<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ___________ to ___________
Commission File Number: 33-26398
---------------
ADVANCED MEDICAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3492624
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9775 Businesspark Avenue, San Diego, CA 92131
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(619) 566-0426
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
On August 8, 1996, 16,138,525 shares of Registrant's Common Stock were
outstanding.
Page 1 of 18
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
INDEX
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements:
Page
----
Condensed consolidated balance sheets at
December 31, 1995 and June 30, 1996. . . . . . . . . . . . 3
Condensed consolidated statements of operations for the
three and six months ended June 30, 1995 and 1996. . . . . 4
Condensed consolidated statements of cash flows for the
six months ended June 30, 1995 and 1996. . . . . . . . . . 5
Condensed consolidated statement of changes in
stockholders' equity for the period from
December 31, 1995 to June 30, 1996 . . . . . . . . . . . . 6
Notes to the condensed consolidated financial statements . 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . 15
Item 2 - Changes in Securities . . . . . . . . . . . . . . Not applicable
Item 3 - Defaults Upon Senior Securities . . . . . . . . . 15
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 5 - Other Information . . . . . . . . . . . . . . . . Not applicable
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . 16
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<PAGE>
FORM 10 - Q
PART 1 - ITEM 1
FINANCIAL INFORMATION
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, JUNE 30,
1995 1996
------------ ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . $ 1,862 $ 2,108
Restricted cash and investment
securities . . . . . . . . . . . . . . . . . . . . . . 2,218 2,274
Securities available for sale. . . . . . . . . . . . . . 6,975 4,649
Receivables, net . . . . . . . . . . . . . . . . . . . . 27,023 23,984
Inventories. . . . . . . . . . . . . . . . . . . . . . . 15,829 17,964
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . . . . . . . . . 3,651 4,736
-------- --------
Total current assets . . . . . . . . . . . . . . . . . 57,558 55,715
Restricted cash. . . . . . . . . . . . . . . . . . . . . . 25,000 12,500
Net investment in sales-type and direct
financing leases . . . . . . . . . . . . . . . . . . . . 15,179 14,055
Property, plant and equipment, net . . . . . . . . . . . . 12,653 13,116
Other non-current assets . . . . . . . . . . . . . . . . . 11,834 10,494
Intangible assets, net . . . . . . . . . . . . . . . . . . 47,406 47,197
-------- --------
$169,630 $153,077
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . $ 322 $ 149
Accounts payable . . . . . . . . . . . . . . . . . . . . 7,881 7,416
Accrued expenses and other current
liabilities . . . . . . . . . . . . . . . . . . . . . 17,417 15,984
-------- --------
Total current liabilities. . . . . . . . . . . . . . . 25,620 23,549
-------- --------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 86,789 84,667
Other non-current liabilities. . . . . . . . . . . . . . . 6,972 6,683
-------- --------
93,761 91,350
-------- --------
Minority interests in consolidated
subsidiaries . . . . . . . . . . . . . . . . . . . . . . 11,500
-------- --------
Contingent liabilities (Note 5)
Mandatorily redeemable equity
securities . . . . . . . . . . . . . . . . . . . . . . . 7,217 7,543
-------- --------
Non-redeemable preferred stock, common stock and other
stockholders' equity: Preferred stock, authorized 6,000
and 3,000 shares at $.001 and $.01 par value,
respectively; issued and outstanding -- none
Common stock, authorized 75,000 shares at $.01 par value;
issued and outstanding -- 16,214 shares and
16,221 shares at December 31, 1995 and June 30, 1996,
respectively . . . . . . . . . . . . . . . . . . . . . 162 162
Capital in excess of par value . . . . . . . . . . . . . 62,965 61,654
Accumulated deficit. . . . . . . . . . . . . . . . . . . (34,468) (32,459)
Treasury stock . . . . . . . . . . . . . . . . . . . . . (734) (734)
Unrealized holding gains from
securities available for sale, net
of tax . . . . . . . . . . . . . . . . . . . . . . . . 3,577 1,800
Other equity . . . . . . . . . . . . . . . . . . . . . . 30 212
-------- --------
Total non-redeemable preferred
stock, common stock and other
stockholders' equity . . . . . . . . . . . . . . . . 31,532 30,635
-------- --------
$169,630 $153,077
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-3-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . $29,166 $28,105 $57,756 $53,870
Cost of sales. . . . . . . . . . . . . . . . . . . . 16,383 15,756 33,414 29,651
------- ------- ------- -------
Gross margin. . . . . . . . . . . . . . . . . . . . 12,783 12,349 24,342 24,219
------- ------- ------- -------
License fees revenue . . . . . . . . . . . . . . . . 110 111 220 221
------- ------- ------- -------
Selling expenses . . . . . . . . . . . . . . . . . . 4,694 4,655 8,914 8,862
General and administrative expenses. . . . . . . . . 2,328 2,579 5,201 5,545
Research and development expenses. . . . . . . . . . 1,905 1,977 3,991 3,789
------- ------- ------- -------
Total operating expenses. . . . . . . . . . . . . . 8,927 9,211 18,106 18,196
------- ------- ------- -------
Income from operations. . . . . . . . . . . . . . . 3,966 3,249 6,456 6,244
------- ------- ------- -------
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . 626 957 1,189 1,914
Interest expense. . . . . . . . . . . . . . . . . . (2,354) (2,184) (4,096) (4,399)
Other, net. . . . . . . . . . . . . . . . . . . . . 6 304 (153) 306
------- ------- ------- -------
(1,722) (923) (3,060) (2,179)
------- ------- ------- -------
Income before income taxes and extraordinary item. . 2,244 2,326 3,396 4,065
Provision for income taxes . . . . . . . . . . . . . 206 1,176 335 2,056
------- ------- ------- -------
Income before extraordinary item . . . . . . . . . . 2,038 1,150 3,061 2,009
Extraordinary item - gain on early retirement of
debt, net of taxes . . . . . . . . . . . . . . . . 6,370 15,177
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . . 8,408 1,150 18,238 2,009
Dividends and accretion on mandatorily redeemable
preferred stock. . . . . . . . . . . . . . . . . . 162 163 325 325
------- ------- ------- -------
Net income applicable to common stock. . . . . . . . $ 8,246 $ 987 $17,913 $ 1,684
------- ------- ------- -------
------- ------- ------- -------
Income per common share assuming no dilution:
Income before extraordinary item. . . . . . . . . . $ .12 $ .06 $ .18 $ .10
Extraordinary item. . . . . . . . . . . . . . . . . .40 1.01
------- ------- ------- -------
Net income per common share assuming no dilution $ .52 $ .06 $ 1.19 $ .10
------- ------- ------- -------
------- ------- ------- -------
Income per common share assuming full dilution:
Income before extraordinary item. . . . . . . . . . $ .06 $ .03 $ .09 $ .06
Extraordinary item. . . . . . . . . . . . . . . . . .20 .48
------- ------- ------- -------
Net income per common share assuming full
dilution. . . . . . . . . . . . . . . . . . . . $ .26 $ .03 $ .57 $ .06
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares outstanding assuming
no dilution . . . . . . . . . . . . . . . . . . . 15,942 16,402 15,018 16,432
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares outstanding assuming
full dilution . . . . . . . . . . . . . . . . . . 32,560 42,593 31,743 42,589
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-4-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1995 1996
------- --------
<S> <C> <C>
Net cash provided by operating activities. . . . . . . $ 8,631 $ 6,656
------- --------
Cash flows from investing activities:
Net (increase) decrease in restricted cash and
investments. . . . . . . . . . . . . . . . . . . . (305) 12,444
Capital expenditures . . . . . . . . . . . . . . . . (2,657) (2,793)
Payment for product distribution rights. . . . . . . (3,358) (1,503)
Proceeds from sale of investments. . . . . . . . . . 154
Proceeds from disposal of property . . . . . . . . . 28 37
------- --------
Net cash provided by (used in)
investing activities . . . . . . . . . . . . . . . . (6,292) 8,339
------- --------
Cash flows from financing activities:
Net repayments under credit facilities . . . . . . . (1,659) (1,973)
Principal payments on long-term debt . . . . . . . . (866) (322)
Purchase of IMED common stock warrants . . . . . . . (12,500)
Offering costs . . . . . . . . . . . . . . . . . . . (443)
Other. . . . . . . . . . . . . . . . . . . . . . . . 15
------- --------
Net cash used in financing activities. . . . . . . . . (2,968) (14,780)
------- --------
Effect of exchange rate changes on cash. . . . . . . . (69) 31
------- --------
Net increase (decrease) in cash and cash equivalents . (698) 246
Cash and cash equivalents at beginning of period . . . 1,340 1,862
------- --------
Cash and cash equivalents at end of period . . . . . . $ 642 $ 2,108
------- --------
------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-5-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
HOLDING
GAINS
FROM
COMMON STOCK CAPITAL IN TREASURY STOCK SECURITIES
--------------- EXCESS OF ACCUMULATED ---------------- AVAILABLE OTHER
SHARES AMOUNT PAR VALUE DEFICIT SHARES AMOUNT FOR SALE EQUITY TOTAL
------ ------ ---------- ----------- ------ ------ ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 16,214 $162 $62,965 $(34,468) 83 $(734) $ 3,577 $30 $31,532
Issuance of common stock 7 14 14
Dividends on mandatorily
redeemable preferred stock (325) (325)
Unrealized holding loss from
securities available for sale (1,777) (1,777)
Repurchase of stock warrants (1,000) (1,000)
Other equity transactions 182 182
Net income for the period 2,009 2,009
------ ---- ------- -------- -- ----- ------- ---- -------
Balance at June 30, 1996 16,221 $162 $61,654 $(32,459) 83 $(734) $ 1,800 $212 $30,635
------ ---- ------- -------- -- ----- ------- ---- -------
------ ---- ------- -------- -- ----- ------- ---- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-6-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
NOTE 1 -- BUSINESS AND STATEMENT OF ACCOUNTING POLICY
BUSINESS:
Advanced Medical, Inc. ("Advanced Medical"), operating through its major
operating subsidiary, IMED Corporation ("IMED"), is a leading developer and
manufacturer of infusion products and related technologies for the health care
industry (Advanced Medical and its subsidiaries are collectively referred to
herein as "the Company").
STATEMENT OF ACCOUNTING POLICY:
The accompanying financial statements have been prepared by the Company without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information not misleading.
In the opinion of the Company, the accompanying financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
statement of the Company's financial position as of June 30, 1996, and the
results of its operations and its cash flows for the six months ended June 30,
1995 and 1996.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform to the
classifications used in 1996.
NET INCOME PER COMMON SHARE:
Net income per common share assuming no dilution is computed using the weighted
average number of common and common stock equivalent shares outstanding during
the period. If dilutive, net income per common share assuming full dilution is
computed using the weighted average number of common and common stock equivalent
shares outstanding during the period plus the shares that would be outstanding
assuming conversion of the $6,000 secured promissory note ("$6,000 Note") issued
to Decisions Incorporated, a corporation affiliated with Jeffry M. Picower,
Chairman and CEO of the Company ("Decisions"), during January 1994, conversion
of the $6,500 secured promissory note ("$6,500 Note") issued to Decisions
during August 1994, and conversion of the $25,000 secured promissory note
("$25,000 Note") (collectively, "the Notes") issued to Decisions during December
1995. Assuming conversion of the Notes, interest expense (net of taxes) on the
convertible debt has been added to the net income applicable to common stock in
the amount of $150 and $412 for the three months ended June 30, 1995 and 1996,
respectively, and $299 and $824 for the six months ended June 30, 1995 and 1996,
respectively. Common stock equivalent shares are excluded from the computation
in periods in which they have an anti-dilutive effect.
-7-
<PAGE>
NOTE 2 -- INVENTORIES
Inventories comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Raw materials. . . . . . . . . . . . . $ 6,946 $ 7,012
Work-in-process. . . . . . . . . . . . 1,686 3,057
Finished goods . . . . . . . . . . . . 7,197 7,895
------- -------
$15,829 $17,964
------- -------
------- -------
</TABLE>
NOTE 3 -- INTANGIBLE ASSETS
Pursuant to the exclusive distribution agreement with Debiotech SA ("Debiotech")
("the Agreement"), IMED paid Debiotech $1,500 during the six months ended June
30, 1996 upon the attainment of certain milestones. The additional payment has
been classified as an intangible asset with previous payments made under the
Agreement, and is being amortized on a straight-line basis over the 15-year term
of the Agreement.
NOTE 4 -- PURCHASE OF IMED COMMON STOCK WARRANT
On June 28, 1996, Advanced Medical purchased General Electric Capital
Corporation's ("GECC") warrant to acquire common shares equal to 10% of IMED's
common stock, on a fully diluted basis, for $12,500. The proceeds from the
$25,000 Note were used to make this acquisition. The IMED common stock warrant
held by GECC had been valued at $11,500 and included in minority interest in
consolidated subsidiaries in the condensed consolidated balance sheet at
December 31, 1995. The purchase of the warrant has been treated as an equity
transaction. Accordingly, the $1,000 difference between the carrying value of
the minority interest and the purchase price was charged directly to
stockholders' equity.
NOTE 5 -- LITIGATION AND CONTINGENCIES
The Company is a defendant in various actions, claims and legal proceedings
arising from normal business operations. Management believes they have
meritorious defenses and intends to vigorously defend against all allegations
and claims. As the ultimate outcome of these matters is uncertain, no
contingent liabilities or provisions have been recorded in the accompanying
financial statements for such matters. However, in management's opinion, based
upon discussion with legal counsel, liabilities arising from these matters, if
any, will not have a material adverse affect on consolidated financial position,
results of operations or cash flows.
NOTE 6 -- MANDATORILY REDEEMABLE EQUITY SECURITIES
As of June 30, 1996, dividends in arrears on the $.01 par value mandatorily
redeemable preferred stock ("10% Preferred Stock") and the $.01 par value
mandatorily redeemable convertible preferred stock ("Convertible Preferred
Stock") were approximately $1,072 and $1,039, respectively. Additionally, the
Company did not declare the March 28, 1994 redemption of its 10% Preferred Stock
(redemption price of approximately $3,300).
On June 18, 1996, the Company and its directors entered into a Stipulation and
Agreement of Compromise and Settlement (the "Stipulation") with respect to the
settlement of an action based upon the Company's failure to redeem its
outstanding shares of 10% Preferred Stock and certain loans of Decisions to the
Company. Pursuant to the Stipulation, the Company agreed to (i) redeem its
outstanding 10% Preferred Stock, plus accrued and unpaid dividends, less an
amount (not to exceed $1.50 per share), if any, the court may award as fees to
counsel for plaintiff, (ii) the payment of up to $500 in attorneys fees and
(iii) amend its by-laws to add a provision concerning material transactions
between the Company and any control person. Pursuant to an order of the court
dated June 28, 1996, a hearing will be held on August 29, 1996 to determine
whether the terms of the settlement contained in the Stipulation should be
approved by the court.
-8-
<PAGE>
NOTE 7 -- SALE OF MARKETABLE SECURITIES
Other income for the three and six months ended June 30, 1996 includes gains on
the sale of marketable securities of $116.
NOTE 8 -- SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Income taxes paid during the six months ended June 30, 1995 and 1996 totaled
$1,232 and $3,077, respectively. Interest paid during the six months ended June
30, 1995 and 1996 totaled $3,566 and $3,315, respectively. Depreciation and
amortization expense for the six months ended June 30, 1995 and 1996 totaled
$3,996 and $4,145, respectively, which amounts included debt issue cost
amortization of $290 and $232, respectively.
NOTE 9 -- PURCHASE OF EUROPEAN DISTRIBUTION RIGHTS
On June 27, 1996, IMED entered into an agreement with its European marketing and
distribution partner, Pharmacia & Upjohn ("Pharmacia"), to acquire the European
Distribution Rights to its IMED line of intravenous infusion pumps and related
disposable administration sets. Under the agreement, IMED will pay, at closing,
approximately $11,000 to Pharmacia for the distribution rights and certain
assets relating to the distribution of IMED's products in Europe. The
transaction is expected to close by August 30, 1996.
-9-
<PAGE>
PART I -- ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
OVERVIEW
Advanced Medical is a holding company for IMED, Fidata Corporation ("Fidata")
and several investments. It also identifies and evaluates potential acquisitions
and investments and performs various corporate functions. As a holding company,
Advanced Medical currently has no revenues to fund its operating and interest
expenses and relies on cash generated by cash flow from IMED, external
borrowings, sale of investments and other external sources of funds to meet its
obligations.
For purposes of this discussion and analysis, the three months ended June 30,
1995 and 1996 are referred to as the 1995 Second Quarter and 1996 Second
Quarter, respectively, and the six months ended June 30, 1995 and 1996 are
referred to as 1995 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Management currently believes that sufficient cash will be available through
IMED, based upon current operations, to satisfy debt service and other corporate
expenses of Advanced Medical in the foreseeable future. In particular, the loan
agreement between IMED and General Electric Capital Corporation ("GECC")
("Amended Loan Agreement") permits IMED to transfer to Advanced Medical up to
$9.25 million annually to fund Advanced Medical's cash requirements for
operating and interest expenses.
In 1996, IMED's cash flow from operations was $10.1 million which was used for
(i) repayments of $2.0 million under the revolving credit facility, (ii)
advances of $3.9 million to Advanced Medical, as permitted under the Amended
Loan Agreement, (iii) payments of $1.5 million for the Debiotech Agreement, and
(iv) capital expenditures of $2.7 million. In addition to IMED's cash flow from
operations, IMED has readily available financial resources under a $35.0 million
revolving credit facility. As of June 30, 1996, IMED had $21.9 million
available for use under its revolving credit facility. IMED relies on cash
generated from operations, together with funds available from the revolving
credit facility, to fund its working capital requirements, interest on the GECC
credit facility, capital expenditures and transfers to Advanced Medical.
In addition to financial resources available to IMED from operations and the
revolving credit facility, management considers it important for Advanced
Medical to maintain financial resources to take advantage of growth and
investment opportunities. Accordingly, in December 1995, the Company borrowed
$25.0 million from Decisions Incorporated ("Decisions") (the "$25 Million
Note"). On June 28, 1996, Advanced Medical purchased GECC's warrant to acquire
common shares equal to 10% of IMED's common stock, on a fully diluted basis, for
$12.5 million. The proceeds from the $25 Million Note were used to make this
acquisition. As of June 30, 1996, $12.5 million remain from the proceeds of the
$25 Million Note and are available to satisfy growth and investment
opportunities, with some restrictions. The remaining proceeds are classified as
restricted cash (non-current) in the condensed consolidated balance sheet.
The Company considers its investment in the common stock of Alteon, Inc.
("Alteon") to be a significant source of capital and liquidity. Under the loan
agreements, the Alteon common stock holdings and the proceeds from any sales are
pledged as security and are restricted to the satisfaction of working capital
requirements. As of June 30, 1996, the Company owned approximately 423,000
shares of Alteon common stock which were registered under the Securities Act on
October 1, 1993, and had an aggregate market value of approximately $4.7 million
based upon the closing price per share on the NASDAQ National Market System
("NASDAQ"). Prices obtainable in any private sales of such securities are
likely to be lower than those quoted on the NASDAQ. Alteon is engaged in the
research and development of medical and pharmaceutical products and as such has
not yet successfully brought products to the market. Therefore,
-10-
<PAGE>
failure of Alteon to develop and market their products successfully could
adversely affect the ability of the Company to dispose of its investments
therein upon favorable terms.
The Company had working capital of $31.9 million as of December 31, 1995
compared with working capital of $32.2 million as of June 30, 1996. The
increase in working capital resulted primarily from an increase in inventory
levels and a reduction in taxes payable due to tax payments. The increase in
working capital resulting from these items was nearly offset by the decrease in
the market value of Advanced Medical's investment in Alteon common stock and the
reduction in accounts receivable due to the collection of year-end receivables.
The Company did not pay the March 28, 1994 mandatory redemption of all
outstanding shares of $.01 par value mandatorily redeemable preferred stock
("10% Preferred Stock") and has not declared and paid dividends since March
1993. As of June 30, 1996, there were 329,913 shares of 10% Preferred Stock
currently outstanding with a liquidation preference of $10 per share and accrued
and unpaid dividends were approximately $1.1 million. In addition to the 10%
Preferred Stock, as of June 30, 1996, there were 333,000 shares of 15%
convertible preferred stock currently outstanding with a liquidation preference
of $6.40 per share and accrued and unpaid dividends were approximately $1.0
million. Since the Company has obtained the consent of the holders of the $25
Million Note to do so, the Company intends to redeem the outstanding 10%
Preferred Stock, the 15% convertible preferred stock and to pay all accrued
dividends thereon in the near future from a portion of the proceeds from the $25
Million Note. (See Part 1, Item 1, Note 6.)
RESULTS OF OPERATIONS
SALES
The Company's sales, cost of sales, and selling expenses for the historical
periods shown consist exclusively of IMED's sales, cost of sales and selling
expenses and are presented in the table below.
<TABLE>
<CAPTION>
1995 1996
SECOND SECOND
QUARTER QUARTER 1995 1996
------- ------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
United States. . . . . . . . . . . . . . $ 24.0 $ 22.4 $ 47.5 $ 42.5
International. . . . . . . . . . . . . . 5.2 5.7 10.3 11.4
------ ------ ------ ------
Total sales. . . . . . . . . . . . . . $ 29.2 $ 28.1 $ 57.8 $ 53.9
------ ------ ------ ------
------ ------ ------ ------
Total sales. . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of sales. . . . . . . . . . . . . . 56.2 56.1 57.9 55.0
------ ------ ------ ------
Gross margin . . . . . . . . . . . . . . 43.8% 43.9% 42.1% 45.0%
------ ------ ------ ------
------ ------ ------ ------
Selling expenses . . . . . . . . . . . . $ 4.7 $ 4.7 $ 8.9 $ 8.9
------ ------ ------ ------
------ ------ ------ ------
Selling expenses as a percentage of sales 16.1% 16.6% 15.4% 16.5%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
-11-
<PAGE>
The following table sets forth IMED sales by major product groups for the
periods presented.
1995 1996
SECOND SECOND
QUARTER QUARTER 1995 1996
------- ------- ----- -----
(IN MILLIONS)
Piston Cassette Disposables. . . . . . . $ 3.8 $ 3.5 $ 9.2 $ 7.1
Peristaltic Disposables. . . . . . . . . 15.6 15.9 29.3 32.0
Piston Cassette Pumps. . . . . . . . . . 0.4 0.1
Peristaltic Pumps. . . . . . . . . . . . 7.6 6.3 13.8 10.0
ReadyMED . . . . . . . . . . . . . . . . 0.6 0.8 1.5 1.3
Other (1). . . . . . . . . . . . . . . . 1.6 1.6 3.6 3.4
----- ----- ----- -----
Total. . . . . . . . . . . . . . . . . . $29.2 $28.1 $57.8 $53.9
----- ----- ----- -----
----- ----- ----- -----
(1) Primarily includes operating lease income relating to pumps, service fees
and accessory sales.
The Company's major source of revenue is the sale of proprietary disposable
administration sets for its installed infusion instrument base. The overall
volume of disposables sold has grown from 1995 to 1996. This growth has been
achieved despite a change in protocol at certain hospitals increasing the
maximum time between set changes from every 24 hours to as much as every 72
hours, and results primarily from an increase in IMED's installed base,
including the addition of new accounts. The Company is unable to predict the
potential effect of this change in protocol, which is expected to continue with
respect to certain applications of IMED's products, on the Company's future
financial condition or results of operations. IMED's products are at the high
end of the industry price range and compete on the basis of technological
sophistication, quality, safety and flexibility in application.
Disposable administration sets used with IMED's piston cassette pumps had
generated, prior to the third quarter of 1992, a majority of IMED's overall
sales of disposables and of IMED's total revenues. Virtually all placements to
new customers during 1995 and 1996 consisted of Gemini instruments. Therefore,
sales of piston cassette products (pumps and disposables) are expected to
continue to decline as demand for IMED's pumps and proprietary disposable
administration sets reflects, to an increasing extent, the expected gradual
shift away from piston cassette technology and toward peristaltic technology,
such as that used in IMED's Gemini series of instruments, and other newer
technology. IMED's current sales efforts, which emphasize its Gemini series of
products, are both consistent with and encourage this shift. There can be no
assurance that future sales of peristaltic products will be sufficient to offset
the anticipated continued decline in sales of older technology.
The decrease in U.S. sales from the 1995 Second Quarter to the 1996 Second
Quarter and from 1995 to 1996 is due primarily to a decrease in the volume of
instrument shipments and the decline in the average selling prices of disposable
administration sets. Both 1995 Second Quarter and 1995 reflected instrument
volume with several large transactions. Efforts by hospitals to control
operating expenses continue to put pressure on the selling prices of disposable
administration sets. Disposable administration set volume increased from 1995
to 1996 partially offsetting the decline in average selling prices.
The increase in international sales from the 1995 Second Quarter to the 1996
Second Quarter and from 1995 to 1996 is due primarily to the increase in the
volume of disposable administration sets which resulted from increases in the
number of instruments installed and utilizing disposable administration sets in
Canada, Australia, Latin America and the Middle East. The disposable
administration set volume of IMED's European marketing and distribution partner,
Pharmacia & Upjohn ("Pharmacia"), increased from the 1995 Second Quarter to the
1996 Second Quarter and from 1995 to 1996, but the volume of instrument
shipments
-12-
<PAGE>
continued to decline during both periods. The decline in instrument shipments
by Pharmacia were partially offset by shipments in other territories,
particularly Latin America and the Far East.
GROSS MARGIN
The gross margin percentage increased from the 1995 Second Quarter to the 1996
Second Quarter and from 1995 to 1996 due to the reductions in the manufacturing
costs of disposable administration sets resulting from (i) the increased
outsourcing of molded parts and components, (ii) negotiated price reductions
from suppliers and (iii) the favorable effects of increased manufacturing
volume. In addition, the gross margin percentage increased from 1995 to 1996 due
to the lower unit cost for inventory at December 31, 1995 that were sold in 1996
compared to the unit cost for inventory at December 31, 1994 that were sold in
1995. The gross margin percentage from the 1995 Second Quarter to the 1996
Second Quarter and from 1995 to 1996 increased despite the decline in the
selling prices in the U.S. market discussed above.
GENERAL AND ADMINISTRATIVE EXPENSES
The following table sets forth general and administrative ("G&A") expenses for
Advanced Medical and its subsidiaries for the periods presented.
1995 1996
SECOND SECOND
QUARTER QUARTER 1995 1996
------- ------- ---- ----
(IN MILLIONS)
IMED . . . . . . . . . . . . . . . . . $2.0 $2.3 $4.4 $4.6
Advanced Medical . . . . . . . . . . . .2 .3 .6 .9
Fidata. . . . . . . . . . . . . . . . . .1 .2
---- ---- ---- ----
Total G&A expenses. . . . . . . . . $2.3 $2.6 $5.2 $5.5
---- ---- ---- ----
---- ---- ---- ----
The increase in IMED's G&A expenses from the 1995 Second Quarter to the 1996
Second Quarter and from 1995 to 1996 results from the recruitment and relocation
expenses of development personnel and certain expenses related to the Company's
investment in information technology.
Due to the nature of Advanced Medical's operations, G&A expenses fluctuate from
period to period as the majority of its costs are comprised of (i) professional
and consulting fees and indirect costs (such as travel costs) associated with
identifying, evaluating and making acquisitions and investments, (ii)
communication and meeting costs of shareholder and investor relations and (iii)
other costs of performing general holding company functions.
Advanced Medical has been winding down Fidata's remaining operations and
settling its remaining claims since it was acquired in March 1989. Due to
unresolved claims and lack of court and regulatory approval, the liquidation of
Fidata did not occur in 1995. Management expects to settle certain remaining
claims and liquidate Fidata completely in 1996. However, there can be no
assurance that Fidata will be completely liquidated in 1996 as such will require
court and regulatory approval.
RESEARCH AND DEVELOPMENT EXPENSES
The Company's research and development ("R&D") expenses, which consist
exclusively of IMED's R&D, increased slightly from the 1995 Second Quarter to
the 1996 Second Quarter and decreased from 1995 to 1996 due to the timing of
certain expenses associated with the development of a new line of hospital
infusion pumps and associated disposable administration sets. R&D expenses for
the year ending December 31, 1996 are expected to be comparable to those for the
year ended December 31, 1995.
-13-
<PAGE>
RESTRUCTURINGS
During 1993, the Company recorded a $3.5 million restructuring charge in
connection with the sale of IMED Ireland and relocation of its molding
operations to the United States. The charge included accruals of $1.3 million
related to estimated relocation costs and professional fees. Cash payments of
approximately $.1 million were made during 1995 and no cash payments were made
in 1996. As of June 30, 1996, the remaining accrual of $.5 million is expected
to be paid during 1996.
SEASONALITY
Infusion instrument sales are typically higher in the fourth quarter due to
sales compensation plans which reward the achievement of annual quotas and the
seasonal characteristics of the industry, including hospital purchasing
patterns. First quarter sales are traditionally not as strong as the fourth
quarter. The Company anticipates that this trend will continue but is unable to
predict the effect, if any, from health care reform and increased competitive
pressures.
OTHER MATTERS
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of
accounting for an employee stock option or similar equity instrument. It also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). The Company has elected to continue to measure its stock-based
compensation in accordance with APB 25. Certain pro forma disclosures required
by SFAS 123 will be made in 1996 in accordance with SFAS 123. The Company does
not expect the adoption of SFAS 123 to have a significant effect on its
financial position or results of operations.
HEALTH CARE REFORM
Heightened public awareness and concerns regarding the growth in overall health
care expenditures in the United States may result in the enactment of national
health care reform or other legislation affecting payment mechanisms and health
care delivery. Legislation which imposes limits on the number and type of
medical procedures which may be performed or which has the effect of restricting
a provider's ability to select specific devices or products for use in
administrating medical care may adversely impact the demand for the Company's
products. In addition, legislation which imposes restrictions on the price
which may be charged for medical products may adversely affect the Company's
results of operations. It is not possible to predict the extent to which the
Company or the health care industry in general may be adversely affected by the
aforementioned in the future.
FORWARD-LOOKING STATEMENTS
Forward-Looking Statements in this report are made pursuant to the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995. Persons
reading this report are cautioned that such forward-looking statements involve
risks and uncertainties, including, without limitation, the effect of
legislative and regulatory changes effecting the health care industry; the
potential of increased levels of competition; technological changes; the
dependence of the Company upon the success of new products and ongoing research
and development efforts; restrictions contained in the instruments governing the
Company's indebtedness; the significant leverage to which the Company is
subject; and other matters referred to in this report.
-14-
<PAGE>
PART II
OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
See Item 3. of the Company's December 31, 1995 Form 10-K and Item 3. of the June
30, 1996 Form 10-Q, below.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(B) ARREARAGES IN THE PAYMENT OF PREFERRED STOCK DIVIDENDS
The Company did not pay the March 28, 1994 mandatory redemption of all
outstanding shares of $.01 par value mandatorily redeemable preferred stock
("10% Preferred Stock") and has not declared and paid dividends since March
1993. As of June 30, 1996, there were 329,913 shares of 10% Preferred Stock
currently outstanding with a liquidation preference of $10 per share and accrued
and unpaid dividends were approximately $1,072,000. In addition to the 10%
Preferred Stock, as of June 30, 1996, there were 333,000 shares of 15%
convertible preferred stock currently outstanding with a liquidation preference
of $6.40 per share and accrued and unpaid dividends were approximately
$1,039,000.
On June 18, 1996, the Company and its directors entered into a Stipulation and
Agreement of Compromise and Settlement (the "Stipulation") with respect to the
settlement of an action based upon the Company's failure to redeem its
outstanding shares of 10% Preferred Stock and certain loans of Decisions to the
Company. Pursuant to the Stipulation, the Company agreed to (i) redeem its
outstanding 10% Preferred Stock, plus accrued and unpaid dividends, less an
amount (not to exceed $1.50 per share), if any, the court may award as fees to
counsel for plaintiff, (ii) the payment of up to $500,000 in attorneys fees and
(iii) amend its by-laws to add a provision concerning material transactions
between the Company and any control person. Pursuant to an order of the court
dated June 28, 1996, a hearing will be held on August 29, 1996 to determine
whether the terms of the settlement contained in the Stipulation should be
approved by the court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Advanced Medical, Inc. (the
"Company") was held on May 29, 1996.
(c) The following resolutions were voted upon and the results of the voting
were as follows:
1. Election of directors
VOTES VOTES
FOR WITHHELD
---------- --------
Jeffry M. Picower 12,067,953 40,969
Anthony Cerami 12,067,867 41,055
Norman M. Dean 12,066,643 42,279
Henry Green 11,959,447 149,475
Frederic Greenberg 12,067,467 41,455
Richard B. Kelsky 12,067,453 41,469
2. Ratification of appointment of Price Waterhouse LLP as independent
accountants
VOTES VOTES
FOR AGAINST ABSTAIN
---------- ------- -------
12,057,507 33,505 17,910
-15-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.15 -- Notice of Pendency of Class Action, Class Determination,
Settlement of Class and Derivative Action, Settlement Hearing and
Right to Appear to all holders of the Company's 10% Cumulative
Preferred Stock and common stock as of March 20, 1996 (and their
successors in interest) and all current shareholders of the Company.
10.27 -- Memorandum of Understanding dated March 19, 1996, by and between
the Company and plaintiff class represented by Richard C. Goodwin,
with respect to the settlement of a class action lawsuit.
10.28 -- Asset Transfer Agreement dated June 26, 1996 by and between the
Company and Pharmacia & Upjohn Limited with respect to the acquisition
of certain European assets.
10.29 -- Assignment Agreement dated June 26, 1996 by and between the Company
and Pharmacia, AB with respect to the acquisition of European
distribution rights.
11.1 -- Computation of Net Income per share for the three and six month
periods ended June 30, 1995 and 1996.
_________________________________________
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report is
being filed.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED MEDICAL, INC.
(REGISTRANT)
Date: August 14, 1996 By: /s/ JOSEPH W. KUHN
-------------------------
Joseph W. Kuhn
PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
-17-
<PAGE>
EXHIBIT INDEX
- -------------------------------------------------------------------------------
Exhibit
No.
- -------
4.15 -- Notice of Pendency of Class Action, Class Determination,
Settlement of Class and Derivative Action, Settlement Hearing
and Right to Appear to all holders of the Company's 10%
Cumulative Preferred Stock and common stock as of March 20,
1996 (and their successors in interest) and all current
shareholders of the Company.
10.28 -- Asset Transfer Agreement dated June 26, 1996 by and between
the Company and Pharmacia & Upjohn Limited with respect to the
acquisition of certain European assets.
10.29 -- Assignment Agreement dated June 26, 1996 by and between the Company
and Pharmacia, AB with respect to the acquisition of European
distribution rights.
11.1 -- Computation of Net Income per share for the three and six month
periods ended June 30, 1995 and 1996.
-18-
<PAGE>
IMPORTANT NOTICE -- READ CAREFULLY
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
RICHARD C. GOODWIN, et al., )
)
Plaintiff, )
) C.A. No. 14618
v. )
)
JEFFRY M. PICOWER, et al., )
)
Defendants. )
NOTICE OF PENDENCY OF CLASS ACTION, CLASS
DETERMINATION, SETTLEMENT OF CLASS AND DERIVA-
TIVE ACTION, SETTLEMENT HEARING AND RIGHT TO APPEAR
TO: ALL HOLDERS OF ADVANCED MEDICAL, INC. ("ADVANCED MEDICAL") 10%
CUMULATIVE PREFERRED STOCK ("PREFERRED STOCK") AND ADVANCED MEDICAL
COMMON STOCK ("COMMON STOCK") AS OF MARCH 20, 1996 AND THEIR SUCCESSORS
IN INTEREST (AND ALL TRANSFEREES OF SUCH SHARES ON OR AFTER THAT DATE)
AND ALL CURRENT SHAREHOLDERS OF ADVANCED MEDICAL.
THIS NOTICE IS BEING GIVEN TO INFORM YOU OF: (1) THE TERMS OF THE PROPOSED
SETTLEMENT OF THE CLASS AND DERIVATIVE CLAIMS ASSERTED BY IN THE ACTION
REFERRED TO IN THE CAPTION AND THE PROPOSED DISMISSAL OF THE ACTION; (2) A
HEARING TO BE HELD ON AUGUST 29, 1996, AT 11:00 A.M. BEFORE THE HONORABLE
MYRON T. STEELE OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE, IN AND FOR
NEW CASTLE COUNTY, AT 1020 KING STREET, WILMINGTON, DELAWARE 19801 TO
DETERMINE WHETHER THE PROPOSED SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE
AND IN THE BEST INTERESTS OF ADVANCED MEDICAL AND THE SETTLEMENT CLASSES (AS
DEFINED BELOW); (3) YOUR RIGHT TO APPEAR AT SAID HEARING AND THE PROCEDURES
AND DEADLINES FOR FILING OBJECTIONS TO THE PROPOSED SETTLEMENT; AND (4) THE
AMOUNT OF FEES, COSTS AND EXPENSES THAT PLAINTIFF'S COUNSEL INTENDS TO
REQUEST IN AN AWARD FROM THE COURT.
PLEASE READ THIS NOTICE CAREFULLY. IF THE COURT APPROVES THE PROPOSED
SETTLEMENT DESCRIBED HEREIN, YOU WILL BE FOREVER BARRED FROM CONTESTING THE
FAIRNESS, REASONABLENESS OR ADEQUACY OF THE PROPOSED SETTLEMENT, OR FROM
PURSUING THE SETTLED CLAIMS.
NOTICE IS HEREBY GIVEN pursuant to Delaware Chancery Court Rules 23
and 23.1, and an Order of the Court dated June 28, 1996 (the "Order") in the
above-captioned action (the "Action"), that a hearing (the "Settlement
Hearing") will be held at 11:00 a.m. on August 29, 1996, Court of Chancery,
1020 King Street, Wilmington, Delaware 19801, before the Honorable Myron T.
Steele, Vice-Chancellor, to determine (a) whether a proposed settlement of
all claims asserted in this Action, on the terms and conditions set forth in
a Stipulation and Agreement of Compromise and Settlement, dated June 18, 1996
(the "Stipulation" or "Settlement") and summarized
<PAGE>
below, is fair, reasonable, and adequate and reached in the best interest of
Advanced Medical and the Temporary Common Class and the Temporary Preferred
Class (as defined below) (collectively referred to herein as the "Temporary
Classes"), and should be approved by this Court and the Temporary Classes
formally certified (the "Settlement Classes"); (b) whether all claims
asserted in the Action on behalf of Advanced Medial, the named plaintiff and
the Temporary Classes should be dismissed on the merits as to all defendants
and with prejudice; (c) whether to release and discharge the Settling
Defendants (as defined below) from all Settled Claims (as defined below); (d)
whether to permanently bar and enjoin the named plaintiff and each and every
member of the Temporary Classes from individually, directly, representatively
or in any other capacity, prosecuting in the Action or in any other action or
proceeding in any forum against any of the Settling Defendants any claims
relating to or arising out of or in connecting with the Settled Claims; and
(e) if the Settlement is approved, to pass upon the application of attorneys
for the plaintiff and the Temporary Classes for an allowance of reasonable
attorney's fees and expenses incurred on behalf of the plaintiff and the
Temporary Classes to be paid as set forth herein.
THIS NOTICE IS NOT AND SHOULD NOT BE UNDERSTOOD AS AN
EXPRESSION OF ANY OPINION OF THE COURT AS TO THE
MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY
OF THE PARTIES. NOTICE IS ONLY PROVIDED SO THAT YOU
MAY DECIDE WHAT STEPS, IF ANY, TO TAKE IN RELATION TO
THE PROPOSED SETTLEMENT OF THE ACTION.
IF A PERSON OTHER THAN YOU IS THE RECORD HOLDER OR
BENEFICIAL HOLDER OF THE PREFERRED OR COMMON STOCK OF
ADVANCED MEDICAL TO WHICH THIS NOTICE REFERS, YOU ARE
REQUESTED TO FORWARD THIS NOTICE TO THE RECORD HOLDER
OR BENEFICIAL OWNER. BROKERAGE FIRMS, BANKS AND/OR
OTHER PERSONS OR ENTITIES WHO HELD SHARES OF ADVANCED
MEDICAL ON OR AFTER MARCH 20, 1996, FOR THE BENEFIT
OF OTHERS ARE DIRECTED PROMPTLY TO SEND THIS NOTICE
TO ALL OF THEIR RESPECTIVE BENEFICIAL OWNERS. IF
ADDITIONAL COPIES OF THE NOTICE ARE NEEDED FOR
FORWARDING, ANY REQUESTS FOR SUCH ADDITIONAL COPIES
MAY BE MADE TO ADVANCED MEDICAL'S TRANSFER AGENT AT
THE FOLLOWING ADDRESS:
MR. EMANUEL GALFO
CHASEMELLON SHAREHOLDER SERVICES
450 WEST 33RD STREET
NEW YORK, NEW YORK 10001
IN THE ALTERNATIVE, RECORD HOLDERS MAY FORWARD THE
NAMES AND ADDRESSES OF THE BENEFICIAL OWNERS TO
ADVANCED MEDICAL'S TRANSFER AGENT AT THE FOREGOING
ADDRESS WHO WILL CAUSE THE NOTICE TO BE SENT.
-2-
<PAGE>
BACKGROUND INFORMATION AND DESCRIPTION OF THE ACTION
Plaintiff filed his complaint in the Action on October 16, 1995,
and a motion to amend the complaint on January 17, 1996, which motion was
consented to without prejudice by defendants. Plaintiff's amended complaint
(the "Complaint") alleges individual and class claims on behalf of plaintiff,
all persons who owned shares of Preferred Stock of Advanced Medical at any
time during the period from March 29, 1994 to the present, or their
successors-in-interest, excluding the defendants herein and other current
directors and officers of Advanced Medical, all persons who owned shares of
Common Stock of Advanced Medical at any time from February, 1995 to the
present, or their successors-in-interest, excluding the defendants herein and
other current directors and officers of Advanced Medical, and stockholder
derivative claims on behalf of Advanced Medical, and names as defendants
Advanced Medical, members of Advanced Medical's Board of Directors, and
Decisions Incorporated ("Decisions").
The Complaint seeks relief for alleged breaches of contract and
breaches of fiduciary duty by the defendants in connection with (i) Advanced
Medical's failure to redeem the outstanding shares of Preferred Stock; (ii)
certain loans by Decisions to Advanced Medical, the first ("Loan I") being a
seven (7%) percent loan in the principal amount of $6 million made on January
4, 1994, the principal amount of which is convertible into Advanced Medical
Common Stock at a price of $1.00 per share, the second ("Loan II") being a
nine (9%) percent loan in the principal amount of $6.5 million made on August
12, 1994, the principal amount of which is convertible into Advanced Medical
Common Stock at a price of .62CENTS per share, and the third ("Loan III")
being a seven (7%) percent loan in the principal amount of $25 million made
on December 5, 1995, the principal amount of which is convertible into
Advanced Medical Common Stock at a price of $2.625 per share; and (iii) the
March 1991 exchange of 262,260 shares of Preferred Stock issued to Jeffery
Picower, Decisions and JA Special Partnership for 333,000 shares of a new
class of subordinate convertible preferred stock (the "Convertible Preferred
Stock"), each share of which is convertible into shares of Common Stock of
Advanced Medical at a specified conversion rate.
More specifically, the Complaint alleges, among other things, that
at all times relevant to the Action, Advanced Medical was obligated to redeem
pursuant to the certificate of voting powers, designation, rights,
preferences and restrictions of 10% cumulative preferred stock governing the
Preferred Stock (the "Certification of Designation"), and that Loans I, II
and III and the Convertible Preferred Stock grant the holders thereof
conversion rights at below market prices which, if exercised in the future,
would constitute an unfair waste of Advanced Medical's assets and which,
plaintiff also claims, resulted in sales of stock and violations of the
dividend preference under the Certificate of Designation governing the
Preferred Stock.
Plaintiff prays in the Complaint (a) that the Action be certified
as a class action on behalf of all persons who have owned shares of Advanced
Medical Preferred Stock at any time between March 29, 1994 and the present or
their successors-in-interest;(b) that the Action be certified as a class
action on behalf of all persons who have owned shares of Advanced Medical
Common Stock at any time between February 1995 and the present or their
successors-in-interest;(c) that the Court order that Advanced Medical redeem
the outstanding shares of Advanced Medical Preferred Stock in an amount
sufficient to pay the mandatory redemption price and all accrued dividends
with interest;(d) that the Court order a reformation of Loans I, II and III
to eliminate Decisions' right to convert any principal portion of the loans
into Common Stock;(e) that the Court reform the Convertible Preferred to
eliminate any and all right to convert the Convertible Preferred to Common
Stock; and (f) that the Court award plaintiff costs and expenses of this
Action, including attorney, accountant and expert fees.
On or about November 30, 1995, plaintiff moved for a temporary
restraining order seeking to enjoin the consummation of Loan III, which was
denied by the Court on December 4, 1995. Thereafter, plaintiff moved for a
preliminary injunction seeking to void Loan III or compel Advanced Medical to
set aside $5 million of the proceeds of Loan III pending the trial of the
Action. In connection with the preliminary injunction motion, the
-3-
<PAGE>
Court granted plaintiff's motion for expedited discovery and the parties set
a schedule for (and began to engage in) expedited discovery.
During the course of the expedited discovery, plaintiff's counsel
and defendants' counsel agreed that plaintiff's motion for a preliminary
injunction would be withdrawn without prejudice provided defendants agreed to
provide plaintiff's counsel with ten (10) days prior notice of the exercise
of any conversion rights with respect to Loans I, II and III or the
Convertible Preferred, and the parties set a schedule for discovery, briefing
and the trial of the Action.
On January 26, 1996, plaintiff moved for partial summary judgment
seeking an order compelling Advanced Medical to redeem the outstanding shares
of Preferred Stock in accordance with the Certificate of Designation, and the
parties agreed upon a tentative briefing schedule on plaintiff's motion for
partial summary judgment.
Following extensive negotiations and discovery, the parties agreed
to the principal terms of the Settlement of the Action as set forth in a
Memorandum of Understanding dated March 19, 1996. This tentative agreement
was announced in a Press Release issued by Advanced Medical on March 20, 1996.
PLAINTIFF'S INVESTIGATION AND DISCOVERY
Since initiation of the Action, counsel for plaintiff has
vigorously pursued the various claims. Prior to and after the execution of
the Memorandum of Understanding plaintiff engaged in significant discovery
including receipt and review of documents obtained from the defendants
pursuant to plaintiff's document request and depositions of the President and
an independent director of Advanced Medical. Moreover, plaintiff's counsel
have investigated, studied and analyzed the public documents concerning the
matters alleged in the Complaint, moved for partial summary judgment and,
subsequent to their motion for a preliminary injunction, arranged with
defendants' counsel for expedited discovery and a pre-trial and trial
schedule. Plaintiff's counsel also retained a financial expert to whom they
provided the material obtained from disclosure and their investigation, and
have had extensive consultation with and received reports from their expert
as to the matters alleged in the Complaint.
DENIAL OF LIABILITY AND WRONGDOING BY DEFENDANTS
Defendants specifically deny all the material allegations of the
complaint in the Action; deny that they have violated any law or regulation;
deny that they have committed any wrongdoing; and deny all liability to the
plaintiff and the Temporary Classes. The defendants assert that their
conduct has at all times proper and lawful and believe that there are valid
and meritorious defenses as a matter of fact and law to the claims asserted
in the Action.
The Court has made no findings that the defendants have engaged in
any wrongdoing or in any wrongful conduct or have otherwise acted improperly
or in violation of any law or regulation in any respect.
-4-
<PAGE>
THE PROPOSED SETTLEMENT
A. Within ten (10) days following Final Court Approval of the
Settlement (as defined below) (the date of such approval being referred to
herein as the "Approval Date"), Advanced Medical shall establish: (i) a
record date (the "Record Date") for holders of Preferred Stock to receive
notice of redemption which Record Date shall be not more than twenty (20)
days following the Approval Date; and (ii) a redemption date (the "Redemption
Date") for the redemption of the Preferred Stock, which Redemption Date shall
be not less than fifteen (15) nor more than fifty (50) days following the
mailing of such notice of redemption. Within ten (10) days following the
Record Date, Advanced Medical shall in accordance with the procedures set
forth in, and in satisfaction of the terms of, the Certificate of Designation
governing the Preferred Stock, mail notice of redemption so as to cause the
Preferred Stock to be redeemed on the Redemption Date at a per share price of
$10.00 plus accrued dividends pro-rated as of the Redemption Date and no more
(the "Base Amount"), less any amount paid from and deducted pro-rata from the
payment of the Base Amount as the Court may award to plaintiff's counsel (see
"ATTORNEYS' FEES AND EXPENSES" below), which payment shall be deemed to
satisfy all of the obligations of Advanced Medical in respect of the
Preferred Stock.
B. Within ten (10) days following the Approval Date, Advanced
Medical shall pay plaintiff's attorneys' fees and expenses in an amount to be
awarded by the Court (see "ATTORNEYS' FEES AND EXPENSES" below).
C. Within ten (10) days following the Approval Date, Advanced
Medical shall amend its by-laws to provide that Advanced Medical will not
subsequently enter into any additional material transactions with any control
person or any entity controlled by such control person without the approval
of a "special committee" of not less than two directors of Advanced Medical,
deemed to be independent pursuant to or in satisfaction of the rules or
policy of the exchange on which Advanced Medical's Common Stock is then
currently listed (or otherwise satisfactory to such exchange), appointed to
review, negotiate and make recommendations to Advanced Medical's Board of
Directors concerning the proposed material transaction, which special
committee, in connection with the foregoing, shall: (i) retain independent
legal counsel, at Advanced Medical's expense, to advise it with respect to
such transaction; and (ii) retain an independent financial advisor, at
Advanced Medical's expense, to advise it with respect to such transaction, if
such action is determined by the committee to be advisable upon consultation
with its independent counsel. A "material transaction" shall mean any
transaction which has a material affect on the business, operations,
financial condition or prospects of Advanced Medical. For this purpose, any
transaction involving total payments in excess of $1 million shall be deemed
to be material. "Control person" means any person controlling Advanced
Medical. For the purposes of this definition, "control", as used with
respect to any person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management of another
person whether through the ownership of voting securities, by agreement or
otherwise.
The redemption set forth in (A) above (the "Redemption") shall be
made if the Settlement is approved and becomes final. As used herein, "Final
Court Approval" of the Settlement means that the Court has entered an Order
and Final Judgment approving the Settlement and that Order and Final Judgment
becomes final and is no longer subject to appeal. The parties to the
Settlement intend the Order and Final Judgment herein to have maximum
preclusive effect (I.E., to act as res judicata and/or collateral estoppel)
and thereby act as a bar to the commencement or prosecution of any other
action in any forum by any member of either of the Settlement Classes
asserting any claims either directly, representatively, derivatively or in
any other capacity, against any defendant herein which have been or could
have been asserted in the Action, or which arise from or relate to any of the
Settled Claims.
In the event that the Court fails to approve the Settlement or if the
Order and Final Judgment referred to above is not entered or does not become
final and non-appealable or if the Stipulation is terminated as
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<PAGE>
provided therein or otherwise by order of the Court, then Advanced Medical
will make no payments of any kind (other than payments for costs already
incurred in connection with the mailing of notice and administration of the
Settlement), and the parties shall be restored to the status quo existing as
of the date of this Stipulation.
The Redemption will be effected on the Redemption Date subject to
and in accordance with the terms of the Certificate of Designation governing
the Preferred Stock, the Stipulation, the Order dated June 28, 1996, and any
subsequent order of the Court, provided, however, that no party shall have
withdrawn from the Settlement as provided therein and the Settlement shall
not otherwise have been terminated.
TEMPORARY CLASS CERTIFICATION
In the Order, this Court temporarily certified the Action for
purposes of settlement to be a class action pursuant to Del. Ch. Ct. R. 23(a)
and 23(b)(1) and (b)(2). The Temporary Common Class consists of all record
holders and beneficial owners (including their legal representatives and
heirs) of Advanced Medical Common Stock as of March 20, 1996 and their
successors-in-interest (including all transferees of such shares on or after
that date). The Temporary Preferred Class consists of all record holders and
beneficial owners (including their legal representatives and heirs) of
Advanced Medical Preferred Stock as of March 20, 1996 and their
successors-in-interest (including all transferees of such shares on or after
that date). Excluded from the Temporary Classes are the defendants herein
and other current directors and officers of Advanced Medical.
POSITION OF THE COURT
This Court's Order certifying the Temporary Classes and directing
the Settlement Hearing should not be construed or considered in any way as an
expression or indication of the Court's views as to the merits of any claims
or defenses asserted by any parties in this litigation. The Court has not
determined the merits of any of the issues in this Action.
OTHER FACTORS CONSIDERED BY PLAINTIFF OR DEFENDANTS
Based upon, among other things, plaintiff's attorneys' review of
documents and depositions taken; filings with the SEC and other relevant and
publicly available materials; the record in this Action; discussions with
their expert, named plaintiff and representatives of defendants; and an
assessment of the likelihood of success and the significant risks inherent in
further litigation of the issues, including those relating to the defendants'
alleged breaches of contract and of fiduciary duties of loyalty and care, and
the fairness of Loans I, II and III and the Convertible Preferred Stock,
plaintiff's attorneys have concluded that the Settlement is highly desirable
and is therefore in the best interest of Advanced Medical, the named
plaintiff and members of the Settlement Classes. Plaintiff has agreed to
settle this action pursuant to the terms and provisions of the Stipulation
after considering: (1) the likelihood of success and the significant risks of
litigation; (2) the desirability of permitting the Settlement to be
consummated in accordance with the terms of the Stipulation; (3) the further
protracted pretrial proceedings which would necessary to resolve the issued
in the Action; (4) the likelihood that such issues would become the subject
of appellate review, with the attendant delay until final adjudication of the
claims and defenses asserted; and (5) the conclusion of plaintiff's attorneys
that the Settlement is fair, reasonable and adequate and in the best
interests of Advanced Medical and the members of the Settlement Classes.
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<PAGE>
Defendants acknowledge that the amendment to the by-laws of
Advanced Medical is being made as a result of the aforementioned negotiations
with plaintiff's counsel and the pendency and prosecution of the Action, and
that the amendment is appropriate for inclusion therein. Although denying
any wrongdoing whatsoever and believing that Action to be without merit,
defendants consider that it is nevertheless desirable that the Action be
settled in the manner and upon the terms and conditions of the Stipulation in
order to avoid the burden and expense of further legal proceedings and to put
to rest all claims which have been, could have been, or might in the future
be asserted arising from or in any way relating to the Settled Claims (as
defined below), which defendants believe is in the best interests of Advanced
Medical and all of its shareholders.
EFFECT OF COURT APPROVAL OF THE SETTLEMENT
If the Court approves the Settlement and if the Settlement becomes
effective, all claims, rights or causes of action whether under any state,
foreign or federal statutory or common law that have been, could have been,
or in the future might have been asserted in any forum by plaintiff herein,
Advanced Medical or any members of the Settlement Classes, known or unknown,
whether directly, representatively, derivatively or in any other capacity,
against any defendant named in the Action, or against any of their respective
parents, subsidiaries, affiliates, divisions, predecessors, heirs,
successors, assigns, and present and former officers, directors, partners,
principals, employees, representatives and each and all of their agents,
financial advisors, legal counsels, employees, officers, directors, partners
and assigns (collectively, the "Settling Defendants"), directly or indirectly
relating to or arising out of or in connection with any of the claims,
transactions, disclosures, facts, matters or occurrences referred to in the
Complaint in the Action and all matters associated therewith or related
thereto (collectively, the "Settled Claims"), shall be compromised, settled,
released and dismissed with prejudice.
The Settlement will not become effective unless and until it is
finally approved by the Court, and the Court enters an Order and Final
Judgment substantially as described herein, and all objections, if any, an
all appeals involved, if any, have been determined, or the time in which to
appeal has expired.
If the Court approves the proposed Settlement, the parties shall
jointly request the Court to enter an Order and Final Judgment providing for
the following:
(a) formally certifying the Temporary Common Class and the
Temporary Preferred Class each as a separate class meeting all of the
requisites of Del. Ch. Ct. R. 23(a), (b)(1) and (b)(2) (the Settlement
Classes);
(b) approving the Settlement as fair, reasonable and adequate and
reached in the best interest of Advanced Medical and the Settlement Classes,
and directing consummation of the Settlement in accordance with the terms and
provisions of the Stipulation;
(c) adjudging that the method of providing notice of the
Settlement and the Settlement Hearing thereon to current shareholders of
Advanced Medical and members of the Temporary Classes, as set forth herein,
was the best notice practicable under the circumstances;
(d) dismissing all claims asserted in the Action on behalf of
Advanced Medical, the named plaintiff and the Settlement Classes on the
merits as to all defendants and with prejudice;
(e) releasing and discharging the Settling Defendants from all
Settled Claims;
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<PAGE>
(f) permanently barring and enjoining the named plaintiff and each
and every member of the Settlement Classes, individually, directly,
representatively or in any other capacity, from prosecuting in the Action or
in any other action or proceeding in any forum against any of the Settling
Defendants any claims relating to or arising out of or in connection with the
Settled Claims.
(g) awarding to the attorneys for the plaintiff and the Settlement
Classes reasonable attorneys' fees and expenses incurred on behalf of the
plaintiff and the Settlement Classes to be paid as set forth below; and
(h) containing such other further provisions consistent with the
terms and provisions of the Stipulation as the Court may deem advisable, and
to which the parties to the Settlement consent.
THE RIGHT TO BE HEARD AT THE SETTLEMENT HEARING
IF YOU DO NOT WISH TO OBJECT TO THE PROPOSED SETTLEMENT, YOU NEED NOT APPEAR
AT THE HEARING.
A hearing shall be held on August 29, 1996, at 11:00 a.m. (the
"Hearing") in the Court of Chancery of the State of Delaware, 1020 King
Street, Wilmington, Delaware 19801, to determine the fairness, reasonableness
and adequacy of the terms and conditions of the Settlement, and whether the
Settlement should be approved by the Court and judgment entered thereon.
The Court reserves the right to adjourn the Hearing or any
adjournment thereof, including consideration of the application for
attorneys' fees and expenses, without further notice other than an oral
announcement at the Hearing or any adjournment thereof. The Court also
reserves the right to approve the Settlement at or after the Hearing with
such modification as may be consented to by the parties to the Stipulation
and without further notice to the members of the classes.
Any shareholder of Advanced Medical or member of either of the
Settlement Classes who objects to the (i) Settlement; (ii) dismissal; (iii)
release; (iv) judgments to be entered with respect thereto; (v) plaintiff's
counsels' application for fees and reimbursement of costs and expenses in the
Action; or (vi) who otherwise wishes to be heard, may appear in person or by
his, her or its attorney at the Hearing and present evidence or argument that
may be proper and relevant; provided, however, that no person other than
counsel for the named plaintiff and defendants in the Action shall be heard
and no papers, briefs, pleadings or other documents submitted by any such
person shall be received and considered by the Court of Chancery (unless the
Court of Chancery in its discretion shall thereafter otherwise direct, upon
application of such person and for good cause shown), unless not later than
ten (10) calendar days prior to the Hearing a written notice of intention to
appear including a statement of such person's objections to any matters
before the Court and the grounds therefor or the reasons for such person's
desiring to appear and be heard, as well as all documents or writings such
person desires the Court to consider, shall be filed by such person with the
Register in Chancery and, on or before the date of such filing, shall be
served upon the following counsel of record:
Thomas R. Hunt, Jr., Esq.
MORRIS, NICHOLS, ARSHT &
TUNNEL
1201 N. Market Street
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Wilmington, DE 19899
Samuel L. Barkin, Esq.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 West 47th Street
New York, NY 10036
Jay W. Eisenhofer, Esq.
BLANK ROME COMISKY
& McCAULEY
1220 Market Street
Wilmington, DE 19801
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Ann D. White, Esq.
MAGER, LIEBENBERG and
WHITE
Two Penn Center
Philadelphia, PA 19102
Unless the Court otherwise directs, no person shall be entitled to
object to the approval of any of the Settlement, any judgment entered
thereon, any award of attorneys' fees and reimbursement of expenses, or
otherwise to be heard, except by serving and filing a written objection and
supporting papers and documents as prescribed above. Any person who fails to
object in the manner and within the time prescribed above shall be deemed to
have waived the right to object (including the right to appeal) and forever
shall be barred, in this proceeding or in any other proceeding, from raising
such objection.
ATTORNEYS' FEES AND EXPENSES
Plaintiff and the Settlement Classes are represented by Blank Rome
Comisky & McCauley, 1220 Market Street, Wilmington, DE 19801, Mager
Liebenberg and White, Two Penn Center, Philadelphia, PA 19102 and Kalikman &
Masnik, 2 Kings Highway West, Haddonfield, NJ 08033. Plaintiff's counsel
intend to make an application to the Court for an award of counsel fees,
expenses, allowances, and disbursements to be paid out by Advanced Medical in
the event that the proposed Settlement is approved by the Court. Plaintiff's
counsel in the Action will apply to the Court, at or subsequent to the
Settlement Hearing, for an award of attorney's fees and expenses in an amount
not to exceed $500,000.00 to be paid by Advanced Medical, and an additional
award of attorney's fees and expenses of up to $1.50 per share of Preferred
Stock redeemed pursuant to and in accordance with the terms of the
Settlement, which shall be paid from, and deducted pro-rata (on a per share
basis) from, the payment of the Base Amount payable in respect of each share
of Preferred Stock to be redeemed pursuant to and in accordance with the
terms of the Settlement.
It is contemplated that the Settlement will be administered by or
at the direction of defendants, and all expenses incurred in connection with
the administration of the Settlement shall be borne by Advanced Medical.
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SCOPE OF THIS NOTICE
The references in this Notice to the pleadings in the Action, the
Stipulation and other papers and proceedings are only summaries and do not
purport to be comprehensive. Further details concerning the Action, the
claims have been asserted by the parties and the terms and conditions of the
Settlement, including a complete copy of the Stipulation, are contained in
the Court's files with respect to the Action under Civil Action No. 14618.
You may examine the file on any weekday during regular business hours at the
office of the Register in Chancery, Daniel L. Hermman Courthouse, 1000 King
Street, Wilmington, Delaware 19801. Should you have any questions with
respect to this Notice, the proposed Settlement or the Action generally, you
should raise them with your own attorney or counsel for the classes. Class
counsel to whom questions concerning this Notice, the proposed Settlement or
the status of the Action may be directed is Blank Rome Comisky & McCauley,
1220 Market Street, Wilmington, DE 19801 (302) 425-6400 Attn: Jay W.
Eisenhofer, Esq. or Mager Liebenberg and White, Two Penn Center,
Philadelphia, PA 19102 (215) 569-6921 Attn: Ann D. White, Esq. DO NOT
CONTACT THE COURT REGARDING SUCH QUESTIONS.
Dover, Delaware
June 28, 1996
By Order of the Court
MYRON T. STEELE
VICE CHANCELLOR
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EXHIBIT 10.28
ASSET TRANSFER AGREEMENT
DATED JUNE 26, 1996
BY AND AMONG
IMED LTD.
IMED CORPORATION,
PHARMACIA AB
AND
PHARMACIA & UPJOHN LIMITED
<PAGE>
ASSET TRANSFER AGREEMENT
THIS AGREEMENT ("AGREEMENT") dated June 26, 1996 is made by and among
IMED Limited (registered number 1570905) whose registered office is at 35 St.
Thomas Street, London SE1 9SN, United Kingdom ("BUYER"); Pharmacia & Upjohn
Limited (registered number 506792) whose registered office is at Fleming Way,
Crawley, West Sussex RH10 2LZ, United Kingdom ("SELLER"); IMED Corporation, a
Delaware (USA) corporation ("IMED"); and Pharmacia AB (publ.), a Swedish
limited liability company ("PHARMACIA").
BACKGROUND
Seller is a wholly-owned subsidiary of Pharmacia, and Buyer is a
wholly-owned subsidiary of IMED.
Pharmacia, IMED and Advanced Medical, Inc. ("AM") entered into an
Amended and Restated Distribution Agreement, dated as of August 12, 1994 (the
"DISTRIBUTION AGREEMENT") under which Pharmacia distributes IMED's infusion
pumps, administration sets and related products in Europe. The Distribution
Agreement was originally entered into as of October 28, 1991. In connection
therewith, Pharmacia and certain of its subsidiaries also acquired as of
October 28, 1991, IMED's European business and assets relating to the
distribution of IMED's infusion pumps, administration sets and related
products in Europe.
Pharmacia, IMED and AM have now agreed to assign Pharmacia's interest in
the Distribution Agreement pursuant to the terms of a certain assignment
agreement, dated the date hereof (the "ASSIGNMENT AGREEMENT"). In connection
with the assignment of the Distribution Agreement, Pharmacia has, among other
things, agreed to cause Seller to sell and transfer to Buyer certain of
Seller's assets related to its business (the "BUSINESS") of distributing
IMED's infusion pumps, administration sets and related products in Europe.
NOW, THEREFORE, the parties hereto agree as follows:
1. INTERPRETATION.
Terms defined in the Distribution Agreement shall, save the context
otherwise requires, bear the same meanings herein. "AFFILIATE" shall mean
any entity controlled, controlling or under common control with the
designated party, where "control" means the direct or indirect ownership of
more than 50% of the equity or voting interests.
<PAGE>
2. TRANSFER OF ASSETS.
2.1 SALE OF ASSETS. Subject to the terms and provisions of this
Agreement, Seller shall or shall procure to sell to Buyer, and Buyer shall
purchase on the Completion Date (as defined in Clause 4.1 below), the
following properties and assets as they shall exist on the Completion Date
(the "ASSETS"):
(a) the benefit subject to the burden (so far as same is capable
of assignment) of all contracts for the supply of Disposables to which
Seller or any of its Affiliates is a party, including, without
limitation, all contracts for the supply of Disposables in connection
with the lease, sale of other disposition of infusion pumps manufactured
by IMED, whether or not separate or any consideration is stated to be
paid for such pumps, including, without limitation, the unperformed
portion of the contracts referred to on SCHEDULE 2.1(A) ("IOC'S"), and
all infusion pumps owned by Seller which are in the possession of the
hospitals or other parties to the IOC's;
(b) the benefit subject to the burden (so far as same is capable
of assignment) of:(i) all other contracts (and outstanding proposals and
tenders therefor) for the supply of and/or service of Products and
Disposables by Pharmacia or its Affiliates, including those set forth in
SCHEDULE 2.1(b); and (ii) the distributor and other agreements and
contracts of Seller referred to in SCHEDULE 2.1(b) (collectively with
the IOC's and the contracts referred to in clause (i) above, the
"ASSIGNED CONTRACTS");
(c) all Products (including spare parts therefor) and
Disposables owned or possessed by Seller on the Completion Date and all
such Products and Disposables owned or in the possession of Pharmacia or
any of its Affiliates on the Completion Date;
(d) all regulatory licenses, approvals and registrations for the
Products (so far as same is capable of assignment) held in the name of
Pharmacia or any its Affiliates, including, without limitation, those
listed on SCHEDULE 2.1(d);
(e) all promotional materials relating solely to the Products;
(f) copies of and the nonexclusive right to use all customer
lists and other customer account information relating to the Products;
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<PAGE>
(g) the computer equipment, vehicles, demonstration units,
testing and service equipment and other fixed assets of Seller and its
French and German Affiliate described in SCHEDULE 2.1(G) (the "FIXED
ASSETS");
(h) copies of all books and records possessed by Seller (or any
of its Affiliates) relating to the Assets and the Assumed Liabilities,
including, without limitation, training and service manuals, service
history records, claims from customers, personnel records of the
Transferred Employees, and correspondence and other documents with
governmental authorities concerning regulatory approvals and
registrations for the Products; PROVIDED, that the foregoing shall not
include financial and tax information (other than sales invoices and
customer payment records), and other information not relating in each
case solely to the Products, Disposables, Assets or Assumed Liabilities.
To the extent such books and records contain information relating to
other products or businesses, Seller and such Affiliates shall cooperate
with Buyer to provide, in the form of extracts or in any other
reasonable manner, the relevant books and records relating to the
Products, Disposables, Assets and Assumed Liabilities.
2.2 RETAINED ASSETS. All properties and assets of Seller or
Pharmacia or any of its Affiliates, other than the Assets (the "RETAINED
ASSETS") are expressly excluded from the purchase and sale contemplated
hereby, including:
(a) all cash of Seller on hand, on deposit or in transit;
(b) all bank accounts, securities and investments of Seller and
other cash equivalents;
(c) all amounts receivable arising out of the sale of Products
shipped by Seller (or Pharmacia or any of its Affiliates) prior to the
Completion Date, other than in respect of IOC's, receivables arising on
or after the Completion Date;
(d) all patents, copyrights, license rights and any and all
intellectual property of Seller; and
(e) all other property, assets, rights and interests of Seller,
of any type and wherever located, other than as specifically set forth
in Clause 2.1 above.
2.3 ASSUMPTION OF LIABILITIES. Upon Completion (as defined in Clause
4.1 below), Buyer shall assume, pay and discharge when due only the following
liabilities and obligations of Seller or one or more of its Affiliates,
except to the extent any such liability or obligations
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<PAGE>
arises by reason of or constitutes a breach of one or more of Seller's
representations or warranties in Section 6 below (the "ASSUMED LIABILITIES"):
(a) all liabilities and obligations accruing after the
Completion Date under the Assigned Contracts;
(b) all obligations accruing after the Completion Date with
respect to the supply of replacement parts and service of Products
shipped prior to such date, (including without limitation, any
obligations to service Products and provide replacement parts during or
following expiration of applicable warranty periods, whether or not
attributable to a nonconformity with any warranty to Pharmacia, its
Affiliates or their customers) as required by law or under any Assigned
Contract, including all extended warranty contracts included within the
Assigned Contracts referred to on SCHEDULE 2.1(b); and
(c) subject to Clause 3.4 below, all liabilities and obligations
to all of the Transferred Employees (as defined in Clause 8.2 below).
2.4 RETAINED LIABILITIES. Save for the Assumed Liabilities and as
otherwise provided in the Assignment Agreement, Buyer does not hereby assume
any other liabilities or obligations of Seller or any of its Affiliates (all
such liabilities and obligations being sometimes collectively referred to as
the "RETAINED LIABILITIES"), all of which Seller shall continue to be solely
responsible for, including, without limitation, all liabilities and
obligations relating to employees other than Transferred Employees.
2.5 SALE OF ASSETS AND LIABILITIES OF SELLER'S AFFILIATES. Seller
shall procure that each of its Affiliates which possess any of the Assets
execute such transfer instruments and other agreements which are required to
transfer such Assets to Buyer or its designee. At the Completion, the
parties shall execute such transfer instruments which may be required in
accordance with local law.
3. PURCHASE PRICE.
3.1 PURCHASE PRICE.
(a) The purchase price for the Assets (the "PURCHASE PRICE")
shall be US$1,037,000 plus the Inventory Value, plus the Fixed Assets
Value (as such terms are defined in Clause 3.2 below). Buyer shall pay
to Seller, by way of provisional payment, the sum of US$2,583,000 (the
"UNADJUSTED PURCHASE PRICE") at Completion.
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<PAGE>
(b) The parties have agreed that the Unadjusted Purchase Price
shall be fairly allocated to the Assets in the manner set forth in
SCHEDULE 3.1. Such allocation to inventory shall be adjusted to the
extent required as a result of any adjustments to the Unadjusted
Purchase Price which are made in accordance with Clause 3.3 below.
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<PAGE>
3.2 INVENTORY AND FIXED ASSETS VALUE. The Inventory Value and the
Fixed Assets Value shall be determined as follows:
(a) The "INVENTORY VALUE" shall mean the value of all Products
and Disposables described in Clause 2.1(c) (exclusive of the infusion
pumps subject to the IOC's). The Inventory Value shall be determined
after a physical inventory in the United Kingdom and France (and
applicable inventory control records in other countries) and valuing all
Products at the Product Price then in effect, plus all duty and freight
charges incurred to import and transport such Products to the warehouse
of Seller or its Affiliate. Products and Disposables in transit to
Seller from IMED shall be excluded. The parties have tentatively
established an Inventory Value of US$1,500,000, which amount shall be
used for the purpose of determining the Unadjusted Purchase Price. Such
amount shall be subject to adjustment as provided in Clause 3.3 below.
(b) The "FIXED ASSETS VALUE" shall mean the book value of the
Fixed Assets as reflected in Seller's accounting records, which the
parties have established at $46,000.
3.3 PURCHASE PRICE ADJUSTMENT. The Unadjusted Purchase Price shall
be subject to adjustment as follows:
(a) Within thirty (30) days after the Completion Date, Seller
shall cause to be prepared a statement (the "PRELIMINARY STATEMENT")
specifying the Inventory Value as at the Completion Date. When
completed, the Preliminary Statement shall promptly be delivered to
Buyer for review, together with all material work papers, calculations
and other records or information used to prepare the Preliminary
Statement.
(b) If Buyer does not dispute Seller's calculation of the
Inventory Value, the Preliminary Statement shall be conclusive and
binding on the parties. If Buyer disagrees with Seller's calculation of
the Inventory Value as of the Completion Date, it shall so notify Seller
in writing within thirty (30) days following delivery of the Preliminary
Statement by Seller to Buyer and the parties will use all reasonable
efforts to resolve any such disputes. If any such dispute can not be
resolved within thirty (30) days after submission of the written
objections of Buyer to Seller, the parties agree that they will submit
the matter to Arthur Andersen (the "ACCOUNTING FIRM"). The resolution
of the dispute by the Accounting Firm will be conclusive and binding
upon the parties hereto, notwithstanding any later allegation or
determination of error, mistake or miscalculation, whether willful or
negligent, by any person, in connection with the determination made by
the Accounting Firm. The fees and expenses of the Accounting Firm will
be paid one-half by Buyer and one-half by Seller. The
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<PAGE>
Preliminary Statement as finally determined pursuant to this subsection
(b) is hereinafter referred to as the "FINAL STATEMENT".
(c) For purposes of this Agreement, the "ADJUSTED PURCHASE
PRICE" shall be equal to the sum of (i) US$1,083,000, plus (ii) the
Inventory Value set forth on the Final Statement, less (iii) the
aggregate amount of prepayments to Seller for extended warranty
contracts included among the Assigned Contracts allocable on a pro rata
basis (based on the number of days) to the remaining term of such
warranties as of the Completion Date, plus or minus (iv) the aggregate
amount of any adjustment to the Inventory Value resulting from the
adjustments required under Section 4.1 and Exhibit 1.16 of the
Distribution Agreement. All amounts in the Final Statement which are
stated in Pounds Sterling or other currency shall be converted into U.S.
Dollars at the exchange rate set forth in the Eastern Edition of THE
WALL STREET JOURNAL on the Completion Date.
(d) If the Adjusted Purchase Price is greater than the
Unadjusted Purchase Price, Buyer shall pay to Seller the amount by which
the Adjusted Purchase Price exceeds the Unadjusted Purchase Price.
(e) If the Adjusted Purchase Price is less than the Unadjusted
Purchase Price, Seller shall pay to Buyer an amount equal to the
difference between the Unadjusted Purchase Price and the Adjusted
Purchase Price.
(f) For the purpose of effecting the payments due under
subsections (d) or (e) above, Buyer shall have the right to offset the
aggregate amount of all invoices then unpaid which were issued under the
Distribution Agreement for Products delivered to Seller prior to the
Completion Date.
(g) Any payment required to be made under subsections (d) or (e)
above, as the case may be, shall be made within two (2) business days of
the determination of the Adjusted Purchase Price, by wire transfer to an
account designated by the person entitled to receive such payment. Any
payment to be made pursuant to subsections (d) or (e) above, as the case
may be, which is not made when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the date
paid.
3.4 APPORTIONMENT OF COSTS. All wages, salaries and other periodic
outgoings in respect of the Transferred Employees and other periodic
outgoings in respect of the Assets and the Assumed Liabilities for any period
of time before the Completion Date shall be borne by Seller and for any
period of time after that time shall be borne by Buyer. Such outgoings in
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<PAGE>
respect of any period starting on or before the Completion Date and ending
after it shall be apportioned accordingly.
3.5 TRANSFER TAXES. Buyer shall pay all stamp duty, registration
fees and other sales, transfer, stamp, use, excise, value added or other
similar taxes, and all notarial, recording, registration and filing fees,
arising out of, or imposed by reason of the sale, transfer, assignment and
delivery of the Assets required by law to be paid by the Buyer in connection
with the sale or transfer of the Assets and the Assumed Liabilities. Seller
shall pay all such taxes and fees required by law to be paid by it.
4. COMPLETION.
4.1 COMPLETION. Subject to the provisions of Section 5, completion
of the sale and purchase of the Assets (hereinafter called "COMPLETION")
shall take place at the offices of Simmons & Simmons on August 30, 1996 (the
"Completion Date") or such other mutually acceptable date within 10 days
after the satisfaction of the each of the conditions referred to in Section 5
below.
4.2 CONVEYANCE INSTRUMENTS. Upon Completion:
(a) Seller shall execute such documents and take all other
action as may be reasonably requested by Buyer to vest title to the
Assets in Buyer;
(b) All Products (and spare parts therefor) and Disposables held
by Seller shall be delivered Ex Works at Seller's warehouse in Milton
Keynes, England (INCOTERMS 1990);
(c) The Unadjusted Purchase Price shall be paid by Buyer by wire
transfer of immediately available funds to the bank account designated
in writing by Seller.
(d) The parties shall exchange the other documents and take the
other actions referred to in SCHEDULE 4.2;
(e) Each of Seller and Buyer (and any applicable Affiliate)
shall execute such transfer instruments and other agreements which may
be required under local law to transfer to Buyer all Assets located
outside of the United Kingdom.
4.3 FURTHER ASSURANCES. Seller and Buyer, as the case may be, at the
request of the other, at or after the Completion Date, will execute and
deliver, or cause to be executed and
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delivered, to the other such documents and instruments, in addition to those
specifically required by the provisions of this Agreement, in form and
substance reasonably satisfactory to the other, as may reasonably be
necessary or desirable to carry out or implement any provision of this
Agreement.
4.4 CONSENT AND APPROVAL.
(a) Each party hereto hereby agrees to use reasonable efforts to (i)
obtain any and all third party consents and approvals required in connection
with the performance by it of the transactions contemplated by this
Agreement; and (ii) do all such other acts as are necessary or advisable in
order to cause the consummation of the transactions contemplated hereby and
thereby.
(b) The foregoing notwithstanding, where any consent or agreement of a
third party is required for the transfer of the benefit of any Assigned
Contract or any other Assets to Buyer or the assumption by Buyer of any
Assumed Liabilities and the release of Pharmacia or its Affiliates from such
liabilities, and despite the parties' reasonable endeavors, such consent or
agreement is not forthcoming, the parties shall conduct themselves on the
basis that such assets will be held by Seller (free and clear of any liens
and other encumbrances, other than claims of the other contract party) on
behalf of Buyer and liabilities performed by Buyer on behalf of any of
Pharmacia or its Affiliates. The parties agree to act in a manner consistent
with reasonable business practices; such measures shall include (where
permitted by legal and regulatory requirements) abstaining from seeking
consents to assign IOC's and other contracts until such time, if any, that
the third party to the contract objects, at which time each party shall use
reasonable efforts to obtain such consent.
4.5 TRANSITION PERIOD.
(a) From the date hereof until the Completion Date (the "TRANSITION
PERIOD") Seller and Buyer shall cooperate to formulate and implement plans
to (i) relocate the Assets to the premises of Buyer and (ii) relocate those of
the Transferred Employees who are to be relocated from the premises of Seller
to the offices of Buyer. All moving and relocation costs and expenses as
contemplated by (i) and (ii) above shall be paid by Buyer.
(b) In relation to the distributor agreements referred to in SCHEDULE
2.1(b) (the "DISTRIBUTOR AGREEMENTS"), IMED hereby undertakes to Seller and
Pharmacia to use its best endeavors to enter into, or to procure that Buyer
or one of its affiliates enters into, new distributor agreements with the
relevant distributors and to provide (at the expense of Buyer) such release
of Seller from its liabilities and obligations under the Distributor
Agreements as Seller may reasonably require, provided that, in the event that
such release is not obtained by
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Buyer within 90 days after the Completion Date, Seller shall be entitled to
terminate such Distributor Agreements by giving the relevant distributors
notice of termination (the notice to be such period as Seller shall on a case
by case basis deem reasonable). Seller assumes all risks and liabilities
arising out of any such termination by it.
5. CONDITIONS TO COMPLETION.
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The
obligations of Buyer under this Agreement shall be subject to the following
conditions being completed to Buyer's satisfaction on or prior to the
Completion Date:
(a) CERTIFICATES. The representations and warranties of Seller
contained in this Agreement and in any Schedule, certificate or other
document delivered in connection with the transactions contemplated by this
Agreement shall be true and correct in all material respects on and as of the
Completion Date, except as affected by the consummation of the transactions
contemplated by this Agreement, and Seller shall have furnished a certificate
to Buyer so stating and affirming that all obligations and covenants required
to be performed by Seller prior to the Completion Date have been (and the
same shall in fact have been) performed in all material respects.
(b) ABSENCE OF LITIGATION. No litigation, governmental investigation
or other proceeding arising out of or relating to Seller or any of its
Affiliates or this Agreement and the transactions contemplated hereunder
shall have been instituted or threatened in a manner which, in the reasonable
judgment of Buyer, renders it inadvisable to proceed with the consummation of
the transactions contemplated by this Agreement.
(c) OTHER CONSENTS AND APPROVALS. Any consents and approvals required
in connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained, including those described on SCHEDULES
6.5 AND 7.3.
(d) ASSIGNMENT AGREEMENT. IMED, Pharmacia and AM shall have executed
and delivered the Assignment Agreement.
(e) COMPLETION DOCUMENTS. Seller and IMED shall have executed and
delivered such other certificates and other instruments and agreements and
documents as the respective counsel for the parties may reasonably request
for the purpose of carrying out the transactions contemplated by this
Agreement, including without limitation, any and all instruments and
documents reasonably required or requested by Buyer from any third party in
connection with
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this transaction and determined by Buyer in good faith to be necessary for
the consummation of this transaction.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The
obligations of Seller under this Agreement shall be subject to the
satisfaction, at or prior to the Completion, of each of the following
conditions:
(a) CERTIFICATES. The representations and warranties of Buyer
contained in this Agreement and in any Schedule, certificate or other
document delivered in connection with the transactions contemplated by this
Agreement shall be true and correct in all material respects on and as of
the Completion Date except as affected by the consummation of the
transactions contemplated by this Agreement and Buyer shall have furnished a
certificate to Seller so stating and affirming that all obligations and
covenants required to be performed by Buyer prior to the Completion Date have
been (and the same shall in fact have been) performed in all material
respects.
(b) ABSENCE OF LITIGATION. No litigation, investigation or other
governmental proceeding arising out of or relating to Buyer or any of its
Affiliates or this Agreement and the transactions contemplated by this
Agreement shall have been instituted or threatened in a manner which, in the
reasonable judgment of Seller, renders it inadvisable to proceed with the
consummation of the transactions contemplated hereunder.
(c) OTHER CONSENTS AND APPROVALS. Any consents and approvals on
SCHEDULE 6.5 required to be obtained by Seller in connection with the
transactions contemplated by this Agreement shall have been obtained.
(d) ASSIGNMENT AGREEMENT. IMED, Pharmacia and AM shall have executed
and delivered the Assignment Agreement.
(e) COMPLETION DOCUMENTS. Buyer and Pharmacia shall have executed and
delivered such other certificates and other instruments and agreements and
documents as the respective counsel for the parties may reasonably request
for the purpose of carrying out the transactions contemplated by this
Agreement, including without limitation, any and all instruments and
documents reasonably required or requested by Seller from any third party in
connection with this transaction and determined by Seller in good faith to be
necessary for the consummation of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF SELLER.
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Seller represents and warrants to Buyer that:
6.1 ORGANIZATION AND EXISTENCE. Seller is a limited liability
company organized and validly existing under the laws of England and has all
requisite power and authority to own, lease and operate the Assets and its
other properties and to carry on its business as now being conducted. The
Documents (as defined in Clause 6.3 below) executed and delivered by Seller
constitute, or when executed and delivered will constitute, the legal, valid
and binding agreements of Seller. The execution, delivery and performance by
Seller of the Documents to be executed and delivered by Seller are within its
powers.
6.2 NO CONFLICT. Neither the execution and delivery of this
Agreement or any of the other Documents, the performance by Seller of its
obligations hereunder and thereunder, nor the consummation of the
transactions contemplated hereby or thereby will:(a) violate any provisions
in Seller's Memorandum or Articles of Association;(b) subject to Clause
4.4(b) above, require notice to or the consent of any party to any agreement
to which Seller is a party, or by which it or any of its properties is bound
or subject;(c) constitute a default under, any loan or credit agreement,
indenture, mortgage, deed of trust or other contract or agreement to which
Seller (or any of its Affiliates) is a party or by which it or its property
is bound, or result in the creation, imposition, or enforcement of any
encumbrance on any of the Assets; or (d) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which Seller (or any of its Affiliates) or any of its properties
is bound or subject.
6.3 DOCUMENTS. As used in this Agreement, the term "DOCUMENTS" means
this Agreement and all other instruments, agreements and documents executed
and delivered or to be executed and delivered by any one or more of the
parties hereto in connection with the transactions contemplated hereby.
6.4 TITLE AND CONDITION OF THE ASSETS. Seller has good and
marketable title to all of the Assets and such title is in all material
respects free and clear of any mortgages, deeds of trust, pledges, vendors'
or other liens, claims, leases, subleases, assignments, security interests or
encumbrances of any kind other than materialmens', workmens' and other
similar statutory liens arising in the ordinary course of business, except
that Seller's title to the infusion pumps placed under IOC's shall be subject
to the IOC's and all rights of third parties arising therefrom. The Products
were maintained and stored under secure, sanitary storage conditions, and are
substantially in the same condition as they were when delivered by IMED to
Seller's warehouse.
6.5 CONSENTS. SCHEDULE 6.5 sets forth a list of all of the
approvals, consents, filings, registrations and releases of third parties
(including, without limitation, any
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government or governmental or regulatory agency) which are required for the
execution or delivery by Seller of this Agreement or the Documents or the
consummation by Seller of the transactions contemplated herein and therein,
including, without limitation, the sale, transfer or assignment of the Assets
to Buyer (including, without limitation, under any contract or agreement to
which Seller is a party or to which the Assets are subject).
6.6 FINDERS. None of Seller nor any of its Affiliates have dealt
with any broker, finder, investment bank or financial adviser as to whom
Buyer may have an obligation to pay any broker's or finder's fee in
connection with the origin, negotiation, execution or performance of this
Agreement.
6.7 EMPLOYMENT.
(a) The Transferred Employees (as defined in Clause 8.2 below) were all
employed by Seller immediately before the execution of this Agreement, there
are no other persons to whom the Regulations (as defined in Clause 8.2 below)
might apply and no Transferred Employee has given or been given written
notice of termination of employment.
(b) Details of the written terms of employment (including the
emoluments and the age and date of commencement of continuous employment) of
every Transferred Employee are set out in, or attached to, the separate
letter, dated June 20, 1996, previously provided to IMED by Seller's counsel
(the "Compensation Letter").
(c) In respect to the Transferred Employees, there is no dispute
between Seller and any trade unions or other organization formed for a
purpose similar to a trade union, existing, pending or threatened, and there
is no collective bargaining agreement or other arrangement to which Seller is
a party.
(d) Seller does not have in existence nor is it proposing to introduce
any share incentive scheme, share option scheme or profit sharing bonus or
other incentive scheme for all or any of the Transferred Employees.
(e) All contracts of service with the Transferred Employees may be
terminated by not more than three months' notice without giving rise to any
claim for damages or compensation (other than a statutory redundancy payment
or statutory compensation for unfair dismissal).
(f) No moneys or benefits other than in respect of contractual
emoluments are payable to any of the Transferred Employees and Seller is not
under any present, future or contingent liability to pay compensation for
loss of office or employment to any ex-officer or
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ex-employee and no payments are due under the Employment Protection
(Consolidation) Act 1978.
(g) No Transferred Employee is absent from work for any reason other
than normal paid holiday or short-term sickness absence (i.e., absence of
less than three days).
6.8 PENSIONS.
(a) DEFINITIONS. For the purpose of this Clause 6.8 and Clause
8.8 below, the terms set forth below shall be defined as follows:
(i) "PENSION SCHEME" means the Kabi Pharmacia Limited Retirement
Benefits Scheme (or the trustees from time to time of that scheme as the
context requires); summary terms of which are set out in the explanatory
booklet entitled, "Retirement Benefits Scheme" (dated August 1994) which
was previously supplied to Buyer;
(ii) "PENSIONABLE EMPLOYEES" means a person who is both a
Transferred Employee and is, or apart from being absent from work would
be, in pensionable service under the Pension Scheme;
(iii) "BUYER'S SCHEME" means the retirement benefits scheme
nominated by or at the instance of the Buyer pursuant to Clause 8.8(a)
or as the context requires the trustees from time to time of such scheme;
(iv) "STATUTORY TRANSFER CONDITIONS" means the provisions
contained in Chapter IV Part IV of the Pension Schemes Act 1993.
(v) "Seller's Actuary" means Michael Sharpe of Scottish Widows
or such other actuary appointed by the Seller for the purpose of this
Agreement.
(vi) "Buyer's Actuary" means Nick Buckland of Bacon & Woodrow
or such other actuary appointed by the Buyer for the purpose of this
Agreement.
(2) Save for the Pension Scheme and pension provided by the
state, the Seller:
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(i) is not under any obligation to pay or provide pension or
other retirement, sickness disability or death benefits to any of the
Transferred Employee or to any person in respect of such Transferred
Employee; and
(ii) is not a party nor does or has it contributed to any scheme
or arrangement for the provision of pension or other retirement,
sickness disability or death benefits and under which any Transferred
Employee or person in respect of him is actually prospectively or
contingently entitled to benefit.
(c) No Transferred Employee enjoys any special terms of
membership of the Pension Scheme and the Seller is not paying any benefit of
a kind described in (b)(i) or (ii) above to any Transferred Employee or to
any person in respect of such Transferred Employee.
(d) Neither the Seller nor the Pension Scheme is engaged in any
litigation or arbitration proceedings in relation to any of the Transferred
Employees and, so far as the Seller is aware, no litigation or arbitration
proceedings is pending or threatened by or against the Pension Scheme in
relation to the Transferred Employees.
(e) Seller will not before Completion enter into any obligation
or agreement (whether legally binding or not) to provide or procure the
provision of benefits in the nature of those described in Clauses 6.8(b)(i)
or (ii) above in respect of any Transferred Employee save in accordance with
the provisions of the Pension Scheme.
(f) Seller is not making and has not regularly made and will not
before Completion make any ex gratia payments to any Transferred Employees or
to any person in respect of any of them.
(g) No power under the Pension Scheme to augment benefits
accrued before Completion has been or will be exercised before Completion in
favor of any of the Transferred Employees (or any person in respect of any of
them).
(h) Insofar as the Transferred Employees are concerned, the
Pension Scheme will be maintained in full force until Completion and, except
with the consent of Buyer (such consent not to be reasonably withheld or
delayed), its provisions will not be amended before Completion nor will any
power or discretion be exercised before Completion which may affect
materially the interests under the Pension Scheme of any of the Transferred
Employees (or any person in respect of any of them other than to comply with
any requirement of the Inland Revenue or statute or other legal requirements).
(i) The Pension Scheme is an exempt approved scheme.
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(j) The Pension Scheme is contracted-out and the Seller holds or
is named in and will until Completion continue to hold or be named in an
appropriate contracting-out certificate (within the meaning of the Pension
Schemes Act 1993) in respect of those of the Transferred Employees who are
members of the Pension Scheme.
(k) Except as provided in Clause 8.8 below, no undertaking or
assurance has been given by Seller to any Transferred Employee as to the
introduction or increase or improvements of any pension rights or
entitlements which Buyer would be required to implement in accordance with
good industrial relations practice whether or not there is any legal
obligation to do so.
(l) Except for those identified on Schedule 8.2 as now employed
by its French affiliate, Seller does not participate in any retirement
benefits scheme established under or regulated by the laws of any
jurisdiction outside of the United Kingdom in respect of any Transferred
Employee.
6.9 ASSIGNED CONTRACTS. Except as expressly stated in either
SCHEDULE 2.1(a) or 2.1(b):
(a) None of the Assigned Contracts is of a long term (namely, in
excess of 5 years) nature or involves:
(i) any contract entered into otherwise than in the
ordinary course of business;
(ii) any agreement or arrangement otherwise than on arm's
length terms;
(iii) any sale or purchase option or similar contract or
arrangement affecting any of the Assets;
(iv) any distributorship or agency agreement.
(b) Seller has no knowledge of the invalidity of or grounds for
recision, avoidance or repudiation of any of the Assigned Contracts and has
not received notice of any intention to terminate any of such Assigned
Contracts.
(c) Save for any condition or warranty implied by law or
contained in its standard terms of business or otherwise given in the
ordinary course of business, so far as
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Seller is aware, there is no guarantee, warranty or representation in respect
of the Products or services supplied or contracted to be supplied by the
Business nor save as aforesaid any obligation relating to the business which
could give rise to any liability after any such goods or services have been
supplied by it.
(d) Seller has complied in all material respects with its
obligations contained in the IOC's.
(e) All Assigned Contracts are in full force and effect; neither
Seller nor, to Seller's knowledge, any other party thereto is in default in
any material respect under any Assigned Contract and there are not any
outstanding material disputes thereunder; and so far as Seller is aware,
there has been no threatened cancellation of any Assigned Contract.
Except as provided in Clause 3.3(c)(iii), none of Seller nor any of its
Affiliates have received any advance payments under any of the Assigned
Contracts or with respect to any Assumed Liability for the performance of
obligations after the Completion Date.
6.10 LITIGATION AND GOVERNMENT PROCEEDINGS. To the extent relating
to the Products or the Business, none of Seller nor any of its Affiliates is
a party (whether directly or as a cross-defendant or liable under any written
indemnity agreement) nor, to the best of its knowledge, threatened with: any
litigation, suit, action or legal, administrative, arbitration or other
proceeding or governmental investigation. Seller is not in default with
respect to any judgment, order or decree of any court of any other
governmental body concerning the Products in any way.
6.11 REGULATORY APPROVALS. Schedule 2.1(d) contains a complete list
of all regulatory approvals, licenses and registrations for the Products
obtained by Seller or any of its Affiliates for the Products and which are
now held in any of their names, other than registrations obtained by
notification only.
7. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that:
7.1 ORGANIZATION AND EXISTENCE. Buyer is a limited liability
company organized and validly existing under the laws of England and has all
requisite power to enter into and perform the Documents. The Documents
executed and delivered by Buyer constitute, or when executed and delivered
will constitute, the legal, valid and binding agreements of Buyer. The
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execution, delivery and performance by Buyer of the Documents to be executed
and delivered by Buyer are within its powers.
7.2 NO CONFLICT. Neither the execution and delivery of this Agreement
or any of the other Documents, the performance by Buyer of its obligations
hereunder and thereunder, nor the consummation of the transactions
contemplated hereby or thereby will:(a) violate any provisions in Buyer's
Memorandum or Articles of Association;(b) require notice to or the consent of
any party to any agreement to which Buyer is a party, or by which it or any
of its properties is bound or subject;(c) constitute a default under, any
loan or credit agreement, indenture, mortgage, deed of trust or other
contract or agreement to which Buyer is a party or by which it or its
property is bound; or (d) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority to which
Buyer or any of its properties is bound or subject.
7.3 CONSENTS. SCHEDULE 7.3 sets forth a list of all of the approvals,
consents, filings, registrations and releases of third parties (including,
without limitation, any government or governmental or regulatory agency)
which are required for the execution or delivery by Buyer of this Agreement
or the Documents or the consummation by Buyer of the transactions
contemplated herein and therein.
7.4 FINDERS. None of Buyer nor any of its Affiliates have dealt with
any broker, finder, investment bank or financial adviser as to whom Seller
may have an obligation to pay any broker's or finder's fee in connection with
the origin, negotiation, execution or performance of this Agreement.
8. ADDITIONAL COVENANTS.
8.1 CONDUCT OF BUSINESS PRIOR TO COMPLETION. Except as specifically
provided in this Agreement, from the date hereof to Completion and to the
extent relating to the Products or the Business, Seller shall (a) operate its
business only in the normal course and not undertake any action not routine;
(b) maintain its properties in customary repair, order and condition; (c)
maintain its books, accounts and records in the usual and ordinary manner;
and (d) use reasonable commercial efforts to (1) keep available the services
of its present employees and (2) preserve its present relationships with
customers, suppliers and others having business dealings with it.
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8.2 PERSONNEL AND LABOR MATTERS.
(a) Seller and Buyer shall discharge all their respective obligations
arising under or by virtue of the Transfer of Undertakings (Protection of
Employment) Regulations 1981 (the "REGULATIONS") prior to Completion. Seller
and Buyer acknowledge that by virtue of the Regulations (and equivalent
requirements in France), the contracts of service of the employees of Seller
(and Seller's French Affiliate) who are listed in SCHEDULE 8.2 (the
"TRANSFERRED EMPLOYEES") shall have effect as if originally made between the
Transferred Employees and Buyer save insofar as the terms of those contracts
of service relate to occupational pension schemes. Pending Completion,
Seller (and Seller's French Affiliate) shall not, save with the prior written
consent of Buyer, alter or enter into new contracts of employment with the
Transferred Employees or any collective agreements governing employment
relationships between Seller (and Seller's French Affiliate) and the
Transferred Employees and will not offer a contract of employment to any
person who following acceptance of such offer would, upon completion, become
an employee of Buyer by virtue of the Regulations.
(b) Seller (and its French Affiliate) shall perform and shall be fully
liable for all of its obligations and liabilities in respect of its employees
up to and including the Completion Date, under or by virtue of the terms and
conditions of the contracts of those employees.
(c) Except for the Transferred Employees, for a period of eighteen (18)
months after Completion, neither party nor any of its Affiliates shall,
directly or indirectly, solicit or otherwise induce any employee of another
party or any of its Affiliates engaged in such entities' infusion product
business to terminate or change his or her employment.
(d)(i) Seller shall be responsible for and shall fully indemnify and
keep indemnified the Buyer from and against all liabilities and obligations
whensoever they arise arising, directly or indirectly, from any act or
omission of the Seller in relation to the Transferred Employees prior to the
Completion Date, including those which are deemed by virtue of the
Regulations to be an act or omission of the Buyer after the Completion Date.
(ii) Buyer shall be responsible for and shall fully indemnify and keep
indemnified the Seller from and against all liabilities and obligations
whensoever they arise arising, directly or indirectly, from any act or
omission of the Buyer in relation to the Transferred Employees.
8.3 ACCESS. Seller shall give Buyer and its attorneys, accountants and
other representatives full access, during normal business hours, to its and
its Affiliates' premises and books and records, and to cause its officers,
attorneys and certified public accountants to furnish such representatives
with such financial and other information with respect to the Assets and the
Assumed Liabilities as such representatives shall reasonably request.
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8.4 VAT PROVISIONS.
(a) All amounts expressed in this Agreement as payable by Buyer are
expressed exclusive of any valued added tax ("VAT") which may be chargeable
thereon.
(b) Seller and Buyer shall use all reasonable endeavors to procure that
the sale of the Assets hereunder is treated by H.M. Customs & Excise as a
transfer of assets within both section 4-9 of the Value Added Tax Act 1994
("VATA 94") and article 5 of the Value Added Tax (Special Provisions Order
1995) ("SPO 95"), save that Seller shall not be required by virtue of this
subsection to make any appeal to any court or tribunal against any
determination of H.M. Customs & Excise that such sale does not fall to be so
treated.
(c) Buyer declares that it is duly registered for VAT purposes under
registration number ___________ and that Buyer shall upon and immediately
after the Completion use the Assets to carry on the same kind of business
(whether or not as part of any existing business of Buyer) as Seller's prior
business relating to the Products.
(d) Seller shall at Completion deliver to Buyer all of its records for
VAT purposes relating to the Assets that are required under Schedule 11
paragraph 6 VATA 94 to be preserved by Buyer in place of Seller and Seller
will not thereafter make a request to H.M. Customs & Excise for such records
to be taken out of the custody of Buyer.
(e) Buyer shall, for such period as may be required by law, preserve
the records delivered to it by Seller pursuant to subsection (d) and, upon
being given reasonable notice by Seller or its agents or Pharmacia, Buyer
shall make those records available to Seller or its agents or Pharmacia for
inspection or copying.
(f) If, notwithstanding the provisions of subsection (b), H.M. Customs
& Excise shall determine that VAT is properly chargeable in respect of the
transfer of all or any part of the Assets hereunder, Seller shall notify
Buyer of that determination and shall supply Buyer with a copy of such
determination within seven days of its being so advised by H.M. Customs &
Excise and Buyer shall pay to Seller a sum equal to the amount of VAT
properly determined by H.M. Customs & Excise to be so chargeable within
fourteen days of Seller notifying Buyer of that determination (against
delivery by Seller of an appropriate tax invoice for VAT purposes). Buyer is
also obliged to pay at the same time a sum equivalent to any penalty and any
interest (chargeable pursuant to section 74 VATA 94) incurred by Seller
solely as a result of a failure to account at the proper time to H.M. Customs
& Excise for the VAT properly chargeable in respect of the transfer of all or
any part of the Assets hereunder (provided always that Buyer shall not be
liable to Seller in respect of any penalty or interest which arises by reason
of any delay or default or error on the part of Seller in accounting for
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the said VAT to H.M. Customs & Excise once Seller has been put in funds by
Buyer pursuant to this sub-clause).
(g) Seller and Buyer shall together send a letter substantially in the
form of SCHEDULE 8.4 to H.M. Customs & Excise immediately after the
Completion seeking confirmation that the transfer of the Assets is treated as
neither a supply of goods nor a supply of service under article 5 SPO 95.
(h) Where one party is required by the terms of this Agreement to
reimburse or indemnify another for the costs or expenses of any supplies made
to that other party, the reimbursing party shall (unless otherwise agreed)
also at the same time pay and indemnify such other party against all the VAT
input tax incurred by that other party provided that within seven days after
the reimbursed party has obtained credit or repayment of the whole or any
part of such Value Added Tax input tax, such reimbursed party shall pay over
an amount equal to such repayment or credit to the reimbursing party.
8.5 ANNOUNCEMENTS. Except as provided below, any public disclosure of
the transactions contemplated hereby and the terms hereof or results obtained
hereunder (including but not limited to press releases or other statements
made available generally by a party hereto to the public) will be reviewed
and consented to by each party prior to such disclosure. Such consent shall
not be untimely or unreasonably withheld by any party hereto.
Notwithstanding the foregoing, any party hereto may, without the prior
consent of the other parties hereto: (a) disclose (i) the existence of the
Agreement (and the aggregate purchase price payable hereunder), (ii) the
general subject matter hereof (other than material business, technical and
commercial terms hereof or related hereto) and (iii) the identity of the
parties hereto or (b) make public disclosure of this Agreement and of the
transactions contemplated hereby or, the terms hereof to the extent that such
public disclosure is required by any law, or rule or regulation of any
agency, including without limitation to the generality of the foregoing, the
United States Securities and Exchange Commission or any securities exchange
on which securities of the disclosing party are then listed. At the request
of Buyer and to the extent now possessed by Seller's counsel, Seller shall
provide copies of this Agreement and all Documents on computer readable
diskettes.
8.6 BOOKS AND RECORDS. The Seller shall make a request to HM Customs
& Excise under Section 49(1)(b) VATA 1994 and shall if HM Customs & Excise so
direct retain all records referred to in the said Section 49(1) relating to
the business and shall upon the Buyer's written requests and at the Buyer's
expense deliver copies of the said records to the Buyer and shall also allow
the Buyer or its agents upon giving reasonable notice to the Seller as to the
originals of such records. Except as otherwise required by the foregoing
provisions of this
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Clause 8.6, Buyer shall retain the books and records included within the
Assets as they physically exist upon Completion for a period of five (5)
years from Completion, and Seller shall retain its books and records
(pertaining to its conduct of business prior to Completion relating to the
sale and servicing of the Products) as they physically exist upon Completion
for a period of five (5) years from Completion. Each party shall have access
to such of the other's books and records on reasonable notice during normal
business hours for any reasonable and necessary purpose. If either party
desires copies of any such books and records after such retention period, it
shall notify the other and will be permitted to have copies or make copies of
such books and records, provided that the requesting party bears the costs
and expenses of such copying.
8.7 ACTIONS DURING TRANSITION PERIOD AND AFTER THE COMPLETION.
(a) The Seller and Buyer shall consult and confer concerning the
procedure, content and timing for notification of employees, customers,
distributors, regulatory authorities and others concerning the transfer
of the Assets and the assignment of the Distribution Agreement.
(b) IMED or, where required by law, the parties jointly shall
notify regulatory authorities in each country within the Territory of
the change in the distribution of IMED's infusion products in such
country. To the extent required by law in any country, IMED shall
designate a local representative to be the legally responsible person in
such country for regulatory matters relating to the Products.
(c) For a period not to exceed 90 days after Completion,
Pharmacia and its Affiliates in the Territory outside the United Kingdom
and, unless the parties otherwise agree, France shall provide certain
services to Buyer and its designee as further described in SCHEDULE
8.7(C), subject to the terms set forth in such Schedule. Such services
shall include warehousing, receipt and shipment of Products, and
invoicing, all of which shall be provided on behalf of Buyer. Unless
otherwise agreed, Pharmacia and its Affiliates shall have the right, at
Buyer's expense, to ship to Buyer all inventory and other Assets in
their possession at the end of such 90 days period.
(d) Buyer shall provide Seller the service work described on
SCHEDULE 8.7(d) concerning compounding equipment sold by such Affiliate,
subject to the terms set forth in such Schedule.
(e) Each party shall remit promptly to the other party any
checks or other payments it receives which properly belong to the other
party, including any payments directed to Buyer for payment of Seller's
accounts receivable outstanding on the
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Completion Date and, subject to the terms referred to in Clause 8.7(c)
above, those directed to Seller for payment of Buyer's invoices issued
after the Completion Date.
8.8 PENSION SCHEMES.
(a) The Buyer shall on or before Completion (or as soon thereafter as
possible) nominate or procure the nomination of a retirement benefits scheme
which is or which is designed to be capable of approval as an exempt approved
scheme under s.592, Income and Corporation Taxes Act 1988 and is
contracted-out within the meaning of the Pension Schemes Act 1993.
(b) (i) The Buyer undertakes to the Seller to procure that the
Pensionable Employees are at the time of Completion (or as soon thereafter as
possible) offered membership of the Buyer's Scheme on terms as to benefits
and contributions for services, as on the Completion Date, which are
identical to those applicable to the Pensionable Employees under the Pension
Scheme immediately prior to execution of this agreement.
(ii) The Buyer undertakes to the Seller to procure that the cover
for all risk benefits is maintained for the Pensionable Employees from
Completion to the date which is one month after the date invitation to join
Buyer's Scheme has been issued to the Pensionable Employees.
(iii) The Buyer shall indemnify the Seller and hold the Seller
harmless against all and any costs, claims, expenses and liabilities
whatsoever arising out of or in connection with pension, retirement or death
benefits not being provided on or after Completion (whether in respect of any
period before or after Completion) for or in respect of the Transferred
Employees or any of them, at the same level and on the same terms as such
benefits are provided prior to Completion (to the extent such benefits were
previously disclosed by Seller to Buyer or are otherwise required to be
provided by law).
(c) The Buyer shall procure that in respect of service before
Completion, subject to the transfer being made and monies received in
accordance with paragraph (e) below, each Pensionable Employee is credited
under the Buyer's Scheme in respect of pensionable service up to Completion
with benefits which would (if the credit had been made on Completion, have
had on that date a capital value which equals (or as nearly as may be) that
part of the transfer value which relates to him and for this purpose the
actuarial assumptions and methodology set out in the Compensation Letter
shall apply MUTATIS MUTANDIS.
(d) The Seller shall use its reasonable endeavors to procure that:
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(i) The Pension Scheme notifies each Pensionable Employee in
writing as soon as practicable after he ceases to be in pensionable
service under the Pension Scheme of the options available to him under
the Pension Scheme;
(ii) Any Pensionable Employee who on ceasing to be in pensionable
service under the Pension Scheme does not acquire a right to a transfer
value under the Statutory Transfer Conditions is given the option under
the Pension Scheme of a transfer value as if he had acquired such a right;
(iii) The transfer value paid in respect of any Pensionable
Employee shall be an enhanced transfer value calculated in accordance
with Clause 8.8(e) with reference to completed pensionable service and
allowing for future salary increases and pension increases but excluding
any surplus. The principal actuarial assumptions and methodology used in
the calculation are as set out in the Compensation Letter and
(iv) If a Pensionable Employee (including one within Clause
8.8(d)(ii) above) requests in writing that a transfer value be paid in
respect of him in a manner permitted under the Statutory Transfer
Conditions the Pension Scheme gives effect to that request as soon as
practicable.
(e) Immediately after Completion, Seller shall instruct Seller's
Actuary to determine the enhanced transfer value referred to in 8.8(d)(iii)
within 56 days after Completion.
(i) Seller and the Buyer shall procure that all such information
as is in their respective possession, custody or control as Seller's Actuary
or Buyer's Actuary may reasonable request for the purpose of calculating the
transfer value available promptly to such actuary.
(ii) Seller shall use their respective best endeavors to expedite
the determination of the transfer value.
(iii) Buyer's Actuary shall have the right to review the
determination made by Seller's Actuary. He may dispute such determination
only to the extent he finds that Seller's Actuary did not follow the
principal assumptions set forth in the Compensation Letter. Any dispute
between Seller's Actuary and Buyer's Actuary concerning the determination of
the transfer values shall, in the absence of an agreement between them, be
referred to an independent actuary. The independent actuary shall be
nominated jointly by Seller and Buyer or, failing such nomination within 14
days from the first nomination of and actuary by one
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party or the other, shall be nominated jointly by Seller and Buyer or,
failing such nomination, shall be nominated by the President for the time
being of The Institute of Actuaries at the instances of the party first
applying to him. The independent actuary so appointed shall act as an expert
and not as an arbitrator. His decision shall be final and binding. His
costs shall be borne between Seller of the one part and Buyer of the other
part as the independent Actuary may direct.
(iv) Within 10 days after the final determination of the enhanced
transfer value, Seller shall transfer in cash the amount of such value to the
Buyer's Scheme.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made under Sections 6 and 7 or in any Document delivered
hereunder shall not terminate, but shall survive the Completion Date and
continue in effect until the expiration of 12 months following the Completion
Date (other than the representations set forth in Sections 6.1, 6.2, 6.4, 7.1
and 7.2, all of which shall continue until their applicable limitation period
under law) at which time they shall expire; PROVIDED, HOWEVER, that any such
representation or warranty as to which a BONA FIDE claim shall have been
notified in writing to the other party during such survival period shall
continue in effect.
9.2 SURVIVAL OF COVENANTS AND AGREEMENTS. Except as expressly stated
otherwise, all covenants and agreements made hereunder or pursuant to the
Documents shall not terminate but shall survive the Completion.
9.3 INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold
harmless Buyer, its affiliates, their respective officers, directors and
principal stockholders and their respective successors and assigns from and
against any claims, liabilities, losses (including diminished value), damages
or expenses (any one such item being herein called a "LOSS" and all such
items being herein collectively called "LOSSES") which are caused by or arise
out of: (a)any breach or default in the performance by Seller of any covenant
or agreement made by Seller under this Agreement or any Document;(b) subject
to Clause 9.1, any breach of warranty or representation made by Seller under
Section 6 or in any Document;(c) any Retained Liabilities or any other
liabilities or obligations of Seller or any of its Affiliates (whether
absolute or contingent) other than the Assumed Liabilities; and (d) any and
all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees) incident to any of the foregoing.
Notwithstanding the foregoing provisions of this Clause 9.3, no claim for
indemnification shall be made by Buyer with respect to Clause 9.3(b) or
Clause 9.3(d) to the extent incident or otherwise related to the breach of a
warranty or representation covered by Clause 9.3(b), unless and until the
aggregate amount of all Losses of Buyer in respect
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thereof shall exceed $200,000 (the "Required Minimum"). If the Required
Minimum shall be exceeded, Buyer shall be entitled to seek and obtain
indemnification from Seller for any and all Losses, including those within
the Required Minimum, exceeding $50,000.
9.4 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
harmless Seller, its affiliates, their respective officers, directors and
principal stockholders and their respective successors and assigns from and
against any Losses which are caused by or arise out of:(a) any breach or
default in the performance by Buyer of any covenant or agreement made by
Buyer under this Agreement or any Document;(b) subject to Clause 9.1, any
breach of warranty or representation made by Buyer under Section 6 or in any
Document;(c) any Assumed Liabilities;(d) any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees) incident to any of the foregoing; or (e) any act by
Buyer after the Completion Date arising out, or related to, the operation by
Buyer of its business related to the Products. Notwithstanding the foregoing
provisions of this Clause 9.4, no claim for indemnification shall be made by
Seller with respect to Clause 9.4(b) or Clause 9.4(d) to the extent incident
or otherwise related to the breach of a warranty or representation covered by
Clause 9.4(b), unless and until the aggregate amount of all Losses of Seller
in respect thereof shall exceed the Required Minimum. If the Required
Minimum shall be exceeded, Seller shall be entitled to seek and obtain
indemnification from Buyer for any and all Losses, including those within the
Required Minimum, exceeding $50,000.
9.5 DEFENSE BY INDEMNIFYING PARTIES. An indemnified party shall
notify the indemnifying party of any claim of such indemnified party for
indemnification under this Agreement within thirty (30) days of the date on
which an executive officer of such indemnified party first becomes aware of
the existence of such claim whether such claim would be subject to the
Required Minimum or otherwise. Such notice shall specify the nature of such
claim in reasonable detail and the indemnifying party shall be given
reasonable access to any documents or properties within the control of the
indemnified party as may be useful in the investigation of the basis for such
claim. The failure to so notify the indemnifying party within such
thirty-day period shall not constitute a waiver of such claim (provided that
it does not interfere with the right of the indemnifying party to defend such
action) but an indemnified party shall not be entitled to receive any
indemnification with respect to any Loss that occurred as a result of the
failure of such person to give such notice.
In the event any indemnified party is entitled to indemnification hereunder
based upon a claim asserted by a third party the indemnifying party shall be
given prompt notice thereof, in reasonable detail. The failure to so notify the
indemnifying party shall not constitute a waiver of such claim but an
indemnified party shall not be entitled to receive any indemnification with
respect to any Loss that occurred as a result of the failure of such person to
give such notice. The indemnifying party shall have the right (without
prejudice to the right of any indemnified
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party to participate at its expense through counsel of its own choosing) to
defend or prosecute such claim at its expense and through counsel of its own
choosing if it gives written notice of its intention to do so not later than
twenty (20) days following notice thereof by the indemnified party or such
shorter time period as required so that the interests of the indemnified
party would not be materially prejudiced as a result of its failure to have
received such notice; PROVIDED, HOWEVER, that if the defendants in any action
shall include both an indemnifying party and an indemnified party and the
indemnified party shall have reasonably concluded that counsel selected by
the indemnifying party has a conflict of interest because of the availability
of different or additional defenses to the indemnified party, the indemnified
party shall have the right to select separate counsel to participate in the
defense of such action on its behalf, at the expense of the indemnifying
party. If the indemnifying party does not so choose to defend or prosecute
any such claim asserted by a third party for which any indemnified party
would be entitled to indemnification hereunder, then the indemnified party
shall be entitled to recover from the indemnifying party, on a monthly basis,
all of its attorneys' reasonable fees and other costs and expenses of
litigation of any nature whatsoever incurred in the defense of such claim.
Notwithstanding the assumption of the defense of any claim by the indemnified
party pursuant to this subsection, the indemnifying party shall have the
right to approve the terms of any settlement of a claim (which approval shall
not be unreasonably withheld).
9.6 COOPERATION. The indemnifying party and the indemnified party
shall cooperate in furnishing evidence and testimony and in any other manner
which the other may reasonably request, and shall in all other respects have
an obligation of good faith dealing, one to the other, so as not to
unreasonably expose the other to an undue risk of loss. The indemnified
party shall be entitled to reimbursement for out-of-pocket expenses incurred
by it in connection with such cooperation. Except for fees and expenses for
which indemnification is provided pursuant to Clause 9.3 or Clause 9.4 , as
the case may be, and as provided in the preceding sentence, each party shall
bear its own fees and expenses incurred pursuant to this Clause 9.6.
9.7 REMEDIES EXCLUSIVE. Subject to the last sentence of this Clause
9.7, from and after the Completion Date, the rights and remedies under
Clauses 9.3 and 9.4 shall be deemed to be exclusive of all other rights and
remedies that would otherwise be available to the parties hereto for breach
of the representations and warranties under Sections 6 and 7, respectively.
The exercise or attempted exercise by either party of any such rights or
remedies shall not preclude the simultaneous or later exercise by such party
of any or all other such rights or remedies as provided in Section 9. No
course of dealing by either party, or any delay or omission of any party in
exercising any rights or remedies under this Agreement shall operate as a
waiver of such right or remedy or any other rights or remedies of such party
provided in this Section 9. Notwithstanding the foregoing, the parties agree
that remedies at law may be
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inadequate, and accordingly, each of the parties hereto, in addition to other
remedies they may have, shall have the right to enforce their respective
rights hereunder by an action or actions for specific performance, injunction
or other appropriate equitable remedies.
9.8 NO WARRANTY. Except as expressly provided in this Agreement, the
Documents and the Schedules, the Assets are sold "AS IS, WHERE IS," AND WITH
ALL FAULTS. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
9.9 ALLOCATION. Although the consideration for the Assets is
allocated as provided in Schedule 3.1, its is nevertheless agreed that such
consideration is a single price and for the purpose of determining any Loss,
the compensation payable shall be determined accordingly.
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10. MISCELLANEOUS.
10.1 CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the laws of England.
10.2 JURISDICTION. In relation to any legal action or proceeding to
enforce this Agreement or arising out of or in connection with this Agreement
("PROCEEDINGS") each of the parties irrevocably submits to the jurisdiction
of the English courts and waives any objection to Proceedings in such courts.
Without prejudice to the generality of the foregoing, each of the parties
irrevocably waives any objection to such jurisdiction on the grounds of venue
or on the grounds the proceedings have been brought in an inconvenient forum
or on the ground that proceedings between the parties involving the same
cause of action are already before the courts of another jurisdiction. Such
submissions shall not affect the right of any party to take Proceedings in
any other jurisdiction nor shall the taking of proceedings in any
jurisdiction preclude any party from taking Proceedings in any other
jurisdiction.
10.3 PROCESS AGENT. IMED and Buyer, and Pharmacia and Seller
irrevocably appoint Edward Banks of Slaughter & May and Richard Slater of
Simmons & Simmons, respectively, as their process agents respectively to
accept on their behalf service of process in any Proceedings in England.
Such service shall be deemed effective on delivery to such process agent
(whether or not it is forwarded to and received by such party). If for any
reason such process agent ceases to be able to act as process agent, or no
longer has an address in England, the relevant party irrevocably agrees to
appoint a substitute process agent in England acceptable to the other parties
and to deliver to the other parties a copy of the new process agent's
acceptance of that appointment within 30 days stating the new process agent's
address. In default of such substitute being appointed, and notified to the
other parties, service of process shall be deemed effective upon delivery to
the address of process agent as may be notified to the other parties,
notwithstanding that such process agent is no longer found at such address or
has ceased to act.
10.4 OTHER METHODS OF PROCESS. The relevant parties hereto
irrevocably consents to any process in any Proceedings anywhere being served
in accordance with the provisions of this Agreement relating to the service
of notices. Such service shall become effective 30 days after dispatch.
Nothing herein contained shall affect the right to serve process in any other
manner permitted by law.
10.5 EXPENSES. The parties shall each pay their own expenses in
connection with the negotiation, preparation and carrying out of this
Agreement.
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10.6 NOTICES. All notices, requests, demands, waivers, consents,
approvals or other communications to either party hereunder shall be in
writing in English and shall be deemed to have been duly given if delivered
personally to such party or sent to such party by Federal Express, DHL or
other reputable overnight courier service, telegram or telex, or by
registered or certified mail, postage prepaid, to the following addresses:
If to Buyer or IMED:
IMED Corporation
9775 Businesspark Avenue
San Diego, California 92131
Attention: Office of General Counsel
with a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
Attention: Keith L. Schaitkin, Esq.
If to Seller or Pharmacia:
Pharmacia AB
S-171 97 Stockholm
Sweden
Attention: General Counsel
with a copy to:
Wiggin & Dana
301 Tresser Blvd.
Stamford, CT 06901 USA
Attention: James F. Farrington, Jr.
or to such other address as the addressee may have specified in notice duly
given to the sender as provided herein. Such notice, request, demand,
waiver, consent, approval or other communications will be deemed to have been
given as of the date so delivered, telegraphed, telexed, or five (5) days
after so mailed.
<PAGE>
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10.7 ENGLISH LANGUAGE. If this Agreement is translated into any
language, the English language version shall govern in the event of any
conflict or question of construction or interpretation.
10.8 SEVERABILITY. In the event that any provision of this Agreement
shall be found in any jurisdiction to be illegal, void, invalid or
unenforceable, such finding shall in no event invalidate any other provision
of this Agreement in that jurisdiction, and the legality, validity and
enforceability of the entire Agreement shall not be affected in any other
jurisdiction.
10.9 ENTIRE AGREEMENT. This Agreement and the other documents
referred to herein state the entire agreement reached between the parties
hereto with respect to the transactions contemplated hereby and may not be
amended or modified except by written instrument duly executed by the parties
hereto. Any and all previous agreements and understandings between the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement.
10.10 NO WAIVER. The failure of either party hereto to enforce at
any time, or for any period of time, any provision of this Agreement shall
not be construed as a waiver of such provision or of the right of such party
thereafter to enforce each and every provision.
10.11 ASSIGNMENT, BINDING EFFECT. Neither of the parties hereto
shall assign this Agreement nor any of their respective rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be withheld unreasonably. Any such attempted assignment without
such consent shall be void. Notwithstanding the foregoing, either party
hereto shall be entitled to assign this Agreement to another person without
such consent upon thirty (30) days prior written notice, if such person (i)
acquires (by purchase or merger) all or substantially all of such party's
business and assets and (ii) assumes all of the obligations of such party
hereunder. This Agreement and the rights granted herein shall be binding
upon and shall inure to the benefit of Seller, Buyer and their respective
successors and permitted assigns. Any party hereto may assign, or grant a
security interest in, its rights hereunder to a lender as collateral security
for a loan, as part of a financing involving a similar collateral assignment
or grant with respect to a substantial portion of its assets.
10.12 HEADINGS. All section headings contained in this Agreement are
for convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
10.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall
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constitute but one and the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to account for any
of the other counterparts.
10.14 CURRENCY. All payments due under Section 3 shall be made in
lawful coin and currency of the United States of America. In respect of any
calculation contemplated by this Agreement of any amount denominated in
British Pounds which is payable under such Section, such calculation shall be
based upon the exchange rate for British Pounds and United States of America
Dollars contained in the Eastern Edition of THE WALL STREET JOURNAL on the
day which comes closest to preceding the Completion Date. All payments of
Losses under Clauses 9.3 and 9.4 shall be determined and payable in the
currencies in which the Losses were incurred.
10.15 IMED GUARANTY.
(a) OBLIGATIONS GUARANTEED. IMED unconditionally and irrevocably:
(i) guarantees to Seller and Pharmacia as principal obligor and
not merely as surety (with the intention that any amount not recoverable
for any reason from IMED under this clause on the basis of a guarantee
shall nevertheless be recoverable on the basis of an indemnity) the due
and punctual payment by Buyer of all sums payable under this Agreement
as and when the same fall due;
(ii) guarantees to Seller and Pharmacia as principal obligor and
not merely as surety the due and punctual performance by Buyer of all
other acts, covenants and obligations to be performed, given or observed
by it under this Agreement; and
(iii) undertakes to keep Seller and Pharmacia fully and
effectually indemnified against all losses, damages, costs, claims and
expenses whatsoever arising out of or in connection with any failure on
the part of Buyer to effect due and punctual payment of any sum as
aforesaid or to perform or observe all or any of the other acts,
covenants and obligations aforesaid.
(b) NO DISCHARGE. The obligations of IMED under this Agreement shall
not be discharged except by performance and then only to the extent of such
performance. Such obligations:
(i) shall not be subject to any prior notice to or demand upon the IMED
with regard to any default on the part of Buyer or otherwise;
(ii) shall not be impaired by:
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(A) any extension of time, forbearance or concession given to Buyer; or
(B) any assertion of or failure to assert any right or remedy against
Buyer; or
(C) any modification or variation of the provisions of this Agreement;
or
(D) the administration, insolvency or liquidation of Buyer; or
(E) by any other thing which might otherwise wholly or partially
discharge IMED from its obligations under this Agreement or affect
its liability if IMED were the sole principal debtor.
(c) CONTINUING GUARANTEE. The guarantee and indemnity contained in
this clause shall be a continuing guarantee and indemnity and shall remain in
full force and effect until all moneys payable to Seller and Pharmacia by
Buyer under the provisions of this Agreement shall have been duly paid and
all acts, covenants and obligations described in sub-Clause 10.16(a)(ii) have
been duly performed.
10.16 PHARMACIA GUARANTY.
(a) OBLIGATIONS GUARANTEED. Pharmacia unconditionally and irrevocably:
(i) guarantees to Buyer and IMED as principal obligor and not
merely as surety (with the intention that any amount not recoverable for
any reason from Pharmacia under this clause on the basis of a guarantee
shall nevertheless by recoverable on the basis of an indemnity) the due
and punctual payment by Seller of all sums payable under this Agreement
as and when the same fall due;
(ii) guarantees to Buyer and IMED as principal obligor and not
merely as surety the due and punctual performance by Seller of all other
acts, covenants and obligations to be performed, given or observed by it
under this Agreement; and
(iii) undertakes to keep Buyer and IMED fully and effectually
indemnified against all losses, damages, costs, claims and expenses
whatsoever arising out of or in connection with any failure on the part
of Seller to effect due and punctual payment of any sum as aforesaid or
to perform or observe all or any of the other acts, covenants and
obligations aforesaid.
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(b) NO DISCHARGE. The obligations of Pharmacia under this Agreement
shall not be discharged except by performance and then only to the extent of
such performance. Such obligations:
(i) shall not be subject to any prior notice to or demand upon
Pharmacia with regard to any default on the part of Seller or otherwise;
(ii) shall not be impaired by:
(A) any extension of time, forbearance or concession given to Seller; or
(B) any assertion of or failure to assert any right or remedy against
Seller; or
(C) any modification or variation of the provisions of this Agreement;
or
(D) the administration, insolvency or liquidation of Seller; or
(E) by any other thing which might otherwise wholly or partially
discharge Pharmacia from its obligations under this Agreement or
affect its liability if Pharmacia were the sole principal debtor.
(c) CONTINUING GUARANTEE. The guarantee and indemnity contained in
this clause shall be a continuing guarantee and indemnity and shall remain in
full force and effect until all moneys payable to Buyer and IMED by Seller
under the provisions of this Agreement shall have been duly paid and all
acts, covenants and obligations described in sub-Clause 10.17(a)(ii) have
been duly performed.
THE NEXT PAGE IS THE SIGNATURE PAGE
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
IMED LIMITED
By:____________________________________
Name:
Title:
IMED CORPORATION
By:_____________________________________
Name:
Title:
PHARMACIA & UPJOHN LIMITED
By:____________________________________
Name:
Title:
PHARMACIA AB
By:____________________________________
Name:
Title:
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LIST OF SCHEDULES
Schedule 2.1(a) IOC Contracts
Schedule 2.1(b) Other Assigned Contracts
Schedule 2.1(d) Regulatory Approvals
Schedule 2.1(g) Fixed Assets
Schedule 3.1 Purchase Price Allocation
Schedule 4.2 Completion Documents
Schedule 6.5 Consents Required by Seller
Schedule 7.3 Consents Required by Buyer
Schedule 8.2 Transferred Employees
Schedule 8.4 VAT Notification Letter
Schedule 8.7(c) Transition Services for IMED
Schedule 8.7(d) Service Work for Pharmacia
Schedule 8.8 Pension Scheme Valuation
36
<PAGE>
SCHEDULE 2.1(a)
IOC CONTRACTS
SEE ATTACHED 4 PAGES IDENTIFYING IOC'S AS OF 2/96
Other IOC's were entered into (or have expired) in the ordinary course of
business on substantially similar terms since that date.
37
<PAGE>
SCHEDULE 2.1(b)
OTHER ASSIGNED CONTRACTS
DISTRIBUTOR AGREEMENTS
- ----------------------
COUNTRY COMPANY SPECIFIC WRITTEN CONTRACT
- ------- ------- -------------------------
Portugal Iberdata LdA no
Malta Technoline Ltd no
Cyprus Pap Medical no
Israel Levant Tech Ltd no
Palestine Intermed no
Ireland Intraveno yes
Sweden Gote Johansson yes
OTHER AGREEMENTS
- ----------------
(1) Extended Warranty Contracts as described in the enclosed list and
typical letter agreements
(2) Car leases described in the enclosed list and Contract Hire Master
Agreement
(3) Miscellaneous contracts referred to in the enclosed intracompany
correspondence
38
<PAGE>
SCHEDULE 2.1(d)
REGULATORY APPROVALS
SEE THE ENCLOSED PAGES CONCERNING FRANCE AND ITALY. Seller does not hold any
registrations or other regulatory approvals to sell the Products which were
obtained by it, other than those requiring notification only..
Notifications - either by Buyer or jointly - to regulatory authorities may be
required in one of more countries.
39
<PAGE>
SCHEDULE 2.1(g)
FIXED ASSETS TO BE TRANSFERRED
AS DESCRIBED ON THE ENCLOSED LIST AS OF 4/30/96
PLUS
- ----
(1) Seller-owned vehicles identified on the enclosed list
(2) Equipment used solely for the testing or servicing of IMED Products
which is possessed by Seller's French or German affiliate
40
<PAGE>
SCHEDULE 3.1
PURCHASE PRICE ALLOCATION
<TABLE>
<CAPTION>
ASSETS HELD BY SELLER
- ---------------------
ASSET USD (000's)
----- -----------
<S> <C>
IOC's (plus pumps placed with contract parties) 1,037
Inventory 700
Fixed Assets 46
-----
SUBTOTAL 1,783
ASSETS HELD BY SELLER'S FRENCH AFFILIATE
- ----------------------------------------
Inventory 300
Fixed Assets 0
---
ASSETS HELD BY SELLER'S OTHER AFFILIATES
- ----------------------------------------
Inventory 500
Fixed Assets 0
TOTAL 2,583
</TABLE>
41
<PAGE>
NOTE: The transfer of all intangibles and goodwill, and the consideration
therefor, are provided for in the Assignment Agreement
42
<PAGE>
SCHEDULE 4.2
OTHER COMPLETION DOCUMENTS
Acte de Cession D'Elements de Fonds de Commerce (Asset Sale Agreement) for
the Assets held by Seller's French affiliate
Bills of sale or other assignment instruments to transfer to Buyer all
Inventory
Notifications to regulatory authorities concerning the change in the
distributor of the IMED Products.
43
<PAGE>
SCHEDULE 6.5
CONSENTS REQUIRED BY SELLER
French Treasury (concerning the transfer of the Assets held by Seller's
French affiliate)
Consents are required under the terms of most of the Assigned Contracts. The
parties shall follow the procedure set forth in Clause 4.4(b).
44
<PAGE>
SCHEDULE 7.3
CONSENTS REQUIRED BY BUYER
45
<PAGE>
SCHEDULE 8.2
TRANSFERRED EMPLOYEES
TRANSFERRED EMPLOYEES OF SELLER
- -------------------------------
R Bradshaw
D Grant
D Holden
C McLean
K Hemmings
N Moore
K Watts
M Barclay
E Dawson
P Highmoor
T Holyday
M Rowley
G Walker
M Harper
C Wass
TRANSFERRED EMPLOYEES OF SELLER'S FRENCH AFFILIATE
- --------------------------------------------------
P. Andre
L. Veron
46
<PAGE>
SCHEDULE 8.4
VAT NOTIFICATION LETTER
SEE THE ENCLOSED FORM OF LETTER
47
<PAGE>
SCHEDULE 8.7(c)
TRANSITION SERVICES FOR IMED
Pharmacia market companies on the Continent (excluding of the UK and France,
and those markets listed in Schedule 2.1(b) as served by distributors) shall
invoice IMED customers for a period of ninety (90) days after the Completion
Date.
Pharmacia market companies shall perform warehouse services by holding levels
of product inventory requested by IMED.
Pharmacia shall ship all product to IMED customers on behalf of IMED.
IMED will not require Pharmacia to actively sell products to new or existing
customers. This will include no active promotion of the IMED instrument line.
Pharmacia personnel shall process all incoming orders through its Customer
Service Departments.
All service requirements for installed equipment will be performed by IMED's
new service center in the U.K. All product in need of servicing should be
collected by Pharmacia personnel and sent freight collect to IMED U.K.
Operations. IMED will then return the equipment to Pharmacia freight
prepaid. All freight charges incurred by Pharmacia to return the product to
the customers once, and not recovered by Pharmacia, will be billed to IMED
Ltd.
IMED will invoice sales of products to Pharmacia market companies at 70% of
Pharmacia third party pricing to the end user. Approximate pricing levels
will be provided to IMED by Pharmacia to permit IMED to invoice at 70% of
third party pricing. At the end of ninety (90) days, IMED and Pharmacia will
reconcile pricing so that Pharmacia is ensured of receiving 30% of net sales
service fee.
Should IMED not require the services of Pharmacia prior to the end of ninety
(90) days, IMED shall notify the Pharmacia market company fifteen (15)
working days in advance and make arrangements for all inventory to be
transferred to the appropriate destination. All reconciliation of pricing
will be completed earlier per the above paragraph.
48
<PAGE>
All such services shall be provided by Pharmacia as an agent and for the
benefit of IMED. IMED shall indemnify and defend Pharmacia and its
affiliates from and against all claims and liabilities arising out of the
performance of such services, including all claims for product defects and
infringement of the intellectual property rights of any third party.
SCHEDULE 8.7(d)
SERVICE WORK FOR PHARMACIA
SEE THE ATTACHED LIST OF OUTSTANDING VACUMAT CONTRACTS AND THE
CONTRACT TERMS FOR SERVICE
49
<PAGE>
EXHIBIT 10.29
ASSIGNMENT AGREEMENT
DATED JUNE 26, 1996
BY AND AMONG
IMED INTERNATIONAL TRADING CORP.,
IMED CORPORATION,
PHARMACIA AB
AND
ADVANCED MEDICAL, INC.
<PAGE>
ASSIGNMENT AGREEMENT
THIS AGREEMENT ("AGREEMENT") dated June 26, 1996 is made by and among
IMED International Trading Corp., a Delaware corporation ("IMED TRADING"),
IMED Corporation, a Delaware (USA) corporation ("IMED"); Pharmacia AB
[publ.], a Swedish limited liability company ("PHARMACIA"); and Advanced
Medical, Inc., a Delaware corporation ("AM").
BACKGROUND
Pharmacia, IMED and AM entered into an Amended and Restated Distribution
Agreement, dated as of August 12, 1994 (the "DISTRIBUTION AGREEMENT") under
which Pharmacia distributes IMED's infusion pumps, administration sets and
related products in Europe. The Distribution Agreement was originally
entered into as of October 28, 1991. All capitalized and otherwise undefined
terms in this Agreement shall have the meanings set forth in the Distribution
Agreement.
In connection therewith, Pharmacia and certain of its subsidiaries also
acquired as of October 28, 1991, IMED's European business and assets relating
to the distribution of IMED's infusion pumps, administration sets and related
products in Europe. Pursuant to the terms of a certain Asset Transfer
Agreement, dated the date hereof (the "TRANSFER AGREEMENT"), Pharmacia has
agreed to cause one of its affiliates to sell and transfer to one of IMED's
affiliates, and IMED has agreed to cause one of its affiliates to purchase
certain assets related to its distribution of IMED's infusion pumps,
administration sets and related products in Europe.
In connection with the transfer of certain assets related to Pharmacia's
distribution of IMED's infusion pumps, administration sets and related
products, Pharmacia has now agreed to assign the Distribution Agreement to
IMED Trading, a wholly-owned subsidiary of IMED.
NOW, THEREFORE, the parties hereto agree as follows:
1. ASSIGNMENT OF THE DISTRIBUTION AGREEMENT.
1.1 ASSIGNMENT. The legal effectiveness of the parties' rights and
obligations set forth below shall be subject to the occurrence of Completion
(as defined in the Transfer Agreement). Subject to such effectiveness,
Pharmacia agrees to assign, and hereby assigns, all right, title and
interest under the Distribution Agreement, free and clear of all liens,
claims and encumbrances, to IMED Trading as of August 30, 1996 (the
"COMPLETION DATE"). Pharmacia further agrees to cause its UK and French
Affiliates upon Completion to assign to IMED Trading all of their respective
rights and interest to distribute the Products and all
<PAGE>
intangible rights and goodwill relating thereto. From and after the
Completion Date, Pharmacia shall not have any obligations or other
liabilities to IMED or AM, and AM and IMED shall not have any obligation or
other liabilities to Pharmacia, under the Distribution Agreement, except as
follows:
(a) Pharmacia shall pay the unpaid Product Price and Additional Payment
payable in respect to all Products sold by Pharmacia and its
Affiliates prior to the Completion Date, and shall pay the unpaid
Product Price payable in respect to all Products delivered to
Pharmacia or its Affiliates, but not yet sold, prior to the
Completion Date; PROVIDED, that, notwithstanding anything to the
contrary contained in Section 12.6 of the Distribution Agreement,
Pharmacia shall not have any payment or other obligation as a
result of Products ordered by Pharmacia or its Affiliates prior to
the Completion Date, but not yet delivered to Pharmacia or its
Affiliates. To the extent applicable to the foregoing payments,
Article 4 of the Distribution Agreement shall survive.
(b) Each party shall remain liable for any adjustments to the Product
Price as provided in Section 4.1 and Exhibit 1.16 of the
Distribution Agreement;
(c) In respect to Products sold by Pharmacia and its Affiliates prior
to the Completion Date, IMED shall (a) be liable to remedy any
nonconformance with the warranty obligations set forth in Sections
8.1 through 8.5 of the Distribution Agreement; and (b) perform all
service obligations required to be performed by it or Pharmacia
under Section 8.6 of the Distribution Agreement;
(d) Each party shall continue to be bound under the confidentiality
obligations set forth in Section 10 of the Distribution Agreement,
and, except to the extent required to comply with any requirements
of law, each party shall promptly return to the other party all
documents or other tangible materials representing such other
party's Proprietary Information;
(e) Each party shall remain liable for certain product liability
claims, including those arising under Section 11 of the
Distribution Agreement, but only to the extent set forth in
SCHEDULE 1.1(e) hereto; and
(f) The parties shall provide such notices and take such other actions
as may be required in connection with the transfer of the
Distribution Agreement to IMED Trading under Clause 8.7 of the
Asset Transfer Agreement.
1.2 CONSIDERATION. In consideration for the assignment of the
Distribution Agreement, IMED Trading shall pay Pharmacia a payment in an
aggregate amount of $US 8,463,000 at Completion (as defined in the Asset
Transfer Agreement). The payment due
2
<PAGE>
under this Clause 1.2 shall be made in cash by wire transfer of immediately
available funds to the accounts designated by Pharmacia as follows:
(a) $US 1,363,000 to Pharmacia & Upjohn Ltd.,
(b) $US 100,000 to Pharmacia France S.A., and
(c) $US 7,000,000 to Pharmacia AB.
IMED Trading may offset against such amount $US 218,674, the aggregate amount
now payable to IMED by Pharmacia or one or more of its Affiliates under the
outstanding invoices referred to in SCHEDULE 1.2.
1.3 MUTUAL RELEASES. Except as expressly set forth in Section 1.1
above or Section 2 below:
(a) For and in consideration of the sum of One Dollar ($1.00) in lawful
money of the United States of America, and other valuable consideration,
received to their full satisfaction, each of the IMED Trading, IMED and
AM and each of their affiliates, successors and assigns, hereby remise,
release and forever discharge Pharmacia, its affiliates, successors and
assigns and their officers, employees, and agents of and from any and
all claims, rights, liabilities, obligations or other matters arising
out of or relating to the Distribution Agreement; and
(b) For and in consideration of the sum of One Dollar ($1.00) in lawful
money of the United States of America, and other valuable consideration,
received to their full satisfaction, each of the Pharmacia and its
affiliates, successors and assigns, hereby remise, release and forever
discharge each of IMED Trading, IMED and AM and each of their
affiliates, successors and assigns and their officers, employees, and
agents of and from any and all claims, rights, liabilities, obligations
or other matters arising out of or relating to the Distribution
Agreement.
2. RELATED AGREEMENTS. Except as specifically provided herein, any and all
previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are hereby terminated and the
respective terms and provisions contained therein are null and void and of no
further force or effect. The agreements and understandings set forth in the
following agreements are not terminated or modified by this Agreement: (a)
the Transfer Agreement,(b) the Asset Transfer Agreement, dated as of August
15, 1995, by and among IMED Ireland, IMED, Pharmacia and Gaeleo Investments
Ltd. ("GAELEO"),(c) the Supply Agreement, dated as of August 15, 1995, by and
among IMED, Pharmacia and Gaeleo, (d)the Final Agreement, dated as of August
12, 1994, by and
3
<PAGE>
among AM, AM General Development Corp., AM Development Limited, Dean Kamen,
Deka Products Limited Partnership, Deka Research & Development Corp and
Pharmacia (including, without limitation, Pharmacia's rights under Section
9.8 therein).
3. ARBITRATION.
3,1 RULES. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach, termination or invalidity thereof,
shall be settled by arbitration in London, England in accordance with the
Rules of Conciliation and Arbitration of the International Chamber of
Commerce by three (3) arbitrators appointed in accordance with said Rules.
The decision reached by such arbitrators in any such proceeding shall be
final and binding upon the parties thereto. The parties shall, however,
remain free to apply to any competent judicial authority for interim or
conservatory measures, even after the transmittal of the file to the
aforesaid arbitrators and even if there are no exceptional circumstances.
The arbitration proceeding shall be conducted in the English language, with
each party responsible for its own legal expenses.
3.2 NOTICE. Whenever a party shall decide to institute arbitration
proceedings, it shall give thirty (30) days' prior written notice to that
effect to the other party.
3.3 AWARD. Any monetary award shall bear interest at a rate fixed by
the arbitrators from the date the arbitration proceeding is commenced to the
date on which the award is paid in full. Judgment upon the award so rendered
may be entered in any court having jurisdiction or application may be made to
such court for judicial acceptance of any award and an order of enforcement,
as the case may be.
3.4 NOT TO AFFECT OTHER ACTIVITIES. Performance under this Agreement
shall continue, if reasonably possible, during any disagreement or
arbitration proceedings and no funds payable to either party under this
Agreement shall be withheld on account of such disagreement or proceedings.
4. MISCELLANEOUS.
4.1 CHOICE OF LAW. This Agreement shall be governed and interpreted,
and all rights and obligations of the parties hereunder, shall be governed
and determined in accordance with the laws of the Kingdom of Sweden, without
regard to its conflict of laws rules (and without limiting the foregoing, the
United Nations Convention On Contracts for International Sale of Goods [1980]
shall not govern this Agreement).
4.2 NOTICES. All notices, requests, demands, waivers, consents,
approvals or other communications to any party hereunder shall be in writing
and shall be deemed to have been
4
<PAGE>
duly given if delivered personally to such party or sent to such party by
telegram or telex or by registered or certified mail, postage prepaid, to the
following addresses:
If to IMED:
IMED Corporation
9775 Businesspark Avenue
San Diego, California 92131
Attention: Office of General Counsel
with a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
Attention: Keith L. Schaitkin, Esq.
If to Pharmacia:
Pharmacia AB
S-171 97 Stockholm
Sweden
Attention: General Counsel
with a copy to:
Wiggin & Dana
301 Tresser Blvd.
Stamford, CT 06901 USA
Attention: James F. Farrington, Jr.
If to AM:
Advanced Medical Inc.
c/o IMED Corporation
9775 Businesspark Avenue
San Diego, California 92131
Attention: Office of the President
5
<PAGE>
with a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
Attention: Keith L. Schaitkin, Esq.
or to such other address as the addressee may have specified in notice duly
given to the sender as provided herein. Such notice, request, demand,
waiver, consent, approval or other communications will be deemed to have been
given as of the date so delivered, telegraphed, telexed, or five (5) days
after so mailed.
4.3 ENGLISH LANGUAGE. If this Agreement is translated into any
language, the English language version shall govern in the event of any
conflict or question of construction or interpretation.
4.4 SEVERABILITY. In the event that any provision of this Agreement
shall be found in any jurisdiction to be in violation of public policy or
illegal or unenforceable in law or equity, such finding shall in no event
invalidate any other provision of this Agreement in that jurisdiction, and
this Agreement shall be deemed amended to the minimum extent required to
comply with the law of such jurisdiction.
4.5 ENTIRE AGREEMENT. This Agreement and the other documents
referred to herein state the entire agreement reached between the parties
hereto with respect to the transactions contemplated hereby and may not be
amended or modified except by written instrument duly executed by the parties
hereto. Any and all previous agreements and understandings between the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement.
4.6 NO WAIVER. The failure of either party hereto to enforce at any
time, or for any period of time, any provision of this Agreement shall not be
construed as a waiver of such provision or of the right of such party
thereafter to enforce each and every provision.
4.7 ASSIGNMENT, BINDING EFFECT. None of the parties hereto shall
assign this Agreement nor any of their respective rights or obligations
hereunder without the prior written consent of the other parties, which
consent shall not be withheld unreasonably. Any such attempted assignment
without such consent shall be void. This Agreement and the rights herein
granted shall be binding upon and shall inure to the benefit of IMED, AM,
Pharmacia and their respective successors and permitted assigns.
Notwithstanding the foregoing, either party hereto shall be entitled to
assign this Agreement to another person without such consent upon thirty (30)
days prior written notice, if such person (i) acquires (by purchase or
merger) all or substantially all of such party's business and assets and (ii)
assumes all of the obligations of such party hereunder. Any party hereto may
assign, or grant a security interest in, its
6
<PAGE>
rights hereunder to a lender as collateral security for a loan, as part of a
financing involving a similar collateral assignment or grant with respect to
a substantial portion of its assets.
4.8 HEADINGS. All section headings contained in this Agreement are
for convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall have been executed and delivered by the
parties. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to account for any of the other counterparts.
7
<PAGE>
4.10 FURTHER ASSURANCES. The parties shall from time to time execute
all such documents and do all such things as any of the other parties hereto
may reasonably require for perfecting the transactions intended to be
effected under or pursuant to this Agreement.
IMED CORPORATION
By:_____________________________________
Name:
Title:
IMED INTERNATIONAL TRADING CORP.
By: _____________________________________
Name:
Title:
PHARMACIA AB
By:____________________________________
Name:
Title:
ADVANCED MEDICAL, INC.
By:____________________________________
Name:
Title:
8
<PAGE>
SCHEDULE 1.1(e)
PRODUCT LIABILITY CLAIMS
1. IMED INDEMNITY. IMED shall indemnify and hold Pharmacia and its
Affiliates, and their respective directors, officers and employees harmless
from and against any and all loss, liability, damage, expense and cost
(including, without limitation, reasonable attorneys' fees and other costs of
defense, but net of any associated tax benefits) (collectively, "LOSSES")
arising out of: (a) except to the extent caused by Pharmacia's or its
Affiliates' servicing of Products prior to the Completion Date other than in
accordance with IMED's service instructions, bodily injuries to customers or
users in respect of, resulting from or relating to a defect, nonconformity or
deficiency in the Products; and (b) bodily injury or property damage caused
by Pharmacia's or its Affiliates' servicing of Products prior to the
Completion Date in accordance with IMED's service instructions. IMED shall
defend at its own expense any actions brought against Pharmacia, its
Affiliates or permitted sub-distributors or any of their customers alleging
that any Product infringes any claim of a patent or other intellectual
property rights and shall pay all damages and costs awarded in said actions.
2. PHARMACIA INDEMNITY. Except for those matters set forth in Section
1, for which IMED has agreed to provide indemnification, Pharmacia shall
indemnify and hold IMED, Advanced Medical, Inc., their Affiliates, and their
respective directors, officers and employees harmless from and against any
and all Losses arising out of: (a) third party claims (including, without
limitation, bodily injuries and property damage) in respect of, resulting
from or relating to Pharmacia's or its Affiliates' conduct of their business
prior to the Completion Date, including, without limitation, servicing,
advertising, repacking, storage or handling of the Products, excluding all
Losses in respect of, relating to or arising out of: (i) infringement of any
Product or any IMED Trademark with the rights of third parties; (ii)
restrictive trade practices or other claims in the nature of "anti-trust" or
trade regulation arising out of the entering into this Agreement (the
"REGULATORY MATTERS"); (iii) any matter to the extent IMED or any of its
Subsidiaries provided indemnification in respect of such matter under the
Asset Sale Agreement, dated as of October 28, 1991, by and among IMED Ltd.,
IMED France S.N.C., IMED Medizintechnik GmbH, Kabi Pharmacia Limited,
Pharmacia France S.A., Kabi Pharmacia GmbH, Pharmacia and IMED; or (iv) any
claim to the extent arising out of acts or omissions of IMED or its
Affiliates or other matters for which IMED is liable under the express terms
of this Agreement. Pharmacia shall indemnify and hold IMED and AM and their
affiliates, and their respective directors, officers and employees harmless
from and against any and all Losses arising out of claims asserted by Baxter
Medical AB ("BAXTER") or any of its affiliates in any way related to a
certain Exclusive Distributorship Agreement, dated as of November 30, 1989,
by and between Baxter and Pharmacia (the "BAXTER AGREEMENT"), including
without limitation, any claim that Pharmacia breached or was induced to
breach any of its obligations under the Baxter Agreement.
9
<PAGE>
3. DEFENSE OF ACTIONS. Each party indemnified hereunder (an
"INDEMNIFIED PARTY") will give the indemnifying party written notice of any
action or proceeding relating to any claim or loss for which indemnity is or
may be sought hereunder within ten (10) Business Days after any such
indemnified party shall have had actual notice thereof and the indemnifying
party, at its option, shall be entitled to participate in or direct the
defense or settlement of such action; PROVIDED, the indemnifying party
employs counsel reasonably acceptable to the Indemnified Party. The
Indemnified Party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be borne by it. The
indemnifying party shall not be liable to the Indemnified Party in respect of
settlements effected by the Indemnified Party without the written consent of
the indemnifying party, which will not be unreasonably withheld or delayed.
In the event that any indemnifying party shall undertake to compromise or
defend any action or proceeding, it shall promptly notify the Indemnified
Party of its intention to do so and the indemnified party agrees to cooperate
fully with the indemnifying party and its counsel in any such compromise or
defense; PROVIDED, that the Indemnified Party shall not be required to incur
any costs or other unreasonable obligations.
4. INSURANCE. IMED and Pharmacia shall self-insure or obtain and keep
in force until the third anniversary of the Completion Date, general
comprehensive liability insurance covering each occurrence of bodily injury
and property damage in an amount of not less than $10,000,000 combined single
limit with special endorsements providing coverage for: (a) Products and
Completed Operations Liability; and (b) Blanket Contractual Liability
including an additional endorsement deleting the Contractual Liability
exclusion for Products and Completed Operations Liability. If such insurance
is procured, the insurance policy shall be endorsed to provide for: (a)
written notification by the insurer not less than 30 days prior to
cancellation, expiration or modification and (b) naming the other party as an
additional insured for the original insured's acts or omissions without
limiting any of the original insured's indemnity obligations hereunder. A
certificate of insurance evidencing compliance with this paragraph and
referencing this Agreement shall be furnished to the other party within 10
days after the date hereof, or the date on which such insurance is effective.
5. PRODUCT RECALL. The following provisions apply to all Products
shipped by Pharmacia and its Affiliates prior to the Completion Date:
(A) MANDATORY RECALL. In the event that a nonappealable administrative
or judicial order (the "RECALL ORDER") is issued or requested by an entity or
authority having jurisdiction in the matter, IMED shall be responsible, at
its sole cost and expense, for complying with the Recall Order, including,
without limitation, expenses or obligations to third parties, the cost of
notifying customers and the costs associated with shipment of that recalled
Product (and all products shipped by IMED or any of its Subsidiaries prior to
October 28, 1991, which products shall be referred to in this Section 5 as
"OLD PRODUCTS") from a customer to IMED; PROVIDED, HOWEVER, that Pharmacia
shall bear the costs and expenses associated with implementing any such
corrective action (other than those relating to Old
10
<PAGE>
Products) to the extent resulting from the acts or omissions of Pharmacia
unless such acts or omissions were in conformity with instructions from IMED.
(B) VOLUNTARY RECALL. In the event that IMED or Pharmacia reasonably
believes that a Product or any of the Old Products violate any provision of
applicable law or should be recalled due to health or safety considerations,
IMED and Pharmacia shall consult in good faith concerning the necessity for
implementing any corrective action and the means of implementing the same;
PROVIDED, HOWEVER, that IMED shall be entitled to make the final
determination as to whether to effect any such corrective action. IMED shall
be responsible, at its sole cost and expense, for implementing any such
corrective action, including without limitation, expenses or obligations to
third parties, the cost of notifying customers and the costs associated with
shipment of the Product and the Old Products subject to such corrective
action from a customer to IMED; PROVIDED, HOWEVER, that Pharmacia shall bear
the costs and expenses associated with implementing any such corrective
action (other than those relating to Old Products) to the extent resulting
from the acts or omissions of Pharmacia unless: (i) Pharmacia does not agree
to effect such corrective action; or (ii) such acts or omissions were in
conformity with instructions from IMED. Notwithstanding the foregoing, the
parties agree that IMED shall be responsible for all such costs and expenses
arising out of the pending recall of the Gemini PC-1 infusion pumps.
(C) RECALL COOPERATION. IMED and Pharmacia will keep one another fully
informed with respect to any information, inquiry or correspondence from any
government, agency or authority having jurisdiction in the Territory relating
to the investigation or review of Product compliance with applicable legal,
health or safety requirements.
11
<PAGE>
SCHEDULE 1.2
PAST DUE INVOICES
SEE ATTACHED MEMO FROM GRANT BRYCE, DATED MAY 21, 1996
12
<PAGE>
COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11.1
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME PER COMMON SHARE ASSUMING NO DILUTION
Income before extraordinary item and dividends
on mandatorily redeemable preferred stock............... $ 2,038 $ 1,150 $ 3,061 $ 2,009
Dividends on mandatorily redeemable preferred stock....... (162) (163) (325) (325)
------- ------- ------- -------
Income before extraordinary item.......................... 1,876 987 2,736 1,684
Extraordinary item - gain on early retirement of debt,
net of taxes............................................ 6,370 15,177
------- ------- ------- -------
Net income applicable to common stock..................... $ 8,246 $ 987 $17,913 $ 1,684
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares outstanding (1)............ 15,942 16,402 15,018 16,432
------- ------- ------- -------
------- ------- ------- -------
Income per common share assuming no dilution:
Income before extraordinary item.......................... $ .12 $ .06 $ .18 $ .10
Extraordinary item........................................ .40 1.01
------- ------- ------- -------
Net income per common share assuming no dilution.......... $ .52 $ .06 $ 1.19 $ .10
------- ------- ------- -------
------- ------- ------- -------
INCOME PER COMMON SHARE ASSUMING FULL DILUTION
Income before extraordinary item and dividends on
mandatorily redeemable preferred stock.................. $ 2,038 $ 1,150 $ 3,061 $ 2,009
Dividends on mandatorily redeemable preferred stock....... (162) (163) (325) (325)
Add back interest expense, net of taxes, on convertible
promissory notes........................................ 150 412 299 824
------- ------- ------- -------
Income before extraordinary item.......................... 2,026 1,399 3,035 2,508
Extraordinary item - gain on early retirement of debt,
net of taxes............................................ 6,370 15,177
------- ------- ------- -------
Net income applicable to common stock..................... $ 8,396 $ 1,399 $18,212 $ 2,508
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares outstanding prior
to conversion of convertible promissory notes (1) 15,995 16,504 15,218 16,500
Add weighted average shares issued upon conversion
of convertible promissory notes......................... 16,565 26,089 16,525 26,089
------- ------- ------- -------
Weighted average common shares outstanding................ 32,560 42,593 31,743 42,589
------- ------- ------- -------
------- ------- ------- -------
Income per common share assuming full dilution:
Income before extraordinary item.......................... $ .06 $ .03 $ .09 $ .06
Extraordinary item........................................ .20 .48
------- ------- ------- -------
Net income per common share assuming full dilution........ $ .26 $ .03 $ .57 $ .06
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
(1) INCLUDES THE COMMON STOCK EQUIVALENT OF DILUTIVE OPTIONS OUTSTANDING
AT THE END OF EACH PERIOD.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the Condesed
Consolidated Balance sheet and Condensed Consolidated Statement of Operations
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,382
<SECURITIES> 4,649
<RECEIVABLES> 17,485
<ALLOWANCES> (900)
<INVENTORY> 17,964
<CURRENT-ASSETS> 55,715
<PP&E> 33,052
<DEPRECIATION> (19,936)
<TOTAL-ASSETS> 153,077
<CURRENT-LIABILITIES> 23,549
<BONDS> 84,667
7,543
0
<COMMON> 162
<OTHER-SE> 30,473
<TOTAL-LIABILITY-AND-EQUITY> 153,077
<SALES> 53,870
<TOTAL-REVENUES> 54,091
<CGS> 29,651
<TOTAL-COSTS> 29,651
<OTHER-EXPENSES> 18,146
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 4,399
<INCOME-PRETAX> 4,065
<INCOME-TAX> 2,056
<INCOME-CONTINUING> 2,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,684
<EPS-PRIMARY> .10
<EPS-DILUTED> .06
</TABLE>
