melvin K. Nerby, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.4 of
the 1995 Form 10-K).*
10.5.5 Employment Agreement between MDT Biologic Company
and Michael L. Schneier, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.5 of
the 1995 Form 10-K).*
10.5.6 Employment Agreement between MDT Diagnostic Company
and Charles B. Swenson, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.6 of the
1995 Form 10-K).*
10.5.7 Employment Agreement between MDT Technionic Company
and Richard G. Kinsey, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.7 of the
1995 Form 10-K).*
10.5.8 Employment Agreement between MDT Corporation and
Creighton A. White, dated as of April 1, 1995
(incorporated by reference to Exhibit 10.6.8 of the
1995 Form 10-K).*
10.5.9 Amendment (the "Payment Refusal Amendment") to
Employment Agreement, dated as of March 1, 1996,
between MDT Corporation and William T. Hilvert.
10.5.10 List of omitted Payment Refusal Amendments to
Employment Agreements with executive officers.
10.5.11 Amendment (the "MICP Amendment") to Employment
Agreement, dated May 10, 1996, between MDT
Corporation and William T. Hilvert.
10.5.12 List of Omitted MICP Amendment to Employment
Agreements with certain executive officers.
10.6 Lease between MDT Corporation and Petula
Associates, Ltd., dated February 17, 1995
(incorporated by reference to Exhibit 10.7 of
the 1995 Form 10-K).*
_______________
* Incorporated by reference.
64
<PAGE>
Sequentially
Numbered
Exhibit No. Description Page
- - ----------- ------------------------------------------- ------------
10.7.1 Lease Agreement between MDT Diagnostic Company
and Ashley Industrial Developers, dated August 9,
1994 (incorporated by reference to Exhibit
10.8.1 of the 1995 Form 10-K).*
10.7.2 Lease Agreement between MDT Diagnostic Company and
Carolina Industrial Developers, dated August 9,
1994 (incorporated by reference to Exhibit 10.8.2
of the 1995 Form 10-K).*
10.7.3 Lease Agreement between MDT Diagnostic Company and
Carolina Industrial Developers, dated August 9,
1994 (incorporated by reference to Exhibit 10.8.3
of the 1995 Form 10-K).*
10.7.4 Lease Agreement dated MDT, Inc. and D.E. Gresset,
dated June 1, 1995 (incorporated by reference to
Exhibit 10.8.4 of the 1995 Form 10-K).*
10.7.5 Lease Agreement between MDT Diagnostic Company and
Ashley Industrial Developers, dated March 14, 1996.
10.7.6 Lease Agreement between MDT Diagnostic Company and
Carolina Industrial Developers, dated March 14,
1996.
10.7.7 Lease Agreement between MDT Diagnostic Company and
Carolina Industrial Developers, dated March 14, 1996.
10.7.8 Lease Agreement between MDT Biologic Company and
YWCA of Annapolis and Anne Arundel County, Maryland,
Inc., dated April 4, 1996.
10.8.1 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).*
10.8.2 Amendment to Credit Agreement, dated August 1, 1995,
among MDT Corporation, MDT Biologic Company, MDT
Diagnostic Company, MDT Technionic Company and Wells
Fargo Bank, National Association, as Agent
(incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1995).*
_______________
* Incorporated by reference.
65
<PAGE>
Sequentially
Numbered
Exhibit No. Description Page
- - ----------- ------------------------------------------- ------------
10.8.3 Amendment to Credit Agreement (the "Credit
Agreement Amendment"), dated February
15, 1996, among MDT Corporation, MDT Biologic
Company, MDT Diagnostic Company, MDT Technionic
Company and Wells Fargo Bank, National
Association, as Agent.
10.8.4 Mortgage (Fee), dated as of February 15, 1996,
executed by MDT Corporation in favor of Wells
Fargo Bank, National Association, as Agent.
10.8.5 Deed of Trust, Assignment of Rents, and Fixture
Filing, dated as of February 15, 1996, among
MDT Corporation as Trustor, American Securities
Company as Trustee, and Wells Fargo Bank,
National Association, as Agent.
10.8.6 Stock Pledge Agreement, dated as of February 15,
1996, between MDT Corporation and Wells Fargo
Bank, National Association, as Agent.
10.8.7 Patent Security Agreement, dated as of February
15, 1996, made by MDT Corporation, MDT Biologic
Company, MDT Diagnostic Company, MDT Canada
Limited, and MDT Technionic Company in favor
of Wells Fargo Bank, National Association, as
Agent.
10.8.8 Trademark Security Agreement, dated as of
February 15, 1996, made by MDT Corporation,
MDT Biologic Company, MDT Diagnostic Company,
MDT Canada Limited, and MDT Technionic Company
in favor of Wells Fargo Bank, National Association,
as Agent.
10.9.1 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).*
10.9.2 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).*
10.9.3 Agreement amending the Rights Agreement, dated as
of May 10, 1996, between MDT Corporation and
Chemical Trust Company of California (incorporated
by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K dated May 10, 1996 (File No.
0-15308)).*
11 Statement regarding computation of per share
earnings.
21 Subsidiaries of MDT Corporation.
23.1 Consent of KPMG Peat Marwick.
23.2 Consent of KPMG Peat Marwick with respect to
financial statements contained in Exhibit 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, 1995.
_______________
* Incorporated by reference.
66
<PAGE>
Sequentially
Numbered
Exhibit No. Description Page
- - ----------- ------------------------------------------- ------------
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, 1995.
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, 1995.
_______________
* Incorporated by reference.
67
<PAGE>
EXHIBIT 10.1.2
To: MDT CORPORATION
I am a director of MDT Corporation and the holder of options to
purchase shares of MDT Corporation common stock, subject to the terms of the MDT
Corporation Amended and Restated 1987 Stock Option Plan (the "Plan").
I acknowledge that, notwithstanding any other provisions to the
contrary of the Plan or in the related option agreements, upon the successful
consummation of the tender offer made pursuant to that certain Agreement and
Plan of Merger by and among MDT Corporation, Getinge Industrier A.B. and Getinge
Acquisition, Inc., all of my options shall be terminated. However, if the
tender offer is not successfully consummated, any unexercised options shall be
governed by their original terms.
/s/ J. Miles Branagan
------------------------------
Director's Signature
J. Miles Branagan
------------------------------
Print Name
May 10, 1996
------------------------------
Date
<PAGE>
EXHIBIT 10.1.3
LIST OF ACKNOWLEDGEMENTS OF DIRECTORS
OF MDT CORPORATION RESPECTING OPTIONS
AWARDED UNDER MDT CORPORATION
AMENDED AND RESTATED 1987 STOCK
OPTION PLAN (THE "1987 STOCK OPTION PLAN")*
-------------------------------------------
1. Acknowledgement of LaMoyne H. Fleming, dated May 10, 1996, of certain
modifications to his rights with respect to options awarded to Dr. Fleming
under the 1987 Stock Option Plan.
2. Acknowledgement of Charles A. French, dated May 10, 1996, of certain
modifications to his rights with respect to options awarded to Mr. French
under the 1987 Stock Option Plan.
3. Acknowledgement of John S. Gilbertson, dated May 10, 1996, of certain
modifications to his rights with respect to options awarded to Mr.
Gilbertson under the 1987 Stock Option Plan.
4. Acknowledgement of Clark D. Jones, dated May 10, 1996, of certain
modifications to his rights with respect to options awarded to Mr. Jones
under the 1987 Stock Option Plan.
5. Acknowledgement of Charles E. Johnson, dated May 10, 1996, of certain
modifications to his rights with respect to options awarded to Mr. Johnson
under the 1987 Stock Option Plan.
6. Acknowledgement of James B.D. Mark, M.D., dated May 10, 1996, of certain
modifications to his rights with respect to options awarded to Dr. Mark
under the 1987 Stock Option Plan.
7. Acknowledgement of Katherine A. Schipper, Ph.D., dated May 10, 1996, of
certain modifications to her rights with respect to options awarded to Dr.
Schipper under the 1987 Stock Option Plan.
8. Acknowledgement of John C Shamy, dated May 10, 1996, of certain
modifications to her rights with respect to options awarded to Mr. Shamy
under the 1987 Stock Option Plan.
- - -----------------------------
* Each of the listed Acknowledgements is substantially in the form of the
Acknowledgement attached as Exhibit 10.1.1 to this From 10-K, except with
respect to the name of the Director executing such Acknowledgement.
MDT Corporation agrees to furnish supplementally a copy of any of the omitted
Acknowledgements to the Commission upon request.
1
<PAGE>
Exhibit 10.4.2
AMENDMENT III
TO THE
MDT CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, MDT Corporation ("MDT") maintains the MDT Corporation
Supplemental Executive Retirement Plan ("Plan");
WHEREAS, Section 6.1 of the Plan provides that MDT has the right to
amend the Plan by resolution of its board of directors;
NOW, THEREFORE, the Plan is amended as follows:
1. Effective May 1, 1996, Section 4.3 of the Plan is hereby amended
by adding the following sentence thereto:
"Notwithstanding the foregoing, this Section 4.3 shall not apply as a result
of any Change in Control with respect to any transaction (or change in the
majority of the board of directors of the Company as a result of any
transaction) pursuant to the Agreement and Plan of Merger dated May __,
1996, involving Getinge Industrier A.B."
2. Effective May 1, 1996, for Participants then employed by the
Company, Section 4.5 is amended in its entirety to read as follows:
<PAGE>
4.5 - Limitation of Retirement Benefits.
---------------------------------
Notwithstanding anything contained herein to the contrary, including
Section 4.1, each Participant's benefit under this Plan shall equal the amounts
contributed, if any, on behalf of such Participant, if any, to the trust
established by the Company with respect to the Plan, plus any earnings or minus
any losses. The Company shall contribute no more than the sum of the following
amounts on behalf of each Participant:
(a) for each Plan Year, twenty percent (20%) of the Participant's
Annual Base Salary (excluding Annual Base Salary payable after attainment
age 65).
(b) for each calendar year beginning on or after January 1, 1994,
the excess of (i) the employer "retirement contributions" that would have
been made to the MDT Corporation Retirement Plan (for the period prior to
July 1, 1996) and the Savings Plan, as defined in (c) below (for the Period
thereafter), if the limits on compensation under Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended (the "Code"), were not in effect,
over (ii) the actual employer retirement contributions made by the Company
to the Retirement Plan and Savings Plan on behalf of such Participant; and
2
<PAGE>
(c) for each calendar year beginning on or after January 1, 1996, if
the Participant makes the maximum basic deposit permitted (subject to all tax
limitations) to the MDT Corporation Retirement Savings Plan for Salaried
Employees (formerly, the MDT Corporation Savings and Thrift Plan for Salaried
Employees) ("Savings Plan") while eligible to participate, the excess of (i) the
employer matching contributions that would have been made to the Savings Plan if
Code Section 401(a)(17) were not in effect and the Participant made the maximum
basic deposit permitted (subject to all tax limitations other than Code Section
401(a)(17)), over (ii) the employer matching contributions that would have been
made to the Savings Plan if the Participant made deposits equal to 6% of his
compensation, as defined in the Savings Plan, but not in excess of the maximum
permitted under Code Section 402(g). This Clause (c) shall be interpreted to
avoid making Participants whole if they are adversely affected by the various
nondiscrimination tests applicable to basic deposits or matching contributions."
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to be executed
by its duly authorized officers and a corporate seal to be hereunto affixed this
17th day of May, 1996.
MDT CORPORATION
By: /s/ J. Miles Branagan
----------------------
By: /s/ Thomas Hein
----------------------
4
<PAGE>
EXHIBIT 10.5.9
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is entered
into as of [March 1,] 1996, by and between MDT CORPORATION, a Delaware
corporation ("Employer"), and WILLIAM T. HILVERT ("Employee").
------------------
RECITALS
A. This Amendment is made with reference to that certain Employment
Agreement entered into as of April 1, 1995 (the "Employment Agreement"), by and
between Employer and Employee. The terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Employment
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto hereby agree that the Employment Agreement
is amended, effective [March 1,] 1996, as follows:
AGREEMENT
1. Section 10 (c) is amended by adding the following to the end
thereof.
"Notwithstanding the foregoing, Employee shall be entitled to refuse all or
any portion of payment or other benefit (as selected by Employee in his sole
discretion) under this Agreement if he or she determines that receipt of such
payment may result in adverse tax consequences to him or her. The Employer
shall be totally and permanently relieved of any obligation to pay any amount
which Employee explicitly so refuses in writing."
1
<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 Branagan
------------------------
"EMPLOYEE"
---------------------------
/s/ William T. Hilvert
------------------------
2
<PAGE>
EXHIBIT 10.5.10
LIST OF OMITTED AMENDMENTS ("THE PAYMENT REFUSAL
AMENDMENTS") TO EMPLOYMENT AGREEMENTS
WITH EXECUTIVE OFFICERS*
------------------------------------------------
<TABLE>
<C> <S>
1. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Corporation and J. Miles Branagan
2. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Corporation and Thomas M. Hein
3. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Biologic Company and Melvin K. Nerby
4. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Biologic Company and Michael L. Schneier
5. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Diagnostic Company and Charles B. Swenson
6. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Technionic Company and Richard G. Kinsey
7. Amendment to Employment Agreement, dated as of March 1, 1996, between MDT
Corporation and Creighton A. White
</TABLE>
- - ------------------
* Each of the listed Payment Refusal Amendments is substantially in the form of
the Payment Refusal Amendment attached as Exhibit 10.5.9 to this Form 10-K,
except with respect to the name of the executive executing such listed Payment
Refusal Amendment. MDT Corporation agrees to furnish supplementally a copy of
any of the omitted Payment Refusal Amendments to the Commission
upon request.
<PAGE>
EXHIBIT 10.5.11
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
The Employment Agreement ("Agreement") dated and executed as of April 1,
1995 by and between MDT CORPORATION ("Employer") and WILLIAM T. HILVERT is
hereby amended and restated, in part, as follows:
WHEREAS, the Employment Agreement provides for the Employee's participation
in the Management Incentive Compensation Plan ("MICP") subject to the terms of
the MICP.
WHEREAS, Employer has terminated the MICP effective at the close of Fiscal
Year 1996;
WHEREAS, Employer expects to adopt a new discretionary bonus program;
WHEREAS, Employee would like to be eligible to participate in the new
discretionary bonus program;
WHEREAS, Employer and Employee hereby agree to amend and restate the
Employment Agreement to reflect the elimination of the MICP.
NOW THEREFORE, Employer and Employee hereby agree as follows:
1. Subparagraph 4(b) of the Agreement is hereby deleted in its entirety.
2. Subparagraphs 4(c), 4(d) and 4(e) of the Agreement shall be renumbered
as subparagraphs 4(b), 4(c) and 4(d), respectively.
3. Subparagraphs 10(c) of the Agreement is hereby amended and restated as
follows:
<PAGE>
(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 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 the Agreement without
cause, Employer's sole obligation shall be to pay Employee the salary in effect
at that time of his termination, in semi-monthly installments and to provide
healthcare and life insurance benefits and to continue his participation in the
Retirement Plan, as amended or as merged into Employer's 401(k) Plan (provided
that if contributions cannot be made under applicable law, cash payments equal
to such contributions shall be made to Employee), 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
<PAGE>
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 and to provide healthcare and life insurance
benefits and to continue his participation in the Retirement Plan, as amended,
or as merged into Employer's 401(k) Plan (provided that if contributions cannot
be made under applicable law, cash payments equal to such contributions shall be
made to employee), 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.
Notwithstanding the foregoing, Employee shall be entitled to refuse
all or any portion of any payment or other benefit (as selected by Employee in
his sole discretion) under this Agreement if he or she determines that receipt
of such payment may result in adverse tax consequences to him or her. The
Employer shall be totally and permanently relieved of any obligation to pay any
amount which Employee explicitly so refuses in writing.
4. The Agreement, as amended and restated herein, shall remain in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, Employer and Employee have executed this Amendment to
Employment Agreement as of this 10th day of May, 1996.
---- ---
"EMPLOYER" "EMPLOYEE"
/s/ J. Miles Branagan /s/ William T. Hilvert
- - ----------------------- ------------------------
<PAGE>
EXHIBIT 10.5.12
LIST OF OMITTED AMENDMENTS (THE "MICP
AMENDMENTS") TO EMPLOYMENT AGREEMENTS
with EXECUTIVE OFFICERS*
-------------------------------------
1. Amendment to Employment Agreement, dated April 30, 1996, between
MDT Corporation and J. Miles Branagan
2. Amendment to Employment Agreement, dated May 10, 1996, between
MDT Biologic Company and Melvin K. Nerby
3. Amendment to Employment Agreement, dated as of May 15, 1996, between
MDT Biologic Company and Michael L. Schneier
4. Amendment to Employment Agreement, dated as of May 20, 1996, between
MDT Diagnostic Company and Charles B. Swenson
- - ------------------------
* Each of the listed MICP Amendments is substantially in the form attached as
Exhibit 10.5.11 to this Form 10-K, except with respect to the name of the
executive executing such MICP Amendment. MDT Corporation agrees to furnish
supplementally a copy of any of the omitted MICP Amendments to the
Commission upon request.
<PAGE>
EXHIBIT 10.7.5
STATE OF SOUTH CAROLINA )
) AGREEMENT
COUNTY OF CHARLESTON )
THIS AGREEMENT, entered into this 14th day of March, 1996, 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").
WITNESSETH:
-----------
1.
LEASED PREMISES
---------------
Lessor hereby leases to Lessee and Lessee (sometimes also referred to as
Tenant) rents from Lessor (sometimes also referred to as Landlord) real property
at 7370-B SPARTAN BOULEVARD, 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; 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 (the Premises).
2.
AGREEMENT TO LEASE AND TERM
---------------------------
(a) Lessor agrees to lease and rent the Premises to Lessee upon the terms
and conditions herein contained, and Lessee agrees to lease and take the
Premises from Lessor upon the terms and conditions herein contained.
(b) The term of this lease shall commence 1 January 1996, and shall end
on 31 December 1996, after which the term will be automatically extended for up
to four (4) additional one (1) year periods until such time as Lessee delivers
written notice to Lessor that Lessee will terminate this lease and vacate
premises at least four (4) months prior to termination of the then lease term.
TRACT C-2b
-1-
<PAGE>
3.
RENT
----
(a) Except as otherwise specifically provided herein, Lessee agrees as of 1
January 1996, to pay to Lessor as rental for the leased premises for each year
of this lease the sum of Seventy-Two Thousand and No/100 ($72,000.00) Dollars
per year, payable without demand in equal monthly installments of Six Thousand
and No/100 ($6,000.00) Dollars due in advance of the first (1st) day of each
month; further, provided that the base rental set forth in this 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 has been made and said deposit shall be applied to the last
month's rental under this agreement. Any unapplied balance of the deposit will
be returned to Lessee upon fulfillment of the terms and conditions of this
agreement.
(c) All payments shall be made at, or mailed via 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 taxes, 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-2b
-2-
<PAGE>
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 applicable building code and do not conflict with any
written requirement of Lessor's fire and extended coverage insurance policy in
force. 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 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 Premises whether Lessor has given its consent or not 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 plumbing, doors, windows,
interior walls and ceilings, during the term of this lease. 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.
TRACT C-2b
-3-
<PAGE>
9.
RESTORATION OF PROPERTY AT TERMINATION OF LEASE
-----------------------------------------------
Lessee shall, at the termination of this lease, restore the 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 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 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 Premises which was not
contemplated by Lessor and Lessee at the time of execution of this lease. Lessee
shall not deface or injure the Premises, or do anything or permit anything to be
done upon the Premises which shall create a nuisance.
12.
UTILITIES
---------
Lessee shall pay for all utilities and services (including Charleston
County Solid Waste Disposal fee) 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.
TRACT C-2b
-4-
<PAGE>
13.
LESSOR'S ACCESS TO PREMISES
---------------------------
Lessor's employees, agents and representatives, as the case may be, shall
have the right of entering the Premises to make such repairs and alteration as
may reasonably be required for the safety, care or preservation of the Premises,
to place "For Rent" signs of reasonable number and size on the Premises for a
period of sixty (60) days prior to the termination of this lease, or to show the
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 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 OF 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
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, 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 No/100 ($997.00) 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
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.
TRACT C-2b
-5-
<PAGE>
16.
DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
If, during the term of this lease, the 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 the Premises to the
operable condition for which the 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, first causing the Premises to be restored to the
operable condition for which the Premises were being used at the time of the
destruction or damage; and, second substantially returning 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 Premises shall be destroyed or damaged, or partially
destroyed or damaged, to such an extent that the repair of such destruction or
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 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 the 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 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 and to the extent that the Lessor cannot make such repairs 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.
TRACT C-2b
-6-
<PAGE>
17.
CONDEMNATION
------------
If the whole of the Premises or the whole of the building included in the
Premises 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 included in the Premises shall be taken
or condemned by any competent authority for any public or quasi-public use or
purpose and the part so taken cannot be replaced at some other location on the
Premises, within ninety (90) days after such taking, by the exercise of
reasonable diligence by the Lessor, so as to render the Premises, after
replacing the part of the building so taken at the new location of the Premises,
suitable for use by the Lessee for the purpose for which the 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 Premises other than the
building or any part of the Premises other than the building shall be taken or
condemned by an competent authority for any public or quasi-public use or
purpose so as to render the remaining portion of the Premises unsuitable for use
by the Lessee for the purpose for which the 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 Premises adjoining the street
or road upon which the 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 Premises unsuitable for use by the Lessee for the purpose for which the
Premises were or condemnation, if Lessor shall make suitable replacement parking
available to Lessee, within a reasonable distance, from the 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 Premises, shall likewise
not be construed as rendering the remaining portion of the Premises unsuitable
for the use of the Lessee for the purpose for which the 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 Premises unavailable for the use by the Lessee for the
purpose for which the 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 shall 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
TRACT C-2b
-7-
<PAGE>
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 by
or 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 make an
assignment for the benefit of creditors, Lessor reserves the right to terminate
this Lease forthwith and without notice.
19.
ASSIGNMENT AND SUBLETTING
-------------------------
Lessee shall have the right to assign this lease and to sublet the
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 so long as the
sub-Lessee used the Premises in a manner consistent with the within 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 Premises for the term provided for in
Article 2 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:
TRACT C-2b
-8-
<PAGE>
(1) declare the term of this lease ended and re-enter and take possession
of the Premises, or;
(2) pursue any remedy whatsoever provided for by law, or;
(3) re-enter the 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 the 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 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, demand 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.
TRACT C-2b
-9-
<PAGE>
25.
SUCCESSORS TO PARTIES
---------------------
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.
26.
ENVIRONMENTAL REGULATIONS
-------------------------
Lessee agrees to comply with all state and federal environmental laws and
regulations and shall in no event store or discharge any hazardous or
contaminated waste on the premises. Lessee shall be responsible for clean-up of
any environmental problems created during its tenancy.
27.
ATTORNEY'S FEES
---------------
In the event that any party hereto (or any third-party beneficiary of this
Agreement) shall bring an action to enforce the terms hereof or to declare right
hereunder, the prevailing party in any such action, shall be entitled to his
court costs and reasonable attorney's fees to be paid by the non-prevailing
party as fixed by the court of appropriate jurisdiction, including, but not
limited to, attorney's fees and court cost incurred in courts of original
jurisdiction, bankruptcy courts, or appellate courts.
28.
CONTROLLING LAW AND ENTIRE AGREEMENT
------------------------------------
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. No representations, inducements, promises, or agreements, oral
or otherwise, between the parties, not embodied herein, shall be of any force or
effect.
TRACT C-2b
-10-
<PAGE>
IN WITNESS WHEREOF, ASHLEY 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 Charles B. Swenson,
-------------------
its 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/ G.F. Caccamise By: /s/ C. Ronald Coward
- - ----------------------------- -------------------------------
C. Ronald Coward
One of its Partners (Lessor)
- - -----------------------------
As to Lessor
MDT Diagnostic Company
A Delaware Corporation
-------------------
/s/ G.F. Caccamise By: /s/ Charles B. Swenson
- - ----------------------------- -------------------------------
(Lessee)
- - ----------------------------- Its: President
As to Lessee ------------------------------
TRACT C-2b
-11-
<PAGE>
STATE OF SOUTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF CHARLESTON )
----------
I, CARLA L. DANDRIDGE, Notary Public for the State of South Carolina, do
------------------ --------------
hereby certify that ASHLEY INDUSTRIAL DEVELOPERS, A Partnership, by C. Ronald
Coward, one of its Partners, personally appeared before me this day and
acknowledged the due execution of the foregoing instrument.
SWORN and subscribed to before me this 14 day of March, 1996.
-- ----- -
/s/ Carla L. Dandridge
-----------------------------------
Notary Public for South Carolina
My commission expires July 1, 2001
------------
(SEAL)
STATE OF SOUTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF )
-------------
I, , Notary Public for the State of ,
--------------------- ----------------
do hereby certify that MDT Diagnostic Company, a corporation, by
--------------
, its , personally appeared before me this day and
- - -------------- ------------
acknowledged the due execution of the foregoing instrument.
SWORN and subscribed to before me this day of , 199 .
--- ----------- -
-----------------------------------
Notary Public for South Carolina
My commission expires
-----------------
(SEAL)
TRACT C-2b
-12-
<PAGE>
EXHIBIT 10.7.7
STATE OF SOUTH CAROLINA )
) AGREEMENT
COUNTY OF CHARLESTON )
THIS AGREEMENT, entered into this 14th day of March, 1996, by and between
---- ----- -
CAROLINA INDUSTRIAL DEVELOPERS, a partnership, Charleston, South Carolina, party
of first part (hereinafter called "Lessor") and MDT DIAGNOSTIC COMPANY, party of
the second part (hereinafter called "Lessee").
WITNESSETH:
-----------
1.
LEASED PREMISES
---------------
Lessor hereby leases to Lessee and Lessee (sometimes also referred to as
Tenant) rents from Lessor (sometimes also referred to as 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; 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 (the Premises).
2.
AGREEMENT TO LEASE AND TERM
---------------------------
(a) Lessor agrees to lease and rent the Premises to Lessee upon the terms
and conditions herein contained, and Lessee agrees to lease and take the
Premises from Lessor upon the terms and conditions herein contained.
(b) The term of this lease shall commence 1 January 1996, and shall end
on 31 December 1996, after which the term will be automatically extended for up
to four (4) additional one (1) year periods until such time as Lessee delivers
written notice to Lessor that Lessee will terminate this lease and vacate
premises at least four (4) months prior to termination of the then lease term.
TRACT B-2
-1-
<PAGE>
3.
RENT
----
(a) Except as otherwise specifically provided herein, Lessee agrees as of 1
January 1996, to pay to Lessor as rental for the leased premises for each year
of this lease the sum of One Hundred Seventy-Six Thousand Two Hundred Fifty-Nine
and 48/100 ($176,259.48) Dollars per year, payable without demand in equal
monthly installments of Fourteen Thousand Six Hundred Eighty-Eight and 29/100
($14,688.29) Dollars due in advance of the first (1st) day of each month;
further, provided that the base rental set forth in this 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 ($27,000)
Dollars has been made and said deposit shall be applied to the last month's
rental under this agreement. Any unapplied balance of the deposit will be
returned to Lessee upon fulfillment of the terms and conditions of this
agreement.
(c) All payments shall be made at, or mailed via 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 taxes, 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 B-2
-2-
<PAGE>
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 applicable building code and do not conflict with any
written requirement of Lessor's fire and extended coverage insurance policy in
force. 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 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 Premises whether Lessor has given its consent or not 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 plumbing, doors, windows,
interior walls and ceilings, during the term of this lease. 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.
TRACT B-2
-3-
<PAGE>
9.
RESTORATION OF PROPERTY AT TERMINATION OF LEASE
-----------------------------------------------
Lessee shall, at the termination of this lease, restore the 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 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 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 Premises which was not
contemplated by Lessor and Lessee at the time of execution of this lease. Lessee
shall not deface or injure the Premises, or do anything or permit anything to be
done upon the Premises which shall create a nuisance.
12.
UTILITIES
---------
Lessee shall pay for all utilities and services (including Charleston
County Solid Waste Disposal fee) 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.
TRACT B-2
-4-
<PAGE>
13.
LESSOR'S ACCESS TO PREMISES
---------------------------
Lessor's employees, agents and representatives, as the case may be, shall
have the right of entering the Premises to make such repairs and alteration as
may reasonably be required for the safety, care or preservation of the Premises,
to place "For Rent" signs of reasonable number and size on the Premises for a
period of sixty (60) days prior to the termination of this lease, or to show the
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 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 OF 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
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, 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
Premises to the extent that such real property taxes and assessments exceed
Twelve Thousand Four Hundred Ninety and 58/100 ($12,490.58) Dollars per
year.
TRACT B-2
-5-
<PAGE>
16.
DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
If, during the term of this lease, the 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 the Premises to the
operable condition for which the 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, first causing the Premises to be restored to the
operable condition for which the Premises were being used at the time of the
destruction or damage; and, second substantially returning 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 Premises shall be destroyed or damaged, or partially
destroyed or damaged, to such an extent that the repair of such destruction or
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 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 the 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 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 and to the extent that the Lessor cannot make such repairs 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.
TRACT B-2
-6-
<PAGE>
17.
CONDEMNATION
------------
If the whole of the Premises or the whole of the building included in the
Premises 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 included in the Premises shall be taken
or condemned by any competent authority for any public or quasi-public use or
purpose and the part so taken cannot be replaced at some other location on the
Premises, within ninety (90) days after such taking, by the exercise of
reasonable diligence by the Lessor, so as to render the Premises, after
replacing the part of the building so taken at the new location of the Premises,
suitable for use by the Lessee for the purpose for which the 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 Premises other than the
building or any part of the Premises other than the building shall be taken or
condemned by an competent authority for any public or quasi-public use or
purpose so as to render the remaining portion of the Premises unsuitable for use
by the Lessee for the purpose for which the 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 Premises adjoining the street
or road upon which the 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 Premises unsuitable for use by the Lessee for the purpose for which the
Premises were or condemnation, if Lessor shall make suitable replacement parking
available to Lessee, within a reasonable distance, from the 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 Premises, shall likewise
not be construed as rendering the remaining portion of the Premises unsuitable
for the use of the Lessee for the purpose for which the 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 Premises unavailable for the use by the Lessee for the
purpose for which the 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 shall 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
TRACT B-2
-7-
<PAGE>
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 by
or 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 make an
assignment for the benefit of creditors, Lessor reserves the right to terminate
this Lease forthwith and without notice.
19.
ASSIGNMENT AND SUBLETTING
-------------------------
Lessee shall have the right to assign this lease and to sublet the
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 so long as the
sub-Lessee used the Premises in a manner consistent with the within 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 Premises for the term provided for in
Article 2 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:
TRACT B-2
-8-
<PAGE>
(1) declare the term of this lease ended and re-enter and take possession
of the Premises, or;
(2) pursue any remedy whatsoever provided for by law, or;
(3) re-enter the 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 the 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 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, demand 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.
TRACT B-2
-9-
<PAGE>
25.
SUCCESSORS TO PARTIES
---------------------
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.
26.
ENVIRONMENTAL REGULATIONS
-------------------------
Lessee agrees to comply with all state and federal environmental laws and
regulations and shall in no event store or discharge any hazardous or
contaminated waste on the premises. Lessee shall be responsible for clean-up of
any environmental problems created during its tenancy.
27.
ATTORNEY'S FEES
---------------
In the event that any party hereto (or any third-party beneficiary of this
Agreement) shall bring an action to enforce the terms hereof or to declare right
hereunder, the prevailing party in any such action, shall be entitled to his
court costs and reasonable attorney's fees to be paid by the non-prevailing
party as fixed by the court of appropriate jurisdiction, including, but not
limited to, attorney's fees and court cost incurred in courts of original
jurisdiction, bankruptcy courts, or appellate courts.
28.
CONTROLLING LAW AND ENTIRE AGREEMENT
------------------------------------
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. No representations, inducements, promises, or agreements, oral
or otherwise, between the parties, not embodied herein, shall be of any force or
effect.
TRACT B-2
-10-
<PAGE>
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 Charles B. Swenson,
------------------
its 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/ G.F. Caccamise By: /s/ C. Ronald Coward
- - ----------------------------- -------------------------------
C. Ronald Coward
One of its Partners (Lessor)
- - -----------------------------
As to Lessor
MDT Diagnostic Company
A Delaware Corporation
-------------------
/s/ G.F. Caccamise By: /s/ Charles B. Swenson
- - ----------------------------- -------------------------------
(Lessee)
- - ----------------------------- Its: President
As to Lessee ------------------------------
TRACT B-2
-11-
<PAGE>
STATE OF SOUTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF CHARLESTON )
----------
I, CARLA L. DANDRIDGE, Notary Public for the State of South Carolina, do
------------------ --------------
hereby certify that CAROLINA INDUSTRIAL DEVELOPERS, A Partnership, by C. Ronald
Coward, one of its Partners, personally appeared before me this day and
acknowledged the due execution of the foregoing instrument.
SWORN and subscribed to before me this 14 day of March, 1996.
-- ----- -
/s/ Carla L. Dandridge
-----------------------------------
Notary Public for South Carolina
My commission expires July 1, 2001
------------
(SEAL)
STATE OF SOUTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF )
-------------
I, , Notary Public for the State of ,
--------------------- ----------------
do hereby certify that MDT Diagnostic Company, a corporation, by
--------------
, its , personally appeared before me this day and
- - -------------- ------------
acknowledged the due execution of the foregoing instrument.
SWORN and subscribed to before me this day of , 199 .
--- ----------- -
-----------------------------------
Notary Public for South Carolina
My commission expires
-----------------
(SEAL)
TRACT B-2
-12-
<PAGE>
EXHIBIT 10.7.7
STATE OF SOUTH CAROLINA )
) AGREEMENT
COUNTY OF CHARLESTON )
THIS AGREEMENT, entered into this 14th day of March, 1996, by and between
CAROLINA INDUSTRIAL DEVELOPERS, a partnership, Charleston, South Carolina, party
of first part (hereinafter called "Lessor") and MDT DIAGNOSTIC COMPANY, party of
the second part (hereinafter called "Lessee").
WITNESSETH:
-----------
1.
LEASED PREMISES
---------------
Lessor hereby leases to Lessee and Lessee (sometimes also referred to as
Tenant) rents from Lessor (sometimes also referred to as 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; 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 (the Premises).
2.
AGREEMENT TO LEASE AND TERM
---------------------------
(a) Lessor agrees to lease and rent the Premises to Lessee upon the terms
and conditions herein contained, and Lessee agrees to lease and take the
Premises from Lessor upon the terms and conditions herein contained.
(b) The terms of this lease shall commence 1 January 1996, and shall end
on 31 December 1996, after which the term will be automatically extended for up
to four (4) additional one (1) year periods until such time as Lessee delivers
written notice to Lessor that Lessee will terminate this lease and vacate
premises at least four (4) months prior to termination of the then lease term.
TRACT C-8
-1-
<PAGE>
3.
RENT
----
(a) Except as otherwise specifically provided herein, Lessee agrees as of
1 January 1996, to pay to Lessor as rental for the leased premises for each year
of this lease the sum of One Hundred Fifteen Thousand Nine Hundred Forty-Five
and 92/100 ($115,945.92) Dollars per year, payable without demand in equal
monthly installments of Nine Thousand Six Hundred Sixty-Two and 16/100
($9,662.16) Dollars due in advance of the first (1st) day of each month;
further, provided that the base rental set forth in this 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 month's rental under this agreement. Any unapplied balance
of the deposit will be returned to Lessee upon fulfillment of the terms and
conditions of this agreement.
(c) All payments shall be made at, or mailed via 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 taxes, 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.
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 applicable building code and do not conflict with any
written requirement of Lessor's fire and extended coverage insurance policy in
force. 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 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 Premises whether Lessor has given its consent or not 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 plumbing, doors, windows,
interior walls and ceilings, during the term of this lease. 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.
TRACT C-8
-3-
<PAGE>
9.
RESTORATION OF PROPERTY AT TERMINATION OF LEASE
-----------------------------------------------
Lessee shall, at the termination of this lease, restore the 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 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 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 Premises which was not
contemplated by Lessor and Lessee at the time of execution of this lease. Lessee
shall not deface or injure the Premises, or do anything or permit anything to be
done upon the Premises which shall create a nuisance.
12.
UTILITIES
---------
Lessee shall pay for all utilities and services (including Charleston
County Solid Waste Disposal fee) 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.
TRACT C-8
-4-
<PAGE>
13.
LESSOR'S ACCESS TO PREMISES
---------------------------
Lessor's employees, agents and representatives, as the case may be, shall
have the right of entering the Premises to make such repairs and alteration as
may reasonably be required for the safety, care or preservation of the Premises,
to place "For Rent" signs of reasonable number and size on the Premises for a
period of sixty (60) days prior to the termination of this lease, or to show the
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 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 OF 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
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, 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.
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
Premises to the extent that such real property taxes and assessments exceed
Twenty-One Thousand Three Hundred Forty-Six and 78/100 ($21,346.78) Dollars per
year.
TRACT C-8
-5-
<PAGE>
16.
DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
If, during the term of this lease, the 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 the Premises to the
operable condition for which the 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, first causing the Premises to be restored to the
operable condition for which the Premises were being used at the time of the
destruction or damage; and, second substantially returning 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 Premises shall be destroyed or damaged, or partially
destroyed or damaged, to such an extent that the repair of such destruction or
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 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 the 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 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 and to the extent that the Lessor cannot make such repairs 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.
TRACT C-8
-6-
<PAGE>
17.
CONDEMNATION
------------
If the whole of the Premises or the whole of the building included in the
Premises 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 included in the Premises shall be taken
or condemned by any competent authority for any public or quasi-public use or
purpose and the part so taken cannot be replaced at some other location on the
Premises, within ninety (90) days after such taking, by the exercise of
reasonable diligence by the Lessor, so as to render the Premises, after
replacing the part of the building so taken at the new location of the Premises,
suitable for use by the Lessee for the purpose for which the 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 Premises other than the
building or any part of the Premises other than the building shall be taken or
condemned by an competent authority for any public or quasi-public use or
purpose so as to render the remaining portion of the Premises unsuitable for use
by the Lessee for the purpose for which the 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 Premises adjoining the street
or road upon which the 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 Premises unsuitable for use by the Lessee for the purpose for which the
Premises were or condemnation, if Lessor shall make suitable replacement parking
available to Lessee, within a reasonable distance, from the 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 Premises, shall likewise
not be construed as rendering the remaining portion of the Premises unsuitable
for the use of the Lessee for the purpose for which the 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 Premises unavailable for the use by the Lessee for the
purpose for which the 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 shall 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
TRACT C-8
-7-
<PAGE>
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 by
or 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 make an
assignment for the benefit of creditors, Lessor reserves the right to terminate
this Lease forthwith and without notice.
19.
ASSIGNMENT AND SUBLETTING
-------------------------
Lessee shall have the right to assign this lease and to sublet the
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 so long as the
sub-Lessee used the Premises in a manner consistent with the within 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 Premises for the term provided for in
Article 2 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:
TRACT C-8
-8-
<PAGE>
(1) declare the term of this lease ended and re-enter and take possession
of the Premises, or;
(2) pursue any remedy whatsoever provided for by law, or;
(3) re-enter the 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 the 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 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, demand 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.
TRACT C-8
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<PAGE>
25.
SUCCESSORS TO PARTIES
---------------------
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.
26.
ENVIRONMENTAL REGULATIONS
-------------------------
Lessee agrees to comply with all state and federal environmental laws and
regulations and shall in no event store or discharge any hazardous or
contaminated waste on the premises. Lessee shall be responsible for clean-up of
any environmental problems created during its tenancy.
27.
ATTORNEY'S FEES
---------------
In the event that any party hereto (or any third-party beneficiary of this
Agreement) shall bring an action to enforce the terms hereof or to declare right
hereunder, the prevailing party in any such action, shall be entitled to his
court costs and reasonable attorney's fees to be paid by the non-prevailing
party as fixed by the court of appropriate jurisdiction, including, but not
limited to, attorney's fees and court cost incurred in courts of original
jurisdiction, bankruptcy courts, or appellate courts.
28.
CONTROLLING LAW AND ENTIRE AGREEMENT
------------------------------------
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. No representations, inducements, promises, or agreements, oral
or otherwise, between the parties, not embodied herein, shall be of any force or
effect.
TRACT C-8
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<PAGE>
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 Charles B. Swenson,
------------------
its 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/ G.F. Caccamise By: /s/ C. Ronald Coward
- - ----------------------------- -------------------------------
C. Ronald Coward
One of its Partners (Lessor)
- - -----------------------------
As to Lessor
MDT Diagnostic Company
A Delaware Corporation
-------------------
/s/ G.F. Caccamise By: /s/ Charles B. Swenson
- - ----------------------------- -------------------------------
(Lessee)
- - ----------------------------- Its: President
As to Lessee ------------------------------
TRACT C-8
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<PAGE>
STATE OF SOUTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF CHARLESTON )
----------
I, CARLA L. DANDRIDGE, Notary Public for the State of South Carolina, do
------------------ --------------
hereby certify that CAROLINA INDUSTRIAL DEVELOPERS, A Partnership, by C. Ronald
Coward, one of its Partners, personally appeared before me this day and
acknowledged the due execution of the foregoing instrument.
SWORN and subscribed to before me this 14 day of March, 1996.
-- ----- -
/s/ Carla L. Dandridge
-----------------------------------
Notary Public for South Carolina
My commission expires July 1, 2001
------------
(SEAL)
STATE OF SOUTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF )
-------------
I, , Notary Public for the State of ,
--------------------- ----------------
do hereby certify that MDT Diagnostic Company, a corporation, by
--------------
, its , personally appeared before me this day and
- - -------------- ------------
acknowledged the due execution of the foregoing instrument.
SWORN and subscribed to before me this day of , 199 .
--- ----------- -
-----------------------------------
Notary Public for South Carolina
My commission expires
-----------------
(SEAL)
TRACT C-8
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<PAGE>
EXHIBIT 10.7.8
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (hereinafter referred to as "the Lease") is made this
4th day of April 1996 by and between MDT Biologic Corporation (hereinafter
- - --- ----- ------------------------
referred to as "LESSEE"), and YMCA of Annapolis and Anne Arundel County,
Maryland, Inc., a Maryland corporation, its successors and assigns (hereinafter
referred to as "LESSOR"), as follows:
1. PREMISES. LESSOR hereby leases to LESSEE and LESSEE hereby leases from
--------
LESSOR, for the term or terms, and under the covenants and conditions
hereinafter set forth, the real property known as: Suite 209, 1517 Ritchie
---
Highway, Arnold, Maryland 21012, containing approximately 912 square feet of
---
commercial space, and as outlined on the plan attached hereto and made a part
hereof as Exhibit A (said suite(s) being hereinafter referred to as the
---------
"Premises", and the building of which the Premises are a part being hereinafter
referred to as the "Building").
2. TERM.
----
2.1. INITIAL TERM. The term of this Lease shall commence on April 1, 1996
------------ -------------
and shall be for a period of two (2) year(s) ending on May 31, 1998 unless
--- - ------------
sooner terminated or extended as hereinafter provided.
2.2. RENEWAL TERM. Provided the LESSEE is not in default hereunder,
------------
either at the time of the giving of notice or at the commencement of such
renewal term, the LESSEE shall have the option to renew this Lease for N/A ( )
--- --
additional term(s) of N/A ( ) years(s), commencing at the expiration of the
--- --
original term and terminating on the anniversary of such expiration, by giving
to the Landlord express, written notice of such renewal not less than N/A ( )
--- --
days before the date on which the renewal term is to commence.
3. RENT.
----
3.1 BASE RENT-ORIGINAL TERM. LESSEE agrees to pay to LESSOR an annual Base
-----------------------
Rent in the sum of Nine Thousand Five Hundred Seventy-six and No/100 DOLLARS
-------------------------------------------------
($9,576.00). Base Rent shall be paid in equal monthly installments of Seven
-------- -----
Hundred Ninety-eight and No/100 DOLLARS ($798.00) on or before the first day of
- - ------------------------------- ------
each calendar month hereunder, without demand being made therefore. Monthly
payments of rent shall be made payable to LESSOR and mailed or delivered to
LESSOR at the following address:
YWCA of Annapolis & Anne Arundel County, Maryland, Inc.
Suite 201, 1517 Ritchie Highway
Arnold, Maryland 21012
or to such other person, or at such other place, as LESSOR may from time to time
designate in writing. LESSOR hereby acknowledges receipt of the rent for the
initial month hereunder. The annual Base Rent payment shall be adjusted as of
each anniversary of the commencement of this Lease upon notice to LESSEE by
LESSOR pursuant to the terms of Section 20 of this Lease. The Base Rent for any
partial month shall be prorated based on the number of days in said month.
3.2. PAYMENT OF RENT. It is agreed and understood by all parties to this
---------------
Lease that any rental payment not received by the LESSOR within five (5) days of
the due date shall be subject to imposition of a late charge of ten percent
(10%) of the monthly rental. Said late charge, if not remitted with the
delinquent rental payment shall be due and payable with the following rental
payment and shall constitute Additional Rent.
3.3. ADDITIONAL RENT. In addition to the Base Rent set forth in Section
---------------
3.1. of this Lease, LESSEE shall pay LESSOR as Additional Rent LESSEE'S
Proportionate Share (as set forth herein) of the expenses described in, but not
limited to, Sections 5, 6, 7, 11, 12.1 and 22 of this Lease. LESSEE shall also
pay LESSOR as
1
<PAGE>
Additional Rent any and all other charges and/or sums due or payable to LESSOR
under the terms of this Lease. Except as otherwise provided in this Lease,
LESSEE shall pay such Additional Rent with the next monthly installment of Base
Rent due after LESSOR notifies LESSEE of the amounts of any such Additional
Rent. In the alternative and any provisions in this Lease to the contrary
notwithstanding, LESSOR may, at its discretion: (a) make reasonable estimates
of the Additional Rent which may become due hereunder for any calendar year; (b)
require LESSEE to pay to LESSOR one hundred percent (100%) of such estimated
annual amount of Additional Rent on a quarterly or monthly basis; and (c)
increase or decrease from time to time for any calendar year the estimate of
Additional Rent due for such year. LESSEE'S Proportionate Share for the
purposes of this Lease shall be 3.767% in that the Premises constitute 3.767% of
----- -----
the total leaseable square footage of the Building.
4. USE. The Premises are to be used for the purpose of an office and
--- ---------
for no other purposes whatsoever without prior written consent of LESSOR. LESSEE
shall at its own cost expense obtain any and all licenses and permits for such
use and shall satisfy and all rules, regulations, and ordinances applicable
thereto.
5. UTILITIES. LESSEE shall be solely responsible for and shall promptly
---------
pay all charges for water, sewer, heat, gas, electricity, and/or any other
utility used or consumed in connection with the Premises and shall provide
trash and refuse removal. LESSEE shall be responsible for its Proportionate
Share of all common area utilities, elevator service and common area alarm
systems. If water and sewer service is not separately metered for the Premises,
water and sewer charges against the Building will be paid by LESSOR and LESSEE
shall thereupon be billed for its Proportionate Share of the cost thereof as set
forth in Section 3.3. of this Lease. LESSEE shall have all utility accounts
(except water and sewage) placed in the name of LESSEE.
6. TAXES. LESSEE agrees to pay to LESSOR its Proportionate Share of the
-----
real property, front foot benefit, metropolitan district and other similar taxes
or public or private assessments (whether regular or special) levied against any
or all of the Property (provided, however, that an appropriate adjustment shall
be made for any tax exemption granted to LESSOR), and to pay, or cause to be
paid, any and all taxes of whatever nature levied against the personal property,
including trade fixtures, equipment and inventory kept on the Premises and/or
used from the Premises, and any and all use, employee, business or other taxes
incurred by LESSEE'S operation.
7. MAINTENANCE.
-----------
7.1. LESSEE, at LESSEE'S expense, shall keep and maintain the interior of
the Premises in good order and repair, and shall return same to LESSOR at the
termination of this Lease (and/or any renewal) in the same condition as
received, reasonable wear and tear excepted.
7.2.1. LESSEE, at LESSEE'S expense, shall perform all routine maintenance
and/or service on the mechanical, plumbing, electrical, and HVAC equipment
and/or systems located in or serving the Premises and shall keep and maintain
such equipment and/or systems in good order and repair during the term of this
Lease or any renewal. LESSEE further agrees to pay LESSOR as Additional Rent
LESSEE'S Proportionate Share of the cost of all necessary repair, maintenance
and/or service to the mechanical, plumbing, electrical and HVAC equipment and/or
systems which otherwise service the Premises. In the event that it becomes
necessary to replace any of the mechanical, plumbing, electrical and/or HVAC
systems existing as of the date of this Lease, and/or any portion thereof, then
LESSEE agrees to replace such equipment and/or systems as are located on the
Premises at LESSEE'S expense and/or pay LESSOR LESSEE'S Proportionate Share of
the cost of replacing such equipment and/or systems, which otherwise service the
Premises (as the case may be) as Additional Rent.
2
<PAGE>
7.2.2. In the event that LESSOR shall perform and/or provide any repairs,
maintenance, service and/or replacement for which LESSEE is responsible under
subsection 7.2.1. of this Lease, LESSEE shall pay LESSOR the cost of any such
repairs, maintenance, service and/or replacement as Additional Rent.
7.2.3. Notwithstanding the provisions of subsections 7.2.1. and 7.2.2. and
as an alternative thereto, LESSOR and LESSEE may agree that LESSOR may purchase,
at LESSEE'S expense, a service policy or policies providing for the repair,
maintenance, service and/or replacement of the mechanical, plumbing, electrical
and HVAC equipment and/or systems located in and/or otherwise servicing the
Premises during the term of this Lease or any renewal. If LESSOR and LESSEE so
agree, then LESSEE shall pay LESSOR as Additional Rent, the full cost of any
policy or policies covering equipment and/or systems which service the Premises
exclusively, and LESSEE'S Proportionate Share of the cost of any policies
covering equipment and/or systems which otherwise service the Premises. Upon the
purchase of such policy or policies, and so long as they remain in force, LESSEE
pays all of such Additional Rent charges, and LESSEE, its agents, servants
and/or employees do not engage in any conduct which would contravene, void and
otherwise affect such policies, LESSEE shall not be responsible for the cost of
any necessary repairs, maintenance, service and/or replacement of the equipment
and/or systems except for such repairs, maintenance, service and/or replacement
as may be necessitated by an intentional or negligent act or omission on the
part of the LESSEE, its agents, servants and/or employees and/or which are not
covered by such policy or policies.
7.2.4. Notwithstanding the provisions of subsection 7.2.2. and/or any other
provisions of this Lease, nothing in this Lease shall be construed or
interpreted as any agreement and/or undertaking by LESSOR to repair, service
and/or maintain the Premises and/or its systems and/or appurtenances during the
term of this Lease or any renewal.
7.3. LESSEE agrees to replace any plate, window or door glass broken in the
Premises, with glass of like kind and quality, except when said plate, window or
door glass is broken by reason of defective construction of the Building, or due
to negligent repair of the Building by LESSOR. LESSEE shall further obtain and
maintain during the term of this Lease and any renewal, at LESSEE'S expense,
plate glass insurance on the Premises in such amount and with such insurer as
may be satisfactory to LESSOR. If LESSOR so requires LESSOR shall be designated
as a named insured on any such policy of insurance upon LESSOR'S request. In
the alternative, and at LESSOR'S option, LESSOR may purchase such insurance and
LESSEE shall pay LESSEE'S Proportionate Share of the cost of such insurance to
LESSOR as Additional Rent hereunder.
7.4. LESSEE shall pay LESSOR as Additional Rent LESSEE'S Proportionate
Share of the cost of all common area services, maintenance and repairs
including, without limitation, refuse and trash removal.
8. ALTERATIONS, ADDITIONS AND IMPROVEMENTS.
---------------------------------------
8.1. LESSOR shall prepare the Premises in accordance with Exhibit B at
LESSOR'S expense. All such alterations, additions and improvements shall become
the property of LESSOR.
8.2. Upon LESSOR'S completion of the work provided for in Section 8.1., or
at such earlier time as LESSOR may agree, LESSEE may make such other
improvements to the premises in preparation for and in the conduct of its
business as LESSEE deems necessary and/or appropriate, at LESSEE'S expense,
subject to LESSOR'S prior written consent. LESSEE warrants that any and all
such alterations, additions and/or improvements made pursuant to this subsection
shall be made in a good, workmanlike manner and in full and complete compliance
with all laws, rules, regulations, and ordinances and in satisfaction of the
requirements of such building, fire, safety, health and other codes as may now
be or hereafter become applicable, without cost to LESSOR. All alterations,
additions and improvements shall become the property
3
<PAGE>
of the LESSOR; however, upon written notice by LESSOR to LESSEE prior to the
expiration of this Lease and/or renewal, LESSEE agrees to remove such
alterations, additions and improvements and to restore the Premises to its
original condition at LESSEE'S expense, normal wear and tear excepted.
8.3. By executing this Lease, LESSEE acknowledges that, LESSEE has
inspected the Premises (except for the alterations, additions and improvements
provided for by Section 8.1.), that they are in good order and repair, and that
LESSEE accepts them "as is" and waives any defects therein.
8.4. If any mechanic's lien, materialmen's lien or other lien is filed
against the Premises, the Building, the property upon which the Building is
located and/or any portions thereof, by reason of any work, labor, equipment,
materials and/or services, furnished and/or alleged to have been furnished to or
for LESSEE or for any changes, alterations, additions, improvements and/or
repairs made by LESSEE, LESSEE shall cause said lien to be released of record
within five (5) days after the filing of such lien. LESSEE shall further
indemnify and hold LESSOR harmless from any and all claims, demands, suits,
actions, losses, liability and damages arising out of and/or relating to any
such lien or claim of lien.
9. TRADE AND OTHER FIXTURES. LESSEE may, at LESSEE'S expense, install or
------------------------
cause to be installed such equipment, machinery, trade and/or other fixtures as
are reasonably necessary for the operation and conduct of LESSEE'S business. Any
such trade fixtures shall remain LESSEE'S personal property and may be removed
by LESSEE, provided that LESSEE shall repair at LESSEE'S expense any damage to
the Premises resulting from the installation and/or removal of such trade
fixtures.
10. CASUALTY DAMAGE. Upon the occurrence of any casualty, damage or
---------------
destruction affecting the Premises, LESSEE shall give immediate notice to
LESSOR. If, in the opinion of LESSOR, the Premises are rendered substantially
unfit for occupancy or use by any such casualty, damage or destruction, or
LESSOR should decide not to rebuild or remodel the Premises, this Lease shall
cease and Base Rent and Additional Rent shall abate from the occurrence of such
casualty or vacation of the Premises, whichever is later. If, in the opinion of
LESSOR, the Premises are not thereby rendered substantially unfit for occupancy
or use, LESSOR shall promptly and diligently restore so much of the Premises as
was damaged to its condition at the commencement of this Lease, exclusive of the
Tenant Improvement Items, with no abatement of rent.
11. FIRE INSURANCE. LESSOR shall provide, and pay the premiums for, fire
--------------
and extended coverage to protect the Building with coverage amounts and with an
insurer satisfactory to LESSOR. LESSEE will not do anything in or about the
Premises that will contravene or affect any insurance which LESSOR may place
thereon. LESSEE will pay as Additional Rent its Proportionate Share of such
insurance upon being billed therefor by LESSOR and shall pay the entire cost of
any increase in the insurance premium due to LESSEE'S use of the premises.
12. INSURANCE AND LIABILITY.
-----------------------
12.1. LESSEE, at LESSEE'S sole expense, shall maintain in force continuously
throughout the term of this Lease and/or any renewal, a comprehensive general
liability policy with respect to the Premises and LESSEE'S occupancy, use and/or
operations of, on and/or about the Premises, in such amounts as LESSOR may
require from time to time but in no event less than $500,000.00 for any one
person and $1,000,000.00 for any one occurrence with respect to death, bodily
injury and/or personal injury and $100,000.00 for each occurrence with respect
to damage and/or destruction of property; such insurance shall be with an
insurer satisfactory to LESSOR and shall include coverage for and/or against
assumed and/or contractual liability under this Lease. Such insurance shall
include LESSSOR and LESSOR'S management agent as named insured and LESSEE shall
promptly furnish LESSOR with a Certificate from the insurer that such insurance
is in effect. In the event that the
4
<PAGE>
insurer imposes any premium charge on LESSOR and/or LESSOR pays the premium for
such insurance, LESSEE shall reimburse LESSOR for such charges; LESSEE shall pay
such charges as Additional Rent. LESSEE shall be responsible for LESSEE'S
Proportionate Share of the cost of any public liability insurance maintained by
LESSOR with respect to the Building and property on which it is situated.
12.2. LESSOR and its management agent shall not be liable and/or
responsible for, and LESSEE shall indemnify and hold LESSOR and its management
agent harmless against any and all damages and claims for damages, including
but not limited to damages and/or claims for damages for the death, bodily
injury and/or personal injury to any person and/or any injury, loss and/or
damage to any property occurring on and/or relating to or arising out of
LESSEE'S occupancy and/or use of the Premises, the Building and/or their
appurtenances, unless such death, bodily injury, personal injury and/or injury,
loss or damage to property and other damage was proximately caused by the
negligent and/or intentionally tortious act or omission of the LESSOR, its
management agent and/or some agent, servant, and/or employee for whose conduct
they are legally responsible. Notwithstanding the foregoing, LESSOR and its
management agent shall not be liable and/or responsible for any such damages
and/or claims for damages for any such injury, loss and/or damage occurring on
or about the Premises, the Building and/or their appurtenances, regardless of
whether such injury, loss and/or damage was proximately caused by the
negligent act or omission of LESSOR and its management agent and/or an agent,
servant, and/or employee for whose conduct they are legally responsible, where
such Premises, Building and/or appurtenances are within the exclusive control of
LESSEE.
12.3. LESSEE further agrees that LESSOR shall not be liable and/or
responsible for, and to hold LESSEE harmless against any and all intentionally
tortious and/or negligent acts and/or omissions of any other persons leasing
from LESSOR and their agents, servants, employees, contractors, invitees, and/or
visitors.
13. COMPLIANCE WITH LAWS. LESSEE agrees to promptly comply with all
--------------------
applicable and valid laws, ordinances and regulations of any and all Federal,
State, County, Municipal or other lawful authorities pertaining to the use and
occupancy of the Premises.
14. ASSIGNMENT AND SUBLETTING. LESSEE shall not assign this Lease or
-------------------------
allow the same to be assigned by operation of law or otherwise, or sublet the
Premises or any part thereof, or use of permit same to be used for any purpose
other than as above specified, without LESSOR'S prior written consent, which
consent may be withheld in LESSOR'S sole discretion. Any such assignment or
sublease which is made without LESSOR'S consent shall be void and of no force
and effect. Any such assignment or sublease which is made with LESSOR'S consent
shall be subject to all of the terms and conditions of this Lease. If any
partnership interest in, or any corporate share of stock of LESSEE are
transferred by sale, assignment, bequest, inheritance, operation of law or
otherwise, so as to result in a change of the voting control of LESSEE by those
owning a majority of the interest in LESSEE as of the date hereof, such transfer
shall constitute an assignment for the purposes hereof and shall require
LESSOR'S prior written consent thereto. In any event, LESSEE shall notify
LESSOR of such change of control and LESSOR may terminate this Lease at any time
thereafter upon sixty (60) days' prior written notice to LESSEE.
15. BANKRUPTCY. Should LESSEE make an assignment for the benefit of
----------
creditors, file for bankruptcy, or have any involuntary petition in bankruptcy
filed against it, such action shall constitute a breach of the Lease, which
shall automatically terminate all rights of LESSEE under this LEASE. Upon the
filing of a petition by or against LESSEE under the Federal Bankruptcy Code (or
any successor federal bankruptcy statute), LESSEE, as debtor and/or as debtor in
possession, and any trustee who may be appointed, agree to perform each and
every obligation of LESSEE under this Lease, including, but not limited to, the
payment of all monetary obligation hereunder, until such time as this Lease is
either rejected or assumed by order of a United States Bankruptcy Court, or
other federal court having jurisdiction over bankruptcy matters.
5
<PAGE>
16. EMINENT DOMAIN. If all or any part of the Premises are taken under
--------------
power of eminent domain or conveyed under threat of condemnation proceedings and
LESSOR shall determine that the remainder of the Premises is inadequate or
unsatisfactory for the purpose of this Lease, then this Lease shall terminate
effective as of the date LESSEE is required to give up the right to occupy or
use the Premises. LESSEE shall have no right to make any claim against LESSOR
because of such termination, nor to participate in any awards.
17. ATTORNEYS' FEES. LESSEE shall pay LESSOR all costs, expenses and
---------------
charges incurred by LESSOR in collecting any sums due LESSOR under this Lease,
and/or enforcing any provisions of this Lease, and/or recovering any damages
and/or losses from LESSEE to which LESSOR is legally entitled, including, but
not limited to, reasonable attorneys' fees.
18. DEFAULT.
-------
18.1. In the case of any default of LESSEE in any of the terms and/or
conditions of this Lease (other than any default occasioned by the institution
of bankruptcy proceedings and/or an assignment for the benefit of creditors
which shall be governed by Section 15 of this Lease), LESSOR, at LESSOR'S
option, may recover the Premises if such default continues uncured for a period
of ten (10) days after LESSOR notifies LESSEE of such default and of LESSOR'S
intention to recover the Premises. Upon the giving of such notice and the
expiration of such ten (10) day period, unless LESSEE shall have cured the
default during that time, LESSOR shall be entitled to repossess and/or relet the
Premises as the agent of LESSEE for any balance of the then term and collect
rent therefor. And in any event, the LESSOR may distrain, by any legal means,
for any overdue installment of rent or rental payment and may enter the property
for such purpose by force if necessary without liability, which liability is
hereby expressly waived. In the event of reletting by the LESSOR as agent for
the LESSEE, the reletting shall be on such terms, conditions and rentals as the
LESSOR deems proper, and the proceeds that may be collected from same, less the
expense of reletting, including any broker's commission and costs for the
repair, restoration and/or preparation of the Premises for reletting, shall be
applied against the rental to be paid by LESSEE, and LESSEE shall be liable for
any balance that may be due under this Lease or any renewal, and such reletting
shall not operate as termination of this Lease or any renewal or as a waiver or
postponement of any right of LESSOR against the LESSEE. Any recovery of the
Premises, institution of proceedings to recover the Premises, re-entry,
repossession and/or reletting hereunder shall not operate as, nor shall it be
interpreted or construed as a termination of this Lease or any renewal, and
shall not relieve LESSEE of its liability and obligations under this Lease and
LESSEE shall in all events remain liable for the full amount of Base Rent and
Additional Rent provided for in this Lease and for any deficiency or loss of
such rent; LESSOR, at LESSOR'S option, may recover such rent and/or damages for
the loss of rent in separate actions from time to time as LESSEE'S liability
and/or obligation to pay rent accrue or would have accrued had LESSEE not
defaulted. Any such recovery, institution of legal proceedings, re-entry,
repossession, and/or reletting shall be in addition to and without prejudice to
any rights and/or remedies which LESSOR may otherwise have.
18.2. Notwithstanding any provision of Section 18.1. to the contrary,
LESSOR shall be entitled immediately upon a default by LESSEE to avail himself
of all rights and remedies afforded LESSOR by this Lease and/or law, without any
notice to LESSEE and without giving LESSEE any grace period if such default
arises under Section 15 of this Lease, or if LESSEE has defaulted in and/or
breached the same and/or any other term and/or condition of this Lease during
the twelve (12) months preceding such current default and for which notice was
given (whether or not subsequently cured), or if such default is of such a
nature as to give rise to an emergency situation which in LESSOR'S reasonable
judgment requires LESSOR to take immediate action to cure such default.
19. HOLDING OVER. Should LESSEE continue to occupy the Premises, or any
------------
portion thereof, after the termination of this
6
<PAGE>
Lease (and/or any renewal) and unless otherwise agreed in writing, LESSEE shall
pay LESSOR on demand an amount equal to two hundred percent (200%) of the rent
due for the last full month of the term of this Lease (or renewal) for each
month or portion thereof that LESSEE continues to occupy all or any part of the
Premises. Such payments shall not be deemed to be rent and acceptance of any
such payments by LESSOR shall not be deemed or construed to convert LESSEE into
a month to month tenant or otherwise grant LESSEE any right to remain in
possession of the Premises or so as to otherwise impair LESSOR'S right to the
immediate possession of the Premises. Similarly, any such payments shall be in
addition to and without prejudice to LESSOR'S right to recover any damage to
which LESSOR otherwise would be entitled as a result to LESSEE'S holding over.
20. CPI CLAUSE. The annual Base Rent, and the monthly installments
----------
thereof, shall be increased on the first anniversary of this Lease and each and
every anniversary thereafter by the greater of (i) six percent (6%) or (ii) the
percentage increase in the Consumer Price Index (defined below) over the year
which ends on or about said anniversary date. The Consumer Price Index shall
mean the "Consumer Price Index for All Urban Consumers (CPI-U), for Washington,
D.C. SMSA, All Items 1982-84-100" as issued by the Bureau of Labor Statistics of
the United States Department of Labor. In the event that the Consumer Price
Index is replaced and/or discontinued, the term Consumer Price Index is replaced
and/or discontinued, the term Consumer Price Index as used herein shall also
mean such other replacement or substitute index as may be issued and/or adopted
by the Bureau of Labor Statistics of the United States Department of Labor.
21. RIGHT OF ENTRY. Notwithstanding any other provisions of this Lease
--------------
to the contrary, LESSOR and its agents shall have the right to enter the
Premises at any reasonable times to inspect the Premises, to exhibit the
Premises to any existing or prospective purchasers, lessees and/or mortgagees,
to make any alterations, improvements and/or repairs, or for any other purpose
relating to the operation and/or maintenance of the Premises and/or Building.
Unless it would otherwise be impractical because of any emergency, LESSOR shall
give LESSEE at least twenty-four (24) hours notice of LESSOR'S intention to
enter the Premises and LESSOR shall use reasonable efforts to avoid interfering
with LESSEE.
22. SIGNS.
-----
22.1. Subject to LESSOR'S approval and consent, LESSEE may install, at
LESSEE'S expense, interior and exterior signs on the Premises. All signs shall
conform to all rules, regulations and ordinances governing signs and shall be
only as approved by LESSOR. At the termination of this Lease, LESSEE shall
remove all such signs and shall repair any damages resulting from the
installation and/or removal of such signs, at LESSEE'S expense.
22.2. Subject to space availability, LESSEE may place a sign advertising
its business on any pole, marquee or other directory type sign which LESSOR may
install and/or maintain for the Building. LESSEE'S sign shall conform to all
applicable rules, regulations, and ordinances and shall be at LESSEE's expense
LESSEE shall also pay its Proportionate Share of the cost of installing and/or
maintaining said directory sign. Such costs shall be billed by LESSOR to LESSEE
from time to time and shall not exceed a sum determined by dividing the total
cost of LESSOR by the number of occupants' signs included on the directory.
LESSEE shall pay such costs as Additional Rent.
23. SUBORDINATION. This Lease is subject and subordinate to all
-------------
mortgages, deeds of trust, or other debt instruments which may now or hereafter
affect such lease, the Building, site or other improvements thereon. The
foregoing provisions shall be self operative and no further instrument of
subordination shall be required by any mortgagee or other interested party,
provided, however, that in confirmation of such subordination LESSEE shall, upon
request of LESSOR, executed and deliver, in recordable form, any instrument or
subordination required by LESSOR, and LESSEE hereby does constitute and appoint
LESSOR as LESSEE'S attorney-in-fact to execute any such subordination instrument
on behalf of LESSEE.
7
<PAGE>
24. CONTINUOUS USE. Anything herein to the contrary notwithstanding,
--------------
this Lease shall be deemed in default if LESSEE shall discontinue the business
referred to in Paragraph 4 herein, the Premises shall become or appear vacant,
or LESSEE abandons or appears to abandon the Premises. Under any of the
aforesaid conditions the LESSOR may exercise its rights as stated in Paragraph
18 herein.
25. NO PARTNERSHIP. By execution of this Lease, LESSOR does not in any
--------------
way become for any purpose a partner, principal, master, agent, servant, and/or
employee of the LESSEE in the operation and/or conduct of LESSEE'S business nor
does LESSOR assume, nor become subject to any responsibility or liability
therefore and LESSEE agrees to indemnify and hold LESSOR harmless against any
and all claims or demands, of whatever nature, arising out of the operation and
conduct of LESSEE'S business.
26. NOTICES. Any notice required or permitted hereunder shall be in
-------
writing and delivered either in person against hand receipt to the other party
or other party's authorized agent, or by the United States Certified Mail Return
Receipt Requested, postage fully paid, to the address set forth hereinafter, or
to such other address as either party may designate in writing and delivered as
herein provided.
LESSOR: YWCA of Annapolis and Anne Arundel County
c/o Benchmark Realty Corporation
Suite 201, 1460 Gov. Ritchie Highway
Arnold, Maryland 21012
LESSEE: MDT Corporation
_________________________________________
_________________________________________
_________________________________________
27. SEVERABILITY. No determination by any court, governmental body or
------------
otherwise that any provision of and/or amendment to this Lease is invalid or
unenforceable in any instance shall affect the validity or enforceability of
such provision and/or amendment in any other instance not controlled by such
determination and no such determination as to any provision and/or amendment
shall affect the validity or enforceability of any other provisions, the terms
and conditions of this Lease being severable.
28. COMPLETE AGREEMENT. This Lease constitutes the complete agreement
------------------
between the LESSOR and LESSEE and supersedes any and all other agreements,
understandings, representations, and/or statements between them as to the
subject matter of this Lease.
29. WAIVER. Any waiver of any term or condition of this Lease shall
------
extend to the particular case only, and only in the manner specified and shall
not be construed as applying to or in any way waiving any further rights under
this Lease. No waiver of any term or condition of this Lease by LESSOR shall be
effective unless in writing and signed by LESSOR and/or its management agent.
30. AMENDMENTS. This Lease may be amended or modified only by written
----------
agreement signed by all parties.
31. SECURITY DEPOSIT. Upon the execution of this Lease LESSEE shall
----------------
deposit with LESSOR a security deposit in the amount of N/A DOLLARS
----------------
($ N/A ) to be held by LESSOR without interest until LESSEE vacates the
-----------
Premises, less any damages to the Premises or monies due LESSOR.
32. RULES AND REGULATIONS. LESSOR shall have the option to establish, at
---------------------
its sole discretion, reasonable rules and regulations governing the use of the
Premises, Building and the Property by all tenants, their visitors, invitees and
employees, and to amend the
8
<PAGE>
same from time to time. The current rules and regulations are attached hereto
as Exhibit C.
---------
33. HEIRS AND ASSIGNS. This Lease shall be binding upon the parties
-----------------
hereto and their respective heirs, executors, administrators, successors in
interest and assigns.
34. VENUE AND JURISDICTION. LESSOR and LESSEE agree that any claim and/or
----------------------
controversy arising out of and/or relating to this Lease shall be brought only
in the District Court of Maryland for Anne Arundel County and/or Circuit Court
for Anne Arundel County, Maryland, to whose jurisdiction the parties hereby
agree and submit; nothing in this Section however, shall preclude either party
from bringing any appropriate Third Party Claim, Cross Claim or other claim
against the other in any action or suit instituted in any other Court by anyone
not a party to this Lease. LESSOR and LESSEE hereby mutually waive any right to
trial by jury in any action instituted by or against the other arising out of
this Lease.
35. JURY WAIVER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
-----------
HERETO EACH WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION, CAUSE
OF ACTION, OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THE LEASE OR
THE LANDLORD/TENANT RELATIONSHIP, AND UNDER ANY PROVISION OF LAW OR EQUITY,
WHETHER NOW EXISTING OR HEREAFTER ARISING.
36. QUIET ENJOYMENT. LESSOR covenants that LESSEE, so long as it
---------------
complies with the terms hereof, shall peaceably and quietly hold and enjoy the
Premises for the term of this Lease.
36. STORAGE. In addition to the Base Rent set forth in Section 3.1 of the
-------
Lease, LESSEE shall pay LESSOR as Additional Rent N/A Dollars
--------------------
($ N/A ) per month for the right to use N/A ( N/A ) storage closet in the
------- ------- -----
lower level of the Building during the term of the Lease.
WITNESS the hands and seal of the parties hereto as of the day and year
first above written.
WITNESS OR ATTEST: LESSEE: MDT Biologic Corporation
By: (SEAL)
- - --------------------------------- --------------------------------
Title:
-----------------------------
LESSOR: YWCA of Annapolis and
Anne Arundel County,
Maryland, Inc.
By: (SEAL)
- - --------------------------------- --------------------------------
Title:
-----------------------------
9
<PAGE>
[DIAGRAM OF SUITE 209]
<PAGE>
EXHIBIT B
---------
Description of Improvements to Premises
---------------------------------------
Tenant accepts the Demised Premises "as-is."
<PAGE>
EXHIBIT C
---------
Current Rules and Regulations
-----------------------------
1. The sidewalks, driveways and parking areas shall not be obstructed by
the LESSEE or used by the LESSEE for any purpose other than ingress and egress
from and to the Premises.
2. The toilet rooms, water closets, sinks, faucets, plumbing and other
service apparatus of any kind shall not be used by the LESSEE for any purpose
other than those for which they were installed, and no sweepings, rubbish, rags,
ashes, chemicals or other refuse or injurious substances shall be placed therein
or used in connection therewith by the LESSEE.
3. No skylight, window, door or transom of the Building shall be covered
or obstructed by the LESSEE, and no window shade, blind, curtain, screen, storm
window, awning or other material shall be installed or placed on any window or
in any window space, except as approved in writing by the LESSOR.
4. No sign, lettering, insignia, advertisement, notice or other thing
shall be inscribed, painted, installed, erected or placed in any portion of the
Premises which may be seen from the outside the Building, or on any window,
window space or other part of the exterior or interior of the Building, unless
first approved in writing by the LESSOR.
5. The LESSEE shall not install any other lock in or upon any door within
the Premises or elsewhere in the Building, and shall surrender all keys for all
locks at the end of the Lease term. The LESSOR shall provide the LESSEE with
one set of keys to the Premises when the LESSEE assumes possession thereof.
6. The LESSEE shall not do or permit to be done anything which obstructs
or interferes with the rights of any other tenant of the Property. The LESSEE
shall not keep anywhere within the Property any matter having an offensive odor,
or any kerosene, gasoline, benzine, camphene, fuel or other explosive or highly
flammable material. No bird, fish or other animal shall be brought into or kept
in or about the Premises.
7. If the LESSEE desires to install communication, data, security or
other wires, apparatus or devices within the Premises, the LESSOR first shall
approve where and how they are to be installed and, except as so approved, no
installation, boring or cutting shall be permitted. The LESSOR shall have the
right (a) to prevent or interrupt the transmission of excessive, dangerous or
annoying current of electricity or otherwise into or through the Building or the
Premises, (b) to require the changing of wiring connections or layout at the
LESSEE'S expense, to the extent that the LESSOR may deem necessary, (c) to
require compliance with such reasonable rules as the LESSOR may establish
relating thereto, and (d) in the event of noncompliance with such requirements
or rules, immediately cut wiring or do whatever else it considers necessary to
remove the danger, annoyance or interference to or with persons or apparatus in
any part of the Building. Each wire installed by the LESSEE must be clearly
tagged at each distributing board and junction box and elsewhere as required by
the LESSOR.
8. The LESSOR shall have the right to rescind, suspend or modify the
Rules and Regulations and to promulgate such other Rules and Regulations as, in
the LESSOR'S reasonable judgment, are from time to time needed for the safety,
care, maintenance, operation and cleanliness of the Building, or for the
preservation of good order therein. Upon the LESSEE'S having been given notice
of the taking of any such action, the Rules and Regulations as so rescinded,
suspended, modified or promulgated shall have the same force and effect as if in
effect at the time at which the LESSEE'S lease was entered into (except that
nothing in the Rules and Regulations shall be deemed in any way to alter or
impair any
<PAGE>
provision of such lease).
9. The use of any room within the Building, as sleeping quarters is
strictly prohibited at all times.
10. Nothing in these Rules and Regulations shall give any tenant any right
or claim against LESSOR or any other person for LESSOR's failure to enforce
these Rules and Regulations against any other tenant or person (whether or not
the LESSOR has the right to enforce them against such tenant or person), and no
such lack of enforcement with respect to any tenant shall constitute a waiver of
LESSOR's right to enforce them as to the LESSEE or any other person.
11. All vehicles shall be parked in the marked parking spaces. Employee and
company vehicles shall not be parked in the parking spaces which are adjacent to
the front of the building.
12. There shall be no smoking in any of the common areas of the Building.
<PAGE>
Exhibit 10.8.3
AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into
as of February 15, 1996, by and among MDT CORPORATION, a Delaware corporation
("MDT"), MDT BIOLOGIC COMPANY, a Delaware corporation ("Biologic"), MDT
DIAGNOSTIC COMPANY, a Delaware corporation ("Diagnostic"), MDT CANADA LIMITED,
an Ontario Canada corporation ("Canada"), MDT TECHNIONIC COMPANY, a Delaware
corporation ("Technionic") (each individually, a "Company" and collectively, the
"Companies"), the financial institutions listed on the signature pages of the
below-referenced Credit Agreement under the heading "BANKS" (each a "Bank" and,
collectively, the "Banks") and WELLS FARGO BANK, NATIONAL ASSOCIATION as agent
for the Banks thereunder (in such capacity, the "Agent"), with reference to the
following facts:
A. The Companies (other than Technionic), the Banks, and the Agent
heretofore have entered into that certain Credit Agreement, dated as
of August 20, 1993 (the "Original Credit Agreement");
B. The Companies, the Banks, and the Agent heretofore have entered into
that certain Amendment to Credit Agreement, dated as of August 1, 1995
(the "August 1, 1995 Amendment"), to amend the Original Credit
Agreement to, among other things, add Technionic as a co-borrower (the
Original Credit Agreement, as amended by the August 1, 1995 Amendment
and as otherwise amended, restated, modified, or supplemented from
time to time, is referred to herein as the "Credit Agreement");
C. The Companies have requested the Banks and the Agent to waive the non-
compliance by the Companies of certain financial covenants and, in
connection therewith, amend further the Credit Agreement to, among
other things, modify certain financial covenants and certain
provisions regarding the Revolving Credit, and the requisite Banks and
the Agent are willing to waive such non-compliance and to so amend the
Credit Agreement, in each case, in accordance with the terms hereof;
and
D. All capitalized terms used herein and not defined herein shall have
the meanings ascribed to them in the Credit Agreement.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the Companies, the
Banks, and the Agent hereby agree as follows:
<PAGE>
1. Amendments to Credit Agreement.
------------------------------
a. The following defined terms hereby are added to Section 1.1
-----------
of the Credit Agreement in alphabetical order:
"Account Debtor" means any Person who is or who may become
--------------
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising
--------
accounts, contract rights, and all other forms of obligations owing to the
Companies, or any of them, arising out of the sale or lease of goods or the
rendition of services by the Companies, or any of them, irrespective of
whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Blocked Account" means a depositary account established or
---------------
maintained pursuant to one of the Blocked Account Agreements.
"Blocked Account Agreements" means one or more blocked account
--------------------------
agreements and/or lockbox agreements, in form and substance satisfactory to
the Agent, each of which is among the Companies, the Agent, and one of the
Blocked Account Banks.
"Blocked Account Banks" means Bank of America, National Trust and
---------------------
Savings Association, any Bank, and/or such other commercial banks (if any)
as the Companies and the Agent may agree upon from time to time.
"Borrowing Base" has the meaning set forth in Section 2.1(a)(ii).
-------------- ------------------
For purposes of this definition, any amount that is denominated in a
currency other than Dollars shall be valued in Dollars based on the
applicable Exchange Rate for such currency as of the date one Business Day
prior to the date of determination.
"Code" means the California Uniform Commercial Code.
----
"Collateral" means all property (and interests therein), whether
----------
personal or real or mixed, tangible or intangible, or now existing or
hereafter arising or acquired, that now or hereafter secure the payment of
the Indebtedness and performance of any of the obligations of one or more
of the Companies pursuant to the Loan Documents.
"Collateral Access Agreement" means a landlord waiver, mortgagee
---------------------------
waiver, bailee letter, or a similar acknowledgement agreement of
2
<PAGE>
any warehouseman, processor, or other Person in possession of Inventory,
in each case, in form and substance satisfactory to the Agent.
"Collections" means all cash, checks, notes, instruments, and
-----------
other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds).
"Consolidated Loss Condition" means that either (a) as of the
---------------------------
fiscal quarter ending June 30, 1996, the Companies shall have a profit
before taxes of at least a negative One Hundred Thousand Dollars
(<$100,000>), or (b) (i) as of the fiscal quarter ending June 30, 1996, the
Companies shall have a profit before taxes of at least a negative Two
Hundred Thousand Dollars (<$200,000>), and (ii) on or before August 1,
1996, the Companies shall have sold their Wilson product line and their
McKesson product line and applied the net cash proceeds thereof as a
prepayment of the Term Loans in accordance with Section 4.3(b) hereof.
--------------
"Eligible Accounts" means those Accounts consisting solely of
-----------------
trade Accounts that have been created by a Company in the ordinary course
of its business, upon which the applicable Company's right to receive
payment is absolute and not contingent upon the fulfillment of any
condition whatsoever, that comply with each and all of the representations
and warranties respecting Accounts made by the Companies to the Agent, and
in which the Agent has a perfected Lien of first priority. Eligible
Accounts shall not include:
(a) any Account which is more than ninety (90) days past due;
(b) that portion of any Account for which there exists any right of
setoff, defense or discount (except regular discounts allowed in
the ordinary course of business to promote prompt payment) or
for which any defense or counterclaim has been asserted or any
other Account in dispute that has not been resolved;
(c) Accounts that represent obligations of an Account Debtor that is
a state or municipal government or the United States government
or any political subdivision thereof to the extent that the
aggregate amount at any one time owing by such Account Debtor
exceeds One Hundred Thousand Dollars ($100,000) (except for
Accounts that represent obligations of the United States
government and for which an Assignment of Claims Act form
satisfactory to the Agent has been duly executed and
acknowledged);
3
<PAGE>
(d) any Account that is not payable in Dollars or Canadian dollars;
(e) any Account with respect to which the Account Debtor: (i) does
not maintain its chief executive office in the United States, or
the Eligible Canadian Provinces; or (ii) is not organized under
the laws of the United States or any state thereof or Canada or
any Eligible Canadian Province; or (iii) is the government of
any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof,
or any department, agency, public corporation, or other
instrumentality thereof; unless and except to the extent any
such Account is supported by an irrevocable letter of credit, or
is insured under a policy of foreign credit insurance, in each
case, in form, substance, and amount, and issued by a party
acceptable to the Agent;
(f) any Account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an
employee, affiliate, partner, member, parent or subsidiary of
any Company;
(g) that portion of any Account which represents interim or progress
billings or retention rights on the part of the Account Debtor;
(h) any Account which represents an obligation of any Account Debtor
when twenty percent (20%) or more of the Companies' Accounts
from such Account Debtor are not eligible pursuant to (a) above;
(i) that portion of any Account from an Account Debtor which
represents the amount by which a Company's total Accounts from
said Account Debtor exceeds twenty-five percent (25%) of the
Companies' total Accounts;
(j) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and
hold, or other terms by reason of which the payment by the
Account Debtor may be conditional;
(k) Accounts with respect to which the goods giving rise to such
Account have not been shipped and delivered to and accepted by
the Account Debtor, the services giving rise to such
4
<PAGE>
Account have not been performed and accepted by the Account
Debtor, or the Account otherwise does not represent a final
sale;
(l) Accounts with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, Indiana, or West Virginia
(or any other state or province that requires a creditor to file
a Business Activity Report or similar document in order to bring
suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such
state or province), unless the applicable Company has qualified
to do business in New Jersey, Minnesota, Indiana, West Virginia,
or such other states or provinces, or has filed a Notice of
Business Activities Report with the applicable division of
taxation, the department of revenue, or with such other state or
provincial offices, as appropriate, for then-current year, or is
exempt from such filing requirement;
(m) Accounts with respect to which the Account Debtor is subject to
an Insolvency Proceeding, becomes insolvent, or goes out of
business.
(n) any Account deemed ineligible by the Agent when the Agent, in
its sole discretion, deems the creditworthiness or financial
condition of the Account Debtor, or the industry in which the
Account Debtor is engaged, to be unsatisfactory.
"Eligible Canadian Province" means any of the Canadian provinces
--------------------------
of Alberta, British Columbia, Manitoba, Ontario, and Saskatchewan, and the
Yukon Territory, so long as, in the Agent's determination, such Canadian
jurisdiction recognizes the Agent's first priority Lien on, and right to
collect, such Account as a consequence of any security agreement and UCC
filings (or the Canadian equivalent thereof) in favor of the Agent.
5
<PAGE>
"Eligible Inventory" means Inventory consisting of finished
------------------
goods held for sale in the ordinary course of the Companies' business and
raw materials for such finished goods, that are located at the Companies'
premises identified on Schedule E-1, that comply with each and all of the
------------
representations and warranties respecting Inventory made by the Companies
to the Agent, and that are and at all times continue to be acceptable to
the Agent in all respects; provided, however, that standards of eligibility
may be fixed and revised from time to time by the Agent in the Agent's
reasonable credit judgment. In determining the amount to be so included,
Inventory shall be valued at the lower of cost or market on a basis
consistent with the Companies' current and historical accounting practices.
An item of Inventory shall not be included in Eligible Inventory if:
(a) it is not owned solely by the Companies, or any of them, or the
Companies, or any of them, do not have good, valid, and
marketable title thereto;
(b) it is not located at one of the locations set forth on Schedule
E-1 attached hereto;
(c) it is not located on property owned or leased by the Companies,
or any of them, or in a contract warehouse, in each case,
subject to a Collateral Access Agreement executed by the
mortgagee, lessor, or the warehouseman, as the case may be, and
segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first priority Lien
in favor of the Agent;
(e) it consists of goods returned or rejected by the Companies'
customers or goods in transit; and
(f) it is obsolete or slow moving, a restrictive or custom item,
work-in-process, a component that is not part of finished goods,
or constitutes packaging and shipping materials, supplies used
or consumed in the Companies' business, Inventory subject to a
Lien in favor of any third Person, bill and hold goods,
defective goods, "seconds," or Inventory acquired on
consignment.
6
<PAGE>
"Exchange Rate" means and refers to the nominal rate of exchange
-------------
available to the Agent in a chosen foreign exchange market for the purchase
of non-Dollar currency by the Agent at 12:00 noon, local time, one Business
Day prior to any date of determination, expressed as the number of units of
such currency per one (1) Dollar.
"February 15, 1996 Amendment" means that certain Amendment to
---------------------------
Credit Agreement, dated as of February 15, 1996, by and among the
Companies, the Banks, and the Agent.
"First Amendment Date" means the date on which the August 1, 1995
--------------------
Amendment first became effective in accordance with its terms.
"Insolvency Proceeding" means any proceeding commenced by or
---------------------
against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or
other similar relief.
"Inventory" means all present and future inventory in which the
---------
Companies, or any of them, have any interest, including goods held for sale
or lease or to be furnished under a contract of service and all of the
Companies' present and future raw materials, work in process, finished
goods, and packing and shipping materials, wherever located, and any
documents of title representing any of the above.
"Mortgages" means one or more mortgages, deeds of trust, or deeds
---------
to secure debt, executed by one or more of the Companies in favor of the
Agent, the form and substance of which shall be satisfactory to the Agent,
that encumber the Mortgaged Real Property and the related improvements
thereto.
"Mortgaged Real Property" means the parcel or parcels of real
-----------------------
property and the related improvements thereto identified on Schedule R-1.
------------
"Negotiable Collateral" means all of the Companies' present and
---------------------
future letters of credit, notes, drafts, instruments, certificated
securities (including the shares of stock of the Companies other than MDT),
documents, personal property leases (wherein one or more of the Companies
is the lessor), chattel paper, and books and records relating to the
foregoing.
7
<PAGE>
"Patent Security Agreement" means the Patent Security Agreement
-------------------------
between the Companies and the Agent, in the form of Exhibit P-1 attached
-----------
hereto, pursuant to which each Company pledges its patents and related
collateral described therein to the Agent.
"Pledge Agreement" means the Stock Pledge Agreement between MDT
----------------
and the Agent, in the form of Exhibit P-2 attached hereto, pursuant to
-----------
which MDT pledges the Pledged Stock and related collateral described
therein to the Agent.
"Pledged Stock" has the meaning ascribed thereto in the Pledge
-------------
Agreement.
"Second Amendment Date" means the date on which the February 15,
---------------------
1996 Amendment first becomes effective in accordance with its terms.
"Second Amendment Fee" means a fee in the amount of Fifty
--------------------
Thousand Dollars, which fee shall be fully earned, non-refundable, and due
and payable upon the execution and delivery of the February 15, 1995
Amendment.
"Solvent" means, with respect to any Person on a particular date,
-------
that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person is able to realize upon
its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal
course of business, (d) such Person does not intend to, and does not
believe that it will, incur debts beyond such Person's ability to pay as
such debts mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's properties and assets would constitute unreasonably
small capital after giving due consideration to the prevailing practices in
the industry in which such Person is engaged. In computing the amount of
contingent liabilities at any time, it is intended that such liabilities
will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably
can be expected to become an actual or matured liability.
8
<PAGE>
"Subordination Agreements" means, collectively, the Subordination
------------------------
Agreements of each of the Companies and CESCO in favor of the Agent, each
substantially in the form of Exhibit S-2 attached hereto.
-----------
"Trademark Security Agreement" means the Trademark Security
----------------------------
Agreement between the Companies and the Agent, in the form of Exhibit T-2
-----------
attached hereto, pursuant to which each Company pledges its trademarks and
related collateral described therein to the Agent.
b. The definition of "Cash Flow Coverage Ratio" contained in
Section 1.1 of the Credit Agreement hereby is deleted in its entirety and the
- - -----------
following hereby is substituted in lieu thereof:
"Cash Flow Coverage Ratio" means, as of the date any
------------------------
determination thereof is to be made, the ratio of (a) EBITDA, divided by
----------
(b) Interest Expense plus CPLTD, in each case for the immediately preceding
four (4) fiscal quarters.
c. The definition of "Loan Documents" contained in Section
-------
1.1 of the Credit Agreement hereby is deleted in its entirety and the following
- - ---
hereby is substituted in lieu thereof:
"Loan Documents" means this Agreement, the Notes, the Security
--------------
Agreements, the Guaranties, the Letter of Credit Agreement, the Pledge
Agreement, the Trademark Security Agreement, the Patent Security Agreement,
the Subordination Agreements, the Mortgages, the Blocked Account
Agreements, the Collateral Access Agreements, and each other contract,
instrument, or document executed and delivered, or to be executed and
delivered, by a Company in connection herewith or therewith to the Agent or
the Banks.
d. The definition of "Revolving Credit Commitment" contained
in Section 1.1 of the Credit Agreement hereby is deleted in its entirety and the
-----------
following hereby is substituted in lieu thereof:
"Revolving Credit Commitment" means, at the time any
---------------------------
determination thereof is to be made, the total amount of the Banks'
commitments under the Revolving Credit to extend credit to the Companies by
means of Revolving Loans, the total amount of which, subject to Section
-------
4.1, shall be the aggregate of the amounts set forth under the name of each
---
of the Banks as follows and, with respect to each Bank, shall be the amount
set forth under its name as follows:
9
<PAGE>
<TABLE>
<CAPTION>
================================================================================
REVOLVING CREDIT Bank: Wells Fargo Bank, Bank: Chemical Bank
COMMITMENT OF: National Association
================================================================================
<S> <C> <C>
During the period Sixteen Million Seven Nine Million Thirty
commencing on February Hundred Seventy Thousand Thousand Dollars
15, 1996 and ending on Dollars ($16,770,000) ($9,030,000)
the Revolving Credit
Maturity Date:
================================================================================
</TABLE>
e. The definition of "Revolving Credit Maturity Date"
contained in Section 1.1 of the Credit Agreement hereby is deleted in its
-----------
entirety and the following hereby is substituted in lieu thereof:
"Revolving Credit Maturity Date" means August 1, 1996; provided,
------------------------------ --------
however, that (a) if the Consolidated Loss Condition is satisfied, and (b)
-------
so long as no Default or Event of Default has occurred and is continuing,
the Revolving Credit Maturity Date shall be extended to October 1, 1996.
f. The definition of "Revolving Note" contained in Section
-------
1.1 of the Credit Agreement hereby is deleted in its entirety and the
---
following hereby is substituted in lieu thereof:
"Revolving Note" means one of the promissory notes of the
--------------
Companies, jointly and severally, each payable to the order of a Bank,
substantially in the form of that attached to the February 15, 1996
Amendment as Exhibit R-1A and Exhibit R-1B, as the case may be.
------------ ------------
g. The definition of "Term Loan" contained in Section 1.1 of
-------
the Credit Agreement hereby is deleted in its entirety and the following hereby
is substituted in lieu thereof:
"Term Loan" means each of the term loans in the maximum aggregate
---------
amount of Twelve Million Dollars ($12,000,000), as more fully described in
Section 2.2.
-----------
h. Anything in the Credit Agreement to the contrary
notwithstanding, from and after the execution and delivery of this Amendment:
(i) all Borrowings shall consist of Base Rate Portions; (ii) the Companies no
longer shall have the option to (x) designate new Borrowings as consisting of
LIBOR Rate Portions, (y) convert outstanding Base Rate Portions of existing
Loans to LIBOR Rate Portions, or (z) continue existing LIBOR Rate Portions of
Loans as such; (iii) the Banks no longer shall have the obligation to make Loans
bearing interest at a rate determined by reference to the LIBOR
10
<PAGE>
Rate; and (iv) except for Section 5 of the Credit Agreement, all references in
---------
the Credit Agreement to, and all provisions in the Credit Agreement regarding,
the LIBOR Rate or the LIBOR Rate Portions of Loans hereby are overridden to the
extent necessary to effect the foregoing clauses (i), (ii), and (iii). The LIBOR
Rate Portions of Loans outstanding as of the date hereof shall convert
automatically into Base Rate Portions upon the expiration of the respective
Interest Periods thereof and Section 5.2 of the Credit Agreement shall apply in
-----------
respect of each such automatic conversion.
i. Section 2.1(a) of the Credit Agreement hereby is deleted
--------------
in its entirety and the following hereby is substituted in lieu thereof:
(a) Revolving Loans. (i) Each Bank severally agrees, on the
---------------
terms and conditions hereinafter set forth, to make revolving loans (each a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Companies
jointly and severally, from time to time on any Business Day during the
period from the date hereof until the Revolving Credit Maturity Date, in an
aggregate principal amount up to but not exceeding at any time such Bank's
Revolving Credit Commitment. The aggregate amount of the Revolving Credit
Commitment is $25,800,000 as of the Second Amendment Date. Within the
limits of each Bank's Revolving Credit Commitment, during the period up to
the Revolving Credit Maturity Date, the Companies jointly and severally,
may borrow, repay the Loans in whole or in part, and, subject to Section
-------
7.2, reborrow hereunder, all in accordance with the conditions hereof.
---
(ii) Aggregate outstanding borrowings under
Section 2.1(a)(i), up to the maximum principal amount equal to the
-----------------
Revolving Loan Commitment, shall not at any time exceed the Borrowing Base.
For purposes of this Agreement, "Borrowing Base," as of any date of
determination, shall mean the sum of:
(x) eighty percent (80%) of Eligible Accounts; plus
----
(y) the lesser of: (1) thirty-five percent (35%) of
Eligible Inventory; and (2) Ten Million Dollars ($10,000,000); minus
-----
(z) the aggregate amount of reserves, if any,
established by the Agent under Section 2.1(a)(iii).
-------------------
(iii) The individual components of the Borrowing Base and the
advance rates in respect thereof shall be determined by the Agent upon
receipt and review of the collateral reports required hereunder and such
11
<PAGE>
other documents and collateral information as the Agent may from time to
time require. The Companies acknowledge that the Borrowing Base was
established by the Agent with the understanding that, among other things,
the aggregate of all returns, rebates, discounts, credits, and allowances
for the immediately preceding three (3) months at all times shall be less
than five percent (5%) of the Companies' gross sales for said period. If
such dilution of the Accounts for the immediately preceding three (3)
months at any time exceeds 5% of the Companies' gross sales for said
period, or if there at any time exists any other matters, events,
conditions, or contingencies that the Agent reasonably believes may affect
the payment of any portion of the Accounts, the Agent, in its sole
discretion, may reduce the advance rate in respect of Eligible Accounts to
a percentage appropriate to reflect such additional dilution and/or
establish additional reserves against the Eligible Accounts. Anything to
the contrary herein notwithstanding, the Agent may create reserves against
and/or reduce its advance rates based upon Eligible Accounts or Eligible
Inventory without declaring an Event of Default if it determines, in its
reasonable discretion, that there is a material impairment of the prospect
of repayment of all or any portion of the Indebtedness or other obligations
of the Companies owing to the Banks or a material impairment of the value
or priority of the Agent's Liens on the Collateral.
j. The second sentence of Section 2.1(b) hereby is deleted
in its entirety and the following hereby is substituted in lieu thereof:
Each commercial Letter of Credit shall be issued for a term not to exceed
one hundred eighty (180) days and each standby Letter of Credit shall be
issued for a term not to exceed three hundred sixty (360) days, as
designated by the Company requesting such Letter of Credit; provided,
--------
however, that no Letter of Credit shall have an expiration date over three
-------
hundred sixty (360) days subsequent to the Revolving Credit Maturity Date;
provided, further, that, in respect of any Letter of Credit
-------- -------
outstanding that has a stated expiration date later than the Revolving
Credit Maturity Date then in effect, the Companies shall provide to the
Agent, on or before the Revolving Credit Maturity Date, for any such Letter
of Credit either cash collateral or a letter of credit payment guarantee in
form and substance and issued by a Person acceptable to the Agent, in each
case in an amount acceptable to the Agent.
k. A new subsection (c) hereby is added to Section 2.1 of
-----------
the Credit Agreement as follows:
(c) Overadvances. If, at any time or for any reason, the
amount of Indebtedness owed by the Companies to the Banks pursuant to Section
-------
2.1(a) and Section 2.1(b) is greater than either the dollar or
------ --------------
12
<PAGE>
percentage limitations set forth in Section 2.1(a) or Section 2.1(b), the
-------------- -------------
Companies immediately shall pay to the Agent, in cash, the amount of such
excess to be used by the Agent, first, to repay advances under
Section 2.1(a) and, thereafter, to be held by the Agent as cash collateral
--------------
to secure the Companies' obligation to repay to the Agent all amounts paid
pursuant to the Letters of Credit.
l. Section 2.6(a) of the Credit Agreement hereby is deleted
--------------
in its entirety and the following hereby is substituted in lieu thereof:
(a) Notes. (i) As evidence of the Indebtedness of the
-----
Companies to each Bank resulting from the Revolving Loans made by such
Bank under Section 2.1(a), the Companies, jointly and severally, on or
--------------
before February 15, 1996 and concurrently with the cancellation by each
Bank and return to the Companies of the applicable then existing Revolving
Note, shall execute and deliver for the account of each Bank a replacement
Revolving Note (in the form of Exhibit R-1A or Exhibit R-1B, as the case
------------ ------------
may be), dated as of February 15, 1996, setting forth such Bank's Revolving
Credit Commitment as the maximum principal amount thereof; provided,
--------
however, that the Companies shall pay to the Agent, for the ratable benefit
-------
of the Banks, the amount, if any, by which (y) the aggregate amount of
Revolving Loans outstanding immediately prior to the effectiveness of the
February 15, 1996 Amendment exceeds (z) immediately after the February 15,
-------
1996 Amendment first becomes effective, the lower of (1) then extant
Revolving Credit Commitment and (2) the amount of then extant Borrowing
Base.
(ii) As evidence of the Indebtedness of MDT to each Bank
resulting from the Term Loan made by such Bank under Section 2.2, MDT on or
-----------
before August 1, 1995 and concurrently with the cancellation by each Bank
and return to the Companies of the applicable then existing Term Loan Note,
shall execute and deliver for the account of each Bank a replacement Term
Loan Note, dated as of August 1, 1995, setting forth such Bank's Term
Facility Commitment as the maximum principal amount thereof; provided,
---------
however, that MDT shall pay each Bank the installment due August 1, 1995
-------
under the applicable Term Loan Note in effect immediately prior to
executing and delivering to that Bank the replacement Term Loan Note in the
form of Exhibit T-1A or Exhibit T-1B, as the case may be.
------------ ------------
m. Item (i) of Section 3.1(a) of the Credit Agreement hereby
is deleted in its entirety and the following hereby is substituted in lieu
thereof:
13
<PAGE>
(i) in respect of each Base Rate Portion thereof, at a
fluctuating rate per annum equal at all times to the Base Rate plus one-
----
half of one percent (1/2%); and
n. Section 3.1(b) of the Credit Agreement hereby is deleted
--------------
in its entirety and the following hereby is substituted in lieu thereof:
(b) Interest Rate-Term Loans. MDT shall pay interest on the
------------------------
unpaid principal balance of each Term Loan from the date of such Term Loan
until the maturity thereof, at a fluctuating rate per annum equal at all
times to the Base Rate plus three-quarters of one percent (3/4%). It is
----
expressly understood and agreed that MDT shall not have the option to
convert all or any portion of the Term Loans to Loans that bear interest at
a rate determined by reference to the LIBOR Rate.
o. Item (ii) of Section 4.3(b) of the Credit Agreement
--------------
hereby is deleted in its entirety and the following hereby is substituted in
lieu thereof:
(ii) If any of the Companies or any of their subsidiaries sells or
otherwise disposes of any property or asset, then MDT shall pay to the
Agent as a prepayment in whole or ratably in part of the outstanding amount
of the Term Loans, an amount equal to all net cash proceeds in excess of
Fifty Thousand Dollars ($50,000) in the aggregate received by the Companies
or such subsidiaries from all such sales or dispositions that occur during
any twelve (12) month period (to the extent of the amount of the Term Loans
then outstanding).
p. The following new sections hereby are added to the Credit
Agreement in numerical/alphabetical order:
SECTION 6.6 Blocked Accounts.
----------------
Within thirty (30) days following the Second Amendment Date, the
Agent, the Companies, and one or more Blocked Account Banks shall enter
into one or more Blocked Account Agreements pursuant to which all
Collections of the Companies will, at such time or times as the Agent in
its sole discretion elects, be forwarded to the Agent (or a depositary
selected thereby) on a daily basis. Prior to the date of any such
election, the Collections automatically will be transferred from the
Blocked Account to an operating account of the Companies at the applicable
Blocked Account Bank. The Companies shall instruct all Account Debtors to
remit all Collections to the Blocked Accounts. The Companies agree, at all
times, to cause their Collections to be consolidated and deposited into the
Blocked Accounts on
14
<PAGE>
each banking day and shall not fail to so cause their Collections to be
consolidated and deposited into the Blocked Accounts without the prior
written consent of the Agent. Upon the request of the Agent, the Companies
will provide to the Agent written reports, with such frequency and for such
periods as the Agent may determine and in form and substance satisfactory
to the Agent, specifying the amount of Collections received in each Blocked
Account for the relevant period. The Companies agree to hold in trust for
the Agent, as the Agent's trustee, any Collections received contrary to the
procedures summarized in this Section 6.6 or established in the Blocked
-----------
Account Agreements and immediate deposit such Collections into a Blocked
Account. No Blocked Account Agreement or arrangement contemplated thereby
shall be modified by the Companies without the prior written consent of the
Agent.
*
*
*
SECTION 8.12 Title to Collateral. The Companies have good and
-------------------
marketable title to the Collateral consisting of personal property.
SECTION 8.13 Eligible Accounts. The Eligible Accounts are, at
-----------------
the time of the creation thereof and as of each date on which the Companies
include them in a Borrowing Base calculation or certification, bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of the
Companies' business, unconditionally owed to the Companies without
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation (other than pursuant to the Companies' warranty policy in the
ordinary course of business). The property giving rise to such Eligible
Accounts has been delivered to the Account Debtor, or to the Account
Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. At the time of the creation of an Eligible Account and
as of each date on which the Companies include an Eligible Account in a
Borrowing Base calculation or certification, the Companies have not
received notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any applicable Account Debtor
regarding such Eligible Account.
SECTION 8.14 Eligible Inventory. All Eligible Inventory is now
------------------
and at all times hereafter shall be of good and merchantable quality, free
from material defects.
15
<PAGE>
SECTION 8.15 Inventory Records. The Companies now keep, and
-----------------
hereafter at all times shall keep, correct and accurate records itemizing
and describing the kind, type, quality, and quantity of the Inventory, and
the Companies' cost therefor.
SECTION 8.16 Solvency. Each Company is Solvent. No transfer of
--------
property is being made by any Company and no obligation is being incurred
by any Company in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Company.
*
*
*
SECTION 9.11 Accounting System. Maintain a standard and modern
-----------------
system of accounting in accordance with GAAP with ledger and account cards
or computer tapes, disks, printouts, and records pertaining to the
Collateral which contain information as from time to time may be requested
by the Agent. The Companies also shall keep a modern inventory reporting
system that shows all additions, sales, claims, returns, and allowances
with respect to their Inventory.
SECTION 9.12 Collateral Reporting. Provide the Agent with the
--------------------
following documents at the following times in form satisfactory to the
Agent: (a) on a monthly basis and, in any event, by no later than the
fifteenth (15th) day of each month during the term of this Agreement, (i) a
detailed calculation of the Borrowing Base, (ii) a detailed aging, by
total, of the Accounts, together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided to the Agent, (iii) a
summary aging, by vendor, of each Company's accounts payable, and (iv)
Inventory reports specifying the Companies' cost and, if requested by the
Agent, the wholesale market value of their Inventory by category, with, if
requested by the Agent, additional detail showing additions to and
deletions from the Inventory; (b) upon request, copies of invoices in
connection with the Accounts, customer statements, credit memos, remittance
advices and reports, deposit slips, shipping and delivery documents in
connection with the Accounts and for Inventory and equipment acquired by
the Companies, purchase orders and invoices; and (c) such other reports as
to the Collateral or the financial condition of the Companies as the Agent
may request from time to time.
16
<PAGE>
SECTION 9.13 Returns. Returns and allowances, if any, as
-------
between any Company and its Account Debtors shall be on the same basis and
in accordance with the usual customary practices of the Companies, as they
exist at the time of the execution and delivery of this Agreement. If, at
a time when no Event of Default has occurred and is continuing, any Account
Debtor returns any Inventory to the Companies, the Companies promptly shall
determine the reason for such return and, if the Companies accept such
return, issue a credit memorandum in the appropriate amount to such Account
Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to the Companies, the
Companies promptly shall determine the reason for such return and, if the
Agent consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with, if requested by the Agent, a copy to be sent to
the Agent) in the appropriate amount to such Account Debtor.
SECTION 9.14 Location of Inventory and Equipment. Keep the
-----------------------------------
Inventory and equipment of the Companies only at the locations identified
on Schedule 9.14; provided, however, that the Companies may amend Schedule
------------- -------- ------- --------
9.14 so long as such amendment occurs by written notice to the Agent not
----
less than thirty (30) days prior to the date on which the Inventory or
equipment is moved to such new location, so long as such new location is
within the continental United States, and so long as, at the time of such
written notification, the Companies provide any financing statements or
fixture filings necessary to perfect and continue perfected the Agent's
security interests in such assets and also provide to the Agent a
Collateral Access Agreement.
*
*
*
SECTION 10.9 Transactions with Affiliates. Directly or
----------------------------
indirectly enter into or permit to exist any material transaction with any
affiliate of any Company (other than another Company) except for
transactions that are in the ordinary course of such Company's business,
upon fair and reasonable terms, that are fully disclosed to the Agent, and
that are no less favorable to such Company than would be obtained in an
arm's length transaction with a non-affiliate.
17
<PAGE>
*
*
*
SECTION 11.3 Additional Rights and Remedies. Upon the occurrence
------------------------------
and during the continuance of an Event of Default, the Agent may, subject
to Section 11.2 and without notice or demand, do any one or more of the
------------
following (all of which are authorized by the Companies), without limiting
the availability of any other rights and remedies under the Loan Documents
or applicable law (whether by suit in equity, by action at law, or both):
(a) Hold, as cash collateral, any and all balances and deposits
of the Companies held by the Agent or the Banks, and any amounts received
in the Blocked Accounts, to secure the full and final repayment of all of
the Indebtedness; and
(b) Without notice to or demand upon any Company or any
guarantor, make such payments and do such acts as the Agent considers
necessary or reasonable to protect its Liens on the Collateral. The
Companies agree to assemble the Collateral consisting of personal property
("Personal Property Collateral") if the Agent so requires, and to make the
Personal Property Collateral available to the Agent as the Agent may
designate. The Companies authorize the Agent to enter the premises where
the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or lien that
in the Agent's determination appears to conflict with its Lien and to pay
all expenses incurred in connection therewith. With respect to any of the
Companies' owned premises, the Companies hereby grant the Agent a license
to enter into possession of such premises and to occupy the same, without
charge, in order to exercise any of the Agent's rights or remedies provided
in the Loan Documents, at law, in equity, or otherwise.
q. Section 7.2(b) of the Credit Agreement hereby is deleted in
--------------
its entirety and the following hereby is substituted in lieu thereof:
(b) Documentation. The Agent shall have received (i) all
-------------
additional documents which may be reasonably required in connection with
such Borrowing or Letter of Credit, including the Notice of Borrowing with
respect to each Borrowing, (ii) a certificate of the chief financial
officer of MDT that the Companies are in compliance with the conditions set
forth in Section 7.2(a) as of the date of such Borrowing, and (iii) the
--------------
most recent
18
<PAGE>
Borrowing Base calculation required to be delivered in accordance with
Section 9.12(a).
---------------
r. Subsection (a) of Section 9.9 of the Credit Agreement hereby
-----------
is deleted in its entirety and the following hereby is substituted in lieu
thereof:
(a) Tangible Net Worth not at any time after the Second
Amendment Date less than Thirty Eight Million Dollars ($38,000,000), net of
the Sumitomo aspirator inventory write-down in an amount not to exceed
$750,000.
s. Subsection (d) of Section 9.9 of the Credit Agreement hereby
-----------
is deleted in its entirety and the following hereby is substituted in lieu
thereof:
(d) Cash Flow Coverage Ratio not less than 0.30 to 1.00 on the
final day of any fiscal quarter ending after the Second Amendment Date,
calculated based upon the four (4) immediately preceding fiscal quarters,
including the quarter then ended.
t. Subsection (f) of Section 9.9 of the Credit Agreement hereby
-----------
is deleted in its entirety and the following hereby is substituted in lieu
thereof:
(f) The Companies shall have a profit before taxes: (i) on a
consolidated basis, of at least a negative Four Million Three Hundred Fifty
Thousand Dollars (<$4,350,000>), net of the Sumitomo aspirator inventory
write-down in an amount not to exceed $750,000, for the fiscal year ending
March 31, 1996; and (ii) on a consolidated, year-to-date basis, of at least
a negative Two Hundred Thousand Dollars (<$200,000>), as of the end of the
fiscal quarter ending June 30, 1996.
u. Item (a) of Section 10.4 of the Credit Agreement hereby is
------------
deleted in its entirety and the following hereby is substituted in lieu thereof:
(a) [intentionally omitted];
v. Items (b), (c), and (g) of Section 10.8 of the Credit
------------
Agreement hereby are deleted in their entirety and the following, respectively,
hereby are substituted in lieu thereof:
(b) [intentionally omitted]; (c) purchase money Liens incurred in
connection with any acquisition of equipment permitted under this Agreement
so long as the amount of such Lien does not exceed the fair market value of
the
19
<PAGE>
equipment acquired and so long as such Lien only secures the purchase
price of such equipment;
*
*
*
(g) any other Liens not otherwise permitted under items (a) through (f)
above in an aggregate amount not to exceed $1,000,000 at any time, on or
with respect to the Companies' real or personal property other than
Accounts or Inventory;
w. Item (c) of Section 11.1 of the Credit Agreement hereby is
------------
deleted in its entirety and the following hereby is substituted in lieu thereof:
(c) Any default by any Company in the performance of or compliance
with any obligation, agreement or other provision contained herein (other
than those referred to in subsections (a) and (b) of this Section 11.1)
------------
shall occur and continue without being cured or waived for a period of
thirty (30) days from the first to occur of the date any of the Companies
has knowledge thereof or receives notice from the Agent thereof; provided,
--------
however, that with respect to a material breach, as determined by the
-------
Majority Banks, of Section 9.4, the thirty (30) day cure period shall
-----------
commence as of the date of such breach.
x. Section 11.1 of the Credit Agreement hereby is amended by adding
to the end thereof the following additional items (k) and (l):
(k) If a notice of lien, levy, or assessment is filed of record with
respect to any of the properties or assets of any Company by the United
States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, or if any taxes
or debts owing at any time hereafter to any one or more of such entities
becomes a lien, whether choate or otherwise, upon any of the properties or
assets of any Company and the same is not paid on the payment date thereof.
(l) If the obligation of any Company, CESCO, or third Person
under any guaranty, subordination agreement, or other Loan Document, in
favor of the Agent for the benefit of the Banks is limited or terminated by
operation of law or, without the consent of the Banks, by such Company,
CESCO, or other third Person, as the case may be.
20
<PAGE>
y. Clause (b) of the first sentence of Section 11.2 of the
------------
Credit Agreement hereby is deleted in its entirety and the following hereby is
substituted in lieu thereof:
(b) whether or not the actions referred to in clause (a) have been taken,
proceed to enforce all other rights and remedies available to the Agent and
the Banks under the Loan Documents (including, without limitation, Section
-------
11.3 of this Agreement) or applicable law (whether by suit in equity, by
----
action at law, or both).
z. The notice address for Wells Fargo Bank, National
Association, in its respective capacities as the Agent and a Bank, is set forth
below its name on the signature page of this Amendment.
2. Limited Waiver. The Companies have advised the Agent that (y)
--------------
as of October 31, 1995, the Companies have failed to maintain a Tangible Net
Worth of at least $41,500,000 as required pursuant to Section 9.9(a) of the
Credit Agreement; and (z) as of the end of the second quarter of the Companies'
current fiscal year, the Companies did not have a profit before taxes on a
consolidated, year-to-date basis of at least $1,000,000 as required pursuant to
Section 9.9(f) of the Credit Agreement (the failures described in clauses (y)
and (z) above are hereinafter referred to as the "Non-Compliance Items").
Anything in the Credit Agreement to the contrary notwithstanding, the Agent and
the Banks hereby agree that, effective at 12:01 a.m. on November 15, 1995, the
Agent and the Banks hereby retroactively and forever waive the Non-Compliance
Items. The waiver contained in this paragraph (the "Limited Waiver") is specific
in time and in intent and, except as expressly set forth herein, shall not
operate as a waiver or modification of any right, power or remedy of the Agent
or the Banks, nor as a consent to any further or other matter, under the Loan
Documents. Nothing herein constitutes a waiver of any other Event of Default, or
any Default related or preliminary thereto, or any Event of Default based on
facts or occurrences other than those on which the Non-Compliance Items are
premised. The Limited Waiver does not preclude any exercise or further exercise
of any other right, power or privilege under any Loan Document, including,
without limitation, the taking of any action or remedy based upon any other
Event of Default.
3. Conditions to Amendment. The satisfaction of each of the
-----------------------
following shall constitute conditions precedent (or, if indicated as such, as a
condition concurrent or a condition subsequent) to the effectiveness of this
Amendment:
a. Each Bank shall have received the following documents,
duly executed, and each such document shall be in full force and effect:
21
<PAGE>
(1) a Revolving Note, in the form of Exhibit R-1A or
------------
Exhibit R-1B, as the case may be;
------------
(2) the Mortgages, the Subordination Agreements, the
Patent Security Agreement, and the Trademark
Security Agreement;
(3) the Pledge Agreement, together with all
certificates representing shares of the Pledged
Stock and undated stock powers with respect
thereto endorsed in blank;
(4) within thirty (30) days following the Second
Amendment Date, the Blocked Account Agreements;
b. The Agent shall have received, for the ratable benefit
of the Banks, the Second Amendment Fee;
c. The Agent shall have received the Reaffirmation and
Consent of Guarantor, attached hereto as Exhibit A-1, duly executed by each
-----------
guarantor under the Guaranties and CESCO;
d. The Mortgages shall have been recorded in all
appropriate jurisdictions;
e. The Agent shall have received, within sixty (60) days
following the Second Amendment Date, a real property survey, in form and
substance satisfactory to the Agent in its sole discretion, in respect of the
Mortgaged Real Property located in Henrietta, New York;
f. The Agent shall have received mortgagee title insurance
policies (or marked commitments to issue the same) for the Mortgaged Real
Property issued by a title insurance company satisfactory to the Agent (each a
"Mortgage Policy" and, collectively, the "Mortgage Policies") in amounts
satisfactory to, and containing such endorsements as may be required by, the
Agent and assuring the Agent that the Mortgages on the Mortgaged Real Property
are valid and enforceable first priority mortgage Liens thereon free and clear
of all defects and subject only to those exceptions acceptable to the Agent, and
the Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to the Agent;
g. Within ninety (90) days following the Second Amendment
Date, the Agent shall have received appraisals of the Mortgaged Real Property,
in each case satisfactory to the Agent;
22
<PAGE>
h. Within ninety (90) days following the Second Amendment
Date: (i) a phase-I environmental report shall have been completed with respect
to the Mortgaged Real Property, at the Companies' sole expense, and copies
thereof delivered to the Agent; and (ii) the environmental consultants retained
for such reports, the scope of the reports, and the results thereof shall be
acceptable to the Agent in its sole discretion;
i. Within sixty (60) days following the Second Amendment
Date: (i) the Banks shall have received the report of an on-site consultant, at
the Companies' sole expense, engaged to evaluate Diagnostic's operations,
including without limitation a valuation of Diagnostic's business lines; and
(ii) the consultant retained for such report, the scope of the report, and the
results thereof shall be acceptable to the Banks in their sole discretion;
j. The Agent shall have received a certificate from the
Secretary of each Company (i) attesting to the incumbency and signatures of
authorized officers of that Company and to the resolutions of that Company's
Board of Directors authorizing its (A) execution and delivery of this Amendment,
the Reaffirmation and Consent of Guarantor attached hereto as Exhibit A-1, and
-----------
the other Loan Documents to which it is a party and contemplated in this
Amendment, and (B) performance of this Amendment, the Agreement as amended by
this Amendment, such reaffirmation and consent, and such other Loan Documents,
and (ii) authorizing specific officers of the Companies to execute and deliver
the same;
k. The Agent shall have received a certificate from the
Secretary of CESCO attesting to the incumbency and signatures of authorized
officials of CESCO and to the resolutions of CESCO's Board of Directors
authorizing its execution and delivery of the Reaffirmation and Consent of
Guarantor attached hereto as Exhibit A-1, the other Loan Documents to which it
-----------
is a party and contemplated in this Amendment, and the performance thereof, and
authorizing specific officers of CESCO to execute and deliver the same;
l. The representations and warranties in this Amendment,
the Credit Agreement as amended by this Amendment, and the other Loan Documents
shall be true and correct in all respects on and as of the date hereof, as
though made on such date (except to the extent that such representations and
warranties relate solely to an earlier date);
m. No Event of Default or event which with the giving of
notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein;
23
<PAGE>
n. No injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against the Companies, the Banks, the Agent, or any
of their respective Affiliates; and
o. All other documents and legal matters in connection with
the transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to the
Agent and its counsel.
4. Representations and Warranties. Each of the Companies hereby
------------------------------
represents and warrants to the Banks and the Agent that: (a) the execution,
delivery, and performance of this Amendment, the Credit Agreement as amended by
this Amendment, and the other Loan Documents required by this Amendment to be
executed and delivered by it (collectively, the "Relevant Loan Documents") are
within its corporate powers, have been duly authorized by all necessary
corporate action, and, except for such instances that could not reasonably be
expected to have a Material Adverse Effect, are not in contravention of any law,
rule, or regulation, or any order, judgment, decree, writ, injunction, or award
of any arbitrator, court, or governmental authority, or of the terms of its
charter or bylaws, or of any contract or undertaking to which it is a party or
by which any of its properties may be bound or affected; (b) the Relevant Loan
Documents constitute its legal, valid, and binding obligations, enforceable
against it in accordance with their respective terms, except as the
enforceability hereof or thereof may be affected by: (i) bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally; or (ii) the limitation of certain remedies by
certain equitable principles of general applicability; (c) Schedule A attached
to the Patent Security Agreement contains a true, correct, and complete list of
all of the existing Patents (as defined in the Patent Security Agreement) of the
Companies; (d) Schedule A attached to the Trademark Security Agreement contains
a true, correct, and complete list of all of the existing Trademarks (as defined
in the Trademark Security Agreement) of the Companies; and (e) Schedule R-1
------------
attached hereto contains true, correct, and complete legal descriptions of the
real property of MDT located in Henrietta, New York and Rancho Dominguez,
California.
5. Effect on Loan Documents. The Credit Agreement, as amended
------------------------
hereby, and the other Loan Documents shall be and remain in full force and
effect in accordance with their respective terms and hereby are ratified and
confirmed in all respects. Except as expressly set forth herein, the execution,
delivery, and performance of this Amendment shall not operate as a waiver or as
an amendment of any right, power, or remedy of the Agent or the Banks, nor as a
consent to any further or other matter, under the Loan Documents.
24
<PAGE>
6. Miscellaneous.
-------------
a. Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Agreement," "hereunder," "herein," "hereof" or
words of like import referring to the Credit Agreement shall mean and refer to
the Credit Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment, each reference
in the Loan Documents to the "Credit Agreement," "thereunder," "therein,"
"thereof" or words of like import referring to the Credit Agreement shall mean
and refer to the Credit Agreement as amended by this Amendment.
c. Upon the effectiveness of this Amendment, each reference
in the Credit Agreement or the other Loan Documents to any of Schedule 9.14,
-------------
Schedule E-1, Schedule R-1, Exhibit P-1, Exhibit P-2, Exhibit R-1A,
- - ------------ ------------ ----------- ----------- ------------
Exhibit R-1B, or Exhibit T-2 attached to the Credit Agreement shall mean and
- - ------------ -----------
refer to Schedule 9.14, Schedule E-1, Schedule R-1, Exhibit P-1, Exhibit P-2,
------------- ------------ ------------ ----------- -----------
Exhibit R- 1A, Exhibit R-1B, or Exhibit T-2, as the case may be, attached to
- - ------------- ------------ --------------
this Amendment.
d. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
e. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
7. Certain Waivers. As used in this Section 7, the term "Bank
---------------
Group" shall mean, individually and collectively, the Agent and the Banks. To
the extent that any Company is a guarantor or accommodation party on behalf of
any one or more other Companies (it being understood and intended by the parties
that the Companies are joint and several obligors), the provisions of this
Section 7 shall apply:
a. To the maximum extent permitted by law, each Company
hereby waives: (i) notice of acceptance hereof; (ii) notice of any loans or
other financial accommodations made or extended under the Loan Documents, or the
creation or existence of any obligations thereunder (the "Obligations"); (iii)
notice of the amount of the Obligations, subject, however, to such Company's
right to make inquiry of the Agent or a Bank to ascertain the amount of the
Obligations at any reasonable time; (iv) notice of any adverse change in the
financial condition of any other Company or of any other fact that might
increase such Company's risk hereunder; and (v) notice of presentment for
payment, demand, protest, and notice thereof as to any instrument among the Loan
Documents.
25
<PAGE>
b. To the fullest extent permitted by applicable law, each
Company waives the right by statute or otherwise to require the Bank Group to
institute suit against any other Company or to exhaust any rights and remedies
which the Bank Group has or may have against such other Company. Each Company
further waives any defense arising by reason of any disability or other defense
(other than the defense that the Obligations shall have been fully and finally
indefeasibly paid) of the other Companies or by reason of the cessation from any
cause (other than that the Obligations shall have been fully and finally
indefeasibly paid) whatsoever of the liability of the other Companies in respect
thereof.
c. To the maximum extent permitted by law, each Company
hereby waives: (i) any rights to assert against the Bank Group any defense
(legal or equitable), set-off, counterclaim, or claim which such Company may now
or at any time hereafter have against the other Companies or any other party
liable to the Bank Group on account of or with respect to the Obligations; (ii)
any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future sufficiency, validity, or
enforceability of the Obligations; (iii) any defense arising by reason of any
claim or defense based upon an election of remedies by the Bank Group including,
to the extent applicable, the provisions of (S)(S) 580d and 726 of the
California Code of Civil Procedure, or any similar law of California or any
other jurisdiction; (iv) the benefit of any statute of limitations affecting
such Company's liability hereunder or the enforcement thereof.
d. To the maximum extent permitted by law, each Company
hereby waives and postpones until indefeasible payment in full of the
Obligations any right of subrogation such Company has or may have as against the
other Companies with respect to the Obligations. In addition, each Company
hereby waives and postpones until indefeasible payment in full of the
Obligations any right to proceed against the other Companies, now or hereafter,
for contribution, indemnity, reimbursement, or any other suretyship rights and
claims (irrespective of whether direct or indirect, liquidated or contingent),
with respect to the Obligations. Each Company also hereby waives and postpones
until indefeasible payment in full of the Obligations any right to proceed or to
seek recourse against or with respect to any property or asset of the other
Companies. Each Company hereby agrees that, in light of the waiver and
postponements of rights contained in this Section, such Company shall not be
deemed to be a "creditor" (as that term is defined in the Bankruptcy Code or
otherwise) of the other Companies, whether for purposes of the application of
Sections 547 or 550 of the Bankruptcy Code or otherwise.
e. If any of the Obligations at any time are secured by a
mortgage or deed of trust upon real property, the Bank Group may elect, in its
sole discretion, upon a default with respect to the Obligations, to foreclose
such mortgage or deed of trust judicially or nonjudicially in any manner
permitted by law, before or after enforcing this Agreement or any
other Loan Document, without diminishing or affecting the liability of
26
<PAGE>
any Company hereunder. Each Company understands that (a) by virtue of the
operation of California's antideficiency law applicable to nonjudicial
foreclosures, an election by the Bank Group nonjudicially to foreclose such a
mortgage or deed of trust probably would have the effect of impairing or
destroying rights of subrogation, reimbursement, contribution, or indemnity of
such Company against the other Companies or guarantors or sureties, and (b)
absent the waiver and postponement of rights given by each Company herein, such
an election might estop the Bank Group from enforcing this Agreement or the
other Loan Documents against such Company. Understanding the foregoing, and
understanding that each Company is hereby relinquishing a defense to the
enforceability of this Agreement and the other Loan Documents, each Company
hereby waives any right to assert against the Bank Group any defense to the
enforcement of this Agreement and the other Loan Documents, whether denominated
"estoppel" or otherwise, based on or arising from an election by the Bank Group
nonjudicially to foreclose any such mortgage or deed of trust. Each Company
understands that the effect of the foregoing waiver may be that such Company may
have liability hereunder for amounts with respect to which such Company may be
left without rights of subrogation, reimbursement, contribution, or indemnity
against the other Companies or guarantors or sureties. Each Company also agrees
that the "fair market value" provisions of Section 580a of the California Code
of Civil Procedure shall have no applicability with respect to the determination
of such Company's liability under this Agreement or the other Loan Documents.
f. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS AGREEMENT, EACH COMPANY HEREBY WAIVES, TO THE
MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING
DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE (S)(S)
2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND
2850, TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE (S)(S) 580a,
580b, 580c, 580d, AND 726, AND, TO THE EXTENT APPLICABLE, CHAPTER 2 OF TITLE 14
OF THE CALIFORNIA CIVIL CODE.
g. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, EACH
COMPANY HEREBY WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF
REMEDIES BY THE BANK GROUP, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A
NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR AN OBLIGATION, HAS
DESTROYED SUCH COMPANY'S RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST THE
PRINCIPAL BY THE OPERATION OF SECTION 580d OF THE CODE OF CIVIL PROCEDURE OR
OTHERWISE.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
MDT CORPORATION MDT DIAGNOSTIC COMPANY
By: /s/ Thomas Hein By: /s/ Thomas Hein
----------------------------- ------------------------
Title: V. P., Finance & Treasurer Title: Treasurer
-------------------------- ---------------------
MDT BIOLOGIC COMPANY MDT CANADA LIMITED
By: /s/ Thomas Hein By: /s/ Thomas Hein
------------------------- ------------------------
Title: Treasurer Title: Treasurer
---------------------- ---------------------
MDT TECHNIONIC COMPANY
By: /s/ Thomas Hein
------------------------
Title: Treasurer
---------------------
S-1
<PAGE>
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as the Agent and a Bank
By: /s/ Paul Dobel
--------------------------
P. Steve Dobel
Senior Vice President
Address:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
111 Sutter Street
17th Floor
(MAC # 0188-176)
San Francisco, California 94104
Attn: P. Steve Dobel
Telecopier: (415) 398-7572
S-2
<PAGE>
CHEMICAL BANK
By: /s/ Virginia Allen
---------------------------
Title: Vice President
------------------------
Address:
CHEMICAL BANK
300 Linden Oaks
2nd Floor
Rochester, New York 14625
Attn: Virginia Allen
Telecopier: (716) 586-6305
S-3
<PAGE>
Exhibit A-1
------------
Reaffirmation and Consent of Guarantor
All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in that certain Amendment to Credit
Agreement, dated as of February 15, 1996 (the "Amendment").
Each of the undersigned hereby agrees that each reference in the Loan
Documents to the "Credit Agreement," "thereunder," "therein," "thereof" or words
of like import referring to the Credit Agreement shall mean and refer to the
Credit Agreement as amended by the Amendment.
Each of the undersigned hereby (a) represents and warrants to the
Agent and the Banks that the execution, delivery, and performance of this
Reaffirmation and Consent of Guarantor and the other Loan Documents required by
the Amendment to be executed and delivered by it are within its corporate
powers, have been duly authorized by all necessary corporate action, and, except
for such instances that could not reasonably be expected to have a Material
Adverse Effect, are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected; (b) consents to the amendment of the Credit Agreement
by the Amendment; (c) acknowledges and reaffirms its obligations owing to the
Agent and the Banks under its guaranty and any other Loan Documents to which it
is a party; and (d) agrees that its guaranty and any such other Loan Documents
are and shall remain in full force and effect. Although each of the undersigned
has been informed of the matters set forth herein and has acknowledged and
agreed to same, it understands that the Agent and the Banks have no obligation
to inform it of such matters in the future or to seek its acknowledgement or
agreement to future amendments, and nothing herein shall create such a duty.
Each of the undersigned also hereby agrees to execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
the Agent, and take all
S-4
<PAGE>
actions as the Agent may reasonably request from time to time, to fully
consummate the transactions contemplated under the Amendment and the Credit
Agreement, as amended by the Amendment.
MDT CORPORATION
By: /s/ Thomas Hein
------------------------------
Title: Vice President & Treasurer
---------------------------
MDT BIOLOGIC COMPANY
By: /s/ Thomas Hein
---------------------------
Title: Treasurer
------------------------
MDT DIAGNOSTIC COMPANY
By: /s/ Thomas Hein
---------------------------
Title: Treasurer
------------------------
MDT CANADA LIMITED
By: /s/ Thomas Hein
---------------------------
Title: Treasurer
------------------------
MDT TECHNIONIC COMPANY
By: /s/ Thomas Hein
---------------------------
Title: Treasurer
------------------------
CONSOLIDATED EQUIPMENT
SUPPLY CORPORATION
By: /s/ Thomas Hein
---------------------------
Title: Treasurer
------------------------
S-5
<PAGE>
SCHEDULE R-1
------------
Attached are the legal descriptions of:
1. the Rancho Dominguez, California real property; and
2. the Henrietta, New York real property.
<PAGE>
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IS SITUATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCEL A:
PARCEL 7 AND THE EASTERLY 65.00 FEET OF PARCEL 4, AS SHOWN ON PARCEL MAP NO.
16827, FILED IN BOOK 204 PAGES 25 AND 26 OF PARCEL MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED.
ALSO EXCEPT ALL 100 PERCENT OF THE OIL, GAS, PETROLEUM AND OTHER HYDROCARBON
SUBSTANCES WHICH LIE BELOW A PLANE PARALLEL TO AND 500 FEET BELOW THE NATURAL
SURFACE OF SAID LAND WITHOUT, HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF
SAID LAND TO EXPLORE FOR, DEVELOP OR REMOVE SAID SUBSTANCES, BUT WITH FULL RIGHT
TO EXPLORE FOR, DEVELOP AND REMOVE THE SAME BY MEANS OF WELLS OR EQUIPMENT,
HAVING SURFACE LOCATIONS OUTSIDE THE OUTER BOUNDARIES OF SAID REAL PROPERTY, IN
AND UNDER OR RECOVERABLE FROM SAID REAL PROPERTY, AS EXCEPTED IN THE DEED FROM
DEL AMO ESTATE COMPANY, A CORPORATION, RECORDED NOVEMBER 8, 1963, IN BOOK D2250
PAGE 74, OFFICIAL RECORDS.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED ALL MINERALS AND
ALL MINERAL RIGHTS OF EVERY KIND AND CHARACTER NOW KNOWN TO EXIST OR HEREAFTER
DISCOVERED INCLUDING WITHOUT LIMITING THE GENERALITY OF THE OIL, GAS, AND RIGHTS
THERETO, TOGETHER WITH THE SOLE, EXCLUSIVE AND PERPETUAL RIGHT TO EXPLORE FOR,
REMOVE AND DISPOSE OF SAID MINERALS BY ANY MEANS OR METHODS, SUITABLE TO
DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, ITS SUCCESSOR AND ASSIGNS,
BUT WITHOUT ENTERING UPON OR USING THE SURFACE OF SAID LAND OR ANY PORTION OF
THE SUBSURFACE WITHIN 500 FEET OF THE SURFACE, AND IN SUCH MANNER AS NOT TO
DAMAGE THE SURFACE OF SAID LAND OR TO INTERFERE WITH THE USE THEREOF, AS
EXCEPTED AND RESERVED BY DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, IN
DEED RECORDED DECEMBER 12, 1967 IN BOOK D3856 PAGE 664, OFFICIAL RECORDS, AS
INSTRUMENT NO. 3065.
PARCEL B:
PARCEL 8, IN THE CITY OF LOS ANGELES, AS SHOWN ON PARCEL MAP NO. 16827, FILED IN
BOOK 204 PAGES 25 AND 26 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.
EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED.
ALSO EXCEPT ALL 100 PERCENT OF THE OIL, GAS, PETROLEUM AND OTHER HYDROCARBON
SUBSTANCES WHICH LIE BELOW A PLANE PARALLEL TO AND 500 FEET BELOW THE NATURAL
SURFACE OF SAID LAND WITHOUT, HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF
SAID LAND TO EXPLORE FOR, DEVELOP OR REMOVE SAID SUBSTANCES, BUT WITH FULL RIGHT
TO EXPLORE FOR, DEVELOP AND REMOVE THE SAME BY MEANS OF WELLS OR EQUIPMENT,
HAVING SURFACE LOCATIONS OUTSIDE THE OUTER BOUNDARIES OF SAID REAL PROPERTY, IN
AND UNDER OR RECOVERABLE FROM SAID REAL PROPERTY, AS EXCEPTED IN THE DEED FROM
DEL AMO ESTATE COMPANY, A CORPORATION, RECORDED NOVEMBER 8, 1963 AS INSTRUMENT
NO. 5445 IN BOOK D-2250 PAGE 754, OFFICIAL RECORDS.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED ALL MINERALS AND
ALL MINERAL RIGHTS OF EVERY KIND AND CHARACTER NOW KNOWN TO EXIST OR HEREAFTER
<PAGE>
DISCOVERED INCLUDING WITHOUT LIMITING THE GENERALITY OF THE OIL, GAS AND RIGHTS
THERETO, TOGETHER WITH THE SOLE, EXCLUSIVE AND PERPETUAL RIGHT TO EXPLORE FOR,
REMOVE AND DISPOSE OF SAID MINERALS BY ANY MEANS OR METHODS, SUITABLE TO
DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, ITS SUCCESSORS AND ASSIGNS,
BUT WITHOUT ENTERING UPON OR USING THE SURFACE OF SAID LAND OR ANY PORTION OF
THE SUBSURFACE WITHIN 500 FEET OF THE SURFACE, AND IN SUCH MANNER AS NOT TO
DAMAGE THE SURFACE OF SAID LAND OR TO INTERFERE WITH THE USE THEREOF, AS
EXCEPTED AND RESERVED BY DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, IN
DEED RECORDED DECEMBER 12, 1967 IN BOOK D-3856 PAGE 564, OFFICIAL RECORDS AS
INSTRUMENT NO. 3065.
<PAGE>
Title No.: 905-M-28,879
N/A #69392 5
SCHEDULE A
ALL THAT TRACT OR PARCEL OF LAND, situate in the Town of Henrietta, Monroe
County, New York, being parts of Lots five and six in the Third Range of Lots,
Township twelve, Range seven, bounded and described as follows:
BEGINNING at a point in the centerline of East Henrietta Road distant southerly
three hundred ten and 20/100 feet from the intersection of the center line of
East Henrietta Road with the center line of Jefferson Road; thence
1. Northwesterly and forming an interior angle with the center line of East
Henrietta Road of one hundred forty-two degrees and fifty-two minutes
thirty seconds a distance of two hundred twenty-one and 34/100 feet to a
point; thence,
2. Westerly and forming an interior angle with the last course of one hundred
twenty-seven degrees thirty-one minutes thirty seconds a distance of six
hundred fifty-four and 65/100 feet to a point; thence
3. Continuing westerly and deflecting to the right fourteen degrees fifty-one
minutes thirty seconds a distance of four hundred forty-six and 60/100 feet
to a point; thence,
4. Southwesterly and forming an interior angle with the last course of one
hundred twelve degrees, thirty-seven minutes thirty seconds a distance of
one thousand one hundred feet to a point; thence,
5. Easterly and forming an interior angle with the last course of seventy
degrees twenty-two minutes a distance of one thousand four hundred ninety-
seven and 6/100 feet to a point; thence,
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 6
SCHEDULE A CONTINUED
6. Northeasterly and forming an interior angle with the last course of one
hundred nine degrees thirty-three minutes forty-five seconds a distance of
four hundred forty-five feet to a point; thence
7. Easterly deflecting to the right fifty-one degrees thirty-five minutes
thirty-five seconds a distance of one hundred ninety-nine and 98/100 feet
to a point in the center line of East Henrietta Road; thence,
8. Northerly along the center line of East Henrietta Road and forming an
interior angle with the last course of ninety degrees thirty-five minutes
forty seconds a distance of six hundred eighty-four and 80/100 feet to the
place of beginning.
EXCEPTING:
i. All that certain property appropriated by the State of New York on November
20, 1969, shown and described on Map No. 13R-2, Parcel Nos. 22, 23, and 55,
filed in the Office of the State Department of Transportation and in the
Office of the County Clerk for Monroe County; and
ii. All that certain property appropriated by the State of New York on April
18, 1978, shown and described on Map No. 719, Parcel Nos. 753 and 754,
filed in the Office of the Department of Transportation and in the Office
of the County Clerk for Monroe County; and
Such Parcels being described as follows:
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 7
SCHEDULE A CONTINUED
PARCEL NO.22
- - ------------
BEGINNING at a point in the existing division line between the property
of The People of the State of New York, on the east and the property of
Sybron Corporation (reputed owner) on the west, at its intersection with
the division line between the property of James D. Andrews, Ruth Jane
Andrews, Mary Ruth Andrews Sweeting and John Bruce Andrews (reputed owners)
on the south and property of Sybron Corporation (reputed owner) on the
north, said intersection being southeasterly 185.03 feet measured at right
angles from station 267+85.96 of the hereinafter described survey base line
for Construction of Genesee Expressway (East Henrietta - Rochester, State
Highway 494 to Thruway); thence N 88/o/ 16' 45" W 452.78 feet to a point;
said point being the northwesterly 100.00 feet measured at right angles
from base line station 271+37.76; thence N 58/o/ 11' 15" E, 565.34 feet
to a point, said point being northwesterly 46.00 feet measured at right
angles from base line station 265+'5.00; thence N 51/o/ 33' 46" E 167.60
feet to a point in the division line between the property of Southern Oil
Company of New York, Inc. (reputed owner) on the east, and the property
of Sybron Corporation (reputed owner) on the west, said point being
northwesterly 4934 feet measured at right angles from base line station
264+07.44; thence S 20/o/ 56' 31" W, 445.20 feet along the last mentioned
division line and the above mentioned division line between the property
of The People of the State of New York, on the east and the property of
James D. Andrews, Ruth Jane Andrews, Mary Ruth Andrews Sweeting and
John Bruce Andrews (reputed owners) on the west, to the point of beginning.
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 8
SCHEDULE A CONTINUED
PARCEL NO. 23
- - -------------
BEGINNING at a point in the existing westerly highway boundary line of
East Henrietta-Rochester State Highway 494 at its intersection with the
division line between the property of Southern Oil Company of New York,
Inc. (reputed owner) on the south and the property of Sybron Corporation
(reputed owner) on the north, said intersection being southeasterly 34.11
feet measured at right angles from station 262+54.89 of the hereinafter
described survey base line for the Construction of Genesee Expressway
(East Henrietta-Rochester State Highway 494 to Thruway); thence S 72/o/
32' 17" W, 166.71 feet along the above mentioned division line to a point,
said point being northwesterly 49.34 feet measured at right angles from base
line station 264+07.44; thence N 28/o/ 33' 09" E, 205.60 feet to a point,
said point being northwesterly 97.30 feet measured at right angles from
base line station 261+95.96; thence N 16/o/ 57' 58" W, 234.82 feet to a point,
said point being northwesterly 296.12 feet measured at right angles from base
line station 261+71.02; thence N 73/o/ 02' 02" E 20.00 feet to a point in
the above mentioned highway boundary line, said point being northwesterly
285.47 feet measured at right angles from base line station 260+54.28; thence S
16/o/ 57' 58" E, 377.44 feet along said highway boundary line to the point of
beginning.
PARCEL NO. 55
- - -------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494, said point being northwesterly 592.56
feet measured at right angles from station 258+61.10 of the hereinafter
described survey base line for the Construction of Genesee Expressway (East
Henrietta-Rochester State Highway 494 to Thruway);
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 9
SCHEDULE A CONTINUED
thence S 16/o/ 57' 58" E 362.69 feet along the above mentioned highway boundary
line to a point, said point being northwesterly 285.47 feet measured at right
angles from base line station 260+54.28; thence S 73/o/ 02' 02" W 20.00 feet to
a point; said point being northwesterly 296.12 feet measured at right angles
from base line station 260+71.02; thence N 16/o/ 57' 58" W 388.97 feet to a
point in the above mentioned highway boundary line, said point being
northwesterly 625.46 feet measured at right angles from base line station
258+64.08; thence S 54/o/ 17' 12" E, 33.04 feet continuing along said highway
boundary line to the point of beginning.
The above mentioned base lines for Parcels 22, 23 and 55 is a portion of the
survey base line for the Construction of Genesee Expressway (East
Henrietta-Rochester State Highway No. 494 to Thruway) as shown on a map and plan
on file in the office of the State Department of Transportation and described as
follows:
BEGINNING at B-8 P.I. Station 251+67.28; thence S 40/o/ 53' 22" W, 1,214.35 feet
to B-11 Station P.I. 263+82.63; thence S 52/o/ 42' 23" W, 827.05 feet to B-13
Station P.I. 72+09.68.
PARCEL NO. 753
- - --------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494, said point being northwesterly 296.12
feet measured at right angles from station 260+71.08 of the hereinafter
described survey base line for the Construction of Interstate Route 509 (390)
Genesee Expressway, Section 13 (East Henrietta-Rochester S.H. 494 to Thruway);
thence S 16/o/ 57' 58" E 234.82 feet along said highway boundary line to its
intersection with the existing northwesterly highway boundary line of Interstate
Route 509 (390) Genesee Expressway, Section 13
SCHEDULE A CONTINUED
<PAGE>
TITLE NO.: 905-M-28,879
N/A #69392 10
SCHEDULE A CONTINUED
(East Henrietta-Rochester S.H. 494 to Thruway) said intersection being
northwesterly 97.30 feet measured at right angles from baseline station
261+95.96; thence S 28/o/ 33' 09" W 39.02 feet along the last mentioned highway
boundary line to a point, said point being northwesterly 88.96 feet measured at
right angles from base line station 262+34.08; thence through the property of
Sybron Corporation (reputed owner) the following three (3) courses and
distances:
1. N 01/o/ 01' 21" W 65.01 feet to a point, said point being northwesterly
132.40 feet measured at right angles from base line station 261+85.77;
thence
2. N 16/o/ 57' 58" W 199.64 feet to a point, said point being northwesterly
301.44 feet measured at right angles from base line station 260+9.55;
thence
3. N 73/o/ 02' 02" E 10.0 feet to the point of beginning.
PARCEL NO. 754
- - --------------
BEGINNING at a point in the existing highway boundary line of East
Henrietta-Rochester State Highway 494, said point being northwesterly 296.12
feet measured at right angles from station 260+71.08 of the hereinafter
described survey base line for the Construction of Interstate Route 509 (390)
Genesee Expressway, Section 13 (East Henrietta-Rochester S.H. 494 to Thruway);
thence through the property of Sybron Corporation (reputed owner) to the
following (3) courses and distances.
1. S 73/o/ 02' 02" W, 10.0 feet to a point, said point being northwesterly
301.44 feet measured at right angles from baseline station 260+9.55;
thence
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 11
SCHEDULE A CONTINUED
2. N 16/o/ 57' 58" W, 198.03 feet to a point, said point being northwesterly
469.11 feet measured at right angles from baseline station 269+74.19;
thence
3. N 73/o/ 02' 02" E, 10.0 feet to a point in the above mentioned highway
boundary line, said point being northwesterly 463.79 feet measured at right
angles from baseline Station 259+65.72; thence S 16/o/ 57' 58" E 198.03
feet along said highway boundary line to the point of beginning.
The above mentioned base line for Parcels 753 and 754 is a portion of the survey
base line for the construction of Interstate Route 509 (390) Genesee Expressway,
Section 13, (East Henrietta-Rochester S.H. 494 to Thruway) as shown on a map and
plan on file in the Office of the State Department of Transportation and
described as follows:
BEGINNING at B-8, Station P.I. 251+67.28; thence S 40/o/ 53' 22" W to B-11,
Station P.I. 263+82.63.
The policy to be issued under this report will insure title to
such buildings and improvements erected on the premises which by
law constitute real property.
FOR
CONVEYANCE
ONLY
TOGETHER with all the right, title and interest of the party of
the first part, of, in and to the land lying in the street in
front of adjoining said premises.
<PAGE>
Exhibit 10.8.4
MDT CORPORATION
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Agent
MORTGAGE
(FEE)
Dated: As of February 15, 1996
Location: 1777 East Henrietta Road,
Henrietta, New York
RECORD AND RETURN TO:
Brobeck, Phleger & Harrison LLP
1301 Avenue of the Americas, 30th Floor
New York, New York 10019
Attention: Robert P. Wessely
<PAGE>
MORTGAGE
--------
THIS MORTGAGE made as of the 15th day of February 1996, between MDT
Corporation, a Delaware corporation having an office and place of business
c/o MDT Technionic Company, 1777 East Henrietta Road, Henrietta, Monroe
County, New York (the "Mortgagor"), and WELLS FARGO BANK, a national
banking association having an office at 111 West Ocean Boulevard, Suite
300, Long Beach, California 90802, as agent under the below-defined Credit
Agreement ("Mortgagee"). As used herein, the "Credit Agreement" shall mean
that certain Credit Agreement, dated as of August 20, 1993, as amended by
that certain Amendment to Credit Agreement, dated as of August 1, 1995, and
that certain Amendment to Credit Agreement, dated as of even date herewith
(as so amended, and as it may otherwise be amended, restated, supplemented,
renewed, extended, or modified from time to time), among Mortgagee, certain
financial institutions named therein as "Banks", Mortgagor, and certain
affiliates of Mortgagor.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS the Mortgagor is the owner of a fee estate in the premises
described in Exhibit A attached hereto (the "Premises");
NOW THEREFORE, to secure the payment of an indebtedness in the
principal sum of Six Million and no/100 Dollars ($6,000,000.00), lawful money of
the United States of America, to be paid with interest in accordance with the
Notes (as defined below) (said indebtedness, interest and all other sums which
may or shall become due hereunder being hereinafter collectively referred to as
the "Debt"), and to secure the performance of all other obligations arising
under or in connection with (i) that certain Amended and Restated Promissory
Note (the "Wells Fargo Note"), dated as of August 1, 1995, in the original
principal amount of Seven Million Eight Hundred Thousand Dollars ($7,800,000),
executed by Mortgagor and payable to Wells Fargo Bank, National Association or
its order, (ii) that certain Amended and Restated Promissory Note (the "Chemical
Note"), dated as of August 1, 1995, in the original principal amount of Four
Million Two Hundred Thousand Dollars ($4,200,000), executed by Mortgagor and
payable to Chemical Bank or its order; and (iii) any other promissory note
hereafter designated as a "Term Loan Note" under the Credit Agreement (the Wells
Fargo Note, the Chemical Note, and such other Term Loan Notes, in each case as
it may be amended, restated, supplemented, renewed, extended, or modified from
time to time, are referred to herein, collectively, as the "Notes"), the
Mortgagor has mortgaged, given, granted,
<PAGE>
bargained, sold, aliened, enfeoffed, conveyed, confirmed and assigned, and by
these presents does mortgage, give, grant, bargain, sell, alien, enfeoff,
convey, confirm and assign unto the Mortgagee forever all right, title and
interest of the Mortgagor now owned, or hereafter acquired, in and to the
following property, rights and interests (such property, rights and interests
being hereinafter collectively referred to as the "Mortgaged Property"):
(a) the Premises;
(b) all buildings and improvements now or hereafter located on the
Premises (the "Improvements");
(c) all easements, rights-of-way, gores of land, streets, ways,
alleys, passages, sewer rights, waters, water courses, water rights and
powers, and all estates, rights titles, interests, privileges, liberties,
tenements, hereditaments, and appurtenances of any nature whatsoever, in
any way belonging, relating or pertaining to the Mortgaged Property
(including, without limitation, any and all development rights, air rights
or similar or comparable rights of any nature whatsoever now or hereafter
appurtenant to the Premises or now or hereafter transferred to the
Premises) and all land lying in the bed of any street, road or avenue,
opened or proposed, in front of or adjoining the Premises to the center
line thereof;
(d) all machinery, apparatus, equipment, fittings and other fixtures
now or hereafter located upon or in, or attached to, any portion of the
Mortgaged Property, or appurtenances thereto, and used or usable in
connection with the present or future operation and occupancy of the
Mortgaged Property, and all additions thereto and renewals and replacements
thereof, and all substitutions therefor now owned or hereafter acquired by
the Mortgagor, or in which the Mortgagor has or shall have an interest
(collectively, the "Equipment"), and the right, title and interest of the
Mortgagor in and to any of the Equipment which may be subject to any
security agreements (as defined in the Uniform Commercial Code of the State
of New York (the "Uniform Commercial Code") superior in lien to the lien of
this Mortgage, and all proceeds and products of any of the above;
(e) all awards or payments, including interest thereon, and the right
to receive and apply the same to the payment of the Debt, which may be made
with respect to the Mortgaged Property, whether from the exercise of the
right of eminent domain (including any transfer made in lieu of the
exercise of said right), or for any other injury to or decrease in the
value of the Mortgaged Property;
2
<PAGE>
(f) all leases and other agreements affecting the use or occupancy of
the Mortgaged Property now or hereafter entered into (the "Leases") and the
right to receive and apply the rents, issues and profits of the Mortgaged
Property (the "Rents") to the payment of the Debt;
(g) all proceeds of any insurance policies covering any of the
Mortgaged Property, including, without limitation, the right to receive and
apply the proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Mortgaged Property; and
(h) the right, in the name and on behalf of the Mortgagor, to appear
in and defend any action or proceeding brought with respect to the
Mortgaged Property and to commence any action or proceeding to protect the
interest of the Mortgagee in the Mortgaged Property.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the proper use and benefit of the Mortgagee, and the successors and
assigns of the Mortgagee, forever.
AND the Mortgagor covenants and agrees with an represents and warrants
to the Mortgagee as follows:
ARTICLE I - COLLATERAL
1. Payment of Debt. The Mortgagor will pay the Debt at the time and
---------------
in the manner provided for its payment in the Credit Agreement, the Notes and in
this Mortgage.
2. Warranty of Title; Other Representations and Warranties.
-------------------------------------------- ----------
(a) Except as disclosed on Schedule I(2)(a) hereto, the Mortgagor
warrants the title to the Premises, the Improvements, the Equipment and the
balance of the Mortgaged Property.
(b) The Mortgagor also represents and warrants that: (i) the
Mortgagor is now, and after giving effect to this Mortgage, will be in a solvent
condition, (ii) the execution and delivery of this Mortgage by the Mortgagor
does not constitute a fraudulent conveyance, within the meaning of Title 11 of
the United States Code as now constituted or under any other applicable statute,
(iii) no bankruptcy or insolvency proceedings are pending or contemplated by or
against the Mortgagor, and (iv) there are no existing, pending or, to the best
knowledge of Mortgagor, threatened actions or proceedings which are reasonably
expected to materially adversely affect the Mortgaged Property
3
<PAGE>
except for possible negligence actions or proceedings which are fully covered by
insurance.
(c) The Mortgagor additionally represents and warrants that: (i)
it has full corporate power and authority to execute this Mortgage, and to
mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm and assign
the Mortgaged Property pursuant to the terms hereof and to keep and observe all
of the terms of this Mortgage on the Mortgagor's part to be performed, and (ii)
the Mortgagor is a duly organized and presently existing corporation and the
execution and delivery of this Mortgage has been duly authorized by all
necessary corporate action on behalf of the Mortgagor.
3. Insurance.
---------
(a) The Mortgagor, at its expense, (i) will keep the Improvements
and the Equipment insured with extended coverage against loss or damage by fire,
vandalism, malicious mischief and such other hazards as the Mortgagee shall from
time to time require, in amounts approved by the Mortgagee, which amounts shall
in no event be less than one hundred percent (100%) of the full insurable value
of the Improvements and the Equipment and shall be sufficient to meet all
applicable co-insurance requirements, and (ii) will maintain rental and business
interruption insurance and such other forms of insurance coverage with respect
to the Mortgaged Property as the Mortgagee shall from time to time require in
amounts approved by the Mortgagee. If any portion of the Premises is located in
a Federally designated special flood hazard area, in addition to the other
policies of insurance required under this paragraph (the "Policies"), a flood
insurance policy shall be delivered by the Mortgagor to the Mortgagee. If no
portion of the Premises is located in a Federally designated "special flood
hazard area", such fact shall be substantiated by a certificate in form
satisfactory to the Mortgagee from a licensed surveyor, appraiser or
professional engineer or other qualified person satisfactory to the Mortgagee in
accordance with applicable regulations.
(b) The Mortgagor shall at all times comply with and shall cause
the Improvements and Equipment and the use, occupancy, operation, maintenance,
alteration, repair and restoration thereof to comply with the terms, conditions,
stipulations and requirements of the Policies. All Policies shall be issued by
insurers having a minimum policy holders rating of "A1" per the latest rating
publication of Property and Casualty Insurers by A.M. Best Company and who are
lawfully doing business in New York and are otherwise acceptable in all respects
to the Mortgagee. All Policies shall, with respect to the Premises and the
Improvements, contain the standard New York mortgagee non-contribution clause
endorsement or an equivalent endorsement and, with respect to the Equipment,
contain a lender's loss payable clause endorsement or an equivalent
4
<PAGE>
endorsement, all naming the Mortgagee as the person to which all payments made
by the insurer thereunder shall be paid and otherwise in form and substance
satisfactory in all respects to the Mortgagee. Blanket insurance policies shall
not be acceptable for the purposes of this paragraph unless otherwise approved
to the contrary by the Mortgagee. The Mortgagor shall pay the premiums for the
Policies as the same become due and payable. At the request of the Mortgagee,
the Mortgagor will deliver the Policies to the Mortgagee. Not later than thirty
(30) days prior to the expiration date of each of the Policies, the Mortgagor
will deliver to the Mortgagee a renewal policy or policies marked "premium paid"
or accompanied by other evidence of payment of premium satisfactory to the
Mortgagee. If at any time the Mortgagee is not in receipt of written evidence
that all insurance required hereunder is in full force and effect, the Mortgagee
shall have the right, but not the obligation, without notice to the Mortgagor,
to take such action as the Mortgagee deems necessary to protect its interest in
the Mortgaged Property, including, without limitation, the obtaining of such
insurance coverage as the Mortgagee in its sole discretion deems appropriate,
and all expenses incurred by the Mortgagee in connection with such action or in
obtaining such insurance and keeping it in effect shall be paid by the Mortgagor
to the Mortgagee upon demand and until paid shall be secured by this Mortgage in
accordance with Paragraph 7 of Article II hereof.
(c) If the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or other property hazard or casualty, the Mortgagor
shall give prompt notice thereof to the Mortgagee. Proceeds paid to the
Mortgagee by any insurer may be retained and applied by the Mortgagee toward
payment of the Debt, whether or not then due and payable, in such order,
priority and proportions as the Mortgagee in its discretion shall deem proper
or, at the discretion of the Mortgagee, the same may be paid, either in whole or
in part, to the Mortgagor for such purposes as the Mortgagee shall reasonably
designate.
(d) Notwithstanding the foregoing, in the event such proceeds with
respect to any particular insured loss are less than $1,500,000 and the
Mortgagee determines, reasonably and in good faith, that there has been no
material impairment of the prosect of repayment of any portion of the Debt or
any material impairment of the value of the Mortgagee's security interests in
the collateral securing the Debt, the Mortgagee shall deliver such proceeds to
the Mortgagor, for the purpose of repair or restoration of the damaged property
or, at the request of the Mortgagor, shall apply such proceeds to the repayment
of the Term Loan Notes. In the event such proceeds with respect to any
particular insured loss are equal to or greater than $1,500,000, the Mortgagee,
in its reasonable judgment, may elect to either apply such proceeds on account
of any portion of the Debt (initially with respect to the Term Loan Notes then
outstanding and, thereafter, to the Revolving Loans (as defined in the Credit
5
<PAGE>
Agreement) then outstanding) or deliver all or a portion of such proceeds to the
Mortgagor for the purpose of repair or restoration of the damaged property.
(e) If the Mortgagee shall receive and retain such insurance
proceeds, the lien of this Mortgage shall be reduced only by the amount thereof
received and retained by the Mortgagee and actually applied by the Mortgagee in
reduction of the debt. The Mortgagee shall not be obligated to see to the proper
application of insurance money paid over to the Mortgagor, and if the Mortgagee
receives and retains any insurance proceeds, the lien of this Mortgage shall be
affected only by a reduction of the amount of said lien by the amount of such
insurance money so received and retained by the Mortgagee. Nevertheless, if
prior to the receipt by the Mortgagee of any insurance proceeds, the Premises
shall have been sold on foreclosure of this Mortgage, as between the Mortgagor
and the Mortgagee, the Mortgagee shall have the right to receive said insurance
proceeds, and the Mortgagor shall pay over to the Mortgagee said insurance
proceeds as, if and when the Mortgagor receives same, to the extent of (i) any
deficiency found to be due upon such sale, with legal interest thereon, whether
or not a deficiency judgment on this Mortgage shall have been sought or
recovered, and (ii) of the attorney's fees, costs and disbursements incurred by
the Mortgagee in connection with the collection of such insurance proceeds. All
remaining right, title and interest of the Mortgagor in and to all policies of
insurance required by this Paragraph 3 shall inure to the benefit of and pass to
the successor in-interest to the Mortgagor or the purchaser or grantee of the
Mortgaged Property. The Mortgagor hereby appoints the Mortgagee its attorney-in-
fact to endorse any checks, drafts or other instruments representing any
proceeds of such insurance, whether payable by reason of loss thereunder or
otherwise. The provisions of subsection 4 of Section 254 of the Real Property
Law of New York covering the insurance of buildings against loss by fire shall
not apply to this Mortgage.
4. Payment of Taxes, etc. The Mortgagor shall pay all taxes,
---------------------
assessments, water rates, sewer rents and other charges, including vault charges
and license fees for the use of vaults, chutes and similar areas adjoining the
Premises, now or hereafter levied or assessed against the Mortgaged Property by
any public or quasi-public authority or utility company (collectively, the
"Taxes") prior to the date upon which any fine, penalty, interest or cost may be
added thereto or imposed by law for the nonpayment thereof, and, in default
thereof, the Mortgagee may, in its sole discretion, but shall not be obligated
to, pay same (all such payments to be secured hereby in accordance with
Paragraph 7 of Article II hereof), and the Mortgagor shall reimburse the
Mortgagee promptly following demand for such expenditures.
6
<PAGE>
5. Escrow Fund. After an Event of Default has occurred, and during
-----------
the continuation thereof, the Mortgagor will, at the option of and following
written notice by the Mortgagee, pay to the Mortgagee on the first day of each
calendar month one-twelfth of an amount (the "Escrow Fund") which would be
sufficient to pay, on the first day of the month preceding the month in which
they become due, the Taxes and the premiums on all Policies (the "Premiums")
payable, or estimated by the Mortgagee to be payable, during the ensuing twelve
(12) months. The Mortgagee will apply the Escrow Fund to the payment of Taxes
and the Premiums which are required to be paid by the Mortgagor pursuant to the
provisions of this Mortgage. If the amount of the Escrow Fund shall exceed the
amount of the Taxes and the Premiums payable by the Mortgagor pursuant to the
provisions of this Mortgage, the Mortgagee shall, in its discretion, (i) return
any excess to the Mortgagor, or (ii) credit such excess against future payments
to be made to the Escrow Fund. In allocating such excess, the Mortgagee may
deal with the person shown on the records of the Mortgagee to be the owner of
the Mortgaged Property. If the amount being deposited on a monthly basis into
the Escrow Fund is not sufficient to pay the Taxes and/or the Premiums, as the
same become payable, the Mortgagor shall pay to the Mortgagee, upon request, an
amount which the Mortgagee shall estimate as sufficient to make up the
deficiency. Until expended or applied as above provided, any amounts in the
Escrow Fund shall be held in a security account and shall constitute additional
security for the Debt and shall not bear interest except to the extent and in
the amount required by law.
6. Condemnation. Notwithstanding any taking by any public or quasi-
------------
public authority through eminent domain or otherwise, the Mortgagor shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Notes and this Mortgage and the Debt shall not be reduced until any award
or payment therefore shall have been actually received and applied by the
Mortgagee to the discharge of the Debt. If an Event of Default has occurred or
is then continuing, or if the Mortgagee otherwise has reasonably determined that
its security is or may be impaired, then the Mortgagee may apply the entire
amount of any such award or payment to the discharge of the Debt whether or not
then due and payable in such order, priority and proportions as the Mortgagee in
its discretion shall deem proper. If an Event of Default is not then
continuing, or if the Mortgagee's security is not then impaired, then such award
or proceeds shall be released to Mortgagor upon such conditions as the Mortgagee
reasonably may impose. The Mortgagee shall not be obligated to see to the
proper application of any award or payment paid over to the Mortgagor, and if
the Mortgagee receives such award or payment, the lien of this Mortgage shall be
affected only by a reduction of the amount of said lien by the amount of such
award or payment so received by the Mortgagee. If the Mortgaged Property is
sold, through foreclosure or otherwise, prior to the receipt by the Mortgagee of
such award or payment,
7
<PAGE>
the Mortgagee shall have the right, whether or not a deficiency judgment on the
Notes shall have been sought, recovered or denied, to receive such award or
payment, or a portion thereof sufficient to pay the Debt, whichever is less, and
the Mortgagor shall pay over to the Mortgagee said award or payment as, if and
when the Mortgagor receives same, to the extent of any deficiency judgment found
to be done upon such sale, with interest thereon, whether or not a deficiency
judgment on this Mortgage shall have been sought or recovered or denied, and of
the attorney's fees, costs and disbursements incurred by the Mortgagee in
connection with the collection of such award or payment. It is the express
intent and agreement of the parties that in the event of any such taking, the
Mortgagee shall receive interest at the rate set forth in the Notes (the "Note
Rate") up to and including the date of actual payment in full of the Debt,
provided that the rate set forth in the Notes is higher than the statutory rate,
and the Mortgagor (or any assignee or successor in interest thereof) shall
therefore be responsible to pay to the Mortgagee an amount equal to the entire
difference between the amount of interest received by the Mortgagee from the
condemning authority (or to which the Mortgagee is entitled under the
condemnation interest statute) and the Note Rate from the date of vesting of
title in such condemnation to the date of actual payment, except where the
statutory rate on the condemnation award is higher than the Note Rate, in which
event, the Mortgagee shall be entitled to the statutory rate. The Mortgagor
shall file and prosecute its claim or claims for any such award or payment in
good faith and with due diligence and cause the same to be collected and paid
over to the Mortgagee. The Mortgagor hereby irrevocably authorizes and empowers
the Mortgagee, in the name of the Mortgagor or otherwise, to collect and receipt
for any such award or payment and to file and prosecute such claim or claims.
Although it is hereby expressly agreed that the same shall not be necessary in
any event, the Mortgagor shall, upon demand of the Mortgagee, make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such award or payment to the Mortgagee, free and clear of any
encumbrances of any kind or nature whatsoever.
7. Leases and Rents. Subject to the terms of this paragraph, the
----------------
Mortgagee waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents, and grants the Mortgagor the right to collect the Rents
and to let the Mortgaged Property or any part thereof. The Mortgagor shall hold
the Rents in trust for use in payment of the Debt. The right of the Mortgagor
to collect the Rents and to let the Mortgaged Property or any part thereof may
be revoked by the Mortgagee upon and during the continuance of any Event of
Default by the Mortgagor under the terms of the Notes or this Mortgage and for
the duration thereof, the Mortgagee may let the Mortgaged Property or any part
thereof and may retain and apply the Rents toward payment of the Debt in such
order, priority and proportions as the Mortgagee, in its reasonable discretion,
shall deem proper,
8
<PAGE>
or toward the operation, maintenance and repair of the Mortgaged Property, and
irrespective of whether the Mortgagee shall have commenced a foreclosure of this
Mortgage or shall have applied or arranged for the appointment of a receiver.
The Mortgagee shall give to the Mortgagor notice of such revocation of the right
to let and collect the Rents within a reasonable time thereafter. The Mortgagor
shall not, without the consent of the Mortgagee, make, or suffer to be made, any
Leases or modify any Leases or cancel any Leases or accept prepayments of
installments of the Rents for a period of more than one (1) month in advance or
further assign the whole or any part of the Rents. The Mortgagee shall have all
of the rights against tenants of the Mortgaged Property as set forth in Section
291-f of the Real Property Law of New York. The Mortgagor shall (i) fulfill or
perform each and every provision of the Leases on the part of the Mortgagor to
be fulfilled or performed, (ii) promptly send copies of all notices of default
which the Mortgagor shall send or receive under the Leases to the Mortgagee, and
(iii) enforce, short of termination of the Leases, the performance or observance
of the provisions thereof by the tenants thereunder. Nothing contained in this
paragraph shall be construed as imposing on the mortgagee any of the obligations
of the lessor under the Leases.
8. Transfer or Encumbrance of the Mortgaged Property. Except as may
-------------------------------------------------
be permitted in the Credit Agreement, no part of the Mortgaged Property nor any
interest of any nature whatsoever therein, nor any interest of any nature
whatsoever in the Mortgagor (whether partnership, stock, equity, beneficial,
membership, profit, loss or otherwise) shall in any manner be further
encumbered, sold, transferred, assigned or conveyed, or permitted to be further
encumbered, sold, transferred, assigned or conveyed without the prior written
consent of the Mortgagee, which consent in any and all circumstances may be
withheld in the sole and absolute discretion of the Mortgagee. The provisions
of the foregoing sentence of this paragraph shall apply to each and every such
further encumbrance, sale, transfer, assignment or conveyance, regardless of
whether or not the Mortgagee has consented to, or waived by its action or
inaction its rights hereunder with respect to, any such previous further
encumbrance, sale, transfer, assignment or conveyance, and irrespective of
whether such further encumbrance, sale, transfer, assignment or conveyance is
voluntary, by reason of operation of law or is otherwise made.
9. Maintenance of the Mortgaged Property; Compliance with Laws,
------------------------------------------------- ----------
Regulations, Covenants and Easements.
- - ------------------------------------
(a) The Mortgagor shall cause the Mortgaged Property to be maintained
in good condition and repair and, to the extent of any renovations that are made
by the Mortgagor, the same shall be made in compliance with the requirements of
all governmental authorities having jurisdiction over the Mortgaged Property.
The Mortgagor will not commit or suffer to be
9
<PAGE>
committed any waste of the Mortgaged Property. The Improvements and the
Equipment shall not be removed, demolished or materially altered (except for
normal replacement of the Equipment in the ordinary course of the Mortgagor's
business), without the consent of the Mortgagee, which consent shall not be
unreasonably withheld. The Mortgagor shall promptly repair, replace or rebuild
any part of the Mortgaged Property which may be damaged or destroyed by fire or
other property hazard or casualty (including any fire or other property hazard
or casualty for which insurance was not obtained or obtainable) or which may be
affected by any taking by any public or quasi-public authority through eminent
domain or otherwise, and shall complete and pay for, within a reasonable time,
any structure at any time in the process of construction or repair on the
Premises.
(b) The Mortgagor represents and warrants that, except to the
extent set forth on Schedule I(9)(b) hereto, the Mortgaged Property is currently
and in all material respects in compliance with, and the Mortgagor shall in the
future promptly comply in all material respects with, all existing and future
governmental laws, orders, ordinances, rules and regulations affecting the
Mortgaged Property, or any portion thereof or the use thereof, including
specifically, but not by way of limitation, all provisions of the Americans with
Disabilities Act. The Mortgagor shall comply in all material respects with the
requirements of all, and shall not materially modify, amend or terminate any,
easements and restrictive covenants which from time to time materially affect
the whole or any portion of the Mortgaged Property. The Mortgagor shall also
comply in all material respects with the requirements of, and to the extent
reasonably within the Mortgagor's control, maintain, preserve, enforce and
renew, all rights of way, easements, grants, privileges, licenses, franchises
and restrictive covenants which from time to time benefit or pertain in any
material respect to the whole or any portion of the Mortgaged Property, and the
Mortgagor shall not materially modify, amend or terminate, or surrender any of
its rights under, any of such rights of way, easements, grants, privileges,
licenses, franchises or restrictive covenants. The Mortgagor will not, without
obtaining the prior written consent of the Mortgagee, initiate, join in or
consent to any new private restrictive covenant, zoning ordinance, or other
public or private restrictions, limiting or affecting the uses which may be made
of the Mortgaged Property or any part thereof. Except as may be done in the
ordinary course of the Mortgagor's business, the Mortgagor will not materially
alter the use of the Mortgaged Property without the prior written consent of the
Mortgagee.
10. Environmental Provisions.
------------------------
(a) For the purposes of this paragraph, the term "Hazardous
Material" shall mean any material or substance that, whether by its nature or
use, is now or hereafter defined as a
10
<PAGE>
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Requirement (as defined in paragraph (b) below), or which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous or which is or contains petroleum, gasoline,
diesel fuel or another petroleum hydrocarbon product.
(b) The Mortgagor hereby represents and warrants to the Mortgagee
that, except as disclosed to and acknowledged by the Mortgagee in writing prior
to the date hereof: (i) during the period of the Mortgagor's ownership or
possession of the Premises, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or hazardous substance (as said terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, any other applicable state
or Federal environmental laws, and any rules or regulations, all as adopted or
as may be adopted pursuant to any of the foregoing) (collectively,
"Environmental Requirements") by any person from, on, under or about the
Premises; and (ii) the Mortgagor has no knowledge of, nor any reason to believe
that there has been (a) any use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or hazardous
substance by any prior owners or occupants of the Premises, or (b) any actual or
threatened litigation or claims of any kind by any person relating to such
matters. The Mortgagor agrees to indemnify and hold the Mortgagee harmless from
and against any and all claims, losses, liabilities, damages, penalties and
expenses of any kind or character, including reasonable attorneys' fees, which
the Mortgagee may directly or indirectly sustain of suffer as a result of any
breach of this Section 10, or as a consequence of any use, generation,
manufacture, storage, treatment, disposal, release or threatened release
occurring prior to the Mortgagor's ownership of any interest in the Premises,
whether or not the same was or should have been known to the Mortgagor.
(c) The Mortgagor shall comply, and shall cause all tenants or
other occupants of the Mortgaged Property to comply, in all respects with all
Environmental Requirements, and will not generate, store, handle, process,
dispose of or otherwise use, and will not permit any tenant or other occupant of
the Mortgaged Property to generate, store, handle, process, dispose of or
otherwise use, Hazardous Materials at, in, on, or about the Mortgaged Property
in a manner that could lead or potentially lead to the imposition on the
Mortgagor, the Mortgagee or the Mortgaged Property of any liability or lien of
any nature whatsoever under any Environmental Requirement. The Mortgagor shall
notify the Mortgagee promptly in the event of any spill or other release of any
Hazardous Material at, in, on, under or about the Mortgaged Property which is
required to be reported to any governmental authority under any Environmental
11
<PAGE>
Requirement, will promptly forward to the Mortgagee copies of any notices
received by the Mortgagor relating to alleged violations of any Environmental
Requirement and will promptly pay when due any fine or assessment against the
Mortgagee, the Mortgagor or the Mortgaged Property relating to any Environmental
Requirement. If at any time it is determined that the operation or use of the
Mortgaged Property violates any applicable Environmental Requirement or that
there are Hazardous Materials located at, in, on, under or about the Mortgaged
Property that violate any applicable Environmental Requirement or that there are
Hazardous Materials located at, in, on, under or about the Mortgaged Property
which, under any Environmental Requirement, require special handling in
collection, storage, treatment or disposal, or any other form of cleanup or
corrective action, the Mortgagor shall, within thirty (30) days after receipt of
notice thereof from any governmental authority or from the Mortgagee, take, at
the Mortgagor's sole cost and expense, such actions as may be necessary to fully
comply in all respects with all Environmental Requirements, provided, however,
that if such compliance cannot reasonably be completed within such thirty (30)
day period, the Mortgagor shall commence such necessary action within such
thirty (30) day period and shall thereafter diligently and expeditiously proceed
to fully comply in all respects and in a timely fashion with all Environmental
Requirements.
(d) If the Mortgagor fails to timely take, or to diligently and
expeditiously proceed to complete in a timely fashion, any such action described
in clause (c) above, the Mortgagee may, in its sole and absolute discretion,
make advances or payments toward the performance or satisfaction the same, but
shall in no event be under any obligation to do so. All sums so advanced or
paid by the Mortgagee (including, without limitation, counsel and consultant
fees and expenses, and fines or other penalty payments) and all sums advanced or
paid in connection with any judicial or administrative investigation or
proceeding relating thereto, will immediately, upon demand, become due and
payable from the Mortgagor and shall bear interest at the Default Rate from the
date any such sums are so advanced or paid by the Mortgagee until the date any
such sums are paid by the Mortgagor to the Mortgagee. The Mortgagor will
execute and deliver, promptly upon request, such instruments as the Mortgagee
may deem useful or necessary to permit the Mortgagee to take any such action,
and such additional notes and mortgages, as the Mortgagee may require to secure
all sums so advanced or paid by the Mortgagee. If a lien is filed against the
Mortgaged Property by any governmental authority resulting from the need to
expend or the actual expending of monies arising from an action or omission,
whether intentional or unintentional, of the Mortgagor or for which the
Mortgagor is responsible, resulting in the releasing, spilling, leaking,
leaching, pumping, emitting, pouring, emptying or dumping of any Hazardous
Material into the waters or onto land located within or without the State where
the Mortgaged Property is located, then the Mortgagor will, within
12
<PAGE>
thirty (30) days from the date that the Mortgagor is first given notice that
such lien has been placed against the Mortgaged Property (or within such shorter
period of time as may be specified by the Mortgagee if such governmental
authority has commenced steps to cause the Mortgaged Property to be sold
pursuant to such lien), either (a) pay the claim and remove the lien, or (b)
furnish a cash deposit, bond, or such other security with respect thereto as is
satisfactory in all respects to the Mortgagee and is sufficient to effect a
complete discharge of such lien on the Mortgaged Property.
(e) The Mortgagee may, at its option, at intervals of not less
than one year, or more frequently if the Mortgagee reasonably believes that a
Hazardous Material or other environmental condition violates or threatens to
violate any Environmental Requirement, cause an environmental audit of the
Mortgaged Property or portions thereof to be conducted to confirm the
Mortgagor's compliance with the provisions of this paragraph, and the Mortgagor
shall cooperate in all reasonable ways with the Mortgagee in connection with any
such audit. The Mortgagor shall bear all costs and expenses incurred in
connection with such audit.
(f) If this Mortgage is foreclosed, or if the Mortgaged Property
is sold pursuant to the provisions of this Mortgage, or if the Mortgagor tenders
a deed or assignment in lieu of foreclosure or sale, the Mortgagor shall deliver
the Mortgaged Property to the purchaser at foreclosure or sale or to the
mortgagee, its nominee, or wholly-owned subsidiary, as the case may be, in a
condition that complies in all respects with all Environmental Requirements. The
Mortgagor will defend, indemnify, and hold harmless the Mortgagee, its
employees, agents, officers, and directors, from and against any and all claims,
demands, penalties, causes of action, fines, liabilities, settlements, damages,
costs, or expenses of whatever kind or nature, known or unknown, foreseen or
unforeseen, contingent or otherwise (including, without limitation, counsel and
consultant fees and expenses, investigation and laboratory fees and expenses,
court costs, and litigation expenses) arising out of, or in any way related to,
(i) any breach by the Mortgagor of any of the provisions of this paragraph, (ii)
the presence, disposal, spillage, discharge, emission, leakage, release, or
threatened release of any Hazardous Material which is at, in, on, under, about,
from or affecting the Mortgaged Property, including, without limitation, any
damage or injury resulting from any such Hazardous Material to or affecting the
Mortgaged Property or the soil, water, air, vegetation, buildings, personal
property, persons or animals located on the Mortgaged Property or on any other
property or otherwise, (iii) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to any such
Hazardous Material, (iv) any lawsuit brought or threatened, settlement reached,
or order or directive of or by any governmental authority relating to such
Hazardous
13
<PAGE>
Material, or (v) any violation of any Environmental Requirement or any policy or
requirement of the Mortgagee hereunder. The aforesaid indemnification shall,
notwithstanding any exculpatory or other provision of any other document or
instrument now or hereafter executed and delivered in connection with the loan
evidenced by the Notes and secured by this Mortgage, constitute the personal
recourse undertakings, obligations and liabilities of the Mortgagor.
(g) The obligations and liabilities of the Mortgagor under this
paragraph 10 shall survive and continue in full force and effect and shall not
be terminated, discharged or released, in whole or in part, irrespective of
whether the Debt has been paid in full and irrespective of any foreclosure of
this Mortgage, sale of the Mortgaged Property pursuant to the provisions of this
Mortgage or acceptance by the Mortgagee, its nominee or wholly-owned subsidiary
of a deed or assignment in lieu of foreclosure or sale and irrespective of any
other fact or circumstance of any nature whatsoever.
11. Performance of Other Agreements. The Mortgagor shall observe and
-------------------------------
perform each and every term to be observed or performed by the Mortgagor
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Mortgaged Property.
12. Other Security for the Debt. The Mortgagor shall observe and
---------------------------
perform all of the terms, covenants and provisions contained in the Notes and in
all other mortgages and other instruments or documents evidencing, securing or
guaranteeing payment of the Debt, in whole or in part, or otherwise executed and
delivered in connection with the Notes, this Mortgage or the loans evidenced and
secured thereby or hereby.
13. Right of Entry. The Mortgagee and its agents shall have the
--------------
right to enter and inspect the Mortgaged Property at all reasonable times.
14. New York Trust Fund. Pursuant to Section 13 of the Lien Law of
-------------------
New York, the Mortgagor shall receive the advances secured hereby and shall hold
the right to receive the advances secured hereby as a trust fund to be applied
first for the purpose of paying the cost of any improvement and shall apply such
advances first to the payment of the cost of any such improvement on the
Mortgaged Property before using any part of the total of the same for any other
purpose.
ARTICLE II - DEFAULTS AND REMEDIES
1. Events of Default. The Debt shall become due at the option of the
-----------------
Mortgagee upon the occurrence of any one or more of the following events (each
of which is hereby deemed and referred to as an "Event of Default"):
14
<PAGE>
(a) if the Mortgagor or any Guarantor (as defined in subparagraph
(d) below) or other person shall be in default under the Notes, under
the Credit Agreement, or under any other mortgage, instrument or
document evidencing, securing or guaranteeing payment of the Debt, in
whole or in part, or otherwise executed and delivered in connection
with the Notes, this Mortgage or the loans evidenced and secured
thereby or hereby (in each case, however, after the expiration of any
applicable cure period set forth herein or therein);
(b) if any Federal tax lien is filed against the Mortgagor or the
Mortgaged Property and the same is not discharged of record or
contested in good faith (as determined by the Mortgagee in its sole
discretion), within sixty (60) days after the same is filed;
(c) if on application of the Mortgagee two or more fire insurance
companies lawfully doing business in the State of New York refuse to
issue Policies;
(d) if any representation or warranty of the Mortgagor, or of any
person (a "Guarantor") guaranteeing payment of the Debt or any portion
thereof, or of operating expenses of the Mortgaged Property or
performance by the Mortgagor of any of the terms of this Mortgage made
herein or in any such guaranty (a "Guaranty"), or in any certificate,
report, financial statement or other instrument furnished in
connection with the making of the Notes, or this Mortgage or any such
Guaranty shall prove false or misleading in any material respect;
(e) if the Mortgagor or any Guarantor (each of whom is
hereinafter in this subparagraph referred to as an "Obligor") shall
commence any case, proceeding or other action relating to it in
bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up, arrangement, composition or readjustment of its debts, or
for any other relief, under bankruptcy, insolvency, reorganization,
liquidation, dissolution, winding-up, arrangement, composition,
readjustment of debt or other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; or if an Obligor shall
apply for a receiver, custodian or trustee of it or for all or a
substantial part of its property; or it an Obligor shall make an
assignment for the benefit of creditors; or if an obligor shall be
unable to, or shall admit in writing the inability to pay its debts
generally as they become due; or if an Obligor shall take any action
indicating its consent to, approval of, acquiescence in, or in
furtherance of, any of the foregoing; or if any case, proceeding or
other action
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<PAGE>
against an Obligor shall be commenced in bankruptcy or seeking
reorganization, liquidation, dissolution, winding up, arrangement,
composition or readjustment of its debts, or any other relief, under
any bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement, composition, readjustment of debt or other similar act or
law of any jurisdiction, domestic or foreign, now or hereafter
existing; or if a warrant of attachment, execution or distraint, or
similar process, shall be issued against any substantial part of the
property of an Obligor and such condition shall continue for a period
of sixty (60) days undismissed, undischarged or unbonded;
(f) if the Mortgagor or any Guarantor shall be in default (after
the expiration of any applicable grace period) under any mortgage or
deed of trust covering any part of the Mortgaged Property whether
superior or inferior in lien to this Mortgage, and including, without
limitation, any such mortgage or deed of trust now or hereafter held
by the Mortgagee; or
(g) if the Mortgagor shall continue to be in default under any of
the other terms, covenants or conditions of this Mortgage for five (5)
days after notice from the Mortgagee in the case of any default which
can be cured by the payment of a sum of money or for thirty (30) days
after notice from the Mortgagee in the case of any other default,
recognizing that the cure periods set forth in this subparagraph shall
not be in addition to those provided in the Credit Agreement, the
Notes or elsewhere in this Mortgage.
2. Appointment of Receiver. The holder of this Mortgage, in any
-----------------------
action to foreclose it, shall be entitled to the appointment of a receiver. In
addition, upon the actual or threatened waste to any part of the Mortgaged
Property or upon the occurrence of any default hereunder, the holder of this
Mortgage shall be at liberty, without notice, to apply for the appointment of a
receiver of the Rents, and shall be entitled to the appointment of such receiver
as a matter of right, without regard to the value of the Mortgaged Property as
security for the Debt, or the solvency or insolvency of any person then liable
for the payment of the Debt.
3. Sale of Mortgaged Property. If this Mortgage is foreclosed,
--------------------------
the Mortgaged Property, or any interest therein, may, at the discretion of the
Mortgagee, be sold in one or more parcels or in several interests or portions
and in any order or manner.
4. Security Agreement. This Mortgage constitutes both a real
------------------
property mortgage and a "security agreement," within
16
<PAGE>
the meaning of the Uniform Commercial Code, and the Mortgaged Property includes
both real and personal property and all other rights and interests, whether
tangible or intangible in nature, of the Mortgagor in the Mortgaged Property.
The Mortgagor by executing and delivering this Mortgage has granted to the
Mortgagee, as security for the Debt, a security interest in the Equipment. If
the Mortgagor shall default under the Notes or this Mortgage, the Mortgagee, in
addition to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing, the right to take possession
of the Equipment or any part thereof, and to take such other measures as the
Mortgagee may deem necessary for the care, protection and preservation of the
Equipment. Upon request or reasonable demand of the Mortgagee, the Mortgagor
shall at its expense assemble the Equipment and make it available to the
Mortgagee at the Premises or at such other mutually convenient place acceptable
to the Mortgagee. The Mortgagor shall pay to the Mortgagee promptly following
written demand any and all expenses, including legal expenses and attorneys'
fees, incurred or paid by the Mortgagee in protecting its interest in the
Equipment and in enforcing its rights hereunder with respect to the Equipment.
Any notice of sale, disposition or other intended action by the Mortgagee with
respect to the Equipment sent to the Mortgagor in accordance with the provisions
of this Mortgage at least seven (7) days prior to the date of any such sale,
disposition or other action, shall constitute reasonable notice to the
Mortgagor, and the method of sale or disposition or other intended action set
forth or specified in such notice shall conclusively be deemed to be
commercially reasonable within the meaning of the Uniform Commercial Code unless
objected to in writing by the Mortgagor within five (5) days after receipt by
the Mortgagor of such notice. The proceeds of any sale or disposition of the
Equipment, or any part thereof, may be applied by the Mortgagee to the payment
of the Debt in such order, priority and proportions as the Mortgagee in its
reasonable discretion shall deem proper.
5. Recovery of Sums Required To Be Paid. The Mortgagee shall have
------------------------------------
the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of the Mortgagee thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by the Mortgagor existing at the time such
earlier action was commenced.
6. Actions and Proceedings. The Mortgagee shall have the right to
-----------------------
appear in and defend any action or proceeding brought with respect to the
Mortgaged Property and to bring any action or proceeding, in the name and on
behalf of the Mortgagor,
17
<PAGE>
which the Mortgagee, in its discretion, feels should be brought to protect the
Mortgagee's interest in the Mortgaged Property.
7. Right to Cure Defaults. Upon the occurrence or any default
----------------------
hereunder, the Mortgagee may, at its discretion, remedy the same and for such
purpose shall have the right to enter upon the Mortgaged Property or any portion
thereof without thereby becoming liable to the Mortgagor or any person in
possession thereof holding under or claiming under or through the Mortgagor, it
being understood and agreed that nothing contained in this Mortgage shall in any
manner obligate the Mortgagee to remedy any default or appear in, defend, or
bring any action or proceeding to protect the Mortgagee's interest in the
Mortgaged Property or to foreclose this Mortgage or collect the Debt, the costs
and expenses thereof (including attorney's fees to the extent permitted by law),
with interest as provided in this paragraph, shall be paid by the Mortgagor to
the Mortgagee upon demand. All such costs and expenses incurred by the
Mortgagee in remedying such default or in appearing in, defending, or bringing
any such action or proceeding shall be paid by the Mortgagor to the Mortgagee
promptly following written demand, with interest at a rate per annum (calculated
for the actual number of days elapsed on the basis of a 360-day year) equal to
the default rate of interest set forth in Section 3.2 of the Credit Agreement
(the "Default Rate"), provided, however, that the Default Rate shall in no event
exceed the maximum interest rate which the Mortgagor may by law pay, for the
period from the date of notice from the Mortgagee that such costs or expenses
were incurred to the date of payment thereof to the Mortgagee. The term "Prime
Rate" shall mean such rate of interest as is publicly announced by the Mortgagee
at its principal office from time to time as its prime rate. To the extent any
of the aforementioned costs or expenses paid by the Mortgagee after default by
the Mortgagor shall constitute payment of (i) taxes, charges or assessments
which may be imposed by law upon the Mortgaged Property, (ii) Premiums, (iii)
expenses incurred in upholding the lien of this Mortgage, including, but not
limited to, the costs and expenses of any litigation to collect the indebtedness
secured by this Mortgage or to prosecute, defend, protect or preserve the rights
and the lien created by this Mortgage, or (iv) any amount, cost or charge to
which the Mortgagee becomes subrogated, upon payment, whether under recognized
principles of law or equity, or under express statutory authority; then, and in
each such event, such costs, expenses and amounts, together with interest
thereon at the Default Rate, shall be added to the indebtedness secured by this
Mortgage and shall be secured by this Mortgage.
8. Late Payment Charge. If any payment under the Notes or this
-------------------
Mortgage is not paid within ten (10) days after the date on which it is due, the
Mortgagor shall pay to the Mortgagee upon demand, in addition to any interest,
if any, payable pursuant to Paragraph 7 above, an amount equal to 5% of such
unpaid installment as a late payment charge.
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<PAGE>
9. Sole Discretion of Mortgagee. Except as may otherwise be
----------------------------
expressly provided to the contrary, wherever pursuant to the Notes, this
Mortgage or any other document or instrument now or hereafter executed and
delivered in connection therewith or otherwise with respect to the loans secured
hereby, the Mortgagee exercises any right given to it to consent or not consent,
or to approve or disapprove, or any arrangement or term is to be satisfactory to
the Mortgagee, the decision of the Mortgagee to consent or not consent, or to
approve or disapprove, or to decide that arrangements or terms are satisfactory
or not satisfactory, shall be in the sole and absolute discretion of the
Mortgagee and shall be final and conclusive.
10. Non-Waiver. The failure of the Mortgagee to insist upon strict
----------
performance of any term of this Mortgage shall not be deemed to be a waiver of
any term of this Mortgage. No delay or omission by the Mortgagee to exercise
any right, power or remedy accruing under this Mortgage shall be construed to be
a waiver of any default or acquiescence therein. A waiver in one or more
instances, and at the particular time or times only, and no such waiver shall be
deemed a continuing waiver, but every term, covenant, provision or condition
establishing such right, power or remedy shall survive and continue to remain in
full force and effect. The Mortgagor shall not be relieved of the Mortgagor's
obligation to pay the Debt at the time and in the manner provided for its
payment in the Notes and this Mortgage by reason of: (i) failure of the
Mortgagee to comply with any request of the Mortgagor to take any action to
foreclose this Mortgage or otherwise enforce any of the provisions hereof or of
the Notes or any other mortgage, instrument or document evidencing, securing or
guaranteeing payment of the Debt or any portion thereof, (ii) the release,
regardless of consideration, of the whole or any part of the Mortgaged Property
or any other security for the Debt, or (iii) any agreement or stipulation
between the Mortgagee and any subsequent owner or owners of the Mortgaged
Property or other person extending the time of payment or otherwise modifying or
supplementing the terms of the Notes, this Mortgage or any other mortgage,
instrument or document evidencing, securing or guaranteeing payment of the Debt
or any portion thereof, without first having obtained the consent of the
Mortgagor, and in the latter event, the Mortgagor shall continue to be obligated
to pay the Debt at the time and in the manner provided in the Notes and this
Mortgage, as so extended, modified and supplemented, unless expressly released
and discharged from such obligation by the Mortgagee in writing. Regardless of
consideration, and without the necessity for any notice to or consent by the
holder of any subordinate lien, encumbrance, right, title or interest in the
Mortgaged Property, the Mortgagee may release any person at any time liable for
the payment of the Debt or any portion thereof or any part of the security held
for the Debt and may extend the time of payment or otherwise modify the terms of
the Notes or this Mortgage, including, without limitation, a modification of the
interest rate payable on the
19
<PAGE>
principal balance of the Notes, without in any manner impairing or affecting
this Mortgage or the lien hereof or the priority of this Mortgage, as so
extended and modified, as security for the Debt over any such subordinate lien,
encumbrance, right, title or interest. The Mortgagee may resort for the payment
of the Debt to any other security held by the Mortgagee in such order and manner
as the Mortgagee, in its discretion, may elect. The Mortgagee may take action
to recover the Debt, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of the Mortgagee thereafter to foreclose this
Mortgage. The Mortgagee shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every additional right and
remedy now or hereafter afforded by law or equity. The rights of the Mortgagee
under this Mortgage shall be separate, distinct and cumulative and none shall be
given effect to the exclusion of the others. No act of the Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision.
11. Absolute and Unconditional Obligation. The Mortgagor
-------------------------------------
acknowledges that the Mortgagor's obligation to pay the Debt in accordance with
the provisions of the Notes and this Mortgage is and shall at all times continue
to be absolute and unconditional in all respects, and shall at all times be
valid and enforceable irrespective of any other agreements or circumstances of
any nature whatsoever which might otherwise constitute a defense to the Notes or
this Mortgage or the obligation of the Mortgagor thereunder to pay the Debt or
the obligations of any other person relating to the Notes or this Mortgage or
the obligations of the Mortgagor under the Notes or this Mortgage or otherwise
with respect to the loans secured hereby, and the Mortgagor absolutely,
unconditionally and irrevocably waives any and all right to assert any setoff,
counterclaim or crossclaim of any nature whatsoever with respect to the
obligation of the Mortgagor to pay the Debt in accordance with the provisions of
the Notes and this Mortgage or the obligations of any other person relating to
the Notes or this Mortgage or obligations of the Mortgagor under the Notes or
this Mortgage or otherwise with respect to the loans secured hereby in any
action or proceeding brought by the Mortgagee to collect the Debt, or any
portion thereof, or to enforce, foreclose and realize upon the lien and security
interest created by this Mortgage or any other document or instrument securing
repayment of the Debt, in whole or in part (provided, however, that the
foregoing shall not be deemed a waiver of the Mortgagor's right to assert any
compulsory counterclaim maintained in a court of the United States, or of the
State of New York if such counterclaim is compelled under local law or rule of
procedure, nor shall the foregoing be deemed a waiver of the Mortgagor's right
to assert any claim which would constitute a defense, setoff, counterclaim or
crossclaim of any nature whatsoever against the Mortgagee in any separate action
or proceeding).
20
<PAGE>
12. Offsets, Counterclaims and Defenses. Any assignee of this
-----------------------------------
Mortgage and the Notes shall take the same free and clear of all offsets,
counterclaims or defenses of any nature whatsoever which the Mortgagor may have
against any assignor of this Mortgage and the Notes, and no such offset,
counterclaim or defense shall be interposed or asserted by the Mortgagor in any
action or proceeding brought by any such assignee upon this Mortgage or the
Notes and any such right to interpose or assert any such offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by the
Mortgagor.
13./1/ Waiver of Statutory Rights. The Mortgagor shall not and
--------------------------
will not apply for or avail itself of any appraisement, valuation, stay,
extension or exemption laws, or any so-called "Moratorium Laws," now existing or
hereafter enacted, in order to prevent or hinder the enforcement or foreclosure
of this Mortgage, but hereby waives the benefit of such laws to the full extent
that the Mortgagor may do so under applicable law. The Mortgagor for itself and
all who may claim through or under it waives any and all right to have the
property and estates comprising the Mortgaged Property marshalled upon any
foreclosure of the lien of this Mortgage and agrees that any court having
jurisdiction to foreclose such lien may order the Mortgaged Property sold as an
entirety. The Mortgagor hereby waives for itself and all who may claim through
or under it, and to the full extent Mortgagor may do so under applicable law,
any and all rights of redemption from sale under any order or decree of
foreclosure of this Mortgage or granted under any statute now existing or
hereafter enacted.
14./1/ Waiver of Trial by Jury. The Mortgagor hereby irrevocably
-----------------------
and unconditionally waives, and the Mortgagee by its acceptance of the Notes and
this Mortgage irrevocably and unconditionally waives, any and all rights to
trial by jury in at any action, suit or counterclaim arising in connection with,
out of or otherwise relating to the Notes, this Mortgage or any other document
or instrument heretofore, now or hereafter executed and/or delivered in
connection therewith, the loans secured by this Mortgage or in any way related
to this transaction or otherwise with respect to the Mortgaged Property.
ARTICLE III - MISCELLANEOUS
1. Notice. Any notice, request, demand, statement, authorization,
------
approval or consent made hereunder shall be in writing and shall be sent by
Federal Express, or other reputable courier service, or by postage prepaid
registered or certified mail, return receipt requested, and shall be deemed
given when
_______________
/1/ THESE PARAGRAPHS TO REMAIN IN BOLD PRINT AND TO BE INITIALLED BY THE
MORTGAGOR.
21
<PAGE>
received or refused (as indicated on the receipt) and addressed as follows:
If to the Mortgagor:
MDT Corporation
1009 Slater Road
Suite 200
Morrisville, North Carolina 27560
Attention: Mr. Thomas Hein
Fax No.: (919) 941-9755
With a copy to:
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071
Attention: C. James Levin, Esq.
Jack B. Hicks, Esq.
Fax No.: (213) 669-6407
If to the Mortgagee:
Wells Fargo Bank, N.A.
111 Sutter Street
17th Floor
(MAC # 0188-176)
San Francisco, California 94104
Attention: Mr. P. Steve Dobel
Fax No.: (415) 398-7572
With a copy to:
Brobeck, Phleger & Harrison, LLP
1301 Avenue of the Americas
30th Floor
New York, New York 10019
Attention: Robert P. Wessely, Esq.
Fax No.: (212) 586-7878
it being understood and agreed that each party will use reasonable efforts to
send copies of any notices to the addresses marked "With a copy to" hereinabove
set forth; provided, however, that failure to deliver such copy or copies shall
have no consequence whatsoever to the effectiveness of any notice made to the
Mortgagor or the Mortgagee. Notice shall be deemed given by telecopy to the
numbers hereinabove set forth when confirmation of receipt is received by the
sender, provided the original of
22
<PAGE>
such telecopy is delivered by the close of business of the next business day to
the party to whom such telecopy was sent. Each party may designate a change of
address by notice given, as herein provided, to the other party, at least
fifteen (15) days prior to the date such change of address is to become
effective.
2. Waiver of Notice. The Mortgagor shall not be entitled to any
----------------
notice of any nature whatsoever from the Mortgagee except with respect to
matters for which this Mortgage specifically and expressly provides for the
giving of notice by the Mortgagee to the Mortgagor, and the Mortgagor hereby
expressly waives the right to receive any notice from the Mortgagee with respect
to any matter for which this Mortgage does not specifically and expressly
provide for the giving of notice by the Mortgagee to the Mortgagor.
3. Estoppel Certificates. The Mortgagor, within ten (10) days after
---------------------
request by the Mortgagee and at the Mortgagor's expense, will furnish the
Mortgagee with a statement, duly acknowledged and certified, setting forth the
amount of the Debt and the offsets or defenses thereto, if any.
4. Changes in Laws Regarding Taxation. In the event of the passage
----------------------------------
after the date of this Mortgage of any law of the State of New York deducting
from the value of real property for the purpose of taxation any lien or
encumbrance thereon or changing in any way the laws for the taxation of
mortgages or debts secured by mortgages for state or local purposes or the
manner of the collection of any such taxes, and imposing a tax, either directly
or indirectly, on this Mortgage, the Notes or the Debt, the Mortgagor shall, if
permitted by law, pay any tax imposed as a result of any such law within the
statutory period or within fifteen (15) days after demand by the Mortgagee,
whichever is less, provided, however, that if, in the opinion of the attorneys
for the Mortgagee, the Mortgagor is not permitted by law to pay such taxes, the
Mortgagee shall have the right, at its option, to declare the Debt due and
payable on a date specified in a prior notice to the Mortgagor of not less than
thirty (30) days.
5. No Credits on Account of the Debt. The Mortgagor will not claim
---------------------------------
or demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes assessed against the Mortgaged Property or any part thereof
and no deduction shall otherwise be made or claimed from the taxable value of
the Mortgaged Property, or any part thereof, by reason of this Mortgage or the
Debt.
6. Documentary Stamps. If at any time the United States of America,
------------------
any State thereof, or any governmental subdivision of any such state, shall
require revenue or other stamps to be affixed to the Notes or this Mortgage, the
Mortgagor
23
<PAGE>
will, upon demand, pay for the same, with interest and penalties thereon, if
any.
7. Filing of Mortgage. The Mortgagor forthwith upon the execution
------------------
and delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage and any extension, modification, renewal or replacement hereof, and any
security instrument creating a lien or evidencing the lien hereof upon the
Mortgaged Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present of future law in order to publish notice of and fully to protect,
preserve and perfect the lien hereof upon, and the interest of the Mortgagee in,
the Mortgaged Property. The Mortgagor will pay all title insurance fees and
charges, all filing, registration and recording fees, and all expenses incident
to the preparation, execution and acknowledgment of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property, and any instrument of further assurance, and all Federal, State,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Mortgage, any
mortgage supplemental hereto, any security instrument with respect to the
Mortgaged Property or any instrument of further assurance. The Mortgagor shall
hold harmless and indemnify the Mortgagee, its successors and assigns, against
any liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage.
8. Further Acts, etc. The Mortgagor will, at the cost of the
------------------
Mortgagor, and without expense to the Mortgagee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as the Mortgagee
shall, from time to time, require for the better assuring, conveying, assigning,
transferring and confirming unto the Mortgagee the property and rights hereby
mortgaged or intended now or hereafter so to be, or which the Mortgagor may be
or may hereafter become bound to convey or assign to the Mortgagee, or for
carrying out the intention or facilitating the performance of the terms of this
Mortgage or for filing, registering or recording this Mortgage and, on demand,
will execute and deliver and hereby authorizes the Mortgagee to execute in the
name of the Mortgagor to the extent the Mortgagee may lawfully do so, one or
more financing statements, chattel mortgages or comparable security instruments,
to evidence more effectively the lien hereof upon the Mortgaged Property.
9. Usury Laws. This Mortgage and the Notes are subject to the
----------
express condition that at no time shall the Mortgagor be obligated or required
to pay interest on the principal balance due under the Notes at a rate which
could subject the holder of the Notes to either civil or criminal
24
<PAGE>
liability as a result of being in excess of the maximum interest rate which the
Mortgagor is permitted by law to contract or agree to pay. If, by the terms of
this Mortgage or the Notes, the Mortgagor is at any time required or obligated
to pay interest on the principal balance due under the Notes at a rate in excess
of such maximum rate, the rate of interest under the Notes shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Notes.
10. Brokerage. The Mortgagor covenants and agrees that no brokerage
---------
commission or other fee, commission or compensation is to be paid by the
Mortgagee and the Mortgagor agrees to indemnify the Mortgagee against any claims
for any of the same.
11. Indemnity. Anything in this Mortgage or the other Loan Documents
---------
to the contrary notwithstanding, the Mortgagor shall indemnify and hold the
Mortgagee harmless and defend the Mortgagee at the Mortgagor's sole cost and
expense against any loss or liability, cost or expense (including, without
limitation, reasonable attorneys' fees and disbursements of the Mortgagee's
counsel, whether in-house staff, retained firms or otherwise), and all claims,
actions, procedures and suits arising out of or in connection with (i) any
ongoing matters arising out of the transaction contemplated hereby, the Debt,
this Mortgage, the Notes or any other document or instrument now or hereafter
executed and/or delivered in connection with the Debt (the "Loan Documents")
including, but not limited to, all costs of reappraisal of the Mortgaged
Property or any part thereof, whether required by law, regulation, the Mortgagee
or any governmental or quasi-governmental authority, (ii) any amendment to, or
restructuring of, the Debt and this Mortgage, the Notes or any of the other Loan
Documents, and (iii) any and all lawful action that may be taken by the
Mortgagee in connection with the enforcement of the provisions of this Mortgage
or the Notes or any of the other Loan Documents, whether or not suit is filed in
connection with the same, or in connection with the Mortgagor, any Guarantor
and/or any partner, joint venturer or shareholder thereof becoming a party to a
voluntary or involuntary Federal or state bankruptcy, insolvency, or similar
proceeding. All sums expended by the Mortgagee shall be deemed additional
principal of the Debt and secured hereby and shall bear interest at the Default
Rate. The obligations of the Mortgagor under this paragraph shall,
notwithstanding any exculpatory or other provisions of any nature whatsoever set
forth in the Loan Documents, constitute the personal recourse undertakings,
obligations and liabilities of the Mortgagor.
12. No Oral Change. This Mortgage may only be modified, amended or
--------------
changed by an agreement in writing signed by
25
<PAGE>
the Mortgagor and the Mortgagee, and may only be released, discharged or
satisfied of record by an agreement in writing signed by the Mortgagee. No
waiver of any term, covenant or provision of this Mortgage shall be effective
unless given in writing by the Mortgagee and if so given by the Mortgagee shall
only be effective in the specific instance in which given. The Mortgagor
acknowledges that the Notes, this Mortgage and the other documents and
instruments executed and delivered in connection therewith or otherwise in
connection with the loans secured hereby set forth the entire agreement and
understanding of the Mortgagor and the Mortgagee with respect to the loans
secured hereby and that no oral or other agreement, understanding,
representation or warranty exists with respect to the loans secured hereby other
than those set forth in the Notes, this Mortgage and such other executed and
delivered documents and instruments.
13. Enforceability. This Mortgage was negotiated in the State of New
--------------
York, which State the parties agree has a substantial relationship to the
parties and to the underlying transaction embodied hereby, and in all respects,
including, without limiting the generality of the foregoing, matters of
construction, validity and performance, this Mortgage and the obligations
arising hereunder shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to contracts made and performed in such
State and any applicable laws of the United States of America, it being
understood that, to the fullest extent permitted by the law of such State, the
law of the State of New York shall govern the validity and enforceability of
this Mortgage, and the obligations arising hereunder, the parties hereto
recognizing that the Credit Agreement and the Notes are governed by, and
construed in accordance with, the laws of the State of California. Whenever
possible, each provision of this Mortgage shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Mortgage shall be unenforceable or prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such unenforceability,
prohibition or invalidity, without invalidating the remaining provisions of this
Mortgage.
14. Relationship. The relationship of the Mortgagee to the Mortgagor
------------
hereunder is strictly and solely that of lender and borrower and mortgagor and
mortgagee and nothing contained in the Notes, this Mortgage or any other
document or instrument now or hereafter executed and delivered in connection
therewith or otherwise in connection with the loans secured hereby is intended
to create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between the Mortgagee and the
Mortgagor other than as lender and borrower and mortgagor and mortgagee.
26
<PAGE>
15. Liability. If the Mortgagor consists of more than one person,
---------
the obligations and liabilities of each such person hereunder shall be joint and
several.
16. Certain Definitions. Unless the context clearly indicates a
-------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean each the mortgagor and any subsequent owner or
owners of the Mortgaged Property or any part thereof or interest therein; the
word "Mortgagee" shall mean the Mortgagee or any subsequent holder of the Notes;
the word "Notes" shall mean the Notes, any amendment, extension, modification,
restatement or replacement of either of the Notes or any other evidence of
indebtedness secured by this Mortgage; the word "Guarantor" shall mean each
person guaranteeing payment of the Debt or any portion thereof or performance by
the Mortgagor of any of the terms of this Mortgage and their respective heirs,
executors, administrators, legal representatives, successors and assigns; the
word "person" shall include an individual, corporation, limited liability
company, partnership, trust, unincorporated association, government,
governmental authority, or other entity; the words "Mortgaged Property" shall
include any portion of the Mortgaged Property or interest therein; and the word
"Debt" shall mean all sums secured by this Mortgage; and the word "default"
shall mean the occurrence of any default by the mortgagor or other person in the
observance or performance of any of the terms, covenants or provisions of the
Notes or this Mortgage on the part of the Mortgagor or such other person to be
observed or performed without regard to whether such default constitutes or
would constitute upon notice or lapse of time, or both, an Event of Default
under this Mortgage. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.
17. Headings, etc. The headings and captions of various paragraphs
-------------
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
18. Duplicate Originals. This Mortgage may be executed in any number
-------------------
of duplicate originals, and each such duplicate original shall be deemed to
constitute but one and the same instrument.
19. Non-Residential Property. This Mortgage does not cover real
------------------------
property principally improved by one or more structures containing in the
aggregate six (6) or less residential dwelling units having their own separate
cooking facilities.
27
<PAGE>
20. Reasonableness. If at any time the Mortgagor believes that the
--------------
Mortgagee has not acted reasonably in granting or withholding any approval or
consent under the Notes, this Mortgage or any other document or instrument now
or hereafter executed and delivered in connection therewith or otherwise with
respect to the loans secured hereby, as to which approval or consent either the
Mortgagee has expressly agreed to act reasonably, or absent such agreement, a
court of law having jurisdiction over the subject matter would require the
Mortgagee to act reasonably, then the Mortgagor's sole remedy shall be to seek
injunctive relief or specific performance and no action for monetary damages or
punitive damages shall in any event or under any circumstances be maintained by
the Mortgagor against the Mortgagee.
21. Construction. In the event of any direct conflict between the
------------
provisions of this Mortgage and the provisions of the Notes or of the Credit
Agreement, the provisions of the Notes and of the Credit Agreement shall govern.
In the event that the context of the conflicting provisions would require
additional obligations under the Mortgage that do not directly conflict with the
intentions of the applicable provisions of the Notes or Credit Agreement, the
parties shall in good faith attempt to resolve such conflicts and comply with
such obligations.
IN WITNESS WHEREOF, the Mortgagor has duly executed this Mortgage as
of the day and year first above written.
MDT CORPORATION
By: /s/ Thomas Hein
-----------------------------
Name: Thomas Hein
Title: V. P. Finance & Treasurer
28
<PAGE>
Corporate Acknowledgment
------------------------
STATE OF NORTH CAROLINA)
) SS.:
COUNTY OF WAKE )
On the 26th day of March, 1996, before me personally came Thomas M.
Hein, to me known, who, being by me duly sworn, did depose and say that he
resides at Cary, North Carolina; that he is Chief Financial Officer of MDT
Corporation, the corporation described in and which executed the above
instrument; and that he signed his name thereto by authority of the Board of
Directors of said corporation.
Emogene Dominick
-----------------------------------------
Notary Public
[My Commission Expires 9/13/2000]
29
<PAGE>
Attorney-in-Fact Acknowledgment - Corporate, without Seal
---------------------------------------------------------
STATE OF )
: SS.:
COUNTY OF )
On the _______ day of _______, 1996 before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ______________________________________; that he is the
Attorney-in-Fact duly appointed of MDT Corporation, the corporation described in
and which executed the above instrument; and that he signed his name thereto by
authority of the Board of Directors of said corporation.
_________________________________________
Notary Public
30
<PAGE>
EXHIBIT A
(Description of Premises)
31
<PAGE>
EXHIBIT A
---------
Attached is the legal description of the Henrietta, New York real property.
<PAGE>
Title No.: 905-M-28,879
N/A #69392 5
SCHEDULE A
ALL THAT TRACT OR PARCEL OF LAND, situate in the Town of Henrietta, Monroe
County, New York, being parts of Lots five and six in the Third Range of Lots,
Township twelve, Range seven, bounded and described as follows:
BEGINNING at a point in the centerline of East Henrietta Road distant southerly
three hundred ten and 20/100 feet from the intersection of the center line of
East Henrietta Road with the center line of Jefferson Road; thence
1. Northwesterly and forming an interior angle with the center line of East
Henrietta Road of one hundred forty-two degrees and fifty-two minutes
thirty seconds a distance of two hundred twenty-one and 34/100 feet to a
point; thence,
2. Westerly and forming an interior angle with the last course of one hundred
twenty-seven degrees thirty-one minutes thirty seconds a distance of six
hundred fifty-four and 65/100 feet to a point; thence,
3. Continuing westerly and deflecting to the right fourteen degrees fifty-one
minutes thirty seconds a distance of four hundred forty-six and 60/100 feet
to a point; thence,
4. Southwesterly and forming an interior angle with the last course of one
hundred twelve degrees, thirty-seven minutes thirty seconds a distance of
one thousand one hundred feet to a point; thence,
5. Easterly and forming an interior angle with the last course of seventy
degrees twenty-two minutes a distance of one thousand four hundred ninety-
seven and 6/100 feet to a point; thence,
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 8
SCHEDULE A CONTINUED
PARCEL NO. 23
- - -------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494 at its intersection with the division
line between the property of Southern Oil Company of New York, Inc. (reputed
owner) on the south and the property of Sybron Corporation (reputed owner) on
the north, said intersection being southeasterly 34.11 feet measured at right
angles from station 262+54.89 of the hereinafter described survey base line for
the Construction of Genesee Expressway (East Henrietta-Rochester State Highway
494 to Thruway); thence S 72/o/ 32' 17" W, 166.71 feet along the above mentioned
division line to a point, said point being northwesterly 49.34 feet measured at
right angles from base line station 264+07.44; thence N 28/o/ 33' 09" E, 205.60
feet to a point, said point being northwesterly 97.30 feet measured at right
angles from base line station 261+95.96; thence N 16/o/ 57' 58" W, 234.82 feet
to a point, said point being northwesterly 296.12 feet measured at right angles
from base line station 261+71.02; thence N 73/o/ 02' 02" E 20.00 feet to a point
in the above mentioned highway boundary line, said point being northwesterly
285.47 feet measured at right angles from base line station 260+54.28; thence S
16/o/ 57' 58" E, 377.44 feet along said highway boundary line to the point of
beginning.
PARCEL NO. 55
- - -------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494, said point being northwesterly 592.56
feet measured at right angles from station 258+61.10 of the hereinafter
described survey base line for the Construction of Genesee Expressway (East
Henrietta-Rochester State Highway 494 to Thruway):
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 9
SCHEDULE A CONTINUED
thence S 16/o/ 57' 58" E 362.69 feet along the above mentioned highway boundary
line to a point, said point being northwesterly 285.47 feet measured at right
angles from base line station 260+54.28; thence S 73/o/ 02' 02" W 20.00 feet to
a point; said point being northwesterly 296.12 feet measured at right angles
from base line station 260+71.02; thence N 16/o/ 57' 58" W 388.97 feet to a
point in the above mentioned highway boundary line, said point being
northwesterly 625.46 feet measured at right angles from base line station
258+64.08; thence S 54/o/ 17' 12" E, 33.04 feet continuing along said highway
boundary line to the point of beginning.
The above mentioned base lines for Parcels 22, 23 and 55 is a portion of the
survey base line for the Construction of Genesee Expressway (East Henrietta-
Rochester State Highway No. 494 to Thruway) as shown on a map and plan on file
in the office of the State Department of Transportation and described as
follows:
BEGINNING at B-8 P.I. Station 251+67.28; thence S 40/o/ 53' 22" W, 1,214.35
feet to B-11 Station P.I. 263+82.63; thence S 52/o/ 42' 23" W, 827.05 feet to
B-13 Station P.I. 72+09.68.
PARCEL NO. 753
- - --------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494, said point being northwesterly 296.12
feet measured at right angles from station 260+71.08 of the hereinafter
described survey base line for the Construction of Interstate Route 509 (390)
Genesee Expressway, Section 13 (East Henrietta-Rochester S.H. 494 to Thruway);
thence S 16/o/ 57' 58" E 234.82 feet along said highway boundary line to its
intersection with the existing northwesterly highway boundary line of Interstate
Route 509 (390) Genesee Expressway, Section 13
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 10
SCHEDULE A CONTINUED
(East Henrietta-Rochester S.H. 494 to Thruway) said intersection being
northwesterly 97.30 feet measured at right angles from baseline station
261+95.96; thence S 28/o/ 33' 09" W 39.02 feet along the last mentioned highway
boundary line to a point, said point being northwesterly 88.96 feet measured at
right angles from base line station 262+34.08; thence through the property of
Sybron Corporation (reputed owner) the following three (3) courses and
distances:
1. N 01/o/ 01' 21" W 65.01 feet to a point, said point being northwesterly
132.40 feet measured at right angles from baseline station 261+85.77;
thence
2. N 16/o/ 57' 58" W 199.64 feet to a point, said point being northwesterly
301.44 feet measured at right angles from base line station 260+79.55;
thence
3. N 73/o/ 02' 02" E 10.0 feet to the point of beginning.
PARCEL NO. 754
- - --------------
BEGINNING at a point in the existing highway boundary line of East Henrietta-
Rochester State Highway 494, said point being northwesterly 296.12 feet measured
at right angles from station 260+71.08 of the hereinafter described survey base
line for the Construction of Interstate Route 509 (390) Genesee Expressway,
Section 13 (East Henrietta-Rochester S.H. 494 to Thruway); thence through the
property of Sybron Corporation (reputed owner) to the following (3) courses and
distances:
1. S 73/o/ 02' 02" W, 10.0 feet to a point, said point being northwesterly
301.44 feet measured at right angles from baseline station 260+9.55;
thence
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 6
SCHEDULE A CONTINUED
6. Northeasterly and forming an interior angle with the last course of one
hundred nine degrees thirty-three minutes forty-five seconds a distance of
four hundred forty-five feet to a point; thence
7. Easterly deflecting to the right fifty-one degrees thirty-five minutes
thirty-five seconds a distance of one hundred ninety-five and 98/100 feet
to a point in the center line of East Henrietta Road; thence,
8. Northerly along the center line of East Henrietta Road and forming an
interior angle with the last course of ninety degrees thirty-five minutes
forty seconds a distance of six hundred eighty-four and 80/100 feet to the
place of beginning.
EXCEPTING
I. All that certain property appropriated by the State of New York on November
20, 1969, shown and described on Map No. 13R-2, Parcel Nos. 22, 23, and 55,
filed in the Office of the State Department of Transportation and in the
Office of the County Clerk for Monroe County; and
II. All that certain property appropriated by the State of New York on April
18, 1978, shown and described on Map No. 719, Parcel Nos. 753 and 754,
filed in the Office of the Department of Transportation and in the Office
of the County Clerk for Monroe County; and
Such parcels being described as follows:
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 7
SCHEDULE A CONTINUED
PARCEL NO. 22
- - -------------
BEGINNING at a point in the existing division line between the property of The
People of the State of York, on the east and the property of Sybron Corporation
(reputed owner) on the west, at its intersection with the division line between
the property of James D. Andrews, Ruth Jane Andrews, Mary Ruth Andrews Sweeting
and John Bruce Andrews (reputed owners) on the south, and property of Sybron
Corporation (reputed owner) on the north, said intersection being southeasterly
185.03 feet measured at right angles from station 267+85.96 of the hereinafter
described survey base line for Construction of Genesee Expressway (East
Henrietta - Rochester, State Highway 494 to Thruway); thence N 88/o/ 16' 45" W
452.78 feet to a point; said point being the northwesterly 100.00 feet measured
at right angles from base line station 271+37.75; thence N 58/0/ 11' 15" E,
565.34 feet to a point, said point being northwesterly 46.00 feet measured at
right angles from base line station 265+'5.00; thence N 51" 33' 46" E 167.60
feet to a point in the division line between the property of Southern Oil
Company of New York, Inc. (reputed owner) on the east, and the property of
Sybron Corporation (reputed owner) on the west, said point being northwesterly
4934 feet measured at right angles from base line station 264+07.44; thence S
20/0/ 56' 31" W, 445.20 feet along the last mentioned division line and the
above mentioned division line between the property of The People of the State of
New York, on the east and the property of James D. Andrews, Ruth Jane Andrews,
Mary Ruth Andrews Sweeting and John Bruce Andrews (reputed owners) on the west,
to the point of beginning.
SCHEDULE A CONTINUED
<PAGE>
Title No: 905-M-28,879
N/A #69392 8
SCHEDULE A CONTINUED
PARCEL NO. 23
- - -------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494 at its intersection with the division line
between the property of Southern Oil Company of New York, Inc. (reputed owner)
on the south and the property of Sybron Corporation (reputed owner) on the
north, said intersection being southeasterly 34.11 feet measured at right angles
from station 262+54.89 of the hereinafter described survey base line for the
Construction of Genesee Expressway (East Henrietta-Rochester State Highway 494
to Thruway); thence S 72/o/ 32' 17" W, 166.71 feet along the above mentioned
division line to a point, said point being northwesterly 49.34 feet measured at
right angles from base line station 264+07.44; thence N 28/0/ 33' 09" E, 205.60
feet to a point, said point being northwesterly 97.30 feet measured at right
angles from base line station 261+95.96; thence N 16/o/ 57' 58" W, 234.82 feet
to a point, said point being northwesterly 296.12 feet measured at right angles
from base line station 261+71.02; thence N 73/o/ 02' 02" E 20.00 feet to a point
in the above mentioned highway boundary line, said point being northwesterly
285.47 feet measured at right angles from base line station 260+54.28; thence S
16/o/ 57' 58" E, 377.44 feet along said highway boundary line to the point of
beginning.
PARCEL NO. 55
- - -------------
BEGINNING at a point in the existing westerly highway boundary line of East
Henrietta-Rochester State Highway 494, said point being northwesterly 592.56
feet measured at right angles from station 258+61.10 of the hereinafter
described survey base line for the Construction of Genesee Expressway (East
Henrietta-Rochester State Highway 494 to Thruway);
SCHEDULE A CONTINUED
<PAGE>
Title No.: 905-M-28,879
N/A #69392 10
SCHEDULE A CONTINUED
(East Henrietta-Rochester S.H. 494 to Thruway) said intersection being
northwesterly 97.30 feet measured at right angles from baseline station
261+95.96; thence S 28/o/ 33' 09" W 39.02 feet along the last mentioned highway
boundary line to a point, said point being northwesterly 88.96 feet measured at
right angles from base line station 262+34.08; thence through the property of
Sybron Corporation (reputed owner) the following three (3) courses and
distances:
1. N 01/o/ 01' 21" W 65.01 feet to a point, said point being northwesterly
132.40 feet measured at right angles from baseline station 261+85.77;
thence
2. N 16/o/ 57' 58" W 199.64 feet to a point, said point being northwesterly
301.44 feet measured at right angles from base line station 260+79.55;
thence
3. N 73/o/ 02' 02" E 10.0 feet to the point of beginning.
PARCEL NO. 754
- - --------------
BEGINNING at a point in the existing highway boundary line of East Henrietta-
Rochester State Highway 494, said point being northwesterly 296.12 feet measured
at right angles from station 260+71.08 of the hereinafter described survey base
line for the Construction of Interstate Route 509 (390) Genesee Expressway,
Section 13 (East Henrietta-Rochester S.H. 494 to Thruway); thence through the
property of Sybron Corporation (reputed owner) to the following (3) courses and
distances;
1. S 73/o/ 02' 02" W, 10.0 feet to a point, said point being northwesterly
301.44 feet measured at right angles from baseline station 260+9.55; thence
<PAGE>
Title No.: 905-M-28,879
N/A #69392 11
SCHEDULE A CONTINUED
List of Omitted Schedules and Materials
---------------------------------------
The following Schedules to the Mortgage have been omitted from this Exhibit
and shall be furnished supplementally to the Commission upon request:
Schedule I(2)(a) -- (Exceptions to Warranty of Title)
Schedule I(9)(b) -- (Compliance With Law)
Disclosure of Use of Hazardous Substances Pursuant to Section I(10)(b)
2. N 16/o/ 57' 58" W, 198.03 feet to a point, said point being northwesterly
469.11 feet measured at right angles from baseline station 259+74.19;
thence
3. N 73/o/ 02' 02" E, 10.0 feet to a point in the above mentioned highway
boundary line, said point being northwesterly 463.79 feet measured at right
angles from baseline Station 259+65.72; thence S 16/o/ 57' 58" E 198.03
feet along said highway boundary line to the point of beginning.
The above mentioned base line for Parcels 753 and 754 is a portion of the survey
base line for the Construction of Interstate Route 509 (390) Genesee Expressway,
Section 13, (East Henrietta-Rochester S.H. 494 to Thruway) as shown on a map and
plan on file in the Office of the State Department of Transportation and
described as follows:
BEGINNING at B-8, Station P.I. 251+67.28; thence S 40/o/ 53' 22" W to B-11,
Station P.I. 263+82.63.
The policy to be issued under this report will insure title to
such buildings and improvements erected on the premises which by
law constitute real property.
FOR
CONVEYANCE
ONLY
TOGETHER will all the right, title and interest of the party of
the first part, of, in and to the land lying in the street in
front of adjoining said premises.
<PAGE>
Exhibit 10.8.5
Recording Requested By, For Recorder's Use Only
WELLS FARGO BANK,
NATIONAL ASSOCIATION
And when recorded return to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Attn: Raymond T. Sung, Esq.
________________________________________________________________
DEED OF TRUST,
ASSIGNMENT OF RENTS,
AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, AND FIXTURE FILING (THIS "DEED OF
TRUST") is entered into as of February 15, 1996, by and among MDT CORPORATION, a
Delaware corporation ("Trustor"), AMERICAN SECURITIES COMPANY ("Trustee"), and
WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent under the below-defined Credit
Agreement ("Beneficiary"). As used herein, the "Credit Agreement" shall mean
that certain Credit Agreement, dated as of August 20, 1993, as amended by that
certain Amendment to Credit Agreement, dated as of August 1, 1995, and that
certain Amendment to Credit Agreement, dated as of even date herewith (as so
amended, and as otherwise may be amended, restated, supplemented, renewed,
extended, or modified from time to time), among Beneficiary, certain financial
institutions named therein as "Banks", and Trustor and certain affiliates
thereof named therein as "Companies".
THIS DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTION 9313 OF THE
UNIFORM COMMERCIAL CODE OF THE STATE OF CALIFORNIA AND APPLIES TO ALL GOODS AND
PERSONAL PROPERTY WHICH, UNDER CALIFORNIA LAW, ARE OR ARE TO BECOME FIXTURES ON
THE REAL PROPERTY LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AND
MORE PARTICULARLY DESCRIBED ON EXHIBIT A WHICH IS ATTACHED HERETO AND
INCORPORATED HEREIN BY THIS REFERENCE. THE MAILING ADDRESS OF THE TRUSTOR
(DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN SECTION 6.10 OF THIS
DEED OF TRUST.
ARTICLE I. GRANT IN TRUST
--------------
1.01 Grant. For the purposes and upon the terms and conditions in this
-----
Deed of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in
trust for the benefit of Beneficiary, with power of sale and right of entry and
possession, Trustor's interest in all that real property located in the County
of Los Angeles, State of California, described on Exhibit A attached hereto,
---------
together with all appurtenances, easements, rights and rights of way appurtenant
or related thereto, all buildings, other improvements and fixtures now or
hereafter located thereon, all interest or estate which Trustor now has or may
hereafter acquire in the property described above, and all additions and
accretions thereto ("Subject Property"). The listing of specific rights or
property shall not be interpreted as a limit of general terms.
-1-
<PAGE>
1.02 Address. The address of the Subject Property is 19645 Rancho Way,
-------
Rancho Dominguez, California 90220-6039. Neither the failure to designate an
address nor any inaccuracy in the address designated shall affect the validity
or priority of the lien of this Deed of Trust on the Subject Property as
described on Exhibit A. In the event of any conflict between the provisions of
---------
Exhibit A and said address, Exhibit A shall control.
- - --------- ---------
ARTICLE II. OBLIGATIONS SECURED
-------------------
2.01 Obligations Secured. Trustor makes this grant and assignment for the
-------------------
purpose of securing the following obligations (each, a "Secured Obligation" and
collectively, the "Secured Obligations"):
(a) payment when due to Beneficiary of all sums at any time owing and
performance of all other obligations arising under or in connection with (i)
that certain Amended and Restated Promissory Note (the "Wells Fargo Note"),
dated as of August 1, 1995, in the original principal amount of Seven Million
Eight Hundred Thousand Dollars ($7,800,000), executed by Trustor and payable to
Wells Fargo Bank, National Association or its order, (ii) that certain Amended
and Restated Promissory Note (the "Chemical Note"), dated as of August 1, 1995,
in the original principal amount of Four Million Two Hundred Thousand Dollars
($4,200,000), executed by Trustor and payable to Chemical Bank or its order; and
(iii) any other promissory note hereafter designated as a "Term Loan Note" under
the Credit Agreement (the Wells Fargo Note, the Chemical Note, and such other
Term Loan Notes, in each case as it may be amended, restated, supplemented,
renewed, extended, or modified from time to time, are referred to herein,
collectively, as the "Notes"); together with the payment and performance of any
other indebtedness or obligations incurred in connection with the credit
accommodation evidenced by the Notes, whether or not specifically referenced
therein; and
(b) payment and performance of all obligations of Trustor under this Deed
of Trust, together with all advances, payments or other expenditures made by
Beneficiary or Trustee pursuant to this Deed of Trust as or for the payment or
performance of any such obligations of Trustor; and
(c) payment and performance of all obligations, if any, and the contracts
under which they arise, which any rider attached to and recorded with this Deed
of Trust recites are secured hereby; and
(d) payment and performance of all future advances and other obligations
that the then record owner of the Subject Property may agree to pay and/or
perform (whether as principal, surety or guarantor) for the benefit of
Beneficiary, when any such advance or other obligation is evidenced by a writing
which recites that it is secured by this Deed of Trust; and
(e) all modifications, extensions and renewals of any of the Secured
Obligations (including without limitation, (i) modifications, extensions or
renewals at a different rate of interest, or (ii) deferrals or accelerations of
the required principal payment dates or interest payment dates or both, in whole
or in part), however evidenced, whether or not any such modification, extension
or renewal is evidenced by a new or additional promissory note or notes.
2.02 Obligations. The term "obligations" is used herein in its most
-----------
comprehensive sense and includes any and all advances, debts, obligations and
liabilities heretofore, now or hereafter made, incurred or created, whether
voluntary or involuntary and however arising,
-2-
<PAGE>
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, joint or several, relating to, arising from or in
connection with this Deed of Trust, the Credit Agreement, the Notes and the
other documents executed in connection herewith or therewith, including without
limitation, all principal, interest, charges, including prepayment charges and
late charges, and loan fees at any time accruing or assessed on any Secured
Obligation.
2.03 Incorporation. All terms of the Secured Obligations are incorporated
-------------
herein by this reference. All persons who may have or acquire an interest in
the Subject Property are hereby deemed to have notice (a) of the terms of the
Secured Obligations and (b) that, if provided therein, (i) the Notes or any
other Secured Obligation may permit borrowing, repayment and reborrowing, and
(ii) the rate of interest on one or more of the Secured Obligations may vary
from time to time.
ARTICLE III. ASSIGNMENT OF RENTS
-------------------
3.01 Assignment. For the purposes and upon the terms and conditions set
----------
forth herein, Trustor irrevocably assigns to Beneficiary all of Trustor's right,
title and interest in, to and under all leases, licenses, rental agreements and
other agreements of any kind relating to the use or occupancy of any of the
Subject Property, whether existing as of the date hereof or at any time
hereafter entered into, together with all guarantees of and security for any
tenant's or lessee's performance thereunder, and all amendments, extensions,
renewals and modifications thereto (each, a "Lease" and collectively, the
"Leases"), together with any and all other rents, issues and profits of the
Subject Property (collectively, "Rents"). This Assignment shall not impose upon
Beneficiary any duty to produce Rents from the Subject Property, nor cause
Beneficiary to be (a) a "mortgagee in possession" for any purpose so long as
Beneficiary has not itself entered into actual possession of the Subject
Property, (b) responsible for performing any of the obligations of the lessor or
landlord under any Lease, or (c) responsible for any waste committed by any
person or entity at any time in possession of the Subject Property or any part
thereof, or for any dangerous or defective condition of the Subject Property, or
for any negligence in the management, upkeep, repair or control of the Subject
Property, but the foregoing shall not relieve Beneficiary of responsibility for
damages arising from its gross negligence or willful misconduct. This is an
absolute assignment, not an assignment for security only, and Beneficiary's
right to Rents is not contingent upon and may be exercised without possession of
the Subject Property. Trustor agrees to execute and deliver to Beneficiary,
within five (5) days of Beneficiary's written request, such additional documents
as Beneficiary or Trustee may reasonably request to further evidence the
assignment to Beneficiary of any and all Leases and Rents.
3.02 Protection of Security. To protect the security of this Assignment,
----------------------
Trustor agrees:
(a) At Trustor's sole cost and expense: (i) to perform each obligation to
be performed by the lessor or landlord under each Lease and to enforce or secure
the performance of each obligation to be performed by the lessee or tenant under
each Lease; (ii) not to modify any Lease in any material respect, nor accept
surrender under or terminate the term of any Lease except in accordance with the
terms thereof; (iii) not to anticipate the Rents under any Lease; and (iv) not
to waive or release any lessee or tenant of or from any Lease
obligations. Trustor assigns to Beneficiary all of Trustor's right and power to
modify the terms of any Lease, to accept a surrender under or terminate the term
of or anticipate the Rents under any Lease, and to waive or release any lessee
or tenant of or from any Lease
-3-
<PAGE>
obligations, and any attempt on the part of Trustor to exercise any such rights
or powers without Beneficiary's prior written consent shall be a breach of the
terms hereof.
(b) At Trustor's sole cost and expense, to defend any action in any manner
connected with any Lease or the obligations thereunder, and to pay all costs of
Beneficiary or Trustee, including reasonable attorneys' fees, in any such action
relating to a Lease in which Beneficiary or Trustee may appear.
(c) That, should Trustor fail to do any act required to be done by Trustor
under a Lease within the applicable time period (including any grace period) set
forth therein, then Beneficiary or Trustee, but without obligation to do so and
without notice to Trustor and without releasing Trustor from any obligation
hereunder, may make or do the same in such manner and to such extent as
Beneficiary or Trustee deems necessary to protect the security hereof, and, in
exercising such powers, Beneficiary or Trustee may employ attorneys and other
agents, and Trustor shall pay necessary costs and reasonable attorneys' fees
incurred by Beneficiary or Trustee, or their agents, in the exercise of the
powers granted herein. Trustor shall give prompt notice to Beneficiary of any
default by any lessee or tenant under any Lease, and of any notice of default on
the part of Trustor under any Lease received from a lessee or tenant thereunder,
together with an accurate and complete copy thereof.
(d) To pay to Beneficiary immediately upon demand all sums expended under
the authority hereof, including reasonable attorneys' fees, together with
interest thereon at the then-current rate per annum payable under any Secured
Obligation, and the same may, at Beneficiary's option, be added to any Secured
Obligation and shall be secured hereby.
3.03 License. Beneficiary confers upon Trustor a license ("License") to
-------
collect and retain the Rents as, but not more than 30 days before, they come due
and payable, until the occurrence of any Default. Upon the occurrence of any
Default, the License shall be automatically revoked, and Beneficiary or Trustee
may, at Beneficiary's option and without notice, either in person or by agent,
with or without bringing any action, or by a receiver to be appointed by a
court: (a) enter, take possession of, manage and operate the Subject Property
or any part thereof; (b) make, cancel, enforce or modify any Lease; (c) obtain
and evict tenants, fix or modify Rents, and do any acts which Beneficiary or
Trustee deems proper to protect the security hereof; and (d) either with or
without taking possession of the Subject Property, in its own name, sue for or
otherwise collect and receive all Rents, including those past due and unpaid,
and apply the same in accordance with the provisions of Section 5.04 hereof.
The entering and taking possession of the Subject Property, the collection of
Rents and the application thereof as aforesaid, shall not cure or waive any
Default, nor waive, modify or affect any notice of default hereunder, nor
invalidate any act done pursuant to such notice. The License shall not grant to
Beneficiary or Trustee the right to possession, except as provided in this Deed
of Trust. Upon Trustor's complete cure of such Default, the License shall be
reinstated by Beneficiary and thereafter continue in accordance with (and
subject to the conditions of) this Section 3.03.
ARTICLE IV. RIGHTS AND DUTIES OF THE PARTIES
--------------------------------
4.01 Title. Trustor warrants that, except as otherwise disclosed to
-----
Beneficiary prior to the date hereof in a writing which refers to this warranty,
Trustor lawfully possesses and holds fee simple title to the Subject Property
without limitation on the right to encumber and assign its interest therein, as
herein provided, and that this Deed of Trust is a valid lien on the Subject
Property and all of Trustor's interest therein.
-4-
<PAGE>
4.02 Taxes and Assessments. Trustor shall pay prior to delinquency all
---------------------
taxes, assessments, levies and charges imposed (a) by any public or quasi-public
authority or utility company which are or which may become a lien upon or cause
a loss in value of the Subject Property or any interest therein, or (b) by any
public authority upon Beneficiary by reason of its interest in any Secured
Obligation or in the Subject Property, or by reason of any payment made to
Beneficiary pursuant to any Secured Obligation; but Trustor shall have no
obligation to pay any income taxes of Beneficiary. Trustor shall have the right
to contest in good faith the amount or validity of any such taxes, assessments,
levies and charges by appropriate legal or administrative proceedings diligently
pursued, so long as the lien of this Deed of Trust shall not be adversely
affected by such contest.
4.03 Performance of Secured Obligations. Trustor shall promptly pay and
----------------------------------
perform each Secured Obligation when due.
4.04 Liens, Encumbrances and Charges. Trustor shall immediately discharge
-------------------------------
any lien not approved by Beneficiary in writing that has or may attain priority
over this Deed of Trust. Except as otherwise provided in any Secured Obligation
or other agreement with Beneficiary, Trustor shall pay when due all obligations
secured by or reducible to liens and encumbrances which shall now or hereafter
encumber the Subject Property, whether senior or subordinate hereto, including
without limitation, any mechanics' liens. Trustor shall have the right to
contest in good faith the amount or validity of any such lien or encumbrance by
appropriate legal or administrative proceedings diligently pursued, so long as
the lien of this Deed of Trust shall not be adversely affected by such contest.
4.05 Insurance. Trustor shall insure the Subject Property against loss or
---------
damage by fire and such other risks as Beneficiary shall from time to time
require. Trustor shall carry public liability insurance, flood insurance as
required by applicable law and such other insurance as Beneficiary may
reasonably require, including without limitation, business interruption
insurance or loss of rental value insurance. Trustor shall maintain all
required insurance at Trustor's expense, under policies issued by companies and
in form and substance satisfactory to Beneficiary. Neither Beneficiary nor
Trustee, by reason of accepting, rejecting, approving or obtaining insurance
shall incur any liability for: (a) the existence, nonexistence, form or legal
sufficiency thereof; (b) the solvency of any insurer; or (c) the payment of
losses. All policies and certificates of insurance shall name Beneficiary as
loss payee, and shall provide that the insurance cannot be terminated as to
Beneficiary except upon a minimum of ten (10) days' prior written notice to
Beneficiary. Immediately upon any request by Beneficiary, Trustor shall deliver
to Beneficiary the original of all such policies or certificates, with receipts
evidencing annual prepayment of the premiums.
4.06 Security Account. Upon the occurrence and during the continuation of
----------------
a Default under this Deed of Trust, Beneficiary may require, at its option, but
subject to applicable law and to any specific limits on exercise of that option
contained herein, that Trustor pay to Beneficiary each month an additional sum
estimated by Beneficiary to be equal to the annual amount of (a) taxes, bonds,
assessments, levies and charges described in Section 4.02 hereof, and (b)
premiums for fire and other hazard and mortgage insurance next due, divided by,
in each instance, the number of months to lapse before one month before said
annual amount will become due. Such payments of additional sums by Trustor to
Beneficiary shall be held in a security account, and Trustor hereby grants and
transfers to Beneficiary a security interest in all sums so held in said
security account, and all proceeds thereof, to secure the payment and
performance of each Secured Obligation. All sums so paid shall not bear
interest, except to the extent and in the amount required by law. Beneficiary
shall apply said sums to the payment of, or at the sole option of Beneficiary,
release said sums to Trustor for application to and payment of, such taxes,
bonds, assessments, levies, charges and insurance premiums. If the amount so
deposited by Trustor
-5-
<PAGE>
is insufficient to pay the installment of the taxes, bonds, assessments, levies,
charges or insurance premiums then due, and Trustor fails to deposit the amount
of such deficiency promptly upon Beneficiary's notice to Trustor of the amount
of such deficiency, then Beneficiary at its sole option may apply all or any
part of said sums to any Secured Obligation. The relationship between
Beneficiary and Trustor with respect to said security account shall be one of
debtor-creditor, and not one where Beneficiary shall be deemed a trustee,
special depository or other fiduciary acting for the benefit of Trustor. The
existence of said security account shall not limit Beneficiary's rights under
any other provision of this Deed of Trust or any other agreement or statute or
rule of law. Beneficiary may refund any sums in the Security Account which
exceed the total amount to be paid therefrom for any year, or may continue to
hold the excess and reduce proportionately the required monthly deposits for the
next year.
4.07 Damages; Insurance and Condemnation Proceeds.
--------------------------------------------
(a) (i) All awards of damages and all other compensation payable directly
or indirectly by reason of a condemnation or proposed condemnation for public or
private use affecting the Subject Property; (ii) all other claims and awards for
damages to or decrease in value of the Subject Property; (iii) all proceeds of
any insurance policies payable by reason of loss sustained to the Subject
Property; and (iv) all interest which may accrue on any of the foregoing, are
all absolutely and irrevocably assigned to and shall be paid to Beneficiary. If
a Default then has occurred and is continuing, or if Beneficiary otherwise
reasonably determines that its security is or may be impaired, then, at the
absolute discretion of Beneficiary, but subject to applicable law, if any, and
without regard to any requirement contained in Section 4.08(c) hereof,
Beneficiary may apply all or any of the proceeds it receives to its expenses in
settling, prosecuting or defending any such claim and apply the balance to the
Secured Obligations in any order, and release all or any part of the proceeds to
Trustor upon any conditions Beneficiary reasonably may impose. If a Default is
not then continuing, or if Beneficiary's security is not impaired, then such
proceeds shall be released to Trustor upon such conditions Beneficiary
reasonably may impose. Beneficiary may commence, appear in, defend or prosecute
any assigned claim or action, and may adjust, compromise, settle and collect all
claims and awards assigned to Beneficiary, but shall not be responsible for any
failure to collect any claim or award, regardless of the cause of the failure.
Nothing in this Section 4.07(a) shall prevent Trustor from commencing, appearing
in, defending or prosecuting any claim or action, or adjusting, compromising,
settling and collecting any claims and awards, if Beneficiary fails to do so in
a timely manner.
(b) At its sole option, Beneficiary may permit insurance or condemnation
proceeds held by Beneficiary to be used for repair or restoration but may impose
any conditions on such use as Beneficiary reasonably deems necessary.
4.08 Maintenance and Preservation of Subject Property. Subject to the
------------------------------------------------
provisions of any Secured Obligation, Trustor covenants:
(a) to keep the Subject Property in good condition and repair ordinary wear
and tear excepted;
(b) except with Beneficiary's prior written consent (except as necessary to
comply with applicable laws), not to remove or demolish the Subject Property,
not to alter, restore or add to the Subject Property, and not to initiate or
join in the application for any change in any zoning or other land
classification which affects the Subject Property;
(c) to restore promptly and in good workmanlike manner any portion of the
Subject Property which may be damaged or destroyed, unless Beneficiary requires
that all of
-6-
<PAGE>
the insurance proceeds be used to reduce the Secured Obligations as provided in
Section 4.07 hereof;
(d) to comply with and not to suffer violation of any or all of the
following which govern acts or conditions on, or otherwise affect the Subject
Property: (i) laws, ordinances, regulations, standards and judicial and
administrative rules and orders; (ii) covenants, conditions, restrictions and
equitable servitudes, whether public or private; and (iii) requirements of
insurance companies and any bureau or agency which establishes standards of
insurability;
(e) not to commit or permit waste of the Subject Property; and
(f) to do all other acts which from the character or use of the Subject
Property may be reasonably necessary to maintain and preserve its value.
4.09 Hazardous Substances; Environmental Provisions. Trustor represents
----------------------------------------------
and warrants to Beneficiary that, except as disclosed to, and acknowledged by,
Beneficiary in writing prior to the date hereof: (a) to the best of Trustor's
knowledge, during the period of Trustor's ownership or possession of the Subject
Property, there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or hazardous
substance (as said terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, any other applicable state or
Federal environmental laws, and any rules or regulations adopted pursuant to any
of the foregoing) by any person from, on, under or about the Subject Property;
and (b) to the best of Trustor's knowledge, there has not been (i) any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or hazardous substance by any prior owners or
occupants of the Subject Property, or (ii) any actual or threatened litigation
or claims of any kind by any person relating to such matters. Trustor agrees to
indemnify and hold Beneficiary harmless from and against any and all claims,
losses, liabilities, damages, penalties and expenses of any kind or character,
including reasonable attorneys' fees, which Beneficiary may directly or
indirectly sustain or suffer as a result of (x) any breach of this Section 4.09,
or (y) as a consequence of any use, generation, manufacture, storage, treatment,
disposal, release or threatened release occurring prior to Trustor's ownership
of any interest in the Subject Property, whether or not the same was or should
have been known to Trustor. This obligation to indemnify shall survive the
payment of the Secured Obligations and the satisfaction of this Deed of Trust,
and shall not be affected by Beneficiary's acquisition of any interest in the
Subject Property, whether by foreclosure or otherwise.
Trustor and Beneficiary agree that this Section 4.09 is intended as
Beneficiary's written request for information (and Trustor's response)
concerning the environmental condition of the Subject Property as required by
California Code of Civil Procedure (S)726.5, and that each representation and
warranty contained in this Section 4.09 (together with any indemnity applicable
to a breach of any such representation and warranty) with respect to the
environmental condition of the Subject Property is intended by Trustor and
Beneficiary to be an "environmental provision" for purposes of California Code
of Civil Procedure (S)736.
4.10 Protection of Security. Trustor shall, at Trustor's sole expense:
----------------------
(a) protect, preserve and defend the Subject Property and Trustor's title and
right to possession of the Subject Property against all adverse claims; (b) if
Trustor's interest in the Subject Property is a leasehold interest or estate,
pay and perform in a timely manner all obligations to be paid and/or performed
by the lessee or tenant under the lease or other agreement creating such
leasehold interest or estate; and (c) protect, preserve and defend the security
of this Deed of
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<PAGE>
Trust and the rights and powers of Beneficiary and Trustee under this Deed of
Trust against all adverse claims. Trustor shall give Beneficiary and Trustee
prompt notice in writing of the assertion of any claim, the filing of any action
or proceeding, or the occurrence of any damage, condemnation offer or other
action relating to or affecting the Subject Property and, if Trustor's interest
in the Subject Property is a leasehold interest or estate, of any notice of
default or demand for performance under the lease or other agreement pursuant to
which such leasehold interest or estate was created or exists.
4.11 Acceptance of Trust; Powers and Duties of Trustee. Trustee accepts
-------------------------------------------------
this trust when this Deed of Trust is executed. From time to time, upon written
request of Beneficiary and presentation of this Deed of Trust for endorsement,
and without affecting the personal liability of any person for payment of any
indebtedness or performance of any of the Secured Obligations, Trustee may,
without obligation to do so and without liability therefor and without notice:
(a) reconvey all or any part of the Subject Property; (b) consent to the making
of any map or plat of the Subject Property; and (c) join in any grant of
easement thereon, any declaration of covenants and restrictions, any extension
agreement or any agreement subordinating the lien or charge of this Deed of
Trust. Trustee or Beneficiary may from time to time apply to any court of
competent jurisdiction for aid and direction in the execution of the trusts and
the enforcement of the rights and remedies available under this Deed of Trust,
and may obtain orders or decrees directing or confirming or approving acts in
the execution of said trusts and the enforcement of said rights and remedies.
Trustee has no obligation to notify any party of any pending sale or any action
or proceeding (including, but not limited to, actions in which Trustor,
Beneficiary or Trustee shall be a party) unless held or commenced and maintained
by Trustee under this Deed of Trust. Trustee shall not be obligated to perform
any act required of it under this Deed of Trust unless the performance of the
act is requested in writing and Trustee is reasonably indemnified against all
losses, costs, liabilities and expenses in connection therewith.
4.12 Compensation; Exculpation; Indemnification.
------------------------------------------
(a) Trustor shall pay all Trustee's fees and reimburse Trustee for all
expenses in the administration of this trust, including reasonable attorneys'
fees. Trustor shall pay Beneficiary reasonable compensation for services
rendered concerning this Deed of Trust, including without limitation, the
providing of any statement of amounts owing under any Secured Obligation.
Beneficiary shall not directly or indirectly be liable to Trustor or any other
person as a consequence of: (i) the exercise of any of the rights, remedies or
powers granted to Beneficiary in this Deed of Trust (other than with respect to
Beneficiary's gross negligence or willful misconduct in connection with such
exercise); (ii) the failure or refusal of Beneficiary to perform or discharge
any obligation or liability of Trustor under any Lease or other agreement
related to the Subject Property or under this Deed of Trust; or (iii) any loss
sustained by Trustor or any third party as a result of Beneficiary's failure to
lease the Subject Property after any Default or from any other act or omission
of Beneficiary in managing the Subject Property after any Default unless such
loss is caused by the willful misconduct or gross negligence of Beneficiary; and
no such liability shall be asserted or enforced against Beneficiary, and to the
extent permitted by law all such liability is hereby expressly waived and
released by Trustor.
(b) Trustor shall indemnify Trustee and Beneficiary against, and hold them
harmless from, any and all losses, damages, liabilities, claims, causes of
action, judgments, court costs, attorneys' fees and other legal expenses, costs
of evidence of title, costs of evidence of value, and other expenses which
either may suffer or incur: (i) by reason of this Deed of Trust; (ii) by reason
of the execution of this trust or the performance of any act required or
permitted hereunder or by law; (iii) as a result of any failure of Trustor to
perform Trustor's obligations; or (iv) by reason of any alleged obligation or
undertaking of
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<PAGE>
Beneficiary to perform or discharge any of the representations, warranties,
conditions, covenants or other obligations contained in any other document
related to the Subject Property, including without limitation, the payment of
any taxes, assessments, rents or other lease obligations, liens, encumbrances or
other obligations of Trustor under this Deed of Trust (other than with respect
to Beneficiary's or Trustee's gross negligence or willful misconduct). Trustor's
duty to indemnify Trustee and Beneficiary shall survive the payment, discharge
or cancellation of the Secured Obligations and the release or reconveyance, in
whole or in part, of this Deed of Trust.
(c) Trustor shall pay all indebtedness arising under this Section 4.12
immediately upon demand by Trustee or Beneficiary, together with interest
thereon from the date such indebtedness arises at the then-current rate per
annum payable under any Secured Obligation. Beneficiary may, at its option, add
any such indebtedness to any Secured Obligation.
4.13 Substitution of Trustees. From time to time, by a writing signed and
------------------------
acknowledged by Beneficiary and recorded in the Office of the Recorder of the
County in which the Subject Property is situated, Beneficiary may appoint
another trustee to act in the place and stead of Trustee or any successor. Such
writing shall set forth the date, book and page of its recordation and any other
information required by law. The recordation of such instrument of substitution
shall discharge Trustee herein named and shall appoint the new trustee as the
trustee hereunder with the same effect as if originally named Trustee herein. A
writing recorded pursuant to the provisions of this Section 4.13 shall be
conclusive proof of the proper substitution of such new Trustee.
4.14 Due on Sale or Encumbrance. Except as permitted by the provisions of
--------------------------
any Secured Obligation or applicable law, if the Subject Property or any
interest therein shall be sold, transferred, mortgaged, assigned, encumbered or
leased, whether voluntarily, involuntarily or by operation of law (each of which
actions and events is called a "Transfer"), without Beneficiary's prior written
consent (which, in the case of leases, will not be unreasonably withheld), then
Beneficiary may, at its sole option, declare all Secured Obligations immediately
due and payable in full. Trustor shall notify Beneficiary in writing of each
Transfer within ten (10) business days of the date thereof.
4.15 Releases, Extensions, Modifications and Additional Security. Without
-----------------------------------------------------------
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Subject Property or in any manner
obligated under any Secured Obligation ("Interested Parties"), Beneficiary may,
from time to time, release any of the Interested Parties from liability for the
payment of any Secured Obligation, take any action or make any agreement
extending the maturity or otherwise altering the terms or increasing the amount
of any Secured Obligation, accept additional security, and enforce, waive,
subordinate or release all or a portion of the Subject Property or any other
security for any Secured Obligation. None of the foregoing actions shall
release or reduce the personal liability of any of the Interested Parties, nor
release or impair the priority of the lien of this Deed of Trust upon the
Subject Property.
4.16 Reconveyance. Upon Beneficiary's written request, and upon surrender
------------
of this Deed of Trust and every note or other instrument setting forth any
Secured Obligations to Trustee for cancellation, Trustee shall reconvey, without
warranty, the Subject Property or that portion thereof then covered hereby. The
recitals of any matters or facts in any reconveyance executed hereunder shall be
conclusive proof of the truthfulness thereof. To the extent permitted by law,
the reconveyance may describe the grantee as "the person or persons legally
entitled thereto." Neither Beneficiary nor Trustee shall have any duty to
determine the rights of persons claiming to be rightful grantees of any
reconveyance. When the Subject Property has been fully reconveyed, the last
such reconveyance shall operate as a
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<PAGE>
reassignment of all future Rents to the person or persons legally entitled
thereto. Upon Beneficiary's demand, Trustor shall pay all reasonable costs and
expenses incurred by Beneficiary in connection with any reconveyance.
4.17 Subrogation. Beneficiary shall be subrogated to the lien of all
-----------
encumbrances, whether released of record or not, paid in whole or in part by
Beneficiary pursuant to this Deed of Trust or by the proceeds of any Secured
Obligation.
4.18 Trustor Different From Obligor ("Third Party Trustor"). As used in
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this Section 4.18, the term "Obligor" shall mean each person or entity which is
obligated in any manner under any of the Secured Obligations; and the term
"Third Party Trustor" shall mean (1) each person or entity which is included in
the definition of Trustor herein and which is not an Obligor under all of the
Secured Obligations, and (2) each person or entity which is included in the
definition of Trustor herein if there is any Obligor which is not included in
said definition of Trustor.
(a) Representations and Warranties. Each Third Party Trustor represents
------------------------------
and warrants to Beneficiary that: (i) this Deed of Trust is executed at an
Obligor's request; (ii) this Deed of Trust complies with all agreements between
each Third Party Trustor and any Obligor regarding such Third Party Trustor's
execution hereof; (iii) Beneficiary has made no representation to any Third
Party Trustor as to the creditworthiness of any Obligor; and (iv) each Third
Party Trustor has established adequate means of obtaining from each Obligor on a
continuing basis financial and other information pertaining to such Obligor's
financial condition. Each Third Party Trustor agrees to keep adequately informed
from such means of any facts, events or circumstances which might in any way
affect such Third Party Trustor's risks hereunder. Each Third Party Trustor
further agrees that Beneficiary shall have no obligation to disclose to any
Third Party Trustor any information or material about any Obligor which is
acquired by Beneficiary in any manner. The liability of each Third Party Trustor
hereunder shall be reinstated and revived, and the rights of Beneficiary shall
continue if and to the extent that for any reason any amount at any time paid on
account of any Secured Obligation is rescinded or must otherwise be restored by
Beneficiary, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, all as though such amount had not been paid. The
determination as to whether any amount so paid must be rescinded or restored
shall be made by Beneficiary in its sole discretion; provided however, that if
Beneficiary chooses to contest any such matter at the request of any Third Party
Trustor, each Third Party Trustor agrees to indemnify and hold Beneficiary
harmless from and against all costs and expenses, including reasonable
attorneys' fees, expended or incurred by Beneficiary in connection therewith,
including without limitation, in any litigation with respect thereto.
(b) Waivers.
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(i) Each Third Party Trustor waives any right to require Beneficiary
to: (A) proceed against any Obligor or any other person; (B) proceed against or
exhaust any security held from any Obligor or any other person; (C) give notice
of the terms, time and place of any public or private sale of personal property
security held from any Obligor or any other person, or otherwise comply with any
other provisions of Section 9504 of the California Uniform Commercial Code; (D)
pursue any other remedy in Beneficiary's power; or (E) make any presentments or
demands for performance, or give any notices of nonperformance, protests,
notices of protest or notices of dishonor in connection with any obligations or
evidences of indebtedness held by Beneficiary as security for or which
constitute in whole or in part the Secured Obligations, or in connection with
the creation of new or additional obligations.
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<PAGE>
(ii) Each Third Party Trustor waives any defense to its obligations
hereunder based upon or arising by reason of: (A) any disability or other
defense of any Obligor or any other person; (B) the cessation or limitation from
any cause whatsoever, other than payment in full, of any Secured Obligation; (C)
any lack of authority of any officer, director, partner, agent or any other
person acting or purporting to act on behalf of any Obligor which is a
corporation, partnership or other type of entity, or any defect in the formation
of any such Obligor; (D) the application by any Obligor of the proceeds of any
Secured Obligation for purposes other than the purposes represented by any
Obligor to, or intended or understood by, Beneficiary or any Third Party
Trustor; (E) any act or omission by Beneficiary which directly or indirectly
results in or aids the discharge of any Obligor or any portion of any Secured
Obligation by operation of law or otherwise, or which in any way impairs or
suspends any rights or remedies of Beneficiary against any Obligor; (F) any
impairment of the value of any interest in any security for the Secured
Obligations or any portion thereof, including without limitation, the failure to
obtain or maintain perfection or recordation of any interest in any such
security, the release of any such security without substitution, and/or the
failure to preserve the value of, or to comply with applicable law in disposing
of, any such security; or (G) any modification of any Secured Obligation, in any
form whatsoever, including without limitation the renewal, extension,
acceleration or other change in time for payment of, or other change in the
terms of, any Secured Obligation or any portion thereof, including increase or
decrease of the rate of interest thereon. Until all Secured Obligations shall
have been paid in full, no Third Party Trustor shall have any right of
subrogation. Each Third Party Trustor waives all rights and defenses it may have
arising out of (1) any election of remedies by Beneficiary, even though that
election of remedies, such as a non-judicial foreclosure with respect to any
security for any portion of the Secured Obligations, destroys such Third Party
Trustor's rights of subrogation or such Third Party Trustor's rights to proceed
against any Obligor for reimbursement, or (2) any loss of rights any Third Party
Trustor may suffer by reason of any rights, powers or remedies of any Obligor in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging any Obligor's obligations, whether by operation of Sections 726
or 580d of the Code of Civil Procedure as from time to time amended, or
otherwise. Until all Secured Obligations shall have been paid in full, each
Third Party Trustor further waives any right to enforce any remedy which
Beneficiary now has or may hereafter have against any Obligor or any other
person, and waives any benefit of, or any right to participate in, any security
now or hereafter held by Beneficiary.
(iii) If any of said waivers in this Section 4.18(b) is determined to
be contrary to any applicable law or public policy, such waiver shall be
effective to the extent permitted by law.
ARTICLE V. DEFAULT PROVISIONS
------------------
5.01 Default. The occurrence of any of the following and Trustor's
-------
failure to cure the same within any applicable grace or cure period set forth in
the Credit Agreement or the Notes (or, with respect to the matters set forth in
the following clauses (a) and (b), within the time set forth in the Credit
Agreement for the failure to perform obligations or agreements contained in the
Credit Agreement, or to rectify a misrepresentation) shall constitute a
"Default" under this Deed of Trust: (a) Trustor shall fail to observe or
perform any obligation or agreement contained herein; (b) any representation or
warranty of Trustor herein shall prove to be incorrect, false or misleading in
any material respect when made; or (c) any default in the payment or performance
of any obligation, or any defined event of default, under any provisions of the
Credit Agreement, any Note, or any other document executed in connection with,
or with respect to, any Secured Obligation.
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<PAGE>
5.02 Rights and Remedies. Upon the occurrence of any Default, and at any
-------------------
time thereafter, Beneficiary and Trustee shall have all the following rights and
remedies:
(a) With or without notice, to declare all Secured Obligations
immediately due and payable in full;
(b) With or without notice, and without releasing Trustor from any
Secured Obligation, and without becoming a mortgagee in possession, to cure any
Default of Trustor and, in connection therewith, to enter upon the Subject
Property and to do such acts and things as Beneficiary or Trustee deems
necessary or desirable to protect the security of this Deed of Trust, including
without limitation, to appear in and defend any action or proceeding purporting
to affect the security of this Deed of Trust or the rights or powers of
Beneficiary or Trustee hereunder; to pay, purchase, contest or compromise any
encumbrance, charge, lien or claim of lien which, in the judgment of either
Beneficiary or Trustee, is senior in priority to this Deed of Trust, the
judgment of Beneficiary or Trustee being conclusive as between the parties
hereto; to obtain, and to pay any premiums or charges with respect to, any
insurance required to be carried hereunder; and to employ counsel, accountants,
contractors and other appropriate persons to assist them;
(c) To commence and maintain an action or actions in any court of
competent jurisdiction to foreclose this Deed of Trust as a mortgage or to
obtain specific enforcement of the covenants of Trustor under this Deed of
Trust, and Trustor agrees that such covenants shall be specifically enforceable
by injunction or any other appropriate equitable remedy and that for the
purposes of any suit brought under this subsection, Trustor waives to the extent
permitted by law, the defenses of laches and any applicable statute of
limitations;
(d) To apply to a court of competent jurisdiction for and obtain
appointment of a receiver of the Subject Property as a matter of strict right
and without regard to: (i) the adequacy of the security for the repayment of the
Secured Obligations; (ii) the existence of a declaration that the Secured
Obligations are immediately due and payable; or (iii) the filing of a notice of
default; and Trustor consents to such appointment;
(e) To take and possess all documents, books, records, papers and accounts
of Trustor or the then owner of the Subject Property; to make or modify Leases
of, and other agreements with respect to, the Subject Property upon such terms
and conditions as Beneficiary deems proper; and to make repairs, alterations and
improvements to the Subject Property deemed necessary, in Trustee's or
Beneficiary's judgment, to protect or enhance the security hereof;
(f) To execute a written notice of such Default and of its election to
cause the Subject Property to be sold to satisfy the Secured Obligations.
Trustee shall give and record such notice as the law then requires as a
condition precedent to a trustee's sale. When the minimum period of time
required by law after such notice has elapsed, Trustee, without notice to or
demand upon Trustor, except as otherwise required by law, shall sell the Subject
Property at the time and place of sale fixed by it in the notice of sale, at one
or several sales, either as a whole or in separate parcels and in such manner
and order, all as Beneficiary in its sole discretion may determine, at public
auction to the highest bidder for cash, in lawful money of the United States,
payable at the time of sale (the Secured Obligations being the equivalent of
cash for purposes of said sale). Neither Trustor nor any other person or entity
shall have the right to direct the order in which the Subject Property is sold.
Subject to requirements and limits imposed by law, Trustee may postpone any sale
of the Subject Property by public announcement at such time and place of sale,
and from time to time may postpone such sale by public announcement at the time
and place fixed by
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<PAGE>
the preceding postponement. Trustee shall deliver to the purchaser at such sale
a deed conveying the Subject Property or portion thereof so sold, but without
any covenant or warranty, express or implied. The recitals in said deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including Trustee, Trustor or Beneficiary, may purchase at such sale;
(g) To resort to and realize upon the security hereunder and any other
security now or later held by Beneficiary concurrently or successively and in
one or several consolidated or independent judicial actions or lawfully taken
non-judicial proceedings, or both, and to apply the proceeds received to payment
of the Secured Obligations, all in such order and manner as Trustee and
Beneficiary, or either of them, shall determine in their sole discretion, with
the balance (if any) to be paid to the person or persons legally entitled
thereto.
5.03 Application of Foreclosure Sale Proceeds. After deducting all
----------------------------------------
costs, fees and expenses of Trustee, and of this trust, including costs of
evidence of title and reasonable attorneys' fees in connection with a sale,
Trustee shall apply all proceeds of any foreclosure sale first, to payment of
all Secured Obligations (including without limitation, all sums expended by
Beneficiary under the terms hereof and not then repaid, with accrued interest at
the then-current rate per annum payable under any Secured Obligation), in such
order and amounts as Beneficiary in its sole discretion shall determine; and the
remainder, if any, to the person or persons legally entitled thereto.
5.04 Application of Other Sums. All Rents or other sums received by
-------------------------
Beneficiary hereunder, less all costs and expenses incurred by Beneficiary or
any receiver, including reasonable attorneys' fees, shall be applied to payment
of the Secured Obligations in such order as Beneficiary shall determine in its
sole discretion (but Beneficiary shall have no liability for funds not actually
received by Beneficiary), with the balance (if any) to be paid to the person or
persons legally entitled thereto.
5.05 No Cure or Waiver. Neither Beneficiary's, Trustee's or any
-----------------
receiver's entry upon and taking possession of the Subject Property, nor any
collection of Rents, insurance proceeds, condemnation proceeds or damages, other
security or proceeds of other security, or other sums, nor the application of
any collected sum to any Secured Obligation, nor the exercise of any other right
or remedy by Beneficiary, Trustee or any receiver shall impair the status of the
security of this Deed of Trust, or cure or waive any breach, Default or notice
of default under this Deed of Trust, or nullify the effect of any notice of
default or sale (unless all Secured Obligations and any other sums then due
hereunder have been paid in full and Trustor has cured all other Defaults), or
prejudice Beneficiary or Trustee in the exercise of any right or remedy, or be
construed as an affirmation by Beneficiary of any tenancy, lease or option or a
subordination of the lien of this Deed of Trust.
5.06 Payment of Costs, Expenses and Attorneys' Fees. Trustor agrees to
----------------------------------------------
pay to Beneficiary immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including court costs and reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of
Beneficiary's in-house counsel, whether or not incurred or expended in
litigation), expended or incurred by Trustee or Beneficiary pursuant to
subsections (a) through (g) inclusive of Section 5.02 hereof, with interest from
the date of expenditure until said sums have been paid at the then-current rate
per annum payable under any Secured Obligation. Beneficiary shall be entitled
to bid, at any sale of the Subject Property held pursuant to Section 5.02(f)
hereof or pursuant to any judicial foreclosure of this Deed of Trust, the amount
of all of the foregoing, including interest thereon, in addition to the amount
of the other Secured Obligations, as a credit bid, the equivalent of cash.
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<PAGE>
5.07 Power to File Notices and Cure Defaults. Trustor hereby irrevocably
---------------------------------------
appoints Beneficiary and its successors and assigns as Trustor's true attorney-
in-fact to perform any of the following powers, which agency is coupled with an
interest, (a) to execute and/or record any notices of completion, cessation of
labor, or any other notices that Beneficiary reasonably deems appropriate to
protect Beneficiary's interest, and (b) upon the occurrence of any event, act or
omission which with the giving of notice or the passage of time, or both, would
constitute a Default, to perform any obligation of Trustor hereunder; provided
that: (i) Beneficiary, as such attorney-in-fact, shall only be accountable for
such funds as are actually received by Beneficiary; and (ii) Beneficiary shall
not be liable to Trustor or any other person or entity for any failure to act
under this Section.
5.08 Remedies Cumulative. All rights and remedies of Beneficiary and
-------------------
Trustee hereunder are cumulative and are in addition to all rights and remedies
provided by law or in any other agreements between Trustor and Beneficiary.
ARTICLE VI. MISCELLANEOUS PROVISIONS
------------------------
6.01 Merger. No merger shall occur as a result of Beneficiary's
------
acquiring any other estate in, or any other lien on, the Subject Property unless
Beneficiary specifically consents to a merger in writing.
6.02 Recourse to Separate Property. Any married person who executes this
-----------------------------
Deed of Trust as a Trustor and who is obligated under any Secured Obligation
agrees that any money judgment which Beneficiary or Trustee obtains pursuant to
the terms of this Deed of Trust or any other obligation of that married person
secured by this Deed of Trust may be collected by execution upon that person's
separate property, and any community property of which that person is a manager.
6.03 Disclosure of Information. In connection with the right of
-------------------------
Beneficiary or any Bank to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, its rights and
benefits under the Notes, any and all other Secured Obligations, and this Deed
of Trust, Beneficiary or such Bank may disclose all documents and information
which it now has or hereafter acquires relating to the Subject Property, all or
any of the Secured Obligations and/or Trustor and, as applicable, any partners
or joint venturers of Trustor, whether furnished by any Trustor or otherwise.
6.04 Rules of Construction. (a) When the identity of the parties or
---------------------
other circumstances make it appropriate, the masculine gender includes the
feminine or neuter or both, and the singular number includes the plural; (b) the
term "Subject Property" means all and any part of and any interest in the
Subject Property; (c) if any term of this Deed of Trust shall be invalid or
unenforceable, the remainder of this Deed of Trust shall not be affected
thereby, and each term of this Deed of Trust shall be valid and enforceable to
the fullest extent permitted by law; (d) all Section headings herein are for
convenience of reference only, are not a part of this Deed of Trust, and shall
be disregarded in the interpretation of any portion of this Deed of Trust; and
(e) if more than one person or entity has executed this Deed of Trust as
"Trustor," the obligations of all such Trustors hereunder shall be joint and
several.
6.05 Successors; Assigns. This Deed of Trust shall be binding upon and
-------------------
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties hereto; provided however,
that this Section does not waive the provisions of Section 4.14 hereof.
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<PAGE>
6.06 Statement of Obligation. Upon demand by Beneficiary, Trustor shall
-----------------------
pay Beneficiary a fee not to exceed $60.00 or such other maximum as may be
imposed by law for furnishing any Statement of Obligation as provided by Section
2943 of the California Civil Code.
6.07 Execution of Documents. Trustor agrees, upon demand by Beneficiary
----------------------
or Trustee, to execute any and all documents and instruments reasonably
necessary to effectuate the provisions hereof.
6.08 Right of Inspection. Beneficiary or its agents or employees may
-------------------
enter onto the Subject Property at any reasonable time and (so long as no
Default has occurred and is continuing) upon reasonable notice, and (so long as
no Default has occurred and is continuing) in a manner that will not materially
interfere with Trustor's operations, for the purpose of inspecting the Subject
Property and ascertaining Trustor's compliance with the terms hereof.
6.09 Incorporation. All terms of Exhibit A, and each other exhibit
-------------
and/or rider attached hereto and recorded herewith, are hereby incorporated into
this Deed of Trust by this reference.
6.10 Address; Requests for Notice. Notice to Beneficiary shall be sent
----------------------------
to Beneficiary addressed to:
WELLS FARGO BANK, NATIONAL ASSOCIATION
111 Sutter Street, 17th Floor
(MAC # 0188-176)
San Francisco, California 94104
Attention: P. Steve Dobel
or at such other place as Beneficiary from time to time may designate. Notice
to Trustor shall be sent to Trustor addressed to:
MDT Corporation
Stratford Hall, Suite 200
1009 Slater Road
Morrisville, North Carolina 27650
Attention: Chief Financial Officer
or at such other place so Trustor from time to time may designate. Trustor
hereby requests that a copy of any notice of default and notice of sale be
mailed to such Trustor at that address. Trustee's address is AMERICAN SECURITIES
COMPANY, c/o Corporate Secretary, MAC #0101-121, 464 California Street, San
Francisco, CA 94163.
6.11 Inconsistency with Credit Agreement. In the event of a direct
-----------------------------------
conflict between the terms and provisions of this Deed of Trust, on the one
hand, and the Credit Agreement, on the other hand, it is the intention of the
parties hereto that such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid: (a) the
terms and provisions of this Deed of Trust shall control and govern in respect
of the treatment of "Subject Property" under California law; provided, however,
that the inclusion herein of additional obligations on the part of the Trustor
and supplemental rights and remedies in favor of the Beneficiary, in each case
in respect of the "Subject Property" under California law, shall not be deemed a
conflict between the Credit
-15-
<PAGE>
Agreement, on the one hand, and this Deed of Trust, on the other hand; and (b)
the provisions of the Credit Agreement shall control in all other respects.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date
first set forth above.
TRUSTOR PLEASE NOTE: IN THE EVENT OF YOUR DEFAULT, CALIFORNIA PROCEDURE
PERMITS THE TRUSTEE TO SELL THE SUBJECT PROPERTY AT A SALE HELD WITHOUT
SUPERVISION BY ANY COURT AFTER EXPIRATION OF A PERIOD PRESCRIBED BY LAW (SEE
SECTION 5.02(f) ABOVE). UNLESS YOU PROVIDE AN ADDRESS FOR THE GIVING OF NOTICE,
YOU MAY NOT BE ENTITLED TO OTHER NOTICE OF THE COMMENCEMENT OF SALE PROCEEDINGS.
BY EXECUTION OF THIS DEED OF TRUST, YOU CONSENT TO SUCH PROCEDURE. IF YOU HAVE
ANY QUESTIONS CONCERNING IT, YOU SHOULD CONSULT YOUR LEGAL ADVISOR. BENEFICIARY
URGES YOU TO GIVE PROMPT NOTICE OF ANY CHANGE IN YOUR ADDRESS SO THAT YOU MAY
RECEIVE PROMPTLY ANY NOTICE GIVEN PURSUANT TO THIS DEED OF TRUST.
"Trustor"
MDT CORPORATION
By: /s/ Thomas M. Hein
-------------------------
Thomas M. Hein,
Chief Financial Officer
-16-
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
=========================================================================================================
<S> <C>
State of North Carolina -- OPTIONAL SECTION --
County of Wake CAPACITY CLAIMED BY
SIGNER
Though statute does not
On March 26, 1996 ,before me, Emogene Dominick, Notary Public require the Notary to
______________________________________________________________, fill in the data below,
Date Name and Title of the Officer - e.g., "JANE DOE, NOTARY PUBLIC" doing so may prove
invaluable to persons
relying on the document.
personally appeared Thomas M Hein [ ] INDIVIDUAL
-------------------------------------------, [X] CORPORATE OFFICER(S)
Name(s) of Signer(s) Chief Financial Officer
--------------------
--------------------
[ ]personally known to me-OR [X]proved to me on the basis of TITLES:
satisfactory evidence
to be the person whose name is subscribed to the within instrument [ ] PARTNER(S) [ ] LIMITED
and acknowledged to me that he executed the same in his authorized [ ] GENERAL
capacity, and that by his signature on the instrument the person, [ ]ATTORNEY-IN-FACT
or the entity upon behalf of which the person acted, executed the [ ]TRUSTEE(S)
instrument. [ ]GUARDIAN/CONSERVATOR
[ ]OTHER
WITNESS my hand and official seal.
/s/ Emogene Dominick --------------------
------------------------------------------ --------------------
SIGNATURE OF NOTARY SIGNER IS
REPRESENTING
[My Comission Expires 9-13-2000] NAME OF PERSON(S) OR ENTITY(IES)
MDT CORPORATION
--------------------------------
========================================OPTIONAL SECTION=========================================
THIS CERTIFICATE MUST BE ATTACHED TO THE Title or Type of Document DEED OF TRUST
DOCUMENT DESCRIBED AT RIGHT:
- - ---------------------------------------- Number of Pages_________ Date of Document as of February 15,
1996
Though the data requested here is not
required by law, it could prevent
fraudulent reattachment of this form. Signer(s) Other Than Named Above_____________________________
============================================================================================================
</TABLE>
-17-
<PAGE>
EXHIBIT A
---------
Attached is the legal description of the Rancho Dominguez, California real
property.
<PAGE>
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IS SITUATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCEL A:
PARCEL 7 AND THE EASTERLY 65.00 FEET OF PARCEL 4, AS SHOWN ON PARCEL MAP
NO. 16827, FILED IN BOOK 204 PAGES 25 AND 26 OF PARCEL MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED.
ALSO EXCEPT ALL 100 PERCENT OF THE OIL, GAS, PETROLEUM AND OTHER HYDROCARBON
SUBSTANCES WHICH LIE BELOW A PLANE PARALLEL TO AND 500 FEET BELOW THE NATURAL
SURFACE OF SAID LAND WITHOUT, HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF
SAID LAND TO EXPLORE FOR, DEVELOP AND REMOVE THE SAME BY MEANS OF WELLS OR
EQUIPMENT, HAVING SURFACE LOCATIONS OUTSIDE THE OUTER BOUNDARIES OF SAID REAL
PROPERTY, IN AND UNDER OR RECOVERABLE FROM SAID REAL PROPERTY, AS EXCEPTED IN
THE DEED FROM DEL AMO ESTATE COMPANY, A CORPORATION, RECORDED NOVEMBER 8, 1963,
IN BOOK D2250 PAGE 74, OFFICIAL RECORDS.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED ALL MINERALS AND
ALL MINERAL RIGHTS OF EVERY KIND AND CHARACTER NOW KNOWN TO EXIST OR HEREAFTER
DISCOVERED INCLUDING WITHOUT LIMITING THE GENERALITY OF THE OIL, GAS, AND RIGHTS
THERETO, TOGETHER WITH THE SOLE, EXCLUSIVE AND PERPETUAL RIGHT TO EXPLORE FOR,
REMOVE AND DISPOSE OF SAID MINERALS BY ANY MEANS OR METHODS, SUITABLE TO
DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, ITS SUCCESSOR AND ASSIGNS,
BUT WITHOUT ENTERING UPON OR USING THE SURFACE OF SAID LAND OR ANY PORTION OF
THE SUBSURFACE WITHIN 500 FEET OF THE SURFACE, AND IN SUCH MANNER AS NOT TO
DAMAGE THE SURFACE OF SAID LAND OR TO INTERFERE WITH THE USE THEREOF, AS
EXCEPTED AND RESERVED BY DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, IN
DEED RECORDED DECEMBER 12, 1967 IN BOOK D3856 PAGE 564, OFFICIAL RECORDS, AS
INSTRUMENT NO. 3065.
PARCEL B:
PARCEL 8, IN THE CITY OF LOS ANGELES, AS SHOWN ON PARCEL MAP NO. 16827, FILED IN
BOOK 204 PAGES 25 AND 26 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.
EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED.
ALSO EXCEPT ALL 100 PERCENT OF THE OIL, GAS, PETROLEUM AND OTHER HYDROCARBON
SUBSTANCES WHICH LIE BELOW A PLANE PARALLEL TO AND 500 FEET BELOW THE NATURAL
SURFACE OF SAID LAND WITHOUT, HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF
SAID LAND TO EXPLORE FOR, DEVELOP OR REMOVE SAID SUBSTANCES, BUT WITH FULL RIGHT
TO EXPLORE FOR, DEVELOP AND REMOVE THE SAME BY MEANS OF WELLS OR EQUIPMENT,
HAVING SURFACE LOCATIONS OUTSIDE THE OUTER BOUNDARIES OF SAID REAL PROPERTY, IN
AND UNDER OR RECOVERABLE FROM SAID REAL PROPERTY, AS EXCEPTED IN THE DEED FROM
DEL AMO ESTATE COMPANY, A CORPORATION, RECORDED NOVEMBER 8, 1963 AS INSTRUMENT
NO. 5445 IN BOOK D-2250 PAGE 754, OFFICIAL RECORDS.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND THEREIN DESCRIBED ALL MINERALS AND
ALL MINERAL RIGHTS OF EVERY KIND AND CHARACTER NOW KNOWN TO EXIST OR HEREAFTER
<PAGE>
DISCOVERED INCLUDING WITHOUT LIMITING THE GENERALITY OF THE OIL, GAS AND RIGHTS
THERETO, TOGETHER WITH THE SOLE, EXCLUSIVE AND PERPETUAL RIGHT TO EXPLORE FOR,
REMOVE AND DISPOSE OF SAID MINERALS BY ANY MEANS OR METHODS, SUITABLE TO
DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, ITS SUCCESSORS AND ASSIGNS,
BUT WITHOUT ENTERING UPON OR USING THE SURFACE OF SAID LAND OR ANY PORTION OF
THE SUBSURFACE WITHIN 500 FEET OF THE SURFACE, AND IN SUCH MANNER AS NOT TO
DAMAGE THE SURFACE OF SAID LAND OR TO INTERFERE WITH THE USE THEREOF, AS
EXCEPTED AND RESERVED BY DOMINGUEZ ESTATE COMPANY, A CALIFORNIA CORPORATION, IN
DEED RECORDED DECEMBER 12, 1967 IN BOOK D-3856 PAGE 564, OFFICIAL RECORDS AS
INSTRUMENT NO. 3065.
<PAGE>
LIST OF OMITTED MATERIALS
-------------------------
Disclosure of Use of Hazardous Substances Pursuant to Section 4.09
<PAGE>
Exhibit 10.8.6
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of February
15, 1996, is entered into between MDT Corporation, a Delaware corporation
("Pledgor"), and Wells Fargo Bank, National Association, as agent under the
below-defined Credit Agreement ("Secured Party"), with reference to the
following:
WHEREAS, Pledgor beneficially owns: (i) one hundred thousand (100,000)
shares of the common stock of MDT Biologic Company, a Delaware corporation
("Biologic"); (ii) one hundred thousand (100,000) shares of the common stock of
MDT Diagnostic Company, a Delaware corporation ("Diagnostic"); (iii) fifteen
(15) shares of the common stock of MDT Canada Limited, an Ontario (Canada)
corporation ("Canada"); and (iv) one hundred thousand (100,000) shares of the
common stock of MDT Technionic Company, a Delaware corporation ("Technionic");
WHEREAS, Borrower and Secured Party are parties to the Credit
Agreement, pursuant to which Secured Party has agreed to make certain financial
accommodations to Borrower;
WHEREAS, to induce Secured Party to make the limited waiver and agree
to the amendments in accordance with the February 15, 1996 Amendment, and to
continue to make the financial accommodations provided to Borrower pursuant to
the Credit Agreement, Pledgor desires to pledge, grant, transfer, and assign to
Secured Party a security interest in the Collateral (as hereinafter defined) to
secure the Secured Obligations (as hereinafter defined), as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:
1. Definitions and Construction.
----------------------------
(a) Definitions. All initially capitalized terms used herein
-----------
and not otherwise defined herein shall have the meaning ascribed thereto in the
Credit Agreement. As used in this Agreement:
"Agreement" shall mean this Stock Pledge Agreement.
---------
"Borrower" shall mean Pledgor, Biologic, Diagnostic,
--------
Canada, and Technionic, individually and collectively, and jointly and
severally.
"Chief Executive Office" shall mean where Pledgor is
----------------------
deemed located pursuant to (S)9-103(3)(d) of the Code.
1
<PAGE>
"Collateral" shall mean the Pledged Shares, the Future Rights,
----------
and the Proceeds, collectively.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
----------------
of August 20, 1993, among Wells Fargo Bank, National Association ("Wells
Fargo"), Chemical Bank ("Chemical"), Secured Party, and Borrower (other than
Technionic), as amended by that certain Amendment to Credit Agreement, dated as
of August 1, 1995, among Wells Fargo, Chemical, Secured Party, and Borrower, as
further amended by that certain Amendment to Credit Agreement, dated as of even
date herewith, among Wells Fargo, Chemical, Secured Party, and Borrower, and as
otherwise amended, restated, modified, or supplemented from time to time.
"Future Rights" shall mean: (a) all shares of stock (other than
-------------
Pledged Shares) of the Issuers, and all securities convertible or exchangeable
into, and all warrants, options, or other rights to purchase, shares of stock of
the Issuers; (b) to the extent of Pledgor's interest therein, all shares of, all
securities convertible or exchangeable into, and all warrants, options, or other
rights to purchase shares of stock of any Person in which Pledgor, after the
date of this Agreement, acquires a direct equity interest, irrespective of
whether such Person is or becomes a Subsidiary of Pledgor; and (c) the
certificates or instruments representing such additional shares, convertible or
exchangeable securities, warrants, and other rights and all dividends, cash,
options, warrants, rights, instruments, and other property or proceeds from time
to time received, receivable, or otherwise distributed in respect of or in
exchange for any or all of such shares.
"Holder" and "Holders" shall have the meanings ascribed thereto
------ -------
in Section 3 of this Agreement.
---------
"Issuers" shall mean Biologic, Diagnostic, Canada, and Technionic, and
-------
any other Person identified as an Issuer on Schedule A attached hereto (or any
----------
addendum thereto), and any successors thereto, whether by merger or otherwise.
"Lien" shall mean any lien, mortgage, pledge, assignment (including
----
any assignment of rights to receive payments of money), security interest,
charge, or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, or any agreement to
give any security interest); provided, however, that "Lien" shall not include
-------- -------
any restrictions on transfer generally arising under any applicable federal or
state securities law or any of such items that constitutes a statutory lien
arising in the ordinary course of business.
"Pledged Shares" shall mean all of the shares described in the
--------------
recitals to this Agreement and any other shares identified as Pledged Shares on
Schedule A attached hereto (or any addendum thereto).
- - ----------
2
<PAGE>
"Pledgor" shall have the meaning ascribed thereto in the preamble
-------
to this Agreement.
"Proceeds" shall mean all proceeds (including proceeds of proceeds) of
--------
the Pledged Shares and Future Rights including all: (a) rights, benefits,
distributions, premiums, profits, dividends, interest, cash, instruments,
documents of title, accounts, contract rights, inventory, equipment, general
intangibles, deposit accounts, chattel paper, and other property from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for, or as a replacement of or a substitution for, any of the Pledged Shares,
Future Rights, or proceeds thereof (including any cash, stock, or other
securities or instruments issued after any recapitalization, readjustment,
reclassification, merger or consolidation with respect to the Issuers and any
claims against financial intermediaries under (S)8-313(2) of the Code or
otherwise); (b) "proceeds," as such term is used in (S)9-306 of the Code; (c)
proceeds of any insurance, indemnity, warranty, or guaranty (including
guaranties of delivery) payable from time to time with respect to any of the
Pledged Shares, Future Rights, or proceeds thereof; (d) payments (in any form
whatsoever) made or due and payable to Pledgor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Pledged Shares, Future Rights, or proceeds thereof; and (e)
other amounts from time to time paid or payable under or in connection with any
of the Pledged Shares, Future Rights, or proceeds thereof.
"Secured Obligations" shall mean all liabilities, obligations, or
-------------------
undertakings owing by Borrower to Secured Party of any kind or description
arising out of or outstanding under, advanced or issued pursuant to, or
evidenced by the Credit Agreement, the other Loan Documents, or this Agreement,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which Borrower
is required to pay pursuant to any of the foregoing, by law, or otherwise.
"Secured Party" shall have the meaning ascribed thereto in the
-------------
preamble to this Agreement, together with its successors or assigns.
"Securities Act" shall have the meaning ascribed thereto
--------------
in Section 9(c) of this Agreement.
------------
(b) Construction.
------------
(i) Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular and to the singular include the
plural, the part includes the whole, the term "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the
3
<PAGE>
phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and other
similar terms in this Agreement refer to this Agreement as a whole and not
exclusively to any particular provision of this Agreement. Article, section,
subsection, exhibit, and schedule references are to this Agreement unless
otherwise specified. All of the exhibits or schedules attached to this Agreement
shall be deemed incorporated herein by reference. Any reference to any of the
following documents includes any and all alterations, amendments, restatements,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable: this Agreement, the Credit Agreement, or any of the other Loan
Documents.
(ii) Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Secured Party or Pledgor, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by both of the parties and their respective counsel and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto.
(iii) In the event of a direct conflict between the terms and
provisions of this Agreement, on the one hand, and the Credit Agreement or the
Security Agreement to which Pledgor is a party (the "Pledgor Security
Agreement"), on the other hand, it is the intention of the parties hereto that
both such documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of the Credit Agreement or the Pledgor Security Agreement, as the
case may be, shall control and govern; provided, however, that the inclusion
herein of additional obligations on the part of Pledgor and supplemental rights
and remedies in favor of Secured Party, in each case in respect of the
Collateral, shall not be deemed a conflict with the Credit Agreement or the
Pledgor Security Agreement, as the case may be.
2. Pledge. As security for the prompt payment and performance of
------
the Secured Obligations in full by Borrower when due, whether at stated
maturity, by acceleration or otherwise (including amounts that would become due
but for the operation of the provisions of the Bankruptcy Code), Pledgor hereby
pledges, grants, transfers, and assigns to Secured Party a security interest in
all of Pledgor's right, title, and interest in and to the Collateral.
3. Delivery and Registration of Collateral.
---------------------------------------
(a) All certificates or instruments representing or evidencing the
Collateral shall be promptly delivered by Pledgor to Secured Party or Secured
Party's designee pursuant hereto at a location designated by Secured Party and
shall be held by or on behalf of Secured Party pursuant hereto, and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party.
4
<PAGE>
(b) After the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right, at any time in its discretion and
without notice to Pledgor, to transfer to or to register on the books of the
Issuers (or of any other Person maintaining records with respect to the
Collateral) in the name of Secured Party or any of its nominees any or all of
the Collateral. In addition, Secured Party shall have the right at any time to
exchange certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
(c) If, at any time and from time to time, any Collateral (including
any certificate or instrument representing or evidencing any Collateral) is in
the possession of a Person other than Secured Party or Pledgor (a "Holder"),
then Pledgor shall immediately, at Secured Party's option, either cause such
Collateral to be delivered into Secured Party's possession, or execute and
deliver to such Holder a written notification/instruction, and take all other
steps necessary to perfect the security interest of Secured Party in such
Collateral, including obtaining from such Holder a written acknowledgement that
such Holder holds such Collateral for Secured Party, all pursuant to (S)(S)8-313
and 8-321 of the Code or other applicable law governing the perfection of
Secured Party's security interest in the Collateral in the possession of such
Holder. Each such notification/instruction and acknowledgement shall be in form
and substance satisfactory to Secured Party.
(d) Any and all Collateral (including dividends, interest, and other
cash distributions) at any time received or held by Pledgor shall be so received
or held in trust for Secured Party, shall be segregated from other funds and
property of Pledgor and shall be forthwith delivered to Secured Party in the
same form as so received or held, with any necessary endorsements; provided that
--------
cash dividends or distributions received by Pledgor, if and to the extent they
are not prohibited by the Credit Agreement, may be retained by Pledgor in
accordance with Section 4 and used in the ordinary course of Pledgor's business.
---------
(e) If at any time and from time to time any Collateral consists of an
uncertificated security or a security in book entry form, then Pledgor shall
immediately cause such Collateral to be registered or entered, as the case may
be, in the name of Secured Party, or otherwise cause Secured Party's security
interest thereon to be perfected in accordance with applicable law.
4. Voting Rights and Dividends.
---------------------------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of the Loan Documents and shall be
entitled to receive and retain any cash dividends or distributions paid in
respect of the Collateral.
5
<PAGE>
(b) Upon the occurrence and during the continuance of an Event of
Default (and, with respect to voting rights only, after the receipt of written
nottice from Secured Party), all rights of Pledgor to exercise the voting and
other consensual rights or receive and retain cash dividends or distributions
that it would otherwise be entitled to exercise or receive and retain, as
applicable pursuant to Section 4(a), shall cease, and all such rights shall
-----------
thereupon become vested in Secured Party, who shall thereupon have the sole
right to exercise such voting or other consensual rights and to receive and
retain such cash dividends and distributions. Pledgor shall execute and deliver
(or cause to be executed and delivered) to Secured Party all such proxies and
other instruments as Secured Party may reasonably request for the purpose of
enabling Secured Party to exercise the voting and other rights which it is
entitled to exercise and to receive the dividends and distributions that it is
entitled to receive and retain pursuant to the preceding sentence.
5. Representations and Warranties. Pledgor represents, warrants,
------------------------------
and covenants as follows:
(a) Pledgor has taken all steps it deems necessary or appropriate to
be informed on a continuing basis of changes or potential changes affecting the
Collateral (including rights of conversion and exchange, rights to subscribe,
payment of dividends, reorganizations or recapitalization, tender offers and
voting rights), and Pledgor agrees that Secured Party shall have no
responsibility or liability for informing Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto;
(b) All information herein or hereafter supplied to Secured Party by
or on behalf of Pledgor in writing with respect to the Collateral is, or in the
case of information hereafter supplied will be, accurate and complete in all
material respects;
(c) Pledgor is and will be the sole legal and beneficial owner of the
Collateral (including the Pledged Shares and all other Collateral acquired by
Pledgor after the date hereof) free and clear of any adverse claim, Lien, or
other right, title, or interest of any party;
(d) To Pledgor's knowledge, this Agreement, and the delivery to
Secured Party of the Pledged Shares representing Collateral (or the delivery to
all Holders of the Pledged Shares representing Collateral of the
notification/instruction referred to in Section 3 of this Agreement), creates a
---------
valid, perfected, and first priority security interest in one hundred percent
(100%) of the Pledged Shares in favor of Secured Party securing payment of the
Secured Obligations, and all actions necessary to achieve such perfection have
been duly taken;
(e) Schedule A to this Agreement is true and correct and complete in
----------
all material respects; without limiting the generality of the foregoing: (i) all
the Pledged Shares are in certificated form, and, except to the extent
registered in the name of Secured
6
<PAGE>
Party or its nominee pursuant to the provisions of this Agreement, are
registered in the name of Pledgor; and (ii) the Pledged Shares as to each of the
Issuers constitute at least the percentage of all the fully diluted issued and
outstanding shares of stock of such Issuer as set forth in Schedule A to this
----------
Agreement;
(f) There are no presently existing Future Rights or Proceeds owned by
Pledgor, except as set forth in Schedule C hereto;
----------
(g) The Pledged Shares have been duly authorized and validly
issued and are fully paid and nonassessable; and
(h) Neither the pledge of the Collateral pursuant to this Agreement
nor the extensions of credit represented by the Secured Obligations violates
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
6. Further Assurances.
------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action that may be necessary or reasonably desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Pledgor will: (i)
at the request of Secured Party, mark conspicuously each of its records
pertaining to the Collateral with a legend, in form and substance reasonably
satisfactory to Secured Party, indicating that such Collateral is subject to the
security interest granted hereby; (ii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or reasonably desirable, or as Secured Party may
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby; (iii) allow inspection of the Collateral by
Secured Party or Persons designated by Secured Party; and (iv) appear in and
defend any action or proceeding that may affect Pledgor's title to or Secured
Party's security interest in the Collateral.
(b) Pledgor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Pledgor where permitted by
law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Pledgor will furnish to Secured Party, upon the request of Secured
Party: (i) a certificate executed by an authorized officer of Pledgor, and dated
as of the date of delivery to Secured Party, itemizing in such detail as Secured
Party may
7
<PAGE>
request, the Collateral which, as of the date of such certificate, has
been delivered to Secured Party by Pledgor pursuant to the provisions of this
Agreement; and (ii) such statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Secured Party may request.
7. Covenants of Pledgor. Pledgor shall:
--------------------
(a) Perform each and every covenant in the Loan Documents
applicable to Pledgor;
(b) At all times keep at least one complete set of its records
concerning substantially all of the Collateral at its Chief Executive Office as
set forth in Schedule B hereto, and not change the location of its Chief
----------
Executive Office or such records without giving Secured Party at least thirty
(30) days prior written notice thereof;
(c) To the extent it may lawfully do so, use its best efforts to
prevent the Issuers from issuing Future Rights or Proceeds, except for cash
dividends and other distributions, if any, that are not prohibited by the terms
of the Credit Agreement to be paid by any Issuer to Pledgor; and
(d) Upon receipt by Pledgor of any material notice, report, or other
communication from any of the Issuers or any Holder relating to all or any part
of the Collateral, deliver such notice, report or other communication to Secured
Party as soon as possible, but in no event later than five (5) days following
the receipt thereof by Pledgor.
8. Secured Party as Pledgor's Attorney-in-Fact.
-------------------------------------------
(a) Pledgor hereby irrevocably appoints Secured Party as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Secured Party or otherwise, from time to time at Secured
Party's discretion, to take any action and to execute any instrument that
Secured Party may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, including: (i) after the occurrence and during the
continuance of an Event of Default, to receive, endorse, and collect all
instruments made payable to Pledgor representing any dividend, interest payment
or other distribution in respect of the Collateral or any part thereof to the
extent permitted hereunder and to give full discharge for the same and to
execute and file governmental notifications and reporting forms; (ii) to issue
any notifications/instructions Secured Party deems necessary pursuant to Section
-------
3 of this Agreement; or (iii) to arrange for the transfer of the Collateral on
- - -
the books of any of the Issuers or any other Person to the name of Secured Party
or to the name of Secured Party's nominee.
(b) In addition to the designation of Secured Party as Pledgor's
attorney-in-fact in subsection (a), Pledgor hereby irrevocably appoints Secured
--------------
Party as Pledgor's agent and attorney-in-fact to make, execute and deliver any
and all documents
8
<PAGE>
and writings which may be necessary or appropriate for approval of, or be
required by, any regulatory authority located in any city, county, state or
country where Pledgor or any of the Issuers engage in business, in order to
transfer or to more effectively transfer any of the Pledged Shares or otherwise
enforce Secured Party's rights hereunder.
9. Remedies upon Default. Upon the occurrence and during the
---------------------
continuance of an Event of Default:
(a) Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the Code
(irrespective of whether the Code applies to the affected items of Collateral),
and Secured Party may also without notice (except as specified below) sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. To the maximum extent permitted by applicable
law, Secured Party may be the purchaser of any or all of the Collateral at any
such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply all or any part of the
Secured Obligations as a credit on account of the purchase price of any
Collateral payable at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives (to the extent permitted by law) all rights of
redemption, stay, or appraisal that it now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) calendar days notice to Pledgor of the time and place of any
public sale or the time after which a private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the maximum extent permitted by law, Pledgor hereby waives any claims against
Secured Party arising because the price at which any Collateral may have been
sold at such a private sale was less than the price that might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.
(b) Pledgor hereby agrees that any sale or other disposition of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, or other financial institutions in the City of Los
Angeles, California in disposing of property similar to the Collateral shall be
deemed to be commercially reasonable.
9
<PAGE>
(c) Pledgor hereby acknowledges that the sale by Secured Party of any
Collateral pursuant to the terms hereof in compliance with the Securities Act of
1933 as now in effect or as hereafter amended, or any similar statute hereafter
adopted with similar purpose or effect (the "Securities Act"), as well as
applicable "Blue Sky" or other state securities laws may require strict
limitations as to the manner in which Secured Party or any subsequent transferee
of the Collateral may dispose thereof. Pledgor acknowledges and agrees that in
order to protect Secured Party's interest it may be necessary to sell the
Collateral at a price less than the maximum price attainable if a sale were
delayed or were made in another manner, such as a public offering under the
Securities Act. Pledgor has no objection to sale in such a manner and agrees
that Secured Party shall have no obligation to obtain the maximum possible price
for the Collateral. Anything herein to the contrary notwithstanding, Pledgor
agrees that (i) upon the occurrence and during the continuation of an Event of
Default, Secured Party may, subject to applicable law, from time to time elect
(but shall have no obligation) to conduct the offer and sale of all or any part
of the Collateral in such a manner as to avoid the need for registration or
qualification thereof under any federal or state securities laws, such as by a
private placement, (ii) such conduct may include restrictions and other
requirements that may result in prices or other terms less favorable than those
which might have been obtained through a public sale not subject to such
restrictions and requirements, including, without limitation, restricting the
bidders and prospective purchasers to those who will represent and agree that
they are purchasing for their own account, for investment only, and not with a
view towards distribution or resale, (iii) in so doing, Secured Party may
solicit offers to buy the Collateral or any part thereof for cash, from a
limited number of investors deemed by Secured Party, in its reasonable judgment,
to be institutional investors or other responsible parties who might be
interested in purchasing the Collateral, and (iv) any offer and sale so
conducted shall be deemed to be a commercially reasonable method of disposition
of the Collateral.
(d) If Secured Party shall determine to exercise its right to sell all
or any portion of the Collateral pursuant to this Section, Pledgor agrees that,
upon request of Secured Party, Pledgor will, at its own expense:
(i) use its best efforts to execute and deliver, and cause the
Issuers and the directors and officers thereof to execute and deliver, all such
instruments and documents, and to do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of Secured Party, advisable to
register such Collateral under the provisions of the Securities Act, and to
cause the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectuses which, in the opinion of Secured Party, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
10
<PAGE>
(ii) use its best efforts to qualify the Collateral under the
state securities laws or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by Secured
Party;
(iii) cause the Issuers to make available to their respective
security holders, as soon as practicable, an earnings statement which will
satisfy the provisions of Section 11(a) of the Securities Act;
(iv) execute and deliver, or cause the officers and directors
of the Issuers to execute and deliver, to any person, entity or governmental
authority as Secured Party may choose, any and all documents and writings which,
in Secured Party's reasonable judgment, may be necessary or appropriate for
approval, or be required by, any regulatory authority located in any city,
county, state or country where Pledgor or the Issuers engage in business, in
order to transfer or to more effectively transfer the Pledged Shares or
otherwise enforce Secured Party's rights hereunder; and
(v) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof valid
and binding and in compliance with applicable law.
Pledgor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.
(e) PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW:
(i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME
SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS
SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR
MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING
OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a) OF THIS
--------------
SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.
10. Application of Proceeds. After the occurrence and during the
-----------------------
continuance of an Event of Default, any cash held by Secured Party as Collateral
and all cash proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
pursuant to the exercise by Secured Party of its remedies as a secured creditor
as provided in Section 9 shall be applied from time to time by Secured Party as
---------
provided in the Credit Agreement.
11. Duties of Secured Party. The powers conferred on Secured Party
-----------------------
hereunder are solely to protect its interests in the Collateral and shall not
impose on it any
11
<PAGE>
duty to exercise such powers. Except as provided in Section 9-207 of the Code,
Secured Party shall have no duty with respect to the Collateral or any
responsibility for taking any necessary steps to preserve rights against any
Persons with respect to any Collateral.
12. Choice of Law and Venue. THE VALIDITY OF THIS AGREEMENT, ITS
-----------------------
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY
OTHER COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
OF PLEDGOR AND SECURED PARTY WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 12.
----------
13. Amendments; Etc. No amendment or waiver of any provision of this
---------------
Agreement nor consent to any departure by Pledgor herefrom shall in any event be
effective unless the same shall be in writing and signed by Secured Party, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No failure on the part of Secured
Party to exercise, and no delay in exercising any right under this Agreement,
any other Loan Document, or otherwise with respect to any of the Secured
Obligations, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement, any other Loan Document, or
otherwise with respect to any of the Secured Obligations preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided for in this Agreement or otherwise with respect to any of the Secured
Obligations are cumulative and not exclusive of any remedies provided by law.
14. Notices. Unless otherwise specifically provided herein, any
-------
notice or other communication herein required or permitted to be given shall be
in writing and shall be delivered in the manner set forth in the Credit
Agreement.
15. Continuing Security Interest. This Agreement shall create a
----------------------------
continuing security interest in the Collateral and shall: (i) remain in full
force and effect until the indefeasible payment in full of the Secured
Obligations, including the cash collateralization, expiration, or cancellation
of all Secured Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
12
<PAGE>
accommodations under the Credit Agreement; (ii) be binding upon Pledgor and its
successors and assigns; and (iii) inure to the benefit of Secured Party and its
successors, transferees, and assigns. Upon the indefeasible payment in full of
the Secured Obligations, including the cash collateralization, expiration, or
cancellation of all Secured Obligations, if any, consisting of letters of
credit, and the full and final termination of any commitment to extend any
financial accommodations under the Credit Agreement, the security interests
granted herein shall automatically terminate and all rights to the Collateral
shall revert to Pledgor. Upon any such termination, Secured Party will, at
Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination. Such documents shall be
prepared by Pledgor and shall be in form and substance reasonably satisfactory
to Secured Party.
16. Security Interest Absolute. To the maximum extent permitted by
--------------------------
law, all rights of Secured Party, all security interests hereunder, and all
obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of any of the Secured
Obligations or any other agreement or instrument relating thereto, including any
of the Loan Documents;
(b) any change in the time, manner, or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from any of the Loan Documents, or any
other agreement or instrument relating thereto;
(c) any exchange, release, or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty for all or any of the Secured Obligations; or
(d) any other circumstances that might otherwise constitute a
defense available to, or a discharge of, Pledgor.
To the maximum extent permitted by law, Pledgor hereby waives any right to
require Secured Party to: (A) proceed against or exhaust any security held from
Pledgor; or (B) pursue any other remedy in Secured Party's power whatsoever.
17. Headings. Section and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
18. Severability. In case any provision in or obligation under this
------------
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
13
<PAGE>
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
20. Waiver of Marshaling. Each of Pledgor and Secured Party
--------------------
acknowledges and agrees that in exercising any rights under or with respect to
the Collateral: (i) Secured Party is under no obligation to marshal any
Collateral; (ii) may, in its absolute discretion, realize upon the Collateral in
any order and in any manner it so elects; and (iii) may, in its absolute
discretion, apply the proceeds of any or all of the Collateral to the Secured
Obligations in any order and in any manner it so elects. Pledgor and Secured
Party waive any right to require the marshaling of any of the Collateral.
21. Waiver of Jury Trial. PLEDGOR AND SECURED PARTY HEREBY WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGOR AND SECURED PARTY REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
22. Waivers.
-------
(a) To the maximum extent permitted by law, Pledgor hereby waives: (i)
notice of acceptance hereof; (ii) notice of any loans or other financial
accommodations made or extended under the Credit Agreement, or the creation or
existence of any Indebtedness; (iii) notice of the amount of the Indebtedness,
subject, however, to Section 6.2 of the Credit Agreement and Pledgor's right to
make inquiry of Secured Party to ascertain the amount of the Indebtedness at any
reasonable time; (iv) notice of any adverse change in the financial condition of
Borrower or of any other fact that might increase Pledgor's risk hereunder; (v)
notice of presentment for payment, demand, protest, and notice thereof as to any
instrument among the Loan Documents; (vi) notice of any unmatured Event of
Default or Event of Default under the Credit Agreement; and (vii) all other
notices (except if such notice is specifically required to be given to Pledgor
under this Agreement) and demands to which Pledgor might otherwise be entitled.
(b) To the fullest extent permitted by applicable law, Pledgor waives
the right by statute or otherwise to require Secured Party to institute suit
against Borrower or to exhaust any rights and remedies which Secured Party has
or may have against Borrower. Pledgor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Indebtedness shall have been fully and finally indefeasibly
14
<PAGE>
paid) of Borrower or by reason of the cessation from any cause (other than that
the Indebtedness shall have been fully and finally indefeasibly paid) whatsoever
of the liability of Borrower in respect thereof.
(c) To the maximum extent permitted by law, Pledgor hereby waives: (i)
any rights to assert against Secured Party any defense (legal or equitable),
set-off, counterclaim, or claim which Pledgor may now or at any time hereafter
have against Borrower or any other party liable to Secured Party on account of
or with respect to the Indebtedness; (ii) any defense, set-off, counterclaim, or
claim, of any kind or nature, arising directly or indirectly from the present or
future sufficiency, validity, or enforceability of the Indebtedness; (iii) any
defense arising by reason of any claim or defense based upon an election of
remedies by Secured Party including, to the extent applicable, the provisions of
(S)(S) 580d and 726 of the California Code of Civil Procedure, or any similar
law of California or any other jurisdiction; (iv) the benefit of any statute of
limitations affecting Pledgor's liability hereunder or the enforcement thereof.
(d) To the maximum extent permitted by law, Pledgor hereby waives and
postpones until indefeasible payment in full of the Indebtedness any right of
subrogation Pledgor has or may have as against Borrower with respect to the
Indebtedness. In addition, Pledgor hereby waives and postpones until
indefeasible payment in full of the Indebtedness any right to proceed against
Borrower, now or hereafter, for contribution, indemnity, reimbursement, or any
other suretyship rights and claims (irrespective of whether direct or indirect,
liquidated or contingent), with respect to the Indebtedness. Pledgor also
hereby waives and postpones until indefeasible payment in full of the
Indebtedness any right to proceed or to seek recourse against or with respect to
any property or asset of Borrower. Pledgor hereby agrees that, in light of the
waivers and postponements of rights contained in this Section, Pledgor shall not
be deemed to be a "creditor" (as that term is defined in the Bankruptcy Code or
otherwise) of Borrower, whether for purposes of the application of Sections 547
or 550 of the United States Bankruptcy Code or otherwise.
(e) If any of the Secured Obligations at any time are secured by a
mortgage or deed of trust upon real property, Secured Party may elect, in its
sole discretion, upon a default with respect to the Secured Obligations, to
foreclose such mortgage or deed of trust judicially or nonjudicially in any
manner permitted by law, before or after enforcing this Agreement, without
diminishing or affecting the liability of Pledgor hereunder. Pledgor
understands that (a) by virtue of the operation of California's antideficiency
law applicable to nonjudicial foreclosures, an election by Secured Party
nonjudicially to foreclose such a mortgage or deed of trust probably would have
the effect of impairing or destroying rights of subrogation, reimbursement,
contribution, or indemnity of Pledgor against Borrower or guarantors or
sureties, and (b) absent the waiver and postponement of rights given by Pledgor
herein, such an election might estop Secured Party from enforcing this Agreement
against Pledgor. Understanding the foregoing, and understanding that Pledgor is
hereby relinquishing a defense to the enforceability of this Agreement, Pledgor
hereby waives any right to assert against Secured Party any defense
15
<PAGE>
to the enforcement of this Agreement, whether denominated "estoppel" or
otherwise, based on or arising from an election by Secured Party nonjudicially
to foreclose any such mortgage or deed of trust. Pledgor understands that the
effect of the foregoing waiver may be that Pledgor may have liability hereunder
for amounts with respect to which Pledgor may be left without rights of
subrogation, reimbursement, contribution, or indemnity against Borrower or
guarantors or sureties. Pledgor also agrees that the "fair market value"
provisions of Section 580a of the California Code of Civil Procedure shall have
no applicability with respect to the determination of Pledgor's liability under
this Agreement.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS AGREEMENT, PLEDGOR HEREBY WAIVES, TO THE MAXIMUM
EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING DIRECTLY OR
INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE (S)(S) 2808, 2809,
2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND 2850, TO THE
EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE (S)(S) 580a, 580b, 580c,
580d, AND 726, AND, TO THE EXTENT APPLICABLE, CHAPTER 2 OF TITLE 14 OF THE
CALIFORNIA CIVIL CODE.
(g) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS AGREEMENT, PLEDGOR HEREBY WAIVES ALL RIGHTS AND
DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY SECURED PARTY, EVEN THOUGH
THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO
SECURITY FOR A SECURED OBLIGATION, HAS DESTROYED PLEDGOR'S RIGHTS OF SUBROGATION
AND REIMBURSEMENT AGAINST THE PRINCIPAL BY THE OPERATION OF SECTION 580d OF THE
CODE OF CIVIL PROCEDURE OR OTHERWISE.
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first written above.
WELLS FARGO BANK, NATIONAL MDT CORPORATION,
ASSOCIATION, as agent a Delaware corporation
By /s/ Paul S. Dobel
----------------------
Title: S.V.P By /s/ Thomas Hein
---------------------------
Title: VP. Finance & Treasurer
16
<PAGE>
SCHEDULE A
----------
TO
STOCK PLEDGE AGREEMENT
----------------------
Pledgor: MDT Corporation
Pledged Shares
--------------
<TABLE>
<CAPTION>
Number Former Name, if Pledgor's Jurisdiction
of Certificate any, in which Percentage of
Issuer Shares Class Number(s) Certificate Issued Ownership Incorporation
- - ------ ------ ----- ----------- ------------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Biologic 100,000 common 100% Delaware
Diagnostic 100,000 common 1 100% Delaware
Canada 15 common 1 & 2 725959 Ontario 100% Ontario, Canada
Inc. (for
Certificate #1)
Technionic 100,000 common 1 100% Delaware
</TABLE>
<PAGE>
SCHEDULE B
----------
TO
STOCK PLEDGE AGREEMENT
----------------------
Pledgor: MDT Corporation, a Delaware corporation
Address of Chief Executive Office:
1009 Slater Road, Suite 200
Morrisville, NC 27560
<PAGE>
SCHEDULE C
----------
TO
STOCK PLEDGE AGREEMENT
----------------------
Existing Future Rights and Proceeds: None.
<PAGE>
EXHIBIT 10.8.7
PATENT SECURITY AGREEMENT
-------------------------
THIS PATENT SECURITY AGREEMENT (this "Agreement"), dated as of
February 15, 1996 is made by each of MDT CORPORATION, a Delaware corporation
("MDT"), MDT BIOLOGIC COMPANY, a Delaware corporation ("Biologic"), MDT
DIAGNOSTIC COMPANY, a Delaware corporation ("Diagnostic"), MDT CANADA LIMITED, a
corporation incorporated under the laws of the Province of Ontario ("Canada"),
and MDT TECHNIONIC COMPANY, a Delaware corporation ("Technionic") (individually,
a "Debtor", and collectively, the "Debtors"), in favor of WELLS FARGO BANK,
NATIONAL ASSOCIATION, as agent under the below-referenced Credit Agreement
("Secured Party").
RECITALS
--------
A. The Debtors and Secured Party are parties to the Credit Agreement,
pursuant to which the Banks agreed to make certain financial accommodations to
the Debtors. In addition, each Debtor is party to a Security Agreement,
pursuant to which, such Debtor has granted to Secured Party a security interest
in (among other things) all of the general intangibles of such Debtor.
B. Pursuant to the February 15, 1996 Amendment, and as one of the
conditions precedent to the obligations of the Banks thereunder, each Debtor has
agreed to execute and deliver this Agreement to Secured Party for filing with
the United States Patent and Trademark Office and with any other relevant
recording systems in any domestic or foreign jurisdiction, and as further
evidence of and to effectuate Secured Party's existing security interests in the
patents and other general intangibles described herein.
AGREEMENT
---------
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which is hereby acknowledged, each Debtor hereby agrees in favor of Secured
Party as follows:
1. Definitions; Interpretation.
---------------------------
(a) Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings:
"Credit Agreement" shall mean that certain Credit Agreement, dated
----------------
as of August 20, 1993, among Wells Fargo Bank, National Association ("Wells
Fargo"), Chemical Bank ("Chemical"), Secured Party, and the Debtors (other than
Technionic), as amended by that certain Amendment to Credit Agreement, dated as
of August 1, 1995, among Wells Fargo, Chemical, Secured Party, and the Debtors,
as further amended by that certain Amendment to Credit Agreement, dated as of
even date herewith, among Wells Fargo, Chemical, Secured
-1-
<PAGE>
Party, and the Debtors, and as otherwise amended, restated, modified, or
supplemented from time to time.
"Patent Collateral" has the meaning set forth in Section 2.
-----------------
"Patents" has the meaning set forth in Section 2.
-------
"Proceeds" means whatever is receivable or received from or upon the
--------
sale, lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Patent Collateral, including "proceeds" as
defined at UCC Section 9306, all insurance proceeds and all proceeds of
proceeds. Proceeds shall include (i) any and all accounts, chattel paper,
instruments, general intangibles, cash and other proceeds, payable to or for the
account of any Debtor, from time to time in respect of any of the Patent
Collateral, (ii) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to or for the account of any Debtor from time to time with
respect to any of the Patent Collateral, (iii) any and all claims and payments
(in any form whatsoever) made or due and payable to any Debtor from time to time
in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Patent Collateral by any Person acting
under color of governmental authority, and (iv) any and all other amounts from
time to time paid or payable under or in connection with any of the Patent
Collateral or for or on account of any damage or injury to or conversion of any
Patent Collateral by any Person.
"PTO" means the United States Patent and Trademark Office and any
---
successor thereto.
"Secured Obligations" means all liabilities, obligations, or
-------------------
undertakings owing by each Debtor to Secured Party of any kind or description
arising out of or outstanding under, advanced or issued pursuant to, or
evidenced by the Credit Agreement, the other Loan Documents, or this Agreement,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which the
Debtors are required to pay pursuant to any of the foregoing, by law, or
otherwise.
"UCC" means the Uniform Commercial Code as in effect from time to
---
time in the State of California.
"United States" and "U.S." each mean the United States of America.
------------- ----
(b) Terms Defined in UCC. Where applicable and except as otherwise
--------------------
defined herein, terms used in this Agreement shall have the meanings ascribed to
them in the UCC.
-2-
<PAGE>
(c) Interpretation. In this Agreement, except to the extent the
--------------
context otherwise requires:
(i) Any reference to a Section or a Schedule is a reference to
a section hereof, or a schedule hereto, respectively, and to a subsection or a
clause is, unless otherwise stated, a reference to a subsection or a clause of
the Section or subsection in which the reference appears.
(ii) The words "hereof," "herein," "hereto," "hereunder" and
the like mean and refer to this Agreement as a whole and not merely to the
specific Section, subsection, paragraph or clause in which the respective word
appears.
(iii) The meaning of defined terms shall be equally applicable
to both the singular and plural forms of the terms defined.
(iv) The words "including," "includes" and "include" shall be
deemed to be followed by the words "without limitation."
(v) References to agreements and other contractual instruments
shall be deemed to include any and all alterations, amendments, restatements,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable.
(vi) References to statutes or regulations are to be construed
as including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation referred to.
(vii) Any captions and headings are for convenience of reference
only and shall not affect the construction of this Agreement.
(viii) Capitalized words not otherwise defined herein shall have
the respective meanings ascribed to them in the Credit Agreement.
(ix) In the event of a direct conflict between the terms and
provisions of this Agreement, on the one hand, and the Credit Agreement or the
applicable Security Agreement, on the other hand, it is the intention of the
parties hereto that both such documents shall be read together and construed, to
the fullest extent possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as aforesaid, the
terms and provisions of the Credit Agreement or the applicable Security
Agreement shall control and govern; provided, however, that the inclusion herein
of additional obligations on the part of the Debtors and supplemental rights and
remedies in favor of Secured Party (whether under California law or applicable
federal law), in each case in respect of the Patent Collateral, shall not be
deemed a conflict with the Credit Agreement or the applicable Security
Agreement.
-3-
<PAGE>
2. Security Interest.
-----------------
(a) Assignment and Grant of Security Interest. As security for the
-----------------------------------------
payment and performance of the Secured Obligations, each Debtor hereby assigns,
transfers, and conveys to Secured Party, and hereby grants a security interest
to Secured Party in, all of such Debtor's right, title and interest in, to and
under the following property, whether now existing or hereafter acquired or
arising (collectively, the "Patent Collateral"):
(i) all letters patent of the U.S. or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the U.S. or any other country, owned, held or used by that Debtor in whole or in
part, including all existing U.S. patents and patent applications of that Debtor
which are described in Schedule A hereto, as the same may be amended or
----------
supplemented pursuant hereto from time to time, and together with and including
all patent licenses held by that Debtor (unless otherwise prohibited by any
license or related licensing agreement under circumstances where the granting of
the security interest would have the effect under applicable law of the
termination or permitting termination of the license for breach and where the
licensor, other than any affiliate of a Debtor, has elected such termination
remedy), together with all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof and the inventions disclosed
therein, and all rights corresponding thereto throughout the world, including
the right to make, use, lease, sell and otherwise transfer the inventions
disclosed therein, and all proceeds thereof, including all license royalties and
proceeds of infringement suits (collectively, the "Patents");
(ii) all claims, causes of action and rights to sue for past,
present and future infringement or unconsented use of any of the Patents and all
rights arising therefrom and pertaining thereto;
(iii) all general intangibles (as defined in the UCC) and all
intangible intellectual or other similar property of that Debtor of any kind or
nature, whether now owned or hereafter acquired or developed, associated with or
arising out of any of the Patents and not otherwise described above; and
(iv) all products and Proceeds of any and all of the foregoing.
(b) Continuing Security Interest. Each Debtor agrees that this
----------------------------
Agreement shall create a continuing security interest in the Patent Collateral
which shall remain in effect until terminated in accordance with Section 17.
3. Further Assurances; Appointment of Secured Party as Attorney-in-Fact.
--------------------------------------------------------------------
Each Debtor at its expense shall execute and deliver, or cause to be executed
and delivered, to Secured Party any and all documents and instruments, in form
and substance satisfactory to Secured Party, and take any and all action, which
Secured Party may reasonably request from
-4-
<PAGE>
time to time, to perfect and continue perfected, maintain the priority of or
provide notice of Secured Party's security interest in the Patent Collateral and
to accomplish the purposes of this Agreement. Secured Party shall have the
right, in the name of each Debtor, or in the name of Secured Party or otherwise,
without notice to or assent by that Debtor, and each Debtor hereby irrevocably
constitutes and appoints Secured Party (and any of Secured Party's officers or
employees or agents designated by Secured Party) as that Debtor's true and
lawful attorney-in-fact with full power and authority, (i) to sign the name of
that Debtor on all or any of such documents or instruments and perform all other
acts that Secured Party deems necessary or advisable in order to perfect or
continue perfected, maintain the priority or enforceability of or provide notice
of Secured Party's security interest in, the Patent Collateral, and (ii) to
execute any and all other documents and instruments, and to perform any and all
acts and things for and on behalf of that Debtor, which Secured Party may deem
necessary or advisable to maintain, preserve and protect the Patent Collateral
and to accomplish the purposes of this Agreement, including (A) after the
occurrence and during the continuance of any Event of Default, to defend,
settle, adjust or institute any action, suit or proceeding with respect to the
Patent Collateral, (B) to assert or retain any rights under any license
agreement for any of the Patent Collateral, including any rights of Debtor
arising under Section 365(n) of the Bankruptcy Code, and (C) after the
occurrence and during the continuance of any Event of Default, to execute any
and all applications, documents, papers and instruments for Secured Party to use
the Patent Collateral, to grant or issue any exclusive or non-exclusive license
with respect to any Patent Collateral (it being understood that so long as no
Event of Default has occurred and is continuing, that Debtor may grant or issue
licenses in the ordinary course of business with respect to the Patent
Collateral), and to assign, convey or otherwise transfer title in or dispose of
the Patent Collateral. The power of attorney set forth in this Section 3, being
coupled with an interest, is irrevocable so long as this Agreement shall not
have terminated in accordance with Section 17.
4. Representations and Warranties. Each Debtor represents and warrants
------------------------------
to Secured Party as follows:
(a) No Other Patents. A true and correct list of all of the existing
----------------
Patents owned, held (whether pursuant to a license or otherwise) or used by that
Debtor, in whole or in part, is set forth in Schedule A.
----------
(b) Validity. Each of the Patents listed on Schedule A is
-------- ----------
subsisting and has not been adjudged invalid or unenforceable, in whole or in
part, all maintenance fees required to be paid on account of any Patents have
been timely paid for maintaining such Patents in force, and, to the best of that
Debtor's knowledge, each of the Patents is valid and enforceable.
(c) Ownership of Patent Collateral; No Violation. (i) That Debtor
--------------------------------------------
has rights in and good title to the existing Patent Collateral, (ii) with
respect to the Patent Collateral shown on Schedule A hereto as owned by it, that
----------
Debtor is the sole and exclusive owner thereof,
-5-
<PAGE>
free and clear of any Liens and rights of others (other than the security
interest created hereunder), including licenses, shop rights and covenants by
that Debtor not to sue third persons and (iii) with respect to any Patent for
which that Debtor is either a licensor or a licensee pursuant to a license or
licensee agreement regarding such Patent, each such license or licensing
agreement is in full force and effect, that Debtor is not in default of any of
its obligations thereunder and, other than the parties to such licenses or
licensing agreements, no other Person has any rights in or to any of the Patent
Collateral. To the best of that Debtor's knowledge, the past, present and
contemplated future use of the Patent Collateral by that Debtor has not, does
not and will not infringe upon or violate any right, privilege or license
agreement of or with any other Person.
(d) No Infringement. To the best of that Debtor's knowledge, no
---------------
material infringement or unauthorized use presently is being made of any of the
Patent Collateral by any Person.
(e) Powers. That Debtor has the unqualified right, power and
------
authority to pledge and to grant to Secured Party a security interest in all of
that Debtor's right, title, and interest in and to the Patent Collateral
pursuant to this Agreement, and to execute, deliver and perform its obligations
in accordance with the terms of this Agreement, without the consent or approval
of any other Person except as already obtained.
5. Covenants. So long as any of the Secured Obligations remain
---------
unsatisfied, each Debtor agrees that it will comply with all of the covenants,
terms and provisions of this Agreement, the Credit Agreement and the other Loan
Documents, and each Debtor will promptly give Secured Party written notice of
the occurrence of any event that could have a material adverse effect on any of
the Patents or the Patent Collateral, including any petition under the
Bankruptcy Code filed by or against any licensor of any of the Patents for which
Debtor is a licensee.
6. Future Rights. Except as otherwise expressly agreed to in writing by
-------------
Secured Party, for so long as any of the Secured Obligations shall remain
outstanding, or, if earlier, until Secured Party shall have released or
terminated, in whole but not in part, its interest in the Patent Collateral, if
and when any Debtor shall obtain rights to any new patentable inventions, or
become entitled to the benefit of any Patent, or any reissue, division,
continuation, renewal, extension or continuation-in-part of any Patent or Patent
Collateral or any improvement thereof (whether pursuant to any license or
otherwise), the provisions of Section 2 shall automatically apply thereto and
that Debtor shall give to Secured Party prompt notice thereof. Each Debtor
shall do all things deemed necessary or advisable by Secured Party to ensure the
validity, perfection, priority and enforceability of the security interests of
Secured Party in such future acquired Patent Collateral. Each Debtor hereby
authorizes Secured Party to modify, amend or supplement the Schedules hereto and
to re-execute this Agreement from time to time on that Debtor's behalf and as
its attorney-in-fact to include any future patents which are or
-6-
<PAGE>
become Patent Collateral and to cause such re-executed Agreement or such
modified, amended or supplemented Schedules to be filed with the PTO.
7. Secured Party's Duties. Notwithstanding any provision contained in
----------------------
this Agreement, Secured Party shall have no duty to exercise any of the rights,
privileges or powers afforded to it and shall not be responsible to any Debtor
or any other Person for any failure to do so or delay in doing so. Except for
the accounting for moneys actually received by Secured Party hereunder or in
connection herewith, Secured Party shall have no duty or liability to exercise
or preserve any rights, privileges or powers pertaining to the Patent
Collateral.
8. Remedies. Secured Party shall have all rights and remedies available
--------
to it under the Credit Agreement, the Security Agreements, and applicable law
(which rights and remedies are cumulative) with respect to the security
interests in any of the Patent Collateral or any other Collateral. Each Debtor
agrees that such rights and remedies include the right of Secured Party as a
secured party to sell or otherwise dispose of its Collateral after default,
pursuant to UCC Section 9504. Each Debtor agrees that Secured Party shall at
all times have such royalty free licenses, to the extent permitted by law, for
any Patent Collateral that is reasonably necessary to permit the exercise of any
of Secured Party's rights or remedies upon or after the occurrence of (and
during the continuance of) an Event of Default with respect to (among other
things) any tangible asset of the Debtors in which Secured Party has a security
interest, including Secured Party's rights to sell inventory, tooling or
packaging which is acquired by the Debtors (or their respective successors,
permitted assignees or trustees in bankruptcy). In addition to and without
limiting any of the foregoing, upon the occurrence and during the continuance of
an Event of Default, Secured Party shall have the right but shall in no way be
obligated to bring suit, or to take such other action as Secured Party deems
necessary or advisable, in the name of any Debtor or Secured Party, to enforce
or protect any of the Patent Collateral, in which event each Debtor shall, at
the request of Secured Party, do any and all lawful acts and execute any and all
documents required by Secured Party in aid of such enforcement. To the extent
that Secured Party shall elect not to bring suit to enforce such Patent
Collateral, each Debtor agrees to use all reasonable measures and its diligent
efforts, whether by action, suit, proceeding or otherwise, to prevent the
infringement, misappropriation or violation thereof by others and for that
purpose agrees diligently to maintain any action, suit or proceeding against any
Person necessary to prevent such infringement, misappropriation or violation.
9. Binding Effect. This Agreement shall be binding upon, inure to the
--------------
benefit of and be enforceable by each Debtor and Secured Party and their
respective successors and permitted assigns.
10. Notices. All notices and other communications hereunder to or from
-------
Secured Party or any Debtor shall be in writing and shall be mailed, sent or
delivered in accordance with the Credit Agreement.
-7-
<PAGE>
11. GOVERNING LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE
------------------------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
ASSIGNMENT AND SECURITY INTERESTS HEREUNDER IN RESPECT OF ANY PROPERTY ARE
GOVERNED BY FEDERAL LAW, IN WHICH CASE SUCH CHOICE OF CALIFORNIA LAW SHALL NOT
BE DEEMED TO DEPRIVE SECURED PARTY OF SUCH RIGHTS AND REMEDIES AS MAY BE
AVAILABLE UNDER FEDERAL LAW. THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK, COMMONWEALTH OF
MASSACHUSETTS OR THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE
OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH SECURED PARTY SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH DEBTOR AND SECURED PARTY
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.
----------
EACH DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH DEBTOR AND SECURED PARTY REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12. Entire Agreement; Amendment. This Agreement, together with the
---------------------------
Schedules hereto, contains the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior drafts and communications
relating to such subject matter. Neither this Agreement nor any provision
hereof may be modified, amended or waived except by the written agreement of the
parties, as provided in the Credit Agreement. Notwithstanding
-8-
<PAGE>
the foregoing, Secured Party may re-execute this Agreement or modify, amend or
supplement the Schedules hereto as provided in Section 6 hereof.
13. Severability. If one or more provisions contained in this Agreement
------------
shall be invalid, illegal or unenforceable in any respect in any jurisdiction or
with respect to any party, such invalidity, illegality or unenforceability in
such jurisdiction or with respect to such party shall, to the fullest extent
permitted by applicable law, not invalidate or render illegal or unenforceable
any such provision in any other jurisdiction or with respect to any other party,
or any other provisions of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
15. Credit Agreement and Security Agreements. Each Debtor acknowledges
----------------------------------------
that the rights and remedies of Secured Party with respect to the security
interest in the Patent Collateral granted hereby are more fully set forth in the
Credit Agreement, the Security Agreements, and the other Loan Documents and all
such rights and remedies are cumulative.
16. No Inconsistent Requirements. Each Debtor acknowledges that this
----------------------------
Agreement and the other Loan Documents may contain covenants and other terms and
provisions variously stated regarding the same or similar matters, and each
Debtor agrees that all such covenants, terms and provisions are cumulative and
all shall be performed and satisfied in accordance with their respective terms.
17. Termination. Upon the indefeasible payment in full of the Secured
-----------
Obligations, including the cash collateralization, expiration, or cancellation
of all Secured Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
accommodations under the Credit Agreement, this Agreement shall terminate and
Secured Party shall execute and deliver such documents and instruments and take
such further action reasonably requested by any Debtor and at that Debtor's
expense as shall be necessary to evidence termination of the security interest
granted by that Debtor to Secured Party hereunder.
18. Suretyship Waivers and Consents. Each Debtor acknowledges that the
-------------------------------
obligations of such Debtor undertaken herein might be construed to consist, at
least in part, of the guaranty of obligations of Persons or entities other than
such Debtor (including the other Debtors party hereto) and, in full recognition
of that fact, each Debtor consents and agrees that Secured Party may, at any
time and from time to time, without notice or demand, whether before or after
any actual or purported termination, repudiation or revocation of this Agreement
by any one or more Debtors, and without affecting the enforceability or
continuing effectiveness hereof as to each Debtor: (a) if it has so agreed with
the applicable other Debtors, supplement,
-9-
<PAGE>
restate, modify, amend, increase, decrease, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Secured Obligations or
any part thereof, including any increase or decrease of the rate(s) of interest
thereon; (b) supplement, restate, modify, amend, (if it has so agreed with the
applicable other Debtors) increase, decrease or waive, or enter into or give any
agreement, approval or consent with respect to, the Secured Obligations or any
part thereof, or any of the Loan Documents or any additional security or
guarantees, or any condition, covenant, default, remedy, right, representation
or term thereof or thereunder; (c) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan Documents
or the Secured Obligations or any part thereof; (d) accept partial payments on
the Secured Obligations; (e) receive and hold additional security or guarantees
for the Secured Obligations or any part thereof; (f) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as Secured Party in its sole and
absolute discretion may determine; (g) release any Person from any personal
liability with respect to the Secured Obligations or any part thereof; (h)
settle, release on terms satisfactory to Secured Party or by operation of
applicable laws or otherwise liquidate or enforce any Secured Obligations and
any security therefor or guaranty thereof in any manner, consent to the transfer
of any security and bid and purchase at any sale; or (i) consent to the merger,
change or any other restructuring or termination of the corporate or partnership
existence of any Debtor or any other Person, and correspondingly restructure the
Secured Obligations, and any such merger, change, restructuring or termination
shall not affect the liability of any Debtor or the continuing effectiveness
hereof, or the enforceability hereof with respect to all or any part of the
Secured Obligations.
Upon the occurrence and during the continuance of any Event of Default,
Secured Party may enforce this Agreement independently as to each Debtor and
independently of any other remedy or security Secured Party at any time may have
or hold in connection with the Secured Obligations, and it shall not be
necessary for Secured Party to marshal assets in favor of any Debtor or any
other Person or to proceed upon or against or exhaust any security or remedy
before proceeding to enforce this Agreement. Each Debtor expressly waives any
right to require Secured Party to marshal assets in favor of any Debtor or any
other Person or to proceed against any other Debtor or any collateral provided
by any Person, and agrees that Secured Party may proceed against Debtors or any
collateral in such order as it shall determine in its sole and absolute
discretion.
Secured Party may file a separate action or actions against any Debtor,
whether action is brought or prosecuted with respect to any security or against
any other Person, or whether any other Person is joined in any such action or
actions. Each Debtor agrees that Secured Party and any Debtor and any Affiliate
of any Debtor may deal with each other in connection with the Secured
Obligations or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the continuing efficacy of this Agreement.
-10-
<PAGE>
Secured Party's rights hereunder shall be reinstated and revived, and
the enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the Secured Obligations which thereafter shall be
required to be restored or returned by Secured Party, all as though such amount
had not been paid. The rights of Secured Party created or granted herein and the
enforceability of this Agreement at all times shall remain effective to cover
the full amount of all the Secured Obligations even though the Secured
Obligations, including any part thereof or any other security or guaranty
therefor, may be or hereafter may become invalid or otherwise unenforceable as
against any Debtor and whether or not any other Debtor shall have any personal
liability with respect thereto.
To the maximum extent permitted by applicable law, each Debtor
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (a) any disability or other defense of any other Debtor with respect
to the Secured Obligations, (b) the unenforceability or invalidity of any
security or guaranty for the Secured Obligations or the lack of perfection or
continuing perfection or failure of priority of any security for the Secured
Obligations, (c) the cessation for any cause whatsoever of the liability of any
other Debtor (other than by reason of the full payment and performance of all
Secured Obligations), (d) any failure of Secured Party to marshal assets in
favor of any Debtor or any other Person, (e) any failure of Secured Party to
give notice of sale or other disposition of collateral to any Debtor or any
other Person or any defect in any notice that may be given in connection with
any sale or disposition of collateral, (f) any failure of Secured Party to
comply with applicable law in connection with the sale or other disposition of
any collateral or other security for any Secured Obligation, including any
failure of Secured Party to conduct a commercially reasonable sale or other
disposition of any collateral or other security for any Secured Obligation, (g)
any act or omission of Secured Party or others that directly or indirectly
results in or aids the discharge or release of any of any Debtor or the Secured
Obligations or any security or guaranty therefor by operation of law or
otherwise, (h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (i) any failure of Secured Party to
file or enforce a claim in any bankruptcy or other proceeding with respect to
any Person, (j) the election by Secured Party of the application or non-
application of Section 1111(b)(2) of the United States Bankruptcy Code, (k) any
extension of credit or the grant of any lien under Section 364 of the United
States Bankruptcy Code, (l) any use of cash collateral under Section 363 of the
United States Bankruptcy Code, (m) any agreement or stipulation with respect to
the provision of adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien in favor of Secured Party for any reason, or (o)
any action taken by Secured Party that is authorized by this section or any
other provision of any Loan Document. Until such time as all of the Secured
Obligations have been fully, finally, and indefeasibly paid in full in cash: (i)
each Debtor hereby waives and postpones any right of subrogation it has or may
have as against any other Debtor with respect to the Secured Obligations; and
(ii) in addition, each Debtor also hereby waives and postpones any right to
proceed or to seek recourse against or with respect to any property or asset of
any other Debtor. Each Debtor expressly waives all setoffs and counterclaims and
all presentments,
-11-
<PAGE>
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Secured
Obligations, and all notices of acceptance of this Agreement or of the
existence, creation or incurring of new or additional Secured Obligations.
In the event that all or any part of the Secured Obligations at any time
are secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Debtor
authorizes Secured Party on Secured Party's behalf), upon the occurrence of and
during the continuance of any Event of Default, at its sole option, without
notice or demand and without affecting the obligations of any Debtor, the
enforceability of this Agreement, or the validity or enforceability of any liens
of, or for the benefit of, Secured Party on any collateral, to foreclose any or
all of such deeds of trust or mortgages or other instruments by judicial or
nonjudicial sale.
To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of this Agreement or any rights
of Secured Party created or granted hereby or to the recovery by Secured Party
against any Debtor or any other Person liable therefor of any deficiency after a
judicial or nonjudicial foreclosure or sale, even though such a foreclosure or
sale may impair the subrogation rights of Debtors and may preclude Debtors from
obtaining reimbursement or contribution from other Debtors. Each Debtor
expressly waives any suretyship defenses or benefits that it otherwise might or
would have under applicable law. Each Debtor expressly waives any right to
receive notice of any judicial or nonjudicial foreclosure or sale of any real
property or interest therein of another Debtor that is subject to any such deeds
of trust or mortgages or other instruments and any Debtor's failure to receive
any such notice shall not impair or affect such Debtor's obligations or the
enforceability of this Agreement or any rights of Secured Party created or
granted hereby. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS SECTION, EACH DEBTOR WAIVES ALL RIGHTS AND DEFENSES
ARISING OUT OF AN ELECTION OF REMEDIES BY SECURED PARTY, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR THE OBLIGATIONS, HAS DESTROYED SUCH DEBTOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE PRINCIPAL DEBTOR BY THE OPERATION LAW OR OTHERWISE.
Debtors and each of them warrant and agree that each of the waivers
and consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Debtors otherwise
may have against other Debtors, Secured Party or others, or against Collateral.
If any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
MDT CORPORATION,
a Delaware corporation
By: /s/ Thomas Hein
__________________________
Title: V.P. Finance & Treasurer
MDT BIOLOGIC COMPANY,
a Delaware corporation
By: /s/ Thomas Hein
__________________________
Title: Treasurer
MDT DIAGNOSTIC COMPANY,
a Delaware corporation
By: /s/ Thomas Hein
__________________________
Title: Treasurer
MDT CANADA LIMITED,
a corporation incorporated under the laws of the
Province of Ontario
By: /s/ Thomas Hein
__________________________
Title: Treasurer
MDT TECHNIONIC COMPANY,
a Delaware corporation
By: /s/ Thomas Hein
__________________________
Title: Treasurer
-13-
<PAGE>
WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent
By: /s/ Paul Dobel
________________________
Title: S.V.P.
-14-
<PAGE>
LIST OF OMITTED SCHEDULES
-------------------------
The following Schedules have been omitted from the Patent Security
Agreement and will be provided to the Commission upon request:
Schedule A - Issued U.S. Patents of Each Debtor; Pending U.S.
Patent Applications; U.S. Patent Licenses of Each
Debtor; Foreign Patents of Each Debtor
<PAGE>
STATE OF California )
) SS
COUNTY OF San Francisco )
On March 26, 1996, before me, Barbara L. McCauley, Notary Public,
personally appeared Paul S. Dobel, personally known to me to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara L. McCauley
---------------------------
Signature
[SEAL]
STATE OF __________________ )
) ss
COUNTY OF _______________ )
On ____________, 1996, before me, ______________________________, Notary
Public, personally appeared ______________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
---------------------------
Signature
[SEAL]
<PAGE>
STATE OF North Carolina )
) ss
COUNTY OF Wake )
On March 26, 1996, before me, Emogene Dominick, Notary Public, personally
appeared Thomas M. Hein, personally known to me to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Emogene Dominick
---------------------------
Signature
[SEAL]
[My Commission Expires 9-13-2000]
STATE OF __________________ )
) ss
COUNTY OF _______________ )
On ____________, 1996, before me, ______________________________, Notary
Public, personally appeared ______________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
---------------------------
Signature
[SEAL]
<PAGE>
EXHIBIT 10.8.8
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS TRADEMARK SECURITY AGREEMENT (this "Agreement"), dated as of
February 15, 1996 is made by each of MDT CORPORATION, a Delaware corporation
("MDT"), MDT BIOLOGIC COMPANY, a Delaware corporation ("Biologic"), MDT
DIAGNOSTIC COMPANY, a Delaware corporation ("Diagnostic"), MDT CANADA LIMITED, a
corporation incorporated under the laws of the Province of Ontario ("Canada"),
and MDT TECHNIONIC COMPANY, a Delaware corporation ("Technionic") (individually,
a "Debtor", and collectively, the "Debtors"), in favor of WELLS FARGO BANK,
NATIONAL ASSOCIATION, as agent under the below-referenced Credit Agreement
("Secured Party").
RECITALS
--------
A. The Debtors and Secured Party are parties to the Credit Agreement,
pursuant to which the Banks agreed to make certain financial accommodations to
the Debtors. In addition, each Debtor is party to a Security Agreement,
pursuant to which, such Debtor has granted to Secured Party a security interest
in (among other things) all of the general intangibles of such Debtor.
B. Pursuant to the February 15, 1996 Amendment, and as one of the
conditions precedent to the obligations of the Banks thereunder, each Debtor has
agreed to execute and deliver this Agreement to Secured Party for filing with
the United States Patent and Trademark Office and with any other relevant
recording systems in any domestic or foreign jurisdiction, and as further
evidence of and to effectuate Secured Party's existing security interests in the
trademarks and other general intangibles described herein.
AGREEMENT
---------
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which is hereby acknowledged, each Debtor hereby agrees in favor of Secured
Party as follows:
1. Definitions; Interpretation.
---------------------------
(a) Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings:
"Credit Agreement" shall mean that certain Credit Agreement, dated
----------------
as of August 20, 1993, among Wells Fargo Bank, National Association ("Wells
Fargo"), Chemical Bank ("Chemical"), Secured Party, and the Debtors (other than
Technionic), as amended by that certain Amendment to Credit Agreement, dated as
of August 1, 1995, among Wells Fargo, Chemical, Secured Party, and the Debtors,
as further amended by that certain Amendment to Credit Agreement, dated as of
even date herewith, among Wells Fargo, Chemical, Secured
-1-
<PAGE>
Party, and the Debtors, and as otherwise amended, restated, modified, or
supplemented from time to time.
"Proceeds" means whatever is receivable or received from or upon the
--------
sale, lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Trademark Collateral, including "proceeds" as
defined at UCC Section 9306, all insurance proceeds and all proceeds of
proceeds. Proceeds shall include (i) any and all accounts, chattel paper,
instruments, general intangibles, cash and other proceeds, payable to or for the
account of any Debtor, from time to time in respect of any of the Trademark
Collateral, (ii) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to or for the account of any Debtor from time to time with
respect to any of the Trademark Collateral, (iii) any and all claims and
payments (in any form whatsoever) made or due and payable to any Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Trademark Collateral by any
Person acting under color of governmental authority, and (iv) any and all other
amounts from time to time paid or payable under or in connection with any of the
Trademark Collateral or for or on account of any damage or injury to or
conversion of any Trademark Collateral by any Person.
"PTO" means the United States Patent and Trademark Office and any
---
successor thereto.
"Secured Obligations" means all liabilities, obligations, or
-------------------
undertakings owing by each Debtor to Secured Party of any kind or description
arising out of or outstanding under, advanced or issued pursuant to, or
evidenced by the Credit Agreement, the other Loan Documents, or this Agreement,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which the
Debtors are required to pay pursuant to any of the foregoing, by law, or
otherwise.
"Trademark Collateral" has the meaning set forth in Section 2.
--------------------
"Trademarks" has the meaning set forth in Section 2.
----------
"UCC" means the Uniform Commercial Code as in effect from time to
---
time in the State of California.
"United States" and "U.S." each mean the United States of America.
------------- ----
(b) Terms Defined in UCC. Where applicable and except as otherwise
--------------------
defined herein, terms used in this Agreement shall have the meanings ascribed to
them in the UCC.
-2-
<PAGE>
(c) Interpretation. In this Agreement, except to the extent the
--------------
context otherwise requires:
(i) Any reference to a Section or a Schedule is a reference to
a section hereof, or a schedule hereto, respectively, and to a subsection or a
clause is, unless otherwise stated, a reference to a subsection or a clause of
the Section or subsection in which the reference appears.
(ii) The words "hereof," "herein," "hereto," "hereunder" and
the like mean and refer to this Agreement as a whole and not merely to the
specific Section, subsection, paragraph or clause in which the respective word
appears.
(iii) The meaning of defined terms shall be equally applicable
to both the singular and plural forms of the terms defined.
(iv) The words "including," "includes" and "include" shall be
deemed to be followed by the words "without limitation."
(v) References to agreements and other contractual instruments
shall be deemed to include any and all alterations, amendments, restatements,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable.
(vi) References to statutes or regulations are to be construed
as including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation referred to.
(vii) Any captions and headings are for convenience of reference
only and shall not affect the construction of this Agreement.
(viii) Capitalized words not otherwise defined herein shall have
the respective meanings ascribed to them in the Credit Agreement.
(ix) In the event of a direct conflict between the terms and
provisions of this Agreement, on the one hand, and the Credit Agreement or the
applicable Security Agreement, on the other hand, it is the intention of the
parties hereto that both such documents shall be read together and construed, to
the fullest extent possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as aforesaid, the
terms and provisions of the Credit Agreement or the applicable Security
Agreement shall control and govern; provided, however, that the inclusion herein
of additional obligations on the part of the Debtors and supplemental rights and
remedies in favor of Secured Party (whether under California law or applicable
federal law), in each case in respect of the Trademark Collateral, shall not be
deemed a conflict with the Credit Agreement or the applicable Security
Agreement.
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<PAGE>
2. Security Interest.
-----------------
(a) Assignment and Grant of Security Interest. As security for the
-----------------------------------------
payment and performance of the Secured Obligations, each Debtor hereby assigns,
transfers, and conveys to Secured Party, and hereby grants a security interest
to Secured Party in, all of such Debtor's right, title and interest in, to and
under the following property, whether now existing or hereafter acquired or
arising (collectively, the "Trademark Collateral"):
(i) all state (including common law), federal and foreign
trademarks, service marks and trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, together with and
including all licenses therefor held by that Debtor (unless otherwise prohibited
by any license or related licensing agreement under circumstances where the
granting of the security interest would have the effect under applicable law of
the termination or permitting termination of the license for breach and where
the licensor, other than any affiliate of a Debtor, has elected such termination
remedy), and all registrations and recordings thereof, and all applications
filed or to be filed in connection therewith, including registrations and
applications in the PTO, any State of the United States or any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including without limitation any of the foregoing identified on Schedule A
----------
hereto (as the same may be amended, modified or supplemented from time to time),
and the right (but not the obligation) to register claims under any state or
federal trademark law or regulation or any trademark law or regulation of any
foreign country and to apply for, renew and extend any of the same, to sue or
bring opposition or cancellation proceedings in the name of that Debtor or in
the name of Secured Party for past, present or future infringement or
unconsented use thereof, and all rights arising therefrom throughout the world
(collectively, the "Trademarks");
(ii) all claims, causes of action and rights to sue for past,
present or future infringement or unconsented use of any Trademarks and all
rights arising therefrom and pertaining thereto;
(iii) all general intangibles related to or arising out of any
of the Trademarks and all the goodwill of that Debtor's business symbolized by
the Trademarks or associated therewith; and
(iv) all products and Proceeds of any and all of the foregoing.
(b) Continuing Security Interest. Each Debtor agrees that this
----------------------------
Agreement shall create a continuing security interest in the Trademark
Collateral which shall remain in effect until terminated in accordance with
Section 17.
-4-
<PAGE>
3. Further Assurances; Appointment of Secured Party as Attorney-in-Fact.
--------------------------------------------------------------------
Each Debtor at its expense shall execute and deliver, or cause to be executed
and delivered, to Secured Party any and all documents and instruments, in form
and substance satisfactory to Secured Party, and take any and all action, which
Secured Party may reasonably request from time to time, to perfect and continue
perfected, maintain the priority of or provide notice of Secured Party's
security interest in the Trademark Collateral and to accomplish the purposes of
this Agreement. Secured Party shall have the right, in the name of each Debtor,
or in the name of Secured Party or otherwise, without notice to or assent by
that Debtor, and each Debtor hereby irrevocably constitutes and appoints Secured
Party (and any of Secured Party's officers or employees or agents designated by
Secured Party) as that Debtor's true and lawful attorney-in-fact with full power
and authority, (i) to sign the name of that Debtor on all or any of such
documents or instruments and perform all other acts that Secured Party deems
necessary or advisable in order to perfect or continue perfected, maintain the
priority or enforceability of or provide notice of Secured Party's security
interest in, the Trademark Collateral, and (ii) to execute any and all other
documents and instruments, and to perform any and all acts and things for and on
behalf of that Debtor, which Secured Party may deem necessary or advisable to
maintain, preserve and protect the Trademark Collateral and to accomplish the
purposes of this Agreement, including (A) after the occurrence and during the
continuance of any Event of Default, to defend, settle, adjust or institute any
action, suit or proceeding with respect to the Trademark Collateral, (B) to
assert or retain any rights under any license agreement for any of the Trademark
Collateral, including any rights of Debtor arising under Section 365(n) of the
Bankruptcy Code, and (C) after the occurrence and during the continuance of any
Event of Default, to execute any and all applications, documents, papers and
instruments for Secured Party to use the Trademark Collateral, to grant or issue
any exclusive or non-exclusive license with respect to any Trademark Collateral
(it being understood that so long as no Event of Default has occurred and is
continuing, that Debtor may grant or issue licenses in the ordinary course of
business with respect to the Trademark Collateral), and to assign, convey or
otherwise transfer title in or dispose of the Trademark Collateral. The power
of attorney set forth in this Section 3, being coupled with an interest, is
irrevocable so long as this Agreement shall not have terminated in accordance
with Section 17.
4. Representations and Warranties. Each Debtor represents and warrants to
------------------------------
Secured Party as follows:
(a) No Other Trademarks. Schedule A sets forth a true and correct
------------------- ----------
list of all of the existing Trademarks that are registered, or for which any
application for registration has been filed with the PTO or any corresponding or
similar trademark office of any other U.S. or foreign jurisdiction, and that are
owned or held (whether pursuant to a license or otherwise) or used by that
Debtor.
(b) Trademarks Subsisting. Each of the Trademarks listed in
---------------------
Schedule A is subsisting and has not been adjudged invalid or unenforceable, in
- - ----------
whole or in part, and, to the best of that Debtor's knowledge, each of the
Trademarks is valid and enforceable.
-5-
<PAGE>
(c) Ownership of Trademark Collateral; No Violation. (i) That
-----------------------------------------------
Debtor has rights in and good and defensible title to the existing Trademark
Collateral, (ii) with respect to the Trademark Collateral shown on Schedule A
----------
hereto as owned by it, that Debtor is the sole and exclusive owner
thereof, free and clear of any Liens and rights of others (other than the
security interest created hereunder), including licenses, registered user
agreements and covenants by that Debtor not to sue third persons and (iii) with
respect to any Trademarks for which that Debtor is either a licensor or a
licensee pursuant to a license or licensee agreement regarding such Trademark,
each such license or licensing agreement is in full force and effect, that
Debtor is not in default of any of its obligations thereunder and, other than
the parties to such licenses or licensing agreements, no other Person has any
rights in or to any of the Trademark Collateral. To the best of that Debtor's
knowledge, the past, present and contemplated future use of the Trademark
Collateral by that Debtor has not, does not and will not infringe upon or
violate any right, privilege or license agreement of or with any other Person.
(d) No Infringement. To the best of that Debtor's knowledge, no
---------------
material infringement or unauthorized use presently is being made of any of the
Trademark Collateral by any Person.
(e) Powers. That Debtor has the unqualified right, power and
------
authority to pledge and to grant to Secured Party a security interest in all of
that Debtor's right, title, and interest in and to the Trademark Collateral
pursuant to this Agreement, and to execute, deliver and perform its obligations
in accordance with the terms of this Agreement, without the consent or approval
of any other Person except as already obtained.
5. Covenants. So long as any of the Secured Obligations remain
---------
unsatisfied, each Debtor agrees that it will comply with all of the covenants,
terms and provisions of this Agreement, the Credit Agreement and the other Loan
Documents, and each Debtor will promptly give Secured Party written notice of
the occurrence of any event that could have a material adverse effect on any of
the Trademarks or the Trademark Collateral, including any petition under the
Bankruptcy Code filed by or against any licensor of any of the Trademarks for
which Debtor is a licensee.
6. Future Rights. Except as otherwise expressly agreed to in writing by
-------------
Secured Party, for so long as any of the Secured Obligations shall remain
outstanding, or, if earlier, until Secured Party shall have released or
terminated, in whole but not in part, its interest in the Trademark Collateral,
if and when any Debtor shall obtain rights to any new Trademarks, or any
reissue, renewal or extension of any Trademarks, the provisions of Section 2
shall automatically apply thereto and that Debtor shall give to Secured Party
prompt notice thereof. Each Debtor shall do all things deemed necessary or
advisable by Secured Party to ensure the validity, perfection, priority and
enforceability of the security interests of Secured Party in such future
acquired Trademark Collateral. Each Debtor hereby authorizes Secured Party to
modify, amend or supplement the Schedules hereto and to re-execute this
Agreement from time to time on that Debtor's behalf and as its attorney-in-fact
to include any future
-6-
<PAGE>
Trademarks which are or become Trademark Collateral and to cause such re-
executed Agreement or such modified, amended or supplemented Schedules to be
filed with the PTO.
7. Secured Party's Duties. Notwithstanding any provision contained in
----------------------
this Agreement, Secured Party shall have no duty to exercise any of the rights,
privileges or powers afforded to it and shall not be responsible to any Debtor
or any other Person for any failure to do so or delay in doing so. Except for
the accounting for moneys actually received by Secured Party hereunder or in
connection herewith, Secured Party shall have no duty or liability to exercise
or preserve any rights, privileges or powers pertaining to the Trademark
Collateral.
8. Remedies. Secured Party shall have all rights and remedies
--------
available to it under the Credit Agreement, the Security Agreements, and
applicable law (which rights and remedies are cumulative) with respect to the
security interests in any of the Trademark Collateral or any other Collateral.
Each Debtor agrees that such rights and remedies include the right of Secured
Party as a secured party to sell or otherwise dispose of its Collateral after
default, pursuant to UCC Section 9504. Each Debtor agrees that Secured Party
shall at all times have such royalty free licenses, to the extent permitted by
law, for any Trademark Collateral that is reasonably necessary to permit the
exercise of any of Secured Party's rights or remedies upon or after the
occurrence of (and during the continuance of) an Event of Default with respect
to (among other things) any tangible asset of the Debtors in which Secured Party
has a security interest, including Secured Party's rights to sell inventory,
tooling or packaging which is acquired by the Debtors (or their respective
successors, permitted assignees or trustees in bankruptcy). In addition to and
without limiting any of the foregoing, upon the occurrence and during the
continuance of an Event of Default, Secured Party shall have the right but shall
in no way be obligated to bring suit, or to take such other action as Secured
Party deems necessary or advisable, in the name of any Debtor or Secured Party,
to enforce or protect any of the Trademark Collateral, in which event each
Debtor shall, at the request of Secured Party, do any and all lawful acts and
execute any and all documents required by Secured Party in aid of such
enforcement. To the extent that Secured Party shall elect not to bring suit to
enforce such Trademark Collateral, each Debtor agrees to use all reasonable
measures and its diligent efforts, whether by action, suit, proceeding or
otherwise, to prevent the infringement, misappropriation or violation thereof by
others and for that purpose agrees diligently to maintain any action, suit or
proceeding against any Person necessary to prevent such infringement,
misappropriation or violation.
9. Binding Effect. This Agreement shall be binding upon, inure to the
--------------
benefit of and be enforceable by each Debtor and Secured Party and their
respective successors and permitted assigns.
10. Notices. All notices and other communications hereunder to or from
-------
Secured Party or any Debtor shall be in writing and shall be mailed, sent or
delivered in accordance with the Credit Agreement.
-7-
<PAGE>
11. GOVERNING LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE
------------------------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
ASSIGNMENT AND SECURITY INTERESTS HEREUNDER IN RESPECT OF ANY PROPERTY ARE
GOVERNED BY FEDERAL LAW, IN WHICH CASE SUCH CHOICE OF CALIFORNIA LAW SHALL NOT
BE DEEMED TO DEPRIVE SECURED PARTY OF SUCH RIGHTS AND REMEDIES AS MAY BE
AVAILABLE UNDER FEDERAL LAW. THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK, COMMONWEALTH OF
MASSACHUSETTS OR THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE
OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH SECURED PARTY SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH DEBTOR AND SECURED PARTY
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.
----------
EACH DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH DEBTOR AND SECURED PARTY REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12. Entire Agreement; Amendment. This Agreement, together with the
---------------------------
Schedules hereto, contains the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior drafts and communications
relating to such subject matter. Neither this Agreement nor any provision
hereof may be modified, amended or waived except by the written agreement of the
parties, as provided in the Credit Agreement. Notwithstanding
-8-
<PAGE>
the foregoing, Secured Party may re-execute this Agreement or modify, amend or
supplement the Schedules hereto as provided in Section 6 hereof.
13. Severability. If one or more provisions contained in this Agreement
------------
shall be invalid, illegal or unenforceable in any respect in any jurisdiction or
with respect to any party, such invalidity, illegality or unenforceability in
such jurisdiction or with respect to such party shall, to the fullest extent
permitted by applicable law, not invalidate or render illegal or unenforceable
any such provision in any other jurisdiction or with respect to any other party,
or any other provisions of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
15. Credit Agreement and Security Agreements. Each Debtor acknowledges
----------------------------------------
that the rights and remedies of Secured Party with respect to the security
interest in the Trademark Collateral granted hereby are more fully set forth in
the Credit Agreement, the Security Agreements, and the other Loan Documents and
all such rights and remedies are cumulative.
16. No Inconsistent Requirements. Each Debtor acknowledges that this
----------------------------
Agreement and the other Loan Documents may contain covenants and other terms and
provisions variously stated regarding the same or similar matters, and each
Debtor agrees that all such covenants, terms and provisions are cumulative and
all shall be performed and satisfied in accordance with their respective terms.
17. Termination. Upon the indefeasible payment in full of the Secured
-----------
Obligations, including the cash collateralization, expiration, or cancellation
of all Secured Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
accommodations under the Credit Agreement, this Agreement shall terminate and
Secured Party shall execute and deliver such documents and instruments and take
such further action reasonably requested by any Debtor and at that Debtor's
expense as shall be necessary to evidence termination of the security interest
granted by that Debtor to Secured Party hereunder.
18. Suretyship Waivers and Consents. Each Debtor acknowledges that the
-------------------------------
obligations of such Debtor undertaken herein might be construed to consist, at
least in part, of the guaranty of obligations of Persons or entities other than
such Debtor (including the other Debtors party hereto) and, in full recognition
of that fact, each Debtor consents and agrees that Secured Party may, at any
time and from time to time, without notice or demand, whether before or after
any actual or purported termination, repudiation or revocation of this Agreement
by any one or more Debtors, and without affecting the enforceability or
continuing effectiveness hereof as to each Debtor: (a) if it has so agreed with
the applicable other Debtors, supplement,
-9-
<PAGE>
restate, modify, amend, increase, decrease, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Secured Obligations or
any part thereof, including any increase or decrease of the rate(s) of interest
thereon; (b) supplement, restate, modify, amend, (if it has so agreed with the
applicable other Debtors) increase, decrease or waive, or enter into or give any
agreement, approval or consent with respect to, the Secured Obligations or any
part thereof, or any of the Loan Documents or any additional security or
guarantees, or any condition, covenant, default, remedy, right, representation
or term thereof or thereunder; (c) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan Documents
or the Secured Obligations or any part thereof; (d) accept partial payments on
the Secured Obligations; (e) receive and hold additional security or guarantees
for the Secured Obligations or any part thereof; (f) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as Secured Party in its sole and
absolute discretion may determine; (g) release any Person from any personal
liability with respect to the Secured Obligations or any part thereof; (h)
settle, release on terms satisfactory to Secured Party or by operation of
applicable laws or otherwise liquidate or enforce any Secured Obligations and
any security therefor or guaranty thereof in any manner, consent to the transfer
of any security and bid and purchase at any sale; or (i) consent to the merger,
change or any other restructuring or termination of the corporate or partnership
existence of any Debtor or any other Person, and correspondingly restructure the
Secured Obligations, and any such merger, change, restructuring or termination
shall not affect the liability of any Debtor or the continuing effectiveness
hereof, or the enforceability hereof with respect to all or any part of the
Secured Obligations.
Upon the occurrence and during the continuance of any Event of
Default, Secured Party may enforce this Agreement independently as to each
Debtor and independently of any other remedy or security Secured Party at any
time may have or hold in connection with the Secured Obligations, and it shall
not be necessary for Secured Party to marshal assets in favor of any Debtor or
any other Person or to proceed upon or against or exhaust any security or remedy
before proceeding to enforce this Agreement. Each Debtor expressly waives any
right to require Secured Party to marshal assets in favor of any Debtor or any
other Person or to proceed against any other Debtor or any collateral provided
by any Person, and agrees that Secured Party may proceed against Debtors or any
collateral in such order as it shall determine in its sole and absolute
discretion .
Secured Party may file a separate action or actions against any
Debtor, whether action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Debtor agrees that Secured Party and any Debtor and any
Affiliate of any Debtor may deal with each other in connection with the Secured
Obligations or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the continuing efficacy of this Agreement.
-10-
<PAGE>
Secured Party's rights hereunder shall be reinstated and revived, and
the enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the Secured Obligations which thereafter shall be
required to be restored or returned by Secured Party, all as though such amount
had not been paid. The rights of Secured Party created or granted herein and the
enforceability of this Agreement at all times shall remain effective to cover
the full amount of all the Secured Obligations even though the Secured
Obligations, including any part thereof or any other security or guaranty
therefor, may be or hereafter may become invalid or otherwise unenforceable as
against any Debtor and whether or not any other Debtor shall have any personal
liability with respect thereto.
To the maximum extent permitted by applicable law, each Debtor
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (a) any disability or other defense of any other Debtor with respect
to the Secured Obligations, (b) the unenforceability or invalidity of any
security or guaranty for the Secured Obligations or the lack of perfection or
continuing perfection or failure of priority of any security for the Secured
Obligations, (c) the cessation for any cause whatsoever of the liability of any
other Debtor (other than by reason of the full payment and performance of all
Secured Obligations), (d) any failure of Secured Party to marshal assets in
favor of any Debtor or any other Person, (e) any failure of Secured Party to
give notice of sale or other disposition of collateral to any Debtor or any
other Person or any defect in any notice that may be given in connection with
any sale or disposition of collateral, (f) any failure of Secured Party to
comply with applicable law in connection with the sale or other disposition of
any collateral or other security for any Secured Obligation, including any
failure of Secured Party to conduct a commercially reasonable sale or other
disposition of any collateral or other security for any Secured Obligation, (g)
any act or omission of Secured Party or others that directly or indirectly
results in or aids the discharge or release of any of any Debtor or the Secured
Obligations or any security or guaranty therefor by operation of law or
otherwise, (h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (i) any failure of Secured Party to
file or enforce a claim in any bankruptcy or other proceeding with respect to
any Person, (j) the election by Secured Party of the application or non-
application of Section 1111(b)(2) of the United States Bankruptcy Code, (k) any
extension of credit or the grant of any lien under Section 364 of the United
States Bankruptcy Code, (l) any use of cash collateral under Section 363 of the
United States Bankruptcy Code, (m) any agreement or stipulation with respect to
the provision of adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien in favor of Secured Party for any reason, or (o)
any action taken by Secured Party that is authorized by this section or any
other provision of any Loan Document. Until such time as all of the Secured
Obligations have been fully, finally, and indefeasibly paid in full in cash: (i)
each Debtor hereby waives and postpones any right of subrogation it has or may
have as against any other Debtor with respect to the Secured Obligations; and
(ii) in addition, each Debtor also hereby waives and postpones any right to
proceed or to seek recourse against or with respect to any property or asset of
any other Debtor. Each Debtor expressly waives all setoffs and counterclaims and
all presentments,
-11-
<PAGE>
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Secured
Obligations, and all notices of acceptance of this Agreement or of the
existence, creation or incurring of new or additional Secured Obligations.
In the event that all or any part of the Secured Obligations at any time
are secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Debtor
authorizes Secured Party on Secured Party's behalf), upon the occurrence of and
during the continuance of any Event of Default, at its sole option, without
notice or demand and without affecting the obligations of any Debtor, the
enforceability of this Agreement, or the validity or enforceability of any liens
of, or for the benefit of, Secured Party on any collateral, to foreclose any or
all of such deeds of trust or mortgages or other instruments by judicial or
nonjudicial sale.
To the fullest extent permitted by applicable law, each Debtor expressly
waives any defenses to the enforcement of this Agreement or any rights of
Secured Party created or granted hereby or to the recovery by Secured Party
against any Debtor or any other Person liable therefor of any deficiency after a
judicial or nonjudicial foreclosure or sale, even though such a foreclosure or
sale may impair the subrogation rights of Debtors and may preclude Debtors from
obtaining reimbursement or contribution from other Debtors. Each Debtor
expressly waives any suretyship defenses or benefits that it otherwise might or
would have under applicable law. Each Debtor expressly waives any right to
receive notice of any judicial or nonjudicial foreclosure or sale of any real
property or interest therein of another Debtor that is subject to any such deeds
of trust or mortgages or other instruments and any Debtor's failure to receive
any such notice shall not impair or affect such Debtor's obligations or the
enforceability of this Agreement or any rights of Secured Party created or
granted hereby. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS SECTION, EACH DEBTOR WAIVES ALL RIGHTS AND DEFENSES
ARISING OUT OF AN ELECTION OF REMEDIES BY SECURED PARTY, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR THE OBLIGATIONS, HAS DESTROYED SUCH DEBTOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE PRINCIPAL DEBTOR BY THE OPERATION LAW OR OTHERWISE.
Debtors and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Debtors otherwise
may have against other Debtors, Secured Party or others, or against Collateral.
If any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.
MDT CORPORATION,
a Delaware corporation
By: /s/ Thomas Hein
--------------------------
Title: V.P. Finance & Treasurer
MDT BIOLOGIC COMPANY,
a Delaware corporation
By: /s/ Thomas Hein
--------------------------
Title: Treasurer
MDT DIAGNOSTIC COMPANY,
a Delaware corporation
By: /s/ Thomas Hein
--------------------------
Title: Treasurer
MDT CANADA LIMITED,
a corporation incorporated under the laws of the
Province of Ontario
By: /s/ Thomas Hein
--------------------------
Title: Treasurer
MDT TECHNIONIC COMPANY,
a Delaware corporation
By: /s/ Thomas Hein
--------------------------
Title: Treasurer
-13-
<PAGE>
WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent
By: /s/ Paul S. Dobel
------------------------
Title: S.V.P.
-14-
<PAGE>
LIST OF OMITTED SCHEDULES
-------------------------
The following Schedules to the Trademark Security Agreement have been
omitted and will be provided to the Commission upon request:
Schedule A - U.S. Trademarks of Each Debtor; Foreign Trademarks
of each Debtor
<PAGE>
STATE OF North Carolina )
COUNTY OF Wake ) ss
On March 26, 1996, before me, Emogene Dominick, Notary Public, personally
appeared Thomas M. Hein, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Emogene Dominick
---------------------------
Signature
[SEAL] [My Commission Expires 9-13-2000]
STATE OF __________________ )
) ss
COUNTY OF _______________ )
On ____________, 1996, before me, ______________________________, Notary
Public, personally appeared ______________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
---------------------------
Signature
[SEAL]
<PAGE>
STATE OF __________________ )
) ss
COUNTY OF _______________ )
On ____________, 1996, before me, ______________________________, Notary
Public, personally appeared ______________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
---------------------------
Signature
[SEAL]
STATE OF California )
------------------
) ss
COUNTY OF San Francisco )
------------------
On March 26, 1996, before me, Barbara L. McCauley, Notary
-------- -------------------
Public, personally appeared Paul S. Dobel, personally known to
-------------
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara L. McCauley
-----------------------
Signature
[SEAL]
<PAGE>
EXHIBIT 11
MDT CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
Year Ended March 31, 1996
<TABLE>
<CAPTION>
Years Ended March 31,
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of
common shares outstanding
during the year 6,656,000 6,745,000 6,769,000
Number of common equivalent
shares (determined using the
Treasury stock method)
related to stock options and
warrants outstanding at the
year ended 125,000 30,000 --
---------- ---------- -----------
Weighted average number of
common and common equivalent
shares outstanding 6,781,000 6,775,000 6,769,000
========== ========== ===========
Income (Loss) before cumulative
effect of change in accounting
method $1,243,000 $ 276,000 $(6,066,000)
Cumulative effect of change in
accounting method 699,000 -- --
---------- ---------- -----------
Net Income (Loss) $1,942,000 $ 276,000 $(6,066,000)
========== ========== ===========
Earnings (loss) per share:
Income (Loss) before cumulative
effect of change in accounting
method 0.18 0.04 (.90)
Cumulative effect of change in
accounting method 0.11 -- --
---------- ---------- ----------
Net Income (Loss) $ 0.29 $ 0.04 $ (.90)
========== ========== ==========
</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.
MDT Technionic Company, a Delaware corporation.
<PAGE>
EXHIBIT 23.1
[LETTERHEAD OF KPMG PEAT MARWICK]
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 Form 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 17, 1996,
except as to the third paragraph of note 9 and the second paragraph of note 17,
which are as of July 12, 1996, relating to the consolidated balance sheets of
MDT Corporation and subsidiaries as of March 31, 1996 and 1995, and the related
consolidated statements of income (loss), stockholders' equity and cash flows
for each of the years in the three-year period ended March 31, 1996, and the
related schedule, which report appears in the March 31, 1996 Annual Report on
Form 10-K of MDT Corporation.
Our report contains an explanatory paragraph that states that the status of the
Company's existing credit facilities and the need for borrowing capacity during
fiscal 1997 raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
Raleigh, North Carolina
July 12, 1996
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF KPMG PEAT MARWICK]
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
31, 1996, except as to notes 7, which are as of June 17, 1996, relating to the
statements of net assets available for plan benefits of MDT Corporation Savings
and Thrift Plan for Salaried Employees and MDT Corporation Savings and Thrift
Plan for Hourly Employees, and our report dated May 31, 1996 relating to the
statements of net assets available for plan benefits of the MDT Corporation
Savings and Thrift Plan for Union Employees as of December 31, 1995 and 1994,
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, 1995 and reportable transactions for the year ended
December 31, 1995, which reports appear in the March 31, 1996 Annual Report on
Form 10-K of MDT Corporation.
/s/ KPMG Peat Marwick LLP
Raleigh, North Carolina
July 12, 1996
<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 12 MONTHS ENDED MARCH 31, 1996, 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-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,990
<SECURITIES> 0
<RECEIVABLES> 30,000
<ALLOWANCES> (692)
<INVENTORY> 33,872
<CURRENT-ASSETS> 69,802
<PP&E> 49,638
<DEPRECIATION> (23,058)
<TOTAL-ASSETS> 100,528
<CURRENT-LIABILITIES> 56,336
<BONDS> 496
0
0
<COMMON> 8,462
<OTHER-SE> 30,933
<TOTAL-LIABILITY-AND-EQUITY> 100,528
<SALES> 131,188
<TOTAL-REVENUES> 131,188
<CGS> 94,449
<TOTAL-COSTS> 94,449
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 271
<INTEREST-EXPENSE> 3,443
<INCOME-PRETAX> (8,791)
<INCOME-TAX> (2,725)
<INCOME-CONTINUING> (6,066)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,066)
<EPS-PRIMARY> (.90)
<EPS-DILUTED> (.90)
</TABLE>
<PAGE>
EXHIBIT 99.1
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, 1995 and 1994, 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 as of December 31, 1995
and 1994, and the changes in 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.
May 31, 1996,
except as to
note 7, which
is as of
June 17, 1996
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1995
<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 454,526 100,747 43,703 8,191
Receivables:
Employer contributions 1,387 411 394 111
Employees' contributions 3,564 2,031 1,141 433
Other - - - -
-------- ------- ------ -----
4,951 2,442 1,535 544
Due from (to) other funds 1,322 405 83 9
-------- ------- ------ -----
Net assets available
for plan benefits $460,799 103,594 45,321 8,744
======== ======= ====== =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------
Asset
Management Loan
Fund II Fund Other Total
---------- ---- ----- -----
<S> <C> <C> <C>
- 68,317 - 68,317
24,081 - - 631,248
237 - 2,745 5,285
714 - 7,715 15,598
- 70 248 318
------ ------ ------ ------
951 70 10,708 21,201
37 (1,856) - -
------ ------ ------ ------
25,069 66,531 10,708 720,766
====== ====== ====== =======
</TABLE>
<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
Fund II Fund Total
- - ---------- ---- -----
<S> <C> <C>
- 61,443 61,443
17,811 - 506,078
- - 966
- - 2,751
(314) 307 (245)
------ ------ -------
(314) 307 3,472
- (1,530) -
------ ------ ------
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, 1995
<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 $ 26,026 6,857 4,074 1,153
Employees' 88,526 24,627 14,337 4,087
-------- ------- ------- -----
114,552 31,484 18,411 5,240
Net income (loss) from
Master Trust investments,
net of administrative
expenses 22,039 23,071 (10,413) 449
Interest income on
employees' loans - - - -
Other - - - -
-------- ------- ------- -----
Total additions 136,591 54,555 7,998 5,689
Benefit payments (53,931) (4,634) (3,497) (56)
Transfers among funds (13,619) (575) (3,410) 71
-------- ------- ------- -----
Net increase 69,041 49,346 1,091 5,704
Net assets available
for plan benefits:
Beginning of year 391,758 54,248 44,230 3,040
-------- ------- ------- -----
End of year $460,799 103,594 45,321 8,744
======== ======= ======= =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------
Asset
Management Loan
Fund II Fund Other Total
- - ---------- ---- ----- -----
<S> <C> <C> <C>
2,317 - 2,745 43,172
7,862 - 7,715 147,154
------ ------- ------ -------
10,179 10,460 190,326
3,931 - - 39,077
- 4,741 - 4,741
- 70 248 318
------- ------- ------ -------
14,110 4,811 10,708 234,462
(5,640) (16,931) - (84,689)
(898) 18,431 - -
------- ------- ------ -------
7,572 6,311 10,708 149,773
17,497 60,220 - 570,993
------ ------ ------- -------
25,069 66,531 10,708 720,766
====== ====== ====== =======
</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 MDT U.S.
Guaranteed Equity 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 - - - -
Other - - - -
-------- ------ ------ -----
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>
1,938 - 40,575
11,114 - 141,622
------ ------- -------
13,052 182,197
(330) - 25,844
- 828 828
- 307 307
------ ------ -------
12,722 1,135 209,176
(2,929) (1,388) (44,613)
(495) 60,473 -
- - (2,897)
------ ------ -------
9,298 60,220 161,666
8,199 - 409,327
- - ------- ------ -------
17,497 60,220 570,993
====== ====== =======
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 1995 and 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.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect the reported amounts of net assets
available for plan benefits as of the date of the financial statements and
the reported amounts of income during the reporting period. Actual results
could differ from those estimates.
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.
Reclassification
----------------
Certain 1994 financial statement amounts have been reclassified to conform
to the current year presentation.
-2-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(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, 1995 and 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 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 Other fund is a short-term investment fund utilized by the Plan and is
not an investment option available to the participants. The purpose of this
fund is to hold unallocated funds relating to forfeitures,
contribution/loan repayment funding differences, and contribution/loan
repayment funding prior to being allocated to the appropriate investment
funds. Based on participant direction, the investment earnings are
allocated to the appropriate investment funds. Based on participant
direction, the investment earnings are allocated to the appropriate
investment options coincident with the record keeping update.
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, 1995 and 1994 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-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------------------
<TABLE>
<CAPTION>
Statement of net assets of the Master Trust as of December 31, 1995:
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 $ - - 11,832 - - 11,832
Investments at fair value:
MDT Corp. common stock - - 1,372,005 - - 1,372,005
U.S. Government securities - - - 316,060 - 316,060
Other marketable securities - 8,089,941 - - 2,799,154 10,889,095
Investments at contract value:
Guaranteed income group
annuity contracts 18,858,614 - - - - 18,858,614
----------- --------- --------- ------- --------- ----------
18,858,614 8,089,941 1,383,837 316,060 2,799,154 31,447,606
Receivables:
Interest and dividends 86,949 100 118 1 33 87,201
Investments sold - 78,351 - 1,395 - 79,746
----------- --------- --------- ------- --------- ----------
86,949 78,451 118 1,396 33 166,947
----------- --------- --------- ------- --------- ----------
Total assets 18,945,563 8,168,392 1,383,955 317,456 2,799,187 31,614,553
Liabilities
-----------
Accounts payable for
investments purchased - 78,351 - 1,395 - 79,746
-------- --------- --------- ------- --------- ----------
Net assets $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
</TABLE>
-4-
<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>
-5-
<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, 1995 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 $15,179,950 7,174,235 1,011,747 301,095 2,628,113 26,295,140
Union Plan 3,311,087 815,059 328,505 6,775 146,993 4,608,419
Hourly Plan 454,526 100,747 43,703 8,191 24,081 631,248
----------- --------- --------- ------- --------- ----------
Net assets $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
Investment in Master Trust for each participating plan as of December 31, 1994 is as follows:
Open End MDT U.S. Asset
Guaranteed Equity Index Stock Government Management
Income Fund II Fund II Fund Fund Fund II Total
-------------- ------------ ---------- ---------- ---------- -----
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>
-6-
<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, 1995:
<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 $ 1,150,377 1,596 1,525 11,629 584 1,165,711
Dividends - 190,641 - - 152,647 343,288
Net appreciation
(depreciation)
in fair value - 1,747,689 (170,455) 6,469 304,191 1,887,894
----------- --------- --------- ------- --------- ----------
Total invest-
ment earnings
(losses) 1,150,377 1,939,926 (168,930) 18,098 457,422 3,396,893
Administrative expenses (77,850) (20,343) (3,800) (709) (7,367) (110,069)
----------- --------- --------- ------- --------- ----------
Net investment
earnings
(losses) 1,072,527 1,919,583 (172,730) 17,389 450,055 3,286,824
Net transfers in (out) (537,657) 365,677 134,418 28,177 242,995 233,610
Transfers among funds (1,515,290) 842,512 257,552 120,403 294,823 -
----------- --------- --------- ------- --------- ----------
Net increase
(decrease) on
net assets (980,420) 3,127,772 219,240 165,969 987,873 3,520,434
Net assets:
Beginning of year 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
----------- --------- --------- ------- --------- ----------
End of year $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
</TABLE>
-7-
<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>
-8-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR HOURLY EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Net investment earnings (loss) from the Master Trust investments (net of
administrative expenses) for each participating plan for the year ended
December 31, 1995 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 $ 871,449 1,708,493 (137,700) 16,463 423,031 2,881,736
Union Plan 179,039 188,019 (24,617) 477 23,093 366,011
Hourly Plan 22,039 23,071 (10,413) 449 3,931 39,077
------------ ---------- -------- ------ ------- ---------
Net investment
earnings
(losses) $ 1,072,527 1,919,583 (172,730) 17,389 450,055 3,286,824
========= ========= ======= ====== ======= =========
</TABLE>
Net investment earnings (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>
-9-
<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.
(7) Subsequent Events
-----------------
Tender Offer of Sponsor Shares
------------------------------
MDT Corporation, the Plan sponsor, is the subject of a pending public
tender offer for its outstanding shares.
Effective May 17, 1996, the Plan was amended to require the trustee to
notify participants and inquire as to whether the Company stock allocated
to participants' accounts for purposes of a public offering should be
tendered. Each participant may elect that all, but not less than all, of
the Company stock allocated to his account be tendered by the trustee on
his behalf.
Any securities or other property received by the trustee as a result of
having tendered Company stock shall be held, and any cash received be
invested in short-term investments, pending further action the trustee may
be required or directed to take, including elections by participants to
transfer such amounts to another fund. Effective September 30, 1996, any
such funds remaining tin the MDT Stock Fund shall be transferred to the
Asset Management Fund II, andy any election by a participant that
contributions be invested in the MDT Stock Fund shall be deemed an election
to invest in the Asset Management Fund II.
Effective July 1, 1996, the Plan was rewritten to provide that MDT
Corporation Retirement Plan accounts be transferred to the Plan.
Additionally, the Plan was renamed the MDT Corporation Retirement Savings
Plan for Hourly Employees. Moreover, the Plan rewrite provided a health
plan component such that amounts distributed on account of total and
permanent disability, as defined, are excluded from income under the
Internal Revenue Code.
-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, 1995
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Identity of issuer, Description of investment,
borrower, lessor, or including maturity date, Historical Current
similar party rate of interest, collateral, Cost Value
par or maturity value
- - --------------------------------------------------------------------------------
Investment in MDT
Corporation Master (1) $597,260 631,248
Trust No. 161326160
- - --------------------------------------------------------------------------------
Investment in Employees' Loans to plan participants,
Loans maturity dates through 2005,
interest rates from 7.25% to - 68,317
10.00% per annum
- - --------------------------------------------------------------------------------
</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, 1995
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) Expense (g) (h) Current (i) Net gain
Description Purchase Selling Lease incurred Cost value of or (loss)
of asset Price Price Rental with of asset on
(including transaction asset transaction
interest rate date
and maturity
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 $ - - - - - 190,326 -
- - ------------------------------------------------------------------------------------------------------------------------------------
MDT Corporation Divestiture of
Interests in
Master Trust -
Benefit
Payments - - - $84,689 - - -
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.2
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, 1995 and 1994, 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 as of December 31,
1995 and 1994, and the changes in 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.
May 31, 1996,
expect as to
note 7, which
is as of
June 17, 1996
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1995
<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 $15,179,950 7,174,235 1,011,747 301,095
Receivables:
Employer contributions 19,224 13,196 3,255 915
Employees' contributions 70,206 51,791 10,758 3,249
Other - - - -
----------- --------- --------- -------
89,430 64,987 14,013 4,164
Due from (to) other funds (3,109) 12,977 2,176 172
----------- --------- --------- -------
Net assets available
for plan benefits $15,266,271 7,252,199 1,027,936 305,431
=========== ========= ========= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
------------------------------
Asset
Management Loan
Assets Fund II Fund Other Total
------ ---------- ---- ----- -----
<S> <C> <C> <C> <C>
Investment in employees' loans 891,427 - 891,427
Investment in Master Trust 2,628,113 - - 26,295,140
Receivables:
Employer contributions 5,938 - 26,283 68,811
Employees' contributions 23,731 - 73,035 232,770
Other - 173 1,568 1,741
--------- ------- ------- ----------
29,669 173 100,886 303,322
Due from (to) other funds 10,162 (22,378) - -
--------- ------- ------- ----------
Net assets available
for plan benefits 2,667,944 869,222 100,886 27,489,889
========= ======= ======= ==========
</TABLE>
<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 Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1995
<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 $ 257,600 145,079 40,377 10,631
Employees' 1,006,407 572,561 137,490 38,604
----------- --------- -------- -------
1,264,007 717,640 177,867 49,235
Net income (loss) from
Master Trust investments,
net of administrative
expenses 871,449 1,708,493 (137,700) 16,463
Interest income on employees'
loans - - - -
Other - - - -
----------- --------- -------- -------
Total additions 2,135,456 2,426,133 40,167 65,698
Benefit payments (1,756,803) (309,886) (33,476) (20,836)
Transfers among funds (1,520,262) 678,099 95,698 115,953
----------- --------- -------- -------
Net increase (decrease) (1,141,609) 2,794,346 102,389 160,815
Net assets available
for plan benefits:
Beginning of year 16,407,880 4,457,853 925,547 144,616
----------- --------- -------- -------
End of year $15,266,271 7,252,199 1,027,936 305,431
=========== ========= ========= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------
Asset
Management Loan
Fund II Fund Other Total
---------- ---- ----- -----
<S> <C> <C> <C> <C>
Contributions:
Employer 67,010 - 26,283 546,980
Employees' 277,046 - 73,035 2,105,143
------- ------ ------- ----------
344,056 - 99,318 2,652,123
Net income (loss) from
Master Trust investments,
net of administrative
expenses 423,031 - - 2,881,736
Interest income on employees'
loans - 53,970 - 53,970
Other - 173 1,568 1,741
------- ------ ------- ----------
Total additions 767,087 54,143 100,886 5,589,570
Benefit payments (60,301) (29,522) - (2,210,824)
Transfers among funds 248,116 382,396 - -
------- ------ ------- ----------
Net increase (decrease) 954,902 407,017 100,886 3,378,746
Net assets available
for plan benefits:
Beginning of year 1,713,042 462,205 - 24,111,143
--------- ------- ------- ----------
End of year 2,667,944 869,222 100,886 27,489,889
========= ======= ======= ==========
</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, 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 - - - -
Other - - - -
---------- --------- -------- -------
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 - 7,273 7,273
Other - 2,473 2,473
---------- --------- ----------
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
Notes to Financial Statements
December 31, 1995 and 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.
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect the reported amounts of net assets
available for plan benefits as of the date of the financial statements and
the reported amounts of income during the reporting period. Actual results
could differ from those estimates.
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.
Reclassification
----------------
Certain 1994 financial statement amounts have been reclassified to conform
to the current year presentation.
-2-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(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, 1995 and 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 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 Other fund is a short-term investment fund utilized by the Plan and is
not an investment option available to the participants. The purpose of this
fund is to hold unallocated funds relating to forfeitures,
contribution/loan repayment funding differences, and contribution/loan
repayment funding prior to being allocated to the appropriate investment
funds. Based on participant direction, the investment earnings are
allocated to the appropriate investment options coincident with the record
keeping update.
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, 1995 and 1994 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-
<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, 1995:
<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 $ - - 11,832 - - 11,832
Investments at fair value:
MDT Corp. common stock - - 1,372,005 - - 1,372,005
U.S. Government securities - - - 316,060 - 316,060
Other marketable securities - 8,089,941 - - 2,799,154 10,889,095
Investments at contract value:
Guaranteed income group
annuity contracts 18,858,614 - - - - 18,858,614
---------- --------- --------- ------- --------- ----------
18,858,614 8,089,941 1,383,837 316,060 2,799,154 31,447,606
Receivables:
Interest and dividends 86,949 100 118 1 33 87,201
Investments sold - 78,351 - 1,395 - 79,746
---------- --------- --------- ------- --------- ----------
86,949 78,451 118 1,396 33 166,947
---------- --------- --------- ------- --------- ----------
Total assets 18,945,563 8,168,392 1,383,955 317,456 2,799,187 31,614,553
Liabilities
- - -----------
Accounts payable for
investments purchased - 78,351 - 1,395 - 79,746
---------- --------- --------- ------- --------- ----------
Net assets $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
</TABLE>
-4-
<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>
-5-
<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,
1995 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 $15,179,950 7,174,235 1,011,747 301,095 2,628,113 26,295,140
Union Plan 3,311,087 815,059 328,505 6,775 146,993 4,608,419
Hourly Plan 454,526 100,747 43,703 8,191 24,081 631,248
---------- --------- --------- ------- --------- ----------
Net assets $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
========== ========= ========= ======= ========= ==========
</TABLE>
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>
-6-
<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, 1995:
<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 $ 1,150,377 1,596 1,525 11,629 584 1,165,711
Dividends - 190,641 - - 152,647 343,288
Net appreciation
(depreciation)
in fair value - 1,747,689 (170,455) 6,469 304,191 1,887,894
---------- --------- --------- ------- --------- ----------
Total invest-
ment earnings
(losses) 1,150,377 1,939,926 (168,930) 18,098 457,422 3,396,893
Administrative expenses (77,850) (20,343) (3,800) (709) (7,367) (110,069)
---------- --------- --------- ------- --------- ----------
Net investment
earnings
(losses) 1,072,527 1,919,583 (172,730) 17,389 450,055 3,286,824
Net transfers in (out) (537,657) 365,677 134,418 28,177 242,995 233,610
Transfers among funds (1,515,290) 842,512 257,552 120,403 294,823 -
---------- --------- --------- ------- --------- ----------
Net increase on
net assets (980,420) 3,127,772 219,240 165,969 987,873 3,520,434
Net assets:
Beginning of year 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
---------- --------- --------- ------- --------- ----------
End of year $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
========== ========= ========= ======= ========= ==========
</TABLE>
-7-
<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>
-8-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR SALARIED EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Net investment earnings (losses) from the Master Trust investments (net of
administrative expenses) for each participating plan for the year ended
December 31, 1995 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 $ 871,449 1,708,493 (137,700) 16,463 423,031 2,881,736
Union Plan 179,039 188,019 (24,617) 477 23,093 366,011
Hourly Plan 22,039 23,071 (10,413) 449 3,931 39,077
--------- --------- -------- ------ ------- ---------
Net investment
earnings
(losses) $1,072,527 1,919,583 (172,730) 17,389 450,055 3,286,824
========= ========= ======== ====== ======= =========
</TABLE>
Net investment earnings (losses) 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>
-9-
<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 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.
(7) Subsequent Events
-----------------
Tender Offer of Sponsor Shares
------------------------------
MDT Corporation, the Plan sponsor, is the subject of a pending public
tender offer for its outstanding shares.
Effective May 17, 1996, the Plan was amended to require the trustee to
notify participants and inquire as to whether the Company stock allocated
to participants' accounts for purposes of a public offering should be
tendered. Each participant may elect that all, but not less than all, of
the Company stock allocated to his account be tendered by the trustee on
his behalf.
Any securities or other property received by the trustee as a result of
having tendered Company stock shall be held, and any cash received be
invested in short-term investments, pending further action the trustee may
be required or directed to take, including elections by participants to
transfer such amounts to another fund. Effective September 30, 1996, any
such funds remaining in the MDT Stock Fund shall be transferred to the
Asset Management Fund II, and any election by a participant that
contributions be invested in the MDT Stock Fund shall be deemed an election
to invest in the Asset Management Fund II.
Effective July 1, 1996, the Plan was rewritten to provide that MDT
Corporation Retirement Plan accounts be transferred to the Plan.
Additionally, the Plan was renamed the MDT Corporation Retirement Savings
Plan for Salaried Employees. Moreover, the Plan rewrite provided a health
plan component such that amounts distributed on account of total and
permanent disability, as defined, are excluded from income under the
Internal Revenue Code.
-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, 1995
<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) $ 24,905,721 26,295,140
- - --------------------------------------------------------------------------------------------------------------
Investment in Employees' Loans Loans to plan participants, maturity
dates through 2005, interest rates
from 7.25% to 10.00% per annum - 891,427
- - --------------------------------------------------------------------------------------------------------------
</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, 1995
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) Description of asset (c) Purchase (d) Selling Price (e) Lease (f) Expense incurred
(including interest rate and Price Price Rental with transaction
maturity in case of a loan)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MDT Acquisition of Interests in Master
Corporation Trust - Employee and
Employer Contributions $ - - - -
- - ------------------------------------------------------------------------------------------------------------------------------------
MDT Divestiture of Interests in Master
Corporation Trust - Benefit Payments - - - 2,210,824
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- - ---------------------------------------------------------------------------
(a) (g) Cost of (h) Current value of asset (i) Net gain
asset on transaction date or (loss)
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
MDT
Corporation
- 2,652,123 -
- - ---------------------------------------------------------------------------
MDT
Corporation - - -
- - ---------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.3
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, 1995 and 1994, 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 as of December 31, 1995
and 1994, and the changes in 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.
May 31, 1996
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1995
<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 $3,311,087 815,059 328,505 6,775
Receivables:
Employer contributions 7,039 1,689 346 53
Employees' contributions 24,879 6,933 1,102 145
Other - - - -
---------- ------- ------- -----
31,918 8,622 1,448 198
Due from (to) other funds 9,972 2,377 1,063 97
---------- ------- ------- -----
Net assets available
for plan benefits $3,352,977 826,058 331,016 7,070
========== ======= ======= =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------
Asset
Management Loan
Fund II Fund Other Total
- - ---------- ---- ----- -----
<S> <C> <C> <C>
- 484,929 - 484,929
146,993 - - 4,608,419
434 - 9,129 18,690
1,319 - 25,047 59,425
- 223 539 762
------- ------- ------ ---------
1,753 223 34,715 78,877
721 (14,230) - -
------- ------- ------ ---------
149,467 470,922 34,715 5,172,225
======= ======= ====== =========
</TABLE>
<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 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 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
Fund II Fund Total
- - ---------- ---- -----
<S> <C> <C>
- 401,769 401,769
95,104 - 3,971,921
- - 2,586
- - 10,693
(1,819) 2,111 (327)
------ ------- ---------
(1,819) 2,111 12,952
372 (9,701) -
------ ------- ---------
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, 1995
<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 $ 85,709 20,285 4,896 658
Employees' 323,121 81,058 14,724 2,065
---------- ------- ------- -----
408,830 101,343 19,620 2,723
Net income (loss) from
Master Trust investments,
net of administrative
expenses 179,039 188,019 (24,617) 477
Interest income on
employees' loans - - - -
Other - - - -
---------- ------- ------- -----
Total additions 587,869 289,362 (4,997) 3,200
Benefit payments (175,992) (8,397) (7,518) -
Transfers among funds (267,206) 62,187 140,197 (390)
---------- ------- ------- -----
Net increase(decrease) 144,671 343,152 127,682 2,810
Net assets available
for plan benefits:
Beginning of year 3,208,306 482,906 203,334 4,260
---------- ------- ------- -----
End of year $3,352,977 826,058 331,016 7,070
========== ======= ======= =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Asset
Management Loan
Fund II Fund Other Total
---------- ---- ----- -----
<S> <C> <C> <C>
5,136 - 9,129 125,813
15,535 - 25,047 461,550
------ ------ ------ --------
20,671 34,176 587,363
23,093 - - 366,011
- 33,912 - 33,912
- 223 539 762
------- ------ ------ --------
43,764 34,135 34,715 988,048
(1,447) (9,111) - (202,465)
13,493 51,719 - -
------- ------ ------ --------
55,810 76,743 34,715 785,583
93,657 394,179 - 4,386,642
-------- ------- ------ ---------
149,467 470,922 34,715 5,172,225
======= ======= ====== =========
</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, 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 $ 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 - - - -
Other - - - -
---------- ------- ------- -------
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>
5,197 - 100,051
18,140 - 374,011
------ ------ -------
23,337 - 474,062
(3,177) - 228,541
- 7,994 7,994
- 2,111 2,111
------ ------- --------
20,160 10,105 712,708
(33) - (289,157)
11,479 384,074 -
------ ------- --------
31,606 394,179 423,551
62,051 - 3,963,091
------ ------- ---------
93,657 394,179 4,386,642
====== ======= =========
</TABLE>
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
December 31, 1995 and 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.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect the
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
------------------------------------------
reported amounts of net assets available for plan benefits as of the date
of the financial statements and the reported amounts of income during the
reporting period. Actual results could differ from those estimates.
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.
Reclassification
----------------
Certain 1994 financial statement amounts have been reclassified to conform
to the current year presentation.
(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, 1995 and 1994, market
value of loans approximates fair value.
-2-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(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 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, 1995 and 1994 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-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
<TABLE>
<CAPTION>
(4) Investments (continued)
-----------
Statement of net assets of the Master Trust as of December 31, 1995:
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 $ - - 11,832 - - 11,832
Investments at fair value:
MDT Corp. common stock - - 1,372,005 - - 1,372,005
U.S. Government securities - - - 316,060 - 316,060
Other marketable securities - 8,089,941 - - 2,799,154 10,889,095
Investments at contract value:
Guaranteed income group
annuity contracts 18,858,614 - - - - 18,858,614
----------- --------- --------- ------- --------- ----------
18,858,614 8,089,941 1,383,837 316,060 2,799,154 31,447,606
Receivables:
Interest and dividends 86,949 100 118 1 33 87,201
Investments sold - 78,351 - 1,395 - 79,746
----------- --------- --------- ------- --------- ----------
86,949 78,451 118 1,396 33 166,947
----------- --------- --------- ------- --------- ----------
Total assets 18,945,563 8,168,392 1,383,955 317,456 2,799,187 31,614,553
Liabilities
-----------
Accounts payable for
investments purchased - 78,351 - 1,395 - 79,746
----------- --------- --------- ------- --------- ----------
Net assets $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
</TABLE>
-4-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
<TABLE>
<CAPTION>
(4) Investments (continued)
-----------------------
Statement of net assets of the Master Trust as of December 31, 1994:
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>
-5-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
<TABLE>
<CAPTION>
(4) Investments (continued)
-----------------------
Investment in Master Trust for each participating plan as of December 31, 1995 is as follows:
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 $15,179,950 7,174,235 1,011,747 301,095 2,628,113 26,295,140
Union Plan 3,311,087 815,059 328,505 6,775 146,993 4,608,419
Hourly Plan 454,526 100,747 43,703 8,191 24,081 631,248
----------- --------- --------- ------- --------- ----------
Net assets $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Investment in Master Trust for each participating plan as of December 31, 1994 is as follows:
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>
-6-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
<TABLE>
<CAPTION>
(4) Investments (continued)
-----------------------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1995:
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 $ 1,150,377 1,596 1,525 11,629 584 1,165,711
Dividends - 190,641 - - 152,647 343,288
Net appreciation
(depreciation)
in fair value - 1,747,689 (170,455) 6,469 304,191 1,887,894
----------- --------- --------- ------- --------- ----------
Total invest-
ment earnings
(losses) 1,150,377 1,939,926 (168,930) 18,098 457,422 3,396,893
Administrative expenses (77,850) (20,343) (3,800) (709) (7,367) (110,069)
----------- --------- --------- ------- --------- ----------
Net investment
earnings
(losses) 1,072,527 1,919,583 (172,730) 17,389 450,055 3,286,824
Net transfers in (out) (537,657) 365,677 134,418 28,177 242,995 233,610
Transfers among funds (1,515,290) 842,512 257,552 120,403 294,823 -
----------- --------- --------- ------- --------- ----------
Net increase
(decrease) on
net assets (980,420) 3,127,772 219,240 165,969 987,873 3,520,434
Net assets:
Beginning of year 19,925,983 4,962,269 1,164,715 150,092 1,811,314 28,014,373
----------- --------- --------- ------- --------- ----------
End of year $18,945,563 8,090,041 1,383,955 316,061 2,799,187 31,534,807
=========== ========= ========= ======= ========= ==========
</TABLE>
-7-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
<TABLE>
<CAPTION>
(4) Investments (continued)
-----------
Statement of changes in net assets of the Master Trust for the year ended
December 31, 1994:
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>
-8-
<PAGE>
MDT CORPORATION SAVINGS AND THRIFT PLAN
FOR UNION EMPLOYEES
Notes to Financial Statements
(4) Investments (continued)
-----------
Net income (losses) from the Master Trust investments (net of
administrative expenses) for each participating plan for the year ended
December 31, 1995 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 $ 871,449 1,708,493 (137,700) 16,463 423,031 2,881,736
Union Plan 179,039 188,019 (24,617) 477 23,093 366,011
Hourly Plan 22,039 23,071 (10,413) 449 3,931 39,077
------------ ---------- -------- --------- ----------- ---------
Net investment
earnings
(losses) $ 1,072,527 1,919,583 (172,730) 17,389 450,055 3,286,824
========== ========= ======= ====== ======= =========
</TABLE>
Net income (losses) 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>
<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, 1995
<TABLE>
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- - ------------------------------------------------------------------------------------------------------
Investment in MDT Corporation
Master Trust No. 161326160 (1) $4,359,994 4,608,419
- - ------------------------------------------------------------------------------------------------------
Investment in Employees' Loans to plan participants, maturity
Loans dates through 2005, interest rates from
7.25% to 10.00% per annum - 484,929
- - ------------------------------------------------------------------------------------------------------
</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, 1995
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
(a) (b)
Description of
asset (h) Current
(including (f) Expense (g) value of
interest rate (c) (d) (e) incurred Cost asset on (i) Net
and maturity in Purchase Selling Lease with of transaction gain or
case of a loan) Price Price Rental transaction asset date (loss)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MDT Corporation Acquisition of
Interests in
Master Trust -
Employee and
Employer
Contributions $ - - - - - 587,363 -
- - ------------------------------------------------------------------------------------------------------------------------------------
MDT Corporation Divestiture
of Interests
in Master
Trust -
Benefit
Payments - - - 202,465 - - -
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
