SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 29, 1996 Commission File Number: 0-18671
NUTRAMAX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 061200464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 Blackburn Drive, Gloucester, Massachusetts 01930
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 283-1800
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____
As of August 8, 1996 there were 8,527,752 shares of Common Stock, par value
$.001 per share, outstanding.
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
Thirteen Weeks Ended June 29, 1996
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations -
Thirteen Weeks and Thirty-Nine Weeks ended June 29, 1996
and July 1, 1995 (Unaudited) 4
Condensed Consolidated Balance Sheets -
June 29, 1996 (Unaudited) and September 30, 1995 5
Condensed Consolidated Statements of Cash Flows -
Thirty-Nine Weeks ended June 29, 1996 and July 1, 1995 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
Thirteen Weeks Ended June 29, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
3
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------- --------------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
NET SALES $20,071,000 $15,184,000 $58,043,000 $45,362,000
COST OF SALES 14,473,000 11,321,000 41,322,000 32,618,000
----------- ----------- ----------- -----------
GROSS PROFIT 5,598,000 3,863,000 16,721,000 12,744,000
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 3,105,000 2,158,000 8,800,000 6,554,000
----------- ----------- ----------- -----------
OPERATING INCOME 2,493,000 1,705,000 7,921,000 6,190,000
OTHER CREDITS (CHARGES):
Interest expense (380,000) (364,000) (1,071,000) (1,105,000)
Other ( 8,000) 60,000 (308,000) 288,000
------------ ----------- ------------ -----------
INCOME BEFORE INCOME TAX EXPENSE 2,105,000 1,401,000 6,542,000 5,373,000
INCOME TAX EXPENSE 826,000 544,000 2,571,000 2,167,000
----------- ----------- ----------- -----------
NET INCOME $ 1,279,000 $ 857,000 $ 3,971,000 $ 3,206,000
=========== =========== =========== ===========
EARNINGS PER SHARE $ .15 $ .10 $ .47 $ .38
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,523,000 8,520,000 8,521,000 8,520,000
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 29, September 30,
1996 1995
----------- -------------
(Unaudited) (See Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 285,000 $ 503,000
Accounts receivable, net 10,655,000 9,050,000
Inventories 17,052,000 12,497,000
Deferred income taxes 928,000 977,000
Prepaid expenses and other 465,000 525,000
----------- -----------
TOTAL CURRENT ASSETS 29,385,000 23,552,000
PROPERTY, PLANT AND EQUIPMENT, net 27,789,000 23,714,000
RESTRICTED CASH 5,457,000 --
GOODWILL, net 13,555,000 13,978,000
OTHER ASSETS 2,191,000 1,830,000
----------- -----------
$78,377,000 $63,074,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,887,000 $ 6,191,000
Accrued payroll and related taxes 904,000 366,000
Accrued expenses - other 321,000 939,000
Current maturities of long-term debt 13,652,000 1,904,000
----------- -----------
TOTAL CURRENT LIABILITIES 20,764,000 9,400,000
LONG-TERM DEBT, less current maturities 12,183,000 12,550,000
DEFERRED INCOME TAXES AND OTHER LIABILITIES 2,191,000 1,891,000
STOCKHOLDERS' EQUITY 43,239,000 39,233,000
----------- -----------
$78,377,000 $63,074,000
=========== ===========
</TABLE>
Note: The balance sheet at September 30, 1995 has been condensed from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
5
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-------------------------------
June 29, July 1,
1996 1995
----------- --------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,971,000 $ 3,206,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Non cash items primarily depreciation and amortization 3,401,000 3,199,000
Increase (decrease), net of effect of acquisitions:
Accounts receivable (360,000) 350,000
Inventories (3,061,000) (1,396,000)
Prepaid expenses and other 65,000 444,000
Accounts payable (21,000) (1,373,000)
Accrued payroll and related taxes 407,000 (146,000)
Accrued expenses - other (275,000) (517,000)
Federal and state taxes payable (442,000) 93,000
----------- ----------
Net cash provided by operating activities 3,685,000 3,860,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition-Oral Care, net of cash acquired (2,723,000) --
Acquisition-feminine hygiene assets (2,367,000) --
Restricted Cash (5,457,000) --
Purchases of property and equipment (3,979,000) (2,818,000)
Deferred packaging costs (588,000) (406,000)
Other -- 100,000
----------- -----------
Net cash used in investing activities (15,114,000) (3,124,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 12,878,000 --
Debt Repayments (1,497,000) (965,000)
Other (170,000) --
------------ -----------
Net cash provided by (used in) financing activities 11,211,000 (965,000)
------------ ------------
NET INCREASE (DECREASE) IN CASH (218,000) (229,000)
CASH:
Beginning of period 503,000 376,000
------------ -----------
End of period $ 285,000 $ 147,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 2,753,000 $ 1,786,000
============ ===========
Interest paid $ 912,000 $ 1,041,000
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Condensed Consolidated Financial Statements
The condensed consolidated balance sheet as of June 29, 1996, the condensed
consolidated statements of operations for the thirteen and thirty-nine weeks
ended June 29, 1996 and July 1, 1995, and the condensed consolidated statements
of cash flows for the thirty-nine weeks then ended have been prepared by the
Company without audit. In the opinion of the Company, all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at June 29, 1996,
and for all periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's September 30, 1995 Annual Report on Form 10-K. The results of
operations for the period ended June 29, 1996 are not necessarily indicative of
the operating results for the full year.
Note B - Acquisitions
Effective October 23, 1995, the Company acquired substantially all of the assets
and assumed certain liabilities of Mi-Lor Corporation, Professional Brushes,
Inc. and Codent Dental Products, Inc. ("Oral Care") which manufacture and market
toothbrushes, dental floss and related products for store brand markets. The
purchase price consisted of $1,800,000 in cash and liabilities assumed of
$363,000, and the transaction resulted in related expenses of approximately
$560,000.
On February 29, 1996, the Company purchased certain of the assets, including
machinery and inventory, of the Hospital Specialties Division of the Tranzonic
Companies related to the manufacture and sale of feminine hygiene products. The
purchase price consisted of $2,367,000 in cash which was financed with long term
debt (see Note E). The transaction has been accounted for by the purchase method
of accounting.
Note C - Restricted Cash
In connection with the proceeds received from two Massachusetts Industrial
Finance Agency Variable Rate Industrial Development Bonds ("IDB") (see Note E),
a total of $5,457,000 of unused proceeds remained as invested cash as of June
29, 1996. Of this total, $1,957,000 is restricted for capital expenditures at
the Oral Care facility in Florence, Massachusetts and $3,500,000 is restricted
for capital expenditures at the Powers Pharmaceutical facility in Brockton,
Massachusetts. The "IDB" restricts the investment vehicles available for the
excess cash. As of June 29, 1996 the $3,500,000 was invested in Treasury Bills
for two months at $99.2361 and the $1,957,000 was invested at 4.76% in a money
market account.
7
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note D - Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
July 29, September 30,
1996 1995
----------- -------------
Raw materials $ 7,400,000 $ 5,278,000
Finished goods 7,881,000 6,088,000
Work-in-process 781,000 417,000
Machine parts and factory supplies 990,000 714,000
----------- -----------
$17,052,000 $12,497,000
=========== ===========
The inventory associated with the Oral Care and feminine hygiene acquisitions
resulted in an increase in inventory of $2,550,000 as compared to September 30,
1995.
Note E - Long-Term Debt
On December 30, 1995, the Company's revolving credit facility was increased
$1,000,000 to $9,000,000. On February 29, 1996, the revolving credit facility
was increased an additional $1,000,000 to $10,000,000. The revolving credit
facility was temporarily increased an additional $1,000,000 to $11,000,000 on
March 27, 1996 in anticipation of the "IDB" financing (see below) to take place.
The temporary $1,000,000 line extension expired April 29, 1996. As of June 29,
1996, $7,929,000 was outstanding on the revolving credit facility and
approximately $2,000,000 was available based on balances of eligible accounts
receivable and inventory. The revolving credit facility expires in December
1996. In addition, on February 29, 1996 the Company obtained a $2,750,000 term
loan, with the same commercial lender, for the feminine hygiene acquisition (see
Note B), payable February 29, 1997 at interest rates comparable to the Company's
existing revolving credit facility, which effective November 30, 1995 was
reduced to LIBOR plus 1.5% (as of June 29, 1996 the rate was 7.0%). The term
loan interest rate was also reduced at the same time to LIBOR plus 2.25% (as of
June 29, 1996 the rate was 7.75%).
On May 3, 1996, the Company completed a $4,200,000 "IDB". Proceeds from the
financing were used to reduce the outstanding balance under the company's
revolving credit facility which was used to fund the Oral Care acquisition and
for the capital expenditures made and scheduled to be made over the next twelve
months for the Oral Care operation. It is anticipated that all proceeds will be
expended by December 31, 1996. As of June 29, 1996 $2,243,000 of the proceeds of
the bond had been used to repay a portion of the Company's outstanding balance
under its existing revolving credit facility and to pay for equipment
purchases. The variable interest rate on the bond as of June 29, 1996 was 3.4%
and interest is payable monthly. Principal payments are funded monthly and are
payable annually beginning May 1, 1997 at $400,000 per year through May 1, 2003,
$200,000 due May 1, 2004 and $100,000 per year thereafter through May 1, 2016.
The "IDB" is supported by a letter of credit with State Street Bank and Trust
Company and contains certain financial covenants
8
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
with respect to minimum quarterly net earnings, tangible net worth, indebtedness
to net worth ratios and cash flows. The "IDB" contains certain restrictions
including limiting capital expenditures, made for the Oral Care operation, to
$10,000,000 over the next three years.
On June 7, 1996, the Company completed a second "IDB" for $3,500,000 for the
purpose of funding the expansion of the Powers Pharmaceutical manufacturing
facility and the purchase of additional manufacturing equipment at the facility.
The variable interest rate on the bond as of June 29, 1996 was 3.4% and interest
is payable monthly. Principal payments are funded monthly and are payable
annually beginning May 1, 1997 at $400,000 per year, through May 1, 2001 and
$100,000 per year thereafter through May 1, 2016. The "IDB" is supported by a
letter of credit with State Street Bank and Trust Company and contains certain
financial covenants with respect to minimum quarterly net earnings, tangible net
worth, indebtedness to net worth ratios and cash flows. The "IDB" contains
certain restrictions including limiting capital expenditures, made for the
Powers Pharmaceutical operation, to $10,000,000 over the next three years.
Note F - Special Committee
The Board of Directors of MEDIQ Incorporated ("MEDIQ"), a 47% owner of the
Company's Common Stock, has undertaken a process of exploring alternative ways
to maximize MEDIQ's shareholder value, which could include the disposition of
its holdings in the Company. In fiscal 1995, the Company formed a Special
Committee of its Board of Directors to explore strategic alternatives for the
Company. The Special Committee retained Wasserstein Parella & Co. as financial
advisors to seek opportunities for the Company to enhance shareholder value. The
financial statements contain a charge of $3,000 and $187,000, before taxes,
related to the activities of the Special Committee for the quarter and nine
month period respectively.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
The following discussion addresses the financial condition of the
Company as of June 29, 1996 and its results of operations for the thirteen and
thirty-nine week periods then ended, compared with the same periods last year.
This discussion should be read in conjunction with the Management's Discussion
and Analysis section included in the Company's Annual Report on Form 10-K for
the year ended September 30, 1995 (pages 8-10) to which the reader is directed
for additional information.
Some of the information presented in this report constitutes forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although the Company believes that its expectations are
based on reasonable assumptions within the bounds of its knowledge of its
business and operation, there can be no assurance that actual results will not
differ materially from its expectations. Factors which could cause actual
results to differ from expectations include the timing and amount of new product
introductions by the Company, the timing of orders received from customers, the
gain or loss of significant customers, changes in the mix of products sold,
competition from brand name and other private label manufacturers, seasonal
changes in the demand for the Company's products, increases in the cost of raw
materials and changes in the retail market for health and beauty aids in
general. For additional information concerning these and other important factors
which may cause the Company's actual results to differ materially from
expectations and underlying assumptions, please refer to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995 and other reports
filed with the Securities and Exchange Commission.
Results of Operations
On October 23, 1995, the Company acquired substantially all of the
assets and assumed certain liabilities of Mi-Lor Corporation, Professional
Brushes, Inc. and Codent Dental Products, Inc. ("Oral Care") which manufacture
and market toothbrushes, dental floss and related products for store brand
markets. The purchase price consisted of $1,800,000 in cash and liabilities
assumed of $363,000, and the transaction resulted in related expenses of
$560,000. This acquisition represents the addition of the Company's Oral Care
product line.
On February 29, 1996, the Company purchased certain of the assets,
including machinery and inventory, of the Hospital Specialties division of the
Tranzonic Companies related to the manufacture and sale of feminine hygiene
products. The purchase price consisted of $2,367,000 in cash which was financed
with long term debt (see Note E).
10
<PAGE>
The following table sets forth, for all periods indicated, the
percentage relationship that items in the Company's Condensed Consolidated
Statements of Operations bear to net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES 100% 100% 100% 100%
COST OF SALES 72 75 71 72
---- ---- ---- ----
GROSS PROFIT 28 25 29 28
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 16 14 15 14
---- ---- ---- ----
OPERATING INCOME 12 11 14 14
OTHER CREDITS (CHARGES) (2) (2) (3) (2)
---- ---- ---- ----
INCOME BEFORE INCOME TAX EXPENSE 10 9 11 12
INCOME TAX EXPENSE 4 4 4 5
---- ---- ---- ----
NET INCOME 6% 5% 7% 7%
==== ==== ==== ====
</TABLE>
Thirteen Weeks Ended June 29, 1996 Compared with Thirteen Weeks Ended
July 1, 1995
Net sales in 1996 increased $4,887,000 to $20,071,000, as compared to
$15,184,000 for the prior year quarter. The increase in net sales was primarily
attributable to $1,858,000 of sales of Oral Care products, $315,000 of sales of
Adult Liquid Nutrition products (introduced in March 1995), $1,448,000 of
Cough/Cold products which showed strength in both contract and private label
sales, and $872,000 of Feminine Hygiene sales which resulted from continued
increases in market penetration and the purchase of certain assets of the
company's largest competitor in Disposable Douche.
Gross profit for 1996 was $5,598,000 which was 28% of net sales, as
compared to $3,863,000 or 25% of net sales for the prior year quarter. The
improved margin is a result of lower raw material costs, primarily plastic
resin, plastic film and corrugated materials as well as increased manufacturing
volume spread over a fixed overhead base.
Selling, general and administrative expenses for 1996 were $3,105,000,
or 16% of net sales, as compared to $2,158,000, or 14% of net sales for the
prior year quarter. The increase of $947,000 is primarily attributable to
freight and commission expense related to increased sales, an increase in
allowance for doubtful accounts associated with increased sales and management
incentive compensation accruals for the quarter.
Interest expense for 1996 was $380,000, as compared to $364,000 in the
prior year quarter. This increase was primarily attributable to increased debt
balances (see Note E) offset by lower interest rates.
Other credits for the quarter were $8,000, primarily consisting of
interest income on the restricted cash associated with the "IDB" financing. The
prior year quarter was comprised primarily of gains on the sale of equipment.
11
<PAGE>
The effective income tax rate for the quarter was 39% which was
comparable to the prior year quarter.
Thirty-Nine Weeks Ended June 29, 1996 Compared with Thirty-Nine Weeks Ended
July 1, 1995
Net sales for 1996 were $58,043,000, an increase of $12,681,000, or
28%, compared to sales of $45,362,000 in the prior year period. The increase was
primarily attributable to $5,318,000 of Oral Care, $3,310,000 of Cough/Cold
products, $2,038,000 of Adult Liquid Nutrition, $1,968,000 of Feminine Hygiene
products.
Gross profit for 1996 was $16,721,000, or 29% of net sales, as compared
to $12,744,000, or 28% of net sales for the prior year period. The increased
gross margin is attributable to lower raw material costs primarily plastic
resin, plastic film and corrugated items as well as increased manufacturing
volume spread over a fixed overhead base.
Selling, general and administrative expenses for 1996 were $8,800,000
or 15% of net sales, as compared to $6,554,000, or 14% of net sales in the prior
year period. The increase of $2,246,000 was primarily attributable to increased
freight and commission expense related to the increased sales, an increase in
the allowance for doubtful accounts associated with increased sales and
management incentive compensation accruals.
Interest expense for 1996 was $1,071,000, as compared to $1,105,000 in
the prior year period. This decrease was primarily attributable to lower
interest rates offset by increased debt.
Other charges for 1996 were $308,000 primarily consisting of costs
associated with the Special Committee of the Board of Directors and Wasserstein,
Parella & Co., it's financial advisors, as well as research and development
costs. The prior year period primarily consisted of income from the sale of
fixed assets.
The effective income tax rate for the thirty nine weeks of fiscal 1996
was 39%, as compared to 40% in the prior year period. The decrease relates to
the implementation of tax planning strategies undertaken during 1995 to maximize
state tax benefits.
Liquidity and Capital Resources
As of June 29, 1996 the Company had working capital of $8,621,000 as
compared to working capital of $14,152,000 as of September 30, 1995. The
decrease in working capital was primarily attributable to the reclassification
of long term debt to current debt offset by increased inventories and accounts
receivable.
Net cash provided by operating activities was $3,685,000 for the
thirty-nine weeks ended June 29, 1996, as compared to $3,860,000 in the prior
year period. This decrease was primarily attributable to increased inventory
levels to support anticipated sales growth of Oral Care and Adult Liquid
Nutrition product categories.
12
<PAGE>
Net cash used in investing activities was $15,114,000 for 1996,
consisting primarily of $5,457,000 of cash restricted under the terms of the
"IDB" (see Note C), $5,090,000 for the Oral Care and feminine hygiene asset
acquisitions, and capital expenditures of $3,979,000. The assets associated with
the Oral Care and feminine hygiene acquisitions resulted in an increase in net
property plant and equipment of $6,063,000 and in inventories of $2,550,000 as
compared to September 30, 1995. The Company anticipates additional capital
expenditures of approximately $1,600,000 for the remainder of fiscal 1996,
$750,000 of which will be financed from the proceeds of the "IDB" (see note E).
The remaining expenditures relate primarily to additional manufacturing capacity
requirements and are expected to be financed through cash generated from
operations.
Net cash provided by financing activities was $11,211,000 for 1996,
which consisted primarily of $7,700,000 of funds resulting from the "IDB"
financing and borrowings under the line of credit facility of $5,178,000
primarily for the Oral Care and feminine hygiene asset acquisitions and
equipment purchases, offset by debt repayments of $1,497,000.
On December 30, 1995, the Company's revolving credit facility was
increased $1,000,000 to $9,000,000. On February 29, 1996, the revolving credit
facility was increased an additional $1,000,000 to $10,000,000. The revolving
credit facility was temporarily increased an additional $1,000,000 to
$11,000,000 on March 27, 1996 in anticipation of the "IDB" financing (see below)
to take place. The temporary $1,000,000 line extension expired April 29, 1996.
As of June 29, 1996, $7,929,000 was outstanding on the revolving credit facility
and approximately $2,000,000 was available based on the balance of eligible
accounts receivable and inventory. The revolving credit facility expires in
December 1996. In addition, on February 29, 1996 the Company obtained a
$2,750,000 term loan, with the same commercial lender, for the feminine hygiene
acquisition (see Note B), payable February 29, 1997 at interest rates comparable
to the Company's existing revolving credit facility, which effective November
30, 1995 was reduced to LIBOR plus 1.5% (as of June 29, 1996 the rate was 7.0%).
The term loan interest rate was also reduced at the same time to LIBOR plus
2.25% (as of June 29, 1996 the rate was 7.75%).
On May 3, 1996, the Company completed a $4,200,000 ("IDB"). Proceeds
from the financing were used to reduce the outstanding balance under the
company's revolving credit facility which was used to fund the Oral Care
acquisition and for the capital expenditures made and scheduled to be made over
the next twelve months for the Oral Care operation. It is anticipated that all
proceeds will be expended by December 31, 1996. As of June 29, 1996 $2,243,000
of the proceeds of the bond had been used to repay a portion of the Company's
outstanding balance under it's existing revolving credit facility and to pay for
equipment purchases. The variable interest rate on the bond as of June 29, 1996
was 3.4% and interest is payable monthly. Principal payments are funded monthly
and are payable annually beginning May 1, 1997 at $400,000 per year through May
1, 2003, $200,000 due May 1, 2004 and $100,000 per year thereafter through May
1, 2016. The "IDB" is supported by a letter of credit with State Street Bank and
Trust Company and contains certain financial covenants with respect to minimum
quarterly net earnings, tangible net worth, indebtedness to net worth ratios and
cash flows. The "IDB" contains certain restrictions including limiting capital
expenditures, made for the Oral Care operation, to $10,000,000 over the next
three years.
13
<PAGE>
On June 7, 1996, the Company completed a second "IDB" for $3,500,000 for the
purpose of funding the expansion of the Powers Pharmaceutical manufacturing
facility and the purchase of additional manufacturing equipment at the facility.
The variable interest rate on the bond as of June 29, 1996 was 3.4% and interest
is payable monthly. Principal payments are funded monthly and are payable
annually beginning May 1, 1997 at $400,000 per year, through May 1, 2001 and
$100,000 per year thereafter through May 1, 2016. The "IDB" is supported by a
letter of credit with State Street Bank and Trust Company and contains certain
financial covenants with respect to minimum quarterly net earnings, tangible net
worth, indebtedness to net worth ratios and cash flows. The "IDB" contains
certain restrictions including limiting capital expenditures, made for the
Powers Pharmaceutical operation, to $10,000,000 over the next three years.
The Company believes that its existing working capital and anticipated
funds to be generated from operations will be sufficient to meet the Company's
operating and capital needs. Depending upon future growth of the business,
additional financing may be required. In addition, it is anticipated that the
balance of the Company's revolving credit facility due December 1996 will be
refinanced at maturity.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 -Financial Data Schedule appears on page 15.
Exhibit 99.1 -Letter to State Street Bank and Trust dated
February 29, 1996, re: Amendment No. 2 to
Revolving Credit, Term Loan and Security
Agreement and Trademark Assignment Agreement.
Exhibit 99.2 -Letter to State Street Bank and Trust dated
March 4, 1996, re: Amendment No. 3 to
Revolving Credit, Term Loan and Security
Agreement and Revolving Time Note.
Exhibit 99.3 -Form of Secured Acquisition Promissory Note.
Exhibit 99.4 -Form of Amended and Restated Revolving Time
Note.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed in the quarter ended June
29, 1996.
14
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
Thirteen Weeks Ended June 29, 1996
SIGNATURE
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.
NutraMax Products, Inc.
-----------------------------
(Registrant)
August 13, 1996
(Date) /s/ Robert F. Burns
----------------------------
Robert F. Burns
Vice President and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
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NutraMax Products, Inc.
9 Blackburn Drive
Gloucester, Massachusetts 01930
Powers Pharmaceutical Corporation
170 Oak Hill Way
Brockton, Massachusetts 02401
Optopics Laboratories Corporation
32 Main Street
Fairton, New Jersey 08320
February 29, 1996
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Re: Amendment No. 2 to Revolving Credit, Term Loan and Security
Agreement and Trademark Assignment Agreement ("Amendment")
Gentlemen:
We refer to the Revolving Credit, Term Loan and Security Agreement made
the 30th day of December, 1994, as amended by the Amendment dated November 30,
1995, (as amended, the "Loan Agreement") by and among NutraMax Products, Inc., a
Delaware corporation having its principal place of business at 9 Blackburn
Drive, Gloucester, Massachusetts 01930 ("NutraMax"), Powers Pharmaceutical
Corporation, a Delaware corporation having its principal place of business at
170 Oak Hill Way, Brockton, Massachusetts 02401 ("Powers"), Optopics
Laboratories Corporation, a Delaware corporation having its principal place of
business at 32 Main Street, Fairton, New Jersey 08320 ("Optopics"; NutraMax,
Powers and Optopics are referred to hereinafter individually as a "Borrower" and
collectively, and jointly and severally, as the "Borrowers"), and State Street
Bank and Trust Company, a Massachusetts trust company having its principal place
of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank"). We
also refer to the Trademark Assignment Agreement dated December 6, 1993 by and
between NutraMax and the Bank (the "Trademark Assignment"). Capitalized terms
used herein without definition shall have the meanings ascribed to such terms in
the Loan Agreement.
We have requested that you make certain amendments to the Loan
Agreement and you have advised us that you are willing to make the amendments
requested by us on the condition that we join with you in this Amendment.
<PAGE>
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Amendment, and fully intending to be
legally bound by this Amendment, we hereby agree with you as follows:
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended in each of the following respects:
1.1 Article I of the Loan Agreement is amended as follows:
(a) The following definitions are hereby inserted as Sections
1.00(a) through 1.00(e) immediately preceding the definition of
"Adjusted Libor" in Section 1.01:
1.00(a) "Acquisition Loan" shall mean the secured one-year
term loan of an amount up to $2,750,000 for the purposes of
acquiring certain assets of the Hospital Specialty Company
Division of The Tranzonic Companies, pursuant to Section 3.04
hereof.
1.00(b) "Acquisition Loan Availability Period" shall mean that
period commencing with the date of that certain Amendment No.
2 to Revolving Credit, Term Loan and Security Agreement dated
February 29, 1996 and ending on March 7, 1996.
1.00(c) "Acquisition Loan Expiration Date" shall mean February
28, 1997.
1.00(d) "Acquisition Loan Funding" shall mean any sum of money
loaned by the Bank to the Borrower pursuant to Section 3.04
hereof.
1.00(e) "Acquisition Loan Interest Payment Date" shall mean
the first day of each month commencing the first day of April,
1996, through the Acquisition Loan Expiration Date.
(b) The definition of "Financing Agreements" in Section 1.23
is hereby amended to read in its entirety as follows:
"Financing Agreements" shall mean this Agreement and any and
all amendments hereto including, without limitation, that
certain Amendment dated November 30, 1995 and that certain
Amendment No. 2 to Revolving Credit, Term Loan and Security
Agreement dated February 29, 1996, and all documents
including, without limitation, collateral documents, letter of
credit agreements, notes, acceptance credit agreements,
security agreements, pledges, guaranties, mortgages, title
insurance, assignments, and subordination agreements required
to be executed by Borrower or any Third Party in connection
with the loan arrangements between the Borrower and Bank.
-2-
<PAGE>
(c) The definition of "Interest Period" in Section 1.28 is
hereby amended to read in its entirety as follows:
"Interest Period" shall mean:
(a) with respect to each Libor Loan, a period
commencing on the Borrowing Date of such Advance,
and ending one, two or three months thereafter,
as the case may be, as determined in accordance
with the provisions of this Agreement provided
that (i) any Interest Period which would
otherwise end on a day which is not a Banking
Day, shall end and the next Interest Period shall
commence on the next preceding or the next
succeeding day which is a Banking Day as
determined in good faith by the Bank in
accordance with the then current bank practices
in the relevant Interbank Market, and (ii) no
Interest Period for a Libor Loan shall end after
the Expiration Date; and
(b) with respect to the Prime Rate Loan(s), a period
commencing on the Borrowing Date of an Advance or
Acquisition Loan Funding, as the case may be, and
ending on the date of repayment of such Advance
or Acquisition Loan Funding; and
(c) with respect to each Libor Election, a period
commencing on the Election Date, and ending one,
two or three months thereafter, as the case may
be, as determined in accordance with the
provisions of this Agreement provided that (i)
any Interest Period which would otherwise end on
a day which is not a Banking Day, shall end and
the next Interest Period shall commence on the
next preceding or the next succeeding day which
is a Banking Day as determined in good faith by
the Bank in accordance with the then current bank
practices in the relevant Interbank Market, and
(ii) no Interest Period for a Libor Election
shall end after the maturity date of the
applicable Term Loan or Acquisition Loan, as the
case may be.
(d) The definition of "Libor Election" in Section 1.31 is
hereby amended to read in its entirety, as follows:
"Libor Election" shall mean a request by the Borrower, in
accordance with Section 4.02 of this Agreement, to calculate
interest on the outstanding principal balance of all or a
portion of the Term Loans and Acquisition Loans at a fixed
rate equal to Adjusted Libor plus two and one-quarter percent
(2 1/4%) per annum.
-3-
<PAGE>
(e) The definition of "Libor Loan(s)" in Section 1.32 is
hereby amended to read in its entirety, as follows:
"Libor Loan(s)" shall mean, when used in the singular, any
Advance or Acquisition Loan Funding on which the interest rate
is calculated by reference to Libor and, when used in the
plural, shall mean all such Advances or Acquisition Loan
Fundings.
(f) The definition of "Prime Rate Loan(s)" in Section 1.40 is
hereby amended to read in its entirety, as follows:
"Prime Rate Loan(s)" shall mean, when used in the singular,
any Advance or Acquisition Loan Funding on which the interest
rate is calculated by reference to the Prime Rate and, when
used in the plural, shall mean all such Advances or
Acquisition Loan Fundings.
(g) The definition of "Obligations" in Section 1.36 is hereby
amended by adding the following new sentence at the end of the
paragraph, as follows:
Without limiting the generality of the foregoing,
"Obligations" shall include the obligations of the Borrower
under the Secured Acquisition Promissory Note dated February
29, 1996 made by the Borrowers in favor of the Bank.
1.2 Article III is hereby renamed "TERM LOANS AND ACQUISITION
LOANS".
1.3 The following new Section 3.04 is hereby added as follows:
3.04 The Bank shall make the Acquisition Loan to the
Borrower which shall bear interest and be payable in
accordance with the terms and conditions of a Secured
Acquisition Promissory Note in the form of "Exhibit E-1"
attached hereto and made a part hereof, and as set forth
herein. Subject to and upon the terms and conditions of this
Agreement, during the Acquisition Loan Availability Period, at
the request of the Borrower, as more particularly described in
Section 4.02 hereof, the Bank will provide Acquisition Loan
Funding to the Borrower in the form of Prime Rate Loans or
pursuant to a Libor Election, provided, however, that no
Acquisition Loan Funding will be made: (i) after the
Acquisition Loan Availability Period; or (ii) if a Default
exists. The total amount of outstanding principal on all
Acquisition Loans and all accrued and unpaid interest thereon
shall be due and payable on the Acquisition Loan Expiration
Date. Any Acquisition Loan not made pursuant to a Libor
Election shall be deemed a Prime Rate Loan.
-4-
<PAGE>
1.4 Sections 3.04, 3.05, 3.06 and 3.07 are hereby renumbered as
Sections 3.05, 3.06, 3.07 and 3.08, respectively. All references in the Loan
Agreement to such Sections shall be deemed to be made to such Sections as so
renumbered.
1.5 Section 4.02 is hereby replaced in its entirety as follows:
4.02 Bank shall not be required to honor a Libor Election
unless Bank receives from the Borrower a request for such
Libor Election (herein a "Notice of Election"), which request
complies with the requirements of this Section 4.02. Each
Notice of Election shall designate (a) the Election Date for
the requested Libor Election, (b) the amount of the Libor
Election, which amount shall be no less than (i) One Million
Dollars and no more than the then outstanding principal
balance of the applicable Term Loan or (ii) Fifty Thousand
Dollars and no more than the then outstanding principal
balance of the applicable Acquisition Loan, minus the amount
of any installments of principal which will become due
thereunder during the Interest Period; and (c) the Interest
Period. Each Notice of Election must be received by Bank not
less than two Banking Days prior to the Election Date. A
Notice of Election may be transmitted by telephone,
telecopier, telex, cable or mail. If a Notice of Election is
transmitted by telephone, telecopier, telex or cable, the
Borrower shall immediately mail to Bank a written confirmation
thereof.
1.6 Section 4.05 is hereby replaced in its entirety as follows:
4.05 All net proceeds of each Advance or Acquisition Loan
Funding shall be credited to any demand deposit account maintained by
the Borrower or any Affiliate with Bank, the specified amount and
account to be designated by the Borrower in the Notice of Borrowing or
Notice of Election, as the case may be, issued with respect to such
Advance or Acquisition Loan Funding.
1.7 Section 5.01 is hereby replaced in its entirety as follows:
5.01(a) With respect to Advances, prior to the Expiration
Date, the Borrower shall pay interest on the unpaid principal balance
of each Prime Rate Loan from the Borrowing Date for such Advance at a
variable per annum rate equal to the Prime Rate in effect from time to
time. Interest accrued under this Section 5.01(a) shall be paid monthly
in arrears on each Interest Payment Date.
5.01(b) With respect to Acquisition Loan Fundings, prior to
the Acquisition Loan Expiration Date, the Borrower shall pay interest
on the unpaid principal balance of each Prime Rate Loan from the
Borrowing Date for such Acquisition Loan Funding at a variable per
annum rate equal to the Prime Rate in effect from time to time plus
one-half percent (1/2%). Interest accrued under this Section 5.01(b)
shall be paid monthly in arrears on each Acquisition Loan Interest
Payment Date.
-5-
<PAGE>
1.8 Section 5.02 is hereby replaced in its entirety as follows:
5.02(a) With respect to Advances, the Borrower shall pay
interest on the aggregate unpaid principal balance of each Libor Loan
from the Borrowing Date for such Advance through and including the
Maturity Date chosen by the Borrower with respect to such Advance at a
per annum rate equal to the aggregate of the Adjusted Libor plus
Margin, and shall pay all interest accrued but unpaid under this
Section 5.02(a) on such Maturity Date.
5.02(b) With respect to Acquisition Loan Fundings, the
Borrower shall pay interest on the aggregate unpaid principal balance
of each Libor Loan from the Borrowing Date for such Acquisition Loan
Funding through and including the Maturity Date chosen by the Borrower
with respect to such Acquisition Loan Funding at a per annum rate equal
to the aggregate of the Adjusted Libor plus two and one-quarter percent
(2 1/4%) per annum, and shall pay all interest accrued but unpaid under
this Section 5.02(b) on such Maturity Date.
1.9 Section 5.03 is hereby replaced in its entirety as follows:
5.03(a) With respect to Advances, if a Libor Loan is not
repaid in full on its Maturity Date, then such Advance shall bear
interest at the rate described in Section 5.01(a) from and after such
Maturity Date through the Expiration Date and thereafter, at the option
of the Bank, as set forth in Sections 5.01(a) and 5.04 until paid in
full.
5.03(b) With respect to Acquisition Loan Funding, if a Libor
Loan is not repaid in full on its Maturity Date, then such Acquisition
Loan Funding shall bear interest at the rate described in Section
5.01(b) from and after such Maturity Date through the Acquisition Loan
Expiration Date and thereafter, at the option of the Bank, as set forth
in Sections 5.01(b) and 5.04 until paid in full.
1.10 Section 5.04 is hereby replaced in its entirety as follows:
5.04 From and after the occurrence of an Event of Default, at
the option of the Bank: (a) with respect to Advances and Term Loans,
(i) all Prime Rate Loans shall bear interest at a variable per annum
rate equal to the aggregate of the Prime Rate in effect from time to
time plus two and one-half (2 1/2%) percent until paid in full; and
(ii) each Libor Loan shall bear interest at the rate established
therefor pursuant to Section 5.02(a) until such Advance's Maturity
Date, and thereafter at the rate set forth in clause (a)(i) of this
Section 5.04 until paid in full; and (b) with respect to Acquisition
Loans, (i) all Prime Rate Loans shall bear interest at a variable per
annum rate equal to the aggregate of the Prime Rate in effect from time
to time plus three (3%) percent until paid in full; and (ii) each Libor
Loan shall bear interest at the rate established therefor pursuant to
Section 5.02(b) until such Acquisition Loan Fundings' Maturity Date,
and thereafter at the rate set forth in clause (b)(i) of this Section
5.04 until paid in full.
-6-
<PAGE>
1.11 Section 6.08 is hereby replaced in its entirety as follows:
6.08 If, due to payments made by the Borrower
pursuant to this Agreement or due to the acceleration of the
maturity of the Revolving Loan, the Term Loans or the
Acquisition Loans pursuant to Article XIII hereof or due to
any other reason, including, without limitation, by reason of
a payment made pursuant to Sections 6.07 or 2.04 of this
Agreement, Bank receives payments of principal of any Libor
Loan or Libor Election prior to the Maturity Date thereof, the
Borrower shall, upon demand by the Bank, pay to Bank any
amounts required to compensate Bank for any additional losses,
costs or expenses which it may reasonably incur as a result of
such payment, including, without limitation, any loss, costs
or expenses incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to
fund or maintain such Libor Loan or Libor Election,
1.12 Section 7.01 is hereby amended by inserting the following
paragraph at the end of Section 7.01 immediately preceding Section 7.02, as
follows:
Without limiting in any way the generality of the foregoing,
the above property shall include all of such property acquired
by NutraMax from The Tranzonic Companies pursuant to a certain
Agreement dated February 29, 1996 between NutraMax, as buyer,
and The Tranzonic Companies, as seller.
1.13 The following new Section 10.15 is hereby added as follows:
10.15 Borrower will not at any time use any of the
proceeds of the Acquisition Loan for any purpose other than
for the acquisition of the certain assets from The Tranzonic
Companies pursuant to a certain Agreement dated February 29,
1996 between NutraMax, as buyer, and The Tranzonic Companies,
as seller.
1.14 Section 15.02(e) is hereby replaced in its entirety as
follows:
(e) If intended for Bank, to:
State Street Bank and Trust Company
225 Franklin Street, Second Floor
Boston, MA 02110
Attn: William F. Zola, Vice President
Telecopier No.: (617) 654-4176
-7-
<PAGE>
with copies to:
Peter S. Johnson, Esq.
Gadsby & Hannah
125 Summer Street
Boston, MA 02110
Telecopier No.: (617) 345-7050
ARTICLE II
AMENDMENTS TO TRADEMARK ASSIGNMENT AGREEMENT
2.1 The introductory paragraph of the Trademark Assignment is hereby
amended by adding the following new sentence at the end of the introductory
paragraph immediately preceding the second grammatical paragraph, as follows:
Without limiting the generality of the foregoing,
"Obligations" shall include the obligations of the Borrower
under the Secured Acquisition Promissory Note dated February
29, 1996 made by the Borrowers in favor of the Bank.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrowers hereby jointly and severally represent and warrant to you
as follows:
3.1 Representations in Financing Agreements. Each of the
representations and warranties made by or on behalf of any Borrower to you in
any of the Financing Agreements, as amended by this Amendment, was true and
correct when made and is true and correct on and as of the date hereof with the
same full force and effect as if each of such representations and warranties had
been made by such Borrower on the date hereof and in this Amendment.
3.2 Events of Default. No Event of Default exists on the date hereof
(after giving effect to all of the arrangements and transactions contemplated by
this Amendment). No condition exists on the date hereof which would, with notice
or the lapse of time, or both, constitute an Event of Default.
-8-
<PAGE>
3.3 Binding Effect of Documents.
(a) This Amendment has been duly executed and delivered to you by the
Borrowers and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrowers contained herein constitute legal,
valid and binding obligations of the Borrowers enforceable against the Borrowers
in accordance with their respective terms.
(b) The obligations of the Borrowers to repay you all of the unpaid
principal of each of the Revolving Loans and each of the Term Loans made
pursuant to the Loan Agreement, to pay you all of the unpaid interest accrued or
to accrue thereon, and to pay you all of the other obligations of the Borrowers
are and will continue to be entitled to all of the benefits of and to all of the
security created by the Loan Agreement and the other Financing Agreements.
ARTICLE IV
PROVISIONS OF GENERAL APPLICATION
4.1 No Other Changes. Except as otherwise expressly provided by this
Amendment, all of the terms, conditions and provisions of the Loan Agreement and
each of the other Financing Agreements remain unaltered. The Loan Agreement and
this Amendment shall be read and construed as one agreement.
4.2 Governing Law. This Amendment is intended to take effect as a
sealed instrument and shall be deemed to be a contract under the laws of The
Commonwealth of Massachusetts. This Amendment and the rights and obligations of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of The Commonwealth of Massachusetts.
4.3 Binding Effect; Assignment. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
4.4 Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
4.5 Conflict with Other Agreements. If any of the terms of this
Amendment shall conflict in any respect with any of the terms of any of the
Financing Agreements, the terms of this Amendment shall be controlling.
4.6 Acknowledgment by Borrowers. Each of NutraMax, Powers and Optopics
jointly and severally acknowledge that the Bank would not have entered into this
Amendment (and, without limiting the generality of the foregoing, would not have
made the Acquisition Loan) unless all of the Borrowers agreed to be and continue
to be, Borrowers on a joint and several basis, and that the Bank would not have
entered into any such arrangements with any individual Borrower alone.
-9-
<PAGE>
4.7 Conditions Precedent. This Amendment shall become effective as of
the date hereof, but only if the Bank shall have received each of the following
agreements and documents in form and substance satisfactory to the Bank and duly
executed and delivered by the parties thereto:
(a) this Amendment;
(b) the Secured Acquisition Promissory Note evidencing the
Acquisition Loan;
(c) certification from the appropriate public officials of the
state of incorporation of each Borrower evidencing the legal existence
and tax good standing of such Borrower as of the most recent
practicable date;
(d) a certificate of the Secretary or Clerk of each Borrower
as to authorizing resolutions, incumbency of officers, by-laws,
specimen signatures, accuracy of representations and warranties, and
absence of Defaults or Events of Default;
(e) a favorable legal opinion addressed to the Bank from
counsel to the Borrowers, in substantially the form of opinion
delivered in connection with the closing of the Loan Agreement;
(f) UCC-1 Financing Statements to be filed with the Secretary
of State of Ohio and the Clerk of Pepper Pike, Ohio;
(g) copies of all executed documents evidencing the
acquisition of the assets from The Tranzonic Companies;
(h) if trademarks have been acquired from the Tranzonic
Companies, a Trademark Assignment Agreement with respect to such
trademarks; and
(i) payment of all outstanding fees and disbursements of
Messrs. Gadsby & Hannah, counsel to the Bank, relating to this
Amendment or the transactions contemplated hereunder.
4.8 Section Headings. Article titles and Section headings are for
reference only and shall have no substantive effect. Without limiting the
generality of the foregoing, Sections 3.05, 3.06, 3.07, 3.08 (formerly Sections
3.04, 3.05, 3.06 and 3.07), 4.03, 4.04, 5.06 and 5.07 shall, to the extent
applicable, pertain to and govern the Acquisition Loans.
[The remainder of this page is intentionally left blank.]
-10-
<PAGE>
If you are in agreement with the foregoing, please sign below and
return this Amendment to the undersigned, whereupon this Amendment, as so
accepted by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
THE BORROWERS:
NUTRAMAX PRODUCTS, INC.
By:_____________________________________
Robert F. Burns, Chief Financial Officer
POWERS PHARMACEUTICAL CORPORATION
By:_____________________________________
Robert F. Burns, Chief Financial Officer
OPTOPICS LABORATORIES CORPORATION
By:_____________________________________
Robert F. Burns, Chief Financial Officer
The foregoing Amendment and each and every part thereof is hereby
accepted by the undersigned effective as of February 29, 1996.
THE BANK:
STATE STREET BANK AND TRUST
COMPANY
By:_____________________________________
William F. Zola, Vice President
-11-
NutraMax Products, Inc.
9 Blackburn Drive
Gloucester, Massachusetts 01930
Powers Pharmaceutical Corporation
170 Oak Hill Way
Brockton, Massachusetts 02401
Optopics Laboratories Corporation
32 Main Street
Fairton, New Jersey 08320
March 4, 1996
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Re: Amendment No. 3 to Revolving Credit, Term Loan and Security
Agreement and Revolving Time Note ("Amendment")
Gentlemen:
We refer to the Revolving Credit, Term Loan and Security Agreement made
the 30th day of December, 1994, as amended by the Amendment dated November 30,
1995 and Amendment No. 2 to the Revolving Credit, Term Loan and Security
Agreement dated February 29, 1996 (as amended, the "Loan Agreement"), by and
among NutraMax Products, Inc., a Delaware corporation having its principal place
of business at 9 Blackburn Drive, Gloucester, Massachusetts 01930 ("NutraMax"),
Powers Pharmaceutical Corporation, a Delaware corporation having its principal
place of business at 170 Oak Hill Way, Brockton, Massachusetts 02401 ("Powers"),
Optopics Laboratories Corporation, a Delaware corporation having its principal
place of business at 32 Main Street, Fairton, New Jersey 08320 ("Optopics";
NutraMax, Powers and Optopics are referred to hereinafter individually as a
"Borrower" and collectively, and jointly and severally, as the "Borrowers"), and
State Street Bank and Trust Company, a Massachusetts trust company having its
principal place of business at 225 Franklin Street, Boston, Massachusetts 02110
(the "Bank"). We also refer to the Revolving Time Note dated December 30, 1994
made by the Borrowers in favor of the Bank. Capitalized terms used herein
without definition shall have the meanings ascribed to such terms in the Loan
Agreement.
We have requested that you make certain amendments to the Loan
Agreement and you have advised us that you are willing to make the amendments
requested by us on the condition that we join with you in this Amendment.
<PAGE>
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Amendment, and fully intending to be
legally bound by this Amendment, we hereby agree with you as follows:
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended in each of the following respects:
1.1 Article I of the Loan Agreement is amended as follows:
(a) The definition of "Borrowing Base" in Section 1.08 is
hereby amended by deleting the reference to the dollar amount
"$2,500,000" in Section 1.08(b)(i) and inserting in place of such
reference the dollar amount of "$3,500,000".
(b) The definition of "Credit Limit" in Section 1.12 is hereby
amended to read in its entirety as follows:
"Credit Limit" shall mean Ten Million ($10,000,000) Dollars.
(c) The definition of "Financing Agreements" in Section 1.23
is hereby amended to read in its entirety as follows:
"Financing Agreements" shall mean this Agreement and any and
all amendments hereto including that certain Amendment dated
November 30, 1995, that certain Amendment No. 2 to Revolving
Credit, Term Loan and Security Agreement dated February 29,
1996 and that certain Amendment No. 3 to Revolving Credit,
Term Loan and Security Agreement dated March __, 1996, and all
documents including collateral documents, letter of credit
agreements, notes, including that certain Amended and Restated
Revolving Time Note dated March 4, 1996, acceptance credit
agreements, security agreements, pledges, guaranties,
mortgages, title insurance, assignments, and subordination
agreements required to be executed by Borrower or any Third
Party in connection with the loan arrangements between the
Borrower and Bank.
(d) The definition of "Obligations" in Section 1.36 is hereby
amended by adding the following new sentence at the end of the
paragraph, as follows:
Without limiting the generality of the foregoing,
"Obligations" shall include the obligations of the Borrower
under the Amended and Restated Revolving Time Note dated
March __, 1996 made by the Borrowers in favor of the Bank.
-2-
<PAGE>
1.2 Section 2.05 is hereby replaced in its entirety as follows:
2.05 All Advances shall bear interest and, at the
option of the Bank, shall be evidenced by notes in a form
satisfactory to Bank, including that certain Amended and
Restated Revolving Time Note dated March 4, 1996 in the form
of Exhibit "B-1" attached hereto and made a part hereof,
(which Amended and Restated Revolving Time Note amends,
restates and replaces the terms and conditions of the
Revolving Time Note dated December 30, 1994 in its entirety),
but in the absence of notes, shall be conclusively evidenced
by Bank's records of Advances and repayments.
ARTICLE II
AMENDMENTS TO REVOLVING TIME NOTE
2.1 The Revolving Time Note dated December 30, 1994 made by the
Borrower in favor of the Bank is hereby amended, restated and replaced in its
entirety by that certain Amended and Restated Revolving Time Note dated March 4,
1996 in the form of Exhibit "A" attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrowers hereby jointly and severally represent and warrant to you
as follows:
3.1 Representations in Financing Agreements. Each of the
representations and warranties made by or on behalf of any Borrower to you in
any of the Financing Agreements, as amended by this Amendment, was true and
correct when made and is true and correct on and as of the date hereof with the
same full force and effect as if each of such representations and warranties had
been made by such Borrower on the date hereof and in this Amendment.
3.2 Events of Default. No Event of Default exists on the date hereof
(after giving effect to all of the arrangements and transactions contemplated by
this Amendment). No condition exists on the date hereof which would, with notice
or the lapse of time, or both, constitute an Event of Default.
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<PAGE>
3.3 Binding Effect of Documents.
(a) This Amendment has been duly executed and delivered to you by the
Borrowers and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrowers contained herein constitute legal,
valid and binding obligations of the Borrowers enforceable against the Borrowers
in accordance with their respective terms.
(b) The obligations of the Borrowers to repay you all of the unpaid
principal of each of the Revolving Loans, each of the Term Loans and each of the
Acquisition Loans made pursuant to the Loan Agreement, to pay you all of the
unpaid interest accrued or to accrue thereon, and to pay you all of the other
obligations of the Borrowers are and will continue to be entitled to all of the
benefits of and to all of the security created by the Loan Agreement and the
other Financing Agreements.
ARTICLE IV
PROVISIONS OF GENERAL APPLICATION
4.1 No Other Changes. Except as otherwise expressly provided by this
Amendment, all of the terms, conditions and provisions of the Loan Agreement and
each of the other Financing Agreements remain unaltered. The Loan Agreement and
this Amendment shall be read and construed as one agreement.
4.2 Governing Law. This Amendment is intended to take effect as a
sealed instrument and shall be deemed to be a contract under the laws of The
Commonwealth of Massachusetts. This Amendment and the rights and obligations of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of The Commonwealth of Massachusetts.
4.3 Binding Effect; Assignment. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
4.4 Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
4.5 Conflict with Other Agreements. If any of the terms of this
Amendment shall conflict in any respect with any of the terms of any of the
Financing Agreements, the terms of this Amendment shall be controlling.
4.6 Acknowledgment by Borrowers. Each of NutraMax, Powers and Optopics
jointly and severally acknowledge that the Bank would not have entered into this
Amendment unless all of the Borrowers agreed to be and continue to be, Borrowers
on a joint and several basis, and that the Bank would not have entered into any
such arrangements with any individual Borrower alone.
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<PAGE>
4.7 Conditions Precedent. This Amendment shall become effective as of
the date hereof, but only if the Bank shall have received each of the following
agreements and documents in form and substance satisfactory to the Bank and duly
executed and delivered by the parties thereto:
(a) this Amendment;
(b) the Amended and Restated Revolving Time Note; and
(c) UCC-3 Amendments to be filed with the Secretary of State
of Ohio and the County of Cuyahoga adding an additional location of the
property.
4.8 Section Headings. Article titles and Section headings are for
reference only and shall have no substantive effect.
[The remainder of this page is intentionally left blank.]
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<PAGE>
If you are in agreement with the foregoing, please sign below and
return this Amendment to the undersigned, whereupon this Amendment, as so
accepted by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
THE BORROWERS:
NUTRAMAX PRODUCTS, INC.
By:_____________________________________
Robert F. Burns, Chief Financial Officer
POWERS PHARMACEUTICAL CORPORATION
By:_____________________________________
Robert F. Burns, Chief Financial Officer
OPTOPICS LABORATORIES CORPORATION
By:_____________________________________
Robert F. Burns, Chief Financial Officer
The foregoing Amendment and each and every part thereof is hereby
accepted by the undersigned effective as of March 4, 1996.
THE BANK:
STATE STREET BANK AND TRUST
COMPANY
By:_____________________________________
William F. Zola, Vice President
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STATE STREET BANK AND TRUST COMPANY
SECURED ACQUISITION PROMISSORY NOTE
$2,750,000.00 February 29, 1996
Boston, Massachusetts
For value received, the undersigned promises to pay to the order of
State Street Bank and Trust Company (the "Bank") at the office of Bank at 225
Franklin Street, Boston, Massachusetts, 02110, or such other place as the holder
hereof shall designate, Two Million Seven Hundred Fifty Thousand ($2,750,000)
Dollars, or such lesser principal amount advanced to the undersigned under the
credit facility established pursuant to a Revolving Credit, Term Loan and
Security Agreement dated December 30, 1994, as amended by that certain Amendment
dated November 30, 1995 and that certain Amendment No. 2 to the Revolving
Credit, Term Loan and Security Agreement of even date (as amended, the
"Agreement"), payable as to principal in one installment on April 28, 1997,
together with interest on the unpaid balances from the date hereof, payable
monthly in arrears on the first day of each calendar month at either: (i) a
fluctuating interest rate per annum equal to one-half percent (1/2%) above the
Bank's Prime Rate in effect from time to time; or (ii) for such portion of the
principal balance subject to a Libor Election by the undersigned pursuant to
Section 4.02 of the Agreement, at a fixed rate per annum equal to two and
one-quarter percent (2 1/4%) above Adjusted Libor as determined in accordance
with the Agreement. If no Notice of Election is received by Bank pursuant to and
in accordance with the terms of Section 4.02 of the Agreement with respect to
any loans hereunder, any such loan shall be deemed to be a Prime Rate Loan.
Interest shall be calculated on the basis of actual days elapsed and a 360-day
year. If this note is not paid on the due date, whether as stated or upon
acceleration, interest on the unpaid balances shall thereafter be payable on
demand at a rate per annum equal to three percent (3%) above the applicable rate
as provided above.
If a Libor Loan is not repaid in full on its Maturity Date, then such
Libor Loan shall bear interest at the rate described in Section 5.01(b) of the
Agreement from and after such Maturity Date through the Acquisition Loan
Expiration Date and thereafter, or in the Event of Default, at the option of the
Bank, as set forth in Sections 5.01(b) and 5.04 of the Agreement until paid in
full.
The principal balances outstanding hereunder which accrue interest at a
fluctuating rate may be prepaid in whole or in part at any time and from time to
time without premium or penalty. Any such amounts prepaid hereunder shall be
applied first to interest and then to installments of principal in the reverse
order of maturity. The principal balances outstanding hereunder which accrue
interest at the Adjusted Libor shall not be prepaid prior to the applicable
Maturity Date as set forth in the Agreement, except upon acceleration by the
Bank. In the event such principal is prepaid prior to the applicable Maturity
Date, whether voluntarily or upon acceleration by the Bank, the undersigned
shall compensate the Bank as provided in Section 6.08 of the Agreement.
<PAGE>
This note shall, at the option of the holder, become immediately due
and payable without notice or demand upon the occurrence of any of the following
events:
(a) Failure to make any payment of interest within five (5)
Banking Days after the same becomes due hereunder;
(b) Failure to make any payment of principal when due hereunder;
(c) The occurrence of an Event of Default under the Agreement; or
(d) Termination of the Agreement.
Any deposits or other sums at any time credited by or due from the
holder to any maker, endorser or guarantor hereof and any securities or other
property of any such maker, endorser or guarantor at any time in the possession
of the holder may at all times be held and treated as collateral for the payment
of this note and any and all other liabilities (direct or indirect, absolute or
contingent, sole, joint or several, secured or unsecured, due or to become due,
now existing or hereafter arising) of any such maker to the holder. Regardless
of the adequacy of collateral, the holder may apply or set off such deposits or
other sums against such liabilities at any time after the occurrence of an Event
of Default in the case of makers but only with respect to matured liabilities in
the case of endorsers and guarantors.
Every maker, endorser and guarantor hereof hereby waives presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement hereof and consents
that this note may be extended from time to time and that no such extension or
other indulgence, and no substitution, release or surrender of collateral, and
no discharge or release of any other party primarily or secondarily liable
hereon, shall discharge or otherwise affect the liability of any such maker,
endorser or guarantor. No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder, and a waiver of any such right on any one occasion shall
not be construed as a bar to or waiver of any such right on any future occasion.
This note is secured by any and all collateral at any time granted to
Bank to secure any obligations of any maker hereof.
Every maker, endorser and guarantor hereof agrees to pay on demand all
costs and expenses (including legal costs and reasonable attorneys' fees)
incurred or paid by the holder in enforcing this note on default.
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<PAGE>
This note shall take effect as a sealed instrument and shall be
governed by the laws of The Commonwealth of Massachusetts.
All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Agreement.
Witness: NUTRAMAX PRODUCTS, INC.
____________________ By:_____________________________
Robert F. Burns
Chief Financial Officer
Address: 9 Blackburn Drive
Gloucester, MA 01930
POWERS PHARMACEUTICAL CORPORATION
____________________ By:_____________________________
Robert F. Burns
Chief Financial Officer
Address: 170 Oak Hill Way
Brockton, MA 02401
OPTOPICS LABORATORIES CORPORATION
____________________ By:_____________________________
Robert F. Burns
Chief Financial Officer
Address: 9 Blackburn Drive
Gloucester, MA 01930
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STATE STREET BANK AND TRUST COMPANY
AMENDED AND RESTATED
REVOLVING TIME NOTE
$10,000,000.00 March 4, 1996
Boston, Massachusetts
On December 1, 1996, for value received, the undersigned promises to
pay to the order of State Street Bank and Trust Company (the "Bank") at the
office of Bank at 225 Franklin Street, Boston, Massachusetts, 02110, or such
other place as the holder hereof shall designate, Ten Million ($10,000,000)
Dollars, or such lesser principal amount advanced to the undersigned under the
line of credit established pursuant to a Revolving Credit, Term Loan and
Security Agreement dated December 30, 1994, as amended by that certain Amendment
dated November 30, 1995, that certain Amendment No. 2 to the Revolving Credit,
Term Loan and Security Agreement dated February 29, 1996 and that certain
Amendment No. 3 to the Revolving Credit, Term Loan and Security Agreement dated
of even date (as amended, the "Agreement"), together with interest thereon as
follows: (a) on outstanding principal designated as a Prime Rate Loan pursuant
to Section 4.01 of the Agreement, interest shall accrue from the date hereof,
payable monthly in arrears on the first day of each calendar month prior to the
due date hereof, and upon the due date hereof, at a fluctuating interest rate
per annum equal to the Bank's Prime Rate in effect from time to time. Each
change in such interest rate shall take effect simultaneously with the
corresponding change in such Prime Rate. "Prime Rate" shall mean the rate of
interest announced by Bank in Boston, Massachusetts, from time to time as its
Prime Rate. Interest shall be calculated on the basis of actual days elapsed and
a 360-day year; (b) on outstanding principal designated as a Libor Loan pursuant
to Section 4.01 of the Agreement, interest shall accrue from the Borrowing Date
for such Advance through and including the Maturity Date chosen by the
undersigned with respect to such Advance, at a fixed interest rate per annum
equal to the aggregate of the Adjusted Libor plus Margin, and shall be payable
on the Maturity Date. The Adjusted Libor interest rate shall change
simultaneously with a change in the Reserve Rate. If a Libor Loan is not repaid
in full on its Maturity Date, then such Advance shall bear interest at the rate
described in (a) above until the Expiration Date or the occurrence of an Event
of Default under the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Agreement.
From and after the occurrence of an Event of Default under the
Agreement, at the option of the Bank: (i) all Prime Rate Loans shall bear
interest at a variable per annum rate equal to the aggregate of the Prime Rate
in effect from time to time plus two and one-half (2 1/2%) percent until paid in
full; and (ii) each Libor Loan shall bear interest at the rate described in (b)
above until such Advance's Maturity Date, and thereafter at the rate set forth
in clause (i) of this paragraph until paid in full.
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<PAGE>
This note shall, at the option of the holder, become immediately due
and payable without notice or demand upon the occurrence of any of the following
events:
(a) Failure to make any payment of interest within five (5)
Banking Days after the same becomes due hereunder;
(b) Failure to make any payment of principal when due hereunder;
(c) The occurrence of an Event of Default under the Agreement; or
(d) Termination of the Agreement.
Any deposits or other sums at any time credited by or due from the
holder to any maker, endorser or guarantor hereof and any securities or other
property of any such maker, endorser or guarantor at any time in the possession
of the holder may at all times be held and treated as collateral for the payment
of this note and any and all other liabilities (direct or indirect, absolute or
contingent, sole, joint or several, secured or unsecured, due or to become due,
now existing or hereafter arising) of any such maker to the holder. Regardless
of the adequacy of collateral, the holder may apply or set off such deposits or
other sums against such liabilities at any time after the occurrence of an Event
of Default in the case of makers but only with respect to matured liabilities in
the case of endorsers and guarantors.
Every maker, endorser and guarantor hereof hereby waives presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement hereof and consents
that this note may be extended from time to time and that no such extension or
other indulgence, and no substitution, release or surrender of collateral, and
no discharge or release of any other party primarily or secondarily liable
hereon, shall discharge or otherwise affect the liability of any such maker,
endorser or guarantor. No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder, and a waiver of any such right on any one occasion shall
not be construed as a bar to or waiver of any such right on any future occasion.
This note is secured by any and all collateral at any time granted to
Bank to secure any obligations of any maker hereof.
Every maker, endorser and guarantor hereof agrees to pay on demand all
costs and expenses (including legal costs and reasonable attorneys' fees)
incurred or paid by the holder in enforcing this note on default.
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<PAGE>
This note shall take effect as a sealed instrument and shall be
governed by the laws of The Commonwealth of Massachusetts.
Witness: NUTRAMAX PRODUCTS, INC.
________________ By:_____________________________
Robert F. Burns
Chief Financial Officer
Address: 9 Blackburn Drive
Gloucester, MA 01930
POWERS PHARMACEUTICAL CORPORATION
________________ By:_____________________________
Robert F. Burns
Chief Financial Officer
Address: 170 Oak Hill Way
Brockton, MA 02401
OPTOPICS LABORATORIES CORPORATION
________________ By:_____________________________
Robert F. Burns
Chief Financial Officer
Address: 9 Blackburn Drive
Gloucester, MA 01930
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