<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: October 3, 1998 Commission File Number O-18671
NUTRAMAX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 061200464
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
51 Blackburn Drive, Gloucester, Massachusetts 01930
(Address of Principal executive offices) (Zip code)
Registrant's telephone number, including area code: (978) 282-1800
---------------------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act
Common Stock, par value $.001 per share
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 [_] No [X]
The aggregate market value of the registrant's voting stock held by non-
affiliates (based upon the closing price of $5.13 on December 24, 1998) was
approximately $12,324,861. As of December 24, 1998 there were 5,672,501 shares
of Common Stock, par value $.001 per share, outstanding.
Indicate by check mark if disclosure of delinquent filer pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes [_] NO [X]
--------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portion of the Proxy Statement for the Annual Meeting of Stockholders to be
held in 1999 are incorporated by reference into Part III. The Index to Exhibits
begins on Page 30.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
NutraMax Products, Inc. (the "Company") was incorporated on April 20, 1987 under
the laws of the State of Delaware and is the successor by merger in July 1990 to
Aid-Pack, Inc., formally a wholly-owned subsidiary of MEDIQ Incorporated
("MEDIQ").
The Company is a private label health and personal care products company. The
Company's strategy is to offer a line of quality products equivalent to national
brands at lower cost to consumers while providing greater profit potential to
retailers than the national brands. National brands dominate health and personal
care product categories. However, in recent years private label products have
captured increased market share by appealing to value conscious consumers
seeking lower cost products of comparable quality.
PRODUCTS
Feminine Needs - The Company manufactures disposable douches for sale under its
value brands Sweet' n Fresh(R) and Sweet Love(R) and on a private label basis.
In February 1996, the Company acquired certain assets of the Hospital Specialty
Company Division of the Tranzonic Companies related to the manufacture and sale
of feminine hygiene products. Sales of douche products in fiscal 1998 were 13%
on net sales, as compared to 19% in 1997 and 23% in 1996.
Cough/Cold products- The Company is the leading manufacturer and distributor of
private label cough drops and throat lozenges, and also manufactures cough drops
on a contract basis. The Company offers and extensive line of solid dosage
cough/cold products, including cough drops, throat lozenges, sugar-free
products, vitamin C drops and liquid center items. Sales of cough/cold products
represented 27%, 34% and 31% of net sales in fiscal 1998, 1997 and 1996,
respectively.
Baby Care- The Company manufactures disposable baby bottle liners on a private
label basis and under its value brand Fresh n Easy(R). The Company manufactures
pediatric electrolyte oral maintenance solution, a product which is used to
replace minerals lost by children who suffer from diarrhea and vomiting, for
sales under its value brand NutraMax Baby Care Pediatric Electrolyte and on a
private label basis. During fiscal years 1998, 1997 and 1996, sales of baby care
products represented 11%, 15% and 15% of net sales, respectively.
Ophthalmics - The Company manufactures private label over-the-counter and
prescription ophthalmic products for retail and industrial customers, including
over-the-counter contact lens solutions, artificial tears and eye drops, as
well as generic prescription eye care products. Sales of ophalmic products
represented 8%, 10% and 9% of net sales in fiscal 1998, 1997 and 1996
respectively.
Adult Nutrition Products - in March 1995, the Company introduced a new line of
adult high calorie liquid nutrition products which were sold under its value
brand NutraMax Plus High Calorie Liquid Nutrition and on a private label basis.
During fiscal 1996, the Company introduced a lower calorie version of this same
product sold under its value brand name NutraMax Complete Liquid Nutrition.
These products were manufactured by a third party and marketed by the Company
through its distribution channels. During fiscal 1998, 1997 and 1996 sales of
adult liquid nutrition products represented 1%, 4% and 5% of net sales,
respectively. The Company withdrew from this market in 1998.
Personal Care - The Company manufactures ready-to-use disposable enemas for sale
under its value brand Pure & Gentle, on a private label basis and for the
institutional market. During fiscal 1998, 1997 and 1996 sales of Personal Care
products represented 4%, 5% and 5% of net sales, respectively.
1
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Oral Care - In October 1995, the Company acquired the assets and assumed certain
liabilities of Mi-Lor Corporation, Professional Brushes, Inc. and Codent Dental
Products, Inc., companies engaged in the manufacturing and marketing of tooth
brushes, dental floss and related products for the store brand market. The
acquisition was the Company's entry into the private label oral care segment.
Oral care products sales represented 6%, 8% and 9% of net sales for fiscal
1998, 1997 and 1996, respectively.
First Aid Products- In September 1997 the Company acquired certain assets and
assumed certain liabilities of American White Cross, Inc. and Weaver
Manufacturing Corporation (collectively "AWC"), companies engaged in the
manufacturing and marketing of adhesive bandages and related products for both
the store brand and institutional markets. The acquisition marked the Company's
entry into the private label first aid market. these products are manufactured
in a 253,000 square foot leased facility in Houston, Texas. The first aid
products are being marketed by the Company through its existing distribution
channels. Sales of first aid products represented 28% and 2% of net sales for
fiscal 1998 and 1997, respectively.
Other Products -The Company's other products consist principally of a patented
line of sterile, profiled, disposable dilution bottles used in laboratory
testing of water, waste water, foods, drug products, pharmaceuticals and
cosmetics. Sales of these other products totaled 2%, 3% and 3% of net sales in
fiscal 1998, 1997 and 1996, respectively.
NEW PRODUCT STRATEGY
The Company's growth strategy includes the acquisition and development of new
products,and the extension and modification of existing product lines to
correspond with national branded products and product variations. The Company
expects to add new product lines through Internal development, acquisition and
joint venture or partnership agreements. The Company contemplates that product
line expansion will enable the Company to capitalize on its established
distribution channels and manufacturing marketing expertise. New products will
most likely focus on consumer packaged goods, including health and personal care
products.
MARKETING AND DISTRIBUTION
The Company utilizes national brand marketing methods to meet the specific needs
of its customers. Such marketing methods include designing contemporary
packaging to improve point-of-purchase impact and increase consumer appeal. Teh
Company also uses price, display, packaging, bonus and multi-pack promotions to
increase sales and retailer support. Sales are made through the Company's sales
representatives and independent brokers.
CUSTOMERS
For fiscal years 1998, 1997 and 1996, Walmart Stores, Inc. accounted for 9%, 11%
of net sales respectively, and American Home Products, Inc. accounted for 7%,
10% and 11% of net slaes respectively. While the Company seeks to continually
expand its distribution and customer base, the loss of one or more of its
largest customers, if not replaced with other comparable businesses, could have
a material addverse affect on the Company's results of operations.
COMPETITION
The markets in which the Company competed are dominated by nationally
advertised brand name products marketed by established consumer packaged goods
companies, most of which have greater marketing, financial and human resources
than the Company. The Company also competed with several other private label
manufacturers and marketers. Competition for consumer health and personal care
products is based primarily on product reability, price, customer service, and
the ability to provide tamper resistant/evident packing. Growth in sales of
private label products is also dependent on increasing the amount of shelf space
available at retail stores in order to maximize brand awareness and consumer
trial. The Company experiences aggressive price competition from time to time
from branded and other private label competitors. There can be no assurance that
such price competition will not have a material adverse effect on the Company's
results of operations (sec "ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation").
2
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GOVERNMENT REGULATION AND HEALTH ISSUES
The Company is registered with the Food & Drug Administration ("FDA") as a
manufacturer for certain of its products. The primary forms of governmental
regulation are the current "good manufacturing practices" and "good laboratory
practices" guidelines administered by the FDA, which set forth the protocols to
be followed in the manufacture, storage, packaging and distribution of medical
products for human use. Certain of the Company's ophthalmic products are subject
to additional FDA regulations relating to pre-market approval of products. The
Company's operations are also subject to periodic inspections by the FDA.
Promotional claims made with respect to health and personal care products are
also subject to regulations by the FDA, and by the Federal Trade Commission.
The use of health and personal care products may result in allergic or other
adverse reactions in users. Since 1952, a number of studies have been published
in medical journals concerning the relationship of douching to the incidence of
pelvic inflamatory disease. These studies provide no conclusive results on the
issue of whether douching causes this disease. A 1990 study showed an
association between douching and the disease and concluded that further studies
were needed. A 1993 study stated that the results of the study lend support to
the hypotheses that douching can predispose a women to pelvic inflammatory
disease. Although the Company believes its douche products are safe when used in
accordance with instructions accompanying the product package, negative,
publicity resulting from such studies and any future studies and affect sales of
douche products. In such event there could be a material adverse effect on the
Company's results of operations.
EMPLOYEES
The Company has approximately 1,200 full-time employees engaged in quality
control, marketing and sales, general corporate and administrative positions and
manufacturing operations. The Company is currently negotiating a collective
bargaining agreement with the United Food and Commercial Workers Local 328
covering approximately 235 employees at the Brockton, Massachusetts facility.
The Company believes that relations with its employees are satisfactory.
ITEM 2. PROPERTIES
The Company currently operates the following facilities (which are owned unless
otherwise indicated):
Approximate Location Type of Facility Square Feet
- -------------------- ---------------- -----------
Gloucester, Massachusetts (1) Corporate and Administrative Officers
Manufacturing and Distribution 131,000
Fairton, New Jersey Manufacturing 48,000
Brockton, Massachusetts Manufacturing 89,000
Florance, Massachusetts (2) Manufacturing 88,000
Houston, Texas (3) Distribution and Manufacturing 253,000
Elmwood Park, NJ Manufacturing 10,000
- --------------------------------------------------------------------------------
(1) Consists of four facilities, of which two are leased, including a lease
effective January 1, 1998 for an 80,000 square foot distribution center
which provides consolidated warehousing and shipping of finished goods.
(2) Acquired in October 1995.
(3) Leased facility effective September 1997.
The Company believes that its presents facilities will be adequate for all of
its reasonably foreseeable manufacturing, warehousing and distribution
requirements, or that alternative facilities can be obtained at a reasonable
costs.
ITEM 3. LEGAL PROCEEDINGS
The Company, like other companies in the store brand industry, has been the
subject of claims and litigation brought by national brand name companies based
on packaging alleged to be similar to competing brand name products. The Company
is also subject to certain claims and informal complaints relating to its
products which are incidental and routine to its business and for which the
Company maintains insurance coverage. The Company knows of no litigation, either
pending or threatened, which is likely to have a material adverse effect on the
Company's financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
3
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
MARKET INFORMATION
The following table sets forth, for the periods indicated, the high and low
prices for the Company's common stock as reported by The Nasdaq stock Market,
Inc. ("NASDAQ"). The Company's common stock is traded on the NASDAQ SmallCap
Market System under the Symbol "NMPC".
Fiscal 1998 High Low
----------- ---- ---
First Quarter $14.750 $11.500
Second Quarter 15.000 12.313
Third Quarter 12.625 9.000
Fourth Quarter 9.750 5.375
Fiscal 1997 High Low
----------- ---- ---
First Quarter $11.000 $8.500
Second Quarter 12.875 10.000
Third Quarter 14.000 11.125
Fourth Quarter 16.000 12.500
COMMON STOCK HOLDERS
The Company believes there are approximately 1,500 holders of common stock,
including individual's shares held in street name by brokers.
DIVIDENDS
The Company has never declared or paid any cash dividends. The declaration of
dividends by the Company in the future will at all times be subject to the sole
discretion of the Company's Board of Directors, and will depend upon operating
results, capital requirements, financial position and bank covenant compliance.
The Company's Senior and Subordinated Debt agreements prohibit the payment of
dividends. See note to the consolidated financial statements included elsewhere
herein.
RECENT SALES OF UNREGISTERED SECURITIES
In order to finance in part the Company's acquisition of certain assets related
to the First Aid business of American White Cross, Inc., on September 11, 1997,
pursuant to the terms of a Stock Purchase Agreement dated as of August 12, 1997,
as amended (the "1997 Stock Purchase Agreement"), by and between the Company and
Cape Ann Investors, L.L.C. ("Cape Ann"). Cape Ann purchased 846,154 shares of
Common stock from the Company in a private placement transaction for an
aggregate purchase price of $11,000,000.
On October 29, 1997, the Company offered to purchase up to an aggregate of
450,000 shares of the Company's then outstanding Common Stock within a price
range of $11.00 per share up to $12.75 per share pursuant to a modified Dutch
auction issuer tender offer (the "Tender Offer"). Upon completion of the Tender
Offer on November 28, 1997, the Company purchased and resold an aggregate of
250,668 shares of outstanding Common Stock at a purchase price of $12.75 per
share. The shares were sold by the Company to: (i) Cape Ann Investors, L.L.C.,
the Company's largest stockholder (an affiliate); (ii) Bernard J. Korman, the
Company's Chairman of the Board, (iii) Donald E. Lepone, the Company's Chief
Executive Officer; and (iv) Donald M. Gleklen, a member of the Board of
Directors of the Company. The Company undertook the Tender Offer in order to
provide added market liquidity for the existing stockholders of the Company who
wished to sell their shares as a result of the Company's 1997 fourth quarter
performance.
On December 14, 1997 the Company issued 225,000 warrants to purchase shares of
the Company's common stock to Cape Ann and certain parties. The warrants are
exercisable at $3.60 per share for a period of 5 years commencing on October 14,
1998.
4
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below has been derived from
the audited financial statements of the Company. This data is qualified in its
entirety by reference to, and should be read in conjunction with, Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Company's Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------------
Oct. 3, Sept. 27, Sept. 28, Sept. 30, Oct. 1,
1998 (1) 1997 (2)(3) 1996(4)(5) 1995 1994 (6)
------------ ----------- ---------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales $128,434 $94,331 $80,479 $63,111 $55,958
Cost of sales 95,463 71,728 57,686 45,916 38,752
Cost of sales-inventory adjustments-AWC 6,649 -- -- -- --
-------- ------- ------- ------- -------
Gross profit 26,322 22,603 22,793 17,195 17,206
Selling, general and administrative expenses 21,118 13,947 11,662 8,694 9,281
Accounts receivable and other adjustments-AWC 1,065 -- -- -- --
-------- ------- ------- ------- -------
Operating income 4,139 8,656 11,131 8,501 7,925
Other income (expense):
Interest expense (8,449) (5,042) (1,479) (1,427] (928)
Other (36) 184 (289) 316 95
-------- ------- ------- ------- -------
Income (loss) before income tax (benefit) expense (4,346) 3,798 9,363 7,390 7,092
Income tax (benefit) expense (1,475] 1,536 3,680 2,916 2,832
-------- ------- ------- ------- -------
Net income (loss) $ (2,871) $ 2,262 $ 5,683 $ 4,474 $ 4,260
======== ======= ======= ======= =======
Basic Earnings (Loss) Per Share:
Per share amount $ (.51) $ .38 $ .66 $ .52 $ .50
======== ======= ======= ======= =======
Weighted average shares 5,650 5,797 8,531 8,520 8,480
======== ======= ======= ======= =======
Diluted Earnings (Loss) Per Share:
Per share amount $ (.51) .39 .67 .53 .50
======== ======= ======= ======= =======
Weighted average shares 5,650 5,797 8,531 8,520 8,480
Effect of dilutive securities:
Stock options -- 79 63 77 114
Warrants -- 47 -- -- --
-------- ------- ------- ------- -------
Adjusted weighted average shares 5,650 5,923 8,594 8,597 8,594
======== ======= ======= ======= =======
<CAPTION>
As of
---------------------------------------------------------------------------------
Oct. 3, Sept. 27, Sept. 28, Sept. 30, Oct. 1,
1998 (1) 1997 (2)(3) 1996(4)(5) 1995 1994 (6)
------------ ----------- ---------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $29,899 $38,602 $9,491 $14,152 $13,172
Total assets 138,751 132,759 82,878 63,074 60,450
Long-term debt, less current maturites 81,625 85,542 11,780 12,550 16,183
Stockholders' equity 21,194 23,479 45,817 39,233 34,757
</TABLE>
(1) In the fourth fiscal quarter of fiscal 1998, the Company adjusted inventory
and accounts receivable of AWC by $6,649,000 and $1,065,000, respectively.
See discussion in Note B to the consolidated financial statements.
(2) In September 1997, the Company acquired certain assets of a manufacturer of
first aid products for $37,170,000 in cash plus transaction related expenses
of approximately $700,000, which was financed by additional term loans and
revolving credit facility borrowings and the private placement of 846,154
shares of the Company's common stock. (See note B to the consolidated
financial statements)
(3) In December 1996, the Company repurchased 4,037,258 shares of its common
stock from MEDIQ, Inc. for $36,335,000. The transaction was financed by a
combination of term loans and subordinated debt. (See note M to the
consolidated financial statements)
(4) In February 1996, the Company acquired certain assets of a manufacturer of
feminine hygiene products for $2,367,000 in cash which was financed by
additional term loan borrowings.
(5) In October 1995, the Company acquired the assets of a manufacturer of
private label toothbrushes and dental floss for $1,800,00 in cash and
liabilities assumed of $363,000, and the transaction resulted in related
expenses of $681,000 which was financed from the Company's revolving credit
facility.
(6) In December 1993, the Company acquired a manufacturer and distributor of
private label cough/cold products for $13,500,000 which was financed with
proceeds from a revolving credit facility.
5
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes (hereto, contained elsewhere herein. References
to a year means the Company's fiscal year, unless the context otherwise
requires.
RESULTS OF OPERATIONS
The consolidated Statements of Operations include the results of operations of
acquired companies and businesses from the dates acquired; certain assets of
American White Cross, Inc. and Weaver Manufacturing Corporation
("AWC")(September 1997); and certain assets of the Hospital Specialty Company
Division of the Tranzonic Companies (February 1996); certain assets of Mi-Lor
Corporation, ("Mi-Lor"), Professional Brushes, Inc. ("Professional Brushes") and
Codent Dental Products, Inc. ("Codent")(October 1995). The following table sets
forth, for all periods indicated, the percentage relationship that items in the
Consolidated Statements of Operations bear to net sales.
Year Ended
------------------------------------
Oct. 3, Sept. 27, Sept. 28,
1998 1997 1996
-------- ---------- ----------
Net Sales 100% 100% 100%
Cost of sales 75 76 72
Cost of sales-inventory adjustments-AWC 5 -- --
-------- ---------- ----------
Gross profit 20 24 28
Selling, general and administrative
expenses 16 15 14
Accounts receivable and other
adjustments--AWC 1 -- --
-------- ---------- ----------
Operating income 3 9 14
Other expense (6) (5) (2)
-------- ---------- ----------
Income (loss) before income tax (benefit)
expense (3) 4 12
Income tax (benefit) expense (1) 2 5
-------- ---------- ----------
Net income (loss) 2% 2% 7%
======== ========== ==========
Fiscal Year 1998 Compared to Fiscal Year 1997
Net sales for 1998 were $128,434,000, an increase of $34,103,000 or 36% over
1997 net sales of $94,331,000. The net sales increase is primarily attributable
to the inclusion of AWC ("the First Aid business") the First Aid business for a
full year ($34,400,000), increased Ophthalmic business revenue due to increased
distribution and Cough/Cold sales volume increases resulting from increased
distribution both in the private label and contract manufacturing markets,
offset by decreases in sales of Feminine Needs products as a result of decreased
promotional activity during the year.
Gross profit for 1998 was $26,322,000 or 20% of net sales, as compared to
$22,603,000 or 24% of net sales in 1997. The increase in gross profit dollars is
primarily a result of the inclusion of the First Aid business for a full year in
1998. The decrease in gross profit percentage relates primarily to $6,600,000 of
fourth quarter adjustments associated with the First Aid business inventory.
Without these adjustments, the results would have indicated an improvement in
gross profit from 24% in 1997 to 25% in 1998. This improvement would have been
the result of the inclusion of the First Aid business for a full year, which has
a higher gross margin than the Company's historic gross margin, as well as
operational efficiencies in the Personal Care, Ophthalmic and Oral Care
facilities, offset by higher costs of operations in the Cough/Cold facility in
the first and second quarters of 1998 related to the delayed shipments and
under-absorbed labor and overhead costs. For further discussion on adjustments
associated with the First Aid business see Note B to the consolidated financial
statements.
Total selling, general and administrative expense for 1998 was $22,183,000 or
17% of net sales as compared to $13,947,000 or 15% of net sales for 1997.
Included in this amount is $1,065,000 related to accounts receivable and other
adjustments associated with the First Aid business. For further discussion see
Note B to the consolidated financial statements. The dollar increase is
primarily attributed to the inclusion of the First Aid business for a full year
($2,510,000), increase goodwill amortization related to the First Aid business
($527,000), an increase of $850,000 in bad debt expense related to the Company's
exit of the Adult Liquid Nutritional market and increased freight, commission,
professional fees and promotional expense related to increased volume
($3,427,000). The percentage increase is primarily related to increased bad debt
expense associated with the Company's exit of the Adult Liquid Nutritional
market, and a full year of goodwill amortization related to the acquisition of
the First Aid business.
Interest expense for 1998 was $8,449,000 as compared to $5,042,000 for 1997.
The increase is primarily attributable to the increase borrowings associated
with the acquisition of the First Aid business (see Purchase of American White
Cross, Inc. and Weaver Manufacturing Corporation).
6
<PAGE>
Income tax benefit for 1998 was $1,475,000 as compared with income tax expense
of $1,536,000 for 1997. The decrease is primarily attributed to the loss in
1998 with respect to adjustments to assets associated with the First Aid
business (see Note B to the consolidated financial statements) as well as the
impact of state tax planning strategies implemented during the year. The
effective tax rate in 1998 was 33.9% compared with 40.4% in 1997 as a result of
state tax planning strategies offset by valuation allowances recorded in 1998.
Fiscal Year 1997 Compared to Fiscal Year 1996
Net sales for 1997 were $94,331,000, an increase of $13,852,000 or 17% over 1996
net sales of $80,479,000. The net sales increase is primarily attributable to
Cough/Cold sales volume increases resulting from increased distribution both in
the private label and contract manufacturing markets and Ophthalmics and
Pediatric Electrolyte sales volume increases as a result of increased
distribution.
Gross profit for 1997 was $22,603,000 or 24% of net sales, as compared to
$22,793,000 or 28% of net sales in 1996. The decrease in gross margin is
primarily attributable to a delay in the completion of a major capital expansion
program at the Cough/Cold division. New production capacity, centered around a
new continuous cooking line used to manufacture cough drops, became operational
later than planned. This delay, coupled with increased Cough/Cold product
orders resulted in delayed shipments and under absorbed labor and overhead.
Selling, general and administrative expense for 1997 was $13,947,000 or 15% of
net sales as compared to $11,662,000 or 14% of net sales for 1996. The dollar
increase is primarily attributed to increase in freight expense, broker
commissions, amortization of financing costs, professional services and
promotion expense related to increased sales volumes and additional debt
refinancing costs. The percentage increase is primarily related to increased
freight expense resulting from shipping inefficiencies related to the capacity
expansion delay at the Cough/Cold division.
Interest expense for 1997 was $5,042,000 as compared to $1,479,000 for 1996. The
increase is primarily attributable to the increased borrowings associated with
the MEDIQ Stock Repurchase (see note M to the consolidated financial
statements).
Income tax expense for 1997 was $1,536,000 compared with $3,680,000 in 1996.
This reduction is primarily related to the reduction in pretax income. The
effective tax rate was 40.4% in 1997 compared with 39.3% for 1996. The increase
relates to an increase in the overall state tax rate in 1997.
SEASONALITY
During the last four months of the calendar year, retailers focus their
merchandising efforts on, and devote more shelf space to, seasonal and holiday
merchandise. As a result, sales of certain of the Company's products tend to be
weaker in the Company's first quarter (ending in December), and normally
strengthen in the second quarter as retailers replenish their shelves with
health and personal care products. Sales of Pediatric Electrolyte and Cough/Cold
products may help mitigate weaker sales in the Company's first quarter, as the
Company's customers purchase such products to stock inventories in anticipation
of an increase in winter sales. The Company's First Aid business sales are
higher in its fourth fiscal quarter. Consequently, the results of any one
quarter may not necessarily be indicative of results of future quarters.
LIQUIDITY AND CAPITAL RESOURCES
As of October 3, 1998, the Company's working capital decreased to $29,899,000
from $38,602,000 on September 27, 1997. The net decrease in working capital is
the result of an increase in the current portion of long-term debt, an increase
in accrued payroll and related taxes and a decrease in accounts receivable and
escrow receivable, partially offset by increases in prepaid expenses and other
current assets including $2,800,000 of estimated federal income tax refund
associated with the tax lost generated in fiscal 1998. Net cash provided by
operating activities decreased to $2,964,000 in 1998 from $4,249,000 in 1997
which was primarily attributable to an increase in depreciation and amortization
expense related to increased capital expenditures as well as a full year of
amortization of goodwill related to the First Aid acquisition, an increase in
deferred taxes primarily related to an increase in depreciation, amortization
and other timing differences offset by increased investment tax credits, a
decrease in accounts receivable related to improved collection efforts offset by
a decrease in net income, an increase in prepaid expenses and other current
assets primarily related to an income tax receivable and prepaid insurance as
well as a decrease in accounts payable and accrued expenses related primarily to
a decrease in accrued interest payable.
Net cash used in investing activities was $6,050,000 and consists primarily of
capital expenditures (primarily for additional capacity) and an increase in
deferred packaging costs related to new items offset by escrow cash received
related to the AWC acquisition. The Company anticipates capital expenditures of
approximately $2,300,000 in fiscal 1999 for additional manufacturing capacity.
Management anticipates that these expenditures will be financed with existing
working capital.
7
<PAGE>
Net cash provided from financing activities totaled $3,604,000 and include
borrowings of $13,227,000; proceeds of $666,000 from the exercise of stock
options; offset by debt repayments of $9,312,000 and deferred financing costs.
On December 31, 1996 pursuant to the terms of an Amended and Restated Stock
Purchase Agreement (the "Stock Purchase Agreement") dated November 20, 1996
among MEDIQ, Inc. MEDIQ Investment Services, Inc. and the Company, the Company
purchased and retired (except as noted below) from MEDIQ all 4,037,258 shares of
the Company's common stock owned by MEDIQ (the "MEDIQ Shares"), of which 33,597
and 657,194 were held in escrow (the "MEDIQ Escrowed Shares") as of October 3,
1998 and September 27, 1997, respectively, in support of MEDIQ's 7.5%
Subordinated Debentures due 2003 (the "MEDIQ Bond"). The aggregate purchase
price of the MEDIQ Shares was $36,335,000 representing a purchase price of $9.00
per share (the "Purchase Price"). The Company paid MEDIQ $19,963,000 of the
$36,335,000 purchase price in cash and delivered to MEDIQ a promissory note (the
"MEDIQ Note") for the remaining $16,372,000 of the purchase price. The balance
of the note as of October 3, 1998 and September 27, 1997 was $302,000 and
$5,915,000 respectively. The MEDIQ Note is payable in installments as MEDIQ
Escrowed Shares are released from escrow, pursuant to the indenture (the MEDIQ
Indenture") and escrow agreement to relating the MEDIQ Bonds, together with
interest at the annual rate of 7.5%, reduced, however, to 5%, 4% and 3% if the
note remains outstanding longer than 18, 30 and 42 months. The current interest
rate is 5%.
Pursuant to the Stock Purchase Agreement, to the extent that any holder of a
MEDIQ Bond (other than MEDIQ) presents such MEDIQ Bond for exchange for MEDIQ
Escrowed Shares in accordance with the terms of the MEDIQ Indenture and MEDIQ
delivers MEDIQ Escrowed Shares to such holder, (i) the principal amount of the
MEDIQ Note shall be reduced by an amount equal to the product of the number of
MEDIQ Escrowed Shares so delivered by MEDIQ to such holder and $9.00, and (ii)
the principal amount of the MEDIQ Note shall further be reduced by an amount
(the "Excess Cash Amount") equal to the product of the number of Escrowed Shares
so delivered by MEDIQ and the number which is equal to the difference between
(x) $1,000 divided by the then exchange rate of the MEDIQ Bonds provided in the
indenture, and (y) $9.00; provided, however, that in lieu of such further
reduction in the principal amount of the MEDIQ note under the foregoing clause
(ii), the Company may elect to receive an amount in cash from MEDIQ equal to the
Excess Cash Amount. There has been no conversion of MEDIQ Escrowed Shares
through October 3, 1998.
The Company's revolving credit facility expired on December 31, 1996 and was
refinanced in connection with the MEDIQ Stock Repurchase. In addition, the
Company had term loans with the same commercial lender which were also
refinanced.
In connection with the MEDIQ Stock Repurchase, the Company obtained senior
financing in the aggregate principal amount of $60,000,000 (the "Senior Debt
Financing") and senior subordinated financing in the aggregate principal amount
of $10,000,000 (the "Subordinated Debt Financing").
Pursuant to the Senior Debt Financing, the Company had senior secured credit
facilities in the aggregate principal amount of $60,000,000 (the "Senior Debt"),
consisting of (i) a $20,000,000 term loan (the "Term Loan A"), (ii) a
$15,000,000 term loan (the "Term Loan B" and, together with the Term Loan A, the
"Term Loans"), (iii) a $20,000,000 letter of credit to support the MEDIQ Note
relating to the MEDIQ Stock Repurchase (the "Stock Repurchase Letter of
Credit"), (iv) a $17,300,000 revolving credit facility (the "Revolving Credit
Facility"), and (v) a $8,100,000 letter of credit to support the Company's
Industrial Development Bonds (the "IDB Letter of Credit" and, together with the
Stock Repurchase Letter of Credit, the "Letters of Credit"). The purpose of
obtaining the Senior Debt Financing was to permit the Company to finance the
MEDIQ Stock Repurchase, to refinance the Company's existing indebtedness and to
satisfy the Company's working capital requirements. At the closing of the Senior
Debt Financing on December 31, 1996 (the "Senior Debt Closing"), $18,628,000 of
the Term Loan A was drawn by the Company and the Stock Repurchase Letter of
Credit was issued by the senior lender. As of September 27, 1997, $19,250,000
was outstanding under Term Loan A, $9,085,000 was outstanding under Term Loan B
and $12,790,000 was outstanding under the Revolving Credit Facility, with
interest rates of 8.27%, 9.5% and 9.5% respectively. As of October 3, 1998
$17,075,000 was outstanding under Term Loan A, $14,698,000 was outstanding under
Term Loan B and $19,763,000 was outstanding under Revolving Credit Facility,
with interest rates of 8.19%, 8.69% and 8.19%, respectively.
8
<PAGE>
Pursuant to the Subordinated Debt Financing, the Company's subordinated lender
has provided the Company with an aggregate principal amount of $10,000,000 (the
"Senior Subordinated Debt") in the form of senior subordinated notes (the
"Senior Subordinated Notes") issued to the subordinated lender. The Senior
Subordinated Notes mature on March 31, 2005 and bear interest at 11.5%. Interest
on the Senior Subordinated Notes is payable quarterly in arrears, commencing on
the first calendar quarter of calendar 1997. In connection with the Subordinated
Debt Financing, the Company issued to the subordinated lender warrants to
purchase 273,419 shares of common stock of the Company (representing
approximately 4.5% (on a fully diluted basis) of the total outstanding common
stock as of December 31, 1996) at $9.00 per share, subject to certain
adjustments to prevent dilution, exercisable for a ten year period beginning
with the date of issue.
In connection with the acquisition of certain of the assets of the first aid
business of American White Cross, the Company amended its Senior Debt agreement
to provide for an increase in the Senior Secured Credit Facility consisting of
(i) a $30,000,000 term loan (the "Additional Term Loan A"), (ii) a $27,000,000
term loan (the "Additional Term Loan B" and, together with Term Loan A, the
"Additional Term Loans") and (iii) a $25,000,000 revolving credit facility (the
"Additional Revolving Credit Facility").
As of October 3, 1998 and September 27, 1997, $10,000,000 was outstanding under
the Additional Term Loan A, $12,000,000 under the Additional Term Loan B and
$4,243,000 under the Additional Revolving Credit Facility with interest rates of
8.19%, 8.69% and 8.19%, respectively for 1998 and 8.75%, 10% and 9.5%,
respectively for 1997.
The agreements evidencing the Senior Debt and the Senior Subordinated Debt
contain certain restrictive covenants including, without limitation, covenants
with respect to the ratio of total debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA"), operating cash flow, interest
coverage, capital expenditures and prevent the payment of dividends. The Company
was in default of its total debt to EBITDA, operating cash flows, minimum
interest coverage, maximum capital expenditures and minimum net worth covenants
as of and for the period ended October 3, 1998. The Company requested and was
granted waivers of these covenants as of and for the period ended October 3,
1998. The Company has also obtained from the Company's senior and subordinated
lenders, amendments to such covenants. (see Recent Developments and note P to
the consolidated financial statements).
On October 29, 1997 the Company announced that it would purchase from its
stockholders in a Dutch auction self tender up to 450,000 shares of its common
stock at a purchase price not greater that $12.75 per share nor less that $11.00
per share. The purpose of the offer was to provide added market liquidity for
stockholders who wished to sell their shares as a result of the Company's 1997
fourth quarter performance.
The offer expired on November 28, 1997. A total of 250,668 shares were purchased
and resold by the Company at a price of $12.75 per share. The shares were sold
by the Company to: (i) Cape Ann Investors, L.L.C., the Company's largest
stockholder (an affiliate); (ii) Bernard J. Korman, the Company's Chairman of
the Board; (iii) Donald E. Lepone, the Company's Chief Executive Officer; and
(iv) Donald M. Gleklen, a member of the Board of Directors of the Company.
Due to the utilization of tax loss carry forwards and an overpayment from the
prior year, the Company paid no Federal Income taxes during 1998.
In connection with the Dutch Auction self tender, the Company received from
Senior and Subordinated lenders waivers to allow for the purchase of its common
stock.
During 1998, the Company obtained a five year mortgage totalling $2,800,000 for
purposes of refinancing an existing mortgage as well as for the purchase of one
of its manufacturing facilities that was previously leased. The interest rate
was fixed upon closing at 8.1%. The mortgage is payable for the first year in
quarterly installments $25,000 plus interest, thereafter payable in monthly
installments of $15,500 plus interest, with a final payment of approximately
$1,980,000 due June 22, 2003.
The Company believes that its existing working capital, anticipated funds to be
generated from future operations and funds available under the Senior and
Subordinated Debt Financing will be sufficient to meet all of the Company's
operating and capital needs through fiscal 1999. However, depending upon future
growth of the business, additional financing may be required. (see Recent
Developments below).
9
<PAGE>
YEAR 2000 COMPLIANCE - The statements in the following section include "Year
2000 Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act.
The Company's State of Readiness - The Company has undertaken an assessment of
the ability of its mission critical information and non-information systems to
function properly with respect to dates in the Year 2000 and thereafter. Mission
critical systems are those systems the failure of which pose a risk of
disruption to the company's ability to manufacture and ship product, collect
revenue, meet safety standards and comply with legal requirements. The Company's
mission critical information systems include its integrated manufacturing,
accounting, order entry and distribution systems. The Company's mission critical
non-information systems include the machinery and equipment used to manufacture
and distribute its products, its telephone systems, and its alarm and sprinkler
systems. The assessment is based upon communication with software vendors,
literature supplied with software, literature received in connection with
maintenance contracts and test evaluations of the Company's systems'. The
Company has substantially completed its Year 2000 assessment with respect to its
mission critical information systems and anticipates completion of its
assessment with respect to its mission critical non-information systems by March
1, 1999. the Company is also currently assessing the Year 2000 risks of its
material third parties as discussed below.
The Company identified potential problems in its electronic data interface order
entry system. The Company has replaced this software system and has completed
testing of the new system both individually and on an integrated basis in order
to ensure the remediation of all Year 2000 risks. In all other mission critical
information systems, the Company believes that Year 2000 compliance has been
achieved with the existing systems, replacement components or upgrades of
software or embedded technology. As noted above, the Company has not yet
completed assessment of its mission critical non-information systems; however,
to date the Company has not identified any Year 2000 complications with respect
to such systems.
Costs to Remedy the Company's Year 2000 Issues - The Company anticipates that
the total costs to remedy Year 2000 issues with respect to its information
systems will be approximately $100,000, which includes approximately $20,000 in
accelerated replacement costs for technology which the company would have other
wise replaced within three years after the Year 2000. The Company is currently
not able to ascertain its potential remediation costs with respect to its
mission critical non-information systems. To date Company has incurred $65,000
in total remediation costs. Such costs are primarily related to the replacement
or upgrade of components, systems and software and the payroll of employees of
the Company's information technology department. The Company does not separately
track the internal costs of its Year 2000 compliance program. The Company's Year
2000 remediation costs are expensed as incurred.
Year 2000 Risks of Material Third Parties - The Company is also in the process
of assessing the Year 2000 risks of third parties with whom the Company has a
material relationship. These material third parties include vendors, major
customers, service suppliers, communications providers and banks. The Company is
in the process of circulating Year 2000 questionnaires of each of these parties
in order to verify their Year 2000 readiness. In addition, the Company is
testing interaction of the Company's systems with such third parties' systems
where appropriate. The assessment is expected to be completed by March 31, 1999
utilizing the Company's existing resources.
Year 2000 Risks; Contingency Plan - It is the Company's belief that the results
of the assessment to date indicate that all of the Company's mission critical
information systems, including its integrated manufacturing, accounting,
distribution and order entry systems, are Year 2000 compliant, and that the Year
2000 issue is not likely to have a material impact on the Company's operations.
However, there can be no assurances that the systems or software of third
parties on which the Company relies will be timely converted or that the Company
will not be adversely affected by the failure of such systems and software to be
made Year 2000 compliant.
The Company believes that its most reasonably likely worst case scenario is the
potential inability of material third parties to obtain Year 2000 complaint
components and software or take other remediatory measures which may inhibit the
Company's ability to maintain its manufacturing processes or a reliable means of
invoicing customers, transporting products and collecting payments. In the event
major customers experience Year 2000 complications, such customers may be come
unable to process orders or receive shipments. As a result, the Company could
experience a backlog of inventory and lost revenue. In the event vendors,
service suppliers, communication providers and banks experience Year 2000
difficulties, the Company's ability to manufacture, process and ship product
maybe impeded and the Company may experience lost revenues and increased
expenses. The Company is not currently able to quantify the potential loses upon
the failure of material third parties to be Year 2000 compliant; however, the
Company believes that any such failure could have a material adverse effect on
the business, operations and financial performance of the Company.
The Company is in the process of developing a contingency plan in the event that
its Year 2000 conversion is unsuccessful or untimely. Currently, the Company's
contingency plan includes the manual performance of certain tasks which would
otherwise be automated, additional staffing of such tasks and increased product
inventories. The company anticipates completion of its contingency plan by March
31, 1999. The company is currently unable to ascertain the additional costs it
will incur if it is required to implement its contingency plan. There can be no
assurance that the Company's contingency plan will successfully avoid disruption
of the Company's business and operations or that such disruption would not have
a material adverse effect on the financial performance of the Company.
10
<PAGE>
PURCHASE OF AMERICAN WHITE CROSS, INC. AND WEAVER MANUFACTURING CORPORATION
On September 11, 1997, the Company purchased certain assets and assumed certain
liabilities related to the first aid business of American White Cross, Inc. and
Weaver Manufacturing Corporation for $37,170,000 in cash plus transaction
related expenses of approximately $700,000. The transaction was accounted for
using the purchase method of accounting (see footnote B to the consolidated
financial statements).
In addition to the increased Senior Debt Financing, the Company, pursuant to the
Stock Purchase Agreement by and between NutraMax Products, Inc. and Cape Ann
Investors, L.L.C., dated August 12, 1997, (the "Stock Purchase Agreement"), sold
846,154 shares of its stock at $13.00 per share yielding $11,000,000 of total
proceeds used in conjunction with the additional Senior Debt proceeds to finance
the transaction.
RECENT DEVELOPMENTS
On November 6, 1998, the company entered into stock purchase agreements with
Cape Ann Investors, L.L.C. ("Cape Ann"), the Company's largest stockholder,
Donald E. Lepone, the Chief Executive Officer, President and a Director of the
Company, and Bernard J. Korman, the Chairman of the Board of the Company (Cape
Ann, Mr. Lepone and Mr. Korman are collectively referred to herein as the
"Purchasers"), pursuant to which the Purchasers agreed to purchase in a private
placement (the "Equity Investment") an aggregate 1,441,860 shares of Common
Stock at a price per share of $4.30, for an aggregate purchase price of
approximately $6,200,000. The purchase price of $4.30 per share represented a
premium of 11% to the closing price per share of $3.875 on October 21, 1998, the
date on which the Board agreed in principle to the terms of the Private
Placement.
The proceeds of the Equity Investment will be used to pay down $4,500,000 of
indebtedness outstanding under its senior credit facilities and up to $1,500,000
of trade payables. Due to its 4th quarter financial results, the Company was in
default with certain financial covenants set forth in the Company's senior
credit facilities and subordinated debt agreement. The Company executed
amendments to the financial covenants for total debt to EBITDA, operating cash
flows, minimum interest coverage and minimum net worth contained in the
Company's existing senior and subordinated credit agreements (the "Credit
Facility Amendments"). Consummation of the Equity Investment is conditioned
upon, among other things, the approval by the stockholders of the Company of the
Equity Investment proposal at the Annual Meeting (see note P to the consolidated
financial statements).
New Accounting Pronouncements--Effective September 28, 1996, the Company adopted
the provisions of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share." The Company changed the method used to compute earnings
per share and restated all prior periods in accordance with SFAS No. 128. SFAS
128 supersedes Accounting Principles Board Opinion No 25. and is intended to
simplify the computation of earnings per share and to make the U.S. computations
more comparable with the international computations by requiring the
presentation of basic and fully diluted earnings per share. The Company's only
dilutive common stock equivalents are stock options and warrants. Not included
in the Company's calculation for diluted earnings per share for 1998 were the
effects of options (16,000 shares) and warrants (30,000 shares). Such
instruments were not included due to their anti-dilutive effect in the current
period.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for annual periods beginning after December
15, 1997, although earlier adoption is permitted. Reclassification of financial
information for earlier periods presented for comparative purposes is required
under SFAS No. 130. As this statement only requires additional disclosures in
the Company's consolidated financial statements, its adoption will not have any
impact on the Company's consolidated financial position or results of
operations. The Company adopted SFAS No. 130 effective October 4, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, which establishes standards
for the reporting of information about operating segments and requires the
reporting of selected information about operating segments in interim financial
statements, is effective for fiscal years beginning after December 15, 1997,
although earlier application is permitted. Reclassification of segment
information for earlier periods presented for comparative purposes is required
under SFAS No. 131. The Company has not yet completed its analysis of the
operating segments it will report on. The Company will adopt SFAS No. 131
effective October 4, 1998.
In June 1988, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
the impact of SFAS No. 133 on the financial statements of the Company. The
Company expects to adopt this accounting standard in its first quarter of its
fiscal year ending in September 2000.
11
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company's policy has been to utilize United States dollar
denominated borrowings to fund its working capital and investment needs. Short
term debt, if required, is used to meet working capital requirements and long
term debt is generally used to finance long term investments. There is inherent
roll-over risk for borrowings as they mature and are renewed at current market
rates. The extent of this risk is not quantifiable or predictable because of the
variability of future interest rates and the Company's future financing
requirements. At October 3, 1998, the Company had total long term debt
outstanding of $96,500,000 of which $14,920,000 is current. Currently, the
majority of the Company's outstanding debt instruments have a variable interest
rate or a variable interest rate component. Using a yield to maturity analysis
and assuming a 10% upward fluctuation in the interest rate on this debt,
interest rate variability on this debt could have a material adverse effect on
the Company's financial results.
Currently, the Company does not enter into financial instruments transactions
for trading or other speculative purposes or the manage interest rate exposure.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Section 21E of the Exchange Act.
Although the Company believes its expectations are based upon reasonable
assumptions within the bounds of its knowledge of its business operations, there
can be no assurance that actual results will not differ materially from those
set fourth in the forward-looking statements. Certain factors that might cause
such a difference include the following: the timing of new products introduced
by the Company, the timing of orders received from customers, the gain or loss
of significant customers, changes in the products sold, competition from other
private label manufacturers, seasonal changes in the demand for the Company's
products, increases in the cost of raw materials, changes in the retail market
for health and beauty aids in general and changes in the expenses of or delays
in; the identification and upgrade or replacement by the company of its non-year
2000 compliance systems, including embedded technology and year 2000 compliance
of material third parties. 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
reports filed by the Company with the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Independent Auditor's Report 13
Consolidated Statements of Operations - Three Fiscal Years
Ended October 3, 1998 14
Consolidated Balance Sheets - October 3, 1998 and September 27, 1997 15
Consolidated Statements of Stockholders' Equity - Three Fiscal Years
Ended October 3, 1998 16
Consolidated Statements of Cash Flows - Three Fiscal Years Ended
October 3, 1998 17
Notes to Consolidated Financial Statements 18-29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption "Election of Directors" in the
Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference from the discussion
responsive thereto under the following captions in the Company's Proxy Statement
relating to the 1998 Annual Meeting of Shareholders.
"Election of Directors" and "Executive Compensation"
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is incorporated by reference from the discussion
thereto under the caption "Principal Shareholders and Management" in the
Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporate by reference from the discussion
responsive thereto under the caption "Certain Relationships and Related
Transactions" in the Company's Proxy Statement relating to the 1998 Annual
Meeting of Shareholders.
12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
NutraMax Products, Inc.
Gloucester, Massachusetts
We have audited the accompanying consolidate balance sheets of NutraMax
Products, Inc. and subsidiaries (the "Company") as of October 3, 1998 and
September 27, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three fiscal years in the
period ended October 3, 1998. Our audits also included the financial statements
schedule listed in Item 14(a)(2). These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of NutraMax Products, Inc. and
subsidiaries as of October 3, 1998 and September 27, 1997, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended October 3, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basis consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 24, 1998 (December 29, 1998 as to Note P and the second to the last
paragraph of note F)
13
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES . CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
Oct. 3, Sept. 27, Sept. 28,
1998 1997 1996
-------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C>
Net Sales $128,434 $ 94,331 $ 80,479
Cost of Sales (see note B) 102,112 71,728 57,686
-------- -------- --------
Gross Profit 26,322 22,603 22,793
Selling, General and Administrative Expenses (see note B) 22,183 13,947 11,662
-------- -------- --------
Operating Income 4,139 8,656 11,131
Other Income (expenses):
Interest expense (8,449) (5,042) (1,479)
Interest income 12 282 95
Other (48) (98) (384)
-------- -------- --------
Income (Loss) Before Income Tax Expenses (4,346) 3,798 9,363
Income Tax (Benefit) Expenses (1,475) 1,536 3,680
-------- -------- --------
Net Income (Loss) $ (2,871) $ 2,262 $ 5,683
======== ======== ========
Basic Earnings (Loss) Per Share:
Per share amount $ (.51) $ .39 $ .67
======== ======== ========
Weighted average shares 5,650 5,797 8,531
======== ======== ========
Dilutive Earnings (Loss) Per Share
Per share amount $ (.51) $ .38 $ .66
======== ======== ========
Weighted average shares 5,650 5,797 8,531
Effect of dilutive securities:
Stock options -- 79 63
Warrants -- 47 --
-------- -------- --------
Adjusted weighted average shares 5,650 5,923 8,594
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES . CONSOLIDATED BALANCE SHEETS
October 3, September 27,
ASSETS 1998 1997
---------- -------------
(In thousands, except share data)
Current Assets:
Cash $ 761 $ 243
Accounts receivable, less allowance for
doubtful accounts of $758 in 1998
and $605 in 1997 17,286 19,618
Inventories 36,879 36,135
Deferred income taxes 1,263 823
Escrow receivable (see Note B) 200 2,876
Refundable income taxes 2,800 --
Prepaid expenses and other 2,990 655
-------- --------
Total Current Assets 62,179 60,350
Property, Plant and Equipment, net 45,903 44,456
Restricted cash 413 316
Goodwill, net of accumulated amortization of
$4,682 in 1998 and $3,672 in 1997 25,075 22,934
Other Assets 5,181 4,703
-------- --------
$138,751 $132,759
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 13,758 $ 13,427
Accrued payroll and related taxes 1,256 936
Accrued interest expense 656 1,325
Accrued expenses - other 1,690 1,709
Current maturities of long-term debt 14,920 4,351
-------- --------
Total Current Liabilities 32,280 21,748
Long-Term Debt, less current maturities 81,625 85,542
Other Long Term Liabilities -- 106
Deferred Income Taxes 3,652 1,884
Stockholders' Equity:
Common stock - $.001 par value:
Authorized - 20,000,000 shares
Issued 5,672,000 in 1998 and
5,620,000 shares in 1997 6 6
Additional paid-in capital -- 5,069
Retained earnings 21,631 24,602
-------- --------
Total 21,637 29,677
Less: Treasury stock at cost, 43,300
shares in 1998 and 657,000
shares in 1997 (443) (6,198)
-------- --------
Total Stockholder's Equity 21,194 23,479
-------- --------
$138,751 $132,759
======== ========
See notes to consolidated financial statements.
15
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES - CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-----------------------
(in thousands)
Treasury Stock
Shares Additional Retained ---------------------------
Outstanding Amount Paid-In Capital Earnings Shares Amount Total
----------- -------- --------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 8,520 $ 9 $ 22,567 $ 16,657 -- $ -- $ 39,233
Exercise of stock options 150 -- 790 -- -- -- 790
Tax benefit of options exercised -- -- 220 -- -- -- 220
Stock redeemed (12) -- (109) -- -- -- (109)
Net income -- -- -- 5,683 -- -- 5,683
----------- -------- --------------- -------- -------- -------- --------
Balance at September 28, 1996 8,658 9 23,468 22,340 -- -- 45,817
Exercise of stock options 153 -- 1,090 -- -- -- 1,090
Tax benefit of options exercised -- -- 304 -- -- -- 304
Issuance of warrants (2) -- -- 1,094 -- -- -- 1,094
Issuance of Stock-
Acquisition (1) 846 1 10,999 -- -- -- 11,000
Repurchase of stock-
MEDIQ repurchase (3) (4,037) (4) (31,886) -- (657) (6,198) (38,088)
Net income -- -- -- 2,262 -- -- 2,262
----------- -------- --------------- -------- -------- -------- --------
Balance at September 27, 1997 5,620 6 5,069 24,602 (657) (6,198) 23,479
Exercise of stock options 62 -- 666 -- -- -- 666
Tax benefit of options exercised -- -- 46 -- -- -- 46
Repurchase stock (10) -- -- -- (10) (126) (126)
Release of escrowed shares-
MEDIQ repurchase (3) -- -- (5,781) (100) 624 5,881 --
Net loss -- -- -- (2,871) -- -- (2,871)
----------- -------- --------------- -------- -------- -------- --------
Balance at October 3, 1998 5,672 $ 6 $ -- $ 21,631 (43) $ (443) $ 21,194
=========== ======== =============== ======== ======== ======== ========
</TABLE>
(1) See Note F to the consolidated financial statements
(2) See Note B to the consolidated financial statements
(3) See Note M to the consolidated financial statements
See notes to consolidated financial statements.
16
<PAGE>
NUTRAMAX PRODUCTS, INC., AND SUBSIDIARIES . CONSOLIDATED STATEMENTS OF CASH
FLOWS
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------
Oct. 3, Sept. 27, Sept. 28,
1998 1997 1996
---------- --------- --------
(in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (2,871) $ 2,262 $ 5,683
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,530 5,063 4,427
Deferred taxes 1,328 258 228
Inventory adjustments - AWC (see note B) 6,649 -- --
Accounts receivable and other adjustments - AWC (see note B) 1,065 -- --
Other -- 9 (132)
Increase (decrease), net of effect of acquisitions:
Accounts receivable 1,267 (319) (2,016)
Inventories (7,393) (6,529) (4,480)
Prepaid expenses and other (2,337) (37) (88)
Refundable income taxes (2,800) -- --
Accounts payable 331 3,032 872
Accrued payroll and related taxes 320 271 169
Accrued expenses - other 592 1,042 35
Income taxes payable (717) (803) 16
---------- --------- --------
Net cash provided by operating activities 2,964 4,249 4,724
Cash Flows Investing Activities:
Acquisition of American White Cross, Inc. and
Weaver Manufacturing, Inc. ("AWC") net of cash acquired -- (37,170) --
Acquisition of Oral Care net of cash acquired -- -- (2,230)
Escrow received 2,676 -- (2,367)
Purchases of property, plant and equipment (7,025) (9,109) (6,130)
Restricted cash (97) 4,426 (4,742)
Deferred packaging costs (1,142) -- (860)
Other (462) 212 20
---------- --------- --------
Net cash used in investing activities (6,050) (41,641) (16,309)
Cash Flows from Financing Activities:
Borrowings 13,227 74,615 13,733
Sale of common stock -- 11,000 --
Proceeds from exercise of stock options 666 1,090 257
Debt repayments (9,312) (26,428) (1,908)
Stock repurchase (126) (21,716) --
Deferred financing costs (387) (958) (679)
Other (464) (262) (27)
---------- --------- --------
Net cash provided by financing activities 3,604 37,341 11,376
---------- --------- --------
Net Increase (Decrease) in cash $ 518 (51) (209)
Cash:
Beginning of year 242 294 503
---------- --------- --------
End of year $ 761 $ 243 $ 294
---------- --------- --------
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ 176 $ 1,845 $ 3,487
---------- --------- --------
Interest paid $ 8,885 $ 3,807 $ 1,310
---------- --------- --------
Supplemental Disclosure on Non-Cash Financing and Investing Activities:
Issuance on note for stock repurchase $ -- $ 16,372 $ --
---------- --------- --------
Issuance of warrants $ -- $ 944 $ --
---------- --------- --------
Exercise of stock options paid for in October 1996 $ -- $ -- $ 644
---------- --------- --------
Redemptions in connection with exercise of stock options $ -- $ -- $ 109
---------- --------- --------
Equipment financed with capital lease obligations $ 419 $ -- $ --
---------- --------- --------
Building purchase financed with mortgage $ 2,159 $ -- $ --
---------- --------- --------
Adjustment of property, plant and equipment - AWC $ (3,149) $ -- $ --
---------- --------- --------
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
NUTRAMAX PRODUCTS, INC., AND SUBSIDIARIES . NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - NutraMax Products, Inc. is a manufacturer and marketer of private
label health and personal care products.
Principles of Consolidation - The consolidated financial statements include the
accounts of NutraMax Products, Inc. and its subsidiaries (the "Company"). In
consolidation, all significant intercompany transactions and balances have been
eliminated.
New Accounting Pronouncements - Effective September 28, 1996, the Company
adopted the provisions of Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share." The Company changed the method used to compute
earnings per share and restated all prior periods in accordance with SFAS No.
128. SFAS 128 supersedes Accounting Principles Board Opinion No. 25, and is
intended to simplify the computation of earnings per share and to make the U.S.
computations more comparable with the international computations by requiring
the presentation of basic and fully diluted earnings per share. The Company's
only dilutive common stock equivalents are stock options and warrants. Not
included in the Company's calculation for diluted earnings per share for 1998
were the effects of options (16,000 shares) and warrants (30,000 shares). Such
instruments were not included due to their anti-dilutive effect in the current
period.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for annual periods beginning after December
15, 1997, although earlier adoption is permitted. Reclassification of financial
information for earlier periods presented for comparative purposes is required
under SFAS No. 130. As this statement only requires additional disclosures in
the Company's consolidated financial statements, its adoption will not have any
impact on the Company's consolidated financial position or results of
operations. The Company adopted SFAS No. 130 effective October 4, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, which establishes standards
for the reporting of information about operating segments and requires the
reporting of selected information about operating segments in interim financial
statements, is effective for fiscal years beginning after December 15, 1997,
although earlier application is permitted. Reclassification of segment
information for earlier periods presented for comparative purposes is required
under SFAS No. 131. The Company has not yet completed its analysis of the
operating segments it will report on. The Company will adopt SFAS No. 131
effective October 4, 1998.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
the impact of SFAS No. 133 on the financial statements of the Company. The
Company expects to adopt this accounting standard in its first quarter of its
fiscal year ending in September 2000.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. The Company's policy of providing for depreciation and amortization is as
follows:
Buildings 20 years on a straight-line basis
Liquid packaging machines 32,000 to 48,000 machine hours which
approximate a five to eight and one-
half year life
Machinery, equipment, molds 5 to 10 years on a straight-line basis
and furniture and fixtures
Leasehold improvements The remaining term of the lease or the
estimated useful life, whichever is
shorter
Vehicles 3 to 5 years on a straight-line basis
18
<PAGE>
Goodwill - The purchase price in excess of net assets acquired is amortized on a
straight-line basis over periods from twenty-five to forty years. The Company
evaluates the carrying value of goodwill based upon current and anticipated net
income and undiscounted cash flows, and recognizes any impairment when it is
probable that such estimated future net income and/or cash flows will be less
than the carrying value of goodwill. Measurement of the amount of impairment, if
any, is based upon the difference between carrying value and fair value.
Other Assets - Other assets include intangible and deferred financing assets
which are amortized on a straight-line basis over the estimated periods of
related benefit, ranging from three to twenty years. Accumulated amortization
was $402,000 and $340,000 as of October 3, 1998 and September 27, 1997,
respectively. Other assets also include external costs deferred in connection
with tools, dies and the design of packaging materials for the Company's
products ("deferred packaging costs") which are amortized on a straight-line
basis over four years.
Revenue Recognition - The Company generates revenues from sales of products
produced. Revenues from sales of products produced are recognized when the
product has been delivered, customer acceptance has occurred and all significant
Company obligations have been satisfied. Payment is generally due within 30
days.
Concentration of Credit Risk - The majority of the Company's revenues are from
customers in the retail consumer products industry, who are not required to
provide collateral for amounts owed to the Company. The Company's customers are
dispersed over a wide geographic area and are subject to periodic review under
the Company's credit policies. The Company does not believe that it is subject
to any unusual credit risks, other than the normal level of risk attendant to
operating its business.
Fair Value of Financial Instruments - Financial instruments held or used by the
Company consist of cash, accounts receivable, accounts payable, long-term debt
and borrowings under revolving credit facilities. Given the nature of the items
considered financial instruments and the variable rate borne by the line of
credit and term loans, management believes that carrying value approximates fair
value for all financial instruments.
Stock-Based Compensation - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS No. 123, "Accounting for Stock-Based Compensation," has been
adopted by the Company for disclosure of certain additional information related
to its stock option plan.
Income Taxes - The Company and its subsidiaries file a consolidated federal
income tax return. Deferred taxes are provided for certain income and expense
items which are accounted for differently for financial reporting and income tax
purposes.
Use of Estimates - In preparing financial statements in conformity with general
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassification of Accounts - Certain reclassifications have been made to
conform prior years' balances to the current year presentation.
19
<PAGE>
NOTE B - ACQUISITION
On September 11, 1997, the Company acquired certain assets and assumed certain
liabilities related to the first aid business of American White Cross, Inc. and
Weaver Manufacturing Corporation ("AWC"). The business is engaged in the
manufacture and distribution of adhesive bandages and related products. The AWC
acquisition has been accounted for as a purchase business combination pursuant
to the principles of APB Opinion No. 16 "Business Combinations." In applying APB
No. 16, all identifiable assets acquired and liabilities assumed were assigned a
portion of the cost of acquiring AWC, equal to their fair values at the date of
the acquisition. The total cost of the acquisition was allocated as follows:
Escrow Cash Receivable 1,125,000
Accounts Receivable 5,972,000
Inventory 11,324,000
Other Current Assets 390,000
Property, Plant and Equipment 6,708,000
Other Assets - Long Term 1,409,000
Accounts Payable (3,130,000)
Accrued Expenses - other (848,000)
Excess of cost over fair value of net assets acquired 13,169,000
------------
Purchase Price $ 36,119,000
------------
Transaction Related Expenses (700,000)
Purchase price adjustment refunded to the Company 1,751,000
------------
Initial Cash Outlay $ 37,170,000
============
The fair value of property, plant and equipment as well as other long term
assets is depreciated or amortized in accordance with the Company's accounting
policies (see note A).
During the fourth quarter of 1998, the Company completed its review of the
assets acquired and the liabilities assumed in the acquisition of the First Aid
business of AWC. This review resulted in an adjustment to the AWC assets of
approximately $7,700,000; of this amount approximately $1,100,000 related
primarily to accounts receivable adjustments for promotional allowance
deductions; $6,200,000 related to inventory valuation and obsolescence, and
$400,000 related to the write-off of machinery spare parts inventory for which
there was no apparent value. The adjustments constituted changes in the original
estimates to the preliminary purchase price allocation and therefore have been
charged to the Statement of Operations in fiscal 1998.
In addition to the adjustments discussed above, the Company also adjusted the
preliminary allocation made to Property, Plant and Equipment by writing down
fixed assets by approximately $3,149,000 and increasing the amount allocated to
Goodwill, which is being amortized over a 25 year period using the straight-
line method. The determination of the appropriate allocation was made based upon
an independent third party appraisal received by the Company in the fourth
quarter.
The acquisition was financed by additional term loan and revolving credit
facility borrowings totaling $25,119,000 as well as a private placement sale of
846,154 shares of the Company's common stock as $13.00 per share.
Unaudited pro forma combined revenue, net income, basic and fully diluted
earnings per share of the Company and AWC for the twelve months ended September
27, 1997 was $136,000,000, $3,549,000, $.52 and $.51, respectively, and for
September 28, 1996 was $129,000,000, $7,899,000, $.85 and $.84, respectively, as
if the acquisition had occurred at the beginning of fiscal year 1996, after
giving effect to certain pro form adjustments related to the acquisition. Pro
forma basic and fully diluted earnings per share was based upon pro forma
weighted average share outstanding and pro form adjusted weighted average shares
outstanding of 6,764,000 and 6,940,000, respectively, for 1997 and 9,340,000 and
9,372,000, respectively, for 1996. These unaudited pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made as of October 1, 1995 or
of results which may occur in the future.
On February 29, 1996, the Company purchased certain of the assets, including
machinery and inventory, of the Hospital Specialty Company 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 F).
20
<PAGE>
NOTE C - RESTRICTED CASH
In connection with the proceeds received from two Massachusetts Industrial
Finance Agency Variable Rate Industrial Development Bonds (collectively, the
"IDB") (see Note F) a total of $413,000 and $316,000 has been paid to the
trustee related to monthly payments held for the annual principal payment to
bond holders. These funds are invested in the Treasury Money Market at a current
yield of 3.7% and 5.2% as of October 3, 1998 and September 27, 1997,
respectively. These funds are also included in the restricted cash balance.
NOTE D - INVENTORIES
Oct. 3, Sept. 27,
1998 1997
----------- -----------
Raw materials $15,934,000 $14,552,000
Finished goods 17,375,000 16,223,000
Work in process 1,467,000 3,322,000
Machinery parts, factory supplies 2,103,000 2,038,000
----------- -----------
Total $36,879,000 $36,135,000
=========== ===========
NOTE E - PROPERTY, PLANT AND EQUIPMENT
Oct. 3, Sept. 27,
1998 1997
----------- -----------
Machinery and equipment $47,096,000 $43,322,000
Land, buildings and improvements 16,046,000 11,897,000
Molds 3,695,000 3,537,000
Furniture and fixtures 1,177,000 2,751,000
Vehicles 129,000 182,00
----------- -----------
$68,143,000 $61,689,000
Less: Accumulated depreciation
and amortization (22,240,000) (17,233,000)
----------- -----------
$45,903,000 $44,456,000
=========== ===========
Depreciation and amortization expense for property, plant and equipment for
1998, 1997 and 1996 was $5,078,000, $3,688,000 and, $3,180,000, respectively.
21
<PAGE>
NOTE F - LONG TERM DEBT
Oct. 3, Sept. 27,
1998 1997
----------- -----------
Revolving credit facility $24,006,000 $17,033,000
Industrial Development Bonds 6,100,000 6,900,000
Term loans 53,773,000 50,335,000
Subordinated debt 9,215,000 9,056,000
MEDIQ Note (see Note M) 302,000 5,915,000
Mortgages 2,775,000 641,000
Capital lease obligation 374,000 13,000
----------- -----------
$96,545,000 $89,893,000
Less: Current maturities of
long-term debt 14,920,000 4,351,000
----------- -----------
$81,625,000 $85,542,000
=========== ===========
Maturities of long-term debt are as follows:
Fiscal Year
1999 $14,920,000
2000 8,217,000
2001 7,000,000
2002 26,554,000
2003 15,040,000
Thereafter 24,814,000
-----------
$96,545,000
===========
The Company's former revolving credit facility expired on December 31, 1996 and
was refinanced in connection with the MEDIQ Stock Repurchase (see Note M). In
addition, the Company had term loans with the same commercial lender which were
also refinanced.
In connection with the MEDIQ Stock Repurchase, the Company obtained senior
financing in the aggregate principal amount of $60,000,000 (the "Senior Debt
Financing") and senior subordinated financing in the aggregate principal amount
of $10,000,000 (the "Subordinated Debt Financing").
Pursuant to the Senior Debt Financing, the Company had senior secured credit
facilities in the aggregate principal amount of $60,000,000 (the "Senior Debt"),
consisting of (i) a $20,000,000 variable rate term loan (the "Term Loan A"),
(ii) a $15,000,000 variable rate term loan (the "Term Loan B" and, together with
the Term Loan A, the "Term Loans"), (iii) a $20,000,000 variable rate letter of
credit to support the MEDIQ Note relating to the MEDIQ Stock Repurchase (the
"Stock Repurchase Letter of Credit"), (iv) a $17,300,000 variable rate revolving
credit facility (the "Revolving Credit Facility"), and (v) a $8,100,000 letter
of credit to support the Company's Industrial Development Bonds (the "IDB Letter
of Credit" and, together with the Stock repurchase Letter of Credit, the
"Letters of Credit"). The purpose of obtaining the Senior Debt Financing was to
permit the Company to finance the MEDIQ Stock Repurchase, to refinance the
Company's existing indebtedness and to satisfy the Company's working capital
requirements. As of September 27, 1997, $19,250,000 was outstanding under Term
Loan A, $9,085,000 was outstanding under Term Loan B and $12,790,000 was
outstanding under the Revolving Credit Facility, with interest rates of 8.27%,
9.5% and 9.5%, respectively. As of October 3, 1998 $17,075,000 was outstanding
under Term Loan A, $14,698,000 was outstanding under Term Loan B and $19,763,000
was outstanding under Revolving Credit Facility, with interest rates of 8.19%,
8.69% and 8.19%, respectively.
22
<PAGE>
In connection with the acquisition of certain of the assets of the first aid
business of American White Cross, the Company amended its Senior Debt agreement
to provide for an increase in the Senior Secured Credit Facility consisting of a
$30,000,000 variable rate term loan (the "Additional Term Loan A"), (ii) a
$27,000,000 variable rate term loan (the "Additional Term Loan B" and, together
with term Loan A, the "Additional Term Loans") and (iii) a $25,000,000 variable
rate revolving credit facility (the "Additional Revolving Credit Facility").
As of October 3, 1998 and September 27, 1997, $10,000,000 was outstanding under
the Additional Term Loan A, $12,000,0000 under the Additional Term Loan B and
$4,243,000 under the Additional Revolving Credit Facility was outstanding with
interest rates of 8.19%, 8.69% and 8.19%, respectively for 1998 and 8.75%, 10%
and 9.5%, respectively for 1997.
Pursuant to the Subordinated Debt Financing, the Company's subordinated lender
has provided the Company with an aggregate principal amount of $10,000,000 (the
"Subordinated Debt") in the form of senior subordinated notes (the "Senior
Subordinated Notes") issued to the subordinated lender. The Senior Subordinated
Notes mature on March 31, 2005 and bear interest at 11.5%. Interest on the
Senior Subordinated Notes is payable quarterly in arrears, commencing on the
first calendar quarter of calendar 1997. In connection with the Subordinated
Debt Financing, the Company issued to the Subordinated lender warrants to
purchase 273,419 shares of common stock of the Company (representing
approximately 4.5% (on a fully diluted basis) of the total outstanding common
stock as of December 31, 1996) at $9.00 per share, subject to certain
adjustments to prevent dilution exercisable at date of issue for a period of ten
years.
The company is required to pay an agent's fee of $10,000 per annum and a
commitment fee payable quarterly at a rate of .375% per annum on the average
daily unused portion of the Revolving Credit Facility and Term Loan B during the
period for which the ratio (the "Funded Debt Ratio") of the Company's total
funded debt to earnings before interest, taxes, depreciation and amortization
("EBITDA") is less than 3.5, and at a rate of .50% per annum if the Funded Debt
Ratio is greater than or equal to 3.5.
In addition, the Company pays fees on the Letter of Credit quarterly in arrears
at a per annum rate equal to 1.75% to 2.50% (depending on the Funded Debt Ratio)
times the maximum amount to be drawn under the applicable Letter of Credit.
The agreements evidencing the Senior Debt and the Senior Subordinated Debt
contain certain restrictive convenants including, without limitation, convenants
with respect to the ratio of total debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA"), operating cash flow, interest
coverage, capital expenditures and prevent the payment of dividends. The
Company was in default of its total debt to EBITDA, operating cash flows,
minimum interest coverage, maximum capital expenditures, and minimum net worth
covenants as of and for the period ended October 3, 1998. The Company requested
and was granted waivers of these covenants as of and for the period ended
October 3, 1998. Amendments to these covenants were executed in December 1998
(see Note P).
During 1998, the Company obtained a five year mortgage totalling $2,800,000 for
purposes of refinancing an existing mortgage as well as for he purchase of one
of its manufacturing facilities previously leased. The interest rate was fixed
upon closing at 8.1%. The mortgage is payable for the first year in quarterly
installments of $25,000 plus interest, thereafter payable in monthly
installments of $15,500 plus interest, with a final payment of approximately
$1,980,000 due June 22, 2003.
23
<PAGE>
NOTE G - COMMITMENTS
Leases - The company leases certain of its administrative, manufacturing,
distribution and warehouse facilities under operating leases. The Company also
leases certain equipment under operating and capital leases. Future minimum
payments under noncancelable operating and capital leases are as follows:
Operating Capital
Leases Leases
Fiscal Year --------- -------
1999 1,450,000 104,000
2000 1,439,000 104,000
2001 1,437,000 104,000
2002 1,362,000 104,000
2003 1,344,000 38,000
Thereafter 10,300,000 --
----------- ---------
Total minimum lease payments $17,332,000 $ 454,000
===========
Amount representing interest 80,000
---------
Present value of minimum lease
payments $ 374,000
=========
Rental expense for operating lease was $1,728,000, $698,000, and $462,000 for
1998, 1997 and 1996, respectively.
NOTE H - INCOME TAXES
Income tax expense (benefit) consisted of the following:
Year Ended
-----------------------------------------
Oct. 3, Sept. 27, Sept. 28,
1998 1997 1996
------------ ---------- ----------
Current:
Federal $(2,833,000) $ 629,000 $2,621,000
State 16,000 324,000 507,000
------------ --------- ----------
(2,817,000) 953,000 3,128,000
Deferred:
Federal 812,000 534,000 537,000
State 143,000 49,000 15,000
Change in valuation allowance (368,000) -- --
------------ ---------- ----------
587,000 583,000 552,000
Tax credits: 755,000 -- --
------------ ---------- ----------
$(1,475,000) $1,536,000 $3,680,000
============ ========== ==========
24
<PAGE>
The difference between the Company's income tax and the statutory federal tax
(benefit) is reconciled below:
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------
Oct. 3, Sept. 27, Sept. 28,
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Statutory federal tax $(1,478,000) $1,291,000 $3,183,000
Nondeductible goodwill amortization 483,000 69,000 189,000
State tax, net of federal benefit (13,000) 219,000 345,000
Tax credits (755,000) -- --
Valuation allowance 368,000 -- --
Other (80,000) (43,000) (37,000)
----------- ---------- ----------
Income tax (benefit) expense $(1,475,000) $1,536,000 $3,680,000
=========== ========== ==========
</TABLE>
As of October 3, 1998, the Company had Federal net operating carryforward of
$1,195,000 which are available to offset future taxable income. The Company also
had Federal and State tax credit carryforward of $1,109,000. Utilization of the
operating loss carryforwards, which expire in fiscal years 1999 to 2018, is
limited to $1,049,000 annually. For further discussion of state taxes see
Note O.
As of October 3, 1998 the Company has recognized deferred income tax assets
related to deductible temporary differences, investment and other tax credits
and cumulative net operating losses. The ability of the Company to fully realize
deferred tax assets in future years is contingent upon its success in generating
sufficient levels of taxable income before the statutory expiration periods for
utilizing such credit and net operating losses lapse. After an assessment of all
available evidence, including historical and projected operating trends, the
Company concluded that realization of all such deferred tax assets in the near
future, except for approximately $368,000 relating to tax credits, was more
likely than not. According, a valuation allowance of approximately 50% of
certain of the Company's investment tax credit carryforwards was recorded to
offset deferred tax assets.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
Oct. 3, Sept. 27,
1998 1997
---------- ----------
Assets:
Net operating loss carryforwards $480,000 $480,000
Allowance for bad debts 303,000 243,000
Inventory 470,000 226,000
Tax credits 1,109,000 354,000
Benefit of stock options exercised 115,000 304,000
Other 186,000 237,000
---------- ----------
2,663,000 1,844,000
Valuation allowance (368,000) --
---------- ----------
Deferred tax assets $2,295,000 $1,844,000
Liabilities:
Depreciation and amortization 3,924,000 2,767,000
Other 760,000 138,000
---------- ----------
Deferred tax liabilities 4,684,000 2,905,000
---------- ----------
Net deferred tax liability $2,389,000 $1,061,000
========== ==========
NOTE I - EMPLOYEE BENEFIT PLANS
The Company has a 401(k) savings plan, covering substantially all employees. The
plan is subject to certain minimum age and length of employment requirements.
Under the plan, the Company matches 50% of each participant's eligible
contributions for the plan year, subject to certain limitations. In addition,
the Company has a profit sharing plan; the Company's contributions to the plan
are discretionary. Contributions of $253,000, $252,000 and $171,000 were made to
the plans in 1998, 1997 and 1996, respectively.
25
<PAGE>
NOTE J - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financIal data for fiscal years 1998 and 1997 is as follows:
1998
- ----
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter(1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $34,463,000 $33,956,000 $27,355,000 $32,660,000
Gross profit 8,589,000 8,147,000 7,218,000 2,368,000
Net income (lose 810,000 624,000 206,000 (4,511,000)
Fully diluted earnings (loss) per share $.14 $.11 $.04 $(.80)
Adjusted weighted average shares outstanding 5,745,000 5,785,000 5,715,000 5,672,000
</TABLE>
(1) includes inventory and accounts receivable adjustments or $7.7 million --
see note B
1997
- ----
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $22,035,000 $25,178,000 $23,006,000 $24,112,000
Cross profit 6,051,000 6,537,000 6,022,000 3,993,000
Net Income (loss) 1,540,000 1,003,000 763,000 (1,044,000)
Fully diluted earnings (loss) per share $.18 $.20 $.15 $(.21)
Adjusted weighted average shares outstanding 8,723,000 4,962,000 5,064,000 4,914,000
</TABLE>
NOTE K - RELATED PARTY TRANSACTIONS
Services Agreement -- Through December 31, 1995, the Company obtained certain
legal, accounting, tax, insurance and human resource services from MEDIQ
Incorporated ("MEDIQ"), the owner at that time (see Note M) of approximately 47%
of the outstanding common stock of the Company. Subsequent to December 31, 1995
the Company received only certain tax and insurance services from MEDIQ. Costs
for such services were $51,000, and 85,000 in fiscal 1997, and 1996
respectively. The Company believes that MEDIQ's charges for such services were
on terms no less favorable to the Company than those that could have been
obtained from unaffiliated third parties for comparable services. All services
ceased to be effective on September 30, 1997.
Insurance -- The Company obtained certain insurance coverages through programs
administered by MEDIQ. Insurance expense under these programs was $42,000 for
fiscal year 1996. In 1997 and 1998, the Company did not obtain insurance
coverage through MEDIQ.
Dutch Auction Self Tender -- On October 29, 1997 the Company announced that it
would purchase from its stockholders in a Dutch Auction self tender up to
450,000 shares of its common stock (see Note L of the consolidated financial
statements).
26
<PAGE>
NOTE L - STOCKHOLDERS' EQUITY
The Company maintains a Stock Option Plan which includes an Incentive Stock
Option Program and a Non-Qualified Stock Option Program. Incentive stock options
may be granted to key employees, including the Company's officers, at the
discretion of the Stock Option Plan Committee, until termination of the Plan.
Non-qualified stock options may be granted to employees, employee directors,
advisors and independent consultants at the discretion of the Committee. No
options may be granted under the programs for a term in excess of five years
from the date of grant.
A summary of stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
Weighted average
Number Exercise Price Exercise Price
of Shares Per Share Per Share
--------- -------------- ----------------
<S> <C> <C> <C>
Outstanding at September 30, 1995 905,000 $6.00-$12.25 $9.66
Granted 10,000 $9.875 $9.88
Exercised (150,000) $6.00 $6.00
Terminated (3,000) $7.50-$8.00 $8.40
---------
Outstanding at September 28, 1996 762,000 $6.00-$12.25 $10.39
Granted 298,000 $8.125-$9.875 $9.58
Exercised (153,000) $6.00-$12.25 $7.14
Terminated (3,000) $12.25 $12.25
---------
Outstanding at September 27, 1997 904,000 $9.38-$12.25 $10.67
Granted 102,000 $12.625-$13.25 $12.93
Exercised (62,000) $9.375-$12.25 $10.67
Terminated (139,000) $9.875-$13.25 $11.21
---------
Outstanding at October 3, 1998 805,000 $9.375-$13.25 $10.86
=========
Exercisable at October 3, 1998 632,200 $9.375-$13.25 $10.85
=========
</TABLE>
The Company apples Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option and other employee stock
based compensation plans. Had compensation cost for the Company's stock option
plans been determined based on fair value at the grant dates for awards under
those plans which were granted on or after October 1, 1995 consistent with the
method of SFAS No. 123, the Company's net income (loss) and basic earnings
(loss) per share for 1998, 1997 and 1996 would have been reduced to ($3,182,000)
and ($0.56), respectively, in 1998, $2,015,000 and $0.35, respectively, in 1997
and $5,675,000 and $0.66, respectively in 1996. The proforma results are not
necessarily indicative of results that would have been reported if all options
had been measured under SFAS No. 123.
The weighted average remaining contractual life of options outstanding at
October 3, 1998 was 2.25 years. The weighted average fair value of options
granted during 1998, 1997 and 1996 was $4.57, $4.09 and $4.24 per share,
respectively.
The fair value of options granted under the Company's stock option plans during
1996, 1997 and 1998 was estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used: No
dividend yield, expected volatility of 26% in 1998 and 38% in 1997 and 1996,
risk free interest rate of 6%, expected life of 5 years, and a forfeiture rate
of 15%.
On October 29, 1997 the company announced that it would purchase from its
stockholders in a Dutch Auction self tender up to 450,000 shares of its common
stock at a purchase price not greater than $12.75 per share nor less than
$11.00 per share. The purpose of the offer was to provide added market liquidity
for stockholders who wished to sell their shares as a result of the Company's
1997 fourth quarter performance.
The offer expired on November 28, 1997. A total of 250,668 shares were purchased
and resold by the Company at a price of $12.75 per share. The shares were sold
by the Company to: (i) Cape Ann Investors, L.L.C., the Company's largest
stockholder (an affiliate); (ii) Bernard J. Korman, the Company's Chairman of
the Board, (iii) Donald E. Lepone, the Company's Chief Executive Officer, and
(iv) Donald M. Gleklen, a member of the Board of Directors of the Company.
In connection with the Dutch Auction self tender, the Company received from
Senior and Subordinated lenders a waiver to allow for the purchase of its common
stock.
27
<PAGE>
NOTE L - STOCKHOLDERS' EQUITY (cont.)
On August 7, 1998, the Company entered into an amendment to the Stock Purchase
Agreement with Cape Ann Investors to permit Cape Ann and its affiliates to
purchase from time to time, in the open market or in privately negotiated
transactions, up to an additional 245,000 shares of common stock of the
Company. As of November 16, 1998, Cape Ann beneficially owned 1,106,168 shares
of common stock of the Company and held warrants issued by the Company, to
purchase 215,425 shares of common stock of the Company and held warrants issued
by the Company, to purchase 215,425 shares of common stock of the Company
exercisable at $3.60 per share for a period of 5 years commencing on October 14,
1998.
NOTE M - THE STOCK PURCHASE AGREEMENT
On December 31, 1996 pursuant to the terms of an Amended and Restated Stock
Purchase Agreement (the "Stock Purchase Agreement") dated November 20, 1996
among MEDIQ Inc. MEDIQ Investment Services, Inc. and the Company, the Company
purchased and retired (except as noted below) from MEDIQ all 4,037,258 shares of
the Company's common stock owned by MEDIQ (the "MEDIQ Shares"), of which 33,597
and 657,194 were held in escrow (the"MEDIQ Escrowed Shares") as of October 3,
1998 and September 27, 1997, respectively, in support of MEDIQ's 7.5%
Subordinated Debentures due 2003 (the "MEDIQ Bonds"). The Aggregate purchase
price of the MEDIQ Shares was $36,335,000 representing a purchase price of $9.00
per share (the "Purchase Price"). The Company paid MEDIQ $19,963,000 of the
$36,335,000 purchase price in cash and delivered to MEDIQ a promissory note (the
"MEDIQ Note") for the remaining $16,372,000 of the purchase price. The balance
of the note as of October 3, 1998 and September 27, 1997 was $302,000 and
$5,915,000, respectively. The MEDIQ Note is payable in installments as MEDIQ
Escrowed Shares are released from escrow, pursuant to the indenture (the "MEDIQ
Indenture") and escrow agreement relating to the MEDIQ Bonds, together with
Interest at the annual rate of 7.5%, reduced, however, to 5%, 4% and 3% if the
note remains outstanding longer than 18, 30 and 42 months, respectively. The
current interest rate is 5%.
Pursuant to the Stock Purchase Agreement, to the extent that any holder of a
MEDIQ Bond (other than MEDIQ) presents such MEDIQ Bond for exchange for MEDIQ
Escrowed Shares in accordance with the terms of the MEDIQ Indenture and MEDIQ
delivers MEDIQ Escrowed Shares to such holder, (i) the principle amount of the
MEDIQ Note shall be reduced by an amount equal to the product of the number of
MEDIQ Escrowed Shares so delivered by MEDIQ to such holder and $9.00, and (ii)
the principal amount of the MEDIQ Note shall further be reduced by an amount
(the "Excess Cash Amount") equal to the product of the number of Escrowed Shares
so delivered by MEDIQ and the number which is equal to the difference between
(x) $1,000 divided by the then exchange rate of the MEDIQ Bonds as provided in
the indenture and (y) $9.00; provided, however, that in lieu of such further
reduction in the principal amount of the MEDIQ note under the foregoing clause
(ll), the Company may elect to receive an amount in cash from MEDIQ equal to the
Excess Cash Amount. There has been no conversion of MEDIQ Escrowed Shares
through October 3, 1998.
The stock repurchase was financed with $20,000,000 from the proceeds of the
Company's Additional Term Loan A, $9,085,000 of the Additional Term Loan B and
the balance utilizing the Company's revolving credit facility (see Note F).
NOTE N - MAJOR CUSTOMERS
Substantially all of the Company's customers are retailers. No base of
customers in one geographic area constitutes a significant portion of sales.
American Home Products, Inc. accounted for 7%, 10% and 11% of net sales in 1998,
1997 and 1996, respectively, and Walmart Stores, Inc. accounted for 9%, 11% and
11% of net sales in 1998, 1997 and 1996, respectively.
<PAGE>
NOTE O - LITIGATION AND CONTINGENCIES
The Company, like other companies in the store brand industry, has been the
subject of claims and litigation brought by national brand name companies based
on packaging alleged to be similar to competing brand name products. The
Company is also subject to certain claims and informal complaints relating to
its products which are incidental and routine to its business and for which the
Company maintains insurance coverage. The Company knows of no litigation,
either pending or threatened, which is likely to have a material adverse effect
on the Company's financial position, results of operations or cash flows.
On July 8, 1997, the Commonwealth of Massachusetts Department of Revenue ("DOR")
notified the Company of its intent to assess the Company approximately $374,000,
including interest and penalties, relating to tax audits for fiscal years ending
1992 through 1994. Tax years 1995 and 1996 remain open. The amount relates
principally to the deductibility of certain expenses related to the Company's
wholly owned subsidiary, NutraMax Holdings, Inc., a Delaware company. The
Company attended a pre-assessment conference with the DOR on March 18, 1998, at
which the Company continued to vigorously defend its tax position. The Company
has not received an further notice from the DOR regarding its intent to assess.
Due to the uncertainties surrounding any assessments, no accrual has been
recorded in the accompanying financial statements.
NOTE P - SUBSEQUENT EVENTS
On November 6, 1998, the company entered into stock purchase agreements with
Cape Ann Investors, L.L.C. ("Cape Ann"), the Company's largest stockholder,
Donald E. Lepone, the Chief Executive Officer, President and a Director of the
Company, and Bernard J. Korman, the Chairman of the Board of the Company (Cape
Ann, Mr. Lepone and Mr. Korman are collectively referred to herein as the
"Purchasers"), pursuant to which the Purchasers agreed to purchase in a private
placement (the "Equity Investment") an aggregate of 1,441,860 shares of Common
Stock at a price per share of $4.30, for an aggregate purchase price of
approximately $6,200,000. The purchase price of $4.30 per share represented a
premium of 11% to the closing price per share of $3,875 on October 21, 1998, the
date on which the Board agreed in principle to the terms of the Equity
Investment. The proceeds of the Equity Investment ("Equity Investment") are
required to be used to pay $4,500,000 of indebtedness outstanding under its
senior credit facilities and up to $1,500,000 of trade payables.
Due to its 4th quarter financial results, the Company did not comply with
certain financial covenants set forth in the Company's senior credit facilities
and subordinated debt agreement. (Note F). The Company executed in December 1998
amendments to the financial covenants for total debt to EBITDA, operating cash
flows, minimum interest coverage and minimum net worth covenants contained in
the Company's existing senior and subordinated credit agreements (the "Credit
Facility Amendments"). In addition, an event of default would exist should the
Equity Investment not be successfully consummated on or before January 15, 1999
or if the borrower shall fail to have received on or before January 15, 1999 net
proceeds from the Equity Investment of $6,200,000 of which up to $1,500,000
shall have been paid to its trade creditors and $4,500,000 shall have been
applied to outstanding revolving loans. Upon an event of default and upon the
agents declaration; (i) the banks' commitment to make further loans shall
terminate and (ii) the unpaid principal amount of the loans together with
accrued interest shall become immediately due and payable. Consummation of the
Equity Investment is conditioned upon, among other things, the approval by the
stockholders of the Company of the Equity Investment proposal at the annual
meeting.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) None
(a) (2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts and Reserves
Other schedules are omitted because of the absence of conditions under which
they are required.
(a) (3) and (c) Exhibits (numbered in accordance with item 601 of Regulation
S-K)
29
<PAGE>
SIGNATURES
Pursuant to requirements of Section 13 of 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: December 28, 1998 NUTRAMAX PRODUCTS, INC.
By: /s/ Donald E. Lepone
-------------------------------------
Donald E. Lepone, President and
Chief Executive Officer
By: /s/ Robert F. Burns
-------------------------------------
Robert F. Burns, Vice
President, Treasurer and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons, which include at least a
majority of the Board of Directors on behalf of the Registrant and in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Bernard J. Korman Chairman of the Board December 28, 1998
- ---------------------
Bernard J. Korman
/s/ Donald E. Lepone President, Chief December 28, 1998
- -------------------- Executive Officer and
Donald E. Lepone Director
/s/ Donald M. Gleklen Director December 28, 1998
- ---------------------
Donald M. Gleklen
/s/ Dennis M. Newnham Director December 28, 1998
- ---------------------
Dennis M. Newnham
/s/ David M. Schulte Director December 28, 1998
- --------------------
David M. Schulte
30
<PAGE>
NUTRAMAX PRODUCTS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS 1998, 1997 AND 1996
<TABLE>
<CAPTION>
COL. A COL. B COL. C - ADDITIONS COL. D COL. E
- ------ ------ ------------------ -------- --------
(1) (2)
Description Balance at Charges to Charged to Balance
Beginning Costs and Other at End
of Period Expenses Accounts Deductions of Period
--------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended October 3, 1998:
Allowance for doubtful accounts $605,000 $2,218,000 -- $(2,065,000) $758,000
======== ========== ======== =========== ========
Year ended September 27, 1997:
Allowance for doubtful accounts $709,000 $300,000 -- $(404,000) $605,000
======== ======== ======== ========= ========
Year ended September 28, 1596:
Allowance for doubtful accounts $601,000 $425,000 $296,000 $(613,000) $709,000
======== ======== ======== ========= ========
</TABLE>
(1) Includes allowance from acquisition of Oral Care in 1996.
(2) Represents accounts directly written-off net of recoveries and adjustments.
31
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Method of Filing
- -------------- ----------- ----------------
2(a) MEDIQ Stock Purchase Agreement (13)
3(a) Restated and Amended Certificate of
Incorporation (1)
3(b) Amendment, filed June 12, 1991, to the
Company's Certificate of Incorporation (1)
3(c) Amendment, filed March 5, 1992, to the
Company's Certificate of Incorporation (2)
3(d) By-Laws (1)
10(a) Employment Agreement between the Company
and Donald E. Lepone, dated November 28,
1993 (3)
10(b) Employment Agreement between the Company
and Richard Zakin, dated January 1, 1994 (3)
10(d) Asset Purchase Agreement dated as of July
21, 1997 (the "Asset Purchase Agreement")
by and among NutraMax Products, Inc.,
American White Cross, Inc. and Weaver
Manufacturing Corp. (11)
10(e) Amendment No. 1 to Asset Purchase Agreement
dated as of August 15, 1997, by and among
NutraMax Products, Inc. American White
Cross, Inc. and Weaver Manufacturing Corp. (11)
10(f) Stock Purchase Agreement dated as of
August 12, 1997 (the "Stock Purchase
Agreement") by and between NutraMax
Products, Inc. and Cape Ann Investors,
L.L.C. (11)
10(g) Amendment No. 1 to Stock Purchase Agreement
dated as of September 9, 1997 by and
between NutraMax Products, Inc. and Cape
Ann Investors, L.L.C. (11)
10(h) 1988 Stock Option Plan (adopted April 28,
1988) (5)
10(i) Amendment No. 1 to the 1988 Stock Option
Plan (2)
10(j) Amendment No. 2 to the 1988 Stock Option
Plan (2)
10(k) Amendment No. 3 to the 1988 Stock Option
Plan (2)
10(l) Amendment No. 4 to the 1988 Stock Option
Plan (3)
10(m) Tax Allocation/Sharing Agreement between
the Company and MEDIQ Incorporated, dated
July 25, 1990 (1)
10(n) Lease Agreement, dated January 1, 1987
between The Aid-Pack Limited Partnership
and Aid-Pack, Inc. (6)
10(o) Lease Extension Agreement, dated May 1,
1991, between The Aid-Pack Limited
Partnership and the Company (6)
10(p) Registration Rights Agreement, dated July 1,
1991 between MEDIC Incorporated and the
Company (7)
10(q) Amendment to Registration Rights Agreement,
dated July 1, 1991 among MEDIQ, MEDIQ
Investment Services, Inc. and the Company (8)
10(r) Services Agreement, dated August 22, 1991
between MEDIQ Incorporated and the Company (7)
10(s) Revolving Credit and Security agreement
between the Company and State Street Bank
and Trust Company (8)
10(t) Revolving Credit and Security Agreement
between State Street Bank and Trust Company (8)
10(u) 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 (10)
32
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Method of Filing
- -------------- ----------- ----------------
<S> <C> <C>
10(v) 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 (10)
10(w) Form of Secured Acquisition Promissory Note (10)
10(x) Form of Amended and Restated Revolving Time Note (14)
10(y) Amendment No. 1 dated as of September 11, 1997 to the Revolving
Credit and Term Loan Agreement dated as of December 30, 1996
among NutraMax Products, Inc., the banks (a defined therein)
and BankBoston, N.A. as agent (11)
10(z) Agreement dated as of October 14, 1997 by and between the
Company and Cape Ann Investors, L.L.C. ("Cape Ann") (12)
10(aa) Amendment to Cape Agreement dated as of October 16, 1997
by and between the Company and Cape Ann (12)
10(bb) Registration Rights Agreement dated as of October 16, 1997
by and between the Company and Mr. Korman (12)
10(cc) Amendment No. 2. To the August 12, 1997 Stock Purchase Agreement by
and, between NutraMax Products, Inc. and Cape Ann Investors, L.L.C.
dated as of August 7, 1998. (9)
10(dd) Stock Purchase Agreement by and between NutraMax Products, Inc. and
Cape Ann Investors, L.L.C. dated as of November 6, 1998. (9)
10(ee) Stock Purchase Agreement by and between NutraMax Products, Inc. and
Bernard J. Korman dated as of November 6, 1998. (9)
10(ff) Stock Purchase Agreement by and between NutraMax Products, Inc. and
Donald E. Lepone dated as of November 6, 1998. (9)
10(gg) Amendment No. 3 to the December 30, 1996 Revolving Credit and Term
Loan Agreement by an among NutraMax products, Inc., the banks
(defined therein) and BankBoston, N.A. as agent dated as of January 20, 1998. (9)
10(hh) Amendment No. 4 to the December 30, 1996 Revolving Credit and Term
Loan Agreement by and among NutraMax products, Inc., the banks
(defined therein) and BankBoston, N.A. as agent dated as of March 31, 1998. (9)
10(ii) Amendment No. 5 to the December 30, 1996 Revolving Credit and Term
Loan Agreement by and among NutraMax products, Inc., the banks
(defined therein) and BankBoston, N.A. as agent dated as of May 7, 1998. (9)
10(jj) Agreement by and between NutraMax Products, Inc. and Bernard J.
Korman dated as of October 14, 1997. (12)
10(kk) Agreement by and between Nutramax Products, Inc. and Donald E.
Lepone dated as of October 14, 1997. (12)
10(ll) Agreement by and between NutraMax Products, Inc. and Donald M.
Gleklen dated as of October 14, 1997. (12)
10(mm) Amendment No. 2 to the December 30, 1996 Revolving Credit and Term
Loan Agreement by and among NutraMax Products, Inc., the banks (defined
therein) and BankBoston, N.A. as agent dated as of November 26, 1997. (9)
10(nn) Form of Warrant Certificate dated October 14, 1997. (9)
10(oo) Amendment No. 6 to the December 30, 1996 Revolving Credit and Term
Loan Agreement by and among NutraMax Products, Inc., the banks (defined
therein) and BankBoston, N.A. as agent dated as of August 31, 1998. (9)
21 Subsidiaries of the Company (9)
23 Consent of Deloitte & Touche LLP, Independent Certified
Public Accountants (9)
27.1 Financial Data Schedule, for the period ending October 3, 1998. (9)
</TABLE>
33
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Method of Filing
- -------------- ----------- ----------------
<S> <C> <C>
27.2 Restated Financial Data Schedule, for the period ending September 27, 1997 (9)
27.3 Restated Financial Data Schedule, for the period ending March 29, 1997 (9)
27.4 Restated Financial Data Schedule, for the period ending September 28, 1996 (9)
27.5 Restated Financial Data Schedule, for the period ending September 30, 1995 (9)
</TABLE>
EXHIBIT INDEX
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-1 on
July 5, 1991, and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal
year 1992, and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal
year 1994, and incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1990, and Incorporated herein by reference.
(6) Filed as an Exhibit to Amendment No. 1 to the Company's Registration
Statement on Form S-1 on August 15, 1991, and incorporated herein by
reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal
year 1991, and incorporated herein by reference.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal
1993, and incorporated herein by reference.
(9) Filed herewith.
(10) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the
period ended June 29, 1996.
(11) Filed as an exhibit to the Company's Current Report on Form 8-K dated
September 11, 1997 and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Issued Tender Offer Statement on
Schedule 13E-4 dated October 29, 1997 and incorporated herein by
reference.
(13) Filed as an exhibit to the Company's Annual Report on Form 10-K for fiscal
year 1996, and incorporated herein by reference.
(14) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
period ending June 29, 1996, and incorporated herein by reference.
34
<PAGE>
Exhibit 10(cc)
AMENDMENT (this "Amendment"), dated as of August 7, 1998, to the Stock
---------
Purchase Agreement (the "Stock Purchase Agreement") dated as of August 12, 1997,
------------------------
as previously amended, by and between NutraMax Products, Inc., a Delaware
corporation (the "Company"), and Cape Ann Investors, L.L.C., a Delaware limited
-------
liability company (the "Purchaser"). All capitalized terms used in this
---------
Amendment and not otherwise defined herein shall have the meanings set forth in
the Stock Purchase Agreement.
1. The first sentence of Section 5.6(b) of the Stock Purchase
Agreement is hereby amended to read in its entirety as follows: "Each of the
Stockholders hereby jointly and severally covenants and agrees that from and
after the date hereof none of the Stockholders or their Affiliates will, without
the prior written consent of the Company specifically expressed in a vote
adopted after the Closing by the Board, directly or indirectly, purchase or
cause to be purchased or otherwise acquire (other than pursuant to a stock
split, stock dividend or similar transaction) or agree to acquire, or become or
agree to become the beneficial owner of, any additional Stock, except that the
Stockholders and their Affiliates may purchase shares of Common Stock (A)
pursuant to Section 2.2 of the Agreement between the Company and Purchaser,
dated as of October 14, 1997 (the "October Agreement"), (B) upon exercise of
-----------------
some or all of the warrants granted pursuant to the October Agreement (the
"Warrants"), (C) from time to time, in the open market or in privately
- ---------
negotiated transactions, up to an aggregate of 245,000 shares of Common Stock,
and (D) from time to time, in the open market or in privately negotiated
transactions, up to an aggregate number of shares of Common Stock which, when
added to the Shares of Common Stock then owned by the Stockholders and their
Affiliates, would result in the Stockholders owning no more than the highest
percentage of voting securities of the Company held by the Stockholders and
their Affiliates immediately following any purchase permitted by clauses (A),
(B) or (C) above.
2. Notwithstanding anything in the Stock Purchase Agreement to the
contrary, any member of the Advisory Board of Chilmark who acquired shares of
Common Stock from Purchaser on September 18, 1997 in accordance with the Stock
Purchase Agreement may, from time to time, in the open market or privately
negotiated transactions, purchase up to an aggregate number of shares of Common
Stock equal to 50% of the number of shares so acquired from Chilmark.
3. Except as expressly provided herein, the Stock Purchase Agreement
shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Amendment as of the date first above written.
NUTRAMAX PRODUCTS, INC.
By: /s/ Donald E. Lepone
--------------------
Name: Donald E. Lepone
Title: President/CEO
CAPE ANN INVESTORS, L.L.C.
By: Chilmark Fund II, L.P., its
Managing Member
By: Chilmark II, L.L.C., its General Partner
By: /s/ David Schulte
-----------------
Name: David Schulte
Title: President
2
<PAGE>
Exhibit 10(dd)
STOCK PURCHASE AGREEMENT
by and between
NUTRAMAX PRODUCTS, INC.,
and
CAPE ANN INVESTORS, L.L.C.
Dated as of November 6, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURCHASE AND SALE 2
1.1. Purchase and Sale 2
1.2. Purchase Price 3
1.3. Closing 3
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
2.1. Due Organization, etc. 7
2.2. Compliance with Law 8
2.3. Authorization; Execution and Delivery of Agreement 9
2.4. No Conflict; No Consent 10
2.5. Capital Stock 11
2.6. SEC Reports 12
2.7. Financial Statements 12
2.8. No Brokers 13
2.9. Litigation and Claims 13
2.10. Use of Proceeds 14
i
<PAGE>
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 14
3.1. Due Organization, etc. 14
3.2. Authorization; Execution and Delivery of Agreement 14
3.3. No Conflict; No Consent 15
3.4. No Brokers 16
3.5. Litigation and Claims 16
3.6. Investment Purposes 16
IV. COVENANTS OF THE COMPANY 17
4.1. Conduct of Business 17
4.2. Exchange of Stock Certificates 18
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates 18
4.4. Course of Dealings with Lenders 18
4.5. Board Representation 19
4.6. Other Purchase Agreements 19
ii
<PAGE>
V. COVENANTS OF THE PURCHASER AND THE COMPANY 19
5.1. Access; Confidentiality 19
5.2. Hart-Scott-Rodino Act Filings 20
5.3. Public Disclosure and Confidentiality 21
5.4. Certain Notifications 21
5.5. Efforts to Consummate; Further Actions 21
5.6. Standstill Obligations of the Purchaser 22
5.7. Proxy Statement; Stockholder Approval 29
VI. REGISTRATION RIGHTS 30
6.1. "Piggyback" Registration 30
6.2. Demand Registration 31
6.3. General Provisions 32
6.4. Information, Documents, Etc. 34
6.5. Expenses 35
6.6. Cooperation 36
6.7. Action to Suspend Effectiveness; Supplement to
Registration Statement 37
6.8. Indemnification 39
iii
<PAGE>
VII. INDEMNIFICATION 45
7.1. Indemnification by the Company 45
7.2. Indemnification by the Purchaser 45
VIII. TERMINATION 46
8.1 Termination 46
IX. GENERAL PROVISIONS 47
9.1. Survival of Representations, Warranties and Agreements 47
9.2. Notices 47
9.3. General 49
9.4. Governing Law 51
9.5. Severability of Provisions 51
9.6. Captions 51
9.7. Expenses 51
9.8. Equitable Relief 52
9.9. Definitions 52
SCHEDULE 2.5(b)
SCHEDULE 2.7(c)
iv
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November 6,
---------
1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the
"Company"), and CAPE ANN INVESTORS, L.L.C., a Delaware limited liability company
- --------
(the "Purchaser").
---------
WHEREAS, the parties hereto are party to a Stock Purchase Agreement
dated as of August 12, 1997 (as amended through the date hereof, the "1997 Stock
----------
Purchase Agreement"), pursuant to which the Purchaser purchased from the Company
- ------------------
shares of the Company's Common Stock, par value $0.001 per share (the "Common
------
Stock");
- -----
WHEREAS, the parties hereto are also party to an Agreement dated as of
October 14, 1997 (as amended through the date hereof, the "October Agreement"),
-----------------
pursuant to which, among other things, the Purchaser purchased from the Company
additional shares of Common Stock and the Company granted to the Purchaser and
others certain warrants to purchase an aggregate of up to 225,000 shares of
Common Stock (the "Warrants");
--------
WHEREAS, the Company recently has defaulted on certain financial
covenants contained in the Company's Credit Facilities (as hereinafter defined),
waivers of which defaults were obtained from the Company's lenders under such
credit agreements (the "Lenders");
-------
WHEREAS, subject to the terms and conditions of this Agreement, the
Purchaser wishes to purchase from the Company, and the Company wishes to sell to
the Purchaser, additional shares (the "Shares") of Common Stock;
------
1
<PAGE>
WHEREAS, the Purchaser and the Company are entering into this
Agreement to provide for such purchase and sale and to establish various rights
and obligations in connection therewith;
WHEREAS, in conjunction with the transactions contemplated by this
Agreement, the Company is also entering into agreements with each of Donald E.
Lepone, the President and Chief Executive Officer of the Company, and Bernard J.
Korman, the Chairman of the Board of Directors of the Company, with respect to
the purchase from the Company by Messrs. Lepone and Korman (the "Lepone
------
Purchase" and the "Korman Purchase," respectively) of approximately 279,070
- -------- ---------------
additional shares of Common Stock (such agreements, the "Lepone Purchase
---------------
Agreement" and the "Korman Purchase Agreement," respectively, and, collectively,
- --------- -------------------------
the "Purchase Agreements"); and
-------------------
WHEREAS, the proceeds from the sale of the Shares, together with the
proceeds from the sale of shares of Common Stock pursuant to the Purchase
Agreements, shall be used to facilitate the Company's negotiation of amendments
to the financial covenants and other terms of the Credit Facilities and to
enable the Company to retire existing indebtedness and to provide the Company
with additional working capital;
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
2
<PAGE>
I. PURCHASE AND SALE
1.1. Purchase and Sale. Upon the terms and subject to the
-----------------
conditions set forth in this Agreement, the Company agrees to issue, sell and
deliver to the Purchaser, and the Purchaser agrees to purchase from the Company,
1,162,790 Shares. The Shares purchased and sold hereunder shall be free and
clear of any liens, security interests, pledges, voting agreements, claims,
options and encumbrances of every kind, character and description whatsoever
("Encumbrances"), except as contemplated by this Agreement.
- --------------
1.2. Purchase Price. As consideration for the sale of the Shares,
--------------
at the Closing (as hereinafter defined) the Purchaser shall pay the Company, in
immediately available funds, a purchase price of $4.30 per share.
1.3. Closing. (a) The closing of the transactions provided for in
-------
this Agreement (the "Closing") shall take place on the second business day after
-------
the satisfaction or waiver of the conditions set forth in Sections 1.3(b) and
1.3(c) of this Agreement at the offices of Goodwin, Procter & Hoar, LLP,
Exchange Place, Boston, Massachusetts, or at such other time and place as the
parties may mutually agree.
(b) Conditions Precedent to the Purchaser's
---------------------------------------
Obligations. The obligation of the Purchaser to consummate the transactions
- -----------
described in this Agreement shall be subject to the satisfaction of the
following conditions on or prior to the Closing: (i) the representations and
warranties of the Company contained in this
3
<PAGE>
Agreement shall have been true and correct when made and shall be true and
correct in all material respects on the date of Closing with the same effect as
if they were made on such date; (ii) the Company shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Company on or prior to
the Closing; (iii) the Company shall have delivered to the Purchaser a
certificate, dated the date of Closing and signed by a duly authorized officer
of the Company, certifying as to the matters described in the foregoing clauses
(i) and (ii); (iv) no action, suit, investigation or proceeding shall have been
instituted before any court, administrative body or governmental agency (a
"Governmental Entity") which seeks to restrain the consummation of, prohibit or
-------------------
declare illegal, or obtain a material amount of damages arising from the
transactions contemplated by this Agreement and which is likely, in the
Purchaser's reasonable judgment, to be successful on the merits, and no
temporary restraining order or injunction shall have been issued by any
Governmental Entity restraining or prohibiting, and no other Legal Requirement
(as hereinafter defined) shall have come into effect making illegal, the
performance of this Agreement or the consummation of any of
4
<PAGE>
the transactions contemplated hereby; (v) all consents, approvals, permits and
authorizations required to be obtained from, and all filings required to be made
with, any Authority (as hereinafter defined) in connection with the consummation
of the transactions contemplated hereby shall have been obtained or made, and
all waiting periods specified under applicable Legal Requirements (including any
such waiting period applicable to the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-
----
Scott-Rodino Act")), and all extensions thereof, the passing of which is
- ----------------
required for such consummation, shall have passed, except as to such consents,
approvals, permits, authorizations or filings that, individually or in the
aggregate, would not have a material adverse effect on the condition (financial
or otherwise), business, operations, properties, assets or liabilities of the
Company and its Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect"); (vi) the issuance and sale of Common Stock
- ------------------------
contemplated by this Agreement shall have been approved by the requisite
affirmative vote of the stockholders of the Company; (vii) from and after the
date of this Agreement, there shall not have occurred any changes concerning the
Company that, when combined, without duplication, with
5
<PAGE>
all other changes concerning the Company from and after the date of this
Agreement, have had or would reasonably be expected to have a Material Adverse
Effect; (viii) the Company shall have obtained a waiver from the Lenders of any
covenant defaults under the Credit Facilities during the fourth quarter of
fiscal 1998 and shall have entered into amendments (the "Credit Facility
---------------
Amendments") to each of the Revolving Credit and Term Loan Agreement, dated as
- ----------
of December 30, 1996, as amended, between the Company, The First National Bank
of Boston ("FNBB"), Fleet National Bank, National Bank of Canada, The Sumitomo
----
Bank, Limited, and FNBB, as Agent (the "Loan Agreement"), and the Purchase
--------------
Agreement, dated as of December 30, 1996, as amended, between the Company and
ING (U.S.) Capital Corporation (together with the Loan Agreement, the "Credit
------
Facilities"), the terms of which amendments shall be reasonably satisfactory to
- ----------
the Purchaser, and such waiver and amendments shall be in full force and effect
without waiver or change in the material terms thereof; and (viii) all
conditions precedent to consummation of the Lepone Purchase and the Korman
Purchase shall have been satisfied or waived by the appropriate party, and no
amendment to the Lepone Purchase Agreement or the Korman Purchase Agreement
6
<PAGE>
shall have been executed or agreed to that changes the material terms thereof in
a manner adverse to the Company without the Purchaser's prior written consent.
In the event any of the foregoing conditions to the Purchaser's obligation to
close hereunder is not satisfied on or before the Closing, the Purchaser may
waive such condition and proceed to Closing. As used herein, "Legal
-----
Requirements" shall include laws, regulations, ordinances, orders, decrees,
- ------------
permits, licenses, consents, approvals, registrations, authorizations and
qualifications required by or from any federal, state, local or foreign
governmental or regulatory authority (each, an "Authority").
---------
(c) Conditions Precedent to the Company's Obligations. The obligation
-------------------------------------------------
of the Company to consummate the transactions described in this Agreement shall
be subject to the satisfaction of the following conditions on or prior to the
Closing: (i) the representations and warranties of the Purchaser contained in
this Agreement shall have been true and correct when made and shall be true and
correct in all material respects on the date of Closing with the same effect as
if they were made on such date; (ii) the Purchaser shall have performed and
complied in all material respects with all covenants and
7
<PAGE>
agreements required by this Agreement to be performed or complied with by the
Purchaser on or prior to the Closing; (iii) the Purchaser shall have delivered
to the Company a certificate, dated the date of Closing and signed by a duly
authorized signatory of the Purchaser, certifying as to the matters described in
the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or
proceeding shall have been instituted before any Governmental Entity which seeks
to restrain the consummation of, prohibit or declare illegal, or obtain a
material amount of damages arising from the transactions contemplated by this
Agreement and which is likely, in the Company's reasonable judgment, to be
successful on the merits and no temporary restraining order or injunction shall
have been issued by any Governmental Entity restraining or prohibiting, and no
other Legal Requirement shall have come into effect making illegal, the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby; (v) all consents, approvals, permits and authorizations
required to be obtained from, and all filings required to be made with, any
Authority in connection with the consummation of the transactions contemplated
hereby shall have been obtained or made, and all waiting periods specified under
applicable Legal Requirements
8
<PAGE>
(including any such waiting period applicable to the transactions contemplated
hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing
of which is required for such consummation, shall have passed, except as to such
consents, approvals, permits, authorizations or filings that, individually or in
the aggregate would not have a Material Adverse Effect; (vi) the issuance and
sale of Common Stock contemplated by this Agreement shall have been approved by
the requisite affirmative vote of the stockholders of the Company; and (vii)
from and after the date of this Agreement, there shall not have occurred any
changes concerning the Purchaser that, when combined, without duplication, with
all other changes concerning the Purchaser from and after the date of this
Agreement, have had or would reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), business, operations,
properties, assets or liabilities of the Purchaser (a "Purchaser Material
------------------
Adverse Effect"). In the event any of the foregoing conditions to the Company's
- --------------
obligation to close hereunder is not satisfied on or before the Closing, the
Company may waive such condition and proceed to Closing.
9
<PAGE>
(d) Company Closing Deliveries. At the Closing, the Company will
--------------------------
deliver to the Purchaser the following:
(i) a stock certificate or certificates representing the Shares;
and
(ii) a certificate of the Secretary of the Company certifying as
to the adoption and effect of resolutions of the Board of
Directors of the Company (the "Board") authorizing the
-----
execution, delivery and performance of this Agreement.
(e) Purchaser Closing Deliveries. At the Closing, the Purchaser will
----------------------------
deliver to the Company the following:
(i) a certificate of the Managing Member of the Purchaser
certifying as to the adoption and effect of resolutions of
the Purchaser authorizing the execution, delivery and
performance of this Agreement; and
(ii) payment of the purchase price provided by Section 1.2.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Due Organization, etc. The Company and each of its Subsidiaries
---------------------
(as hereinafter defined) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and
each has all requisite corporate power and authority to own, operate and lease
its respective properties and assets and to conduct its respective businesses as
now conducted and is qualified to do business in each state or other
jurisdiction where the nature of its properties, assets or businesses requires
such qualification
10
<PAGE>
other than where the failure to be so qualified would not, individually or in
the aggregate have a Material Adverse Effect. All of the outstanding shares of
capital stock of each Subsidiary of the Company are validly issued, fully paid
and non-assessable, other than the shares of capital stock of foreign
Subsidiaries which are not fully paid and which failure to be fully paid,
individually or in the aggregate, does not have a Material Adverse Effect, and
all of such outstanding shares are owned, directly or indirectly, by the Company
free and clear of all Encumbrances, except for liens or security interests or
pledge arrangements involving the capital stock of the Subsidiaries in favor of
the Company's lenders. "Subsidiary" means a corporation or other business
----------
arrangement a majority of the outstanding voting securities or ownership
interests of which is owned, directly or indirectly, by the Company, by one or
more other Subsidiaries or by the Company and one or more other Subsidiaries.
2.2. Compliance with Law. The Company and each Subsidiary has
-------------------
obtained and maintains in full force and effect all permits, licenses, consents,
approvals, registrations, memberships, authorizations and qualifications under
all federal, state, local and foreign laws and regulations, and with all
Authorities, required for the conduct by it of its businesses and the ownership
or possession by it of its properties and assets other than where the failure to
obtain or maintain such permits, licenses, consents, approvals, registrations,
memberships, authorizations or qualifications would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and each Subsidiary are
in compliance with all laws, regulations, ordinances,
11
<PAGE>
orders and decrees (including, without limitation, all environmental and
occupational, health and safety laws) of any Authority applicable to the conduct
by the Company and each Subsidiary of their respective businesses and to their
ownership and possession of their respective properties and assets, other than
where the failure so to comply would not, individually or in the aggregate, have
a Material Adverse Effect.
2.3. Authorization; Execution and Delivery of Agreement. (a) Except
--------------------------------------------------
to the extent that the By-laws of, or other rules or regulations promulgated by,
the National Association of Securities Dealers ("NASD") applicable to Nasdaq
----
SmallCap listed companies may require stockholder approval of the issuance of
shares hereunder, the execution and delivery of this Agreement, the issuance and
sale of the Shares to the Purchaser and the consummation of the transactions
contemplated hereby (i) do not require the approval or consent of any
stockholders of the Company and (ii) have been duly authorized by all necessary
corporate action on the part of the Company for all purposes, including Section
203 of the Delaware General Corporation Law. Except to the extent that the By-
laws of, or other rules or regulations promulgated by, the NASD applicable to
Nasdaq SmallCap listed companies may require stockholder approval of the
issuance of shares hereunder, this Agreement has been duly executed and
delivered by the Company and this Agreement constitutes the legal, valid,
binding and enforceable obligation of the Company, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. The Company has full corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder.
12
<PAGE>
(b) Except to the extent that the By-laws of, or other rules or
regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed
companies may require stockholder approval of the issuance of shares hereunder,
(i) the Shares have been duly authorized by all necessary corporate action on
the part of the Company, and, when issued and delivered by the Company pursuant
to this Agreement against payment of the consideration therefor set forth
herein, the Shares will be validly issued, fully paid and non-assessable and
(ii) the Purchaser will acquire valid and marketable title to the Shares, free
and clear of any Encumbrances except as contemplated by this Agreement.
2.4. No Conflict; No Consent. Except to the extent that the By-laws
-----------------------
of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq
SmallCap listed companies may require stockholder approval of the issuance of
shares hereunder, the execution and delivery of this Agreement, the issuance and
sale of the Shares to the Purchaser and the consummation of the transactions
contemplated hereby do not, and will not, conflict with, or result in any
violation of or default under, or permit the acceleration of any obligation
under, or the creation or imposition of any Encumbrance on any of the properties
or assets of the Company or any Subsidiary under, (i) any provision of the
certificate of incorporation or by-laws or similar constituent documents of the
Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of trust,
loan agreement or other agreement or instrument, or any permit, license,
13
<PAGE>
registration, membership, authorization or qualification from any Authority, of
the Company or any Subsidiary or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation of any Authority to which the Company or any
of its Subsidiaries is a party or by which any of them is bound, other than, in
the case of clause (ii) above, where such conflict, violation, default,
acceleration or Encumbrance would not, individually or in the aggregate, have a
Material Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration, filing with or notice to, any Authority or third
party is required to be made or obtained by the Company or any Subsidiary
(including, without limitation, under any environmental or occupational, health
and safety laws) in order to execute or deliver this Agreement, issue and sell
the Shares or to consummate the transactions contemplated hereby, other than (A)
as may be required by the Hart-Scott-Rodino Act, (B) as a result of the periodic
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (C) the listing requirements of the NASDAQ SmallCap
------------
Market, or except where the failure to make or obtain any such consent,
approval, order, authorization, registration, declaration, filing or notice
would not have a Material Adverse Effect.
2.5. Capital Stock. (a) The authorized capital stock of the Company
-------------
consists of 20,000,000 shares of Common Stock, of which, as of October 3, 1998,
5,682,168 shares were outstanding and 9,665 shares were held in treasury and
1,296,633 shares are reserved for future issuance pursuant to any option,
warrant or other rights agreement, arrangement or other
14
<PAGE>
commitment. All of the issued and outstanding shares of Common Stock have been
validly issued and are fully paid and non-assessable.
(b) (i) Other than this Agreement, the Lepone Purchase Agreement,
the Korman Purchase Agreement and the Warrants or as set forth on Schedule
2.5(b) hereto, there are not authorized or outstanding any subscriptions,
options, conversion rights, warrants or other agreements, securities or
commitments of any nature whatsoever (whether oral or written and whether firm
or conditional) obligating the Company or any Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, to any person any shares of
Common Stock or any other shares of the capital stock of the Company or any
shares of the capital stock of any Subsidiary, or any securities convertible
into or exchangeable for any such shares, or obligating any such person to
grant, extend or enter into any such agreement or commitment; and (ii) except as
set forth on Schedule 2.5(b) hereto, there is no obligation, contingent or
otherwise, of the Company to repurchase, redeem or otherwise acquire any share
of capital stock or other equity interests of the Company or any Subsidiary. No
class of capital stock of the Company is entitled to preemptive rights.
2.6. SEC Reports. Except with respect to the amendment to the
-----------
Current Report on Form 8-K dated September 11, 1998 (filed with the Commission
(as hereinafter defined) on September 26, 1998) contemplated by the disclosure
contained in Items 7(a) and (b) thereof, the Company has filed with the
Securities and Exchange Commission (the "Commission") all proxy
----------
15
<PAGE>
statements, reports, forms and other documents required to be filed by it after
January 1, 1995 under the Exchange Act (collectively, the "SEC Reports"). As of
-----------
their respective dates, the SEC Reports (i) complied as to form in all material
respects with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.7. Financial Statements. (a) The financial statements
--------------------
(including any related notes) included in the SEC Reports (the "Financial
---------
Statements") have been prepared in accordance with generally accepted accounting
- ----------
principles consistently applied throughout the periods involved (except as may
be noted therein) and fairly present the consolidated financial condition,
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of the dates thereof and for the periods ended on such dates (in
each case subject, as to interim statements, to changes resulting from year-end
adjustments (none of which were or, except as otherwise disclosed to the
Purchaser in writing, will be material in amount or effect) and except as
permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act).
(b) On the date hereof, except as disclosed in the SEC Reports,
neither the Company nor any Subsidiary has any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due and whether or not required
16
<PAGE>
to be disclosed in the SEC Reports, other than liabilities that have been
disclosed to the Purchaser in writing, have been incurred in the ordinary course
of business or are not in the aggregate material to the Company and its
Subsidiaries taken as a whole. Since September 28, 1996, the Company has not
declared or paid any dividends to any of its stockholders.
(c) Except as set forth on Schedule 2.7(c), since September 28, 1996,
the Company and each of its Subsidiaries have conducted their respective
businesses only in the ordinary course in substantially the same manner as
theretofore conducted and the Company and its Subsidiaries, taken as a whole,
have not undergone or suffered any Material Adverse Effect, except as otherwise
disclosed to the Purchaser in writing.
2.8. No Brokers. No broker, finder or investment banker is entitled
----------
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
2.9. Litigation and Claims. There is no claim, prosecution, suit,
---------------------
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries or any of their respective properties or assets (nor, to the
knowledge of the Company, are there any facts or circumstances providing a basis
for any such claim, prosecution, suit, action, arbitration, proceeding,
investigation or review) which, if adversely determined, would be reasonably
likely to have a Material Adverse Effect or would prohibit or impose any
limitations on the Purchaser's
17
<PAGE>
ownership of the Shares or would prohibit or make illegal the acceptance for
payment, purchase of or payment for the Shares. Neither the Company nor any of
its Subsidiaries is in default with respect to any judgment, decree, injunction,
rule or order of any court, arbitrator or Authority outstanding against or
binding upon the Company or any of its Subsidiaries, other than where any such
defaults would not, individually or in the aggregate, have a Material Adverse
Effect.
2.10. Use of Proceeds. The Company intends to use the proceeds from
---------------
the sale of Shares to retire debt of the Company under the revolving credit
facility under the Loan Agreement and for other general corporate purposes.
III. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser represents and warrants to the Company that:
3.1. Due Organization, etc. The Purchaser is a limited liability
---------------------
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Purchaser has no direct or indirect subsidiaries.
3.2. Authorization; Execution and Delivery of Agreement. The
--------------------------------------------------
Purchaser has all requisite power and authority to execute this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and this Agreement constitutes the
legal, valid, binding
18
<PAGE>
and enforceable obligation of the Purchaser, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
3.3. No Conflict; No Consent. The execution and delivery of this
-----------------------
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions contemplated hereby do not, and will not,
conflict with, or result in any violation of or default under, or permit the
acceleration of any obligation under, or the creation or imposition of any
Encumbrance on any of the properties or assets of the Purchaser under, (i) any
provision of the certificate of organization and limited liability company
agreement or similar constituent documents of the Purchaser, (ii) any indenture,
lease, mortgage, deed of trust, loan agreement or other agreement or instrument,
or any permit, license, registration, membership, authorization or qualification
from any Authority, of the Purchaser or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation of any Authority to which the
Purchaser is a party or by which it is bound, other than, in the case of clause
(ii) above, where such conflict, violation, default, acceleration or Encumbrance
would not, individually or in the aggregate, have a Purchaser Material Adverse
Effect. Other than as required by the Hart-Scott-Rodino Act or as a result of
the reporting requirements of the Exchange Act, no consent, approval, order or
authorization of, or registration, declaration, filing with or notice to, any
Authority is required to be made or obtained by the Purchaser in order to
execute or deliver this Agreement or to consummate the transactions contemplated
hereby.
19
<PAGE>
3.4. No Brokers. No broker, finder or investment banker is
----------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Purchaser.
3.5. Litigation and Claims. There is no claim, prosecution, suit,
---------------------
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Purchaser, threatened against or affecting the Purchaser, or
any of its properties or assets which, if adversely determined, would prohibit
or make illegal the purchase of or payment for the Shares.
3.6. Investment Purposes. (a) The Purchaser, by reason of its
-------------------
business and financial experience, has such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risks of its investment in the Shares, and is purchasing the Shares
hereunder for its own account, for investment only and not with a view to, or
any present intention of, effecting a distribution of such securities or any
part thereof. The Purchaser acknowledges that the Shares to be purchased
hereunder have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or the securities laws of any state or other
--------------
jurisdiction and cannot be disposed of unless they are subsequently registered
under the Securities Act and any applicable state laws or exemption from such
registration is available.
(b) The Purchaser is an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act.
(c) The Purchaser has had the opportunity to ask questions and to
receive
20
<PAGE>
answers concerning the financial condition, operations and prospects of the
Company and the terms and conditions of the Purchaser's investment, as well as
the opportunity to obtain any additional information necessary to verify the
accuracy of information furnished in connection therewith that the Company
possesses or can acquire without unreasonable effort or expense.
IV. COVENANTS OF THE COMPANY
The Company covenants and agrees that:
4.1. Conduct of Business. Except as specifically consented to in
-------------------
writing by the Purchaser or expressly contemplated by this Agreement, during the
period from the date of this Agreement up to and including the date of the
Closing, the Company shall, and shall cause each of its Subsidiaries to, (i)
conduct its business in the usual and ordinary course consistent with past
practice and use its reasonable best efforts to preserve its business
organization intact, to keep available the services of its key employees,
material independent contractors and material consultants currently employed, to
preserve the present relationships with customers, suppliers and other Persons
(as hereinafter defined) with whom it has significant business relations, to
maintain books and records in the usual and ordinary manner, and to preserve the
goodwill and ongoing business; and (ii) except pursuant to agreements or
commitments entered into by the Company or its Subsidiaries prior to the date of
this Agreement and listed on Schedule 2.5(b) hereto, not issue or sell (or agree
to issue or sell) any stock of any class or any other securities, or any
options, warrants, conversion or other rights to purchase any such securities,
or grant, or
21
<PAGE>
agree to grant, any such options or modify or alter the terms of any of the
above. As used herein, "Person" means any individual, partnership, joint
------
venture, firm, corporation, association, trust or other entity or any government
or political subdivision or agency, department or instrumentality thereof.
4.2. Exchange of Stock Certificates. Promptly upon surrender of
------------------------------
any certificates representing Shares at the office of the Company, the Company
will, at its expense, execute and deliver to the Purchaser a new certificate or
certificates in denominations specified by the Purchaser for an aggregate number
of Shares equal to the number of Shares represented by the certificates
surrendered.
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon
-------------------------------------------------------
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate for Shares and, in the case of loss, theft or
destruction, upon delivery of an indemnity satisfactory to the Company (which,
in the case of the Purchaser may be an undertaking by the Purchaser to so
indemnify the Company), or, in the case of mutilation, upon surrender and
cancellation thereof, the Company will issue a new certificate of like tenor for
a number of Shares equal to the number of Shares represented by the certificate
lost, stolen, destroyed or mutilated.
4.4. Course of Dealings with Lenders. The Company shall use its
-------------------------------
reasonable best efforts to obtain the consents and approvals of the Lenders, and
to negotiate and enter into
22
<PAGE>
Credit Facility Amendments, necessary for the consummation of the transactions
contemplated by this Agreement. The Company shall keep the Purchaser apprised of
all material developments in connection with the negotiation of the Credit
Facility Amendments. Without limiting the foregoing, the Company shall provide
to the Purchaser, promptly after receipt thereof by the Company, a copy of each
draft of the proposed amendments to the Credit Facilities and shall consult with
the Purchaser in connection with the negotiation thereof.
4.5. Board Representation. At each annual meeting of the
--------------------
stockholders of the Company after the Closing, so long as the Purchaser shall
own Shares representing 5% or more of the total issued and outstanding shares of
Common Stock as of the date which is thirty (30) days immediately preceding the
record date of such meeting, the Company shall include in the slate of nominees
for election as the Board at such meeting, David M. Schulte or one other officer
or individual member of the Purchaser designated by the Purchaser (which
designee shall not include any individual whose membership on the Board would be
a violation of law), provided that the Company has consented to such other
designee, which consent shall not be unreasonably withheld.
4.6. Other Purchase Agreements. The Company shall provide to the
-------------------------
Purchaser, promptly after receipt or completion thereof by the Company, a copy
of the proposed final draft of each of the Lepone Purchase Agreement and the
Korman Purchase Agreement and of any proposed amendment of either thereof (or
any proposed waiver of any of the terms or conditions of either thereof).
23
<PAGE>
V. COVENANTS OF THE PURCHASER AND THE COMPANY
5.1. Access; Confidentiality. (a) At the reasonable request of
-----------------------
the Purchaser, the Company shall give the officers, attorneys, accountants and
other authorized representatives of the Purchaser access, during normal business
hours and upon reasonable notice, to all of the Company's, and the Subsidiaries'
offices, facilities, properties and personnel. The Company will furnish the
representatives of the Purchaser with all such information concerning the
Company and its Subsidiaries as such representatives may reasonably request and
cause the employees, accountants, independent accountants and attorneys of the
Company and its Subsidiaries to cooperate fully with such representatives in
connection with such review and examination and to make full disclosure to the
Purchaser of all material facts concerning the Company and its Subsidiaries;
provided, however, that the Purchaser will hold in strict confidence and not use
- -------- -------
for its own benefit (other than in connection with the transactions contemplated
by this Agreement), prior to the Closing, the documents and information
(including all evaluation material relating to employees) furnished to the
Purchaser concerning the Company and its Subsidiaries; and, if the transactions
contemplated by this Agreement shall not be consummated, such confidence shall
be maintained and all such documents and all copies thereof shall promptly
thereafter be returned to the Company. The Purchaser further agrees that it
shall be responsible for any breach of this Section 5.1 by any of its officers,
attorneys, accountants and other authorized representatives.
24
<PAGE>
No investigation by the Purchaser or any of its representatives pursuant to this
Section 5.1 shall affect any representation, warranty or closing condition of
any party hereto.
(b) Chilmark Fund II, L.P. ("Chilmark") agrees that it shall be
---------
bound by the obligations of the Purchaser set forth in Section 5.1(a) as if it
were the Purchaser for purposes of said section.
5.2. Hart-Scott-Rodino Act Filings. Each party covenants and
-----------------------------
agrees to file, if required, on a date no later than ten days from the date
hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with
respect to the purchase by the Purchaser of the Shares pursuant to this
Agreement and will provide promptly any supplemental information that may be
requested in connection therewith. Each party will comply with all reasonable
requests of the other party for information necessary in connection with the
preparation by such other party of its notification and report form.
5.3. Public Disclosure and Confidentiality. Each party hereby
-------------------------------------
agrees that, prior to the Closing, except as required by applicable law (or
under the rules and regulations of the Nasdaq Stock Market (or any national
securities exchange on which the Common Stock is listed)), no press release or
public announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement, the terms hereof or
the transactions contemplated hereby unless specifically approved in advance by
both parties. In the event that a party views disclosure as required by
applicable law (or the rules and regulations of
25
<PAGE>
the Nasdaq Stock Market or any such national stock exchange) as contemplated by
the previous sentence, such disclosing party shall provide a copy of such
disclosure to the other party within a reasonable period of time prior to such
disclosure.
5.4. Certain Notifications. At all times prior to the Closing,
---------------------
each party hereto shall promptly notify the other party in writing of the
occurrence of any event which will or could reasonably result in the failure of
any of the conditions contained in Article I hereof to be satisfied. Such
notice shall be in additional to and not in lieu of the other notices and
communications provided for herein.
5.5. Efforts to Consummate; Further Actions. Subject to the terms
--------------------------------------
and conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
5.6. Standstill Obligations of the Purchaser. (a) As of the date
---------------------------------------
of this Agreement, none of the Purchaser, Chilmark or any Affiliate (as
hereinafter defined) thereof beneficially owns any shares of Common Stock,
except as disclosed in filings through the date hereof on Schedule 13D under the
Exchange Act or as may be deemed to exist under the Exchange Act in respect of
the Warrants. From and after the date of this Agreement until the Closing, none
of the Purchaser or Chilmark (collectively, the "Stockholders") or any of their
------------
Affiliates will acquire any securities issued by the Company or convertible into
or exchangeable
26
<PAGE>
for any equity securities of the Company (collectively referred to as "Stock"),
-----
except pursuant to the terms of this Agreement. For purposes of this Agreement,
an "Affiliate" of any person, entity or corporation shall mean and include (i)
---------
any person, entity or corporation, now or hereafter, directly or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with (through the ownership of voting securities or interests, by
contract or otherwise) such person, entity or corporation, or (ii) any other
person, entity or corporation acting in concert with such person, entity or
corporation in connection with the Company with respect to any matter referred
to in Section 5.6(d) of this Agreement or clauses (a)-(j) of Item 4 of Schedule
13D under the Exchange Act, or with respect to acquiring, holding, voting or
disposing of any Stock. Each of the Stockholders acknowledges and agrees that a
breach of any provision of this Agreement by any Stockholder or any Affiliate
thereof shall constitute a breach by each Stockholder and that each Stockholder
shall be fully liable for any breach of this Agreement by any other Stockholder
or by any Affiliate of any Stockholder, it being understood that notwithstanding
any other provision of this Agreement, any of the Stockholders and their
Affiliates shall be entitled to act in concert with one another with respect to
any action which a Stockholder or an Affiliate of a Stockholder would be
permitted to take individually hereunder. For the purposes of this Agreement,
beneficial ownership shall be determined pursuant to Rule 13d-3 ("Rule 13d-3")
----------
promulgated by the Commission pursuant to the Exchange Act.
27
<PAGE>
(b) Each of the Stockholders hereby jointly and severally covenants
and agrees that from and after the date hereof none of the Stockholders or their
Affiliates will, without the prior written consent of the Company specifically
expressed in a vote adopted after the Closing by the Board, directly or
indirectly, purchase or cause to be purchased or otherwise acquire (other than
pursuant to a stock split, stock dividend or similar transaction) or agree to
acquire, or become or agree to become the beneficial owner of, any additional
Stock, except that the Stockholders and their Affiliates may purchase shares of
Common Stock (A) upon exercise of some or all of the Warrants, (B) from time to
time, in the open market or in privately negotiated transactions, up to an
aggregate of 146,700 shares of Common Stock, and (C) from time to time, in the
open market or in privately negotiated transactions, up to an aggregate number
of shares of Common Stock which, when added to the shares of Common Stock then
owned by the Stockholders and their Affiliates, would result in the Stockholders
and their Affiliates owning no more than the highest percentage of voting
securities of the Company held by the Stockholders and their Affiliates
immediately following the Closing or any purchase permitted by clauses (A) or
(B) above. Nothing contained in Section 5.6(a) or the preceding sentence of this
Section 5.6(b) shall limit the ability under the 1997 Stock Purchase Agreement
of any member of the Advisory Board of Chilmark who acquired shares of Common
Stock from the Purchaser on September 18, 1997 in accordance with the 1997 Stock
Purchase Agreement to acquire, from time to time, in the open market or
privately negotiated transactions, up to an aggregate number of shares of Common
Stock equal to 50% of the number of shares so acquired
28
<PAGE>
from the Purchaser or otherwise prohibit the acquisition of Shares by any such
member in accordance with Section 9.3(d) hereof. Each of the Stockholders agrees
that none of the Stockholders or their Affiliates will, without the prior
written consent of the Board specifically expressed in a vote adopted by the
Board, directly or indirectly, transfer any shares of Stock now owned or
hereafter acquired by them, except for transfers made: (i) pursuant to the
provisions of Section 5.6(c) below, (ii) pursuant to a publicly announced tender
offer for any shares of Stock by any corporation, entity, person or group (other
than any of the Stockholders or their Affiliates) which the Board has voted to
recommend to holders of any shares of Stock, (iii) pursuant to the exercise of
the registration rights provided in Article VI hereof, (iv) pursuant to open
market sales made in accordance with Rule 144 under the Securities Act,
including, if applicable, paragraph (k) thereof or (v) to the members or
investors of the Purchaser, and to their members or investors, by distribution,
dissolution or otherwise; provided, however, that in no event shall any such
-------- -------
member or investor referred to in clause (v) above who is an Affiliate of either
of the Stockholders be permitted to, directly or indirectly, transfer any shares
of Stock now owned or hereafter acquired, except in accordance with this Section
5.6(b). For purposes of this Agreement, "transfer" shall mean and include any
sale, assignment, gift, pledge, the imposition of any other encumbrance or any
other disposition or any agreement or obligation to do any of the foregoing.
29
<PAGE>
(c) If any Stockholder or any Affiliate thereof desires to sell any
shares of Stock (a "Selling Stockholder") (other than pursuant to clause (ii),
-------------------
(iii), (iv) or (v) of Section 5.6(b) hereof), the following requirements shall
be satisfied:
(i) The Selling Stockholder shall notify the Company in writing of
the proposed sale (the "Notice of Proposed Transfer"). The Notice of Proposed
---------------------------
Transfer shall identify and provide reasonable information concerning the
background, business experience and business affiliations of the proposed
transferee (the "Transferee"), the purchase price or other consideration, if
----------
any, the number of shares and type of Stock to be transferred and the complete
terms of the proposed transaction.
(ii) For a period of ten (10) business days following the receipt of
the Notice of Proposed Transfer, the Company and/or any substitute purchaser(s)
as designated by the Company (the Company and/or such substituted purchaser is
hereinafter sometimes called the "Buyer") shall have the option to purchase all,
-----
but not less than all, the Stock specified in the Notice of Proposed Transfer at
the price and upon the terms set forth in the Notice of Proposed Transfer;
provided, however, that if the type of consideration that was to be paid was
non-cash consideration, then the amount payable by the Buyer for such Stock
shall be determined in good faith by the Board, after consultation with the
Company's investment banker. In the event that Buyer elects to purchase all,
but not less than all, of the Stock specified in the Notice of Proposed
Transfer, it shall give written notice to the Selling Stockholder of its
election, in which case settlement for said Stock shall be made and the Buyer
shall purchase such Stock for such price,
30
<PAGE>
in cash within ten (10) business days after the date the Company receives the
Notice of Proposed Transfer. In the event that Buyer elects not to purchase all
of the Stock specified in the Notice of Proposed Transfer, the Selling
Stockholder may consummate the proposed transfer of said Stock with the
Transferee, provided, however, that such transfer shall not be consummated
unless and until such Transferee agrees in writing to be bound by all of the
terms of and to perform all of the obligations of the Stockholders contained in
Section 5.6(b), this Section 5.6(c) and in Section 5.6(d) of this Agreement in
the same manner as if such Transferee were a party to this Agreement.
(d) Each of the Stockholders hereby agrees that, prior to the date
on which the Stockholders beneficially own collectively less than 0.5% of the
total issued and outstanding shares of Common Stock, none of the Stockholders or
their Affiliates will, directly or indirectly, or will solicit, request, advise,
assist or encourage others, directly or indirectly, to:
(i) form, join in or in any other way participate in a "partnership,
limited partnership, syndicate or other group" within the meaning of Section
13(d)(3) of the Exchange Act with respect to shares of Stock or deposit any
Stock in a voting trust or similar arrangement or subject any Stock to any
voting agreement or pooling arrangement, other than solely with one or more
other Stockholders or Affiliates with respect to shares of Common Stock
permitted to be owned hereunder;
31
<PAGE>
(ii) solicit proxies or written consents of shareholders with respect
to Stock under any circumstances, or make, or in any way participate in, any
"solicitation" of any "proxy" to vote any shares of Stock, or become a
"participant" in any election contest with respect to the Company (as such terms
are defined or used in Rules 14a-1 and 14a-11 under the Exchange Act);
(iii) seek to call, or to request the call of, a special meeting of
the shareholders of the Company or seek to make, or make, a shareholder
proposal, or seek to make or make, any nomination of any candidate as a director
of the Company other than a designee of the Purchaser pursuant to Section 4.5
hereof or any candidate nominated by the Board, at any meeting of the
shareholders of the Company;
(iv) commence or announce any intention to commence any tender offer
for any shares of Stock;
(v) make a proposal or bid with respect to, announce any intention
or desire to make, or discuss with any person, or publicly make or disclose,
cause to be made or disclosed publicly, facilitate the making public or public
disclosure of, any proposal or bid with respect to, the acquisition of any
substantial portion of the assets of the Company or of the assets or stock of
any of its Subsidiaries or of all or any portion of the outstanding Stock, or
any merger, consolidation, other business combination, restructuring,
recapitalization, liquidation or other extraordinary transaction involving the
Company or any of its Subsidiaries;
32
<PAGE>
(vi) otherwise act alone or in concert with others to seek to
control or influence in any manner the management or the Board (including the
composition thereof) or the business, operations or affairs of the Company;
provided, however, that this provision shall not prevent the Purchaser's
designee on the Board from participating in, or otherwise seeking to affect the
outcome of, discussions and votes of the Board with respect to matters coming
before it;
(vii) arrange, or in any way participate in, any financing for any
transaction referred to in clauses (i) through (vi) above inclusive;
(viii) make public, or cause or facilitate the making public
(including by disclosure to any journalist or other representative of the media)
of, any request, or otherwise seek, to obtain any waiver or amendment of any
provision of this Agreement, or to take any action restricted hereby.
Notwithstanding the foregoing, (i) the Stockholders may make such
filings with the Commission pursuant to Sections 13(d) and 16(a) of the Exchange
Act to reflect changes in the beneficial ownership of any shares of Stock of any
Stockholder (to the extent such changes reflect action taken by such Stockholder
which is permitted by this Agreement) and (ii) the Purchaser may exercise its
rights with respect to the election of a director to the Board pursuant to
Section 4.5 of this Agreement.
(e) So long as the Stockholders beneficially own collectively 5.0% or
more of the total issued and outstanding shares of Common Stock or an individual
designated by the
33
<PAGE>
Purchaser pursuant to Section 4.5 is a member of the Board, whenever there shall
be submitted to the stockholders of the Company nominees for election to the
Board, each of the Stockholders and any Affiliate of such Stockholder controlled
directly or indirectly by such Stockholder hereby agrees to vote, or to cause to
be voted, all Stock then held by such Stockholder, whether beneficially or of
record, and entitled to vote on such matter, in favor of such nominees
designated or nominated by the Board, and, unless otherwise requested by the
Company, not in favor of any other nominee or nominees other than a designee of
the Purchaser pursuant to Section 4.5.
(f) Each of the Stockholders hereby covenants and agrees that each
Stockholder will promptly notify the Company when and if such Stockholder
receives or learns of (A) any oral or written request to any of the Stockholders
or any of their Affiliates to participate in any of the transactions or actions
referred to in paragraphs (i) through (viii) of subsection (d) above inclusive
or (B) any oral or written communication from or by any person or entity (other
than the Company) with respect to any of the transactions or actions referred to
in paragraphs (i) through (viii) of subsection (d) above inclusive, if such
person or entity could reasonably be deemed to be capable of effecting,
participating in or materially assisting in such an action or transaction
(through one or more Affiliates or otherwise) and such oral or written
communication was of a nature that could reasonably be deemed to indicate a
serious interest in effecting, participating in or materially assisting in such
an action or transaction.
34
<PAGE>
5.7. Proxy Statement; Stockholder Approval. (a) The Company
-------------------------------------
shall, as promptly as practicable following the date of this Agreement, prepare
and file with the Commission, and will use its best efforts to have cleared by
the Commission and thereafter shall mail to its stockholders as promptly as
practicable a proxy statement and a form of proxy in connection with, among
other things, the vote of the Company's stockholders to approve the issuance and
sale of Common Stock contemplated by this Agreement. The proxy statement, and
any amendments thereof or supplements thereto, will not, at the time of the
mailing of the proxy statement or any amendments thereof or supplements thereto
and at the time of the Stockholders Meeting (as hereinafter defined), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
information supplied in writing by the Purchaser or any affiliate of the
Purchaser specifically for inclusion in the proxy statement. The proxy
statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated thereunder.
(b) The Company shall duly call, give notice of, convene and hold
its annual, or a special, meeting of its stockholders (the "Stockholders
------------
Meeting") and shall use its best efforts to obtain the requisite affirmative
- -------
approval of its stockholders at the Stockholders Meeting of the issuance and
sale of the Common Stock contemplated by this Agreement. The Purchaser and
35
<PAGE>
Chilmark shall be present, in person or by proxy, at the Stockholders Meeting
and shall vote or cause to be voted all shares of Common Stock held of record or
beneficially owned (with the power to vote or direct the vote) by it and
eligible to vote as of the record date for such meeting in favor of the proposal
seeking such approval.
VI. REGISTRATION RIGHTS
The Company covenants and agrees to provide the following registration
rights:
6.1. "Piggyback" Registration. If, at any time while the Purchaser
-----------------------
shall hold shares of Common Stock or Warrants, the Company proposes to file a
registration statement relating to the offering of any of its capital stock
under the Securities Act (other than (i) a registration statement required to be
filed in respect of employee benefit plans of the Company on Form S-8 or any
similar form from time to time in effect, (ii) any registration statement on
Form S-4 or similar successor form, or (iii) a registration statement relating
to a transaction pursuant to Rule 145 of the Securities Act), whether or not for
sale for its own account, the Company shall, at least twenty-one days (or if
such twenty-one day period is not practicable, then a reasonable shorter period
which shall not be less than seven days) prior to such filing, give written
notice of such proposed filing to the Purchaser. Upon receipt by the Company
not more than seven days (unless the notice given to the Purchaser pursuant to
the previous sentence is less than ten days, in which case such seven-day period
shall be shortened to five days) after such notice of a written request from the
Purchaser for registration of Purchaser's Stock (as hereinafter
36
<PAGE>
defined), (i) the Company shall, subject to Section 6.3, include such
Purchaser's Stock in such registration statement, and shall use all reasonable
efforts to cause such registration statement to become effective with respect to
such Purchaser's Stock, unless the managing underwriter therefor concludes in
its reasonable judgment that the number of securities requested to be included
in such registration exceeds the number which can reasonably be sold in (or
during the time of) such offering, in which case the Company may (i) include all
securities initially proposed by the Company to be sold for its own account and
(ii) decrease the number of shares of Purchaser's Stock and any other securities
(other than securities included by virtue of clause (i) above) proposed to be
sold to the extent necessary to reduce the number of securities to be included
in the registration to the level recommended by the managing underwriter;
provided, however, that there shall be no such decrease in the number of shares
of Purchaser's Stock unless the number of shares of Purchaser's Stock and such
other securities (other than the securities included by virtue of clause (i)
above) proposed to be sold has been decreased on a pro rata basis, calculated
according to the number of shares of Purchaser's Stock and other securities
requested to be included by the respective holders of each. "Purchaser's Stock"
-----------------
means any Warrants or shares of Common Stock acquired by the Purchaser pursuant
to this Agreement or the 1997 Stock Purchase Agreement, or by a Stockholder in
accordance with Section 5.6(b) hereof or Section 5.6(b) of the 1997 Stock
Purchase Agreement, for which any Stockholder requests registration pursuant to
Section 6.1 or 6.2.
37
<PAGE>
6.2. Demand Registration. If the Company shall receive at any time
-------------------
or from time to time a written request from the Purchaser requesting the Company
to register any shares of Purchaser's Stock under the Securities Act on Form S-3
(or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or
any other similar form then in effect, the Company agrees that it will use all
reasonable efforts to cause the prompt registration of all shares of Purchaser's
Stock as to which such request is made (or will amend or supplement an effective
registration statement to include Purchaser's Stock). The Company may postpone
for a limited time, which in no event shall be longer than 90 days, compliance
with a request for registration pursuant to this Section 6.2 if (i) the Company
shall have given notice to the Purchaser of the occurrence of a Suspension Event
(as hereinafter defined) or (ii) the Company is conducting a public offering of
capital stock and the managing underwriter concludes in its reasonable judgment
that such compliance would materially adversely affect such offering.
Notwithstanding anything in this Section 6.2 to the contrary, the Company shall
not be required to: (a) comply with more than three (3) requests of the
Purchaser pursuant to this Section 6.2 or (b) prepare or cause to be prepared
audited financial statements of the Company other than those prepared in the
normal course of the Company's business at its fiscal year end. Any underwriter
selected by the Purchaser to act as such in connection with a registration
pursuant to this Section 6.2 shall be reasonably acceptable to the Company. The
Company shall not be required to file and effect a new registration pursuant to
this Section 6.2(b) until a period of nine (9) months has
38
<PAGE>
elapsed from the termination of the registration statement with respect to
Purchaser's Stock covered by a prior registration request. The Company agrees
that in the event the Purchaser makes a request under this Section 6.2 to cause
the Company to effect a demand registration and the Company is precluded from
effecting such registration with respect to 25% or more of the shares of
Purchaser's Stock subject to such request as a consequence of the terms of
registration rights previously granted by the Company to any of the Other
Holders, then, under such circumstances, such request shall not be counted
against the number of demand requests granted to Purchaser under this Section
6.2.
6.3. General Provisions. (a) The Company will use all reasonable
------------------
efforts to cause any registration statement referred to in Sections 6.1 and 6.2
to become effective and to remain effective (with a prospectus at all times
meeting the requirement of the 1933 Act) until the earlier of 180 days from the
effective date of the registration statement and the date the Purchaser
completes its distribution of Purchaser's Stock, subject, however, to the
Company's suspension rights set forth in Section 6.7(b). The Company will use
all reasonable efforts to effect such qualifications under applicable Blue Sky
or other state securities laws as may be reasonably requested by the Purchaser
(provided that the Company shall not be obligated to file a general consent to
service of process or qualify to do business as a foreign corporation or
otherwise subject itself to taxation in any jurisdiction solely for the purpose
of any such qualification) to permit or facilitate such sale or other
distribution. The Company will cause the Purchaser's Stock to be listed on the
principal stock exchange on which the shares of Common Stock are listed.
39
<PAGE>
(b) The Purchaser acknowledges that the Company has previously
granted registration rights to other holders of Common Stock and/or other
securities issued by the Company that are convertible into or exercisable for
shares of Common Stock (collectively, the "Other Holders"). The Purchaser
-------------
further acknowledges that, notwithstanding anything to the contrary provided in
this Agreement, the registration rights granted to the Purchaser under this
Agreement shall, in every case, be subject to the rights of the Other Holders
and, to the extent, if any, that any of the provisions of this Article VI
conflict or are inconsistent with any of such rights of the Other Holders, such
rights of the Other Holders shall govern with respect to the subject matter of
such conflict or inconsistency.
(c) The Purchaser agrees, if requested by the managing underwriter
or underwriters in an underwritten offering (an "Offering"), not to effect any
--------
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Offering), during the 15-day
period prior to, and during the 90-day period beginning on, the date of pricing
of each Offering, to the extent timely notified in writing by the Company or the
managing underwriters. Furthermore, notwithstanding anything to the contrary
set forth in the Agreement, the Company's obligation under this Agreement to
cause a registration statement and
40
<PAGE>
any filings with any state securities commission to be made or to become
effective or to amend or supplement such registration statement shall be
suspended in the event and during such period as the Company is proceeding with
an Offering if the Company is advised by the underwriters that the sale of
shares of Purchaser's Stock under such registration statement would have a
material adverse effect on the Offering.
(d) Following the effectiveness of a registration statement and the
filings with any state securities commissions, the Purchaser agrees that it will
not effect any sales of the Purchaser's Stock pursuant to such registration
statement or any such filings at any time after it has received notice from the
Company to suspend sales (i) as a result of the occurrence or existence of any
Suspension Event, or (ii) so that the Company may amend or supplement such
registration statement or such filing. The Purchaser may recommence effecting
sales of the Purchaser's Stock pursuant to the registration statement or such
filings following further notice to such effect from the Company, which notice
shall be given by the Company not later than three (3) business days after the
conclusion of any such Suspension Event or amendment or supplement.
6.4. Information, Documents, Etc. Upon making a request for
---------------------------
registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the
Company such information regarding its holdings and the proposed manner of
distribution thereof as the Company may reasonably request and as shall be
required in connection with any registration, qualification or
41
<PAGE>
compliance referred to in this Article VI. The Company agrees that it will
furnish to the Purchaser the number of prospectuses, offering circulars or other
documents, or any amendments or supplements thereto, incident to any
registration, qualification or compliance referred to in this Article VI as the
Purchaser from time to time may reasonably request.
6.5. Expenses. The Company will bear all expenses of registrations
--------
pursuant to Section 6.1 and one-half of all expenses of the first two
registrations (and amendments and supplements related thereto) pursuant to
Section 6.2 (in each case, other than underwriting discounts and commissions and
brokerage commissions and fees, if any, payable with respect to shares of
Purchaser's Stock sold by the Purchaser, and fees and expenses of any
accountants, counsel or other parties retained or employed by holders of
Purchaser's Stock) including, without limitation, registration fees, printing
expenses, expenses of compliance with Blue Sky or other state securities laws,
and legal and audit fees incurred by the Company in connection with such
registration and amendments or supplements in connection therewith. The
Purchaser will bear one-half of all expenses of the first two registrations (and
amendments and supplements related thereto) and all expenses of the third
registration (and amendments and supplements related thereto) pursuant to
Section 6.2, including, without limitation, registration fees, printing
expenses, expenses of compliance with Blue Sky or other state securities laws,
and legal and audit fees incurred by the Company and the Purchaser and the
holders of Purchaser's Stock. Notwithstanding the foregoing, the Company agrees
that in the event that subsequent to the date
42
<PAGE>
hereof the Company shall grant demand registration rights to a third party and
shall agree in connection therewith to bear all or a greater portion of the
expenses of such demand registrations than as set out above, then this Section
6.5 shall be deemed to have been amended to provide for the Company to bear, and
the Company shall bear, the same portion of the expenses of any subsequent
registration pursuant to Section 6.2 of this Agreement as the Company shall have
agreed to bear for such third party.
6.6. Cooperation. In connection with any registration of
-----------
Purchaser's Stock pursuant to this Article VI, the Company agrees to:
(a) enter into such customary agreement (including an underwriting
agreement containing such representations and warranties by the Company and such
other terms and provisions, including indemnification provisions, as are
customarily contained in underwriting agreements for comparable offerings and,
if no underwriting agreement is entered into, an indemnification agreement on
such terms as is customary in transactions of such nature) and take all such
other actions as the Purchaser or the underwriters, if any, participating in
such offering and sale may reasonably request in order to expedite or facilitate
such offering and sale;
(b) furnish, at the request of the Purchaser or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the Purchaser's Stock and/or
the date of the closing for the sale of the Purchaser's Stock from the
independent certified public accountants of the Company and addressed to the
43
<PAGE>
Purchaser and any underwriters participating in such offering and sale, which
letter or letters shall state that such accountants are independent with respect
to the Company within the meaning of Rule 1.01 of the Code of Professional
Ethics of the American Institute of Certified Public Accountants and shall be in
form reasonably satisfactory to the managing underwriter (or, if none, to the
Purchaser) and shall cover matters of the type customarily covered in "cold
comfort" letters in connection with transactions of a similar nature for similar
entities and (ii) an opinion, dated the date of the closing for the sale of the
Purchaser's Stock, of the counsel representing the Company with respect to such
offering and sale (which counsel may be the General Counsel of the Company or
other counsel reasonably satisfactory to the Purchaser), addressed to the
Purchaser and any such underwriters, which opinion shall be in form reasonably
satisfactory to the managing underwriter (or, if none, to the Purchaser) and
shall address such matters as are customary in transactions of a similar nature
for similar entities;
(c) make available for inspection by the Purchaser, the
underwriters, if any, participating in such offering and sale (which inspecting
underwriters shall, if reasonably possible, be limited to any manager or
managers for such participating underwriters), the counsel for the Purchaser,
one accountant or accounting firm retained by the Purchaser and any such
underwriters, or any other agent retained by the Purchaser or such underwriters,
all financial and other records, corporate documents and properties of the
Company, and supply such additional information, as they shall reasonably
request; provided that any such party shall keep the contents thereof
--------
confidential in the manner prescribed by Section 5.1.
44
<PAGE>
6.7. Action to Suspend Effectiveness; Supplement to Registration
-----------------------------------------------------------
Statement. (a) The Company will notify the Purchaser and its counsel
- ---------
promptly of (i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Purchaser's Stock or the institution or
threatening of any proceeding for such purpose (a "Stop Order") or (ii) the
----------
receipt by the Company of any notification with respect to the suspension of the
qualification of the Purchaser's Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. Immediately upon
receipt of any such notice, the Purchaser shall cease to offer or sell any
Purchaser's Stock pursuant to the registration statement in the jurisdiction to
which such Stop Order or suspension relates. The Company will use all
reasonable efforts to prevent the issuance of any such Stop Order or the
suspension of any such qualification and, if any such Stop Order is issued or
any such qualification is suspended, to obtain as soon as possible the
withdrawal or revocation thereof, and will notify the Purchaser and its counsel
at the earliest practicable date of the date on which the Purchaser may offer
and sell Purchaser's Stock pursuant to the registration statement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to cause the
registration of Purchaser's Stock and any filings with any state securities
commission to be made or to become effective or to amend or supplement a
registration statement shall be suspended in the event and during such period
45
<PAGE>
that there are pending negotiations relating to, or consummation of, a
transaction or the occurrence of an event that would require additional
disclosure of material information by the Company in such registration statement
or such filing (such circumstances being hereinafter referred to as a
"Suspension Event") that would make it impractical or inadvisable to cause such
- -----------------
registration statement or such filings to be made or to become effective or to
amend or supplement such registration statement, but such suspension shall
continue only for so long as such event or its effect is continuing but in no
event will that suspension exceed ninety (90) days. Immediately upon receipt by
the Purchaser of notice of a Suspension Event, the Purchaser shall cease to
offer or sell any Purchaser's Stock pursuant to such registration statement,
cease to deliver or use such registration statement and, if so requested by the
Company, return to the Company, at its expense, all copies (other than permanent
file copies) of such registration statement.
(c) In the event the Company shall determine that it is necessary to
amend or supplement any registration statement relating to Purchaser's Stock,
the Company will furnish copies of such proposed amendment or supplement to the
Purchaser and its counsel and will not file or distribute such amendment or
supplement without the prior consent of the Purchaser, which consent shall not
be unreasonably withheld.
6.8. Indemnification. In the event any Purchaser's Stock is
---------------
included in a registration statement under this Article VI:
46
<PAGE>
(a) To the full extent permitted by law, the Company will indemnify
and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock
as set forth in Section 9.3(d) hereof (each, a "Holder") and the affiliates of
------
such Holder, and their respective directors, officers, employees, general and
limited partners, members, agents and representatives (and the directors,
officers, affiliates and controlling persons thereof), and each other person, if
any, who controls such Holder within the meaning of the Securities Act or the
Exchange Act, from and against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
- ----------
material fact contained in such registration statement, including any
preliminary prospectus, any final prospectus contained therein or any amendments
or supplements thereto, (ii) any omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company in connection with the registration of Purchaser's Stock under the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, affiliate or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with
47
<PAGE>
investigating or defending any such loss, claim, damage, liability or action;
provided, that the indemnity agreement contained in this Section 6.8(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable hereunder in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
the Purchaser or controlling person; and provided, further, that the Company
-------- -------
shall not be liable hereunder in any such case to the extent it is determined
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made:
(A) in any such preliminary prospectus, if (I) it was the
responsibility of such Holder to provide the person asserting such loss,
claim, damage, liability or expense with a current copy of the prospectus
and such Holder failed to deliver or cause to be delivered a current copy
of the prospectus to such person after the Company had furnished such
Holder with a sufficient number of copies of the same and (II) the current
prospectus corrected such untrue statement or omission; or
(B) in such prospectus, if such untrue statement or omission is
corrected in an amendment or supplement to such prospectus and the Holder
thereafter fails to deliver the
48
<PAGE>
prospectus as so amended or supplemented prior to or concurrently with the
sale of Purchaser's Stock to the person asserting such loss, claim, damage,
liability or expense after the Company had furnished such Holder with a
sufficient number copies of the same.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director, officer,
employee, general or limited partner, member, agent, representative or
controlling person and shall survive the transfer of such securities by such
Holder. Each Holder shall furnish such information regarding itself or the
claim in question as the Company may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(b) To the full extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon
49
<PAGE>
(i) any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration
or (ii) an untrue statement or alleged untrue statement or omission or alleged
omission made in the circumstances described in clauses (A) or (B) of Section
6.8(a); and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 6.8(b), in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, that the indemnity agreement
contained in this Section 6.8(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; provided, that, in no event shall any indemnity under
--------
this Section 6.8(b) exceed the gross proceeds from the offering received by such
Holder; and provided, further, that the obligation to provide indemnification
-------- -------
pursuant to this Section 6.8(b) shall be several, and not joint and several,
among such indemnifying parties. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Company or
any such director, officer, representative or controlling person and shall
survive the transfer of such securities by such prospective seller.
(c) Promptly after receipt by an indemnified party under this Section
6.8 of notice of the commencement of any action (including any governmental
action), such
50
<PAGE>
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6.8, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel selected by the indemnifying party or parties.
The failure to deliver written notice to the indemnifying party within a
reasonable time after the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6.8 to the extent of such prejudice, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 6.8. The
indemnified party shall have the right, but not the obligation, to participate
in the defense of any action referred to above through counsel of its own
choosing and shall have the right, but not the obligation, to assert any and all
separate defenses, cross claims or counterclaims which it may have, and the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel has been specifically authorized in
advance by the indemnifying party, (ii) there is a conflict of interest that
prevents counsel for the indemnifying party from adequately representing the
interests of the indemnified party or there are defenses available to the
indemnified party that are different from, or additional to, the defenses that
are available to the indemnifying party, or
51
<PAGE>
(iii) the indemnifying party fails to assume the defense or does not reasonably
contest such action in good faith, in which case, if the indemnified party
notifies the indemnifying party that it elects to employ separate counsel, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party and the reasonable fees and expenses of such
separate counsel shall be borne by the indemnifying party; provided, however,
that, the indemnifying party shall not, in connection with any proceeding or
related proceedings, be liable for the reasonable fees and expenses of more than
one separate firm (in addition to one firm acting as local counsel) for all
indemnified parties.
(d) Contribution. If for any reason (other than the reasons expressly
------------
specified in this Section 6.8) the foregoing indemnity and payment obligation is
unavailable or is insufficient to hold harmless an indemnified party under
paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any loss, claim, damage or liability (or actions or proceedings in respect
thereof), including, without limitation, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other. The relative fault shall be
determined by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a
52
<PAGE>
material fact has been taken or made by, or relates to information supplied by,
the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, untrue statement or omission. If, however, the allocation provided
in the second preceding sentence is not permitted by applicable law, or if the
allocation provided in the second preceding sentence provides a lesser sum to
the indemnified party than the amount hereinafter calculated, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative fault but also the relative benefits to the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties agree that it would not be just and equitable if contributions pursuant
to this Section 6.8(d) were to be determined by pro rata allocation or by any
--- ----
other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 6.8(d).
Notwithstanding anything in this Section 6.8(d) to the contrary, no indemnifying
party (other than the Company) shall be required pursuant to this Section 6.8(d)
to contribute any amount in excess of the gross proceeds received by such
indemnifying party from the sale of Purchaser's Stock in the offering to which
the losses, claims, damages or liabilities of the indemnified parties relate. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
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<PAGE>
(e) The obligations of the Company and the Holders under this Section
6.8 shall survive the completion of any offering of Purchaser's Stock in a
registration statement under this Article VI.
(f) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement (if
any) entered into in connection with any underwritten public offering of the
Purchaser's Stock are in conflict with the foregoing provisions, the provisions
in such underwriting agreement shall control.
VII. INDEMNIFICATION
7.1. Indemnification by the Company. The Company shall indemnify
------------------------------
and hold the Purchaser and each of its members, employees, officers and agents
harmless from and against any and all losses, claims, damages or liabilities
whatsoever (including legal fees and expenses) incurred by any of them based
upon, resulting from or arising out of (i) any material breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement or (ii) except as provided in Section 7.2, any claim brought, directly
or indirectly, by a third party relating to the transactions contemplated by
this Agreement.
7.2. Indemnification by the Purchaser. The Purchaser (and with
--------------------------------
respect to Sections 5.1, 5.2, 5.6 and 5.7, Chilmark) shall indemnify and hold
the Company and each of its employees, directors, officers and agents harmless
from and against any and all losses, claims, damages or liabilities whatsoever
(including legal fees and expenses) incurred by any of them
54
<PAGE>
(i) in the case of the Purchaser, resulting from or arising out of any material
breach of any representation, warranty, covenant or agreement of the Purchaser
contained in this Agreement and (ii) in the case of Chilmark, resulting from or
arising out of any material breach of any covenant or agreement of Chilmark
contained in Sections 5.1, 5.2, 5.6 or 5.7 of this Agreement.
VIII. TERMINATION
8.1 Termination. (a) This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(i) by the Company or the Purchaser, if the Closing has not occurred
by January 31, 1999;
(ii) by mutual written consent of the Company and the Purchaser;
(iii) by the Company, if there has been a material misrepresentation
or breach of warranty on the part of the Purchaser in the representations and
warranties contained herein or a material breach of covenants on the part of the
Purchaser and the same has not been cured within 30 days after notice thereof;
(iv) by the Purchaser, if there has been a material misrepresentation
or breach of warranty on the part of the Company in the representations and
warranties contained herein or a material breach of covenants on the part of the
Company and the same has not been cured within 30 days after notice thereof;
(v) by the Purchaser, if the terms of the Credit Facility Amendments
are not reasonably satisfactory to the Purchaser; or
55
<PAGE>
(vi) by either the Purchaser or the Company, if any Governmental
Entity shall have issued a final order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable, provided that the party
seeking to terminate shall have used its best efforts to appeal such order,
decree, ruling or other action.
(b) Notwithstanding anything herein to the contrary, the right to
terminate this Agreement under this Section 8.1 shall not be available to any
party to the extent the failure of such party to fulfill any of its obligations
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date (as a result, for example, of an action
or failure to act causing a failure of a condition precedent).
(c) A party terminating this Agreement pursuant to this Section 8.1
shall give written notice thereof the other party hereto, whereupon this
Agreement shall terminate and be of no further force and effect, the
transactions contemplated hereby shall be abandoned without further action by
any party and there shall be no liability on the part of the Company or the
Purchaser, except as provided in Section 9.7 hereof and except for any liability
for any willful breach hereof; provided however that the provisions of Sections
5.1, 7.1 and 7.2 shall survive any such termination.
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<PAGE>
IX. GENERAL PROVISIONS
9.1. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
Notwithstanding any investigation conducted or notice or knowledge obtained by
or on behalf of any party hereto, each representation and warranty in this
Agreement and each agreement or covenant in this Agreement which does not by its
own terms expire on or prior to the Closing shall survive the Closing without
limitation as to time, except as specifically referred to herein.
9.2. Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given, (i) when received if given in person, or (ii) on the date of
transmission if sent by nationally recognized overnight courier, certified or
registered mail, return receipt requested or (iii) three days after being
deposited in the U.S. mail, postage prepaid:
(a) if to the Purchaser, addressed as follows:
Cape Ann Investors, L.L.C.
c/o Chilmark Fund II, L.P.
875 North Michigan Avenue
Suite 2100
Chicago, Illinois 60611
Attention: Mr. David M. Schulte
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
57
<PAGE>
(b) if to the Company, addressed as follows:
NutraMax Products, Inc.
51 Blackburn Drive
Gloucester, Massachusetts 01930
Attention: Robert F. Burns, Vice President and
Chief Financial Officer
with a copy to:
Eugene M. Schloss, Jr., Esq.
1700 Cary Road
Huntingdon Valley, Pennsylvania 19006-5002
and
Goodwin, Procter & Hoar, LLP
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Joseph L. Johnson III, Esq.
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<PAGE>
or to such other individual or address as a party hereto my designate for itself
by notice given as herein provided.
9.3. General. (a) This Agreement (including the documents and
-------
instruments referred to or incorporated herein, including the Warrants)
constitutes the entire agreement, and supersedes all of the prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; provided, however, if this Agreement is
terminated, it will not be deemed to supersede prior agreements between the
parties, including the 1997 Stock Purchase Agreement and the October Agreement,
and such agreements will continue in full force and effect.
(b) This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder other than as
contemplated in Article VI, Article VII and Section 9.3(d) and shall not be
assigned by any party by operation of law or otherwise.
59
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(c) This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, heirs and permitted assigns. This
Agreement is not assignable except by consent of each of the parties hereto or
operation of law; provided that in the event Purchaser shall distribute the
Shares to its investors (whether as a result of dissolution or otherwise), (i)
the holders of such Shares shall succeed to the rights and obligations of the
Purchaser contained in Article VI hereof and (ii) Chilmark Fund II, L.P. shall
succeed to the rights and obligations of the Purchaser contained in Section 4.5
hereof so long as it shall hold any Shares; and provided further that the
members of the Advisory Board of Chilmark to whom the Purchaser transferred
shares of Common Stock in accordance with the 1997 Stock Purchase Agreement
shall have the rights and obligations of the Purchaser with respect to such
shares contained in Section 5.6 and Article VI hereof, other than Section 6.2
hereof; and provided further that, prior to the Closing, the Purchaser may,
without the prior written consent of the Company and without relieving the
Purchaser of its obligations hereunder, assign to such members of the Advisory
Board of Chilmark the right and obligation to purchase up to 75,060 Shares as
long as such member agrees in writing to be bound by all of the terms of and to
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<PAGE>
perform all of the obligations of the Purchaser with respect to such Shares
contained in Section 5.6 and Article VI hereof, other than Section 6.2 hereof,
and makes a representation as to such member to the same effects set forth for
the Purchaser in Section 3.6 hereof or otherwise provides written evidence,
reasonably satisfactory to the Company, that such transfer may be effected in
compliance with the federal securities laws and applicable state securities
laws, in which case, upon consummation of the purchase of Shares by any such
member, such member shall have the rights and obligations of the Purchaser with
respect to such Shares contained in Section 5.6 and Article VI hereof, other
than Section 6.2 hereof. Any purported assignment of this Agreement in
violation of this Section 9.3 shall be null and void.
9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(b) Each party agrees that any proceeding relating to this Agreement
shall be brought in a state court of Delaware. Each party hereby consents to
personal jurisdiction in any such action brought in any such Delaware court,
consents to service of process by mail made upon such party and such party's
agent and waives any objection to venue in any such Delaware court or to any
claim that any such Delaware court is an inconvenient forum.
9.5. Severability of Provisions. If any provision or any portion of
---------------------------
61
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any provision of this Agreement or the application of any such provision or any
portion thereof to any person or circumstance, shall be held invalid or
unenforceable, to the extent permitted by law, the remaining portion of such
provision and the remaining provisions of this Agreement, or the application of
such provision or portion of such provision as is held invalid or unenforceable
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby.
9.6. Captions. All section titles or captions contained in this
--------
Agreement are for convenience only, shall not be deemed a part of this Agreement
and shall not affect the meaning or interpretation of this Agreement. All
references herein to Sections shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
9.7. Expenses. Except as otherwise expressly provided in this
--------
Agreement, the Company shall pay the expenses incidental to the preparation of
this Agreement, the carrying out of the provisions hereof and the consummation
of the transactions contemplated hereby.
9.8. Equitable Relief. Each party acknowledges that, in the event
----------------
of any breach of this Agreement by a party, the other party would be irreparably
and immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that such other party, in addition to any other remedy to
which it may be entitled, shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to compel specific
performance of this Agreement. Any requirements for the securing or posting of
any bond with respect to such remedy are hereby waived by each of the parties
hereto.
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9.9. Definitions. The following terms shall have the respective
-----------
meanings specified in the indicated Sections of this Agreement:
Term Agreement Section
- ----- -----------------
1997 Stock Purchase Agreement Recitals
Affiliate 5.6(a)
Agreement Recitals
Authority 1.3(b)
Board 1.3(d)(ii)
Buyer 5.6(c)(ii)
Chilmark 5.1(b)
Closing 1.3(a)
Commission 2.6
Common Stock Recitals
Company Recitals
Credit Facilities 1.3(b)
Credit Facility Amendments 1.3(b)
Encumbrances 1.1
Exchange Act 2.4
Financial Statements 2.7(a)
FNBB 1.3(b)
Governmental Entity 1.3(b)
Hart-Scott-Rodino Act 1.3(b)
Holder 6.8(a)
Korman Purchase Recitals
Korman Purchase Agreement Recitals
Legal Requirements 1.3(b)
Lenders Recitals
63
<PAGE>
Lepone Purchase Recitals
Lepone Purchase Agreement Recitals
Loan Agreement 1.3(b)
Material Adverse Effect 1.3(b)
NASD 2.3(a)
Notice of Proposed Transfer 5.6(c)(i)
October Agreement Recitals
Offering 6.3(c)
Other Holders 6.3(b)
Person 4.1
Purchase Agreements Recitals
Purchaser Recitals
Purchaser Material Adverse Effect 1.3(c)
Purchaser's Stock 6.1
Rule 13d-3 5.6(a)
SEC Reports 2.6
Securities Act 3.6(a)
Selling Stockholder 5.6(c)
Shares Recitals
Stock 5.6(a)
Stockholders 5.6(a)
Stockholders Meeting 5.7(b)
Stop Order 6.7(a)
Subsidiary 2.1
Suspension Event 6.7(b)
Transferee 5.6(c)(i)
Violation 6.8(a)
Warrants Recitals
64
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
-------------------
Name: Robert F. Burns
Title: Vice President, Chief Financial
Officer and Treasurer
CAPE ANN INVESTORS, L.L.C.
By: Chilmark Fund II, L.P., its Managing
Member
By: Chilmark II, L.L.C., its General Partner
By: /s/ David Schulte
-----------------
Name: David Schulte
Title: President
SOLELY FOR PURPOSES OF
SECTIONS 5.1, 5.2, 5.6, 5.7 AND 7.2:
CHILMARK FUND II, L.P.
By: Chilmark II, L.L.C., its General Partner
By: /s/ David Schulte
-----------------
Name: David Schulte
Title: President
65
<PAGE>
Exhibit 10(ee)
STOCK PURCHASE AGREEMENT
by and between
NUTRAMAX PRODUCTS, INC.,
and
BERNARD J. KORMAN
Dated as of November 6, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURCHASE AND SALE 2
1.1. Purchase and Sale 2
1.2. Purchase Price 2
1.3. Closing 2
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 6
2.1. Due Organization, etc. 6
2.2. Compliance with Law 7
2.3. Authorization; Execution and Delivery of Agreement 8
2.4. No Conflict; No Consent 9
2.5. Capital Stock 10
2.6. SEC Reports 11
2.7. Financial Statements 11
2.8. No Brokers 12
2.9. Litigation and Claims 12
2.10. Use of Proceeds 13
<PAGE>
Page
----
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 13
3.1. Authorization; Execution and Delivery of Agreement 13
3.2. No Conflict; No Consent 14
3.3. No Brokers 14
3.4. Litigation and Claims 14
3.5. Investment Purposes 15
IV. COVENANTS OF THE COMPANY 15
4.1. Conduct of Business 15
4.2. Exchange of Stock Certificates 16
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates 16
4.4. Course of Dealings with Lenders 17
4.5. Other Purchase Agreements 17
V. COVENANTS OF THE PURCHASER AND THE COMPANY 17
5.1. Hart-Scott-Rodino Act Filings 17
5.2. Public Disclosure and Confidentiality 18
5.3. Certain Notifications 18
ii
<PAGE>
Page
----
5.4. Efforts to Consummate; Further Actions 18
5.5. Proxy Statement; Stockholder Approval 19
VI. REGISTRATION RIGHTS 20
6.1. "Piggyback" Registration 20
6.2. Demand Registration 21
6.3. General Provisions 22
6.4. Information, Documents, Etc. 24
6.5. Expenses 25
6.6. Cooperation 26
6.7. Action to Suspend Effectiveness; Supplement to Registration
Statement 27
6.8. Indemnification 29
VII. INDEMNIFICATION 35
7.1. Indemnification by the Company 35
7.2. Indemnification by the Purchaser 35
VIII. TERMINATION 35
8.1 Termination 35
iii
<PAGE>
Page
----
IX. GENERAL PROVISIONS 37
9.1. Survival of Representations, Warranties and Agreements 37
9.2. Notices 37
9.3. General 38
9.4. Governing Law 39
9.5. Severability of Provisions 39
9.6. Captions 40
9.7. Expenses 40
9.8. Equitable Relief 40
9.9. Definitions 41
SCHEDULE 2.5(b)
SCHEDULE 2.7(c)
iv
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November 6,
---------
1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the
"Company"), and BERNARD J. KORMAN (the "Purchaser").
- -------- ---------
WHEREAS, the Company recently has defaulted on certain financial
covenants contained in the Company's Credit Facilities (as hereinafter defined),
waivers of which defaults were obtained from the Company's lenders under such
credit agreements (the "Lenders");
-------
WHEREAS, subject to the terms and conditions of this Agreement, the
Purchaser wishes to purchase from the Company, and the Company wishes to sell to
the Purchaser, additional shares (the "Shares") of the Company's Common Stock,
------
par value $0.001 per share (the "Common Stock");
------------
WHEREAS, the Purchaser and the Company are entering into this
Agreement to provide for such purchase and sale and to establish various rights
and obligations in connection therewith;
WHEREAS, in conjunction with the transactions contemplated by this
Agreement, the Company is also entering into agreements with each of Cape Ann
Investors, L.L.C. ("Cape Ann") and Donald E. Lepone, the President and Chief
--------
Executive Officer of the Company, with respect to the purchase from the Company
by Cape Ann and Mr. Lepone (the "Cape Ann Purchase" and the "Lepone Purchase,"
----------------- ---------------
respectively) of approximately 1,162,790 and 46,512 additional shares of Common
Stock, respectively (such agreements, the "Cape Ann
--------
1
<PAGE>
Purchase Agreement" and the "Lepone Purchase Agreement," respectively, and,
- ------------------ -------------------------
collectively, the "Purchase Agreements"); and
-------------------
WHEREAS, the proceeds from the sale of the Shares, together with the
proceeds from the sale of shares of Common Stock pursuant to the Purchase
Agreements, shall be used to facilitate the Company's negotiation of amendments
to the financial covenants and other terms of the Credit Facilities and to
enable the Company to retire existing indebtedness and to provide the Company
with additional working capital;
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
I. PURCHASE AND SALE
1.1. Purchase and Sale. Upon the terms and subject to the
-----------------
conditions set forth in this Agreement, the Company agrees to issue, sell and
deliver to the Purchaser, and the Purchaser agrees to purchase from the Company,
232,558 Shares. The Shares purchased and sold hereunder shall be free and clear
of any liens, security interests, pledges, voting agreements, claims, options
and encumbrances of every kind, character and description whatsoever
("Encumbrances"), except as contemplated by this Agreement.
- --------------
1.2. Purchase Price. As consideration for the sale of the Shares,
--------------
at the Closing (as hereinafter defined) the Purchaser shall pay the Company, in
immediately available funds, a purchase price of $4.30 per share.
1.3. Closing. (a) The closing of the transactions provided for in
-------
this
2
<PAGE>
Agreement (the "Closing") shall take place on the second business day after
-------
the satisfaction or waiver of the conditions set forth in Sections 1.3(b) and
1.3(c) of this Agreement at the offices of Goodwin, Procter & Hoar, LLP,
Exchange Place, Boston, Massachusetts, or at such other time and place as the
parties may mutually agree.
(b) Conditions Precedent to the Purchaser's Obligations.
---------------------------------------------------
The obligation of the Purchaser to consummate the transactions described in
this Agreement shall be subject to the satisfaction of the following conditions
on or prior to the Closing: (i) the representations and warranties of the
Company contained in this Agreement shall have been true and correct when made
and shall be true and correct in all material respects on the date of Closing
with the same effect as if they were made on such date; (ii) the Company shall
have performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company on or prior to the Closing; (iii) the Company shall have delivered to
the Purchaser a certificate, dated the date of Closing and signed by a duly
authorized officer of the Company, certifying as to the matters described in the
foregoing clauses (i) and (ii); (iv) no action, suit, investigation or
proceeding shall have been instituted before any court,
3
<PAGE>
administrative body or governmental agency (a "Governmental Entity") which seeks
-------------------
to restrain the consummation of, prohibit or declare illegal, or obtain a
material amount of damages arising from the transactions contemplated by this
Agreement and which is likely, in the Purchaser's reasonable judgment, to be
successful on the merits, and no temporary restraining order or injunction shall
have been issued by any Governmental Entity restraining or prohibiting, and no
other Legal Requirement (as hereinafter defined) shall have come into effect
making illegal, the performance of this Agreement or the consummation of any of
the transactions contemplated hereby; (v) all consents, approvals, permits and
authorizations required to be obtained from, and all filings required to be made
with, any Authority (as hereinafter defined) in connection with the consummation
of the transactions contemplated hereby shall have been obtained or made, and
all waiting periods specified under applicable Legal Requirements (including any
such waiting period applicable to the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act")), and all extensions thereof, the passing of which is
---------------------
required for such consummation, shall have passed, except as to such consents,
approvals,
4
<PAGE>
permits, authorizations or filings that, individually or in the aggregate, would
not have a material adverse effect on the condition (financial or otherwise),
business, operations, properties, assets or liabilities of the Company and its
Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse
----------------
Effect"); (vi) the issuance and sale of Common Stock contemplated by this
- ------
Agreement shall have been approved by the requisite affirmative vote of the
stockholders of the Company; (vii) from and after the date of this Agreement,
there shall not have occurred any changes concerning the Company that, when
combined, without duplication, with all other changes concerning the Company
from and after the date of this Agreement, have had or would reasonably be
expected to have a Material Adverse Effect; (viii) the Company shall have
obtained a waiver from the Lenders of any covenant defaults under the Credit
Facilities during the fourth quarter of fiscal 1998 and shall have entered into
amendments (the "Credit Facility Amendments") to each of the Revolving Credit
--------------------------
and Term Loan Agreement, dated as of December 30, 1996, as amended, between the
Company, The First National Bank of Boston ("FNBB"), Fleet National Bank,
----
National Bank of Canada, The Sumitomo Bank, Limited, and FNBB, as Agent (the
"Loan Agreement"), and the Purchase
--------------
5
<PAGE>
Agreement, dated as of December 30, 1996, as amended, between the Company and
ING (U.S.) Capital Corporation (together with the Loan Agreement, the "Credit
------
Facilities"), the terms of which amendments shall be reasonably satisfactory to
- ----------
the Purchaser, and such waiver and amendments shall be in full force and effect
without waiver or change in the material terms thereof; and (viii) all
conditions precedent to consummation of the Cape Ann Purchase and the Lepone
Purchase shall have been satisfied or waived by the appropriate party, and no
amendment to the Cape Ann Purchase Agreement or the Lepone Purchase Agreement
shall have been executed or agreed to that changes the material terms thereof in
a manner adverse to the Company without the Purchaser's prior written consent.
In the event any of the foregoing conditions to the Purchaser's obligation to
close hereunder is not satisfied on or before the Closing, the Purchaser may
waive such condition and proceed to Closing. As used herein, "Legal
-----
Requirements" shall include laws, regulations, ordinances, orders, decrees,
- ------------
permits, licenses, consents, approvals, registrations, authorizations and
qualifications required by or from any federal, state, local or foreign
governmental or regulatory authority (each, an "Authority").
---------
6
<PAGE>
(c) Conditions Precedent to the Company's Obligations. The obligation of the
-------------------------------------------------
Company to consummate the transactions described in this Agreement shall be
subject to the satisfaction of the following conditions on or prior to the
Closing: (i) the representations and warranties of the Purchaser contained in
this Agreement shall have been true and correct when made and shall be true and
correct in all material respects on the date of Closing with the same effect as
if they were made on such date; (ii) the Purchaser shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Purchaser on or prior to
the Closing; (iii) the Purchaser shall have delivered to the Company a
certificate, dated the date of Closing and signed by a duly authorized signatory
of the Purchaser, certifying as to the matters described in the foregoing
clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall
have been instituted before any Governmental Entity which seeks to restrain the
consummation of, prohibit or declare illegal, or obtain a material amount of
damages arising from the transactions contemplated by this Agreement and which
is likely, in the Company's reasonable judgment, to be successful on the merits
and
7
<PAGE>
no temporary restraining order or injunction shall have been issued by any
Governmental Entity restraining or prohibiting, and no other Legal Requirement
shall have come into effect making illegal, the performance of this Agreement or
the consummation of any of the transactions contemplated hereby; (v) all
consents, approvals, permits and authorizations required to be obtained from,
and all filings required to be made with, any Authority in connection with the
consummation of the transactions contemplated hereby shall have been obtained or
made, and all waiting periods specified under applicable Legal Requirements
(including any such waiting period applicable to the transactions contemplated
hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing
of which is required for such consummation, shall have passed, except as to such
consents, approvals, permits, authorizations or filings that, individually or in
the aggregate would not have a Material Adverse Effect; and (vi) the issuance
and sale of Common Stock contemplated by this Agreement shall have been approved
by the requisite affirmative vote of the stockholders of the Company. In the
event any of the foregoing conditions to the Company's obligation to close
hereunder is not satisfied on or before the Closing, the Company may waive such
condition and proceed to Closing.
8
<PAGE>
(d) Company Closing Deliveries. At the Closing, the Company will deliver
--------------------------
to the Purchaser the following:
(i) a stock certificate or certificates representing the Shares; and
(ii) a certificate of the Secretary of the Company certifying as to the
adoption and effect of resolutions of the Board of Directors of the Company
(the "Board") authorizing the execution, delivery and performance of this
-----
Agreement.
(e) Purchaser Closing Deliveries. At the Closing, the Purchaser will
----------------------------
deliver to the Company payment of the purchase price provided by Section 1.2.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Due Organization, etc. The Company and each of its
---------------------
Subsidiaries (as hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and each has all requisite corporate power and authority to own,
operate and lease its respective properties and assets and to conduct its
respective businesses as now conducted and is qualified to do business in each
state or other jurisdiction where the nature of its properties, assets or
businesses requires such qualification other than where the failure to be so
qualified would not, individually or in the aggregate have a Material Adverse
Effect. All of the outstanding shares of capital stock of each Subsidiary of
the Company are validly issued, fully paid and non-assessable, other than the
shares of capital stock
9
<PAGE>
of foreign Subsidiaries which are not fully paid and which failure to be fully
paid, individually or in the aggregate, does not have a Material Adverse Effect,
and all of such outstanding shares are owned, directly or indirectly, by the
Company free and clear of all Encumbrances, except for liens or security
interests or pledge arrangements involving the capital stock of the Subsidiaries
in favor of the Company's lenders. "Subsidiary" means a corporation or other
----------
business arrangement a majority of the outstanding voting securities or
ownership interests of which is owned, directly or indirectly, by the Company,
by one or more other Subsidiaries or by the Company and one or more other
Subsidiaries.
2.2. Compliance with Law. The Company and each Subsidiary has
-------------------
obtained and maintains in full force and effect all permits, licenses, consents,
approvals, registrations, memberships, authorizations and qualifications under
all federal, state, local and foreign laws and regulations, and with all
Authorities, required for the conduct by it of its businesses and the ownership
or possession by it of its properties and assets other than where the failure to
obtain or maintain such permits, licenses, consents, approvals, registrations,
memberships, authorizations or qualifications would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and each Subsidiary are
in compliance with all laws, regulations, ordinances, orders and decrees
(including, without limitation, all environmental and occupational, health and
safety laws) of any Authority applicable to the conduct by the Company and each
Subsidiary of their respective businesses and to their ownership and possession
of their respective properties and assets, other than where the failure so to
comply would not, individually or in the aggregate, have a Material Adverse
Effect.
10
<PAGE>
2.3. Authorization; Execution and Delivery of Agreement. (a)
--------------------------------------------------
Except to the extent that the By-laws of, or other rules or regulations
promulgated by, the National Association of Securities Dealers ("NASD")
----
applicable to Nasdaq SmallCap listed companies may require stockholder approval
of the issuance of shares hereunder, the execution and delivery of this
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions contemplated hereby (i) do not require the
approval or consent of any stockholders of the Company and (ii) have been duly
authorized by all necessary corporate action on the part of the Company for all
purposes, including Section 203 of the Delaware General Corporation Law. Except
to the extent that the By-laws of, or other rules or regulations promulgated by,
the NASD applicable to Nasdaq SmallCap listed companies may require stockholder
approval of the issuance of shares hereunder, this Agreement has been duly
executed and delivered by the Company and this Agreement constitutes the legal,
valid, binding and enforceable obligation of the Company, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. The Company has full corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder.
(b) Except to the extent that the By-laws of, or other rules or
regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed
companies may require
11
<PAGE>
stockholder approval of the issuance of shares hereunder, (i) the Shares have
been duly authorized by all necessary corporate action on the part of the
Company, and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration therefor set forth herein, the
Shares will be validly issued, fully paid and non-assessable and (ii) the
Purchaser will acquire valid and marketable title to the Shares, free and clear
of any Encumbrances except as contemplated by this Agreement.
2.4. No Conflict; No Consent. Except to the extent that the By-
-----------------------
laws of, or other rules or regulations promulgated by, the NASD applicable to
Nasdaq SmallCap listed companies may require stockholder approval of the
issuance of shares hereunder, the execution and delivery of this Agreement, the
issuance and sale of the Shares to the Purchaser and the consummation of the
transactions contemplated hereby do not, and will not, conflict with, or result
in any violation of or default under, or permit the acceleration of any
obligation under, or the creation or imposition of any Encumbrance on any of the
properties or assets of the Company or any Subsidiary under, (i) any provision
of the certificate of incorporation or by-laws or similar constituent documents
of the Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of
trust, loan agreement or other agreement or instrument, or any permit, license,
registration, membership, authorization or qualification from any Authority, of
the Company or any Subsidiary or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation of any Authority to which the Company or any
of its Subsidiaries is a party or by which any of
12
<PAGE>
them is bound, other than, in the case of clause (ii) above, where such
conflict, violation, default, acceleration or Encumbrance would not,
individually or in the aggregate, have a Material Adverse Effect. No consent,
approval, order or authorization of, or registration, declaration, filing with
or notice to, any Authority or third party is required to be made or obtained by
the Company or any Subsidiary (including, without limitation, under any
environmental or occupational, health and safety laws) in order to execute or
deliver this Agreement, issue and sell the Shares or to consummate the
transactions contemplated hereby, other than (A) as may be required by the Hart-
Scott-Rodino Act, (B) as a result of the periodic reporting requirements under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (C) the
------------
listing requirements of the NASDAQ SmallCap Market, or except where the failure
to make or obtain any such consent, approval, order, authorization,
registration, declaration, filing or notice would not have a Material Adverse
Effect.
2.5. Capital Stock. (a) The authorized capital stock of the
-------------
Company consists of 20,000,000 shares of Common Stock, of which, as of October
3, 1998, 5,682,168 shares were outstanding and 9,665 shares were held in
treasury and 1,296,633 shares are reserved for future issuance pursuant to any
option, warrant or other rights agreement, arrangement or other commitment. All
of the issued and outstanding shares of Common Stock have been validly issued
and are fully paid and non-assessable.
13
<PAGE>
(b) (i) Other than this Agreement, the Cape Ann Purchase Agreement,
the Lepone Purchase Agreement and the warrants to purchase Common Stock issued
to Cape Ann and others or as set forth on Schedule 2.5(b) hereto, there are not
authorized or outstanding any subscriptions, options, conversion rights,
warrants or other agreements, securities or commitments of any nature whatsoever
(whether oral or written and whether firm or conditional) obligating the Company
or any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, to any person any shares of Common Stock or any other shares of the
capital stock of the Company or any shares of the capital stock of any
Subsidiary, or any securities convertible into or exchangeable for any such
shares, or obligating any such person to grant, extend or enter into any such
agreement or commitment; and (ii) except as set forth on Schedule 2.5(b) hereto,
there is no obligation, contingent or otherwise, of the Company to repurchase,
redeem or otherwise acquire any share of capital stock or other equity interests
of the Company or any Subsidiary. No class of capital stock of the Company is
entitled to preemptive rights.
2.6. SEC Reports. Except with respect to the amendment to the
-----------
Current Report on Form 8-K dated September 11, 1998 (filed with the Commission
(as hereinafter defined) on September 26, 1998) contemplated by the disclosure
contained in Items 7(a) and (b) thereof, the Company has filed with the
Securities and Exchange Commission (the "Commission") all proxy statements,
----------
reports, forms and other documents required to be filed by it after January 1,
1995 under the Exchange Act (collectively, the "SEC Reports"). As of their
-----------
respective dates, the SEC Reports (i) complied as to form in all material
respects with the applicable requirements of the
14
<PAGE>
Exchange Act and the rules and regulations of the Commission thereunder and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.7. Financial Statements. (a) The financial statements
--------------------
(including any related notes) included in the SEC Reports (the "Financial
---------
Statements") have been prepared in accordance with generally accepted accounting
- ----------
principles consistently applied throughout the periods involved (except as may
be noted therein) and fairly present the consolidated financial condition,
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of the dates thereof and for the periods ended on such dates (in
each case subject, as to interim statements, to changes resulting from year-end
adjustments (none of which were or, except as otherwise disclosed to the
Purchaser in writing, will be material in amount or effect) and except as
permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act).
(b) On the date hereof, except as disclosed in the SEC Reports,
neither the Company nor any Subsidiary has any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due and whether or not required to be disclosed in the SEC Reports,
other than liabilities that have been disclosed to the Purchaser in writing,
have been incurred in the ordinary course of business or are not in the
aggregate material to the Company and its Subsidiaries taken as a whole. Since
September 28, 1996, the Company has not declared or paid any dividends to any of
its stockholders.
15
<PAGE>
(c) Except as set forth on Schedule 2.7(c), since September 28, 1996,
the Company and each of its Subsidiaries have conducted their respective
businesses only in the ordinary course in substantially the same manner as
theretofore conducted and the Company and its Subsidiaries, taken as a whole,
have not undergone or suffered any Material Adverse Effect, except as otherwise
disclosed to the Purchaser in writing.
2.8. No Brokers. No broker, finder or investment banker is
----------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.
2.9. Litigation and Claims. There is no claim, prosecution, suit,
---------------------
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries or any of their respective properties or assets (nor, to the
knowledge of the Company, are there any facts or circumstances providing a basis
for any such claim, prosecution, suit, action, arbitration, proceeding,
investigation or review) which, if adversely determined, would be reasonably
likely to have a Material Adverse Effect or would prohibit or impose any
limitations on the Purchaser's ownership of the Shares or would prohibit or make
illegal the acceptance for payment, purchase of or payment for the Shares.
Neither the Company nor any of its Subsidiaries is in default with respect to
any judgment, decree, injunction, rule or order of any court, arbitrator or
Authority
16
<PAGE>
outstanding against or binding upon the Company or any of its Subsidiaries,
other than where any such defaults would not, individually or in the aggregate,
have a Material Adverse Effect.
2.10. Use of Proceeds. The Company intends to use the proceeds
---------------
from the sale of Shares to retire debt of the Company under the revolving credit
facility under the Loan Agreement and for other general corporate purposes.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
3.1. Authorization; Execution and Delivery of Agreement. The
--------------------------------------------------
Purchaser has all requisite power and authority to execute this Agreement, to
perform his obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and this Agreement constitutes the
legal, valid, binding and enforceable obligation of the Purchaser, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
3.2. No Conflict; No Consent. The execution and delivery of this
-----------------------
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions contemplated hereby do not, and will not,
conflict with, or result in any violation of or default under, or permit the
acceleration of any obligation under, or the creation or imposition of any
17
<PAGE>
Encumbrance on any of the properties or assets of the Purchaser under, (i) any
indenture, lease, mortgage, deed of trust, loan agreement or other agreement or
instrument, or any permit, license, registration, membership, authorization or
qualification from any Authority, of the Purchaser or (ii) any judgment, order,
decree, statute, law, ordinance, rule or regulation of any Authority to which
the Purchaser is a party or by which he is bound. Other than as required by the
Hart-Scott-Rodino Act or as a result of the reporting requirements of the
Exchange Act, no consent, approval, order or authorization of, or registration,
declaration, filing with or notice to, any Authority is required to be made or
obtained by the Purchaser in order to execute or deliver this Agreement or to
consummate the transactions contemplated hereby.
3.3. No Brokers. No broker, finder or investment banker is
----------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Purchaser.
3.4. Litigation and Claims. There is no claim, prosecution, suit,
---------------------
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Purchaser, threatened against or affecting the Purchaser, or
any of his properties or assets which, if adversely determined, would prohibit
or make illegal the purchase of or payment for the Shares.
3.5. Investment Purposes. (a) The Purchaser, by reason of his
-------------------
business and financial experience, has such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risks of his investment in the Shares, and is
18
<PAGE>
purchasing the Shares hereunder for his own account, for investment only and not
with a view to, or any present intention of, effecting a distribution of such
securities or any part thereof. The Purchaser acknowledges that the Shares to be
purchased hereunder have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or the securities laws of any state or other
--------------
jurisdiction and cannot be disposed of unless they are subsequently registered
under the Securities Act and any applicable state laws or exemption from such
registration is available.
(b) The Purchaser is an "accredited investor" as that term is defined
in Rule 501 promulgated under the Securities Act.
(c) The Purchaser has had the opportunity to ask questions and to
receive answers concerning the financial condition, operations and prospects of
the Company and the terms and conditions of the Purchaser's investment, as well
as the opportunity to obtain any additional information necessary to verify the
accuracy of information furnished in connection therewith that the Company
possesses or can acquire without unreasonable effort or expense.
IV. COVENANTS OF THE COMPANY
The Company covenants and agrees that:
4.1. Conduct of Business. Except as specifically consented to in
-------------------
writing by the Purchaser or expressly contemplated by this Agreement, during the
period from the date of this Agreement up to and including the date of the
Closing, the Company shall, and shall cause each of its Subsidiaries to, (i)
conduct its business in the usual and ordinary course consistent with past
practice and use its reasonable best efforts to preserve its business
organization intact, to
19
<PAGE>
keep available the services of its key employees, material independent
contractors and material consultants currently employed, to preserve the present
relationships with customers, suppliers and other Persons (as hereinafter
defined) with whom it has significant business relations, to maintain books and
records in the usual and ordinary manner, and to preserve the goodwill and
ongoing business; and (ii) except pursuant to agreements or commitments entered
into by the Company or its Subsidiaries prior to the date of this Agreement and
listed on Schedule 2.5(b) hereto, not issue or sell (or agree to issue or sell)
any stock of any class or any other securities, or any options, warrants,
conversion or other rights to purchase any such securities, or grant, or agree
to grant, any such options or modify or alter the terms of any of the above. As
used herein, "Person" means any individual, partnership, joint venture, firm,
------
corporation, association, trust or other entity or any government or political
subdivision or agency, department or instrumentality thereof.
4.2. Exchange of Stock Certificates. Promptly upon surrender of
------------------------------
any certificates representing Shares at the office of the Company, the Company
will, at its expense, execute and deliver to the Purchaser a new certificate or
certificates in denominations specified by the Purchaser for an aggregate number
of Shares equal to the number of Shares represented by the certificates
surrendered.
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon
-------------------------------------------------------
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any
20
<PAGE>
certificate for Shares and, in the case of loss, theft or destruction, upon
delivery of an indemnity satisfactory to the Company (which, in the case of the
Purchaser may be an undertaking by the Purchaser to so indemnify the Company),
or, in the case of mutilation, upon surrender and cancellation thereof, the
Company will issue a new certificate of like tenor for a number of Shares equal
to the number of Shares represented by the certificate lost, stolen, destroyed
or mutilated.
4.4. Course of Dealings with Lenders. The Company shall use its
-------------------------------
reasonable best efforts to obtain the consents and approvals of the Lenders, and
to negotiate and enter into Credit Facility Amendments, necessary for the
consummation of the transactions contemplated by this Agreement. The Company
shall keep the Purchaser apprised of all material developments in connection
with the negotiation of the Credit Facility Amendments. Without limiting the
foregoing, the Company shall provide to the Purchaser, promptly after receipt
thereof by the Company, a copy of each draft of the proposed amendments to the
Credit Facilities and shall consult with the Purchaser in connection with the
negotiation thereof.
4.5. Other Purchase Agreements. The Company shall provide to the
-------------------------
Purchaser, promptly after receipt or completion thereof by the Company, a copy
of the proposed final draft of each of the Cape Ann Purchase Agreement and the
Lepone Purchase Agreement and of any proposed amendment of either thereof (or
any proposed waiver of any of the terms or conditions of either thereof).
21
<PAGE>
V. COVENANTS OF THE PURCHASER AND THE COMPANY
5.1. Hart-Scott-Rodino Act Filings. Each party covenants and
-----------------------------
agrees to file, if required, on a date no later than ten days from the date
hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with
respect to the purchase by the Purchaser of the Shares pursuant to this
Agreement and will provide promptly any supplemental information that may be
requested in connection therewith. Each party will comply with all reasonable
requests of the other party for information necessary in connection with the
preparation by such other party of its notification and report form.
5.2. Public Disclosure and Confidentiality. Each party hereby
-------------------------------------
agrees that, prior to the Closing, except as required by applicable law (or
under the rules and regulations of the Nasdaq Stock Market (or any national
securities exchange on which the Common Stock is listed)), no press release or
public announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement, the terms hereof or
the transactions contemplated hereby unless specifically approved in advance by
both parties. In the event that a party views disclosure as required by
applicable law (or the rules and regulations of the Nasdaq Stock Market or any
such national stock exchange) as contemplated by the previous sentence, such
disclosing party shall provide a copy of such disclosure to the other party
within a reasonable period of time prior to such disclosure.
22
<PAGE>
5.3. Certain Notifications. At all times prior to the Closing,
---------------------
each party hereto shall promptly notify the other party in writing of the
occurrence of any event which will or could reasonably result in the failure of
any of the conditions contained in Article I hereof to be satisfied. Such
notice shall be in additional to and not in lieu of the other notices and
communications provided for herein.
5.4. Efforts to Consummate; Further Actions. Subject to the terms
--------------------------------------
and conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
5.5. Proxy Statement; Stockholder Approval. (a) The Company
-------------------------------------
shall, as promptly as practicable following the date of this Agreement, prepare
and file with the Commission, and will use its best efforts to have cleared by
the Commission and thereafter shall mail to its stockholders as promptly as
practicable a proxy statement and a form of proxy in connection with, among
other things, the vote of the Company's stockholders to approve the issuance and
sale of Common Stock contemplated by this Agreement. The proxy statement, and
any amendments thereof or supplements thereto, will not, at the time of the
mailing of the proxy statement or any amendments thereof or supplements thereto
and at the time of the Stockholders Meeting (as hereinafter defined), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
information supplied in writing by the
23
<PAGE>
Purchaser specifically for inclusion in the proxy statement. The proxy statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated thereunder.
(b) The Company shall duly call, give notice of, convene and hold its
annual, or a special, meeting of its stockholders (the "Stockholders Meeting")
--------------------
and shall use its best efforts to obtain the requisite affirmative approval of
its stockholders at the Stockholders Meeting of the issuance and sale of the
Common Stock contemplated by this Agreement. The Purchaser shall be present, in
person or by proxy, at the Stockholders Meeting and shall vote or cause to be
voted all shares of Common Stock held of record or beneficially owned (with the
power to vote or direct the vote) by him and eligible to vote as of the record
date for such meeting in favor of the proposal seeking such approval.
VI. REGISTRATION RIGHTS
The Company covenants and agrees to provide the following registration
rights:
6.1. "Piggyback" Registration. If, at any time while the Purchaser
-----------------------
shall hold shares of Common Stock, the Company proposes to file a registration
statement relating to the offering of any of its capital stock under the
Securities Act (other than (i) a registration statement required to be filed in
respect of employee benefit plans of the Company on Form S-8 or any similar form
from time to time in effect, (ii) any registration statement on Form S-4 or
similar successor form, or (iii) a registration statement relating to a
transaction pursuant to Rule 145 of the Securities Act), whether or not for sale
for its own account, the Company shall, at least
24
<PAGE>
twenty-one days (or if such twenty-one day period is not practicable, then a
reasonable shorter period which shall not be less than seven days) prior to such
filing, give written notice of such proposed filing to the Purchaser. Upon
receipt by the Company not more than seven days (unless the notice given to the
Purchaser pursuant to the previous sentence is less than ten days, in which case
such seven-day period shall be shortened to five days) after such notice of a
written request from the Purchaser for registration of Purchaser's Stock (as
hereinafter defined), (i) the Company shall, subject to Section 6.3, include
such Purchaser's Stock in such registration statement, and shall use all
reasonable efforts to cause such registration statement to become effective with
respect to such Purchaser's Stock, unless the managing underwriter therefor
concludes in its reasonable judgment that the number of securities requested to
be included in such registration exceeds the number which can reasonably be sold
in (or during the time of) such offering, in which case the Company may (i)
include all securities initially proposed by the Company to be sold for its own
account and (ii) decrease the number of shares of Purchaser's Stock and any
other securities (other than securities included by virtue of clause (i) above)
proposed to be sold to the extent necessary to reduce the number of securities
to be included in the registration to the level recommended by the managing
underwriter; provided, however, that there shall be no such decrease in the
number of shares of Purchaser's Stock unless the number of shares of Purchaser's
Stock and such other securities (other than the securities included by virtue of
clause (i) above) proposed to be sold has been decreased on a pro rata basis,
calculated
25
<PAGE>
according to the number of shares of Purchaser's Stock and other securities
requested to be included by the respective holders of each. "Purchaser's Stock"
-----------------
means any shares of Common Stock acquired by the Purchaser pursuant to this
Agreement or otherwise for which the Purchaser requests registration pursuant to
Section 6.1 or 6.2.
6.2. Demand Registration. If the Company shall receive at any time
-------------------
or from time to time a written request from the Purchaser requesting the Company
to register any shares of Purchaser's Stock under the Securities Act on Form S-3
(or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or
any other similar form then in effect, the Company agrees that it will use all
reasonable efforts to cause the prompt registration of all shares of Purchaser's
Stock as to which such request is made (or will amend or supplement an effective
registration statement to include Purchaser's Stock). The Company may postpone
for a limited time, which in no event shall be longer than 90 days, compliance
with a request for registration pursuant to this Section 6.2 if (i) the Company
shall have given notice to the Purchaser of the occurrence of a Suspension Event
(as hereinafter defined) or (ii) the Company is conducting a public offering of
capital stock and the managing underwriter concludes in its reasonable judgment
that such compliance would materially adversely affect such offering.
Notwithstanding anything in this Section 6.2 to the contrary, the Company shall
not be required to: (a) comply with more than two (2) requests of the Purchaser
pursuant to this Section 6.2 or (b) prepare or cause to be prepared audited
financial statements of the Company other than those
26
<PAGE>
prepared in the normal course of the Company's business at its fiscal year end.
Any underwriter selected by the Purchaser to act as such in connection with a
registration pursuant to this Section 6.2 shall be reasonably acceptable to the
Company. The Company shall not be required to file and effect a new registration
pursuant to this Section 6.2(b) until a period of nine (9) months has elapsed
from the termination of the registration statement with respect to Purchaser's
Stock covered by a prior registration request. The Company agrees that in the
event the Purchaser makes a request under this Section 6.2 to cause the Company
to effect a demand registration and the Company is precluded from effecting such
registration with respect to 25% or more of the shares of Purchaser's Stock
subject to such request as a consequence of the terms of registration rights
previously granted by the Company to any of the Other Holders, then, under such
circumstances, such request shall not be counted against the number of demand
requests granted to Purchaser under this Section 6.2.
6.3. General Provisions. (a) The Company will use all reasonable
------------------
efforts to cause any registration statement referred to in Sections 6.1 and 6.2
to become effective and to remain effective (with a prospectus at all times
meeting the requirement of the 1933 Act) until the earlier of 180 days from the
effective date of the registration statement and the date the Purchaser
completes its distribution of Purchaser's Stock, subject, however, to the
Company's suspension rights set forth in Section 6.7(b). The Company will use
all reasonable efforts to effect such qualifications under applicable Blue Sky
or other state securities laws as may be
27
<PAGE>
reasonably requested by the Purchaser (provided that the Company shall not be
obligated to file a general consent to service of process or qualify to do
business as a foreign corporation or otherwise subject itself to taxation in any
jurisdiction solely for the purpose of any such qualification) to permit or
facilitate such sale or other distribution. The Company will cause the
Purchaser's Stock to be listed on the principal stock exchange on which the
shares of Common Stock are listed.
(b) The Purchaser acknowledges that the Company has previously granted
registration rights to other holders of Common Stock and/or other securities
issued by the Company that are convertible into or exercisable for shares of
Common Stock (collectively, the "Other Holders"). The Purchaser further
-------------
acknowledges that, notwithstanding anything to the contrary provided in this
Agreement, the registration rights granted to the Purchaser under this Agreement
shall, in every case, be subject to the rights of the Other Holders and, to the
extent, if any, that any of the provisions of this Article VI conflict or are
inconsistent with any of such rights of the Other Holders, such rights of the
Other Holders shall govern with respect to the subject matter of such conflict
or inconsistency.
(c) The Purchaser agrees, if requested by the managing underwriter or
underwriters in an underwritten offering (an "Offering"), not to effect any
--------
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of
28
<PAGE>
such Offering), during the 15-day period prior to, and during the 90-day period
beginning on, the date of pricing of each Offering, to the extent timely
notified in writing by the Company or the managing underwriters. Furthermore,
notwithstanding anything to the contrary set forth in the Agreement, the
Company's obligation under this Agreement to cause a registration statement and
any filings with any state securities commission to be made or to become
effective or to amend or supplement such registration statement shall be
suspended in the event and during such period as the Company is proceeding with
an Offering if the Company is advised by the underwriters that the sale of
shares of Purchaser's Stock under such registration statement would have a
material adverse effect on the Offering.
(d) Following the effectiveness of a registration statement and the
filings with any state securities commissions, the Purchaser agrees that he will
not effect any sales of the Purchaser's Stock pursuant to such registration
statement or any such filings at any time after he has received notice from the
Company to suspend sales (i) as a result of the occurrence or existence of any
Suspension Event, or (ii) so that the Company may amend or supplement such
registration statement or such filing. The Purchaser may recommence effecting
sales of the Purchaser's Stock pursuant to the registration statement or such
filings following further notice to such effect from the Company, which notice
shall be given by the Company not later than three (3) business days after the
conclusion of any such Suspension Event or amendment or supplement.
29
<PAGE>
6.4. Information, Documents, Etc. Upon making a request for
---------------------------
registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the
Company such information regarding its holdings and the proposed manner of
distribution thereof as the Company may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Article VI. The Company agrees that it will furnish to the
Purchaser the number of prospectuses, offering circulars or other documents, or
any amendments or supplements thereto, incident to any registration,
qualification or compliance referred to in this Article VI as the Purchaser from
time to time may reasonably request.
6.5. Expenses. The Company will bear all expenses of registrations
--------
pursuant to Section 6.1 and one-half of all expenses of the registrations (and
amendments and supplements related thereto) pursuant to Section 6.2 (in each
case, other than underwriting discounts and commissions and brokerage
commissions and fees, if any, payable with respect to shares of Purchaser's
Stock sold by the Purchaser, and fees and expenses of any accountants, counsel
or other parties retained or employed by the Purchaser) including, without
limitation, registration fees, printing expenses, expenses of compliance with
Blue Sky or other state securities laws, and legal and audit fees incurred by
the Company in connection with such registration and amendments or supplements
in connection therewith. The Purchaser will bear one-half of all expenses of
the registrations (and amendments and supplements related thereto) pursuant to
Section 6.2, including, without limitation, registration fees, printing
expenses, expenses of
30
<PAGE>
compliance with Blue Sky or other state securities laws, and legal and audit
fees incurred by the Company and the Purchaser. Notwithstanding the foregoing,
the Company agrees that in the event that subsequent to the date hereof the
Company shall grant demand registration rights to a third party and shall agree
in connection therewith to bear all or a greater portion of the expenses of such
demand registrations than as set out above, then this Section 6.5 shall be
deemed to have been amended to provide for the Company to bear, and the Company
shall bear, the same portion of the expenses of any subsequent registration
pursuant to Section 6.2 of this Agreement as the Company shall have agreed to
bear for such third party.
6.6. Cooperation. In connection with any registration of
-----------
Purchaser's Stock pursuant to this Article VI, the Company agrees to:
(a) enter into such customary agreement (including an underwriting
agreement containing such representations and warranties by the Company and such
other terms and provisions, including indemnification provisions, as are
customarily contained in underwriting agreements for comparable offerings and,
if no underwriting agreement is entered into, an indemnification agreement on
such terms as is customary in transactions of such nature) and take all such
other actions as the Purchaser or the underwriters, if any, participating in
such offering and sale may reasonably request in order to expedite or facilitate
such offering and sale;
(b) furnish, at the request of the Purchaser or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with
31
<PAGE>
respect to the Purchaser's Stock and/or the date of the closing for the sale of
the Purchaser's Stock from the independent certified public accountants of the
Company and addressed to the Purchaser and any underwriters participating in
such offering and sale, which letter or letters shall state that such
accountants are independent with respect to the Company within the meaning of
Rule 1.01 of the Code of Professional Ethics of the American Institute of
Certified Public Accountants and shall be in form reasonably satisfactory to the
managing underwriter (or, if none, to the Purchaser) and shall cover matters of
the type customarily covered in "cold comfort" letters in connection with
transactions of a similar nature for similar entities and (ii) an opinion, dated
the date of the closing for the sale of the Purchaser's Stock, of the counsel
representing the Company with respect to such offering and sale (which counsel
may be the General Counsel of the Company or other counsel reasonably
satisfactory to the Purchaser), addressed to the Purchaser and any such
underwriters, which opinion shall be in form reasonably satisfactory to the
managing underwriter (or, if none, to the Purchaser) and shall address such
matters as are customary in transactions of a similar nature for similar
entities;
(c) make available for inspection by the Purchaser, the underwriters,
if any, participating in such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager or managers for such
participating underwriters), the counsel for the Purchaser, one accountant or
accounting firm retained by the Purchaser and any such underwriters, or any
other agent retained by the Purchaser or such underwriters, all financial and
32
<PAGE>
other records, corporate documents and properties of the Company, and supply
such additional information, as they shall reasonably request; provided that any
---------
such party shall keep the contents thereof confidential.
6.7. Action to Suspend Effectiveness; Supplement to Registration
-----------------------------------------------------------
Statement. (a) The Company will notify the Purchaser and its counsel
- ---------
promptly of (i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Purchaser's Stock or the institution or
threatening of any proceeding for such purpose (a "Stop Order") or (ii) the
----------
receipt by the Company of any notification with respect to the suspension of the
qualification of the Purchaser's Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. Immediately upon
receipt of any such notice, the Purchaser shall cease to offer or sell any
Purchaser's Stock pursuant to the registration statement in the jurisdiction to
which such Stop Order or suspension relates. The Company will use all
reasonable efforts to prevent the issuance of any such Stop Order or the
suspension of any such qualification and, if any such Stop Order is issued or
any such qualification is suspended, to obtain as soon as possible the
withdrawal or revocation thereof, and will notify the Purchaser and his counsel
at the earliest practicable date of the date on which the Purchaser may offer
and sell Purchaser's Stock pursuant to the registration statement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to cause the
registration of Purchaser's Stock and
33
<PAGE>
any filings with any state securities commission to be made or to become
effective or to amend or supplement a registration statement shall be suspended
in the event and during such period that there are pending negotiations relating
to, or consummation of, a transaction or the occurrence of an event that would
require additional disclosure of material information by the Company in such
registration statement or such filing (such circumstances being hereinafter
referred to as a "Suspension Event") that would make it impractical or
----------------
inadvisable to cause such registration statement or such filings to be made or
to become effective or to amend or supplement such registration statement, but
such suspension shall continue only for so long as such event or its effect is
continuing but in no event will that suspension exceed ninety (90) days.
Immediately upon receipt by the Purchaser of notice of a Suspension Event, the
Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to such
registration statement, cease to deliver or use such registration statement and,
if so requested by the Company, return to the Company, at its expense, all
copies (other than permanent file copies) of such registration statement.
(c) In the event the Company shall determine that it is necessary to
amend or supplement any registration statement relating to Purchaser's Stock,
the Company will furnish copies of such proposed amendment or supplement to the
Purchaser and his counsel and will not file or distribute such amendment or
supplement without the prior consent of the Purchaser, which consent shall not
be unreasonably withheld.
34
<PAGE>
6.8. Indemnification In the event any Purchaser's Stock is
---------------
included in a registration statement under this Article VI:
(a) To the full extent permitted by law, the Company will indemnify
and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock
as set forth in Section 9.3(d) hereof (each, a "Holder") from and against any
------
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
---------
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus, any final prospectus contained
therein or any amendments or supplements thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company in connection with the registration of
Purchaser's Stock under the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will pay to each
such Holder, as incurred, any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, that the indemnity agreement contained in this
Section 6.8(a) shall not apply to amounts paid in
35
<PAGE>
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable hereunder in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by the Purchaser; and provided, further, that
-------- -------
the Company shall not be liable hereunder in any such case to the extent it is
determined that any such loss, claim, damage, liability or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made:
(A) in any such preliminary prospectus, if (I) it was the
responsibility of such Holder to provide the person asserting such loss,
claim, damage, liability or expense with a current copy of the prospectus
and such Holder failed to deliver or cause to be delivered a current copy
of the prospectus to such person after the Company had furnished such
Holder with a sufficient number of copies of the same and (II) the current
prospectus corrected such untrue statement or omission; or
(B) in such prospectus, if such untrue statement or omission is
corrected in an amendment or supplement to such prospectus and the Holder
thereafter fails to deliver the prospectus as so amended or supplemented
prior to or concurrently with the sale of Purchaser's Stock to the person
asserting such loss, claim, damage, liability or expense after the Company
had furnished such Holder with a sufficient number copies of the same.
36
<PAGE>
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director, officer,
employee, general or limited partner, member, agent, representative or
controlling person and shall survive the transfer of such securities by such
Holder. Each Holder shall furnish such information regarding itself or the
claim in question as the Company may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(b) To the full extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon (i) any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for
37
<PAGE>
use in connection with such registration or (ii) an untrue statement or alleged
untrue statement or omission or alleged omission made in the circumstances
described in clauses (A) or (B) of Section 6.8(a); and each such Holder will
pay, as incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 6.8(b), in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, that the indemnity agreement contained in this Section 6.8(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that, in no
--------
event shall any indemnity under this Section 6.8(b) exceed the gross proceeds
from the offering received by such Holder; and provided, further, that the
-------- -------
obligation to provide indemnification pursuant to this Section 6.8(b) shall be
several, and not joint and several, among such indemnifying parties. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer,
representative or controlling person and shall survive the transfer of such
securities by such prospective seller.
(c) Promptly after receipt by an indemnified party under this Section
6.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6.8, deliver to the
indemnifying party a written notice of the commencement
38
<PAGE>
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
selected by the indemnifying party or parties. The failure to deliver written
notice to the indemnifying party within a reasonable time after the commencement
of any such action, if materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 6.8 to the extent of such prejudice, but
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 6.8. The indemnified party shall have the right, but not
the obligation, to participate in the defense of any action referred to above
through counsel of its own choosing and shall have the right, but not the
obligation, to assert any and all separate defenses, cross claims or
counterclaims which it may have, and the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of such
counsel has been specifically authorized in advance by the indemnifying party,
(ii) there is a conflict of interest that prevents counsel for the indemnifying
party from adequately representing the interests of the indemnified party or
there are defenses available to the indemnified party that are different from,
or additional to, the defenses that are available to the indemnifying party, or
(iii) the indemnifying party fails to assume the defense or does not reasonably
contest such action in good faith, in which case, if the indemnified party
notifies the indemnifying party that it elects
39
<PAGE>
to employ separate counsel, the indemnifying party shall not have the right to
assume the defense of such action on behalf of the indemnified party and the
reasonable fees and expenses of such separate counsel shall be borne by the
indemnifying party; provided, however, that, the indemnifying party shall not,
in connection with any proceeding or related proceedings, be liable for the
reasonable fees and expenses of more than one separate firm (in addition to one
firm acting as local counsel) for all indemnified parties.
(d) Contribution. If for any reason (other than the reasons expressly
------------
specified in this Section 6.8) the foregoing indemnity and payment obligation is
unavailable or is insufficient to hold harmless an indemnified party under
paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any loss, claim, damage or liability (or actions or proceedings in respect
thereof), including, without limitation, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other. The relative fault shall be
determined by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact has been taken or made by,
or relates to information supplied by, the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information
40
<PAGE>
and opportunity to correct or prevent such action, untrue statement or omission.
If, however, the allocation provided in the second preceding sentence is not
permitted by applicable law, or if the allocation provided in the second
preceding sentence provides a lesser sum to the indemnified party than the
amount hereinafter calculated, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative fault but also the relative
benefits to the indemnifying party and the indemnified party as well as any
other relevant equitable considerations. The parties agree that it would not be
just and equitable if contributions pursuant to this Section 6.8(d) were to be
determined by pro rata allocation or by any other method of allocation which
--- ----
does not take account of the equitable considerations referred to in the
preceding sentences of this Section 6.8(d). Notwithstanding anything in this
Section 6.8(d) to the contrary, no indemnifying party (other than the Company)
shall be required pursuant to this Section 6.8(d) to contribute any amount in
excess of the gross proceeds received by such indemnifying party from the sale
of Purchaser's Stock in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and the Holders under this Section
6.8 shall survive the completion of any offering of Purchaser's Stock in a
registration statement under this Article VI.
41
<PAGE>
(f) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement (if
any) entered into in connection with any underwritten public offering of the
Purchaser's Stock are in conflict with the foregoing provisions, the provisions
in such underwriting agreement shall control.
VII. INDEMNIFICATION
7.1. Indemnification by the Company. The Company shall indemnify
------------------------------
and hold the Purchaser harmless from and against any and all losses, claims,
damages or liabilities whatsoever (including legal fees and expenses) incurred
by him based upon, resulting from or arising out of (i) any material breach of
any representation, warranty, covenant or agreement of the Company contained in
this Agreement or (ii) except as provided in Section 7.2, any claim brought,
directly or indirectly, by a third party relating to the transactions
contemplated by this Agreement.
7.2. Indemnification by the Purchaser. The Purchaser shall
--------------------------------
indemnify and hold the Company and each of its employees, directors, officers
and agents harmless from and against any and all losses, claims, damages or
liabilities whatsoever (including legal fees and expenses) incurred by any of
them resulting from or arising out of any material breach of any representation,
warranty, covenant or agreement of the Purchaser contained in this Agreement.
VIII. TERMINATION
8.1 Termination. (a) This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Closing:
42
<PAGE>
(i) by the Company or the Purchaser, if the Closing has not occurred
by January 31, 1999;
(ii) by mutual written consent of the Company and the Purchaser;
(iii) by the Company, if there has been a material misrepresentation
or breach of warranty on the part of the Purchaser in the representations and
warranties contained herein or a material breach of covenants on the part of the
Purchaser and the same has not been cured within 30 days after notice thereof;
(iv) by the Purchaser, if there has been a material misrepresentation
or breach of warranty on the part of the Company in the representations and
warranties contained herein or a material breach of covenants on the part of the
Company and the same has not been cured within 30 days after notice thereof;
(v) by the Purchaser, if the terms of the Credit Facility Amendments
are not reasonably satisfactory to the Purchaser; or
(vi) by either the Purchaser or the Company, if any Governmental
Entity shall have issued a final order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable, provided that the party
seeking to terminate shall have used its best efforts to appeal such order,
decree, ruling or other action.
43
<PAGE>
(b) Notwithstanding anything herein to the contrary, the right to
terminate this Agreement under this Section 8.1 shall not be available to any
party to the extent the failure of such party to fulfill any of its obligations
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date (as a result, for example, of an action
or failure to act causing a failure of a condition precedent).
(c) A party terminating this Agreement pursuant to this Section 8.1
shall give written notice thereof the other party hereto, whereupon this
Agreement shall terminate and be of no further force and effect, the
transactions contemplated hereby shall be abandoned without further action by
any party and there shall be no liability on the part of the Company or the
Purchaser, except as provided in Section 9.7 hereof and except for any liability
for any willful breach hereof; provided however that the provisions of Sections
7.1 and 7.2 shall survive any such termination.
IX. GENERAL PROVISIONS
9.1. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
Notwithstanding any investigation conducted or notice or knowledge obtained by
or on behalf of any party hereto, each representation and warranty in this
Agreement and each agreement or covenant in this Agreement which does not by its
own terms expire on or prior to the Closing shall survive the Closing without
limitation as to time, except as specifically referred to herein.
44
<PAGE>
9.2. Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given, (i) when received if given in person, or (ii) on the date of
transmission if sent by nationally recognized overnight courier, certified or
registered mail, return receipt requested or (iii) three days after being
deposited in the U.S. mail, postage prepaid:
(a) if to the Purchaser, addressed as follows:
Bernard J. Korman
c/o NutraMax Products, Inc.
51 Blackburn Drive
Gloucester, Massachusetts 01930
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
(b) if to the Company, addressed as follows:
NutraMax Products, Inc.
51 Blackburn Drive
Gloucester, Massachusetts 01930
Attention: Robert F. Burns, Vice President and
Chief Financial Officer
with a copy to:
Eugene M. Schloss, Jr., Esq.
1700 Cary Road
Huntingdon Valley, Pennsylvania 19006-5002
and
45
<PAGE>
Goodwin, Procter & Hoar, LLP
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Joseph L. Johnson III, Esq.
46
<PAGE>
or to such other individual or address as a party hereto my designate for itself
by notice given as herein provided.
9.3. General. (a) This Agreement (including the documents and
-------
instruments referred to or incorporated herein) constitutes the entire
agreement, and supersedes all of the prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof; provided, however, if this Agreement is terminated, it will not
be deemed to supersede prior agreements between the parties, including the
Registration Rights Agreement dated as of October 16, 1997 between the Company
and the Purchaser, and such agreements will continue in full force and effect.
(b) This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder other than as
contemplated in Article VI, Article VII and Section 9.3(d) and shall not be
assigned by any party by operation of law or otherwise.
(c) This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, heirs and permitted assigns. This
Agreement is not assignable except by consent of each of the parties hereto or
operation of law; provided that the heirs or legatees of the Purchaser shall
succeed to the rights and obligations of the Purchaser contained in Article VI
hereof. Any purported assignment of this Agreement in violation of this Section
9.3 shall be null and void.
47
<PAGE>
9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(b) Each party agrees that any proceeding relating to this Agreement
shall be brought in a state court of Delaware. Each party hereby consents to
personal jurisdiction in any such action brought in any such Delaware court,
consents to service of process by mail made upon such party and such party's
agent and waives any objection to venue in any such Delaware court or to any
claim that any such Delaware court is an inconvenient forum.
9.5. Severability of Provisions. If any provision or any portion
--------------------------
of any provision of this Agreement or the application of any such provision or
any portion thereof to any person or circumstance, shall be held invalid or
unenforceable, to the extent permitted by law, the remaining portion of such
provision and the remaining provisions of this Agreement, or the application of
such provision or portion of such provision as is held invalid or unenforceable
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby.
9.6. Captions. All section titles or captions contained in this
--------
Agreement are for convenience only, shall not be deemed a part of this Agreement
and shall not affect the meaning or interpretation of this Agreement. All
references herein to Sections shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
48
<PAGE>
9.7. Expenses. Except as otherwise expressly provided in this
--------
Agreement, the Company shall pay the expenses incidental to the preparation of
this Agreement, the carrying out of the provisions hereof and the consummation
of the transactions contemplated hereby.
9.8. Equitable Relief. Each party acknowledges that, in the event
----------------
of any breach of this Agreement by a party, the other party would be irreparably
and immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that such other party, in addition to any other remedy to
which it may be entitled, shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to compel specific
performance of this Agreement. Any requirements for the securing or posting of
any bond with respect to such remedy are hereby waived by each of the parties
hereto.
49
<PAGE>
9.9. Definitions. The following terms shall have the respective
-----------
meanings specified in the indicated Sections of this Agreement:
Term Agreement Section
- ---- -----------------
Agreement Recitals
Authority 1.3(b)
Board 1.3(d)(ii)
Cape Ann Recitals
Cape Ann Purchase Recitals
Cape Ann Purchase Agreement Recitals
Closing 1.3(a)
Commission 2.6
Common Stock Recitals
Company Recitals
Credit Facilities 1.3(b)
Credit Facility Amendments 1.3(b)
Encumbrances 1.1
Exchange Act 2.4
Financial Statements 2.7(a)
FNBB 1.3(b)
Governmental Entity 1.3(b)
Hart-Scott-Rodino Act 1.3(b)
Holder 6.8(a)
Legal Requirements 1.3(b)
Lenders Recitals
Lepone Purchase Recitals
Lepone Purchase Agreement Recitals
Loan Agreement 1.3(b)
Material Adverse Effect 1.3(b)
NASD 2.3(a)
Offering 6.3(c)
50
<PAGE>
Other Holders 6.3(b)
Person 4.1
Purchase Agreements Recitals
Purchaser Recitals
Purchaser's Stock 6.1
SEC Reports 2.6
Securities Act 3.5(a)
Shares Recitals
Stockholders Meeting 5.5(b)
Stop Order 6.7(a)
Subsidiary 2.1
Suspension Event 6.7(b)
Violation 6.8(a)
51
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
-------------------
Name: Robert F. Burns
Title: Vice President, Chief Financial
Officer and Treasurer
/s/ Bernard J. Korman
---------------------
Name: Bernard J. Korman
52
<PAGE>
Exhibit 10(ff)
STOCK PURCHASE AGREEMENT
by and between
NUTRAMAX PRODUCTS, INC.,
and
DONALD E. LEPONE
Dated as of November 6, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURCHASE AND SALE 2
1.1. Purchase and Sale 2
1.2. Purchase Price
1.3. Closing 2
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
2.1. Due Organization, etc. 7
2.2. Compliance with Law 8
2.3. Authorization; Execution and Delivery of Agreement 8
2.4. No Conflict; No Consent 9
2.5. Capital Stock 10
2.6. SEC Reports 11
2.7. Financial Statements 12
2.8. No Brokers 13
2.9. Litigation and Claims 13
2.10. Use of Proceeds 13
i
<PAGE>
Page
----
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 14
3.1. Authorization; Execution and Delivery of Agreement 14
3.2. No Conflict; No Consent 14
3.3. No Brokers 14
3.4. Litigation and Claims 15
3.5. Investment Purposes 15
IV. COVENANTS OF THE COMPANY 16
4.1. Conduct of Business 16
4.2. Exchange of Stock Certificates 17
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates 17
4.4. Course of Dealings with Lenders 17
4.5. Other Purchase Agreements 18
V. COVENANTS OF THE PURCHASER AND THE COMPANY 18
5.1. Hart-Scott-Rodino Act Filings 18
5.2. Public Disclosure and Confidentiality 18
5.3. Certain Notifications 19
ii
<PAGE>
Page
----
5.4. Efforts to Consummate; Further Actions 19
5.5. Proxy Statement; Stockholder Approval 19
VI. REGISTRATION RIGHTS 20
6.1. "Piggyback" Registration 20
6.2. Demand Registration 22
6.3. General Provisions 23
6.4. Information, Documents, Etc. 25
6.5. Expenses 25
6.6. Cooperation 26
6.7. Action to Suspend Effectiveness; Supplement to Registration
Statement 28
6.8. Indemnification 29
VII. INDEMNIFICATION 36
7.1. Indemnification by the Company 36
7.2. Indemnification by the Purchaser 36
VIII. TERMINATION 36
8.1 Termination 36
iii
<PAGE>
Page
----
IX. GENERAL PROVISIONS 38
9.1. Survival of Representations, Warranties and Agreements 38
9.2. Notices 38
9.3. General 39
9.4. Governing Law 40
9.5. Severability of Provisions 40
9.6. Captions 41
9.7. Expenses 41
9.8. Equitable Relief 41
9.9. Definitions 41
SCHEDULE 2.5(b)
SCHEDULE 2.7(c)
iv
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November 6,
---------
1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the
"Company"), and DONALD E. LEPONE (the "Purchaser").
- -------- ---------
WHEREAS, the Company recently has defaulted on certain financial
covenants contained in the Company's Credit Facilities (as hereinafter defined),
waivers of which defaults were obtained from the Company's lenders under such
credit agreements (the "Lenders");
-------
WHEREAS, subject to the terms and conditions of this Agreement, the
Purchaser wishes to purchase from the Company, and the Company wishes to sell to
the Purchaser, additional shares (the "Shares") of the Company's Common Stock,
------
par value $0.001 per share (the "Common Stock");
------------
WHEREAS, the Purchaser and the Company are entering into this
Agreement to provide for such purchase and sale and to establish various rights
and obligations in connection therewith;
WHEREAS, in conjunction with the transactions contemplated by this
Agreement, the Company is also entering into agreements with each of Cape Ann
Investors, L.L.C. ("Cape Ann") and Bernard J. Korman, the Chairman of the Board
--------
of Directors of the Company, with respect to the purchase from the Company by
Cape Ann and Mr. Korman (the "Cape Ann Purchase" and the "Korman Purchase,"
----------------- ---------------
respectively) of approximately 1,162,790 and 232,558 additional shares of Common
Stock, respectively (such agreements, the "Cape Ann
--------
1
<PAGE>
Purchase Agreement" and the "Korman Purchase Agreement," respectively, and,
- ------------------ --------------------------
collectively, the "Purchase Agreements"); and
-------------------
WHEREAS, the proceeds from the sale of the Shares, together with the
proceeds from the sale of shares of Common Stock pursuant to the Purchase
Agreements, shall be used to facilitate the Company's negotiation of amendments
to the financial covenants and other terms of the Credit Facilities and to
enable the Company to retire existing indebtedness and to provide the Company
with additional working capital;
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
I. PURCHASE AND SALE
1.1. Purchase and Sale. Upon the terms and subject to the
-----------------
conditions set forth in this Agreement, the Company agrees to issue, sell and
deliver to the Purchaser, and the Purchaser agrees to purchase from the Company,
46,512 Shares. The Shares purchased and sold hereunder shall be free and clear
of any liens, security interests, pledges, voting agreements, claims, options
and encumbrances of every kind, character and description whatsoever
("Encumbrances"), except as contemplated by this Agreement.
- --------------
1.2. Purchase Price. As consideration for the sale of the Shares,
--------------
at the Closing (as hereinafter defined) the Purchaser shall pay the Company, in
immediately available funds, a purchase price of $4.30 per share.
2
<PAGE>
1.3. Closing. (a) The closing of the transactions provided for in
-------
this Agreement (the "Closing") shall take place on the second business day after
-------
the satisfaction or waiver of the conditions set forth in Sections 1.3(b) and
1.3(c) of this Agreement at the offices of Goodwin, Procter & Hoar, LLP,
Exchange Place, Boston, Massachusetts, or at such other time and place as the
parties may mutually agree.
(b) Conditions Precedent to the Purchaser's Obligations. The
---------------------------------------------------
obligation of the Purchaser to consummate the transactions described in this
Agreement shall be subject to the satisfaction of the following conditions on or
prior to the Closing: (i) the representations and warranties of the Company
contained in this Agreement shall have been true and correct when made and shall
be true and correct in all material respects on the date of Closing with the
same effect as if they were made on such date; (ii) the Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company on or prior to the Closing; (iii) the Company shall have delivered to
the Purchaser a certificate, dated the date of Closing and signed by a duly
authorized officer of the Company, certifying as to the matters described in the
foregoing clauses (i) and (ii); (iv) no action, suit,
3
<PAGE>
investigation or proceeding shall have been instituted before any court,
administrative body or governmental agency (a "Governmental Entity") which seeks
-------------------
to restrain the consummation of, prohibit or declare illegal, or obtain a
material amount of damages arising from the transactions contemplated by this
Agreement and which is likely, in the Purchaser's reasonable judgment, to be
successful on the merits, and no temporary restraining order or injunction shall
have been issued by any Governmental Entity restraining or prohibiting, and no
other Legal Requirement (as hereinafter defined) shall have come into effect
making illegal, the performance of this Agreement or the consummation of any of
the transactions contemplated hereby; (v) all consents, approvals, permits and
authorizations required to be obtained from, and all filings required to be made
with, any Authority (as hereinafter defined) in connection with the consummation
of the transactions contemplated hereby shall have been obtained or made, and
all waiting periods specified under applicable Legal Requirements (including any
such waiting period applicable to the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-
-----
Scott-Rodino Act")), and all extensions thereof, the passing of which is
- ----------------
required for such
4
<PAGE>
consummation, shall have passed, except as to such consents,
approvals, permits, authorizations or filings that, individually or in the
aggregate, would not have a material adverse effect on the condition (financial
or otherwise), business, operations, properties, assets or liabilities of the
Company and its Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect"); (vi) the issuance and sale of Common Stock
- ------------------------
contemplated by this Agreement shall have been approved by the requisite
affirmative vote of the stockholders of the Company; (vii) from and after the
date of this Agreement, there shall not have occurred any changes concerning the
Company that, when combined, without duplication, with all other changes
concerning the Company from and after the date of this Agreement, have had or
would reasonably be expected to have a Material Adverse Effect; (viii) the
Company shall have obtained a waiver from the Lenders of any covenant defaults
under the Credit Facilities during the fourth quarter of fiscal 1998 and shall
have entered into amendments (the "Credit Facility Amendments") to each of the
--------------------------
Revolving Credit and Term Loan Agreement, dated as of December 30, 1996, as
amended, between the Company, The First National Bank of Boston ("FNBB"), Fleet
----
National Bank, National Bank of Canada, The Sumitomo Bank, Limited,
5
<PAGE>
and FNBB, as Agent (the "Loan Agreement"), and the Purchase Agreement, dated as
--------------
of December 30, 1996, as amended, between the Company and ING (U.S.) Capital
Corporation (together with the Loan Agreement, the "Credit Facilities"), the
-----------------
terms of which amendments shall be reasonably satisfactory to the Purchaser, and
such waiver and amendments shall be in full force and effect without waiver or
change in the material terms thereof; and (viii) all conditions precedent to
consummation of the Cape Ann Purchase and the Korman Purchase shall have been
satisfied or waived by the appropriate party, and no amendment to the Cape Ann
Purchase Agreement or the Korman Purchase Agreement shall have been executed or
agreed to that changes the material terms thereof in a manner adverse to the
Company without the Purchaser's prior written consent. In the event any of the
foregoing conditions to the Purchaser's obligation to close hereunder is not
satisfied on or before the Closing, the Purchaser may waive such condition and
proceed to Closing. As used herein, "Legal Requirements" shall include laws,
------------------
regulations, ordinances, orders, decrees, permits, licenses, consents,
approvals, registrations, authorizations and qualifications required by or from
any federal, state, local or foreign governmental or regulatory authority (each,
6
<PAGE>
an "Authority").
---------
(c) Conditions Precedent to the Company's Obligations. The obligation
-------------------------------------------------
of the Company to consummate the transactions described in this Agreement shall
be subject to the satisfaction of the following conditions on or prior to the
Closing: (i) the representations and warranties of the Purchaser contained in
this Agreement shall have been true and correct when made and shall be true and
correct in all material respects on the date of Closing with the same effect as
if they were made on such date; (ii) the Purchaser shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Purchaser on or prior to
the Closing; (iii) the Purchaser shall have delivered to the Company a
certificate, dated the date of Closing and signed by a duly authorized signatory
of the Purchaser, certifying as to the matters described in the foregoing
clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall
have been instituted before any Governmental Entity which seeks to restrain the
consummation of, prohibit or declare illegal, or obtain a material amount of
damages arising from the transactions contemplated by this Agreement and which
is likely,
7
<PAGE>
in the Company's reasonable judgment, to be successful on the merits and no
temporary restraining order or injunction shall have been issued by any
Governmental Entity restraining or prohibiting, and no other Legal Requirement
shall have come into effect making illegal, the performance of this Agreement or
the consummation of any of the transactions contemplated hereby; (v) all
consents, approvals, permits and authorizations required to be obtained from,
and all filings required to be made with, any Authority in connection with the
consummation of the transactions contemplated hereby shall have been obtained or
made, and all waiting periods specified under applicable Legal Requirements
(including any such waiting period applicable to the transactions contemplated
hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing
of which is required for such consummation, shall have passed, except as to such
consents, approvals, permits, authorizations or filings that, individually or in
the aggregate would not have a Material Adverse Effect; and (vi) the issuance
and sale of Common Stock contemplated by this Agreement shall have been approved
by the requisite affirmative vote of the stockholders of the Company. In the
event any of the foregoing conditions to the Company's obligation to close
hereunder is
8
<PAGE>
not satisfied on or before the Closing, the Company may waive such
condition and proceed to Closing.
(d) Company Closing Deliveries. At the Closing, the Company will
--------------------------
deliver to the Purchaser the following:
(i) a stock certificate or certificates representing the Shares;
and
(ii) a certificate of the Secretary of the Company certifying as
to the adoption and effect of resolutions of the Board of
Directors of the Company (the "Board") authorizing the
-----
execution, delivery and performance of this Agreement.
(e) Purchaser Closing Deliveries. At the Closing, the Purchaser will
----------------------------
deliver to the Company payment of the purchase price provided by Section 1.2.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Due Organization, etc. The Company and each of its
---------------------
Subsidiaries (as hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and each has all requisite corporate power and authority to own,
operate and lease its respective properties and assets and to conduct its
respective businesses as now conducted and is qualified to do business in each
state or other jurisdiction where the nature of its properties, assets or
businesses requires such qualification other than where the failure to be so
qualified would not, individually or in the aggregate have a
9
<PAGE>
Material Adverse Effect. All of the outstanding shares of capital stock of each
Subsidiary of the Company are validly issued, fully paid and non-assessable,
other than the shares of capital stock of foreign Subsidiaries which are not
fully paid and which failure to be fully paid, individually or in the aggregate,
does not have a Material Adverse Effect, and all of such outstanding shares are
owned, directly or indirectly, by the Company free and clear of all
Encumbrances, except for liens or security interests or pledge arrangements
involving the capital stock of the Subsidiaries in favor of the Company's
lenders. "Subsidiary" means a corporation or other business arrangement a
----------
majority of the outstanding voting securities or ownership interests of which is
owned, directly or indirectly, by the Company, by one or more other Subsidiaries
or by the Company and one or more other Subsidiaries.
2.2. Compliance with Law. The Company and each Subsidiary has
-------------------
obtained and maintains in full force and effect all permits, licenses, consents,
approvals, registrations, memberships, authorizations and qualifications under
all federal, state, local and foreign laws and regulations, and with all
Authorities, required for the conduct by it of its businesses and the ownership
or possession by it of its properties and assets other than where the failure to
obtain or maintain such permits, licenses, consents, approvals, registrations,
memberships, authorizations or qualifications would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and each Subsidiary are
in compliance with all laws, regulations, ordinances, orders and decrees
(including, without limitation, all environmental and occupational, health and
10
<PAGE>
safety laws) of any Authority applicable to the conduct by the Company and each
Subsidiary of their respective businesses and to their ownership and possession
of their respective properties and assets, other than where the failure so to
comply would not, individually or in the aggregate, have a Material Adverse
Effect.
2.3. Authorization; Execution and Delivery of Agreement. (a)
--------------------------------------------------
Except to the extent that the By-laws of, or other rules or regulations
promulgated by, the National Association of Securities Dealers ("NASD")
----
applicable to Nasdaq SmallCap listed companies may require stockholder approval
of the issuance of shares hereunder, the execution and delivery of this
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions contemplated hereby (i) do not require the
approval or consent of any stockholders of the Company and (ii) have been duly
authorized by all necessary corporate action on the part of the Company for all
purposes, including Section 203 of the Delaware General Corporation Law. Except
to the extent that the By-laws of, or other rules or regulations promulgated by,
the NASD applicable to Nasdaq SmallCap listed companies may require stockholder
approval of the issuance of shares hereunder, this Agreement has been duly
executed and delivered by the Company and this Agreement constitutes the legal,
valid, binding and enforceable obligation of the Company, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. The Company has full corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder.
11
<PAGE>
(b) Except to the extent that the By-laws of, or other rules or
regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed
companies may require stockholder approval of the issuance of shares hereunder,
(i) the Shares have been duly authorized by all necessary corporate action on
the part of the Company, and, when issued and delivered by the Company pursuant
to this Agreement against payment of the consideration therefor set forth
herein, the Shares will be validly issued, fully paid and non-assessable and
(ii) the Purchaser will acquire valid and marketable title to the Shares, free
and clear of any Encumbrances except as contemplated by this Agreement.
2.4. No Conflict; No Consent. Except to the extent that the By-
-----------------------
laws of, or other rules or regulations promulgated by, the NASD applicable to
Nasdaq SmallCap listed companies may require stockholder approval of the
issuance of shares hereunder, the execution and delivery of this Agreement, the
issuance and sale of the Shares to the Purchaser and the consummation of the
transactions contemplated hereby do not, and will not, conflict with, or result
in any violation of or default under, or permit the acceleration of any
obligation under, or the creation or imposition of any Encumbrance on any of the
properties or assets of the Company or any Subsidiary under, (i) any provision
of the certificate of incorporation or by-laws or similar constituent documents
of the Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of
trust, loan agreement or other agreement or instrument, or any permit, license,
registration, membership, authorization or qualification from any Authority, of
the Company or
12
<PAGE>
any Subsidiary or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation of any Authority to which the Company or any of its
Subsidiaries is a party or by which any of them is bound, other than, in the
case of clause (ii) above, where such conflict, violation, default, acceleration
or Encumbrance would not, individually or in the aggregate, have a Material
Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration, filing with or notice to, any Authority or third
party is required to be made or obtained by the Company or any Subsidiary
(including, without limitation, under any environmental or occupational, health
and safety laws) in order to execute or deliver this Agreement, issue and sell
the Shares or to consummate the transactions contemplated hereby, other than (A)
as may be required by the Hart-Scott-Rodino Act, (B) as a result of the periodic
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (C) the listing requirements of the NASDAQ SmallCap
------------
Market, or except where the failure to make or obtain any such consent,
approval, order, authorization, registration, declaration, filing or notice
would not have a Material Adverse Effect.
2.5. Capital Stock. (a) The authorized capital stock of the
-------------
Company consists of 20,000,000 shares of Common Stock, of which, as of October
3, 1998, 5,682,168 shares were outstanding and 9,665 shares were held in
treasury and 1,296,633 shares are reserved for future issuance pursuant to any
option, warrant or other rights agreement, arrangement or other commitment. All
of the issued and outstanding shares of Common Stock have been validly
13
<PAGE>
issued and are fully paid and non-assessable.
(b) (i) Other than this Agreement, the Cape Ann Purchase Agreement,
the Korman Purchase Agreement and the warrants to purchase Common Stock issued
to Cape Ann and others or as set forth on Schedule 2.5(b) hereto, there are not
authorized or outstanding any subscriptions, options, conversion rights,
warrants or other agreements, securities or commitments of any nature whatsoever
(whether oral or written and whether firm or conditional) obligating the Company
or any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, to any person any shares of Common Stock or any other shares of the
capital stock of the Company or any shares of the capital stock of any
Subsidiary, or any securities convertible into or exchangeable for any such
shares, or obligating any such person to grant, extend or enter into any such
agreement or commitment; and (ii) except as set forth on Schedule 2.5(b) hereto,
there is no obligation, contingent or otherwise, of the Company to repurchase,
redeem or otherwise acquire any share of capital stock or other equity interests
of the Company or any Subsidiary. No class of capital stock of the Company is
entitled to preemptive rights.
2.6. SEC Reports. Except with respect to the amendment to the
-----------
Current Report on Form 8-K dated September 11, 1998 (filed with the Commission
(as hereinafter defined) on September 26, 1998) contemplated by the disclosure
contained in Items 7(a) and (b) thereof, the Company has filed with the
Securities and Exchange Commission (the "Commission") all proxy statements,
----------
reports, forms and other documents required to be filed by it after January 1,
1995
14
<PAGE>
under the Exchange Act (collectively, the "SEC Reports"). As of their respective
-----------
dates, the SEC Reports (i) complied as to form in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
2.7. Financial Statements. (a) The financial statements
--------------------
(including any related notes) included in the SEC Reports (the "Financial
---------
Statements") have been prepared in accordance with generally accepted accounting
- ----------
principles consistently applied throughout the periods involved (except as may
be noted therein) and fairly present the consolidated financial condition,
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of the dates thereof and for the periods ended on such dates (in
each case subject, as to interim statements, to changes resulting from year-end
adjustments (none of which were or, except as otherwise disclosed to the
Purchaser in writing, will be material in amount or effect) and except as
permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act).
(b) On the date hereof, except as disclosed in the SEC Reports,
neither the Company nor any Subsidiary has any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due and whether or not required to be disclosed in the SEC Reports,
other than liabilities that have been disclosed to the
15
<PAGE>
Purchaser in writing, have been incurred in the ordinary course of business or
are not in the aggregate material to the Company and its Subsidiaries taken as a
whole. Since September 28, 1996, the Company has not declared or paid any
dividends to any of its stockholders.
(c) Except as set forth on Schedule 2.7(c), since September 28, 1996,
the Company and each of its Subsidiaries have conducted their respective
businesses only in the ordinary course in substantially the same manner as
theretofore conducted and the Company and its Subsidiaries, taken as a whole,
have not undergone or suffered any Material Adverse Effect, except as otherwise
disclosed to the Purchaser in writing.
2.8. No Brokers. No broker, finder or investment banker is
----------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.
2.9. Litigation and Claims. There is no claim, prosecution, suit,
---------------------
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries or any of their respective properties or assets (nor, to the
knowledge of the Company, are there any facts or circumstances providing a basis
for any such claim, prosecution, suit, action, arbitration, proceeding,
investigation or review) which, if adversely determined, would be reasonably
likely to have a Material Adverse Effect or would prohibit or impose any
limitations on the Purchaser's ownership of the Shares or would prohibit or make
illegal the acceptance for payment, purchase
16
<PAGE>
of or payment for the Shares. Neither the Company nor any of its Subsidiaries is
in default with respect to any judgment, decree, injunction, rule or order of
any court, arbitrator or Authority outstanding against or binding upon the
Company or any of its Subsidiaries, other than where any such defaults would
not, individually or in the aggregate, have a Material Adverse Effect.
2.10. Use of Proceeds. The Company intends to use the proceeds
---------------
from the sale of Shares to retire debt of the Company under the revolving credit
facility under the Loan Agreement and for other general corporate purposes.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
3.1. Authorization; Execution and Delivery of Agreement. The
--------------------------------------------------
Purchaser has all requisite power and authority to execute this Agreement, to
perform his obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and this Agreement constitutes the
legal, valid, binding and enforceable obligation of the Purchaser, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
3.2. No Conflict; No Consent. The execution and delivery of this
-----------------------
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions
17
<PAGE>
contemplated hereby do not, and will not, conflict with, or result in any
violation of or default under, or permit the acceleration of any obligation
under, or the creation or imposition of any Encumbrance on any of the properties
or assets of the Purchaser under, (i) any indenture, lease, mortgage, deed of
trust, loan agreement or other agreement or instrument, or any permit, license,
registration, membership, authorization or qualification from any Authority, of
the Purchaser or (ii) any judgment, order, decree, statute, law, ordinance, rule
or regulation of any Authority to which the Purchaser is a party or by which he
is bound. Other than as required by the Hart-Scott-Rodino Act or as a result of
the reporting requirements of the Exchange Act, no consent, approval, order or
authorization of, or registration, declaration, filing with or notice to, any
Authority is required to be made or obtained by the Purchaser in order to
execute or deliver this Agreement or to consummate the transactions contemplated
hereby.
3.3. No Brokers. No broker, finder or investment banker is
----------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Purchaser.
3.4. Litigation and Claims. There is no claim, prosecution, suit,
---------------------
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Purchaser, threatened against or affecting the Purchaser, or
any of his properties or assets which, if adversely determined, would prohibit
or make illegal the purchase of or payment for the Shares.
3.5. Investment Purposes. (a) The Purchaser, by reason of his
-------------------
business and
18
<PAGE>
financial experience, has such knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the merits and
risks of his investment in the Shares, and is purchasing the Shares hereunder
for his own account, for investment only and not with a view to, or any present
intention of, effecting a distribution of such securities or any part thereof.
The Purchaser acknowledges that the Shares to be purchased hereunder have not
been registered under the Securities Act of 1933, as amended (the "Securities
----------
Act"), or the securities laws of any state or other jurisdiction and cannot be
- ---
disposed of unless they are subsequently registered under the Securities Act and
any applicable state laws or exemption from such registration is available.
(b) The Purchaser is an "accredited investor" as that term is defined
in Rule 501 promulgated under the Securities Act.
(c) The Purchaser has had the opportunity to ask questions and to
receive answers concerning the financial condition, operations and prospects of
the Company and the terms and conditions of the Purchaser's investment, as well
as the opportunity to obtain any additional information necessary to verify the
accuracy of information furnished in connection therewith that the Company
possesses or can acquire without unreasonable effort or expense.
IV. COVENANTS OF THE COMPANY
The Company covenants and agrees that:
4.1. Conduct of Business. Except as specifically consented to in
-------------------
writing by the Purchaser or expressly contemplated by this Agreement, during the
period from the date of this
19
<PAGE>
Agreement up to and including the date of the Closing, the Company shall, and
shall cause each of its Subsidiaries to, (i) conduct its business in the usual
and ordinary course consistent with past practice and use its reasonable best
efforts to preserve its business organization intact, to keep available the
services of its key employees, material independent contractors and material
consultants currently employed, to preserve the present relationships with
customers, suppliers and other Persons (as hereinafter defined) with whom it has
significant business relations, to maintain books and records in the usual and
ordinary manner, and to preserve the goodwill and ongoing business; and (ii)
except pursuant to agreements or commitments entered into by the Company or its
Subsidiaries prior to the date of this Agreement and listed on Schedule 2.5(b)
hereto, not issue or sell (or agree to issue or sell) any stock of any class or
any other securities, or any options, warrants, conversion or other rights to
purchase any such securities, or grant, or agree to grant, any such options or
modify or alter the terms of any of the above. As used herein, "Person" means
any individual, partnership, joint venture, firm, corporation, association,
trust or other entity or any government or political subdivision or agency,
department or instrumentality thereof.
4.2. Exchange of Stock Certificates. Promptly upon surrender of
------------------------------
any certificates representing Shares at the office of the Company, the Company
will, at its expense, execute and deliver to the Purchaser a new certificate or
certificates in denominations specified by the Purchaser for an aggregate number
of Shares equal to the number of Shares represented by
20
<PAGE>
the certificates surrendered.
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon
-------------------------------------------------------
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate for Shares and, in the case of loss, theft or
destruction, upon delivery of an indemnity satisfactory to the Company (which,
in the case of the Purchaser may be an undertaking by the Purchaser to so
indemnify the Company), or, in the case of mutilation, upon surrender and
cancellation thereof, the Company will issue a new certificate of like tenor for
a number of Shares equal to the number of Shares represented by the certificate
lost, stolen, destroyed or mutilated.
4.4. Course of Dealings with Lenders. The Company shall use its
-------------------------------
reasonable best efforts to obtain the consents and approvals of the Lenders, and
to negotiate and enter into Credit Facility Amendments, necessary for the
consummation of the transactions contemplated by this Agreement. The Company
shall keep the Purchaser apprised of all material developments in connection
with the negotiation of the Credit Facility Amendments. Without limiting the
foregoing, the Company shall provide to the Purchaser, promptly after receipt
thereof by the Company, a copy of each draft of the proposed amendments to the
Credit Facilities and shall consult with the Purchaser in connection with the
negotiation thereof.
4.5. Other Purchase Agreements. The Company shall provide to the
-------------------------
Purchaser, promptly after receipt or completion thereof by the Company, a copy
of the proposed final draft
21
<PAGE>
of each of the Cape Ann Purchase Agreement and the Korman Purchase Agreement and
of any proposed amendment of either thereof (or any proposed waiver of any of
the terms or conditions of either thereof).
V. COVENANTS OF THE PURCHASER AND THE COMPANY
5.1. Hart-Scott-Rodino Act Filings. Each party covenants and
-----------------------------
agrees to file, if required, on a date no later than ten days from the date
hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with
respect to the purchase by the Purchaser of the Shares pursuant to this
Agreement and will provide promptly any supplemental information that may be
requested in connection therewith. Each party will comply with all reasonable
requests of the other party for information necessary in connection with the
preparation by such other party of its notification and report form.
5.2. Public Disclosure and Confidentiality. Each party hereby
-------------------------------------
agrees that, prior to the Closing, except as required by applicable law (or
under the rules and regulations of the Nasdaq Stock Market (or any national
securities exchange on which the Common Stock is listed)), no press release or
public announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement, the terms hereof or
the transactions contemplated hereby unless specifically approved in advance by
both parties. In the event that a party views disclosure as required by
applicable law (or the rules and regulations of the Nasdaq Stock Market or any
such national stock exchange) as contemplated by the previous
22
<PAGE>
sentence, such disclosing party shall provide a copy of such disclosure to the
other party within a reasonable period of time prior to such disclosure.
5.3. Certain Notifications. At all times prior to the Closing,
---------------------
each party hereto shall promptly notify the other party in writing of the
occurrence of any event which will or could reasonably result in the failure of
any of the conditions contained in Article I hereof to be satisfied. Such
notice shall be in additional to and not in lieu of the other notices and
communications provided for herein.
5.4. Efforts to Consummate; Further Actions. Subject to the terms
--------------------------------------
and conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
5.5. Proxy Statement; Stockholder Approval. (a) The Company
-------------------------------------
shall, as promptly as practicable following the date of this Agreement, prepare
and file with the Commission, and will use its best efforts to have cleared by
the Commission and thereafter shall mail to its stockholders as promptly as
practicable a proxy statement and a form of proxy in connection with, among
other things, the vote of the Company's stockholders to approve the issuance and
sale of Common Stock contemplated by this Agreement. The proxy statement, and
any amendments thereof or supplements thereto, will not, at the time of the
mailing of the proxy statement or any amendments thereof or supplements thereto
and at the time of the Stockholders
23
<PAGE>
Meeting (as hereinafter defined), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, except that no representation is made
by the Company with respect to information supplied in writing by the Purchaser
specifically for inclusion in the proxy statement. The proxy statement will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations promulgated thereunder.
(b) The Company shall duly call, give notice of, convene and hold its
annual, or a special, meeting of its stockholders (the "Stockholders Meeting")
--------------------
and shall use its best efforts to obtain the requisite affirmative approval of
its stockholders at the Stockholders Meeting of the issuance and sale of the
Common Stock contemplated by this Agreement. The Purchaser shall be present, in
person or by proxy, at the Stockholders Meeting and shall vote or cause to be
voted all shares of Common Stock held of record or beneficially owned (with the
power to vote or direct the vote) by him and eligible to vote as of the record
date for such meeting in favor of the proposal seeking such approval.
VI. REGISTRATION RIGHTS
The Company covenants and agrees to provide the following registration
rights:
6.1. "Piggyback" Registration. If, at any time while the Purchaser
-----------------------
shall hold shares of Common Stock, the Company proposes to file a registration
statement relating to the
24
<PAGE>
offering of any of its capital stock under the Securities Act (other than (i) a
registration statement required to be filed in respect of employee benefit plans
of the Company on Form S-8 or any similar form from time to time in effect, (ii)
any registration statement on Form S-4 or similar successor form, or (iii) a
registration statement relating to a transaction pursuant to Rule 145 of the
Securities Act), whether or not for sale for its own account, the Company shall,
at least twenty-one days (or if such twenty-one day period is not practicable,
then a reasonable shorter period which shall not be less than seven days) prior
to such filing, give written notice of such proposed filing to the Purchaser.
Upon receipt by the Company not more than seven days (unless the notice given to
the Purchaser pursuant to the previous sentence is less than ten days, in which
case such seven-day period shall be shortened to five days) after such notice of
a written request from the Purchaser for registration of Purchaser's Stock (as
hereinafter defined), (i) the Company shall, subject to Section 6.3, include
such Purchaser's Stock in such registration statement, and shall use all
reasonable efforts to cause such registration statement to become effective with
respect to such Purchaser's Stock, unless the managing underwriter therefor
concludes in its reasonable judgment that the number of securities requested to
be included in such registration exceeds the number which can reasonably be sold
in (or during the time of) such offering, in which case the Company may (i)
include all securities initially proposed by the Company to be sold for its own
account and (ii) decrease the number of shares of Purchaser's Stock and any
other securities (other than securities included by virtue of clause (i) above)
25
<PAGE>
proposed to be sold to the extent necessary to reduce the number of securities
to be included in the registration to the level recommended by the managing
underwriter; provided, however, that there shall be no such decrease in the
number of shares of Purchaser's Stock unless the number of shares of Purchaser's
Stock and such other securities (other than the securities included by virtue of
clause (i) above) proposed to be sold has been decreased on a pro rata basis,
calculated according to the number of shares of Purchaser's Stock and other
securities requested to be included by the respective holders of each.
"Purchaser's Stock" means any shares of Common Stock acquired by the Purchaser
-----------------
pursuant to this Agreement or otherwise for which the Purchaser requests
registration pursuant to Section 6.1 or 6.2.
6.2. Demand Registration. If the Company shall receive at any time
-------------------
or from time to time a written request from the Purchaser requesting the Company
to register any shares of Purchaser's Stock under the Securities Act on Form S-3
(or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or
any other similar form then in effect, the Company agrees that it will use all
reasonable efforts to cause the prompt registration of all shares of Purchaser's
Stock as to which such request is made (or will amend or supplement an effective
registration statement to include Purchaser's Stock). The Company may postpone
for a limited time, which in no event shall be longer than 90 days, compliance
with a request for registration pursuant to this Section 6.2 if (i) the Company
shall have given notice to the Purchaser of the occurrence of a Suspension Event
(as hereinafter defined) or (ii) the Company is conducting a
26
<PAGE>
public offering of capital stock and the managing underwriter concludes in its
reasonable judgment that such compliance would materially adversely affect such
offering. Notwithstanding anything in this Section 6.2 to the contrary, the
Company shall not be required to: (a) comply with more than two (2) requests of
the Purchaser pursuant to this Section 6.2 or (b) prepare or cause to be
prepared audited financial statements of the Company other than those prepared
in the normal course of the Company's business at its fiscal year end. Any
underwriter selected by the Purchaser to act as such in connection with a
registration pursuant to this Section 6.2 shall be reasonably acceptable to the
Company. The Company shall not be required to file and effect a new registration
pursuant to this Section 6.2(b) until a period of nine (9) months has elapsed
from the termination of the registration statement with respect to Purchaser's
Stock covered by a prior registration request. The Company agrees that in the
event the Purchaser makes a request under this Section 6.2 to cause the Company
to effect a demand registration and the Company is precluded from effecting such
registration with respect to 25% or more of the shares of Purchaser's Stock
subject to such request as a consequence of the terms of registration rights
previously granted by the Company to any of the Other Holders, then, under such
circumstances, such request shall not be counted against the number of demand
requests granted to Purchaser under this Section 6.2.
6.3. General Provisions. (a) The Company will use all reasonable
------------------
efforts to cause any registration statement referred to in Sections 6.1 and 6.2
to become effective and to
27
<PAGE>
remain effective (with a prospectus at all times meeting the requirement of the
1933 Act) until the earlier of 180 days from the effective date of the
registration statement and the date the Purchaser completes its distribution of
Purchaser's Stock, subject, however, to the Company's suspension rights set
forth in Section 6.7(b). The Company will use all reasonable efforts to effect
such qualifications under applicable Blue Sky or other state securities laws as
may be reasonably requested by the Purchaser (provided that the Company shall
not be obligated to file a general consent to service of process or qualify to
do business as a foreign corporation or otherwise subject itself to taxation in
any jurisdiction solely for the purpose of any such qualification) to permit or
facilitate such sale or other distribution. The Company will cause the
Purchaser's Stock to be listed on the principal stock exchange on which the
shares of Common Stock are listed.
(b) The Purchaser acknowledges that the Company has previously granted
registration rights to other holders of Common Stock and/or other securities
issued by the Company that are convertible into or exercisable for shares of
Common Stock (collectively, the "Other Holders"). The Purchaser further
-------------
acknowledges that, notwithstanding anything to the contrary provided in this
Agreement, the registration rights granted to the Purchaser under this Agreement
shall, in every case, be subject to the rights of the Other Holders and, to the
extent, if any, that any of the provisions of this Article VI conflict or are
inconsistent with any of such rights of the Other Holders, such rights of the
Other Holders shall govern with respect to the
28
<PAGE>
subject matter of such conflict or inconsistency.
(c) The Purchaser agrees, if requested by the managing underwriter or
underwriters in an underwritten offering (an "Offering"), not to effect any
--------
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Offering), during the 15-day
period prior to, and during the 90-day period beginning on, the date of pricing
of each Offering, to the extent timely notified in writing by the Company or the
managing underwriters. Furthermore, notwithstanding anything to the contrary
set forth in the Agreement, the Company's obligation under this Agreement to
cause a registration statement and any filings with any state securities
commission to be made or to become effective or to amend or supplement such
registration statement shall be suspended in the event and during such period as
the Company is proceeding with an Offering if the Company is advised by the
underwriters that the sale of shares of Purchaser's Stock under such
registration statement would have a material adverse effect on the Offering.
(d) Following the effectiveness of a registration statement and the
filings with any state securities commissions, the Purchaser agrees that he will
not effect any sales of the Purchaser's Stock pursuant to such registration
statement or any such filings at any time after he has received notice from the
Company to suspend sales (i) as a result of the occurrence or existence of any
Suspension Event, or (ii) so that the Company may amend or supplement such
29
<PAGE>
registration statement or such filing. The Purchaser may recommence effecting
sales of the Purchaser's Stock pursuant to the registration statement or such
filings following further notice to such effect from the Company, which notice
shall be given by the Company not later than three (3) business days after the
conclusion of any such Suspension Event or amendment or supplement.
6.4. Information, Documents, Etc. Upon making a request for
---------------------------
registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the
Company such information regarding its holdings and the proposed manner of
distribution thereof as the Company may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Article VI. The Company agrees that it will furnish to the
Purchaser the number of prospectuses, offering circulars or other documents, or
any amendments or supplements thereto, incident to any registration,
qualification or compliance referred to in this Article VI as the Purchaser from
time to time may reasonably request.
6.5. Expenses. The Company will bear all expenses of registrations
--------
pursuant to Section 6.1 and one-half of all expenses of the registrations (and
amendments and supplements related thereto) pursuant to Section 6.2 (in each
case, other than underwriting discounts and commissions and brokerage
commissions and fees, if any, payable with respect to shares of Purchaser's
Stock sold by the Purchaser, and fees and expenses of any accountants, counsel
or other parties retained or employed by the Purchaser) including, without
limitation, registration
30
<PAGE>
fees, printing expenses, expenses of compliance with Blue Sky or other state
securities laws, and legal and audit fees incurred by the Company in connection
with such registration and amendments or supplements in connection therewith.
The Purchaser will bear one-half of all expenses of the registrations (and
amendments and supplements related thereto) pursuant to Section 6.2, including,
without limitation, registration fees, printing expenses, expenses of compliance
with Blue Sky or other state securities laws, and legal and audit fees incurred
by the Company and the Purchaser. Notwithstanding the foregoing, the Company
agrees that in the event that subsequent to the date hereof the Company shall
grant demand registration rights to a third party and shall agree in connection
therewith to bear all or a greater portion of the expenses of such demand
registrations than as set out above, then this Section 6.5 shall be deemed to
have been amended to provide for the Company to bear, and the Company shall
bear, the same portion of the expenses of any subsequent registration pursuant
to Section 6.2 of this Agreement as the Company shall have agreed to bear for
such third party.
6.6. Cooperation. In connection with any registration of
-----------
Purchaser's Stock pursuant to this Article VI, the Company agrees to:
(a) enter into such customary agreement (including an underwriting
agreement containing such representations and warranties by the Company and such
other terms and provisions, including indemnification provisions, as are
customarily contained in underwriting agreements for comparable offerings and,
if no underwriting agreement is entered
31
<PAGE>
into, an indemnification agreement on such terms as is customary in transactions
of such nature) and take all such other actions as the Purchaser or the
underwriters, if any, participating in such offering and sale may reasonably
request in order to expedite or facilitate such offering and sale;
(b) furnish, at the request of the Purchaser or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the Purchaser's Stock and/or
the date of the closing for the sale of the Purchaser's Stock from the
independent certified public accountants of the Company and addressed to the
Purchaser and any underwriters participating in such offering and sale, which
letter or letters shall state that such accountants are independent with respect
to the Company within the meaning of Rule 1.01 of the Code of Professional
Ethics of the American Institute of Certified Public Accountants and shall be in
form reasonably satisfactory to the managing underwriter (or, if none, to the
Purchaser) and shall cover matters of the type customarily covered in "cold
comfort" letters in connection with transactions of a similar nature for similar
entities and (ii) an opinion, dated the date of the closing for the sale of the
Purchaser's Stock, of the counsel representing the Company with respect to such
offering and sale (which counsel may be the General Counsel of the Company or
other counsel reasonably satisfactory to the Purchaser), addressed to the
Purchaser and any such underwriters, which opinion shall be in form reasonably
satisfactory to the managing underwriter (or, if none, to the Purchaser) and
shall address such matters as are customary in transactions of a similar nature
for similar entities;
32
<PAGE>
(c) make available for inspection by the Purchaser, the underwriters,
if any, participating in such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager or managers for such
participating underwriters), the counsel for the Purchaser, one accountant or
accounting firm retained by the Purchaser and any such underwriters, or any
other agent retained by the Purchaser or such underwriters, all financial and
other records, corporate documents and properties of the Company, and supply
such additional information, as they shall reasonably request; provided that any
---------
such party shall keep the contents thereof confidential.
6.7. Action to Suspend Effectiveness; Supplement to Registration
-----------------------------------------------------------
Statement. (a) The Company will notify the Purchaser and its counsel
- ---------
promptly of (i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Purchaser's Stock or the institution or
threatening of any proceeding for such purpose (a "Stop Order") or (ii) the
----------
receipt by the Company of any notification with respect to the suspension of the
qualification of the Purchaser's Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. Immediately upon
receipt of any such notice, the Purchaser shall cease to offer or sell any
Purchaser's Stock pursuant to the registration statement in the jurisdiction to
which such Stop Order or suspension relates. The Company will use all
reasonable efforts to prevent the issuance of any such Stop Order or the
suspension of any such qualification and, if any such Stop Order is issued or
any such qualification is suspended, to
33
<PAGE>
obtain as soon as possible the withdrawal or revocation thereof, and will notify
the Purchaser and his counsel at the earliest practicable date of the date on
which the Purchaser may offer and sell Purchaser's Stock pursuant to the
registration statement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to cause the
registration of Purchaser's Stock and any filings with any state securities
commission to be made or to become effective or to amend or supplement a
registration statement shall be suspended in the event and during such period
that there are pending negotiations relating to, or consummation of, a
transaction or the occurrence of an event that would require additional
disclosure of material information by the Company in such registration statement
or such filing (such circumstances being hereinafter referred to as a
"Suspension Event") that would make it impractical or inadvisable to cause such
- -----------------
registration statement or such filings to be made or to become effective or to
amend or supplement such registration statement, but such suspension shall
continue only for so long as such event or its effect is continuing but in no
event will that suspension exceed ninety (90) days. Immediately upon receipt by
the Purchaser of notice of a Suspension Event, the Purchaser shall cease to
offer or sell any Purchaser's Stock pursuant to such registration statement,
cease to deliver or use such registration statement and, if so requested by the
Company, return to the Company, at its expense, all copies (other than permanent
file copies) of such registration statement.
34
<PAGE>
(c) In the event the Company shall determine that it is necessary to
amend or supplement any registration statement relating to Purchaser's Stock,
the Company will furnish copies of such proposed amendment or supplement to the
Purchaser and his counsel and will not file or distribute such amendment or
supplement without the prior consent of the Purchaser, which consent shall not
be unreasonably withheld.
6.8. Indemnification. In the event any Purchaser's Stock is
---------------
included in a registration statement under this Article VI:
(a) To the full extent permitted by law, the Company will indemnify
and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock
as set forth in Section 9.3(d) hereof (each, a "Holder") from and against any
------
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
---------
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus, any final prospectus contained
therein or any amendments or supplements thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company in connection with the registration of
Purchaser's Stock under the Securities Act, the
35
<PAGE>
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and the
Company will pay to each such Holder, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, that the indemnity
agreement contained in this Section 6.8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable hereunder in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by the Purchaser; and provided, further, that
-------- -------
the Company shall not be liable hereunder in any such case to the extent it is
determined that any such loss, claim, damage, liability or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made:
(A) in any such preliminary prospectus, if (I) it was the
responsibility of such Holder to provide the person asserting such loss,
claim, damage, liability or expense with a current copy of the prospectus
and such Holder failed to deliver or cause to be delivered a current copy
of the prospectus to such person after the Company had furnished such
Holder with a sufficient number of copies of the same and (II) the current
prospectus
36
<PAGE>
corrected such untrue statement or omission; or
(B) in such prospectus, if such untrue statement or omission is
corrected in an amendment or supplement to such prospectus and the Holder
thereafter fails to deliver the prospectus as so amended or supplemented
prior to or concurrently with the sale of Purchaser's Stock to the person
asserting such loss, claim, damage, liability or expense after the Company
had furnished such Holder with a sufficient number copies of the same.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director, officer,
employee, general or limited partner, member, agent, representative or
controlling person and shall survive the transfer of such securities by such
Holder. Each Holder shall furnish such information regarding itself or the
claim in question as the Company may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(b) To the full extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims,
37
<PAGE>
damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon (i) any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration or (ii) an untrue
statement or alleged untrue statement or omission or alleged omission made in
the circumstances described in clauses (A) or (B) of Section 6.8(a); and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this Section
6.8(b), in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, that the indemnity agreement contained in
this Section 6.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this Section 6.8(b) exceed
- --------
the gross proceeds from the offering received by such Holder; and provided,
--------
further, that the obligation to provide indemnification pursuant to this Section
- -------
6.8(b) shall be several, and not joint and several, among such indemnifying
parties. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative or controlling person and shall survive the transfer of
such securities by
38
<PAGE>
such prospective seller.
(c) Promptly after receipt by an indemnified party under this Section
6.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel selected by the
indemnifying party or parties. The failure to deliver written notice to the
indemnifying party within a reasonable time after the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 6.8 to the extent of such prejudice, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 6.8.
The indemnified party shall have the right, but not the obligation, to
participate in the defense of any action referred to above through counsel of
its own choosing and shall have the right, but not the obligation, to assert any
and all separate defenses, cross claims or counterclaims which it may have, and
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel has been
specifically authorized in advance by the indemnifying party, (ii) there is a
39
<PAGE>
conflict of interest that prevents counsel for the indemnifying party from
adequately representing the interests of the indemnified party or there are
defenses available to the indemnified party that are different from, or
additional to, the defenses that are available to the indemnifying party, or
(iii) the indemnifying party fails to assume the defense or does not reasonably
contest such action in good faith, in which case, if the indemnified party
notifies the indemnifying party that it elects to employ separate counsel, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party and the reasonable fees and expenses of such
separate counsel shall be borne by the indemnifying party; provided, however,
that, the indemnifying party shall not, in connection with any proceeding or
related proceedings, be liable for the reasonable fees and expenses of more than
one separate firm (in addition to one firm acting as local counsel) for all
indemnified parties.
(d) Contribution. If for any reason (other than the reasons expressly
------------
specified in this Section 6.8) the foregoing indemnity and payment obligation is
unavailable or is insufficient to hold harmless an indemnified party under
paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any loss, claim, damage or liability (or actions or proceedings in respect
thereof), including, without limitation, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding, in such proportion as is
appropriate to reflect the relative fault of the indemnifying
40
<PAGE>
party on the one hand and the indemnified party on the other. The relative fault
shall be determined by reference to, among other things, whether the action in
question, including any untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact has been taken or made
by, or relates to information supplied by, the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, untrue statement
or omission. If, however, the allocation provided in the second preceding
sentence is not permitted by applicable law, or if the allocation provided in
the second preceding sentence provides a lesser sum to the indemnified party
than the amount hereinafter calculated, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative fault but also
the relative benefits to the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The parties agree that it
would not be just and equitable if contributions pursuant to this Section 6.8(d)
were to be determined by pro rata allocation or by any other method of
--------
allocation which does not take account of the equitable considerations referred
to in the preceding sentences of this Section 6.8(d). Notwithstanding anything
in this Section 6.8(d) to the contrary, no indemnifying party (other than the
Company) shall be required pursuant to this Section 6.8(d) to contribute any
amount in excess of the gross proceeds received by such indemnifying party from
the sale of Purchaser's Stock in the offering to which the losses, claims,
damages or liabilities of the
41
<PAGE>
indemnified parties relate. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and the Holders under this Section
6.8 shall survive the completion of any offering of Purchaser's Stock in a
registration statement under this Article VI.
(f) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement (if
any) entered into in connection with any underwritten public offering of the
Purchaser's Stock are in conflict with the foregoing provisions, the provisions
in such underwriting agreement shall control.
VII. INDEMNIFICATION
7.1. Indemnification by the Company. The Company shall indemnify
------------------------------
and hold the Purchaser harmless from and against any and all losses, claims,
damages or liabilities whatsoever (including legal fees and expenses) incurred
by him based upon, resulting from or arising out of (i) any material breach of
any representation, warranty, covenant or agreement of the Company contained in
this Agreement or (ii) except as provided in Section 7.2, any claim brought,
directly or indirectly, by a third party relating to the transactions
contemplated by this Agreement.
7.2. Indemnification by the Purchaser. The Purchaser shall
--------------------------------
indemnify and hold
42
<PAGE>
the Company and each of its employees, directors, officers and agents harmless
from and against any and all losses, claims, damages or liabilities whatsoever
(including legal fees and expenses) incurred by any of them resulting from or
arising out of any material breach of any representation, warranty, covenant or
agreement of the Purchaser contained in this Agreement.
VIII. TERMINATION
8.1 Termination. (a) This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(i) by the Company or the Purchaser, if the Closing has not occurred
by January 31, 1999;
(ii) by mutual written consent of the Company and the Purchaser;
(iii) by the Company, if there has been a material misrepresentation
or breach of warranty on the part of the Purchaser in the representations and
warranties contained herein or a material breach of covenants on the part of the
Purchaser and the same has not been cured within 30 days after notice thereof;
(iv) by the Purchaser, if there has been a material misrepresentation
or breach of warranty on the part of the Company in the representations and
warranties contained herein or a material breach of covenants on the part of the
Company and the same has not been cured within 30 days after notice thereof;
(v) by the Purchaser, if the terms of the Credit Facility Amendments
are not
43
<PAGE>
reasonably satisfactory to the Purchaser; or
(vi) by either the Purchaser or the Company, if any Governmental
Entity shall have issued a final order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable, provided that the party
seeking to terminate shall have used its best efforts to appeal such order,
decree, ruling or other action.
(b) Notwithstanding anything herein to the contrary, the right to
terminate this Agreement under this Section 8.1 shall not be available to any
party to the extent the failure of such party to fulfill any of its obligations
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date (as a result, for example, of an action
or failure to act causing a failure of a condition precedent).
(c) A party terminating this Agreement pursuant to this Section 8.1
shall give written notice thereof the other party hereto, whereupon this
Agreement shall terminate and be of no further force and effect, the
transactions contemplated hereby shall be abandoned without further action by
any party and there shall be no liability on the part of the Company or the
Purchaser, except as provided in Section 9.7 hereof and except for any liability
for any willful breach hereof; provided however that the provisions of Sections
7.1 and 7.2 shall survive any such termination.
44
<PAGE>
IX. GENERAL PROVISIONS
9.1. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
Notwithstanding any investigation conducted or notice or knowledge obtained by
or on behalf of any party hereto, each representation and warranty in this
Agreement and each agreement or covenant in this Agreement which does not by its
own terms expire on or prior to the Closing shall survive the Closing without
limitation as to time, except as specifically referred to herein.
9.2. Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given, (i) when received if given in person, or (ii) on the date of
transmission if sent by nationally recognized overnight courier, certified or
registered mail, return receipt requested or (iii) three days after being
deposited in the U.S. mail, postage prepaid:
(a) if to the Purchaser, addressed as follows:
Donald E. Lepone
c/o NutraMax Products, Inc.
51 Blackburn Drive
Gloucester, Massachusetts 01930
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
45
<PAGE>
(b) if to the Company, addressed as follows:
NutraMax Products, Inc.
51 Blackburn Drive
Gloucester, Massachusetts 01930
Attention: Robert F. Burns, Vice President and
Chief Financial Officer
with a copy to:
Eugene M. Schloss, Jr., Esq.
1700 Cary Road
Huntingdon Valley, Pennsylvania 19006-5002
and
Goodwin, Procter & Hoar, LLP
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Joseph L. Johnson III, Esq.
46
<PAGE>
or to such other individual or address as a party hereto my designate
for itself by notice given as herein provided.
9.3. General. (a) This Agreement (including the documents and
-------
instruments referred to or incorporated herein) constitutes the entire
agreement, and supersedes all of the prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
(b) This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder other than as
contemplated in Article VI, Article VII and Section 9.3(d) and shall not be
assigned by any party by operation of law or otherwise.
(c) This Agreement may be executed in two or more counterparts which
47
<PAGE>
together shall constitute a single agreement.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, heirs and permitted assigns. This
Agreement is not assignable except by consent of each of the parties hereto or
operation of law; provided that the heirs or legatees of the Purchaser shall
succeed to the rights and obligations of the Purchaser contained in Article VI
hereof. Any purported assignment of this Agreement in violation of this Section
9.3 shall be null and void.
9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(b) Each party agrees that any proceeding relating to this Agreement
shall be brought in a state court of Delaware. Each party hereby consents to
personal jurisdiction in any such action brought in any such Delaware court,
consents to service of process by mail made upon such party and such party's
agent and waives any objection to venue in any such Delaware court or to any
claim that any such Delaware court is an inconvenient forum.
9.5. Severability of Provisions. If any provision or any portion of
--------------------------
any provision of this Agreement or the circumstance, shall be held invalid or
unenforceable, to the extent permitted by
48
<PAGE>
law, the remaining portion of such provision and the remaining provisions of
this Agreement, or the application of such provision or portion of such
provision as is held invalid or unenforceable to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
9.6. Captions. All section titles or captions contained in this
--------
Agreement are for convenience only, shall not be deemed a part of this Agreement
and shall not affect the meaning or interpretation of this Agreement. All
references herein to Sections shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
9.7. Expenses. Except as otherwise expressly provided in this
--------
Agreement, the Company shall pay the expenses incidental to the preparation of
this Agreement, the carrying out of the provisions hereof and the consummation
of the transactions contemplated hereby.
9.8. Equitable Relief. Each party acknowledges that, in the event of
----------------
any breach of this Agreement by a party, the other party would be irreparably
and immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that such other party, in addition to any other remedy to
which it may be entitled, shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to compel specific
performance of this Agreement. Any requirements for the securing or posting of
any bond with respect to such remedy are hereby waived by each of the parties
hereto.
9.9. Definitions. The following terms shall have the respective
-----------
meanings specified in the indicated Sections of this Agreement:
49
<PAGE>
Term Agreement Section
- ---- -----------------
Agreement Recitals
Authority 1.3(b)
Board 1.3(d)(ii)
Cape Ann Recitals
Cape Ann Purchase Recitals
Cape Ann Purchase Agreement Recitals
Closing 1.3(a)
Commission 2.6
Common Stock Recitals
Company Recitals
Credit Facilities 1.3(b)
Credit Facility Amendments 1.3(b)
Encumbrances 1.1
Exchange Act 2.4
Financial Statements 2.7(a)
FNBB 1.3(b)
Governmental Entity 1.3(b)
Hart-Scott-Rodino Act 1.3(b)
Holder 6.8(a)
Korman Purchase Recitals
Korman Purchase Agreement Recitals
Legal Requirements 1.3(b)
Lenders Recitals
Loan Agreement 1.3(b)
Material Adverse Effect 1.3(b)
NASD 2.3(a)
Offering 6.3(c)
Other Holders 6.3(b)
50
<PAGE>
Term Agreement Section
- ---- -----------------
Person 4.1
Purchase Agreements Recitals
Purchaser Recitals
Purchaser's Stock 6.1
SEC Reports 2.6
Securities Act 3.5(a)
Shares Recitals
Stockholders Meeting 5.5(b)
Stop Order 6.7(a)
Subsidiary 2.1
Suspension Event 6.7(b)
Violation 6.8(a)
51
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
-------------------------------
Name: Robert F. Burns
Title: Vice President, Chief Financial
Officer and Treasurer
/s/ Donald E. Lepone
--------------------
Name: Donald E. Lepone
52
<PAGE>
Exhibit 10(gg)
G&S DRAFT
01/07/98
--------
NUTRAMAX PRODUCTS, INC.
9 Blackburn Drive
Gloucester, MA 01930
Dated as of: January 20, 1998
BankBoston, N.A.
Individually and as Agent
100 Federal Street
Boston, Massachusetts 02110
Fleet National Bank
One Federal Street
Boston, MA 02109
National Bank of Canada
One Federal Street, 27th Floor
Boston, MA 02110
The Sumitomo Bank, Limited
One Post Office Square
Suite 3820
Boston, MA 02109
Senior Debt Portfolio
c/o Eaton Vance Management
24 Federal Street
Boston, MA 02110
Re: Third Amendment to Revolving Credit and Term Loan Agreement
-----------------------------------------------------------
-1-
<PAGE>
Ladies and Gentlemen:
We refer to the Revolving Credit and Term Loan Agreement dated as of
December 30, 1996, as amended by a First Amendment to Revolving Credit and Term
Loan Agreement dated as of September 11, 1997, and by a Second Amendment to
Revolving Credit and Term Loan Agreement dated as of November 26, 1997, (as so
amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"),
the banking institutions referred to therein as Banks (the "Banks") and The
First National Bank of Boston (now known as BankBoston, N.A.), as agent (the
"Agent"). Upon the terms and subject to the conditions contained in the Loan
Agreement, you agreed to make Revolving Loans and Term Loans to, and issue
Letters of Credit for the account of, the Borrower.
Terms used in this letter of agreement (the "Third Amendment") which are
not defined herein, but which are defined in the Loan Agreement, shall have the
same respective meanings herein as therein.
We have requested and you have agreed to make certain modifications of the
Loan Documents (collectively, the "Modifications"), and you have advised us that
you are prepared and would be pleased to make the Modifications so requested by
us on the condition that we join with you in this Third Amendment.
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Third Amendment, and fully intending
to be legally bound by this Third Amendment, we hereby agree with you as
follows:
ARTICLE I
---------
AMENDMENTS TO LOAN AGREEMENT
----------------------------
Effective as of September 28, 1997 (the "Third Amendment Date"), the Loan
Agreement is amended in each of the following respects:
(a) The terms "Loan Documents" and "Security Documents" shall,
wherever used in any of the Loan Documents or Security Documents, be deemed to
also mean and include this Third Amendment.
(b) The term "Subordinated Debt Documents" shall, whenever used in
any of the Loan Documents or Security Documents, be deemed to also mean and
include any required consents in form and substance reasonably satisfactory to
the Banks and the Agent, between the Borrower and ING, as referenced in Article
III(f)(ii) below.
-2-
<PAGE>
(c) Section 6.3 of the Agreement is amended: (i) by deleting the
reference contained therein to "$650,000"; and (ii) by inserting in place
thereof the following: "$1,750,000."
(d) Section 6.10 is amended by deleting the table set forth therein
in its entirety and by inserting the following table in place thereof:
<TABLE>
<CAPTION>
Maximum
Fiscal Year Capital Expenditures
----------- --------------------
<S> <C>
1997 $4,300,000
1998 $8,000,000
1999 $7,000,000
2000, and each $6,750,000
fiscal year thereafter
</TABLE>
ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
The Borrower hereby represents, warrants and covenants to you as follows:
(a) Representations in Loan Agreement. Each of the representations and
---------------------------------
warranties made by the Borrower to you in the Loan Agreement was true, correct
and
-3-
<PAGE>
complete when made and is true, correct and complete in all material respects 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 the Borrower on the date hereof
and in this Third Amendment.
(b) No Defaults or Events of Default. No Default or Event of Default
--------------------------------
exists on the date of this Third Amendment (after giving effect to all of the
arrangements and transactions contemplated by this Third Amendment).
(c) Binding Effect of Documents. This Third Amendment has been duly
---------------------------
executed and delivered to you by the Borrower and the Subsidiaries (as the case
may be) and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrower and the Subsidiaries (as the case may
be) contained herein constitute legal, valid and binding obligations of the
Borrower and the Subsidiaries (as the case may be) enforceable against them in
accordance with their terms.
ARTICLE III
-----------
PROVISIONS OF GENERAL APPLICATION
---------------------------------
(a) No Other Changes. Except to the extent specifically amended and
----------------
supplemented hereby, all of the terms, conditions and the provisions of the Loan
Agreement, the Notes and each of the other Loan Documents shall remain
unmodified, and the Loan Agreement, the Notes and each of the other Loan
Documents, as amended and supplemented by this Third Amendment, are confirmed as
being in full force and effect.
(b) Governing Law. This Third 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 Third 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.
(c) Binding Effect; Assignment. This Third Amendment shall be binding
--------------------------
upon and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(d) Counterparts. This Third Amendment may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which together shall constitute one instrument. In making
proof of this Third Amendment, it shall not be necessary to produce or account
for more than one counterpart hereof signed by each of the parties hereto.
-4-
<PAGE>
(e) Conflict with Loan Agreement. If any of the terms of this Third
----------------------------
Amendment shall conflict in any respect with any of the terms of the Loan
Agreement or any other Loan Document, the terms of this Third Amendment shall be
controlling.
(f) Conditions Precedent. This Third Amendment shall become and be
--------------------
effective as of the Third Amendment Date, but only if:
(i) the form of acceptance at the end of this Third Amendment shall be
signed by the Borrower, each Subsidiary, the Agent and the Banks; and
(ii) the Banks and the Agent shall have received satisfactory evidence that
Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any
and all required consents to the Modifications and has entered into
modifications to the Subordinated Debt Documents in form and substance
satisfactory to the Banks and the Agent in connection therewith (it being
understood and agreed by the Borrower that its failure to enter into with ING,
on or before February 12, 1998, such modifications to the Subordinated Debt
Documents in form and substance satisfactory to the Banks and the Agent shall
constitute an Event of Default under (and as defined in) the Loan Agreement).
-5-
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Third Amendment and return such
counterpart to the undersigned, whereupon this Third Amendment, as so accepted
by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
The Borrower:
-------------
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
(remainder of page intentionally left blank)
The foregoing Third Amendment is hereby accepted by the undersigned
effective as of September 28, 1997.
The Agent:
- ---------
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston),
individually and as Agent
By: /s/ Timothy G. Clifford
-----------------------------
Title: Director
FLEET NATIONAL BANK
By: /s/ Ann M. Meade
-----------------------------
Title: Vice President
-6-
<PAGE>
NATIONAL BANK OF CANADA
By: /s/ Edward T. Paslawski
---------------------------------
Title: Vice President
By: /s/ Leonard J. Pellecchia
---------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Daniel G. Eastman
----------------------------------
Title: Vice President & Manager
By: /s/ Alfred DeGemmis
----------------------------------
Title: Vice President
-7-
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as investment advisor
By: /s/ Scott H. Page
----------------------------
Title: Vice President
-8-
<PAGE>
CONSENT OF GUARANTORS
---------------------
Each of the undersigned has guaranteed the Obligations under (and as
defined in) the Agreement by executing separate Guaranties, each dated as of
December 30, 1996 (or, in the case of the last three signatories listed below,
as of September 11, 1997). By executing this letter, each of the Subsidiaries
hereby absolutely and unconditionally reaffirms the Guaranty to which it is a
party, and acknowledges and agrees to the terms and conditions of this letter
agreement and the Loan Agreement and the other Loan Documents as amended hereby
(including, without limitation, the making of the representations and warranties
and the performance of the covenants applicable to it herein or therein).
NUTRAMAX HOLDINGS, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
NUTRAMAX HOLDINGS II, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
OPTOPICS LABORATORIES, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FAIRTON REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-9-
<PAGE>
ORAL CARE, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FLORENCE REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
POWERS PHARMACEUTICAL CORP.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
CERTIFIED CORP., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ADHESIVE COATINGS, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ELMWOOD PARK REALTY, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-10-
<PAGE>
FIRST AID PRODUCTS, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-11-
<PAGE>
Exhibit 10(hh)
NUTRAMAX PRODUCTS, INC.
9 Blackburn Drive
Gloucester, MA 01930
Dated as of: March 31, 1998
BankBoston, N.A.
Individually and as Agent
100 Federal Street
Boston, Massachusetts 02110
Fleet National Bank
One Federal Street
Boston, MA 02109
National Bank of Canada
One Federal Street, 27th Floor
Boston, MA 02110
The Sumitomo Bank, Limited
450 Lexington Avenue, Suite 1700
New York, NY 10017
Senior Debt Portfolio
c/o Eaton Vance Management
24 Federal Street
Boston, MA 02110
Re: Fourth Amendment to Revolving Credit and Term Loan Agreement
------------------------------------------------------------
Ladies and Gentlemen:
We refer to the Revolving Credit and Term Loan Agreement dated as of
-1-
<PAGE>
December 30, 1996, as amended by a First Amendment to Revolving Credit and Term
Loan Agreement dated as of September 11, 1997, by a Second Amendment to
Revolving Credit and Term Loan Agreement dated as of November 26, 1997, and by a
Third Amendment to Revolving Credit and Term Loan Agreement dated as of January
20, 1998, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc.
(the "Borrower"), the banking institutions referred to therein as Banks (the
"Banks") and The First National Bank of Boston (now known as BankBoston, N.A.),
as agent (the "Agent"). Upon the terms and subject to the conditions contained
in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and
issue Letters of Credit for the account of, the Borrower.
Terms used in this letter of agreement (the "Fourth Amendment") which are
not defined herein, but which are defined in the Loan Agreement, shall have the
same respective meanings herein as therein.
We have requested and you have agreed to make certain modifications of the
Loan Documents (collectively, the "Modifications"), and you have advised us that
you are prepared and would be pleased to make the Modifications so requested by
us on the condition that we join with you in this Fourth Amendment.
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Fourth Amendment, and fully intending
to be legally bound by this Fourth Amendment, we hereby agree with you as
follows:
ARTICLE I
---------
AMENDMENTS TO LOAN AGREEMENT
----------------------------
Effective as of March 31, 1998 (the "Fourth Amendment Date"), the Loan
Agreement is amended in each of the following respects:
(a) The terms "Loan Documents" and "Security Documents" shall,
wherever used in any of the Loan Documents or Security Documents, be deemed to
also mean and include this Fourth Amendment.
(b) The term "Subordinated Debt Documents" shall, whenever used in
any of the Loan Documents or Security Documents, be deemed to also mean and
include any required consents in form and substance reasonably satisfactory to
the Banks and the Agent, between the Borrower and ING, as referenced in Article
III(g)(iii) below.
(c) The last line of Section 2.13(f)(iii) of the Loan Agreement is
amended to read in its entirety as follows:
-2-
<PAGE>
"statements required to be delivered pursuant to Section 5.1(a), provided
--------
that for the fiscal year ending September 30, 1997, there shall only be due
and payable 75% of the Excess Cash Flow of the Borrower for the immediately
preceding three fiscal quarters (the "Stub Period"), and provided, further,
-------- -------
that of the $930,750 of Excess Cash Flow owing for the Stub Period, (x)
$100,000 thereof shall be deferred and become due on June 30, 1998, (y)
$100,000 thereof shall be deferred and become due on October 5, 1998, and
(z) the remaining balance thereof shall be deferred and become due 10 days
after the date on which the financial statements are required to be
delivered pursuant to Section 5.1(a) for the fiscal year ending September
30, 1998, it being understood and agreed, however, that the foregoing
deferrals shall not in any way limit the Borrower's obligations to make
Mandatory Prepayments under clause (ii) above.
(d) Section 6.6 of the Loan Agreement is amended: (i) by deleting
the reference to "4.25 to 1" specified opposite the test for the fiscal quarter
ending March 31, 1998 (but not the fiscal quarter ending June 30, 1998), and
(ii) by inserting in place thereof the following: "4.50 to 1."
(e) Section 6.9 of the Loan Agreement is amended: (i) by deleting
the reference to "2.75 to 1" specified opposite the test for the fiscal quarters
ending March 31, 1998 and June 30, 1998 (but not the fiscal quarter ending
December 31, 1997), and (ii) by inserting in place thereof the following: "2.50
to 1."
ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
The Borrower hereby represents, warrants and covenants to you as follows:
(a) Representations in Loan Agreement. Each of the representations and
---------------------------------
warranties made by the Borrower to you in the Loan Agreement was true, correct
and complete when made and is true, correct and complete in all material
respects 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 the Borrower on the
date hereof and in this Fourth Amendment.
-3-
<PAGE>
(b) No Defaults or Events of Default. No Default or Event of Default
--------------------------------
exists on the date of this Fourth Amendment (after giving effect to all of the
arrangements and transactions contemplated by this Fourth Amendment).
(c) Binding Effect of Documents. This Fourth Amendment has been duly
---------------------------
executed and delivered to you by the Borrower and the Subsidiaries (as the case
may be) and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrower and the Subsidiaries (as the case may
be) contained herein constitute legal, valid and binding obligations of the
Borrower and the Subsidiaries (as the case may be) enforceable against them in
accordance with their terms.
ARTICLE III
-----------
PROVISIONS OF GENERAL APPLICATION
---------------------------------
(a) Waiver. The Borrower has informed the Banks and the Agent that it has
------
failed to comply with the provisions of Sections 2.13(f) and 6.6 of the Loan
Agreement for the fiscal year ending September 30, 1997 and the fiscal quarter
ending December 31, 1997, respectively, which such failure constitutes Events of
Default thereunder. The Borrower has requested that the Banks waive such Events
of Default, and by their countersignatures below, the Banks hereby waive such
Events of Default under Sections 2.13(f) and 6.6 of the Loan Agreement insofar
as (and only to the extent that) such Events of Default relate to the fiscal
year ending September 30, 1997 and the fiscal quarter ending December 31, 1997,
respectively. This waiver is a one-time waiver only, and does not constitute a
waiver of (i) any other Default or Event of Default under the Loan Agreement,
whether existing prior to, on or arising after December 31, 1997, including
without limitation, any breach arising after such date of the same type or
nature or (ii) any of the Banks' or Agent's rights or remedies with respect to
any such other or subsequent Defaults or Events of Default.
(b) No Other Changes. Except to the extent specifically amended and
----------------
supplemented hereby, all of the terms, conditions and the provisions of the Loan
Agreement, the Notes and each of the other Loan Documents shall remain
unmodified, and the Loan Agreement, the Notes and each of the other Loan
Documents, as amended and supplemented by this Fourth Amendment, are confirmed
as being in full force and effect.
(c) Governing Law. This Fourth 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 Fourth 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-
<PAGE>
(d) Binding Effect; Assignment. This Fourth Amendment shall be binding
--------------------------
upon and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(e) Counterparts. This Fourth Amendment may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which together shall constitute one instrument. In making
proof of this Fourth Amendment, it shall not be necessary to produce or account
for more than one counterpart hereof signed by each of the parties hereto.
(f) Conflict with Loan Agreement. If any of the terms of this Fourth
----------------------------
Amendment shall conflict in any respect with any of the terms of the Loan
Agreement or any other Loan Document, the terms of this Fourth Amendment shall
be controlling.
-5-
<PAGE>
(g) Conditions Precedent. This Fourth Amendment shall become and be
--------------------
effective as of the Fourth Amendment Date, but only if:
(i) the form of acceptance at the end of this Fourth Amendment
shall be signed by the Borrower, each Subsidiary, the Agent and
the Banks;
(ii) the Agent shall have received, for the ratable benefit of
those Banks who are signatories to this Fourth Amendment, an
amendment fee from the Borrower in the amount of $90,000 (which
represents approximately 10 basis points of the current Total
Commitment); and
(iii) the Banks and the Agent shall have received satisfactory
evidence that Internationale Nederlanden (U.S.) Capital
Corporation ("ING") has provided any and all required consents to
the Modifications and has entered into modifications to the
Subordinated Debt Documents in form and substance satisfactory to
the Banks and the Agent in connection therewith (including,
without limitation, modifications to certain of the financial
covenants contained therein so as to make them less restrictive
than those which are contained in the Loan Agreement).
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Fourth Amendment and return such
counterpart to the undersigned, whereupon this Fourth Amendment, as so accepted
by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
The Borrower:
-------------
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
-------------------------------
Title: Vice President
(remainder of page intentionally left blank)
<PAGE>
The foregoing Fourth Amendment is hereby accepted by the undersigned
effective as of March 31, 1998.
The Agent:
- ---------
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston),
individually and as Agent
By: /s/ Timothy G. Clifford
---------------------------------
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Ann M. Meade
---------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/ Edward T. Paslawski
---------------------------------
Title: Vice President
By: /s/ Leonard J. Pellecchia
---------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Brian M. Smith
---------------------------------
Title: Senior Vice President
By: /s/ Jeffrey Frost
---------------------------------
Title: Vice President
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as investment advisor
By: /s/ Scott H. Page
----------------------------
Title: Vice President
-8-
<PAGE>
CONSENT OF GUARANTORS
---------------------
Each of the undersigned has guaranteed the Obligations under (and as
defined in) the Agreement by executing separate Guaranties, each dated as of
December 30, 1996 (or, in the case of the last three signatories listed below,
as of September 11, 1997). By executing this letter, each of the Subsidiaries
hereby absolutely and unconditionally reaffirms the Guaranty to which it is a
party, and acknowledges and agrees to the terms and conditions of this letter
agreement and the Loan Agreement and the other Loan Documents as amended hereby
(including, without limitation, the making of the representations and warranties
and the performance of the covenants applicable to it herein or therein).
NUTRAMAX HOLDINGS, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
NUTRAMAX HOLDINGS II, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
OPTOPICS LABORATORIES, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FAIRTON REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ORAL CARE, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
<PAGE>
FLORENCE REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
POWERS PHARMACEUTICAL CORP.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
CERTIFIED CORP., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ADHESIVE COATINGS, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ELMWOOD PARK REALTY, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FIRST AID PRODUCTS, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
<PAGE>
Exhibit 10(ii)
NUTRAMAX PRODUCTS, INC.
9 Blackburn Drive
Gloucester, MA 01930
Dated as of: May 7, 1998
BankBoston, N.A.
Individually and as Agent
100 Federal Street
Boston, Massachusetts 02110
Fleet National Bank
One Federal Street
Boston, MA 02109
National Bank of Canada
One Federal Street, 27th Floor
Boston, MA 02110
The Sumitomo Bank, Limited
450 Lexington Avenue, Suite 1700
New York, NY 10017
Senior Debt Portfolio
c/o Eaton Vance Management
24 Federal Street
Boston, MA 02110
Re: Fifth Amendment to Revolving Credit and Term Loan Agreement
-----------------------------------------------------------
Ladies and Gentlemen:
We refer to the Revolving Credit and Term Loan Agreement dated as of
December 30, 1996, as amended by a First Amendment to Revolving Credit and Term
Loan Agreement dated as of September 11, 1997, by a Second Amendment to
Revolving Credit and Term Loan Agreement dated as of November 26, 1997, by a
Third Amendment to Revolving Credit and Term Loan Agreement dated as of January
20, 1997
-1-
<PAGE>
(and effective as of September 28, 1997), and by a Fourth Amendment to
Revolving Credit and Term Loan Agreement dated as of March 31, 1998, (as so
amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"),
the banking institutions referred to therein as Banks (the "Banks") and The
First National Bank of Boston (now known as BankBoston, N.A.), as agent (the
"Agent"). Upon the terms and subject to the conditions contained in the Loan
Agreement, you agreed to make Revolving Loans and Term Loans to, and issue
Letters of Credit for the account of, the Borrower.
Terms used in this letter of agreement (the "Fifth Amendment") which are
not defined herein, but which are defined in the Loan Agreement, shall have the
same respective meanings herein as therein.
We have requested and you have agreed to make certain modifications of the
Loan Documents (collectively, the "Modifications"), and you have advised us that
you are prepared and would be pleased to make the Modifications so requested by
us on the condition that we join with you in this Fifth Amendment.
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Fifth Amendment, and fully intending
to be legally bound by this Fifth Amendment, we hereby agree with you as
follows:
ARTICLE I
---------
AMENDMENTS TO LOAN AGREEMENT
----------------------------
Effective as of May 7, 1998 (the "Fifth Amendment Date"), the Loan
Agreement is amended in each of the following respects:
(a) The terms "Loan Documents" and "Security Documents" shall,
wherever used in any of the Loan Documents or Security Documents, be deemed to
also mean and include this Fifth Amendment.
(b) The term "Subordinated Debt Documents" shall, whenever used in
any of the Loan Documents or Security Documents, be deemed to also mean and
include any required consents in form and substance reasonably satisfactory to
the Banks and the Agent, between the Borrower and ING, as referenced in Article
III(f)(ii) below.
(c) The term "Obligations" shall, whenever used in any of the Loan
Documents or Security Documents, be deemed to also mean and include any and all
Overadvances.
-2-
<PAGE>
(d) Section 2 of the Agreement is amended by inserting at the end
thereof the following a new Section 2.20:
"2.20 Notwithstanding the provisions of Sections 2.1(a), at the
Borrower's request, the Banks will make Revolving Loans to the Borrower at a
time when the debit balance in the Loan Account in respect of Revolving
Loans and Letters of Credit exceeds the Borrowing Base or which cause the
debit balance in the Loan Account in respect of Revolving Loans and Letters
of Credit to exceed the Borrowing Base (any such Loan or Loans being herein
referred to individually as an "Overadvance" and collectively as
"Overadvances"), provided that: (i)_the aggregate amount of the Overadvances
at any one time outstanding shall not exceed $2,000,000; (ii)_in no event
shall the debit balance in the Loan Account in respect of Revolving Loans
and Letters of Credit at any one time outstanding exceed the Revolving
Credit Commitments of all of the Banks; and (iii)_no Default or Event of
Default shall exist hereunder at the time any Overadvance is requested or
outstanding. Failure of the Borrower to maintain any of the foregoing
conditions (other than the condition under clause (iii) that no Default
shall exist) shall constitute an immediate Event of Default hereunder, and
shall be deemed to be a failure to perform an Obligation hereunder. The
Agent shall enter such Overadvances, along with all interest, expenses and
charges relating thereto, as debits in the Loan Account. Notwithstanding
anything contained in this Section_2 or otherwise, unless sooner demanded as
a result of the failure to meet any of the conditions set forth in
clauses_(i) through (iii) above, the Borrower shall pay all outstanding
Overadvances on or before August_31, 1998 (the "Overadvance Termination
Date").
Prior to the occurrence of an Event of Default, outstanding
Overadvances bearing interest with reference to the Base Rate shall bear
interest at the rate per annum equal to (i)_one percent (1%) plus (ii) the
rate then applicable to Base Rate Loans (e.g., the Base Rate plus the
Applicable Base Rate Margin then in effect), and outstanding Overadvances
bearing interest with reference to the Eurodollar Rate shall bear interest
at the rate per annum equal to (i)_one percent (1%) plus (ii)_ the rate then
applicable to Eurodollar Loans (e.g., the Adjusted Eurodollar Rate plus the
Applicable Eurodollar Margin). After the occurrence of any Default or Event
of Default, outstanding Overadvances shall bear interest at the default rate
otherwise applicable to the Loans pursuant to Section 2.15(a) plus one
percent (1%)."
-3-
<PAGE>
(e) Notwithstanding the provisions of Section 5.1(c) of the Loan
Agreement, it is agreed that during the period commencing on the Fifth Amendment
Date and ending on the Overadvance Termination Date, a Borrowing Base Report
shall be delivered to the Agent on the 15th and last day of each fiscal month
during such period, setting forth the Borrowing Base as of each such date.
(f) Section 5.5 of the Loan Agreement is amended by inserting the
following new sentence at the end thereof:
"Without limitation of the foregoing, it is agreed that the Borrower
shall meet with the Agent on at least a monthly basis, upon the Agent's request,
to discuss the financial condition of the Borrower and such other matters as the
Agent may deem pertinent."
ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
The Borrower hereby represents, warrants and covenants to you as follows:
(a) Representations in Loan Agreement. Each of the representations and
---------------------------------
warranties made by the Borrower to you in the Loan Agreement was true, correct
and complete when made and is true, correct and complete in all material
respects 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 the Borrower on the
date hereof and in this Fifth Amendment.
(b) No Defaults or Events of Default. No Default or Event of Default
--------------------------------
exists on the date of this Fourth Amendment (after giving effect to all of the
arrangements and transactions contemplated by this Fifth Amendment).
(c) Binding Effect of Documents. This Fifth Amendment has been duly
---------------------------
executed and delivered to you by the Borrower and the Subsidiaries (as the case
may be) and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrower and the Subsidiaries (as the case may
be) contained herein constitute legal, valid and binding obligations of the
Borrower and the Subsidiaries (as the case may be) enforceable against them in
accordance with their terms.
-4-
<PAGE>
ARTICLE III
-----------
PROVISIONS OF GENERAL APPLICATION
---------------------------------
(a) No Other Changes. Except to the extent specifically amended and
----------------
supplemented hereby, all of the terms, conditions and the provisions of the Loan
Agreement, the Notes and each of the other Loan Documents shall remain
unmodified, and the Loan Agreement, the Notes and each of the other Loan
Documents, as amended and supplemented by this Fifth Amendment, are confirmed as
being in full force and effect.
(b) Governing Law. This Fifth 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 Fifth 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.
(c) Binding Effect; Assignment. This Fifth Amendment shall be binding
--------------------------
upon and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(d) Counterparts. This Fifth Amendment may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which together shall constitute one instrument. In making
proof of this Fifth Amendment, it shall not be necessary to produce or account
for more than one counterpart hereof signed by each of the parties hereto.
(e) Conflict with Loan Agreement. If any of the terms of this Fifth
----------------------------
Amendment shall conflict in any respect with any of the terms of the Loan
Agreement or any other Loan Document, the terms of this Fifth Amendment shall be
controlling.
(f) Conditions Precedent. This Fifth Amendment shall become and be
--------------------
effective as of the Fifth Amendment Date, but only if:
(i) the form of acceptance at the end of this Fifth Amendment shall
be signed by the Borrower, each Subsidiary, the Agent and the
Majority Banks; and
(ii) the Banks and the Agent shall have received satisfactory
evidence that Internationale Nederlanden (U.S.) Capital Corporation
("ING") has provided any and all required consents to the
Modifications and, to the extent necessary, has entered into
modifications to the Subordinated Debt
-5-
<PAGE>
Documents in form and substance satisfactory to the Banks and the
Agent in connection therewith.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Fifth Amendment and return such
counterpart to the undersigned, whereupon this Fifth Amendment, as so accepted
by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
The Borrower:
-------------
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
---------------------------
Title: Vice President
(reminder of page intentionally left blank)
-6-
<PAGE>
The foregoing Fifth Amendment is hereby accepted by the undersigned
effective as of May __, 1998.
The Agent:
- ---------
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston),
individually and as Agent
By: /s/ Timothy G. Clifford
---------------------------------
Title: Director
FLEET NATIONAL BANK
By: /s/ Ann M. Meade
---------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/ Edward T. Paslawski
---------------------------------
Title: Vice President
By: /s/ Leonard J. Pellecchia
---------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Jeffrey Frost
---------------------------------
Title: Vice President
By: /s/ Brian M. Smith
---------------------------------
Title: Senior Vice President
-7-
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as investment advisor
By: /s/ Scott H. Page
----------------------------
Title: Vice President
-8-
<PAGE>
CONSENT OF GUARANTORS
---------------------
Each of the undersigned has guaranteed the Obligations under (and as
defined in) the Agreement by executing separate Guaranties, each dated as of
December 30, 1996 (or, in the case of the last three signatories listed below,
as of September 11, 1997). By executing this letter, each of the Subsidiaries
hereby absolutely and unconditionally reaffirms the Guaranty to which it is a
party, and acknowledges and agrees to the terms and conditions of this letter
agreement and the Loan Agreement and the other Loan Documents as amended hereby
(including, without limitation, the making of the representations and warranties
and the performance of the covenants applicable to it herein or therein).
NUTRAMAX HOLDINGS, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
NUTRAMAX HOLDINGS II, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
OPTOPICS LABORATORIES, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FAIRTON REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ORAL CARE, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-9-
<PAGE>
FLORENCE REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
POWERS PHARMACEUTICAL CORP.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
CERTIFIED CORP., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ADHESIVE COATINGS, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ELMWOOD PARK REALTY, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-10-
<PAGE>
FIRST AID PRODUCTS, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-11-
<PAGE>
Exhibit 10(mm)
NUTRAMAX PRODUCTS, INC.
9 Blackburn Drive
Gloucester, MA 01930
Dated as of: November 26, 1997
BankBoston, N.A.
Individually and as Agent
100 Federal Street
Boston, Massachusetts 02110
Fleet National Bank
One Federal Street
Boston, MA 02109
National Bank of Canada
One Federal Street, 27th Floor
Boston, MA 02110
The Sumitomo Bank, Limited
One Post Office Square
Suite 3820
Boston, MA 02109
Senior Debt Portfolio
c/o Eaton Vance Management
24 Federal Street
Boston, MA 02110
Re: Second Amendment to Revolving Credit and Term Loan Agreement
------------------------------------------------------------
Ladies and Gentlemen:
We refer to the Revolving Credit and Term Loan Agreement dated as of
December 30, 1996, as amended by a First Amendment to Revolving Credit and Term
Loan Agreement dated as of September 11, 1997, (as so amended, the "Loan
Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking
institutions referred to therein as Banks (the "Banks") and The First National
Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon
the terms and subject to the conditions contained in the Loan Agreement, you
agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit
for the account of, the Borrower.
Terms used in this letter of agreement (the "Second Amendment") which are
not defined herein, but which are defined in the Loan Agreement, shall have the
same respective meanings herein as therein.
We have requested and you have agreed to make certain modifications and
waivers of the Loan Documents (collectively, the "Modifications"), and you have
advised us that you are prepared and would be pleased to make the Modifications
so requested by us on the condition that we join with you in this Second
Amendment.
<PAGE>
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Second Amendment, and fully intending
to be legally bound by this Second Amendment, we hereby agree with you as
follows:
ARTICLE I
---------
AMENDMENTS TO LOAN AGREEMENT
----------------------------
Effective as of September 26, 1997 (the "Second Amendment Date"), the Loan
Agreement is amended in each of the following respects:
(a) The terms "Loan Documents" and "Security Documents" shall,
wherever used in any of the Loan Documents or Security Documents, be deemed to
also mean and include this Second Amendment.
(b) The term "Chilmark Documents" shall, whenever used in any of the
Loan Documents or Security Documents, be deemed to also mean and include the
documents, in form and substance reasonably satisfactory to the Banks and the
Agent, entered into between the Borrower and Cape Ann Investors, L.L.C. in
connection with the Repurchase Transaction (as defined in Article II below).
(c) The term "Subordinated Debt Documents" shall, whenever used in
any of the Loan Documents or Security Documents, be deemed to also mean and
include any required consents in form and substance reasonably satisfactory to
the Banks and the Agent, between the Borrower and ING, as referenced in Section
IV(f)(iv)(d) below.
(d) Section 1.1, containing various definitions, is amended in each
of the following respects:
(i) the definition of "Base Net Worth" is amended to read in
its entirety as follows:
Base Net Worth. An amount equal to $7,500,000, increasing to $23,000,000
--------------
effective as of September 27, 1997.
(ii) the definition of "EBITDA" is amended by adding at the end
thereof the following:
For purposes of calculating EBITDA for the Acquiring Subsidiaries (Adhesive
Coatings, Inc. and First Aid Products, Inc.) with respect to the 1996-97
and 1997-98 fiscal years, EBITDA shall be calculated as follows:
Fiscal year ending $6,837,000
September 30, 1997
First Quarter ending Actual EBITDA results for the
December 31, 1997 first quarter plus $5,127,750
($6,837,000 x 0.75)
Second Quarter ending Actual EBITDA results for the
March 31, 1998 first two quarters plus $3,418,500
($6,837,000 x 0.50)
<PAGE>
Second Quarter ending Actual EBITDA results for the
June 30, 1998 first three quarters plus $1,709,250
($6,837,000 x 0.25)
Fourth Quarter ending Actual EBITDA results for the previous
September 30, 1998 four quarters
(iii) the definition of "Term Loan A" is amended to read in its
entirety as follows:
Term Loan A. The term loan in the principal amount of up to $30,000,000
-----------
(as reduced from $32,000,000) made or to be made to the Borrower between
the Closing Date and the Stock Purchase LC Expiry Date by the Banks having
a Term Loan A Commitment pursuant to this Agreement (including Section
2.1(b) hereof), and subject to the limitations contained herein.
(iv) the definition of "Total Commitment" is amended to read in
its entirety as follows:
Total Commitment. As of any date, the sum of the then-current Commitments
----------------
of the Banks, provided that the Total Commitment shall not at any time
--------
exceed $89,222,693.
(v) the following new definition is added to Section 1.1:
Second Amendment. The Second Amendment to Revolving Credit and Term Loan
----------------
Agreement dated as of September 26, 1997, among the Borrower, the Banks and
the Agent.
(c) Section 2.13(b) is amended to read in its entirety as follows:
(e) The entire principal of the Term Notes A shall be payable by the
Borrower to the Banks in 20 consecutive quarter-annual installments of
principal. Such quarter-annual installments of principal shall be payable on
the installment payment dates, and shall be in the amounts, set forth below:
Installment Aggregate Amount
Payment Date of Payment
- -------------- ----------------
12/31/97 $ 725,000
03/31/98 $ 725,000
06/30/98 $ 725,000
09/30/98 $ 725,000
12/31/98 $1,475,000
03/31/99 $1,475,000
06/30/99 $1,475,000
09/30/99 $1,475,000
12/31/99 $1,787,500
<PAGE>
03/31/00 $1,787,500
06/30/00 $1,787,500
09/30/00 $1,787,500
12/31/00 $1,975,000
03/31/01 $1,975,000
06/30/01 $1,975,000
09/30/01 $1,975,000
12/31/01 $2,037,500
03/31/02 $2,037,500
06/31/02 $2,037,500
09/30/02 $ 37,500
Notwithstanding the foregoing, the last 4_quarter-annual installments set forth
in the table above shall be reduced in the inverse order of maturity by the
difference between (i)_$30,000,000 and (ii)_the aggregate amount borrowed under
Term Loan_A as of the Stock Purchase LC Expiry Date. All of the indebtedness
evidenced by each Term Note_A shall, if not sooner paid, be in any event
absolutely and unconditionally due and payable in full by the Borrower to the
Banks on the Term Loan_A Maturity Date.
(f) Section 5.1(b) is amended to read in its entirety as follows:
(b)(1) as soon as available, but in any event within 45 days
after the end of each fiscal quarter of the Borrower and its Subsidiaries,
a Consolidated balance sheet as of the end of, and a related Consolidated
statement of income, changes in stockholders' equity and cash flow for, the
<PAGE>
portion of the fiscal year then ended and for the fiscal quarter then
ended, prepared in accordance with GAAP and certified by the chief
financial officer of the Borrower, but subject, however, to normal,
recurring year-end adjustments that shall not in the aggregate be material
in amount;
(b)(2) as soon as available, but in any event within 30 days
after the end of each calendar month of the Borrower and its Subsidiaries
(commencing with the month ending October 31, 1997), a Consolidated balance
sheet as of the end of, and a related Consolidated statement of income,
changes in stockholders' equity and cash flow for, the portion of the
fiscal year then ended and for the calendar month then ended, prepared in
accordance with GAAP and certified by the chief financial officer of the
Borrower, but subject, however, to normal, recurring year-end adjustments
that shall not in the aggregate be material in amount;
(g) Section 5.7 is amended to read in its entirety as follows:
5.7. Minimum Net Worth. The Borrower shall maintain a minimum
-----------------
Consolidated Net Worth at least equal to Base Net Worth plus, on a
----
cumulative basis, 75% of the positive Consolidated net income of the
Borrower and its Subsidiaries earned in each of its fiscal quarters. Any
quarterly or annual losses incurred by the Borrower or any Subsidiary shall
not reduce the amount of Consolidated Net Worth required to be maintained
from time to time pursuant to this Section 5.7.
(h) Section 6.6 is amended to read in its entirety as follows:
6.6. Funded Debt Ratio. The Borrower shall not at any time permit the
-----------------
Funded Debt Ratio of the Borrower and its Subsidiaries as at the last day
of any fiscal quarter in any fiscal period identified below to be greater
than the ratio specified below opposite such fiscal period:
Maximum
-------
Period Ratio
- ------ -----
For any fiscal quarter ending on or after March 31, 4.25 to 1
1997 through June 30, 1997
For any fiscal quarter ending on or after September 30, 4.50 to 1
1997 through December 31, 1997
For any fiscal quarter ending on or after March 31, 1998 4.25 to 1
through June 30, 1998
For the fiscal quarter ending on September 30, 1998 3.75 to 1
<PAGE>
For any fiscal quarter ending on or after December 31, 3.25 to 1
1998 through March 31, 1999
For the fiscal quarter ending on June 30, 1999 3.00 to 1
For the fiscal quarter ending on September 30, 1999 2.50 to 1
For any fiscal quarter ending on or after December 31, 2.00 to 1
1999
(i) Section 6.8 is amended to read in its entirety as follows:
6.8. Cash Flow Ratio. The Borrower shall not permit the Cash Flow
---------------
Ratio of the Borrower and its Subsidiaries for any fiscal period identified
below to be less than the ratio specified below opposite such fiscal
period:
Period Minimum Ratio
------ -------------
For the fiscal quarter ending March 31, 1997 1.05 to 1
For the two consecutive fiscal quarters ending June 1.10 to 1
30, 1997
For the three consecutive fiscal quarters ending 1.20 to 1
September 30, 1997
For any four consecutive fiscal quarters ending on or 1.20 to 1
after December 31, 1997 through September 30, 1999
(determined at the end of each fiscal quarter for the
four quarters then ending)
For any four consecutive fiscal quarters ending on or 1.30 to 1
after December 31, 1999 (determined at the end of
each fiscal quarter for the four quarters then ending)
<PAGE>
(j) Section 6.9 is amended to read in its entirety as follows:
6.9. Minimum Interest Coverage. The Borrower shall not permit the
-------------------------
Interest Coverage Ratio of the Borrower and its Subsidiaries for any fiscal
period identified below to be less than the ratio specified below opposite
such period:
Period Minimum Ratio
------- -------------
For the fiscal quarter ending March 31, 1997 2.50 to 1
For the two consecutive fiscal quarters ending June 2.50 to 1
30, 1997
For the three consecutive fiscal quarters ending 2.75 to 1
September 30, 1997
For any four consecutive fiscal quarters ending on or 2.75 to 1
after December 31, 1997 through June 30, 1998
(determined at the end of each fiscal quarter for the
four quarters then ending)
For the four consecutive fiscal quarters ending on 3.00 to 1
September 30, 1998 (determined at the end of such
fiscal quarter for the four quarters then ending)
For the four consecutive fiscal quarters ending on 3.25 to 1
December 31, 1998 (determined at the end of such
fiscal quarter for the four quarters then ending)
For any four consecutive fiscal quarters ending on or 3.50 to 1
after March 31, 1999 through June 30, 1999
(determined at the end of each fiscal quarter for the
four quarters then ending)
<PAGE>
For any four consecutive fiscal quarters ending on or 4.00 to 1
after September 30, 1999 (determined at the end of
each fiscal quarter for the four quarters then ending)
(k) Section 6.10 is amended by deleting the table set forth therein
in its entirety and by inserting the following table in place thereof:
Maximum
Fiscal Year Capital Expenditures
----------- --------------------
1997 $4,000,000
1998 $8,000,000
1999 $7,000,000
2000, and each
fiscal year thereafter $6,750,000
(l) The portion of Schedule 1 to the Loan Agreement setting forth the
Commitment and Commitment Percentages of the Banks with respect to Term Loan A
is amended as set forth in Annex 1 attached hereto.
-------
ARTICLE II
----------
WAIVER
------
At the Borrower's request, the Banks hereby waive Section 5.10 (Use of
Proceeds), Section 6.11 (Restricted Payments), and Section 6.17 (No Amendments
to Certain Documents) of the Loan Agreement to the extent necessary for the
Borrower to proceed with the following transaction (the "Repurchase
Transaction"):
Cape Ann Investors, L.L.C. ("Chilmark"), Donald E. Lepone, Bernard J. Korman
and Donald M. Gleklen will finance the Borrower's repurchase of a designated
number of shares (not to exceed 400,000) of the Borrower's outstanding common
stock (the "Designated Number of Shares"), in return for the receipt of the
Borrower's warrants. Such repurchase will be conducted via a modified Dutch
auction tender offer (the "Offer"), pursuant to which the Borrower will offer to
repurchase the Designated Number of Shares at a price between a stated range
(the "Range"). Those stockholders who desire to tender their shares in
connection with the Offer will select a price within the Range at which they are
willing to tender their shares. Upon expiration of the Offer, the Borrower will
select a per share purchase price (the "Purchase Price") which will enable it to
acquire the Designated Number of Shares. Subject to proration of shares
accepted for
<PAGE>
tender in the event the number of shares tendered at or below the Purchase Price
exceeds the Designated Number of Shares, the Borrower will pay the Purchase
Price for all shares tendered at or below the Purchase Price.
The Banks hereby waive the provisions of Sections 2.13(f), 5.10, 6.11, 6.14
and 6.17 of the Loan Agreement for the limited purpose of allowing the Borrower
to consummate the Repurchase Transaction upon the terms and conditions described
above, it being expressly agreed that no other waiver, modification or consent
is hereby granted.
ARTICLE III
-----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
The Borrower hereby represents, warrants and covenants to you as follows:
(a) Representations in Loan Agreement. Each of the representations and
---------------------------------
warranties made by the Borrower to you in the Loan Agreement was true, correct
and complete when made and is true, correct and complete in all material
respects 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 the Borrower on the
date hereof and in this First Amendment.
(b) No Defaults or Events of Default. No Default or Event of Default
--------------------------------
exists on the date of this Second Amendment (after giving effect to all of the
arrangements and transactions contemplated by this Second Amendment).
(c) Binding Effect of Documents. This Second Amendment has been duly
---------------------------
executed and delivered to you by the Borrower and the Subsidiaries (as the case
may be) and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrower and the Subsidiaries (as the case may
be) contained herein constitute legal, valid and binding obligations of the
Borrower and the Subsidiaries (as the case may be) enforceable against them in
accordance with their terms.
ARTICLE IV
----------
PROVISIONS OF GENERAL APPLICATION
---------------------------------
(a) No Other Changes. Except to the extent specifically amended and
----------------
supplemented hereby, all of the terms, conditions and the provisions of the Loan
Agreement, the Notes and each of the other Loan Documents shall remain
unmodified, and the Loan Agreement, the Notes and each of the other Loan
Documents, as amended and supplemented by this Second Amendment, are confirmed
as being in full force and effect.
(b) Governing Law. This Second 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 Second 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.
(c) Binding Effect; Assignment. This Second Amendment shall be binding
--------------------------
upon and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(d) Counterparts. This Second Amendment may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which together shall constitute one instrument. In making
proof of this Second Amendment, it shall not be necessary to produce or account
for more than one counterpart hereof signed by each of the parties hereto.
<PAGE>
(e) Conflict with Loan Agreement. If any of the terms of this Second
----------------------------
Amendment shall conflict in any respect with any of the terms of the Loan
Agreement or any other Loan Document, the terms of this Second Amendment shall
be controlling.
(f) Conditions Precedent. This Second Amendment shall become and be
--------------------
effective as of the Second Amendment Date, but only if:
(i) the form of acceptance at the end of this Second Amendment
shall be signed by the Borrower, each Subsidiary and the Banks;
(ii) the Agent shall have received originals of the Second
Amendment, together with any and all schedules, exhibits, annexes,
agreements and instruments required to be delivered in connection
therewith, each duly executed and delivered by the parties
thereto, and each in form and substance satisfactory to the Agent;
(iii) the Banks and the Agent shall have received satisfactory
evidence of appropriate corporate and, if necessary, shareholder
approval of the proposed transactions (including both the
Repurchase Transaction and the Modifications);
(iv) the Banks and the Agent shall have received satisfactory
evidence that (a) the Borrower has successfully completed (or,
upon funding by Chilmark of the entire purchase price, will
successfully complete) the Repurchase Transaction, such
transaction to be in form and substance reasonably satisfactory to
the Banks and the Agent and (b) Internationale Nederlanden (U.S.)
Capital Corporation ("ING") has provided any and all required
consents to the Repurchase Transaction and the Modifications and
has entered into modifications to the Subordinated Debt Documents
in form and substance satisfactory to the Banks and the Agent in
connection therewith (it being understood and agreed by the
Borrower that its failure to enter into with ING, on or before
February 12, 1998, such modifications to the Subordinated Debt
Documents in form and substance satisfactory to the Banks and the
Agent shall constitute an Event of Default under (and as defined
in) the Loan Agreement); and
(v) the Agent shall have received, for the ratable benefit of
those Banks who are signatories to this Second Amendment, the
amendment fee from the Borrower in the amount of $111,528.36.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Second Amendment and return such
counterpart to the undersigned, whereupon this Second Amendment, as so accepted
by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
The Borrower:
-------------
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
-------------------------------
Title: Vice President
(remainder of page intentionally left blank)
<PAGE>
The foregoing Second Amendment is hereby accepted by the undersigned
effective as of September 26, 1997.
The Agent:
- ---------
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston),
individually and as Agent
By: /s/ Timothy G. Clifford
---------------------------------
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Ann M. Meade
---------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/ Edward T. Paslawski
---------------------------------
Title: Vice President
By: /s/ Leonard J. Pellecchia
---------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Daniel G. Eastman
---------------------------------
Title: Vice President & Manager
By: /s/ Alfred DeGemmis
---------------------------------
Title: Vice President
<PAGE>
SENIOR DEBT PORTFOLIO
By: /s/ Scott H. Page
--------------------------------
Title: Vice President
<PAGE>
CONSENT OF GUARANTORS
---------------------
Each of the undersigned has guaranteed the Obligations under (and as
defined in) the Agreement by executing separate Guaranties, each dated as of
December 30, 1996 (or, in the case of the last three signatories listed below,
as of September 11, 1997). By executing this letter, each of the Subsidiaries
hereby absolutely and unconditionally reaffirms the Guaranty to which it is a
party, and acknowledges and agrees to the terms and conditions of this letter
agreement and the Loan Agreement and the other Loan Documents as amended hereby
(including, without limitation, the making of the representations and warranties
and the performance of the covenants applicable to it herein or therein).
NUTRAMAX HOLDINGS, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
NUTRAMAX HOLDINGS II, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
OPTOPICS LABORATORIES, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FAIRTON REALTY, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ORAL CARE, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FLORENCE REALTY, INC., Guarantor
-13-
<PAGE>
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
POWERS PHARMACEUTICAL CORP.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
CERTIFIED CORP., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ADHESIVE COATINGS, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ELMWOOD PARK REALTY, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FIRST AID PRODUCTS, INC.
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
<PAGE>
ANNEX 1
-------
Commitment and Commitment Percentages
-------------------------------------
<TABLE>
<CAPTION>
Term Loan A
Bank Commitment Percentage
- ---- ------------ ----------
<S> <C> <C>
BankBoston, N.A. $11,011,335.90 36.70445300%
Fleet National Bank $ 7,684,683.09 25.61561030%
National Bank of Canada $ 6,981,511.22 23.27170405%
The Sumitomo Bank, Limited $ 4,322,469.89 14.40823295%
TOTAL $30,000,000.00 100.0000030%
</TABLE>
* Notwithstanding the foregoing Commitments of the Banks, the Total Commitment
shall not at any time exceed $89,222,693.
-15-
<PAGE>
Exhibit 10(nn)
WARRANT CERTIFICATE
-------------------
October 14, 1997
ARTICLE I
GRANT OF WARRANTS
-----------------
NutraMax Products, Inc., a Delaware corporation (the "Company"), hereby
grants to _________________________________________ (the "Holder") __________
warrants (the "Warrants") to purchase shares of the Company's common stock, par
value $.001 per share (the "Common Stock"). Each Warrant entitles the Holder,
during the Exercise Period (as defined in Section 2.2 hereof), to purchase one
share of Common Stock at a price equal to the Exercise Price per share (as
defined in Section 2.1 hereof).
ARTICLE II
EXERCISE OF WARRANTS; EXERCISE PRICE
------------------------------------
Section 2.1 Exercise Price. Upon exercise of any Warrants, the Holder shall
--------------
pay an exercise price per Warrant (the "Exercise Price") equal to the difference
obtained by subtracting (i) $2.25 from (ii) the Average Stock Price (as defined
below) on the date of the first anniversary of this Certificate (the "Strike
Price Date"). Notwithstanding the foregoing, in the event the Company shall
enter into a Transaction (as defined in Section 3.5(a)) prior to the Strike
Price Date, (a) the Exercise Price shall equal the difference obtained by
subtracting (i) $2.25 from (ii) the Average Stock Price on the date of the first
public announcement of the Transaction (the "Transaction Strike Price Date"),
and (b) the Company shall notify the Holder of the Exercise Price at least ten
(10) business days prior to the effective date of such Transaction. The "Average
Stock Price" on any date shall mean the average of the mean of the high and low
prices for a share of Common Stock reported on the principal market or exchange
on which the Common Stock is traded for the twenty (20) consecutive trading days
preceding such date.
Section 2.2 Right to Exercise the Warrants. The Warrants may be exercised,
------------------------------
in whole or in part, at any time and from time to time during the period
commencing on the Strike Price Date and expiring on the fifth anniversary of the
Strike Price Date (the "Exercise Period"). Notwithstanding the foregoing, in the
event the Company shall enter into a Transaction prior to the Strike Price Date,
each Warrant shall become immediately exercisable on the Transaction Strike
Price Date and each Warrant shall remain exercisable for a period of five years
thereafter unless earlier terminated pursuant Section 3.5(a)(ii).
<PAGE>
Section 2.3 Procedure for Exercising the Warrants. The Holder may exercise
-------------------------------------
the Warrants by executing the Form of Election attached hereto as Exhibit A and
delivering it to the Company and tendering the requisite aggregate Exercise
Price for the number of shares of Common Stock subject to such exercise to the
Company on any business day during normal business hours (the date of receipt of
such Form of Election and aggregate Exercise Price by the Company is hereinafter
referred to as an "Exercise Date"). The Holder shall not be obligated to pay a
stamp tax or similar issuance tax or charge.
Section 2.4 Issuance of Shares of Common Stock. As soon as practicable
----------------------------------
after any Exercise Date the Company shall (provided that it has received the
Form of Election duly executed, accompanied by payment of the Exercise Price
pursuant to Section 2.1 hereof for each of the shares of Common Stock to be
purchased) promptly cause certificates for the number of shares of Common Stock
to be issued on such Exercise Date to be delivered to or upon the order of the
Holder, registered in such name as may be designated by the Holder; provided
that if the Common Stock is to be registered in the name of any entity or person
other than the Holder, the Company may require evidence of compliance by the
Holder with all applicable securities laws.
Section 2.5 Partial Exercise. If the Holder shall exercise this Warrant
----------------
Certificate for less than all of the Warrants represented hereby, the Company
shall issue to the Holder, within ten (10) business days of the Exercise Date, a
new warrant certificate of like kind and tenor to this Warrant Certificate
evidencing the right to exercise the remaining outstanding Warrants. Each
Warrant exercised pursuant to Section 2.2 and Section 2.3 shall be canceled.
ARTICLE III
RESERVATION AND AVAILABILITY OF COMMON STOCK; ADJUSTMENTS
---------------------------------------------------------
Section 3.1 Reservation of Common Stock. The Company covenants and agrees
---------------------------
that it will cause to be kept available out of its authorized and unissued
Common Stock, or its authorized and issued Common Stock held in its treasury,
the number of shares of Common Stock that will be sufficient to permit the
exercise in full of each of the Warrants outstanding under this Warrant
Certificate.
Section 3.2 Common Stock to be Duly Authorized and Issued, Fully Paid and
-------------------------------------------------------------
Non-assessable. The Company covenants and agrees that it will take all such
- --------------
action as may be necessary to ensure that all shares of Common Stock delivered
upon exercise of any Warrants shall, at the time of delivery of the certificates
for such shares, be duly and validly authorized and issued and fully paid and
non-assessable shares and free from all taxes, liens, charges, encumbrances and
restrictions, except as set forth herein or in that certain Stock Purchase
Agreement, dated as of August 12, 1997, as amended (the "Stock Purchase
Agreement"), between the Company and Cape Ann Investors, L.L.C.
2
<PAGE>
Section 3.3 Common Stock Record Date. Each person or entity in whose name
------------------------
any certificate for shares of Common Stock is issued upon the exercise of any
Warrants shall for all purposes be deemed to have become the holder of record of
the shares of Common Stock represented thereby on, and such certificate shall be
dated, the Exercise Date. Prior to the exercise of such Warrants, the Holder
shall not be entitled to any rights of a stockholder of the Company with respect
to the shares of Common Stock for which such Warrants shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 3.4 Adjustment for Common Stock Dividends, Subdivisions and
-------------------------------------------------------
Combinations. In case the Company shall, at any time or from time to time, (i)
- ------------
pay a dividend in Common Stock, or make a distribution in Common Stock, (ii)
subdivide its outstanding Common Stock into a greater number of shares, or (iii)
combine its outstanding Common Stock into a smaller number of shares (including
a recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (a) the Exercise Price determined
in accordance with Section 2.1 shall be adjusted by multiplying such Exercise
Price by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately before such event and the denominator of which is
the number of shares of Common Stock outstanding immediately after such event
and (b) the number of Warrants outstanding pursuant to this Warrant Certificate
immediately before such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the Exercise Price immediately before such
event and the denominator of which is the Exercise Price immediately after such
event.
Section 3.5 Consolidation or Merger; Rights and Other Distributions.
-------------------------------------------------------
(a) If at any time after the date of this Certificate, the Company
shall consolidate with, merge with or into, or sell substantially all of its
assets or property to, another corporation (a "Transaction"), then the Company
or the entity assuming the obligations of the Company, may, in its sole
discretion, either (i) cause effective provision to be made so that each Warrant
shall, effective as of the effective date of such event, be exercisable or
exchangeable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the number of shares of Common Stock
deliverable upon exercise or exchange of such Warrant would have been entitled
upon such event, or (ii) in the event that the only consideration to be received
in the Transaction is cash, upon 20 days written notice by the Company to the
Holder, provide that all unexercised Warrants will terminate immediately prior
to the consummation of the Transaction unless exercised by the Holder prior to
the effective date of the Transaction;
(b) If at any time after the date of this Warrant Certificate, the
Company shall effect any rights offering or pay any dividend (other than
dividends paid in shares of Common Stock for which an adjustment is made
pursuant to Section 3.4 hereof or regular cash dividends payable out of earnings
or surplus and made in the ordinary course of business) to its
3
<PAGE>
stockholders, then in each such case the Company shall cause effective provision
to be made so that each Warrant shall, effective as of the effective date of
such event, be exercisable for the kind and number of shares of stock, other
securities, cash or other property to which a holder of the number of shares of
Common Stock deliverable upon exercise of such Warrant would have been entitled
upon such event and any such provision shall include adjustments in respect of
such stock, securities, cash or other property that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Warrant
Certificate with respect to such Warrant; and
(c) Notwithstanding the foregoing, in the event that the Company shall
distribute "poison pill" rights pursuant to a "poison pill" shareholder rights
plan (the "Rights"), the Company shall, in lieu of making any adjustment
pursuant to clauses (a) or (b) of this Section 3.5, make proper provision so
that the Holder upon exercise of a Warrant after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such exercise, in addition to the Common Stock issuable
upon such exercise, a number of Rights to be determined as follows: (i) if such
exercise occurs on or prior to the date for the distribution to the holders of
Rights of separate certificates evidencing such Rights (the "Distribution
Date"), the same number of Rights to which a holder of a number of shares of
Common Stock equal to the number of shares of Common Stock issuable upon such
exercise is entitled at the time of such exercise in accordance with the terms
and provisions of and applicable to the Rights; and (ii) if such exercise occurs
after the Distribution Date, the same number of Rights to which a holder of the
number of shares of Common Stock into which the Warrant so exercised was
exercisable immediately prior to the Distribution Date would have been entitled
on the Distribution Date in accordance with the terms and provisions of and
applicable to the Rights.
Section 3.6 Notice; Calculations; Etc. Whenever any adjustments are made as
-------------------------
provided in Sections 3.4 or Section 3.5, the Company shall provide to the Holder
a statement, signed by an authorized officer, describing in detail the facts
requiring such adjustment and setting forth a calculation of the Exercise Price
and the number of shares of Common Stock or other stock, securities, cash or
other property applicable to each Warrant after giving effect to such
adjustment. All calculations under this Section 3.6 shall be made to the nearest
one hundredth of a cent or to the nearest one-tenth of a share, as the case may
be.
ARTICLE IV
HOLDER REPRESENTATIONS, WARRANTIES AND COVENANTS
------------------------------------------------
By its receipt and acceptance of this Warrant Certificate, the Holder
represents and warrants to and covenants with, the Company, as follows:
Section 4.1 Representations. The Holder, by reason of its business and
---------------
financial experience, has such knowledge, sophistication and experience in
business and financial
4
<PAGE>
matters as to be capable of evaluating the merits and risks of its investment in
the Warrants and the shares of Common Stock issuable upon the exercise thereof,
and is purchasing the Warrants and the shares of Common stock issuable upon the
exercise thereof to be purchased hereunder have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or the securities
laws of any state or other jurisdiction and cannot be disposed of unless they
are subsequently registered under the Securities Act and any applicable state
laws or exemption from such registration is available. The Holder is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Securities Act. The Holder has had the opportunity to ask questions and to
receive answers concerning the financial condition, operation and prospects of
the Company and the terms and conditions of the Holder's investment, as well as
the opportunity to obtain any additional information necessary to certify the
accuracy of information furnished in connection therewith that the Company
possesses or can acquire without unreasonable effort or expense.
Section 4.2 Restrictions on Transferability. The Warrants and the shares of
-------------------------------
Common Stock received upon exercise thereof shall be subject to the restrictions
contained in the Stock Purchase Agreement. The Warrants and the shares of Common
Stock received upon exercise of the Warrants shall be entitled to the benefits
of the registration rights contained in the Stock Purchase Agreement.
Section 4.3 Restrictive Legend. Each certificate representing shares of the
------------------
Common Stock issuable upon exercise of the Warrants, or any other securities
issued in respect of the Common Stock issued upon exercise of the Warrants, upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (1)
A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT OR (2) AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SUCH
SECURITIES.
THE SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO THE PROVISIONS
OF (I) AN AGREEMENT, DATED AS OF OCTOBER 14, 1997, BY AND BETWEEN
NUTRAMAX PRODUCTS, INC. AND CAPE ANN INVESTORS, L.L.C., AND (II) A
CERTAIN STOCK PURCHASE AGREEMENT, DATED AS OF
5
<PAGE>
AUGUST 12, 1997, AS AMENDED, BY AND BETWEEN NUTRAMAX PRODUCTS, INC.
AND CAPE ANN INVESTORS, L.L.C., INCLUDING CERTAIN RESTRICTIONS ON
TRANSFER SET FORTH THEREIN. COPIES OF SUCH AGREEMENTS ARE AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF NUTRAMAX PRODUCTS, INC. AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE."
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1 Company Covenant. The Company covenants not to purchase any
----------------
shares of its Common Stock during the twenty (20) trading days preceding the
Strike Price Date or the Transaction Strike Price Date, as the case may be.
Section 5.2 Notices. Notices or demands relating to this Warrant
-------
Certificate shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed as follows, or telexed, telecopied, or delivered by
nationally-recognized overnight or other courier:
If to the Holder: ________________________
________________________
________________________
________________________
________________________
copy to: William A. Groll, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
If to the Company: NutraMax Products, Inc.
9 Blackburn Drive
Gloucester, Massachusetts 01930
Attention: Mr. Robert F. Burns
copy to: Joseph L. Johnson III, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
6
<PAGE>
Section 5.3 Successors. All the covenants and provisions of this Warrant
----------
Certificate by or for the benefit of the Company or the Holder shall bind and
inure to the benefit of their respective successors and assigns hereunder.
Section 5.4 DELAWARE CONTRACT. THIS CERTIFICATE AND THE WARRANTS, AND ALL
-----------------
QUESTIONS RELATING TO THE INTERPRETATION, CONSTRUCTION AND ENFORCEABILITY OF
THIS CERTIFICATE AND THE WARRANTS, SHALL BE GOVERNED IN ALL RESPECTS BY THE
SUBSTANTIVE LAWS OF THE STATE OF DELAWARE.
Section 5.5 Amendments and Waivers. Except as otherwise provided herein,
----------------------
the provisions of this Agreement may not be amended, modified or supplemented,
other than by a written instrument executed by the Company and the Holder.
Section 5.6 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Holder shall be enforceable to the fullest extent permitted by law.
Section 5.7 Fractional Shares. No fractional shares of Common Stock shall
-----------------
be issued in connection with the exercise of any Warrants hereunder, but in lieu
of such fractional shares the Company shall make a cash payment therefor upon
the basis of the Average Stock Price as of the Exercise Date.
Section 5.8 Replacement Certificate. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed and delivered, all as of the date and year first above written.
NUTRAMAX PRODUCTS, INC.
By: ___________________________________
Name: Robert F. Burns
Title: Chief Financial Officer
8
<PAGE>
EXHIBIT A
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants)
NUTRAMAX PRODUCTS, INC.:
The undersigned hereby irrevocably elects to exercise _______ Warrants
represented by the Warrant Certificate to purchase _______ shares of Common
Stock issuable upon the exercise of such Warrants and requests that certificates
for such shares be issued in the name of:
_______________________________________
(Please print name and address)
_______________________________________
Please insert federal tax identification number or other identifying number
_______.
Dated: ___________.
________________________________________________
By: ____________________________________________
Name:
Title:
9
<PAGE>
Exhibit 10(oo)
NUTRAMAX PRODUCTS, INC.
9 Blackburn Drive
Gloucester, MA 01930
Dated as of: August 31, 1998
BankBoston, N.A.
Individually and as Agent
100 Federal Street
Boston, Massachusetts 02110
Fleet National Bank
One Federal Street
Boston, MA 02109
National Bank of Canada
One Federal Street, 27th Floor
Boston, MA 02110
The Sumitomo Bank, Limited
450 Lexington Avenue, Suite 1700
New York, NY 10017
Senior Debt Portfolio
c/o Eaton Vance Management
24 Federal Street
Boston, MA 02110
Re: Sixth Amendment to Revolving Credit and Term Loan Agreement
-----------------------------------------------------------
Ladies and Gentlemen:
We refer to the Revolving Credit and Term Loan Agreement dated as of
December 30, 1996, as amended by a First Amendment to Revolving Credit and Term
Loan Agreement dated as of September 11, 1997, by a Second Amendment to
Revolving Credit and Term Loan Agreement dated as of November 26, 1997, by a
Third Amendment to Revolving Credit and Term Loan Agreement dated as of January
20, 1997 (and effective as of September 28, 1997), by a Fourth Amendment to
Revolving Credit and Term Loan Agreement dated as of March 31, 1998, and by a
Fifth Amendment to Revolving Credit and Term Loan Agreement dated as of May 7,
1998, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc. (the
"Borrower"), the banking institutions referred to therein as Banks (the "Banks")
and The First National Bank of Boston (now known as BankBoston, N.A.), as agent
(the "Agent"). Upon the terms and subject to the conditions contained in the
Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue
Letters of Credit for the account of, the Borrower.
-1-
<PAGE>
Terms used in this letter of agreement (the "Sixth Amendment") which are
not defined herein, but which are defined in the Loan Agreement, shall have the
same respective meanings herein as therein.
We have requested and you have agreed to make certain modifications of the
Loan Documents (collectively, the "Modifications"), and you have advised us that
you are prepared and would be pleased to make the Modifications so requested by
us on the condition that we join with you in this Sixth Amendment.
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this Sixth Amendment, and fully intending
to be legally bound by this Sixth Amendment, we hereby agree with you as
follows:
ARTICLE I
---------
AMENDMENTS TO LOAN AGREEMENT
----------------------------
Effective as of August 31, 1998 (the "Sixth Amendment Date"), the Loan
Agreement is amended in each of the following respects:
(a) The terms "Loan Documents" and "Security Documents" shall,
wherever used in any of the Loan Documents or Security Documents, be deemed to
also mean and include this Sixth Amendment.
(b) The term "Subordinated Debt Documents" shall, whenever used in
any of the Loan Documents or Security Documents, be deemed to also mean and
include any required consents in form and substance reasonably satisfactory to
the Banks and the Agent, between the Borrower and ING, as referenced in Article
III(f)(iii) below.
(c) The term "Obligations" shall, whenever used in any of the Loan
Documents or Security Documents, be deemed to also mean and include any and all
Overadvances.
(d) The first paragraph of Section 2.20 of the Loan Agreement is
amended to read in its entirety as follows:
"2.20 Notwithstanding the provisions of Sections 2.1(a), at the
Borrower's request, the Banks will make Revolving Loans to the Borrower at a
time when the debit balance in the Loan Account in respect of Revolving
Loans and Letters of Credit exceeds the Borrowing Base or which cause the
debit balance in the Loan Account in respect of Revolving Loans and Letters
of Credit to exceed the Borrowing Base (any such Loan or Loans being herein
referred to individually as an "Overadvance" and collectively as
"Overadvances"), provided that: (i)_the aggregate amount of the Overadvances
--------
at any one time outstanding shall not exceed $1,500,000; (ii)_in no event
shall the debit balance in the Loan Account in respect of Revolving Loans
and Letters of Credit at any one
-2-
<PAGE>
time outstanding exceed the Revolving Credit Commitments of all of the
Banks; and (iii)_no Default or Event of Default shall exist hereunder at the
time any Overadvance is requested or outstanding. Failure of the Borrower to
maintain any of the foregoing conditions (other than the condition under
clause (iii) that no Default shall exist) shall constitute an immediate
Event of Default hereunder, and shall be deemed to be a failure to perform
an Obligation hereunder. The Agent shall enter such Overadvances, along with
all interest, expenses and charges relating thereto, as debits in the Loan
Account. Notwithstanding anything contained in this Section_2 or otherwise,
unless sooner demanded as a result of the failure to meet any of the
conditions set forth in clauses_(i) through (iii) above, the Borrower shall
pay all outstanding Overadvances on or before September_21, 1998 (the
"Overadvance Termination Date")."
ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
The Borrower hereby represents, warrants and covenants to you as follows:
(a) Representations in Loan Agreement. Each of the representations and
---------------------------------
warranties made by the Borrower to you in the Loan Agreement was true, correct
and complete when made and is true, correct and complete in all material
respects 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 the Borrower on the
date hereof and in this Sixth Amendment.
(b) No Defaults or Events of Default. No Default or Event of Default
--------------------------------
exists on the date of this Sixth Amendment (after giving effect to all of the
arrangements and transactions contemplated by this Sixth Amendment).
(c) Binding Effect of Documents. This Sixth Amendment has been duly
---------------------------
executed and delivered to you by the Borrower and the Subsidiaries (as the case
may be) and is in full force and effect as of the date hereof, and the
agreements and obligations of the Borrower and the Subsidiaries (as the case may
be) contained herein constitute legal, valid and binding obligations of the
Borrower and the Subsidiaries (as the case may be) enforceable against them in
accordance with their terms.
ARTICLE III
-----------
PROVISIONS OF GENERAL APPLICATION
---------------------------------
(a) No Other Changes. Except to the extent specifically amended and
----------------
supplemented hereby, all of the terms, conditions and the provisions of the Loan
Agreement, the Notes and each of the other Loan Documents shall remain
unmodified, and the Loan Agreement, the Notes and each of the other Loan
Documents, as amended and supplemented by this Sixth Amendment, are confirmed as
being in full force and effect.
-3-
<PAGE>
(b) Governing Law. This Sixth 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 Sixth 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.
(c) Binding Effect; Assignment. This Sixth Amendment shall be binding
--------------------------
upon and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(d) Counterparts. This Sixth Amendment may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which together shall constitute one instrument. In making
proof of this Sixth Amendment, it shall not be necessary to produce or account
for more than one counterpart hereof signed by each of the parties hereto.
(e) Conflict with Loan Agreement. If any of the terms of this Sixth
----------------------------
Amendment shall conflict in any respect with any of the terms of the Loan
Agreement or any other Loan Document, the terms of this Sixth Amendment shall be
controlling.
(f) Conditions Precedent. This Sixth Amendment shall become and be
--------------------
effective as of the Sixth Amendment Date, but only if:
(i) the form of acceptance at the end of this Sixth Amendment
shall be signed by the Borrower, each Subsidiary, the Agent and the
Banks;
(ii) each Bank which is a signatory to this Sixth Amendment shall
have received an amendment fee from the Borrower in the amount of
$10,000; and
(iii) the Banks and the Agent shall have received satisfactory
evidence that Internationale Nederlanden (U.S.) Capital Corporation
("ING") has provided any and all required consents to the
Modifications and, to the extent necessary, has entered into
modifications to the Subordinated Debt Documents in form and
substance satisfactory to the Banks and the Agent in connection
therewith.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Sixth Amendment and return such
counterpart to the undersigned, whereupon this Sixth Amendment, as so accepted
by you, shall become a binding agreement among you and the undersigned.
Very truly yours,
The Borrower:
-------------
NUTRAMAX PRODUCTS, INC.
By: /s/ Robert F. Burns
-------------------------------
Title: Vice President
(reminder of page intentionally left blank)
-4-
<PAGE>
The foregoing Sixth Amendment is hereby accepted by the undersigned
effective as of August 31, 1998.
The Agent:
- ---------
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston),
individually and as Agent
By: /s/ Timothy G. Clifford
---------------------------------
Title: Director
FLEET NATIONAL BANK
By: /s/ Ann M. Meade
---------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/ Leonard J. Pellecchia
---------------------------------
Title: Vice President
By: /s/ A. Keith Broyles
---------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Brian M. Smith
---------------------------------
Title: Senior Vice President
By: /s/ Jeffrey Frost
---------------------------------
Title: Vice President
-5-
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as investment advisor
By: /s/ Scott H. Page
----------------------------
Title: Vice President
-6-
<PAGE>
CONSENT OF GUARANTORS
---------------------
Each of the undersigned has guaranteed the Obligations under (and as
defined in) the Agreement by executing separate Guaranties, each dated as of
December 30, 1996 (or, in the case of the last three signatories listed below,
as of September 11, 1997). By executing this letter, each of the Subsidiaries
hereby absolutely and unconditionally reaffirms the Guaranty to which it is a
party, and acknowledges and agrees to the terms and conditions of this letter
agreement and the Loan Agreement and the other Loan Documents as amended hereby
(including, without limitation, the making of the representations and warranties
and the performance of the covenants applicable to it herein or therein).
NUTRAMAX HOLDINGS, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
NUTRAMAX HOLDINGS II, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
OPTOPICS LABORATORIES,
CORPORATION, Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
FAIRTON REALTY HOLDINGS, INC.,
Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
ORAL CARE, INC., Guarantor
By: /s/ Robert F. Burns
--------------------------
Title: Vice President
-7-
<PAGE>
FLORENCE REALTY, INC., Guarantor
By: /s/ Robert F. Burns
-------------------------
Title: Vice President
POWERS PHARMACEUTICAL
CORPORATION, Guarantor
By: /s/ Robert F. Burns
-------------------------
Title: Vice President
CERTIFIED CORP., Guarantor
By: /s/ Robert F. Burns
-------------------------
Title: Vice President
ADHESIVE COATINGS, INC.,
Guarantor
By: /s/ Robert F. Burns
-------------------------
Title: Vice President
ELMWOOD PARK REALTY, INC.,
Guarantor
By: /s/ Robert F. Burns
-------------------------
Title: Vice President
FIRST AID PRODUCTS, INC.,
Guarantor
By: /s/ Robert F. Burns
-------------------------
Title: Vice President
-8-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Set forth below is a list of NutraMax Products, Inc.'s subsidiaries, as of
December 28, 1998, with their respective states of incorporation. All of such
subsidiaries were wholly-owned by the Company as of such date.
Name State of Incorporation
Optopics Laboratories Corporation DE
Fairton Realty Holdings, Inc. DE
Powers Pharmaceutical Corporation (1) DE
Certified Corp. DE
Oral Care, Inc. DE
Florence Realty, Inc. MA
First Aid Products, Inc. DE
Adhesive Coatings, Inc. NJ
Elmwood Park Realty, Inc. NJ
NutraMax Holdings Inc. DE
NutraMax Holdings II Inc. DE
F. A. Products, L.P. DE
(1) Subsidiary or Certified Corp.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-46553 and 33-61724 of Nutramax Products, Inc. on Form S-3 and 33-47175 of
Nutramax Products, Inc. on Form S-8 of our report dated November 24, 1998
(December 29, 1998 as to Note P and the second to last paragraph of Note F),
appearing in this Annual Report on Form 10-K of Nutramax Products Inc., for the
year ended October 3, 1998.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 30, 1998
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This Schedule contains summary financial information extracted from the
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