SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31,
1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Transition period from ____ to
____
Commission File Number 0-26144
-------
INTERNATIONAL MUREX TECHNOLOGIES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA NOT APPLICABLE
-----------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
2255 B. QUEEN STREET EAST, SUITE 828
TORONTO, ONTARIO M4E 1G3
--------------------------------------------------------------
(Address, including zip code, of principal executive officers)
(519) 836-8016
-------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, NO PAR VALUE
SHAREHOLDER RIGHTS PLAN
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, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in the
definitive proxy statement incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's outstanding Common
Shares held by non-affiliates of the Registrant as of March 5, 1998
was U.S. $146,495,755. There were 16,742,372 Common Shares outstanding
as of March 5, 1998.
DOCUMENTS INCORPORATED BY REFERENCE:
-----------------------------------
Portions of the Registrant's Proxy Statement for the Annual General
Meeting of Shareholders to be held on June 4, 1998 are incorporated by
reference in Part III hereof.
Page 1 of 47
----
Index of Exhibits on Page 47
INTERNATIONAL MUREX TECHNOLOGIES CORPORATION
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1997
Table of Contents
-----------------
Item Page
Number Number
- ------ ------
PART I
1. Business 3
..............................................
..............................................
2. Properties 10
..............................................
..............................................
3. Legal Proceedings 10
..............................................
..............................................
4. Submission of Matters to a Vote of Security 10
Holders
..............................................
PART II
5. Market for the Registrant's Common Shares and 11
Related Shareholder Matters....................
6. Selected Financial Data 12
..............................................
..............................................
7. Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
..............................................
..............................................
8. Financial Statements and Supplementary Data 17
..............................................
9. Changes in and Disagreements with Accountants 38
on Accounting and Financial
Disclosure
..............................................
..............................................
PART III
10. Directors and Executive Officers of the 38
Registrant
..............................................
11. Executive Compensation 38
..............................................
..............................................
12. Security Ownership of Certain Beneficial 38
Owners and Management ........................
13. Certain Relationships and Related Transactions 38
..............................................
PART IV
14. Exhibits, Financial Statements, and Reports on
Form 8-K 39
..............................................
Signatures 43
..............................................
..............................................
Index of Exhibits 47
..............................................
..............................................
This Form 10-K contains forward-looking statements within the meaning
- ---------------------------------------------------------------------
of Section 27A of the Securities Act of 1933 and Section 21E of the
- -------------------------------------------------------------------
Securities Exchange Act of 1934. The actual results could differ
- ----------------------------------------------------------------
materially from those set forth in the forward- looking statements.
- -------------------------------------------------------------------
Certain factors that might cause such a difference are discussed in
- -------------------------------------------------------------------
the introductory paragraph to Item 7, "Management's Discussion and
- ------------------------------------------------------------------
Analysis of Financial Condition and Results of Operations," within
- ------------------------------------------------------------------
this report.
- ------------
PART I
ITEM 1. BUSINESS
GENERAL
International Murex Technologies Corporation ("IMTC"), has many
incorporated subsidiaries operating throughout the world generally
under the Murex name (the "Murex Group"). The Murex Group develops,
manufactures and markets medical diagnostic products and provides
medical services for the screening, diagnosis and monitoring of
infectious diseases and other medical conditions.
In February 1992, the Murex Group acquired all the operating
assets and assumed certain related liabilities of the diagnostics
division of The Wellcome Foundation Limited ("Wellcome"). As a result
of this acquisition, IMTC was converted from a research and
development company with a blood banking operation selling products
through an international distributor network to a holding company
which conducts business in a dozen major world currencies via its
subsidiaries with manufacturing capabilities and an international
direct sales force.
The Murex Group performs research, develops and manufactures in
vitro diagnostic products mainly in the United Kingdom and markets
them throughout the world, using 15 distribution centers supporting a
direct sales force in 35 countries and a distributor network in more
than 100 countries. The Murex Group also distributes products
manufactured by third parties. Currently, the Murex Group markets
diagnostic tests, reagent components, and systems for use in clinical
laboratories and blood banks. The Murex Group sells approximately 110
products in the United States which meet the U.S. Food and Drug
Administration ("FDA") requirements. The Murex Group does not
presently intend to market its remaining products in the United
States.
The majority of the Murex Group's products and technologies
relate to two primary product groups: virology and bacteriology assays
for screening, diagnosis and monitoring of infectious diseases.
Worldwide sales of blood viral tests for HIV, Human T- Cell
Lymphotropic Virus ("HTLV") and hepatitis constituted approximately
39%, 42% and 51% of the Company's revenue during 1997, 1996 and 1995,
respectively.
RECENT DEVELOPMENTS
Abbott Litigation
On or about July 1, 1996, Murex Diagnostics Corporation ("MDC"),
a subsidiary within the Murex Group, filed a patent infringement suit
against Abbott Laboratories ("Abbott") in the District Court for the
Northern District of Georgia (No. 96- CV1676), seeking injunctive
relief against Abbott and damages for infringement of a patent held by
MDC for a particle bound binding component immunoassay. The suit
alleges that two Abbott systems, the Abbott IMx(TM) Immunoassay and
the Abbott AxSYM(TM) System, infringe one or more claims of MDC's
patent. In October 1997, a Summary Judgment motion to dismiss the case
that was filed by Abbott was denied in all aspects. Abbott
subsequently moved for reconsideration of this ruling on the Summary
Judgment; however, a decision on Abbott's motion for reconsideration
is still pending. A trial date has not yet been set, but may occur in
late 1998.
Worldwide Launch of LiPA(R) HIV-1 Reverse Transcriptase Test
In conjunction with an important strategic alliance partner,
Innogenetics NV ("Innogenetics"), the LiPA (R) HIV-1 Reverse
Transcriptase ("HIV-RT") test was launched worldwide during May 1997.
This test is the first-ever commercially available, rapid assay that
simultaneously identifies HIV resistance associated with the drugs
AZT, ddI, ddC and 3TC. These reverse transcriptase drugs are currently
being utilized, separately and in combination, to treat HIV patients.
Unfortunately, the success of these therapies is greatly jeopardized
if a patient develops resistance to one or more of the drugs.
Resistance occurs as the HIV virus develops mutations that may
eventually cause the drug, or combination of drugs, to become
ineffective against the virus. Resistance mutations occur with all the
approved HIV drugs. Therefore, it is critical to monitor the
development of mutations so therapies can be appropriately combined
and adjusted. With the introduction of the LiPA(R) HIV-1 RT test,
physicians and healthcare providers will have a rapid assay to monitor
the development of key HIV mutations.
The LiPA(R) HIV-1 RT test provides crucial information relating
to the development of resistance to individual and combination
therapy. By obtaining resistance information, physicians can avoid
using drugs that may not be effective and improve patient care by
selecting more appropriate therapy based on resistance knowledge. In
addition, the expense of unnecessary and ineffective therapy is
eliminated. Furthermore, a physician may utilize resistance
information prior to starting or changing therapy by screening a
patient for the presence of existing drug resistant mutations. See
"Business - Patient Monitoring Products" for further discussion.
South African Manufacturing Facility
The Murex Group has constructed and opened a new, high technology
manufacturing facility near Johannesburg, South Africa. The new plant
contains state-of-the-art laboratories for production, quality
assurance and research and development, and includes warehousing and
administrative offices. The new site has already been ISO 9002
certified for its manufacturing and distribution systems. It is the
Murex Group's third manufacturing facility, built to international
manufacturing and quality specifications, including those of
regulatory authorities. The facility will manufacture blood screening
and medical diagnostics products with particular emphasis on HIV and
Hepatitis C ("HCV"). The Murex Group plans to export over 80% of the
products manufactured at the new facility to other African countries
and elsewhere throughout the world.
Sale of Certain Technologies
During June 1997, the Murex Group sold TTP Corporation ("TTP"), a
wholly-owned subsidiary of MDC, to Shield Diagnostics Group plc.
("Shield"). TTP owned the intellectual property and other rights to
ten products used for the diagnosis of thyroid dysfunction and the
measurement of cardiovascular/blood coagulation degradation products.
TTP's assays are targeted to a specific segment of the diagnostics
industry that is not a part of the Murex Group's long-term strategy of
focusing on the screening, diagnosis and monitoring of infectious
diseases. Therefore, the divestiture of TTP is an element of the Murex
Group's overall plan that will allow it to focus its resources on the
infectious disease diagnostics monitoring market. The Murex Group will
continue to manufacture and sell the TTP product line acquired by
Shield for a period of three years, pursuant to a purchase commitment.
This will provide Shield security regarding availability of the
products while they are being integrated into Shield's business, as
well as permit Shield to utilize the Murex Group's worldwide
distribution network.
IMMUNODIAGNOSTIC PRODUCTS
The health care industry is comprised of four main sectors:
diagnostics, therapeutics, preventive medicine, and health services.
The diagnostics sector involves the diagnosis or detection of specific
diseases or medical conditions. Proper therapy or treatment can only
be provided following an accurate diagnosis of these underlying
diseases or conditions. Diagnostics cover a wide range of products and
services, including items such as X-ray equipment, blood pressure
measurement equipment, analytical chemistry equipment and
immunodiagnostics.
Immunodiagnostics is the field of diagnostics that employs the
reactions between antibodies and antigens as the basis of tests for
the detection of specific diseases and other medical conditions.
Antibodies are proteins in human or animal blood that are produced by
the immune system in response to exposure to foreign substances or
antigens such as bacteria and viruses. Antibodies and antigens are
complementary with each antibody being directed against, and reacting
with, one specific type of antigen. Antibodies will react with
antigens at very low concentrations, and it is these unique
characteristics that give immunodiagnostic tests their high degree of
sensitivity and specificity.
The Murex Group's immunodiagnostic product line includes over 600
diagnostic tests, reagent components and systems. Approximately 39%,
42% and 51% of IMTC's revenue for 1997, 1996 and 1995, respectively,
was generated from the sale of virology diagnostics to detect HIV-1
and HIV-2 (the viruses causing AIDS), HTLV-I and II, and hepatitis A,
B and C infections. The Murex Group also markets bacteriology products
worldwide to detect such bacterial infections as strep throat and
salmonella poisoning. United States sales of bacteriology products
account for approximately 15% of the Murex Group's sales. Trade names
of these products include Wellcogen(TM), Wellcolex(TM),
Staphaurex(TM), REVEAL(TM), and Streptex(TM). The Murex Group
developed an in vitro, immunodiagnostic rapid test system, the Single
Use Diagnostic System, or SUDS(R), that can be used to diagnose
numerous specific diseases or medical conditions. The SUDS (R) HIV
test sales increased 42% during 1997 as compared to 1996, as interest
in this rapid test continues to grow due to new guidelines recently
published by the Center for Disease Control regarding occupational
exposure to HIV by healthcare professionals. The SUDS(R) HIV-1 test
was cleared by the FDA in 1992. In late 1993, the SUDS(R) HIV 1+2 test
was introduced by affiliated companies for sale in Europe. The HIV 1+2
test is not currently available, nor planned, for sale in the United
States and certain other countries because of regulatory and other
restrictions. The Murex Group's product introductions during 1995,
1996 and 1997 include HTLV I and II antibody detection assay, syphilis
antibody test, hepatitis C western blot, therapeutic drug
monitoring-quality assessment program, mycoplasma pneumonia antibody
detection kit, HIV 1+2 type O antibody test, Digene Sharps probe
assays, E-coli, Cryptococcus, Staphaurex Plus assays and Sample
Addition Monitor ("SAM(TM)"). See "Business - Patents, Trademarks and
Licenses".
PATIENT MONITORING PRODUCTS
During February 1996, MDC entered into an exclusive distribution,
development and license agreement with Innogenetics to develop and
market gene probe products for the monitoring of patients and the
classification of viral diseases. This strategic alliance with
Innogenetics has provided the Murex Group with exclusive rights to the
Murex/Innogenetics LiPA(R) HIV-RT monitoring test. This test
simultaneously detects wild-type and HIV mutations associated with the
reverse transcriptase drugs AZT, ddI, ddC and 3TC. The Murex Group
launched the test world-wide, except in the U.S. and France where the
product is distributed for research use only, late in the second
quarter of 1997. In the U.S., Murex Diagnostics, Inc. ("MDI") has had
discussions with the FDA but has not yet filed an application for the
clearance of the test.
The reverse transcriptase drugs AZT, ddI, ddC and 3TC are
currently being utilized, separately and in combination, to treat HIV
patients. Resistance to the drugs occurs as virus mutations develop
that may eventually cause the drug, or a combination of drugs, to
become ineffective against the virus. The Murex/Innogenetics LiPA (R)
HIV-1 RT test is the first rapid assay to identify HIV mutant strains.
Resistant mutations occur with all the approved HIV therapies.
Therefore, it is critical to monitor the development of mutations so
therapies can be appropriately combined and adjusted. The new HIV-1 RT
test provides crucial information relating to the development of
resistance to individual and combination therapy. By obtaining
resistance information, physicians can avoid using drugs that may not
be effective, thereby improving patient care and eliminating the
expense of unnecessary and ineffective therapy. In addition, a
physician may utilize resistance information prior to starting or
changing therapy by screening a patient for the presence of existing
drug resistant mutations.
The broadening of the Murex Group's focus into the world-wide
emerging diagnostics monitoring market, which management expects to
exceed $1 billion by the year 2000, should support revenue growth in
the coming years. The Innogenetics distribution, development and
licensing agreement gives the Murex Group access to the rapidly
growing gene probe market for monitoring patients and the
classification of viral diseases. The monitoring market directly
complements the Murex Group's existing markets of screening and
diagnosis and also leverages its worldwide marketing and distribution
network. The diagnostic monitoring market includes tests that, among
other applications, assess a patient through the course of a disease
or infection, monitor various forms of anti-viral therapies and
monitor conditions associated with transplants. In contrast, screening
and diagnosis tests are used to indicate whether a patient is, or is
not, carrying a disease or infection. In patient use, screening and
diagnosis tests are usually only required to be administered once
while monitoring tests are usually administered numerous times.
Patient monitoring has become an important and critical element
of patient care and treatment. The Murex Group believes it can capture
a significant portion of this emerging market by strategically
positioning itself in key segments of the market including AIDS
therapy, organ transplantation and other immune compromised
conditions.
In addition to the agreement above, during May 1997 the Company
licensed its trademarked SAM(TM) technology to Innogenetics. The
color-coded SAM(TM) technology will be utilized in Innogenetics'
enzyme immunoassay products (EIA) with the first being Innogenetics'
HIV Ag assay. Developed by Murex's internal research and development,
SAM(TM)'s color-coded reagents change color in each testing step of an
assay. The technology assists clinicians in ensuring that samples have
been added and the testing procedure has been conducted correctly. The
Murex Group's SAM(TM) technology is utilized in selected Murex
products and it has been licensed to a number of large healthcare
companies, including Chiron Corporation.
ADDITIONAL STRATEGIC ALLIANCES
As the relationship with Innogenetics demonstrates, management
believes strategic ventures and licensing arrangements position the
Murex Group for the future and play an important role in the
achievement of management's corporate objectives. The worldwide
marketing and distribution capabilities motivate companies like
Innogenetics, Digene Corporation ("Digene"), Eurogenetics N.V.
("Eurogenetics") and Genelabs Diagnostics SA ("Genelabs") to partner
with the Murex Group in licensing agreements and product development
and thereby contribute to the flow of new and creative products. The
alliances provide the Murex Group with access to technology,
strengthen and extend the monitoring market strategy and allow the
Murex Group to further penetrate its existing markets in blood
screening and clinical diagnostics.
Digene Corporation
Effective February 1997, the Murex Group and Digene entered into
a five year agreement to work together to create a direct European
sales operation for Digene's sexually transmitted disease diagnostics
business. Digene, a leading developer of DNA probe technology, will
sell its Hybrid Capture(R) human papillomavirus ("HPV") DNA test
directly in selected European markets using the Murex Group's existing
distribution infrastructure in exchange for agency and selling service
fees. Additionally, Digene will make fixed payments over two years for
the European HPV business. The strategic alliance with Digene was
further extended during the year whereby the Murex Group received
exclusive rights to market Digene's new Hybrid Capture (R) II HIV RNA,
Cytomegalovirus ("CMV") and Hepatitis B ("HBV") tests in the United
Kingdom, Europe, Africa, the Middle East and Singapore, following
receipt of appropriate import and export authorizations from the FDA
and relevant foreign authorities.
Eurogenetics N.V.
During January 1997, MDC entered into a ten year, worldwide
Original Equipment Manufacturer ("OEM") distribution agreement with
Eurogenetics. Pursuant to the terms of the agreement, the Murex Group
will distribute Eurogenetics' micro titre plate EIA kits for rubella,
toxoplasmosis, CMV, chlamydia, herpes and beta- 2 microglobulin.
Genelabs Diagnostics SA
Effective June 1997, Genelabs, of Geneva, Switzerland, appointed
MDC to handle distribution of its diagnostics products in Europe and
South America. The move is expected to benefit hospitals and
laboratories in terms of product availability and technical support,
and expand the supply of Genelabs' speciality tests for the diagnosis
of infectious diseases and immunological disorders to new areas of
need. Agreements made between the two companies, which are exclusive
or co-exclusive depending on the country, provide for the sale of
viral confirmatory tests including, Western Blots for HTLV, HIV,
Epstein-Barr Virus ("EBV") and CMV, Autoblot 36 and Western Blot
instrumentation, as well as Hepatitis E Elisa.
MARKETING AND COMPETITION
The immunodiagnostic systems industry is fragmented and very
competitive. It consists of large multinationals with very entrenched
market positions and many small to medium size companies competing
within specific market segments. The industry is experiencing some
concentration as some of the larger companies merge or acquire smaller
companies. Within the infectious disease market, segmentation exists
both by product group and the type of testing to be performed: mass
screening tests, confirmatory tests and rapid diagnostic tests. The
Murex Group's products compete in all these market segments. Principal
customer types in the infectious disease market include blood banks,
hospitals, clinical diagnostic laboratories and physicians' offices.
Principal competitors in the high volume mass screening market are
Abbott Laboratories, Ortho Diagnostic Systems, Genetic Systems and
Organon Teknika. Principal competitors in the rapid assay market are
Hybritech, Becton- Dickinson and Abbott Laboratories.
The Murex Group possesses a significant portfolio of proven
products and technologies. Approximately 74% of product sales are
concentrated in Europe and the United States. Murex Group sales are
supported by regional distribution centers serving direct sales forces
in the United States, the United Kingdom, Germany, Italy, Spain,
France, Switzerland, the Czech Republic, the Netherlands, Canada,
Argentina, Columbia, Brazil, Australia and South Africa. The Murex
Group is represented in the rest of the world by a network of direct
sales representatives, distributors and agents.
No single customer represented more than 5% of total sales in
1997. For further information concerning IMTC's or the Murex Group's
domestic and foreign operations, see Note 19 to the Consolidated
Financial Statements.
RESEARCH AND DEVELOPMENT
The principal focus of the Murex Group's research and development
efforts has been and will continue to be the development of
high-volume assays for the detection of infectious agents such as
HTLV, HIV and hepatitis using advanced enzyme immunoassay
technologies. Also, under the terms of the 1992 acquisition of the
diagnostics division of Wellcome, Wellcome agreed to collaborate with
the Murex Group and grant first right of access to future
technological discoveries applicable to medical diagnostics through
February 1997. Pursuant to this agreement, MDC has entered into a
semi-exclusive patent licensing agreement with Glaxo-Wellcome relating
to testing for resistance to AZT.
During February 1996, MDC entered into an exclusive distribution,
development and license agreement with Innogenetics to develop and
market gene probe products for the monitoring of patients and the
classification of viral diseases. Under the terms of the agreement,
MDC paid $5.9 million during 1996 and $1.6 million during 1997 to
Innogenetics for the exclusive rights to distribute Innogenetics'
LiPA(R) products, excluding HCV, for 15 years. MDC will also pay
Innogenetics a royalty of 10% of the Murex Group's net sales of
Innogenetics' products. Also under this agreement, MDC will fund
agreed-upon research and development programs, beginning in 1998 and
for each of the following 13 years in an amount equal to 20% of the
Murex Group's net sales of Innogenetics' products, subject to a cap.
This strategic alliance with Innogenetics has provided the Murex Group
exclusive rights to the Murex/Innogenetics HIV-RT monitoring test. In
the U.S., MDI has had discussions with the FDA but has not yet filed
an application for the approval of the test. The Murex/Innogenetics
LiPA(R) HIV-1 RT test is the first rapid assay to measure mutant
strains. See "Business - Patient Monitoring Products" for further
information.
The Murex Group's internal research and development remains
strong as evidenced by its HTLV, syphilis, E. Coli 0157, redeveloped
HIV and HCV tests and other new product introductions. The Murex Group
incurred in-house and third party research and development expenses
aggregating $7,487,000, $6,369,000 and $7,426,000 for the years ended
December 31, 1997, 1996, and 1995, respectively.
MANUFACTURING OPERATIONS
Worldwide distribution and sales of the majority of the Murex
Group's products originate from Murex Biotech Limited's ("MBL")
manufacturing facility, which is located in Dartford, England, under a
contract manufacturing and services agreement with MDC. Several
products sold by the Murex Group are produced by third party
manufacturers located throughout the world. Raw materials are produced
or acquired from independent suppliers and assembled into finished
products. MBL is fully compliant with the European Economic Community
ISO 9001 manufacturing and design standards. See "Business--Government
Regulation".
As discussed in the "Business - Recent Developments" section, the
Murex Group recently constructed and opened a manufacturing plant near
Johannesburg, South Africa which is ISO 9002 certified for its
manufacturing and distribution systems.
MDI operates under Good Manufacturing Practices ("GMP")
guidelines which outline the manufacturing, quality control, quality
assurance and documentation standards mandated by the FDA for a
medical products company. The components of the SUDS(R) test cartridge
and reagent raw materials are purchased by MDI from suppliers and
contract manufacturers and are assembled by MDI. Currently there are
no material adverse effects on capital expenditures, earnings or Murex
Group's competitive position due to compliance with federal, state and
local environmental regulations. See "Business-Government Regulation".
PATENTS, TRADEMARKS, AND LICENSES
Patents and other proprietary technology are important to
biotechnology companies. Extensive research on a worldwide scale by
many companies has led to competitive claims of technology and patents
ownerships. The Murex Group's assets include a comprehensive patent
and license portfolio. Most of these patents and licenses are owned by
MDC. Patented latex agglutination technologies owned by the Murex
Group serve as the base technologies for the REVEAL and Wellcolex
bacterial product lines. License agreements with the Murex Group as
licensee include technologies and patents covering areas such as HIV-2
and hepatitis B core.
The Murex Group's business utilizes newly developed technologies
that include patents on processes and devices. These types of
technologies are the focal point for the biotechnology industry. The
ownership and patentability of such processes or devices have become
increasingly complex, resulting in competitive claims of ownership
within the industry.
As part of a 1996 agreement with Chiron Corporation ("Chiron")
and Ortho Diagnostics Systems, Inc. ("Ortho"), the Murex Group,
through MDC, has a license to sell HCV Serotyping tests worldwide and
other HCV tests in selected countries excluding North America,
European Union members and Japan. The agreement also grants to the
Chiron-Ortho joint business rights to MDC's SAM(TM) technology and an
option to sell MDC's HCV Serotyping test. The agreement also provides
Chiron the opportunity to acquire the Murex Group's HCV immunoassay
business at its then fair value in the event IMTC accepts an offer to
purchase 50% or more of the combined voting power of IMTC's then
outstanding securities, or if IMTC's Board of Directors approves a
merger, or the sale of all, or substantially all, of the Murex Group's
assets. If Chiron does not exercise this option, IMTC is entitled to
transfer its rights and licenses under the agreement described above.
"Wellcogen", "Wellcolex", "Staphaurex", "Staphaurex Plus",
"Streptex", "REVEAL", "Murex", "SUDS" and "SAM" are among the
registered or licensed trademarks of the Murex Group. MDC has also
applied for a trademark for "Information for Life". Under the terms of
the acquisition of the diagnostics division of Wellcome, the Murex
Group has the right to continue to use the name "Well" in connection
with acquired products until August 2000.
The Murex Group, largely through MDC, holds various patents on
current and potentially valuable technologies in multiple countries.
The exploitation of the potential value of this intellectual property
is anticipated through a combination of product development and/or
licensing of technology for use by others.
MDC has licensed certain of its patented technologies to third
parties. MDC completed a non-exclusive, out-licensing transaction
during the second quarter of 1994 by licensing technology, acquired as
part of the 1992 acquisition of the diagnostics division of Wellcome,
to Abbott. This transaction provided MDC with a $10 million minimum
license fee which was paid over four years. Furthermore, MDC earned an
additional $1,075,000, $878,000 and $100,000 in 1997, 1996 and 1995,
respectively, as a result of minimum royalty levels being exceeded.
The underlying revenue stream associated with this licensing agreement
has grown 108% since 1994 and MDC expects the minimum royalty levels
to continue to be exceeded until the expiration of the patents in the
years 2004 and 2008, depending on the country. Beginning in 1998, the
Company anticipates receiving at least $3 million per year from this
licensing arrangement.
The Murex Group also relies on unpatented technology and
know-how. There can be no assurance that others will not obtain access
to, or independently develop, such know-how. The Murex Group also
protects their proprietary information through confidentiality
agreements executed by all management employees.
GOVERNMENT REGULATION
The manufacture and marketing of in vitro diagnostic products are
governed by a variety of statutes and regulations in the United States
and by comparable laws and regulations in other countries. Some
countries do not have any such statutes and regulations. The process
mandated by the FDA for clearance of a diagnostic product differs
depending on whether the product is classified as a medical device or
a biological product.
FDA clearance may be obtained to market medical device products
in the United States through a pre-market notification filing, or
510(k) submission, for a device that is substantially equivalent to
devices on the market. Depending on the device's complexity, the
review period can be in excess of 200 days from the date of filing the
application. Affirmative FDA action is required before marketing may
proceed. Medical devices not substantially equivalent to devices
already on the market must undergo a more elaborate clearance process
requiring the submission to the FDA of an application for pre-market
approval ("PMA") containing substantial technical, manufacturing and
clinical data.
Clearance by the FDA of a biological product (rather than a
medical device product ) for human use, such as the SUDS(R) HIV-1
test, which was cleared by the FDA in 1992, is a multi-step process.
The process includes: (a) pre-clinical laboratory and animal tests,
(b) submission to the FDA of an application for an Investigational New
Drug exemption ("IND"), which must become effective before human
clinical trials may commence, (c) human clinical trials to establish
the safety and effectiveness of the product, (d) submission to the FDA
of a Product License Application ("PLA"), which summarizes the results
of clinical studies, and a related Establishment License Application
("ELA") for the licensing of the product's manufacturing processes and
facilities, (e) FDA approval of the PLA and ELA, and, (f) FDA
evaluation and release of each manufactured lot prior to distribution.
An ELA provides information on the results of the clinical tests as
well as the details of the manufacturing process, such as raw material
suppliers, manufacturing equipment, quality control and assurance
procedures, and product labeling. Additionally, an ELA discloses the
qualifications of the personnel involved in product development,
manufacturing and testing. FDA's review of an ELA entails examination
of such data and information as well as inspection of the facilities
that will be used for the manufacture of the product. MBL's U.K.
manufacturing facility is ISO 9001 certified. The new facility in
South Africa is ISO 9002 certified for its manufacturing and
distribution systems. ISO 9000 certification is an international
quality management system standard for design, manufacture and
distribution of in vitro diagnostic kits and systems.
Although the Murex Group anticipates additional FDA clearances
and foreign approvals, it is not possible to estimate when the
application and review processes will be completed with respect to a
given product or facility. There can be no assurance that additional
clearances or approvals from the FDA or other foreign regulators will
be granted.
The Murex Group is also subject to various federal, state and
local laws and regulations relating to working conditions, laboratory
and manufacturing practices, the experimental use of animals and the
use and disposal of hazardous or potentially hazardous substances,
including radioactive compounds and infectious disease agents, used in
connection with research work and preclinical and clinical trials and
testing. The extent of government regulation which might result from
future legislation or administrative action cannot be accurately
predicted.
EMPLOYEES
As of January 31, 1998, IMTC and its subsidiaries had 665 full
time employees located world wide, 55 of whom were involved in
research and development, 242 in manufacturing and 280 in sales and
marketing. All other employees perform executive and administrative
functions. Certain Murex Group employees are represented by seven
separate unions which include approximately 56 employees, primarily in
manufacturing and sales in the United Kingdom, Italy and France.
Management considers its relations with all of its employees, both
union and non-union, to be good.
YEAR 2000 SYSTEMS COMPLIANCE
The Murex Group recognizes that the arrival of the Year 2000
poses a unique challenge to the ability of all systems to recognize
the date change from December 31, 1999 to January 1, 2000 and has
begun to analyze its various administrative and operating systems to
ensure that these systems will be Year 2000 compliant. Many of the
Murex Group's existing systems include new hardware and packaged
software recently purchased from large vendors who have represented
that these systems are already Year 2000 compliant. Management has not
estimated the costs to upgrade the remaining systems, however, they
are not expected to be material to any single year. Management
presently believes that with conversions to new systems and hardware,
the Year 2000 risks can be mitigated. An assessment of the readiness
of external entities, which it interfaces, such as vendors, customers
and others, is ongoing. There can be no guarantee that the systems of
other companies on which the Murex Group's systems rely will be timely
converted, nor that any unforseen costs won't be material to the
operations of the Murex Group.
ITEM 2. PROPERTIES
MBL researches, develops, manufactures and ships its products
from a 120,000 square foot facility located in Dartford, England,
leased from Glaxo-Wellcome Limited through 2000, subject to a five
year extension. Murex Biotech SA Limited, one of the Murex Group's
South African subsidiaries, leases a new 16,000 square foot
manufacturing facility close to Johannesburg, South Africa until 2002,
subject to a five year extension. MDI manufactures in a 41,000 square
foot facility located in Norcross, Georgia, leased through 1999.
Executive office and subsidiary sales office leases in various
countries generally expire at various times through 2002.
The Murex Group believes its facilities are adequate and suitable
for its current and anticipated manufacturing, research, development,
marketing and administrative operations for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
With the exception of the Abbott patent infringement suit in
which the Murex Group is the plaintiff, as discussed in the "Business
- - Recent Developments" section, the Murex Group is no longer involved
in any other material legal proceedings. The following matters have
been favorably resolved, as discussed below:
CLASS ACTIONS
Four class action lawsuits were instituted on behalf of all
persons who had purchased IMTC's securities between May 21, 1992 and
August 19, 1992 against IMTC, one former and one present executive
officer of IMTC, and two shareholders. Although the defendants denied
the allegations in the complaints, the parties agreed to settle all
outstanding claims for $5.4 million during 1996. In accordance with
the Stipulation Settlement Agreement, the two shareholders transferred
185,886 common shares of IMTC's stock to IMTC to be used as their
portion of the settlement. During 1997, the claims administrator
finished qualifying claimants and submitted a motion to the U.S.
District court setting out the final distribution for the settlement
fund, which was approved by the Court during October 1997. The sum of
damages claimed and expenses incurred by the claims administrator and
Plaintiffs' counsel was less than the total settlement fund.
Consequently, the Murex Group was entitled to the remaining cash of
approximately $2.1 million and 105,766 common shares of IMTC's stock.
These shares are valued at $615,000 ($5.81 per share), as defined by
the settlement agreement. The reversion of the settlement fund has
been reflected in the accompanying financial statements as an offset
to general and administrative costs for the cash portion and an
increase to additional paid-in capital for the stock portion.
UNITED KINGDOM TAX DISPUTE
During 1995, the U.K. Inland Revenue questioned the tax basis of
inventory, accounts receivable and property, plant and equipment
related to the 1992 purchase of assets from Wellcome. This matter was
resolved during 1997, resulting in no additional tax payments or
liabilities. The U.K. Inland Revenue have finalized their review of
all tax returns through 1995, and all outstanding issues have been
resolved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
IMTC's Common Shares are listed and traded on the Nasdaq National
Market System ("Nasdaq") under the symbol "MURXF". The following table
sets forth the quarterly high and low closing sale prices of the
Common Shares for the periods noted.
Calendar Year
1997 1996
- --------------------------------------------------------------------------------
NASDAQ Stock Exchange
(Expressed in U.S
Dollars) High Low High Low
- --------------------------------------------------------------------------------
First Quarter $ 9.47 $ 6.75 $ 3.63 $ 2.38
Second Quarter 10.00 6.00 4.63 2.63
Third Quarter 10.50 8.06 6.38 3.00
Fourth Quarter 10.13 8.50 7.63 5.25
SHAREHOLDERS
As of March 5, 1998, IMTC had 16,742,372 Common Shares held by
approximately 1,799 holders of record. The number of holders do not
include all individuals with a beneficial interest in IMTC's Common
Shares.
DIVIDEND POLICY
IMTC has never paid a cash dividend on its Common Shares and has
no plans to pay cash dividends in the foreseeable future. The policy
of IMTC's Board of Directors is to retain any earnings for use in the
operation and expansion of business. The Bank of America line of
credit facility prohibits the payment of any IMTC dividends except
those paid in Common Shares.
UNREGISTERED SHARES
During the fourth quarter of 1997, IMTC issued no unregistered
securities.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF (In thousands of U.S. Dollars, except per share data)
OPERATIONS DATA
<S> <C> <C> <C> <C> <C>
Product sales $ 98,553 $ 99,881 $ 92,394 $ 93,192 $ 79,689
License fees 7,579 970 9,250 36
-------------------------------------------------------------
Total revenues 106,132 100,851 92,394 102,442 79,725
Cost and expenses:
Cost of products sold 39,250 34,887 30,181 24,353 24,368
Research & development 7,487 6,369 7,426 6,372 5,967
General & administrative 21,630 25,803 27,541 22,399 15,746
Sales & marketing 28,883 29,523 26,898 23,586 22,357
Royalty expense 5,625 (2,799) 8,365 9,599 6,430
Restructuring costs 2,100
All other expenses 104 1,542 (1,016) 547 1,091
-------------------------------------------------------------
Total costs & expenses 102,979 97,425 99,395 86,856 75,959
Operating income (loss) 3,153 3,426 (7,001) 15,586 3,766
Interest income 290 663 1,221 802 285
Interest expense (1,422) (1,306) (167) (632) (917)
All other income (expense), net 7,043 (934) (663) (1,532) (460)
-------------------------------------------------------------
Net income (loss) $ 9,064 $ 1,849 $ (6,610) $ 14,224 $ 2,674
=============================================================
Net income (loss) per common share
Basic $ 0.55 $ 0.11 $ (0.40) $ 0.85 $ 0.16
Diluted $ 0.52 $ 0.11 $ (0.40) 0.85 $ 0.16
Weighted average shares outstanding
Basic, in thousands 16,484 16,215 16,381 16,661 16,255
Diluted, in thousands 17,444 16,507 16,381 16,739 16,340
Cash dividends 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
CONSOLIDATED (In thousands of U.S. Dollars)
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Total assets $ 95,243 $ 95,113 $ 85,748 $ 85,643 $ 58,966
Long term debt 14,331 9,638 0 0 0
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report contains or refers to forward-looking information
including future revenues, products and income and is based upon
current expectations that involve a number of business risks and
uncertainties. Among the factors that could cause actual results to
differ materially from any forward-looking statement include, but are
not limited to, technological innovations of competitors, delays in
product introductions, changes in health care regulations and
reimbursements, litigation claims, changes in foreign economic
conditions or currency translation, product acceptance or changes in
government regulation of the Murex Group's products, as well as other
factors discussed in other Securities and Exchange Commission filings
for IMTC.
FINANCIAL CONDITION
During the year ended December 31, 1997, IMTC and the Murex Group
(collectively referred to herein for consolidated financial purposes
only as the "Company"), continued its profitability, generated cash
from operations and maintained positive working capital.
Litigation and Technology Disputes
The Murex Group's business utilizes newly developed technologies
that include patents on processes and devices. These types of
technologies are the focal point for the biotechnology industry. The
ownership and patentability of such processes or devices have become
increasingly complex, resulting in competitive claims of ownership
within the industry. The Company is not presently the defendant in any
material judicial proceeding, however, the Company is vigorously
pursuing its patent infringement suit in which the Company is the
plaintiff against Abbott. See "Business - Recent Developments".
Liquidity and Capital Resources
The Company anticipates that its projected profitability, line of
credit facility, sufficient cash resources and adequate working
capital will enable it to carry on its current business and meet
existing capital requirements over the next twelve months and beyond.
Cash and working capital totaled $10.1 million and $48.9 million,
respectively at December 31, 1997. The Company generated cash from
operations of $6.0 million during the year ended December 31, 1997. On
November 12, 1996, the Company entered into a three year, $15 million
line of credit facility with Bank of America, which is collateralized
by the accounts receivable and inventory of its U.S., U.K. and
Barbados subsidiaries. Based on the value of the collateral, the
borrowings outstanding of $12,996,000 and a letter of credit
outstanding of $825,000, there was $186,000 unused and available under
this credit facility as of December 31, 1997. On January 14, 1998,
management amended the previous interest rate swap agreement with the
lender and fixed the interest rate at 8.98% (LIBOR + 2.5%) for
notional principal amount of $10 million for five years.
The Company's working capital and capital requirements will
depend upon numerous factors including: the results of research and
development, the levels of resources devoted to the establishment and
expansion of marketing and manufacturing, technological developments,
and the timing and costs of obtaining approvals for new products.
Depending on the outcome of these factors, the Company may need to
raise additional funds in the future for use to complete products in
development or for other general purposes. There are no assurances
that such funds will be available on favorable terms, if at all.
Management Outlook
The key to the Company's growth is the ability to identify new
needs in the marketplace, and to expeditiously meet these needs
through access to appropriate innovations and technologies, and to
rapidly incorporate them into the Murex Group's product line. However,
there can be no assurance that the Murex Group will successfully add a
significant number of new products to its product line. An alternative
strategy under consideration is to seek to maximize shareholder value
through asset sales or other dispositions. This strategy involves
management balancing its analysis of the Company's future prospects
against any third party proposal. There is no assurance that any third
party proposal would be acceptable to the Company or that management
would continue to explore this alternative.
The Company is now positioned to benefit from investments made
during 1997 aimed at expansion not only into the patient monitoring
business with new products but also into emerging markets such as
South East Asia, South America and Southern Africa with both
diagnostic and monitoring products. Recent successes in emerging
markets include winning, for the second year, the entire Taiwan Red
Cross tender for over three million HCV, HTLV and HBsAg screening
assays. Also, late in 1997, the Company won a significant tender in
Turkey for 600,000 HCV tests. The Company also anticipates that sales
to South American countries will increase significantly during 1998.
Furthermore, by being the first company to market diagnostic products
which are manufactured in Africa, the Murex Group is positioned to
capitalize on the significant and growing African market.
Recent Murex Group product innovations, such as SAM(TM), and
tests for HIV, HTLV, syphilis and E-Coli, should contribute to future
sales growth. These and other new or enhanced products, created
through in-house research and development, strengthened the Murex
Group's broad line of well-established virology and bacteriology
products and allowed the Murex Group to enter new markets in targeted
areas around the world.
In addition to relying on research and development and licensing
of core technologies, management's operation strategy also focuses on
maintaining high quality standards, providing excellent customer
service, reducing costs and improving cash flows.
RESULTS OF OPERATIONS
Year ended December 31, 1997 compared to year ended December 31, 1996
Total revenues for the year ended December 31, 1997 increased to
$106,132,000 over the prior year's revenues of $100,851,000. This
increase is partially due to the fixed payments made by Digene in
accordance with the February 1997 agreement and the sale of certain
technologies to Shield. An increase in the ongoing royalty revenue
generated from licensing certain technology to Abbott also contributed
to the increased revenues. The technologies sold to Shield are
targeted to a specific segment of the diagnostics industry that is not
part of the Company's long term focused strategy. The strength of the
U.S. Dollar against most major currencies during the year ended
December 31, 1997 relative to the prior year caused a decrease in the
Dollar equivalent product sales revenue. Murex operates a worldwide
distribution network; consequently, approximately 68% of the Company's
product sales are denominated in currencies other than the U.S.
Dollar, the reporting currency of the Company. The changes in product
sales represent actual increases, using a constant currency basis, of
$3,812,000, offset by negative foreign exchange impacts of $5,140,000
for the year ended December 31, 1997. License fees and royalties
increased to $7,579,000 from $970,000 in the previous year, as a
result of the Abbott, Digene and Shield agreements discussed above.
Gross profit on product sales was 60.2% and 65.1% for the years
ended December 31, 1997 and 1996, respectively. The cost of products
sold was $39,250,000 and $34,887,000 the years ended December 31, 1997
and 1996, respectively. The increase in cost of goods sold is
primarily due to the strength of the British Pound, which also
strengthened against most major currencies during 1997, since the
majority of manufacturing is done in the U.K.
Total costs and expenses, excluding cost of products sold, of
$63,729,000 for the year ended December 31, 1997 reflect a net
increase of $1,191,000 over the year ended December 31, 1996. Research
and development costs for 1997 were increased by $1,118,000 due to the
Company's strategy of developing innovative products for its
distribution network and continuously improving its existing products.
During 1997, the Company focused significant research and development
on improving its HIV and HCV test design and manufacturing process to
meet the changing requirements of this important market. General and
administrative expenses decreased $4,173,000 to $21,630,000 for 1997
as compared to $25,803,000 for 1996. The previous year's general and
administrative expenses included legal, employee compensation, and
other expenses associated with settling the patent litigation related
to its HCV test. As discussed in Note 16 of the accompanying financial
statements, the Company received the reversion of the class action
settlement fund, of which the cash portion of $2,133,000 is considered
as a reduction to general and administrative expenses in 1997. Sales
and marketing expenses were $28,883,000 and $29,523,000 for the years
ended December 31, 1997 and 1996, respectively. The decrease of
$640,000 was due to the effect of translating foreign currencies to a
stronger U.S. Dollar. The foreign exchange loss for the year ended
December 31, 1997 was $104,000 compared with a loss of $1,542,000 for
1996. The 1996 foreign exchange losses were caused predominantly by
the strengthening of the British Pound in relation to the U.S. and
German currencies, as well as the weakening of the South African Rand.
The royalty expense for the year ended December 31, 1997 was
$5,625,000 versus a net credit of $2,799,000 for 1996. As a result of
the settlement of HCV patent litigation during the third quarter of
1996, a reversal was made to royalty accruals made in previous years,
which resulted in a net credit to royalty expense. During September
1996, the Company recorded a restructuring charge of $2.1 million
before tax. The restructuring was driven by the need to reposition the
Company for its movement into the patient monitoring business, and
consisted predominantly of estimated costs for employee severance and
other benefits.
Net interest expense for the year ended December 31, 1997 was
$1,132,000 compared to $643,000 for the year ended December 31, 1996.
The Company currently has access to capital at favorable rates via the
line of credit with Bank of America, however, during the twelve months
ended December 31, 1997, the Company increased the amount borrowed. In
the prior year, the Company factored its Italian receivables to fund
the agreement with Innogenetics. Other income for the year ended
December 31, 1997 was $3,374,000 compared to $386,000 for the year
ended December 31, 1996. The increase of $2,988,000 was primarily from
realized gains on marketable securities. The gain on liquidation of
investee for the year ended December 31, 1997 of $1,114,000 represents
additional proceeds IMTC expects to receive upon the ultimate
liquidation of SDL. Management expects the liquidation process to be
completed during the first quarter of 1998. These additional proceeds
are the result of the final and favorable settlements of claims with
various tax authorities including U.K. Inland Revenue. The equity in
loss of investee for the year ended December 31, 1996 represents SDL's
net loss for that period. For the year ended December 31, 1997, the
provision for income taxes was a benefit of $2,605,000 versus an
expense of $1,016,000 in the prior year. The benefit is due to the
reversal of $2,800,000 of the deferred tax asset valuation reserve for
net operating loss carryforwards in the United States, which is the
portion of the deferred tax asset that management expects to realize.
Year ended December 31, 1996 compared to year ended December 31, 1995
- ---------------------------------------------------------------------
Revenues for the year ended December 31, 1996 increased to
$100,851,000 over the previous year's revenues of $92,394,000. This
increase is mainly due to a $7,487,000 net increase in product sales
as a result of the newly-acquired Innogenetics' product line, growth
of sales in Eastern Europe, South America and South East Asia as well
as the acquisition of the Company's Canadian distributor. The net
increase in product sales represents an actual increase using a
constant currency basis of $8,836,000 which was partially offset by a
negative foreign exchange impact of $1,349,000. License fees and
royalties revenues increased to $970,000 from $0 in the previous year,
primarily as a result of Abbott exceeding the minimum royalty level as
defined in the 1994 agreement.
Gross profit on product sales was 65.1% and 67.3% for the years
ended December 31, 1996 and 1995, respectively. Cost of products grew
$4,706,000 as a result of increased sales, increased use of direct
distributors, especially for the newly-acquired Innogenetics'
products, and increased sales of purchased-in products which have
lower gross profit margins. Furthermore, the strengthening of the
British Pound relative to the U.S. Dollar throughout 1996 caused the
translated Dollar equivalent cost of manufacturing in the U.K. to
increase.
Total operating costs and expenses, excluding cost of products
sold, of $62,538,000 for the year ended December 31, 1996 reflect a
net decrease of $3,553,000 over the year ended December 31, 1995.
Research and development costs for 1996 were reduced by $1,057,000 due
to added efficiencies in internal costs and the Company shifting its
focus to forming strategic business alliances such as with
Innogenetics. General and administrative expenses increased $1,385,000
to $25,803,000 for 1996 as compared to $24,418,000 for 1995. This
increase is due to the legal, employee compensation and other expenses
associated with settling the Company's HCV patent litigation during
the third quarter of 1996. Sales and marketing expenses were
$29,523,000 and $26,898,000 for the years ended December 31, 1996 and
1995, respectively. The increase of $2,625,000 was driven by new
product introductions, including the Innogenetics' LiPA product line,
expansion into the monitoring market and further strengthening of the
Company's overall distribution network. The foreign exchange loss for
the year ended December 31, 1996 was $1,542,000 versus a gain of
$1,016,000 for 1995. The loss is primarily attributable to the
strengthening of the British Pound to its then four year high, as MBL
(the Dartford, England manufacturing facility) carried intercompany
receivables in the local currencies of the various Murex Group
territories. This foreign exchange loss was further exacerbated by the
weakening of the South African Rand. As a result of the 1996 agreement
with Chiron and Ortho, a reversal was made to royalty accruals made in
prior years, which resulted in a net credit to royalty expense of
$2,799,000 for the year ended December 31, 1996. During September
1996, the Company recorded a restructuring charge of $2,100,000 before
tax. The restructuring was driven by a need to reposition the Company
for its movement into the patient monitoring business. The world-wide
plan resulted in personnel reductions from various functions. The
restructuring charge consists predominantly of costs for employee
severance and other benefits, of which $1,402,000 remained accrued at
December 31, 1996.
Net interest expense for the year ended December 31, 1996 was
$643,000 compared to net interest income of $1,054,000 for the year
ended December 31, 1995 due to the increase in long term debt from the
new line of credit arrangement and the factoring of Italian
receivables. The loss on liquidation of investee of $394,000
represents SDL's net loss for the year ended December 31, 1996, net of
the estimated gain upon ultimate liquidation. As of December 31, 1996,
IMTC and its subsidiaries represented predominantly all creditors of
SDL; therefore, in the financial statements, the subsidiary is assumed
to be fully liquidated.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
International Murex Technologies Corporation
CONSOLIDATED BALANCE SHEETS
December 31,
-----------------
(In Thousands of U. S. Dollars) 1997 1996
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $10,087 $ 9,723
Accounts receivable, net of allowance for doubtful
accounts of $2,939 and $3,174, respectively 35,062 33,718
Inventories 21,164 21,534
Amounts due from affiliates 1,477 4,415
Prepaid and other 3,454 1,207
-----------------
Total current assets 71,244 70,597
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT-
at cost less accumulated depreciation and amortization 13,245 10,091
PATENTS, TRADEMARKS AND LICENSES-
at cost less accumulated amortization 7,016 5,738
OTHER ASSETS 3,738 8,687
-----------------
TOTAL $95,243 $95,113
================================================================================
See notes to consolidated financial statements.
17
<PAGE>
December 31,
--------------------
1997 1996
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 10,215 $ 9,757
Accrued expenses:
Professional fees 1,229 2,222
Royalty payments 1,559 1,978
Employee related 5,032 5,985
Income taxes payable 827 1,508
Litigation settlements 155 3,310
Restructuring 1,402
Other 3,110 2,809
Current portion of long term debt 95
Current portion of capitalized lease obligations 163 151
--------------------
Total current liabilities 22,385 29,122
- -------------------------------------------------------------------------------
DEFERRED RENT 47 77
LONG TERM DEBT, less current portion 14,331 9,638
CAPITALIZED LEASE OBLIGATIONS, less current portion 248 93
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common shares, without par value,
200,000,000 shares authorized; 16,689,934 and
16,578,853 shares issued, respectively 84,780 84,460
Additional paid-in capital 14,521 13,906
Accumulated deficit (32,591) (41,655)
Less cost of 101,043 and 286,929
common shares held in treasury, respectively (5) (1,085)
Unrealized gain on marketable securities 676 4,405
Accumulated currency translation adjustment (9,149) (3,848)
--------------------
Shareholders' equity 58,232 56,183
- -------------------------------------------------------------------------------
TOTAL $ 95,243 $ 95,113
===============================================================================
See notes to consolidated financial statements.
18
<PAGE>
<PAGE>
Second Page for Balance Sheet
<PAGE>
International Murex Technologies Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------------------
(In Thousands of U.S. Dollars,
except per share data) 1997 1996 1995
- ----------------------------------------------------------------------------
REVENUES
Product sales $ 98,553 $ 99,881 $ 92,394
License fees and other (See Note 6) 7,579 970
-----------------------------------
Total revenues 106,132 100,851 92,394
COSTS AND EXPENSES
Cost of products sold 39,250 34,887 30,181
Research and development 7,487 6,369 7,426
General and administrative 21,630 25,803 27,541
Sales and marketing 28,883 29,523 26,898
Foreign exchange loss (gain) 104 1,542 (1,016)
Royalty expense (credit) 5,625 (2,799) 8,365
Restructuring expense 2,100
-----------------------------------
Total costs and expenses 102,979 97,425 99,395
- ----------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 3,153 3,426 (7,001)
Interest income 290 663 1,221
Interest (expense) (1,422) (1,306) (167)
Gain (loss) on asset disposals (50) 90 108
Gain (loss) on liquidation of investee 1,114 (394)
Other income (expense) 3,374 386 (289)
-----------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 6,459 2,865 (6,128)
Income tax benefit (expense) 2,605 (1,016) (482)
-----------------------------------
NET INCOME (LOSS) $ 9,064 $ 1,849 $ (6,610)
============================================================================
NET INCOME (LOSS) PER COMMON SHARE
Basic $ 0.55 $ 0.11 $ (0.40)
========= ========= =========
Diluted $ 0.52 $ 0.11 $ (0.40)
========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic, in thousands 16,484 16,215 16,381
========= ========= =========
Diluted, in thousands 17,444 16,507 16,381
========= ========= =========
See notes to consolidated financial statements.
19
<PAGE>
<PAGE>
International Murex Technologies Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands of U.S. Dollars, except share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
----------------------- Paid-In Accumulated
Shares Amount Capital Deficit
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1, 1995 16,778,646 $ 84,082 $ 13,906 $ (36,894)
Issued pursuant to employee
stock purchase plan 17,375 54
Shares repurchased for treasury
Retirement of escrowed shares (107,144)
Issued in exchange for
subsidiary shares 54
Net loss (6,610)
Foreign currency translation
-----------------------------------------------
December 31, 1995 16,688,931 84,136 13,906 (43,504)
Issued pursuant to employee
stock purchase plan 23,297 91
Exercise of employee stock options 15,900 50
Issued as stock compensation 281,925 1,692
Shares tendered to treasury
Retirement of treasury shares (431,200) (1,509)
Unrealized gain on marketable
securities
Net income 1,849
Foreign currency translation
-----------------------------------------------
December 31, 1996 16,578,853 84,460 13,906 (41,655)
Issued pursuant to employee
stock purchase plan 23,617 155
Exercise of employee stock options 218,300 999
Retirement of treasury shares (185,886) (1,080)
Issued pursuant to class action
settlement 80,120 465
Reversion of settlement shares 615
Shares tendered as tax withholding (25,070) (219)
Net change in unrealized gain on
marketable securities
Net income 9,064
Foreign currency translation
===============================================
December 31, 1997 16,689,934 $ 84,780 $ 14,521 $ (32,591)
===============================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Unrealized Accumulated
Gain on Currency Total
Treasury Marketable Translation Shareholders'
Shares Securities Adjustment Equity
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1, 1995 $ (5) $ (4,585) $ 56,504
Issued pursuant to employee
stock purchase plan 54
Shares repurchased for treasury (1,509) (1,509)
Retirement of escrowed shares
Issued in exchange for
subsidiary shares
Net loss (6,610)
Foreign currency translation 1,092 1,092
------------------------------------------------
December 31, 1995 (1,514) (3,493) 49,531
Issued pursuant to employee
stock purchase plan 91
Exercise of employee stock options 50
Issued as stock compensation 1,692
Shares tendered to treasury (1,080) (1,080)
Retirement of treasury shares 1,509
Unrealized gain on marketable
securities $ 4,405 4,405
Net income 1,849
Foreign currency translation (355) (355)
------------------------------------------------
December 31, 1996 (1,085) 4,405 (3,848) 56,183
Issued pursuant to employee
stock purchase plan 155
Exercise of employee stock options 999
Retirement of treasury shares 1,080
Issued pursuant to class action
settlement 465
Reversion of settlement shares 615
Shares tendered as tax withholding (219)
Net change in unrealized gain on
marketable securities (3,729) (3,729)
Net income 9,064
Foreign currency translation (5,301) (5,301)
===============================================
December 31, 1997 $ (5) $ 676 $ (9,149) $ 58,232
================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
<PAGE>
International Murex Technologies Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(In Thousands of U.S. Dollars) 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 9,064 $ 1,849 $ (6,610)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 3,903 3,519 4,199
Amortization 850 459 85
Loss (gain) on sale of property and equipment 50 (90) (108)
Gain on sale of marketable securities (3,095)
Deferred taxes (2,800)
Non-cash compensation 2,694 1,692
Changes in assets and liabilities:
Accounts receivable 1,885 1,118 (3,074)
Inventories 370 (4,593) (1,154)
Prepaid and other assets (1,004) (1,088) 1,388
Trade accounts payable 458 2,171 1,999
Accrued expenses (6,365) (9,963) 5,444
- ----------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities 6,010 (4,926) 2,169
- ----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 157 269 265
Additions to property and equipment (7,805) (4,558) (4,994)
Additions to patents and licenses (2,128) (5,968) (101)
Proceeds from sale of marketable securities 2,811
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (6,965) (10,257) (4,830)
- -----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase in borrowings under line of credit 3,263 9,638 40
Increase (decrease) of other long-term liabilities 1,342 (289) (458)
Proceeds from issuance of common shares 1,154 141 54
Repurchase of shares for treasury (1,509)
- -----------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 5,759 9,490 (1,873)
- -----------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes (4,440) (355) 1,092
Net Increase (Decrease) in Cash and Cash Equivalents 364 (6,048) (3,442)
Cash and Cash Equivalents at Beginning of Period 9,723 15,771 19,213
- -----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,087 $ 9,723 $ 15,771
- -----------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,238 $ 1,306 $ 148
Cash paid for income taxes $ 876 $ 1,140 $ 1,348
</TABLE>
21
<PAGE>
<PAGE>
International Murex Technologies Corporation
- --------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In Thousands of U.S. Dollars)
- ------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the years ended December 31, 1997, 1996 and 1995, the
Company entered into capital lease obligations of approximately $320,
$63 and $53 respectively.
Unpaid acquisition costs totaled $750 at December 31, 1995.
See notes to consolidated financial statements.
<PAGE>
International Murex Technologies Corporation
- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of U.S. Dollars, except share amounts)
- ----------------------------------------------------
- --------------------------------------------------------------------------------
1. NATURE OF THE COMPANY AND BASIS OF PRESENTATION:
International Murex Technologies Corporation ("IMTC"), is
incorporated in Canada and has many incorporated subsidiaries
operating throughout the world under the Murex name (the "Murex
Group"). The Murex Group develops, manufactures and markets
medical diagnostic products and provides medical services for the
screening, diagnosis and monitoring of infectious diseases and
other medical conditions. (IMTC and the Murex Group are
collectively referred to herein for consolidated financial
purposes only as the "Company".)
The accompanying financial statements include IMTC and its
wholly-owned, incorporated subsidiaries doing business in various
territories generally under the name Murex Diagnostics, Murex
Holdings Corporation ("MHC"), a Delaware corporation; and MHC's
majority owned subsidiary; Murex Corporation ("Murex"), a
Delaware corporation; and Murex's wholly owned subsidiaries. In
August 1995, Murex, a then majority-owned subsidiary was merged
with MHC and subsequently into Murex Diagnostics, Inc. ("MDI").
The previous minority interest's portion of Murex's continued
losses in excess of their basis has not been recorded because
management considers that it is not currently realizable. At
December 31, 1996, the U.S. subsidiaries were further
consolidated by merging the U.S. holding company, IMTC Holdings,
Inc. into MDI.
Effective January 1, 1996, IMTC's U.K. operating business was
restructured into two companies, Murex Diagnostics Limited
("MDL") and Murex Biotech Limited ("MBL"). MDL subsequently
changed its name to Specialist Diagnostics Limited ("SDL") and
entered voluntary liquidation. As of December 31, 1997 and 1996,
IMTC and its subsidiaries represented predominately all of the
creditors of SDL; therefore, in the consolidated financial
statements, the subsidiary is assumed to be fully liquidated.
During 1997, approximately $3,888 in cash was returned to the
Company from the SDL liquidator. During the fourth quarter of
1997, claims with various tax authorities including Inland
Revenue were effectively settled which resulted in additional
expected proceeds of $1,114. As such, management expects to
receive the remaining net proceeds of $1,477 from the SDL
liquidator after settlement of all liquidation costs, which is
reflected as of December 31, 1997 as amounts due from affiliates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's financial statements have been prepared in
accordance with United States generally accepted accounting
principles and reflect the following policies:
(A) BASIS OF CONSOLIDATION: The consolidated financial
statements include the accounts of IMTC and all
subsidiaries. All significant intercompany accounts and
transactions are eliminated.
(B) CASH EQUIVALENTS: The Company considers all highly liquid
investments with original maturities of three months or less
to be cash equivalents.
(C) ACCOUNTS RECEIVABLE: Accounts receivable include amounts due
from customers in Italy and Spain which, if not factored,
may take approximately one year to collect. An allowance for
estimated doubtful accounts is provided, as considered
appropriate, based on identification of specific
uncollectible receivables.
(D) INVENTORIES: Stated at the lower of cost (first-in,
first-out method) or market.
(E) LONG-LIVED ASSETS: At each balance sheet date management
reviews assets for impairment based on its expectations of
future non-discounted cash flows. Based on the Company's
most recent analysis, the Company believes no material
impairment of assets exists at December 31, 1997.
(F) PROPERTY, PLANT AND EQUIPMENT: Stated at cost less
accumulated depreciation. Depreciation is provided by the
straight-line method over the useful lives of the assets:
forty years for buildings, three to ten years for equipment
and furniture, and the lesser of the useful life or the term
of the lease for leasehold improvements.
(G) PATENTS, TRADEMARKS AND LICENSES: Costs incurred for legal
expenses in connection with obtaining patent protection,
trademark rights and licenses for certain technology have
been deferred. Amortization of such costs is provided by the
straight-line method over five years for patents and
trademarks and over the life of the agreement, not to exceed
seven years, for license agreements.
(H) INVESTMENTS: The Company accounts for its long-term
investment in the marketable securities of Digene
Corporation in accordance with Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for
Certain Investments in Debt and Equity Securities" .
(I) INCOME TAXES: Deferred income taxes are determined in
accordance with Statement of Financial Accounting Standards
No. 109 ("SFAS No. 109") and reflect the net tax effects of
(a) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes, and (b) operating
loss and tax credit carry forwards.
(J) REVENUE: Revenue is recognized at the time product is
shipped or when contract services are rendered .
(K) RESEARCH AND DEVELOPMENT: Research and development costs
include primarily salaries and benefits, rent, laboratory
materials and supplies, consulting fees, and subcontract
costs, and are expensed in the period incurred.
(L) FOREIGN EXCHANGE: The reporting currency for the Company is
the U.S. Dollar. The functional currency for all operations
is the respective local currency. The translation of all
foreign currencies into U.S. Dollars is performed for asset
and liability accounts using exchange rates in effect at the
balance sheet date, for equity accounts at historical rates,
and for revenue and expense accounts using a weighted
average exchange rate during the period. Gains and losses
resulting from the translation of subsidiary financial
statements and intercompany foreign currency transactions
that are of a long-term investment nature are classified as
accumulated currency translation adjustments within
shareholders' equity. The gains and losses relating to all
other transactions have been included in the consolidated
statements of operations.
(M) STOCK BASED COMPENSATION: Accounting for stock options
issued to employees and non-employee directors is based upon
the "intrinsic value" method set forth in Accounting
Principles Board Opinion No. 25 ("APB 25"), "Accountin g for
Stock Issued to Employees" . Accounting for stock options
issued to non-employees prior to December 16, 1995 is also
based upon APB 25. Accounting for stock options issued to
non-employees (excluding non-employee directors) after
December 15, 1995 is based upon the "fair value" method set
forth in Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accountin g for Stock- Based Compensati on".
See footnote 12 for further discussion of SFAS 123.
(N) NET INCOME (LOSS) PER COMMON SHARE: Basic earnings per
common share are computed by dividing net earnings by the
weighted average number of common shares outstanding during
each year. Diluted earnings per share include common share
equivalents, the incremental shares that would have been
outstanding upon the assumed exercise of dilutive stock
options and warrants. For 1995, the calculation of loss per
common share excludes the effect of common share equivalents
as such effect is anti-dilutive.
(O) PERVASIVENESS OF ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumption s that affect the reported amounts of assets and
liabilitie s and disclosure of contingent assets and
liabilitie s at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(P) RECLASSIFICATIONS: Certain reclassifications of prior year
amounts have been made to conform to the current year
financial statement reporting format.
(Q) NEW ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS 130,
"Reporting Comprehens ive Income" and 131, "Disclosur es
about Segments of an Enterprise and Related Informatio n."
SFAS 130 establishe s standards for reporting and display of
comprehens ive income and its components (revenues,
expenses, gains, and losses) in a full set of general
purpose financial statements . SFAS 131 establishe s
standards for, among other things, reporting informatio n
about operating segments in annual financial statements and
requires that those enterprise s report selected informatio
n about operating segments in interim financial reports
issued to shareholde rs. SFAS 130 and 131 are effective for
financial statements issued for periods beginning after
December 15, 1997. Management believes that the adoption of
these statements will not have a material adverse effect on
the Company's consolidat ed financial statements .
3. EQUITY INVESTMENT IN DIGENE CORPORATION:
IMTC's subsidiary, Murex Diagnostics Corporation ("MDC"), owns
common shares of Digene Corporation ("Digene"). In accordance
with the provisions of SFAS 115, the Company has classified the
investment as "available for sale" and reported it at fair value
in the Other Assets section of the balance sheet, with the
unrealized gain credited to a separate component of shareholders'
equity. At December 31, 1997 and 1996, the fair market value of
the investment was $1,359 and $7,497, respectively, with
unrealized holding gains of $676 and $4,405, respectively. During
the year ended December 31, 1997, 301,475 shares were used to
settle a compensation liability to management. The Company
realized a gain of $3,095 upon the disposition of shares during
1997, which is included in the Other Income section of the income
statement.
4. INVENTORIES:
December 31, December 31,
1997 1996
------------ ------------
Raw materials and supplies $ 5,355 $ 5,911
Work in process 10,659 10,734
Finished goods 9,909 10,379
-------- --------
Total Inventories 25,923 27,024
Less inventory reserves (4,759) (5,490)
-------- --------
Total Inventories, net $ 21,164 $ 21,534
======== ========
5. PROPERTY, PLANT AND EQUIPMENT:
December 31, December 31,
1997 1996
------------ ------------
Furniture and office equipment $ 8,725 $ 8,585
Equipment 18,478 16,524
Leasehold improvements 2,671 2,316
-------- --------
Total 29,874 27,425
Less accumulated depreciation and
amortization (16,629) (17,334)
-------- --------
Property, plant and equipment, net $ 13,245 $ 10,091
======== ========
6. TECHNOLOGY LICENSING AND OTHER AGREEMENTS:
MDC completed a non-exclusive, out-licensing transaction during
1994 by licensing technology to Abbott Laboratories. This
transaction provided MDC with a $10,000 minimum license fee which
was paid over four years. Furthermore, MDC earned an additional
$1,075, $878 and $100 in 1997, 1996, and 1995, respectively, as a
result of minimum royalty levels being exceeded. Licenses have
also been granted for SAM(TM) technology to Chiron Corporation
("Chiron"). MDC also licenses technology and products from other
diagnostics manufacturers and generally, the Murex Group pays a
royalty to these companies based on its sales of the products.
See Note 15.
MDC earned an additional $6,504 during 1997 as a result of
strategic alliance transactions with Digene and Shield
Diagnostics Group plc ("Shield"). Effective February 1997, the
Murex Group and Digene entered into a five year distribution,
agency and sales representation agreement whereby Digene will
sell its Hybrid Capture (R) human papillomavirus ("HPV") DNA test
directly in selected European markets using the Company's
existing distribution infrastructure in exchange for selling
service fees. Additionally, Digene purchased certain intangible
properties for cash paid during 1997 and notes which are payable
through 1998. During June 1997, the Murex Group sold TTP
Corporation ("TTP"), a wholly-owned subsidiary of MDC, to Shield.
TTP owned the intellectual property and other rights to ten
products used for the diagnosis of thyroid dysfunction and the
measurement of cardiovascular/blood coagulation degradation
products. The Murex Group will continue to manufacture and sell
the TTP product line acquired by Shield for a period of three
years, pursuant to a purchase commitment.
7. PATENTS, TRADEMARKS AND LICENSES:
December 31, December 31,
1997 1996
------------ ------------
Patents $ 891 $ 663
Trademarks 203 159
Licenses 8,096 6,240
------- -------
Total 9,190 7,062
Less accumulated amortization (2,174) (1,324)
------- -------
Total, net $ 7,016 $ 5,738
======= =======
8. BORROWINGS UNDER LINES OF CREDIT:
On November 12, 1996, the Company entered into a three year,
$15,000 line of credit facility with Bank of America, which is
collateralized by the accounts receivable and inventory of its
U.S., U.K. and Barbados subsidiaries. The credit agreement
requires the Company to maintain certain financial ratios and
other financial conditions, prohibits the payment of any IMTC
dividends except those paid in common shares, and limits capital
expenditures, certain investments and additional indebtedness. At
December 31, 1997 and 1996, the Company was in compliance with
all loan covenants. Based on the value of the collateral, the
borrowings outstanding of $12,996 and a letter of credit
outstanding of $825, there was $186 unused and available under
this credit facility as of December 31, 1997. Interest is payable
monthly at either LIBOR (5.7% at December 31, 1997) plus 2.5% or
prime (8.5% at December 31, 1997).
On December 11, 1996, the Company entered into a five year,
interest rate swap agreement to reduce the impact of changes in
interest rates on its LIBOR-based line of credit. The five year
agreement effectively fixed the total interest rate at 8.9%, on a
notional principal amount of $8,000. The Company specifically
designated this interest rate swap agreement as a hedge of the
line of credit, and therefore recognizes the differential paid or
received as an adjustment to interest expense in the period in
which it occurs. Therefore, as of December 31, 1997 and 1996,
there were no carrying amounts related to the interest rate swap
agreement in the consolidated balance sheets. The estimated fair
value of the interest rate swap agreement, based on current
market rates approximated a payable of $122 and $0 at December
31, 1997 and 1996, respectively. The Company is exposed to credit
loss in the event of non-performance in the event the other party
to the interest rate swap agreement, however the Company does not
anticipate non-performance by the counter party. See also
Footnote 20.
In order to finance a new manufacturing facility in South Africa
as well as provide a partial, natural foreign exchange hedge of
its long term investment, the Company entered into a Rand
denominated six year term loan with a capacity of approximately
$1,600 at an interest rate of 10.5%. The interest rate is
favorable by South African standards because the loan is part of
an investment incentive package which includes a tax holiday. At
December 31, 1997, $1,430 was outstanding under this term loan,
which is collateralized by the property in South Africa and
guaranteed by IMTC.
The scheduled maturities of long term debt are as follows:
1998 $ 95
1999 13,282
2000 286
2001 286
2002 286
Thereafter 191
------
Total $14,426
=======
The weighted average interest rate on average outstanding debt
was 9.17%, 8.89% and 9.66% for each of the years ended December
31, 1997, 1996 and 1995, respectively.
9. CAPITAL LEASES:
Capitalized lease obligations for property and equipment bear
interest at an imputed average rate of 8.08%. The leases are
collateralized by equipment with an original cost of $792 and
$689 and a net book value of $257 and $81 at December 31, 1997
and 1996, respectively. Future minimum lease payments under
capital leases with terms in excess of one year at December 31,
1997, together with the present value of minimum lease payments,
are shown in the table below.
1998 $ 194
1999 188
2000 109
2001 3
-------
Total 494
Less interest (83)
-------
Present value 411
Current portion (163)
-------
Long term $ 248
=======
10. OPERATING LEASES:
The Company leases office space and certain office equipment
under operating lease agreements. Future minimum lease payments
under noncancellable operating lease agreements with terms in
excess of one year are as follows:
1998 $ 3,549
1999 3,109
2000 1,462
2001 951
2002 743
Thereafter 125
-------
Total $ 9,939
=======
Rent expense under all operating leases amounted to approximately
$3,179, $1,776 and $1,711 for each of the years ended December
31, 1997, 1996 and 1995, respectively.
11. INCOME TAXES:
The taxation of a company that has operations in several
countries involves many complex variables, such as differing tax
structures from country to country as well as the existence and
use of operating loss carryforwards in certain tax jurisdictions.
These complexities do not permit meaningful comparisons between
the domestic and international components of income before taxes
and the provision for income taxes, and disclosures of these
components do not provide indicators of relationships in future
periods.
The Company's deferred tax assets are subject to a valuation
allowance that reduces the deferred tax assets at December 31,
1997 and 1996 to $2,800 and $0, respectively. The long-term
portions of the deferred tax assets were $1,435 and $0 at
December 31, 1997 and 1996, respectively. The tax effects of
significant items comprising the Company's deferred taxes are as
follows:
December 31, December 31,
1997 1996
------------ ------------
Deferred tax liabilities:
Asset basis differences $ 91 $ 22
-------- --------
Deferred tax assets:
Book reserves 1,231 2,574
Operating loss carryforwards 15,032 12,378
All other 761 3,040
-------- --------
17,024 17,992
Less: Valuation allowance (14,133) (17,970)
-------- --------
2,891 22
-------- --------
Deferred income taxes $ 2,800 $ 0
======== ========
During 1996, the Company increased the beginning balance of the
valuation allowance by $1,810 to reflect the liquidation of SDL.
The components of earnings and income tax expense (benefit) are
as follows:
Earnings (losses) before income taxes:
1997 1996 1995
---- ---- ----
U.S. $ 2,205 $ 1,964 $ 505
Foreign 4,254 901 (6,633)
------- ------- -------
$ 6,459 $ 2,865 $(6,128)
======= ======= =======
Income Tax Provision 1997 1996 1995
---- ---- ----
Current
Federal $ 52 $ 35 $ 11
State 45 31 45
Foreign 98 835 423
Deferred
Federal (2,800)
Foreign 115 3
------- ------- -------
Total $(2,605) $ 1,016 $ 482
======= ======= =======
A reconciliation of differences between the statutory U.S.
federal income tax rate and the Company's effective rate is as
follows:
1997 1996 1995
---- ---- ----
U.S. Statutory Rate $ 2,196 $ 974 $(2,084)
State taxes 258 115 (125)
Increase (decrease) in valuation
allowance (3,873) 2,497 (252)
Increase in unused net operating
losses 2,654 243 4,349
Effect of foreign rates differing
from U.S. statutory rate (3,840) (2,813) (1,406)
------- ------- -------
Total $(2,605) $ 1,016 $ 482
======= ======= =======
At December 31, 1997 the Company had, for tax reporting purposes,
net operating loss carryforwards of approximately $41,824,
generated as follows:
Other
U.S. Canada U.K. Foreign Total
---- ------ ---- ------- -----
1997 $ 975 $ 3,483 $ 4,734 $ 9,192
1996 1,200 2,876 1,938 6,014
1995 675 362 1,037
1994 $ 724 369 1,093
1993 1,076 290 921 2,287
Prior periods 18,868 3,333 22,201
------- ------- ------- ------- -------
Total $20,668 $ 6,473 $ 6,359 $ 8,324 $41,824
======= ======= ======= ======= =======
The company has recorded a deferred tax asset of $2,800
reflecting the benefit of $7,368 in U.S. loss carryforwards,
which expire in varying amounts between 1999 and 2009.
Realization is dependent on generating sufficient taxable income
prior to expiration of the loss carryforwards. Although
realization is not assured, management believes it is more likely
than not that all of the deferred tax asset will be realized. The
amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.
The carryforwards expire through 2004 for Canadian purposes.
Other foreign jurisdiction tax loss carryforwards include
European countries which generally expire in 1998 or have
indefinite carryforwards. The 1997, 1996 and 1995 income tax
provisions primarily represent current amounts due to various
U.S. state taxing authorities and various foreign taxing
authorities.
The net operating losses include the U.S. net operating losses of
Murex prior to the merger of Murex into MDI. Net operating loss
carryforwards for income tax purposes of $9,850 are subject to an
annual limitation of approximately $390 on utilization due to a
change in ownership in June 1988. As of December 31, 1997, $6,145
was not yet available for utilization.
12. COMMON SHARES:
(A) NET INCOME (LOSS) PER COMMON SHARE: In February 1997, the
Financial Accounting Standards Board issued Statement of
Financial Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 requires disclosure of basic earnings per
common share based on the net income (loss) and the weighted
average number of common shares outstanding during the
period. SFAS 128 also requires disclosure of diluted
earnings per common share based on the net income (loss) and
the weighted average number of common shares and common
share equivalents outstanding during the period. All periods
presented are retroactively restated to conform to the
presentation requirements of SFAS 128. The following table
represents the computation of basic and diluted earnings per
common share:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Basic earnings per common share:
Net income (loss) $ 9,064 $ 1,849 $ (6,610)
Weighted average common shares outstanding 16,484 16,215 16,381
Basic net income (loss) per common share $ 0.55 $ 0.11 $ (0.40)
Diluted earnings per common share:
Net income (loss) $ 9,064 $ 1,849 $ (6,610)
Weighted average common shares outstanding 16,484 16,215 16,381
Common stock equivalents 960 292
-------- -------- --------
Total weighted average shares 17,444 16,507 16,381
Diluted net income (loss) per common share $ 0.52 $ 0.11 $ (0.40)
</TABLE>
(B) STOCK OPTIONS: On May 11, 1993, IMTC adopted the
International Murex Technologies Corporation Employee Equity
Incentive Plan (the "1993 Plan"), which was approved by
shareholders in June 1993. The plan was amended and restated
in June 1994. The number of options issued under this plan
may not exceed 2 million. The option price per share shall
be determined by the Compensation Committee at the time any
option is granted and shall not be less than the closing
trading price of the stock on the date of grant. Options
granted to management generally vest at 50% per year over a
two year period and expire five years from the grant date.
Options granted to non- employee directors generally vest
immediately and expire ten years from the grant date. In
February 1996, the Compensation Committee of IMTC determined
that certain of the outstanding options no longer provided
the incentives intended by the original grants and
authorized replacement of 946,100 of the options
outstanding. This constituted all of the outstanding options
except those held by outside directors, terminated employees
and consultants. Replacement options totaling 946,100 were
reissued on March 4, 1996 at an exercise price of $3.13 each
expiring in March 2001.
<PAGE>
The following table summarizes the stock option activity for the
three years ended December 31, 1997.
<TABLE>
<CAPTION>
Range of Exercise Number of Exercise
Prices Options Price
---------------------- ------------------- -----------------
<S> <C> <C> <C>
Balance, December 31, 1994 $5.00 - 7.00 1,694,100 $6.14
Granted 3.38 80,000 3.38
Canceled 4.20 - 7.00 (123,500) 6.09
-------------------
Balance, December 31, 1995 3.38 - 7.00 1,650,600 6.01
Granted 3.13 - 6.00 1,390,500 3.24
Canceled 3.13 - 7.00 (1,382,100) 6.03
Exercised 3.13 (15,900) 3.13
-------------------
Balance, December 31, 1996 3.13 - 6.00 1,643,100 3.68
Granted 6.44 - 8.88 302,100 7.29
Canceled 3.13 - 7.13 (19,250) 4.77
Exercised 3.13 - 6.00 (218,300) 4.57
-------------------
Balance, December 31, 1997 3.13 - 8.88 1,707,650 4.19
===================
</TABLE>
The weighted average grant date fair value of the options
granted was $4.17, $1.67 and $2.69 for 1997, 1996 and 1995,
respectively. At December 31, 1997, 1996 and 1995, the
number of exercisable options was 1,377,700, 1,338,900 and
1,677,434, respectively, and the weighted average exercise
price of those options was $3.91, $3.79 and $6.14,
respectively.
The following table summarizes information about stock
options outstanding and exercisable at December 31, 1997.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Weighted
Number average Number Weighted
Range of outstanding at remaining Weighted exercisable at average
Exercise December 31, contractual average December 31, exercise
Prices 1997 life exercise price 1997 price
- ---------------------------------------------------------------------------------------------------------------
$3.13 - 4.50 1,169,850 3.4 $3.15 1,027,700 $3.14
4.51 - 6.00 240,000 6.3 5.42 230,000 5.40
6.01 - 7.50 277,800 5.5 7.18 100,000 7.39
7.51 - 8.88 20,000 9.0 8.88 20,000 8.88
---------------------- ------------------
1,707,650 4.2 4.19 1,377,700 3.91
====================== ==================
</TABLE>
<PAGE>
The Company has adopted the disclosure only provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation".
Accordingly, no compensation cost has been recognized for
the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the
fair value at the grant date for awards in 1997, 1996 and
1995, consistent with the provisions of SFAS No. 123, the
Company's earnings would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) - as reported $ 9,604 $ 1,849 $ (6,610)
Net income (loss) - pro forma 7,800 (254) (6,825)
Basic earnings per common share - as reported 0.55 0.11 (0.40)
Basic earnings per common share - pro forma 0.47 (0.02) (0.42)
Diluted earnings per common share - as reported 0.52 0.11 (0.40)
Diluted earnings per common share - pro forma 0.45 (0.02) (0.42)
</TABLE>
The fair value of each option grant is estimated on the date
of grant using the Black Scholes option-pricing model with
the following weighted-average assumptions used for grants
in 1997, 1996 and 1995: dividend yield of 0%; expected
volatility ranging from 69% to 74%; risk free interest rate
ranging from 5.3% to 6.7%; and expected lives ranging from
three to ten years.
(C) ISSUANCE OF COMMON SHARE PURCHASE WARRANTS: In February
1996, IMTC entered into an agreement with an investment
banking firm. As compensation for its services the
investment banker received common share purchase warrants to
purchase an aggregate of 100,000 common shares exercisable
for a period of two years from February 12, 1996. These
warrants were issued in two lots of 50,000 with exercise
prices of $4.50 and $5.50 per share, respectively, and the
Company recorded an expense of $64 related to these
warrants. As of December 31, 1997 all of these warrants
remained outstanding, however, all of the warrants were
exercised on or before February 11, 1998.
(D) EMPLOYEE STOCK PURCHASE PLAN: On April 14, 1993, IMTC
adopted the International Murex Technologies Corporation
Employee Stock Purchase Plan (the "Purchase Plan"), which
was approved by shareholders in June 1993. Under the
Purchase Plan, all eligible employees can purchase common
shares of IMTC's stock at 90% of the closing market price on
the last day of each month. The number of common shares
which may be purchased under the plan available to employees
shall be set from time to time by the Compensation Committee
and was initially 100,000. On May 13, 1997, the shareholders
approved an amendment to the Purchase Plan which increased
the number of shares available by 500,000. Additionally, the
amendment changed the purchase price to 85% of the lower of
the fair market value at the beginning or end of a six month
interval. The new purchase price was incorporated into the
Purchase Plan effective January 1, 1998.
(E) SHARES RESERVED FOR FUTURE ISSUE: At December 31, 1997, IMTC
has reserved common shares for issuance as shown in the
table below.
Options 1,851,237
Employee Stock Purchase Plan 511,135
Warrant Conversion 100,000
---------
Total 2,462,372
=========
(F) TREASURY SHARES: In November 1996, pursuant to the
Stipulation Settlement Agreement, Edward J. DeBartolo, Jr.
and the Estate of Edward J. DeBartolo, Sr. each transferred
92,943 common shares of the Company's stock to the Company
to be used as their portion of the settlement of the class
action lawsuits initiated in 1992. These shares were retired
during 1997. See Footnote 16.
13. EMPLOYEE RETIREMENT PLANS:
The Murex Group has contributory and non-contributory defined
contribution plans covering substantially all employees. The plan
funding arrangements are consistent with the United States or
other applicable governmental laws and regulations. The plans
provide for employer match up to twice the employee contribution
percentage to a maximum employer matching contribution of 10%.
The Murex Group's contributions to these plans amounted to
approximately $1,777, $1,637 and $1,587 in the years 1997, 1996
and 1995, respectively.
Certain of the Murex Group also have defined benefit pension
plans covering selected employees in certain European locations.
Pension costs and actuarial data are not significant to the
consolidated financial statements. The Company currently provides
no post-retirement benefit plans other than pensions, nor any
significant post-employment benefits, therefore, the financial
statements have no such provisions.
14. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK:
The Company places its cash and cash equivalents with high credit
quality financial institutions. As of December 31, 1997, the
Company had no significant concentrations of credit risk. The
Company has estimated the fair value of its financial
instruments, using available market information and appropriate
valuation methodologies. Considerable judgment is required in
developing the estimated fair value and therefore the values are
not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
15. COMMITMENTS:
Certain of the Murex Group also incur royalty obligations on
certain product sales for the use of patent and license rights.
Royalty rates may vary depending on particular product sales
levels. Agreed royalties are payable on defined sales ranging
from 2% to a combined maximum royalty of 35% for a particular
product's sales. In addition, the Company also has future minimum
royalty payments as follows:
1998 $1,365
1999 1,365
2000 1,365
2001 1,282
2002 1,200
Thereafter 600
------
Total $7,177
======
During February 1996, MDC entered into an exclusive distribution,
development and license agreement with Innogenetics to develop
and market gene probe products for the monitoring of patients and
the classification of viral diseases. Under the terms of the
agreement, MDC paid $5,900 during 1996 and $1,600 during 1997 to
Innogenetics for the exclusive rights to distribute Innogenetics'
LiPA products, excluding HCV, for 15 years. MDC will also pay
Innogenetics a royalty of 10% of the Murex Group's net sales of
Innogenetics' products. Also under this agreement, MDC shall fund
agreed-upon research and development programs, beginning in 1998
and for each of the following 13 years in an amount equal to 20%
of the Murex Group's net sales of Innogenetics' products, subject
to a cap.
16. LITIGATION RESOLUTIONS:
Four class action lawsuits were instituted on behalf of all
persons who had purchased IMTC's securities between May 21, 1992
and August 19, 1992 against IMTC, two executive officers of IMTC,
and two shareholders. Although the defendants denied the
allegations in the complaints, the parties agreed to settle all
outstanding claims for $5,400 during 1996. In accordance with the
Stipulation Settlement Agreement, the shareholders transferred
185,886 common shares of the Company's stock to the Company to be
used as their portion of the settlement. During 1997, the claims
administrator finished qualifying claimants and submitted a
motion to the U.S. District court setting out the final
distribution for the settlement fund, which was approved by the
Court during October 1997. The sum of damages claimed and
expenses incurred by the claims administrator and Plaintiffs'
counsel was less than the total settlement fund, consequently,
the Company was entitled to the remaining cash of approximately
$2,133 and 105,766 common shares of the Company's stock. These
shares are valued at $615 ($5.81 per share), as defined by the
settlement agreement. The reversion of the settlement fund has
been reflected in the accompanying financial statements as an
offset to general and administrative costs for the cash portion
and an increase to additional paid-in-capital for the stock
portion.
During 1995, the U.K. Inland Revenue questioned the tax basis of
inventory, accounts receivable and property, plant and equipment
related to the 1992 purchase of assets from Wellcome. This matter
was resolved during 1997, resulting in no additional tax payments
or liabilities. The U.K. Inland Revenue have finalized their
review of all tax returns through 1995, and all outstanding
issues have been resolved.
Several Subsidiaries of the Murex Group were involved in patent
infringement litigation in several countries against Chiron and
Ortho Diagnostic Systems, Inc. ("Ortho") related to Chiron's HCV
patent. On August 28, 1996, IMTC reached a worldwide agreement
with Chiron and Ortho concerning tests for HCV under which all
litigation among the parties permanently ceased. As a result of
the settlement with Chiron and Ortho, a reversal was made to
royalty accruals made in prior years, which resulted in a net
credit to royalty expense of $2,799 for the year ended December
31, 1996.
17. RESTRUCTURING:
During September 1996, the Company recorded a restructuring
charge of $2,100 before tax. The restructuring was driven by the
need to reposition the Company for its movement into the patient
monitoring business. The worldwide plan resulted in personnel
reductions of approximately 50 people from various functions
during 1997 and 1996. The restructuring provision consists
predominantly of estimated costs for employee severance and other
benefits. As of December 31, 1996, 35 employees left the Company
related to the restructuring plan, resulting in actual payments
of $698. As such, the remaining accrual at December 31, 1996 was
$1,402. All remaining costs were incurred during 1997.
18. SHAREHOLDER RIGHTS PLAN:
In August 1995, IMTC adopted a Shareholder Rights Plan
authorizing the distribution of one Right for each common share
outstanding. The Rights are attached to the common shares and are
not initially exercisable. Rights become exercisable in the
circumstances described in the Shareholder Rights Plan, including
ten days following the announcement that a person or group
without prior approval from the Board of Directors has acquired,
or obtained the right to acquire, beneficial ownership of 20
percent or more of the outstanding common shares of IMTC or ten
days following the announcement of a takeover bid, tender offer
or exchange offer. In certain circumstances, the Rights may be
redeemed by IMTC at a price of $.001 per Right. If not redeemed,
the Rights expire in ten years.
19. DOMESTIC AND FOREIGN OPERATIONS:
Information concerning the Company's domestic and foreign
operations for the years ended December 31, 1997, 1996 and 1995
is summarized below. Murex Group product sales to affiliates are
priced at market prices less an allowance for marketing,
advertising and other sales costs.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
United Far East
Canada States Europe and Other Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------
December 31, 1997
- -----------------
Net Revenues:
<S> <C> <C> <C> <C> <C> <C>
Unaffiliated Customers $ 2,111 $ 26,755 $ 56,897 $ 20,369 $ 106,132
Affiliates 447 28,728 47,332 $ (76,507)
--------- --------- --------- --------- --------- ---------
Total 2,111 27,202 85,625 67,701 (76,507) 106,132
Net Income (Loss) (2,966) 5,169 (7,130) 13,991 9,064
Identifiable Assets 3,456 12,935 46,693 32,159 95,243
December 31, 1996
- -----------------
Net Revenues:
Unaffiliated Customers $ 1,995 $ 24,228 $ 59,461 $ 15,167 $ 100,851
Affiliates 363 28,529 6,704 $ (35,596)
--------- --------- --------- --------- --------- ---------
Total 1,995 24,591 87,990 21,871 (35,596) 100,851
Net Income (Loss) (4,789) 1,568 (2,860) 7,930 1,849
Identifiable Assets 2,955 10,787 53,818 27,553 95,113
December 31, 1995
- -----------------
Net Revenues:
Unaffiliated Customers $ 21,698 $ 61,165 $ 9,531 $ 92,394
Affiliates 1,578 33,076 3,430 $ (38,084)
--------- --------- --------- --------- ---------
Total 23,276 94,241 12,961 (38,084) 92,394
Net Income (Loss) $ (4,088) 966 (6,761) 3,273 (6,610)
Identifiable Assets 4,808 10,305 55,925 14,710 85,748
</TABLE>
<PAGE>
EXPORT SALES BY DESTINATION
Export sales of $112, $339, and $834 for the years ended December
31, 1997, 1996 and 1995, respectively, originated in the United
States. Export sales of $12,320, $9,838, and $8,794 for the years
ended December 31, 1997, 1996 and 1995, respectively, originated
in the United Kingdom. Additional export sales of $4,751, $6,967
and $12,694, for the years ended December 31, 1997, 1996 and
1995, respectively, originated in other European countries and
$1,193 and $5,181 originated in Barbados for the years ended
December 31, 1997 and 1996, respectively. Also in 1997, export
sales from South Africa to other African countries were $911. The
table below summarizes export sales by destination.
Middle East
Europe Asia and Africa Other Total
- --------------------------------------------------------------------------------
December 31:
1997 $ 6,824 $ 5,118 $ 7,145 $ 200 $19,287
1996 7,388 5,349 9,588 22,325
1995 13,447 2,160 6,154 561 22,322
- --------------------------------------------------------------------------------
20. SUBSEQUENT EVENTS:
On January 14, 1998 the Company amended its existing interest
rate swap agreement to increase the notional principal amount to
$10,000 and extend the contract to January 14, 2003. This
agreement fixed the LIBOR portion of the interest rate at 6.48%.
The Company specifically designated this interest rate swap
agreement as a hedge of the line of credit, and therefore will
recognize the differential paid or received as an adjustment to
interest expense in the period in which it occurs.
21. RECONCILIATION OF CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("CANADIAN GAAP" AND "U.S. GAAP") :
There were no differences between Canadian GAAP and U.S. GAAP
during the years ended December 31, 1997, 1996 and 1995.
<PAGE>
International Murex Technologies Corporation
- --------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
International Murex Technologies Corporation:
We have audited the accompanying consolidated balance sheets of
International Murex Technologies Corporation and subsidiaries as of
December 31, 1997 and 1996 and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
International Murex Technologies Corporation and its subsidiaries at
December 31, 1997 and 1996 and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 13, 1998
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The required information is hereby incorporated by reference to
the sections entitled "Election of Directors" and "Shares Held by
Nominees for Election of Directors" in IMTC's Proxy Statement for the
1998 Annual Meeting of Shareholders to be held June 4, 1998. IMTC will
file with the Securities and Exchange Commission pursuant to
Regulation 14A a definitive Proxy Statement involving the election of
directors not later than 120 days after December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The required information is hereby incorporated by reference to
the section entitled "Compensation of Executive Officers" in IMTC's
Proxy Statement for the 1998 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The required information is hereby incorporated by reference to
the sections entitled "Voting Shares," "Shares Held by Nominees for
Election of Directors," and "Beneficial Owners of More Than 5% of
Voting Stock" in IMTC's Proxy Statement for the 1998 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The required information is hereby incorporated by reference to
the section entitled "Interest of Certain Persons in Matters to be
Acted Upon" in IMTC's Proxy Statement for the 1998 Annual Meeting of
Shareholders.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of This Report:
(1) Financial Statements
Included in Part II, Item 8 of this Report:
Consolidated Balance Sheets as of December 31, 1997 and
1996.
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1997.
Consolidated Statements of Changes in Shareholders'
Equity for each of the three years in the period ended
December 31, 1997.
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1997.
Notes to Consolidated Financial Statements.
Independent Auditors' Report
(2) Financial Statement Schedule:
Included in Part IV of this Report:
Schedule Page
-------- ----
Independent Auditors' Consent and Report
on Schedule -- 44
Valuation and Qualifying Accounts II 45
All financial statement schedules other than those
listed above have been omitted as exhibits because they
are not applicable or required under Regulation S-X.
Items 10 through 13 of this Report incorporate only the
indicated portions of IMTC's Proxy Statement for the
1998 Annual Meeting of Shareholders. No other portion
of such Proxy Statement shall be deemed to be
incorporated herein or filed with the Securities and
Exchange Commission.
(b) Reports on Form 8-K
None
(c) Exhibits.
The following exhibits are filed with or incorporated
by reference in this Report. If such filing is made by
incorporation by reference to a previously filed
report, such report is identified in parentheses. See
the Index of Exhibits included with the exhibits filed
as part of this Report.
<PAGE>
Exhibit
Number Document
- ------ --------
3.1 Memorandum of Association of IMTC dated October 31,
1983, as amended on June 16, 1986, December 5, 1988,
February 20, 1989, December 11, 1990 and December 11,
1990 (Exhibit 3.1 to Registration Statement on Form
S-1, No. 33-35422 ("Registration Statement") and
Exhibit 3.3 to Post-Effective Amendment No. 3 to
Registration Statement)
3.2 Articles of Association of IMTC dated October 31, 1983,
as amended November 29, 1985 (Exhibit 3.2 to
Registration Statement)
3.3 Amendments to Memorandum of Association (Exhibit 3.3 to
the Company's Post-Effective Amendment No. 3 to
Registration Statements and Schedule A to the Company's
Proxy Statement dated June 7, 1994)
3.4 Amendments to Articles of Association of IMTC passed by
Special Resolution on June 7, 1994 as filed on May 2,
1995 (Exhibit 3.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995)
4.1 IMTC Stock Option Plan (Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991)
4.2 IMTC Employee Equity Incentive Plan, as amended
(Schedule A to the Company's Proxy Statement dated June
7, 1994)
4.3 IMTC Employee Stock Purchase Plan, (Schedule B to the
Company's Proxy Statement dated May 14, 1993)
4.3.1 IMTC Amended and Restated Employee Stock Purchase Plan
(Schedule A to the Company's Proxy Statement dated
April 3, 1997)
4.4 Warrant Indenture dated July 15, 1993 between IMTC and
Montreal Trust of Canada. (Exhibit 4 to the Company's
Current Report on Form 8-K dated July 27, 1993)
4.5 Shareholder Protection Rights Agreement between IMTC
and The Bank of New York, as Rights Agent, dated August
31, 1996 (Exhibit 4.1 to the Company's Current Report
on Form 8-K dated August 31, 1995)
10.1 Pooling Agreement dated December 16, 1985 among IMTC,
Central Guaranty Trust Company and Axon Limited, Murex
Medical Research Limited, Semiotic Research Limited
Partnership and Coral Sociedade Brasileira de Pesquisas
e Desenvolvimento (Exhibit 10.9 to Registration
Statement)
10.2 Escrow Agreement among Edward J. DeBartolo, Jr.,
Central Guaranty Trust Company and Murex Clinical
Technologies Corporation (Exhibit 10.33 to Current
Report on Form 8-K dated October 26, 1990)
10.3 Employment Agreement dated as of January 1, 1992
between IMTC and F. Michael P. Warren (Exhibit 10.10 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (the "1995 Form 10-K"))
10.3.1 Employment Agreement dated as of January 1, 1992
between MDC (formerly International Murex Technologies
Limited which was formerly Sishui Funds Limited) and F.
Michael P. Warren (Exhibit 10.10.1 to the 1995 Form
10-K)
10.3.2 Employment Agreement dated as of January 1, 1992
between MDL and F. Michael P. Warren (as assigned to
MBL effective January 31, 1996) (Exhibit 10.10.2 to the
1995 Form 10-K)
10.3.3* Employment Agreement dated August 1, 1997 between IMTC
and F. Michael P. Warren
<PAGE>
10.3.4* Employment Agreement dated August 1, 1997 between Murex
Biotech Limited and F. Michael P. Warren
10.3.5* Employment Agreement dated August 1, 1997 between Murex
Diagnostics Corporation and F. Michael P. Warren
10.4 Employment Agreement dated as of January 1, 1995
between IMTC and C. Robert Cusick (Exhibit 10.11.1 to
the 1995 Form 10-K)
10.4.1.* Employment Agreement dated August 1, 1997 between IMTC
and C. Robert Cusick
10.4.2* Amendment to Employment Agreement dated November 6,
1997 between IMTC and C. Robert Cusick
10.5 Employment Agreement dated as of January 1, 1995
between IMTC and J. David Tholen (Exhibit 10.13.1 to
the 1995 Form 10-K)
10.5.1 Separation Agreement dated as of January 20, 1997
between IMTC and J. David Tholen (Exhibit 10.13.1 to
the 1995 Form 10-K)
10.6 Redemption Agreement dated December 30, 1994 among
NuBio Technologies Corporation, IMTC, IMTC Holdings,
Inc. Dominion Biologicals Limited, Blaine MacNeil,
Patrick Waddy and Samuel A. Brushett (Exhibit 10.18.1
to the 1995 Form 10-K)
10.7 License Agreement dated May 3, 1994 between IMTC and
Abbott Laboratories (Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q dated May 13, 1994)
10.8 Stock Purchase Agreement dated May 31, 1994 between
Digene Diagnostics, Inc. ("Digene") and International
Murex Technologies Limited ("IMTL") for the purchase of
1994 Series Preferred Stock (Exhibit 10.20 to the 1995
Form 10- K)
10.8.1 Escrow Agreement dated May 31, 1994 among IMTL, Digene
and Reid & Priest LLP (Exhibit 10.20.1 to the 1995 Form
10-K)
10.8.2 Shareholders Agreement dated May 31, 1994 among IMTL,
Armonk Partners and Digene (Exhibit 10.20.2 to the 1995
Form 10-K )
10.9 Employment Agreement dated as of July 1, 1995 between
IMTC and Steven C. Ramsey (Exhibit 10.19 to the 1995
Form 10-K)
10.9.1* Amendment to Employment Agreement dated November 6,
1997 between IMTC and Steven C. Ramsey
10.10 Distribution, Development and License Agreement between
MDC and Innogenetics dated January 31, 1996 (Exhibit
10.20 to the 1995 Form 10-K)
10.11 Agreement among Chiron Corporation, Johnson &
Johnson/Ortho Diagnostics Systems, Inc. and
International Murex Technologies Corporation dated
August 27, 1996, without exhibits (Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1996)
10.12 Letter Agreement dated January 12, 1996 between Guido
Guidetti and MDL (as assigned to MBL effective January
31, 1996) (Exhibit 10.12 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 (the
"1996 Form 10-K"))
10.13 Letter Agreement dated January 12, 1996 between P.
Silveston and MDL (as assigned to MBL effective January
31, 1996) (Exhibit 10.13 to the 1996 Form 10-K).
10.14 Credit Agreement (without schedules or exhibits) dated
as of November 12, 1996 among IMTC, Murex Diagnostics
International, Inc. ("MDII"), IMTC Holdings, Inc.
("Holdings U.S."), MDC, IMTC Holdings (U.K.) Limited
("Holdings U.K."), MDI and MBL, as the borrowers; Bank
<PAGE>
of America Illinois and Bank of America National Trust
and Savings Association, as issuing banks ("BOA"); Bank
of America, F.S.B., as agent and lender ("BAFSB"), et
al.,as the lenders, in the original principal amount of
$15,000,000 (Exhibit 10.14 to the 1996 Form 10-K).
10.14.1* First Amendment to Credit Agreement dated December 31,
1997 among IMTC, MDII, MDC, Holdings U.K., MDI and MBL,
as the borrowers, and BOA and BAFSB, et.al., as the
lenders. 10.15 Promissory Note dated November 12, 1996
executed by IMTC, MDII, Holdings U.S., MDC, Holdings
U.K., MDI and MBL to the order of BAFSB in the original
principal amount of $8,000,000 (Exhibit 10.15 to the
1996 Form 10-K).
10.16 Offshore Currency Promissory Note dated November 12,
1996 executed by Holdings U.K. and MBL to the order of
BOA (Exhibit 10.16 to the 1996 Form 10-K).
10.17 Security Agreement (without schedules) executed by
Holdings U.S., MDI and IMTC in favor of BASFB (Exhibit
10.17 to the 1996 Form 10-K).
10.18 Deed of Charge executed by Holdings U.K. in favor of
BOA (Exhibit 10.18 to the 1996 Form 10-K).
10.19 Deed of Charge executed by MBL in favor of BOA (Exhibit
10.19 to the 1996 Form 10-K).
10.20 Debenture executed by MDII and MDC in favor of BASFB
(Exhibit 10.20 to the 1996 Form 10-K).
21* Subsidiaries
24* Powers of Attorney
* Filed with this Report
(b) Exhibits required by Item 601 of Regulation S-K.
See Item 14(a)(3) above.
(c) Financial Statement Schedule.
See Item 14(a)(2) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized:
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By: /s/ C. Robert Cusick
--------------------------------
C. Robert Cusick, Vice Chairman,
Chief Executive Officer,
President and Director
DATE: March 6, 1998
-------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on March 6,
1998.
Signature Title
--------- -----
/s/ C. Robert Cusick Vice Chairman, CEO/President and
- ------------------------------------- Director
C. Robert Cusick
* F. Michael P. Warren, Q.C. Chairman of the Board of Directors
- -------------------------------------
F. Michael P. Warren, Q.C.
* J. Trevor Eyton, O. C. Director
- -------------------------------------
J. Trevor Eyton, O. C.
* Thomas L. Gavan, M.D. Director
- -------------------------------------
Thomas L. Gavan, M.D.
* Norbert Gilmore, M.D. Director
- -------------------------------------
Norbert Gilmore, M.D.
* Jay A. Lefton, Esq. Director
- -------------------------------------
Jay A. Lefton, Esq.
*Hartland M. MacDougall, O.C. Director
- -------------------------------------
Hartland M. MacDougall, O.C.
* Stanley E. Read, M.D. Director
- -------------------------------------
Stanley E. Read, M.D.
*Victor A. Rice Director
- -------------------------------------
Victor A. Rice
Vice President, Chief
*By: /s/ Steven C. Ramsey Financial Officer and
- -------------------------------------
Steven C. Ramsey, as Authorized Representative in
Attorney-in-Fact the United States
INTERNATIONAL MUREX TECHNOLOGIES CORPORATION
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Page
----
-- Independent Auditors' Consent and Report on Schedules.............45
II. Valuation and Qualifying Accounts.................................46
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
Board of Directors and Shareholders
International Murex Technologies Corporation:
We consent to the incorporation by reference in Registration
Statements No. 33-40726 and No. 333-44629 of International Murex
Technologies Corporation on Form S-8 of our report dated February 13,
1998 appearing in the Annual Report on Form 10-K of International
Murex Technologies Corporation for the year ended December 31, 1997.
Our audits of the consolidated financial statements referred to in our
aforementioned report also included the financial statement schedule
of International Murex Technologies Corporation, listed in Item 14.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 10, 1998
<PAGE>
INTERNATIONAL MUREX TECHNOLOGIES CORPORATION
Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1997, 1996, and 1995
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
------------------------------- ------------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND TRANSLATION TRANSLATION END OF
DESCRIPTION OF PERIOD EXPENSES ADJUSTMENT ADJUSTMENT WRITE-OFF PERIOD
----------- --------- -------- ---------- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for
Doubtful Accounts $ 3,174,000 $ 171,000 $ (249,000) $ (157,000) $ 2,939,000
Inventory Reserve 5,490,000 439,000 (157,000) (1,012,000) 4,759,000
Year ended December 31, 1996:
Allowance for
Doubtful Accounts 3,410,000 257,000 $ 282,000 (775,000) 3,174,000
Inventory Reserve 3,954,000 3,669,000 297,000 (2,430,000) 5,490,000
Year ended
December 31, 1995:
Allowances for
Doubtful Accounts 2,097,000 1,682,000 124,000 (493,000) 3,410,000
Inventory Reserve 2,581,000 1,424,000 124,000 (175,000) 3,954,000
</TABLE>
<PAGE>
INDEX OF EXHIBITS
The exhibits listed below are filed with this Report.
Exhibit
Number Document
------ --------
10.3.3* Employment Agreement dated August 1, 1997 between IMTC
and F. Michael P. Warren
10.3.4* Employment Agreement dated August 1, 1997 between Murex
Biotech Limited and F. Michael P. Warren
10.3.5* Employment Agreement dated August 1, 1997 between Murex
Diagnostics Corporation and F. Michael P. Warren
10.4.1.* Employment Agreement dated August 1, 1997 between IMTC
and C. Robert Cusick
10.4.2* Amendment to Employment Agreement dated November 6, 1997
between IMTC and C. Robert Cusick
10.9.1* Amendment to Employment Agreement dated November 6, 1997
between IMTC and Steven C. Ramsey
10.14.1* First Amendment to Credit Agreement dated December 31,
1997 among IMTC, MDII, MDC, Holdings U.K., MDI and MBL as
the borrowers; and BOA and BAFSB, et.al., as the lenders.
21 Subsidiaries
24 Powers of Attorney
THIS AGREEMENT is made 1st day of August, 1997 ("the
Effective Date") by and between INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION, incorporated under the laws of the Province of
British Columbia (the "Company"), and F MICHAEL P WARREN
("Executive").
WHEREAS, the Company and Executive previously entered into an
Employment Agreement dated January 1, 1992; and
WHEREAS, the term of the employment relationship created by such
Employment Agreement has not expired; and
WHEREAS, the Company and Executive desire to amend and restate
the terms and conditions of their employment relationship as it
relates to the period subsequent to 1 August, 1997.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the Company and the Executive agree
as follows:
1. Employment
----------
The Company hereby employs Executive, and Executive
accepts such employment and agrees to perform services for
the Company, for the period and upon the other terms and
conditions set forth in this Agreement.
2. Term
----
The initial term of Executive's employment hereunder shall
be for a period of three (3) years, commencing as of 1
August 1997 (the "Commencement Date") subject to earlier
termination as hereinafter specified in Section 8. At
each anniversary date of the Commencement Date (each a
"Renewal Date"), the then remaining term of this Agreement
shall be extended for an additional one year period in
addition to the then remaining term unless either party
hereto shall have provided written notice to the other
party of such non-renewal of this Agreement on or within
three (3) months before such Renewal Date. In the event
that either party shall provide the other party with
written notice of non-renewal of this Agreement, this
Agreement shall not be extended as of any subsequent
Renewal Date but shall remain effective in accordance with
its terms (subject to termination in accordance with
Section 8 hereof) until the end of the then current term
of this Agreement. A non-renewal of this Agreement in
accordance with this Section 2 shall not constitute a
termination of this Agreement for the purpose of Sections
5 or 8.
3. Position and Duties
-------------------
3.1 Service with the Company. During the Term of this
Agreement, Executive shall serve in such position as
Executive and the Board of Directors shall from time to
time agree. In such position, Executive agrees to perform
such executive employment duties consistent with such
position as the Board of Directors of the Company shall
assign to him from time to time. Executive also agrees to
serve, during the Term hereof, as requested by the Board,
and without any additional compensation, as a Director of
the Company and as an executive officer and/or director of
any corporations affiliated with the Company. The
compensation payable to Executive herein shall be paid by
the Company or by a subsidiary of the Company as
designated by Executive.
3.2 Performance of Duties. Executive agrees to serve the
Company faithfully and to the best of his ability and to
devote the time, attention and efforts necessary to
advance the business and affairs of the Company during the
Term of this Agreement. It is understood and agreed that
Executive may pursue personal investments requiring time
commitments that do not conflict with his obligations to
the Company, including those in the preceding sentence.
Executive hereby confirms that he is under no contractual
commitments inconsistent with his obligations set forth in
this Agreement, and that during the Term of this
Agreement, he shall not render or perform services, or
enter into any contract to do so, for any other
corporation, firm, entity or person which are inconsistent
with the provisions of this Agreement.
4. Compensation
------------
4.1 Base Salary
-----------
As compensation for all services to be rendered by
Executive under this Agreement, the Company shall pay to
Executive an initial base annual salary (the "Base
Salary") of US$11,912 which salary shall be paid in semi-
monthly instalments in accordance with the Company's
normal payroll procedures and policies. The base salary
shall be increased on January 1, 1998 and on each January
1 thereafter by the percentage equal to the percentage
increase in the Consumer Price Index maintained by the
United States Bureau of Labor Statistics for the Atlanta,
Georgia metropolitan area or an equivalent index (the
"Index") as of January 1 of such year over the Index for
the immediately preceding January 1. Should the Index be
modified or discontinued, appropriate adjustment shall be
made to reflect such modification or to refer to a similar
index. Additionally, Executive's Base Salary shall be
reviewed annually and may be increased by an amount to be
determined by the Compensation/Option Committee (the
"Committee") on the basis of Executive's performance.
4.2 Incentive Compensation
----------------------
In addition to the Base Salary described in Section 4.1,
Executive shall be eligible to receive incentive
compensation pursuant to the Senior Management Incentive
Plan as approved by the Committee or such other plans as
may from time to time be available.
4.3 Deferral of Compensation
------------------------
Executive shall be entitled to elect to defer the receipt
of up to seventy-five percent (75%) of his Base Salary and
Incentive Compensation for each calendar year during which
this Agreement is in effect. Executive shall make the
election to defer his compensation for a calendar year by
giving written notice to the Company of his desire to do
so in writing no later than December 31 of the immediately
preceding calendar year. In the event that Executive
elects to defer the payment of any compensation due
hereunder in the manner contemplated by this Section 4.3,
the terms and conditions set forth in Exhibit A hereto
with respect to the circumstances under which Executive
shall be entitled to the payment of the deferred
compensation as well as the interest earned thereon and
the timing and method of those payments shall be
applicable. Also in such event, each of the periodic
payments of Executive's Base Salary for any year in which
Executive has elected to defer receipt of a portion of his
Base Salary shall be reduced by the percentage amount of
his total Base Salary which he has elected to defer.
4.4 Participation in Benefit Plans
------------------------------
Executive shall also be entitled to the extent that his
position, title, tenure, salary, age, health and other
qualifications make him eligible, to participate in all
employee benefit plans or programs (including
medical/dental and life insurance, retirement pension,
stock option incentives, vacation time, sick leave and
holidays) of the Company currently in existence on the
date hereof or as may hereafter be instituted from time to
time. Executive's participation in any such plan or
program shall be subject to the provisions, rules and
regulations applicable thereto.
4.5 Expenses
--------
In accordance with the Company's policies established from
time to time, the Company shall pay or reimburse Executive
for all reasonable and necessary out-of-pocket expenses
incurred by him in the performance of his duties under
this Agreement, subject to the timely presentment of
appropriate vouchers and receipts.
4.6 Vacation
--------
Executive will be entitled to the highest number of
vacation days with full pay during each twelve months in
which this Agreement is in effect as are available to any
other key United States corporate executive of the
Company, without any reduction based upon length of
service to the Company.
4.7 Double Tax Liability
--------------------
In the event that in any year during the term of this
Agreement Executive is required to pay income taxes on any
portion of his income for that year both to Canada and to
the United Kingdom, the Company shall pay to Executive the
amount which, after taking into account the taxes required
to be paid by Executive as a result of Executive's receipt
of such payment from the Company, shall cause Executive's
after-tax return on his income to equal the amount which
would have been available to Executive had no United
Kingdom taxes been due with respect to such income. The
amounts due from the Company pursuant to the immediately
preceding sentence shall be determined by Executive's tax
return preparer, shall take into account any foreign tax
credits or other credits and deductions allowed against
his Canadian tax liability, and shall be paid to Executive
no later than fifteen days following the date on which
Executive files the first tax return in which the income
subject to taxation in both Canada and the United Kingdom
is reported in any year, or within fifteen days following
the date on which the relevant taxing authority determines
that Executive's income is subject to taxation both in
Canada and in the United Kingdom, as the case may be.
4.8 Tax and Estate Planning
-----------------------
The Company agrees to reimburse Executive for the cost of
financial, tax and estate planning for each 365 day period
in which this Agreement is in effect in amount not to
exceed US$3,000 (net of any tax required to be paid by
Executive on such reimbursement) for each 365 day period.
In the event that Executive is required to pay any tax on
such reimbursement, the amount to be reimbursed to
Executive shall be grossed up by such amount as shall
ensure that Executive receives the same amount as he would
have received had no such tax been payable.
4.9 Additional Benefits
-------------------
During the term of this Agreement, Executive shall be
entitled to participate in all present and future employee
benefit plans and all other compensation and benefit
plans, programs and structures as may from time to time be
made available by the Company to all other key corporate
executives of the Company, and on terms and conditions no
less favourable than those generally available to other
such employees. In the event that the Company elects to
obtain key man life insurance insuring Executive,
Executive shall make himself available for the necessary
physical examinations and shall co-operate in all other
respects with the Company's efforts to obtain such
insurance.
5. Compensation upon Termination
-----------------------------
(a) In the event this Agreement is terminated pursuant
to sub-section 8.1(a) hereof, in addition to any
benefits to which Executive may then or following
the termination of his employment be entitled under
any other applicable policy or plan of the Company
then in effect (including basic life insurance
which coverage equals two times annual salary, and
survivor benefits which provide Accidental Death
and Dismemberment for each employee at two times
the annual salary), the Company shall pay to
Executive's estate his Base Salary, incentive
compensation and benefits due through the effective
date of termination. In the event that such
termination occurs on any date other than the last
day of the fiscal year, the incentive compensation
shall be based upon the performance goals achieved
at the end of the fiscal year, but shall be
prorated based upon the number of days which have
elapsed in the fiscal year through the date of
termination. Payment of this incentive
compensation or release of any stock representing
incentive compensation due under this Section 5(a)
shall be made no later than 120 days following the
end of the fiscal year with respect to which it is
being paid. Payment of all other amounts under
this Section 5(a) shall be made not later than the
30th day following the effective date of
termination. Executive's estate shall be entitled
to receive an amount equal to twenty-four (24)
times his then current monthly Base Salary.
(b) In the event this Agreement is terminated pursuant
to Sub-section 8.1(b)(i) hereof, Executive or his
representative shall be entitled to receive an
amount equal to twenty-four (24) times his then
current monthly Base Salary, less any disability
insurance benefits payable to Executive during such
twenty-four month period from disability policies
provided by the Company.
(c) In the event this Agreement is terminated pursuant
to Sub-section 8.1(b)(ii) or (iii) hereof,
Executive shall not be entitled to any compensation
other than his then current Base Salary which has
accrued through his date of termination, subject to
the Company's right of offset based upon acts of
Executive which gave rise to the termination.
(d) In the event this Agreement is terminated pursuant
to Sub-section 8.1(c) hereof, Executive shall be
entitled to a severance allowance equal to the
greater of (i) his Base Salary for all months
remaining in his then current term, or (ii) his
then current monthly Base Salary for twenty-four
(24) months.
(e) Subject to Section 5(a) payments or the release of
stock representing compensation to Executive
pursuant to this Section 5 shall be made in either
a lump sum payment or, at the sole discretion of
the Company in four (4) equal payments within six
(6) months of termination of this Agreement.
(f) In the event that Executive is terminated pursuant
to Subsections 8.1(a), 8.1(b)(i) or 8.1(c) hereof,
the expiration dates of Executive's options
currently outstanding pursuant to any of the
Company's stock option plans will be extended
twenty-four (24) months from the date of such
termination.
6. Confidential Information
------------------------
Except as permitted or directed by the Company's Board of
Directors, Executive shall not during the Term of this
Agreement or at any time thereafter divulge, furnish or
make accessible to anyone for use in any way (other than
in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the
Company (for the purposes of Sections 6 through 8 hereof,
the term "Company" shall be deemed to include any
subsidiary or affiliate of the Company) which Executive
has acquired or become acquainted with or will acquire or
become acquainted with prior to the termination of the
period of his employment by the Company, whether developed
by himself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae,
plans, devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of
the business of the Company, and confidential customer or
supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other
confidential or secret aspects of the business of the
Company. Executive acknowledges that the above described
knowledge or information constitutes a unique and valuable
asset of the Company acquired at great time and expense by
the Company and its predecessors, and that any disclosure
or other use of such knowledge or information other than
for the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. Both during
and after the Term of this Agreement, Executive shall
refrain from any acts or omissions that would reduce the
value of the use of such knowledge or information to the
Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information
which is now published or which subsequently becomes
generally publicly known, other than as a direct or
indirect result of the breach of this Agreement by
Executive.
7. Non-Competition, Solicitation of Customers, Solicitation
--------------------------------------------------------
of Employees
------------
7.1 Non-Competition
---------------
(a) Executive agrees that, during the period of his
employment hereunder and for a period of one (1)
year following the termination of such employment,
he shall not directly engage in competition with
the Company within the "Territory" (as hereinafter
defined) in any management capacity in any phase of
the Company's business of developing,
manufacturing, distributing, marketing, leasing or
selling any of the products which the Company is in
the business of developing, manufacturing,
distributing, marketing, leasing to others or
selling (the "Competitive Areas") during the Term
of this Agreement or which the Company has
definitive plans to develop, manufacture or market.
(b) The "Territory" shall be that area throughout the
world in which the Company presently markets its
products. This Agreement shall be deemed
automatically amended without the need of further
action by any party to add to any new countries or
parts thereof where after the date hereof and prior
to the termination of Executive's employment the
Company begins to market it products and to delete
any countries after no Company products have been
sold there for a period of six months.
(c) The restrictions in this Section 7 shall not apply
with respect to (i) a passive investment by
Executive of less than 5% of the outstanding shares
of capital stock of any corporation, or (ii)
employment by Executive with an entity in a
management capacity in an area of business which is
not, directly or indirectly, a Competitive Area.
7.2 Agreement Not to Solicit Customers. Executive agrees that
during his employment by the Company hereunder and for the
two (2) year period following the termination of such
employment, he shall not, without the prior written
consent of the Company, within the Territory, either
directly or indirectly, on his own behalf or in the
service or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate,
to any competing business any person or entity whose
account with the Company was sold or serviced by or under
the supervision of Executive during the year preceding the
termination of such employment.
7.3 Agreement Not to Solicit Employees. Executive agrees that
during his employment by the Company hereunder and for the
two (2) year period following the termination of such
employment, he shall not, either directly or indirectly,
on his own behalf or in the service or on behalf of
others, solicit, divert, or attempt to solicit or divert
any person then employed by the Company.
8. Termination
-----------
8.1 Grounds of Termination
----------------------
This Agreement shall terminate prior to the expiration of
the Initial Term set forth in Section 2 or any extension
thereof in the event that at any time during such Initial
Term or any extension thereof:
(a) Executive shall die; or
(b) The Board of Directors of the Company shall
determine that:
(i) Executive has become disabled; or
(ii) Executive has breached this Agreement in any
material respect, which breach is not cured
by Executive or is not capable of being
cured (as determined in the sole discretion
of the Company's Board of Directors) by
Executive within thirty (30) days after
written notice of such breach is delivered
to Executive; or
(iii) in its sole discretion Cause exists.
"Cause" means (A) conduct amounting to
fraud, embezzlement or misappropriation as
against the Company, (B) the wilful and
knowing material breach of any fiduciary
duty owed to the Company as an officer of
the Company other than done at the direction
of the Board of Directors, (C) having been
convicted of a criminal offence which may
have a material adverse effect on the
Company or the ability of Executive to carry
out his duties of employment, or (D) the
knowing failure of Executive to follow
specific directives of the Board of
Directors of the Company consistent with his
duties. If the Board of Directors
terminates this Agreement pursuant to this
Section 8.01(b)(iii), Executive will be
provided ninety (90) days written notice.
(c) The Board of Directors of the Company shall
determine, in its sole discretion, that the
termination of this Agreement is in the best
interest of the Company, and in which event
Executive shall have no duty to mitigate his
damages. If the Board of Directors terminates this
Agreement pursuant to this Section 8.1(c) Executive
will be provided ninety (90) days written notice.
Notwithstanding any termination of this Agreement,
Executive, in consideration of his employment hereunder to
the date of such termination, shall remain bound by the
provisions of this Agreement which specifically relate to
periods, activities or obligations upon or subsequent to
the termination of Executive's employment.
8.2 "Disability" Defined
--------------------
The Board of Directors may determine that Executive has
become disabled, for the purpose of this Agreement, in the
event that Executive shall fail, because of illness or
other physical or mental incapacity, to render services of
the character contemplated by this Agreement for an
aggregate of more than twelve (12) weeks during any twelve
(12) month period.
8.3 Surrender of Records and Property
---------------------------------
Upon termination of his employment with the Company,
Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters,
memoranda, notes, notebooks, reports, data tables,
calculations or copies thereof, which are the property of
the Company and which relate in any way to the business,
products, practices or techniques of the Company, and all
other property, trade secrets and confidential information
of the Company, including, but not limited to, all
documents which in whole or in part contain any trade
secrets or confidential information of the Company, which
in any of these cases are in his possession or under this
control.
9. Assignment and Enurement
------------------------
This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective
heirs, successors, administrators, and permitted assigns.
The Company may, without the consent of Executive, assign
its rights and obligations under this Agreement to any
corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which
the Company may sell or transfer all or substantially all
of its assets or of which 50% or more of the equity
investment and of the voting control is owned, directly or
indirectly, by, or is under common ownership with, the
Company; provided, however, that if the assignee was not
previously part of a consolidated group with the Company,
Executive will receive payments and benefits as outlined
in Exhibit B attached hereto and incorporated herein.
10. Injunctive Relief
-----------------
Executive agrees that it would be difficult to compensate
the Company fully for damages for any violation of the
provisions of this Agreement, including without limitation
the provisions of Sections 6, 7 and 8.3. Accordingly,
Executive specifically agrees that the Company shall be
entitled to temporary and permanent injunctive relief to
enforce the provisions of this Agreement. This provision
with respect to injunctive relief shall not however,
diminish the right of the Company to claim and recover
damages in addition to injunctive relief.
11. Miscellaneous
-------------
11.1 Governing Law
-------------
This Agreement is made under and shall be governed by and
construed in accordance with the laws of the Province of
Ontario subject to any principles of conflict of laws.
11.2 Prior Agreements
----------------
This Agreement contains the entire agreement of the
parties relating to the subject matter hereof and
supersedes all prior agreements and understandings with
respect to such subject matter, and the parties hereto
have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are
not set forth herein.
11.3 Withholding Taxes
-----------------
The Company may withhold from any benefits payable under
this Agreement all federal, state, city and other taxes as
shall be required pursuant to any law or governmental
regulation or ruling.
11.4 Amendments
----------
No amendment or modification of this Agreement shall be
deemed effective unless made in writing signed by the
party against whom enforcement of the waiver or estoppel
is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall
operate only as the specific term or condition for the
future or as to any act other than specifically waived.
11.5 Notices
-------
Any notice, request, demand or other document to be given
hereunder shall be in writing, and shall be delivered
personally or sent by registered, certified or express
mail or facsimile followed by mail as follows:
If to the Company:
Board of Directors
650 Woodlawn Road West
Guelph, Ontario
Canada
N1K 1B8
If to Executive:
Flat 3
35-37 Grosvenor Square
London W1X 9AE
United Kingdom
or to such other address as either party hereto may
hereinafter duly give to the other.
11.6 Severability
------------
To the extent any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full
force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent
of, or business activities covered by any provision of
this Agreement be in excess of that which is valid or
enforceable under applicable law, then such provision
shall be construed to cover only that duration, extent or
activities which may be validly and enforceably be
covered. Executive acknowledges the uncertainty of the
law in this respect and expressly stipulates that this
Agreement be given the construction which renders its
provisions valid and enforceable to the maximum extent
(not exceeding its express terms) possible under
applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year set forth above.
------------------------------
F Michael P Warren
INTERNATIONAL MUREX
TECHNOLOGIES CORPORATION
By:
--------------------------------
Victor A Rice, on behalf of the
Compensation Committee
and the Board of Directors
EXHIBIT A
---------
DEFERRED COMPENSATION PLAN
--------------------------
1. At the time the Executive elects to defer compensation
pursuant to Section 4.3 of the Employment Agreement, the
Executive shall also elect the percentage of such
compensation to be credited from the date of deferral to
the date it is paid to the Executive with either (a)
simple interest at a rate per annum equal to the average
of the rates then being earned by the Company on deposits
with a term of ninety days or less, adjusted on the first
day of each calendar quarter or (b) the same rate of
return experienced by the common stock of the Company.
The portion of the compensation deferred by the Executive
to which the Executive elects to have the Company common
stock rate of return apply shall be hypothetically
invested in shares of the Company's common stock based on
the closing price of the Company's common stock on the
Nasdaq National Market System, or such other exchange that
the Company's common stock may be listed at the time, on
the business day prior to the date on which the
compensation would otherwise be paid. The number of
shares of the Company's common stock in which the
Executive has hypothetically invested shall be adjusted to
reflect stock splits, stock dividends and other capital
changes affecting the outstanding common stock of the
Company in the same manner as an equivalent number of
actual shares of the Company's common stock are adjusted.
In addition, all cash distributions and the fair market
value (as determined in good faith by the Company) of any
property distributions with respect to shares of common
stock of the Company shall be reinvested in the common
stock of the Company based on the closing price of the
common stock as reported on the Nasdaq National Market
System, or such other exchange that the Company's common
stock may be listed at the time, on the business day prior
to the distribution. The portion of the Executive's
compensation deferred hereunder and credited with simple
interest, together with such simple interest, shall be
referred to herein as "Deferred Compensation". The
portion of Executive's compensation deferred hereunder and
credited with the rate of return of the common stock of
the Company shall be reflected in hypothetical shares of
the Company's common stock with each such share being
referred to herein as a "Stock Credit". On December 31st
of each year during which any Deferred Compensation or
Stock Credits remain unpaid, the Company shall provide the
Executive with a statement setting forth the amount of his
unpaid Deferred Compensation and the number of outstanding
Stock Credits.
2. The Deferred Compensation shall be paid to Executive in a
lump sum following the termination of his employment with
the Company for any reason on the 30th day following the
date of termination. The number of Stock Credits credited
to the Executive shall be paid to the Executive on the
30th date following the date of his termination, by the
release of common stock to the Executive."
3. Notwithstanding the foregoing, in the event of the
occurrence of an "unforeseeable emergency," as hereinafter
defined, Executive shall be entitled to a payment from the
Deferred Compensation (or release of common stock
representing Stock Credits) prior to the date set forth in
paragraph 2 of this Exhibit A of that amount reasonably
required to satisfy the emergency need. As used herein,
"unforeseeable emergency" shall be limited to (i) severe
financial hardship to Executive resulting from a sudden
and unexpected illness or accident of Executive or of a
dependent of Executive, as dependent is defined in Section
152 of the Internal Revenue Code or any successor
provision thereto, (ii) loss of Executive's property due
to casualty, or (iii) other similar extraordinary and
unforeseeable circumstances arising as a result of events
beyond the control of Executive. The circumstances that
will constitute an unforeseeable emergency will depend
upon the facts of each case, but, in any case, a payment
(or release) of all or any portion of the Deferred
Compensation in the event of an unforeseeable emergency
may not be made to the extent that such hardship is or may
be relieved;
(i) Through reimbursement or compensation by
insurance or otherwise,
(ii) By liquidation of Executive's assets, to the
extent the liquidation of such assets would not itself
cause severe financial hardship, or
(iii) By cessation of the deferral of the payment
of the Deferred Compensation pursuant to paragraph 2,
above.
4. The Company's obligation to pay the Deferred Compensation
or release of common stock representing Stock Credits
constitutes a mere promise by the Company to make these
payments at the times specified herein. Accordingly,
Executive shall have the status of a general unsecured
creditor with respect to the Deferred Compensation.
Executive's rights to the payment of Deferred Compensation
or the release of common stock representing Stock Credits
shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of
Executive or his estate or any beneficiary of either
Executive or his estate.
THIS AGREEMENT is made the 1st day of August, 1997 (the
"Effective Date") by and between MUREX BIOTECH LIMITED a company
incorporated in England and Wales (the "Company") and F MICHAEL P
WARREN (the "Executive").
WHEREAS, the Company and Executive previously entered into an
Employment Agreement dated January 1, 1992; and
WHEREAS, the term of the employment relationship created by such
Employment Agreement has not expired; and
WHEREAS, the Company and Executive desire to amend and restate
the terms and conditions of their employment relationship as it
relates to the period subsequent to 1 August, 1997.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the Company and Executive agree as
follows:-
1. Employment
----------
The Company hereby employs Executive, and Executive
accepts such employment and agrees to perform services for
the Company, for the period and upon the other terms and
conditions set forth in this Agreement.
2. Term
----
The initial term of Executive's employment hereunder shall
be for a period of three (3) years, commencing as of 1
August 1997 (the "Commencement Date") subject to earlier
termination as hereinafter specified in Section 9. At
each anniversary date of the Commencement Date (each a
"Renewal Date"), the then remaining term of this Agreement
shall be extended for an additional one year period in
addition to the then remaining term unless either party
hereto shall have provided written notice to the other
party of such non-renewal of this Agreement on or within
three (3) months before such Renewal Date. In the event
that either party shall provide the other party with
written notice of non-renewal of this Agreement, this
Agreement shall not be extended as of any subsequent
Renewal Date but shall remain effective in accordance with
its terms (subject to termination in accordance with
Section 9 hereof) until the end of the then current term
of this Agreement. A non-renewal of this Agreement in
accordance with this Section 2 shall not constitute a
termination of this Agreement for the purpose of Sections
6 or 9.
3. Position and Duties
-------------------
3.1 Service with the Company
------------------------
During the term of this Agreement, Executive shall serve
in such position as Executive and the Board of Directors
shall from time to time agree. In such position,
Executive agrees to perform such executive employment
duties consistent with such positions as the Board of
Directors of the Company shall assign to him from time to
time. Executive also agrees to serve, during the Term
hereof, as requested by the Board, and without any
additional compensation, as a Director of the Company and
as an executive officer and/or director of any
corporations affiliated with the Company. The
compensation payable to Executive herein shall be paid by
the Company or by a subsidiary, holding company or
subsidiary of such holding company of the Company as
designated by Executive.
3.2 Performance of Duties
---------------------
3.2.1 Executive agrees to serve the Company faithfully and to
the best of his ability and to devote the time, attention
and efforts necessary to advance the business and affairs
of the Company during the Term of this Agreement. It is
understood and agreed that Executive may pursue personal
investments requiring time commitments that do not
conflict with his obligations to the Company, including
those in the preceding sentence. Executive hereby
confirms that he is under no contractual commitments
inconsistent with his obligations set forth in this
Agreement, and that during the Term of this Agreement, he
shall not render or perform services, or enter into any
contract to do so, for any other corporation, firm, entity
or person which are inconsistent with the provisions of
this Agreement.
3.2.2 All duties performed by Executive hereunder (other than
incidental duties) shall be performed at such locations in
the United Kingdom as the Board of Directors of the
Company may from time to time direct.
4. Compensation
------------
4.1 Base Salary
-----------
As compensation for all services to be rendered by
Executive under this Agreement, the Company shall pay to
Executive an initial base annual salary (the "Base
Salary") of US$107,206 which salary shall be paid in
semi-monthly instalments in accordance with the Company's
normal payroll procedures and policies. The base salary
shall be increased on January 1, 1998 and on each January
1 thereafter by the percentage equal to the percentage
increase in the Consumer Price Index maintained by the
United States Bureau of Labour Statistics for the Atlanta,
Georgia metropolitan area or an equivalent index (the
"Index") as of January 1 of such year over the Index for
the immediately preceding January 1. Should the Index be
modified or discontinued, appropriate adjustment shall be
made to reflect such modification or to refer to a similar
index. Additionally, Executive's Base Salary shall be
reviewed annually and may be increased by an amount to be
determined by the Compensation/Option Committee (the
"Committee") on the basis of Executive's performance.
4.2 Incentive Compensation
----------------------
In addition to the Base Salary described in Section 4.1,
Executive shall be eligible to receive incentive
compensation pursuant to the Senior Management Incentive
Plan as approved by the Committee or such other plans as
may from time to time be available.
4.3 Deferral of Compensation
------------------------
Executive shall be entitled to elect to defer the receipt
of up to seventy-five percent (75%) of his Base Salary and
Incentive Compensation for each calendar year during which
this Agreement is in effect. Executive shall make the
election to defer his compensation for a calendar year by
giving written notice to the Company of his desire to do
so in writing no later than December 31 of the immediately
preceding calendar year. In the event that Executive
elects to defer the payment of any compensation due
hereunder in the manner contemplated by this Section 4.3,
the terms and conditions set forth in Exhibit A hereto
with respect to the circumstances under which Executive
shall be entitled to the payment of the deferred
compensation as well as the interest earned thereon and
the timing and method of those payments shall be
applicable. Also in such event, each of the periodic
payments of Executive's Base Salary for any year in which
Executive has elected to defer receipt of a portion of his
Base Salary shall be reduced by the percentage amount of
his total Base Salary which he has elected to defer.
4.4 Participation in Benefit Plans
------------------------------
Executive shall also be entitled, to the extent that his
position, title, tenure, salary, and other qualifications
make him eligible, to participate in all employee benefit
plans or programs (including medical/dental and life
insurance, retirement pension, and stock option incentives
relating to stock in International Murex Technologies
Corporation) of the Company currently in existence on the
date hereof or as my hereafter be instituted from time to
time. Executives participation in any such plan or program
shall be subject to the provisions, rules and regulations
applicable thereto.
4.5 Expenses
--------
In accordance with the Company's policies established from
time to time, the Company shall pay or reimburse Executive
for all reasonable and necessary out-of-pocket expenses
incurred by him in the performance of his duties under
this Agreement, subject to the timely presentment of
appropriate vouchers and receipts.
4.6 Car Allowance
-------------
The Company shall provide Executive with a car or pay a
car allowance in amount recommended by the Executive
Committee and approved by the Committee.
4.7 Accommodation
-------------
During the term of this Agreement and whilst Executive
continues to reside in the United Kingdom the Company
shall provide accommodation for Executive in the United
Kingdom of a type commensurate with the status and needs
of Executive and the image of the Company and its
associates. The accommodation shall be provided on terms
to be recommended by the Executive Committee of the
Company and agreed in writing between the Committee and
Executive.
4.8 Club and Professional Dues
--------------------------
During the term of this Agreement, Executive will be
entitled to reimbursement of club/professional society
membership dues and monthly charges and an annual physical
examination by the physician of Executive's choice.
Amounts paid for club/professional society membership dues
and monthly charges shall not exceed US$5,000 annually.
In the event that Executive is required to pay any tax on
such reimbursement, the amount to be reimbursed to
Executive shall be grossed up by such amount as shall
ensure that Executive receives the same amount as he would
have received had not such tax been payable.
4.9 Double Tax Liability
--------------------
In the event that in any year during the term of this
Agreement Executive is required to pay income taxes on any
portion of his income for that year both to Canada and to
the United Kingdom, the Company shall pay to Executive the
amount which, after taking into account the taxes required
to be paid by Executive as a result of Executive's receipt
of such payment from the Company, shall cause Executive's
after-tax return on his income to equal the amount which
would have been available to Executive had no United
Kingdom taxes been due with respect to such income. The
amounts due from the Company pursuant to the immediately
preceding sentence shall be determined by Executive's tax
return preparer, shall take into account any foreign tax
credits or other credits and deductions allowed against
his Canadian tax liability, and shall be paid to Executive
no later than fifteen (15) days following the date on
which Executive files the first tax return in which the
income subject to taxation in both Canada and the United
Kingdom is reported in any year or within fifteen (15)
days following the date on which the relevant taxing
authority determines that Executive's income is subject to
taxation both in Canada and in the United Kingdom, as the
case may be.
4.10 Additional Benefits
-------------------
During the term of this Agreement, Executive shall be
entitled to participate in all present and future employee
benefit plans and all other compensation and benefit
plans, programs and structures as may from time to time be
made available by the Company to all other key corporate
executives of the Company, and on terms and conditions no
less favourable than those generally available to other
such employees. In the event that the Company elects to
obtain key man life insurance insuring Executive,
Executive shall make himself available for the necessary
physical examinations and shall cooperate in all other
respects with the Company's efforts to obtain such
insurance.
5. Sickness
--------
5.1 If Executive is absent because of sickness or injury he
shall report this fact forthwith to the Company and if
Executive is so prevented for seven or more consecutive
days he should provide a medical practitioners statement
on the eighth day and weekly thereafter so that the whole
period of absence is certified by such statement.
Immediately following his return to work after a period of
absence Executive shall complete a self certification form
available from the Company detailing the reason for his
absence.
5.2 If Executive shall be absent due to sickness or injury
duly certified in accordance with the provisions of
Section 5.1, he shall be paid his full compensation
(including incentive compensation) for up to twelve (12)
weeks absence in any period of twelve consecutive months
and thereafter such remuneration, if any, as the board of
directors of the Company shall determine from time to time
provided that such compensation shall be inclusive of any
Statutory Sick Pay to which Executive is entitled under
the provisions of the Social Security and Housing Benefits
Act 1982 and any social security sickness benefit or other
benefit recoverable by Executive (whether or not
recovered) may be deducted therefrom.
6. Compensation upon Termination
-----------------------------
6.1 In the event this Agreement is terminated pursuant to sub-
section 9.1(a) hereof, in addition to any benefits to
which Executive may then or following the termination of
his employment be entitled under any other applicable
policy or plan of the Company then the Company shall pay
to Executive's estate his Base Salary, incentive
compensation and benefits due through the effective date
of termination. In the event that such termination occurs
on any date other than the last day of the fiscal year,
the incentive compensation shall be based upon the
performance goals achieved at the end of the fiscal year,
but shall be prorated based upon the number of days which
have elapsed in the fiscal year through the date of
termination. Payment of this incentive compensation or
release of any stock representing incentive compensation
due under this Section 6.1 shall be made no later than 120
days following the end of the fiscal year with respect to
which it is being paid. Payment of all other amounts under
this Section 6.1 shall be made not later than the 30th day
following the effective date of termination. Executive's
estate shall be entitled to receive an amount equal to
twenty-four (24) times his then current monthly Base
Salary.
6.2 In the event this Agreement is terminated pursuant to sub-
section 9.1(b)(i) hereof, Executive or his representative
shall be entitled to receive an amount equal to twenty
four (24) times his then current monthly Base Salary, less
any disability insurance benefits payable to Executive
during such twenty-four month period from disability
policies provided by the Company.
6.3 In the event this Agreement is terminated pursuant to sub-
section 9.1(b)(ii) or (iii) hereof, Executive shall not be
entitled to any compensation other than his then current
Base Salary which has accrued through his date of
termination, subject to the Company's right of offset
based upon acts of Executive which gave rise to the
termination.
6.4 In the event that Executive is terminated pursuant to sub-
section 9.1(c) hereof, Executive shall be entitled to a
severance allowance equal to the greater of (i) his Base
Salary for all months remaining in his then current term,
or (ii) his then current monthly Base Salary for twenty
four (24) months.
6.5 Subject to Section 6.1, payments or the release of stock
representing compensation to Executive pursuant to this
Section 6 shall be made in either a lump sum payment or,
at the sole discretion of the Company in four (4) equal
payments within six (6) months of termination of this
Agreement.
6.6 In the event that Executive is terminated pursuant to sub-
sections 9.1(a), 9.1(b)(i) or 9.1(c) hereof, the
expiration dates of Executive's options currently
outstanding pursuant to any of the Company's stock option
plans will be extended twenty four (24) months from the
date of such termination or such lesser period as may be
permitted by law or under the terms of the relevant plan.
7. Confidential Information
------------------------
Except as permitted or directed by the Company's Board of
Directors, Executive shall not during the Term of this
Agreement or at any time thereafter divulge, furnish or
make accessible to anyone for use in any way (other than
in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the
Company (for the purposes of Sections 7 through 10 hereof,
the term "Company" shall be deemed to include any
subsidiary or affiliate of the Company) which Executive
has acquired or become acquainted with or will acquire or
become acquainted with prior to the termination of the
period of his employment by the Company, whether developed
by himself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans
devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of
the business of the Company, and confidential customer or
supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other
confidential or secret aspects of the business of the
Company. Executive acknowledges that the above described
knowledge or information constitutes a unique and valuable
asset of the Company acquired at great time and expense by
the Company and its predecessors, and that any disclosure
or other use of such knowledge or information other than
for the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. Both during
and after the Term of this Agreement, Executive shall
refrain from any acts or omissions that would reduce the
value of the use of such knowledge or information to the
Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information
which is now published or which subsequently becomes
generally publicly known, other than as a direct or
indirect result of the breach of this Agreement by
Executive.
8. Non-Competition, Solicitation of Customers, Solicitation
--------------------------------------------------------
of Employees
-------------
8.1 Non-Competition
---------------
(a) Executive agrees that, during the period of his
employment hereunder and for a period of one (1)
year following the termination of such employment,
he shall not directly engage in competition with
the Company within the "Territory" (as hereinafter
defined) in any management capacity in any phase of
the Company's business of developing,
manufacturing, distributing, marketing, leasing or
selling any of the products which the Company is in
the business of developing, manufacturing,
distributing, marketing, leasing to others or
selling (the "Competitive Areas") during the Term
of this Agreement or which the Company has
definitive plans to develop, manufacture or market.
(b) The "Territory" shall be that area throughout the
world in which the Company presently markets its
products. This Agreement shall be deemed
automatically amended without the need of further
action by any party to add any new countries or
parts thereof where after the date hereof and prior
to the termination of Executive's employment the
Company begins to market its products and to delete
any countries after no Company products have been
sold there for a period of six months.
(c) The restrictions in this Section 8 shall not apply
with respect to (i) a passive investment by
Executive of less than 5% of the outstanding shares
of capital stock of any corporation, or (ii)
employment by Executive with an entity in a
management capacity in an area of business which is
not, directly or indirectly, a Competitive Area.
8.2 Agreement not to Solicit Customers
----------------------------------
Executive agrees that during his employment by the Company
hereunder and for the two (2) year period following the
termination of such employment, he shall not, without the
prior written consent of the Company, within the
Territory, either directly or indirectly, on his own
behalf or in the service or on behalf of others, solicit,
divert or appropriate, or attempt to solicit, divert or
appropriate, to any competing business any person or
entity whose account with the Company was sold or serviced
by or under the supervision of Executive during the year
preceding the termination of such employment.
8.3 Agreement not to Solicit Employees
----------------------------------
Executive agrees that during his employment by the Company
hereunder and for the two (2) year period following the
termination of such employment, he shall not, either
directly or indirectly, on his own behalf or in the
service or on behalf of others, solicit, divert, or
attempt to solicit or divert any person then employed by
the Company.
9. Termination
-----------
9.1 Grounds for Termination
-----------------------
This Agreement shall terminate prior to the expiration of
the Initial Term set forth in Section 2 or any extension
thereof in the event that at any time during such Initial
Term or any extension thereof:
(a) Executive shall die; or
(b) The Board of Directors of the Company shall
determine that:
(i) Executive has become disabled; or
(ii) Executive has breached this Agreement in any
material respect, which breach is not cured
by Executive or is not capable of being
cured (as determined in the sole discretion
or the Company's Board of Directors) by
Executive within thirty (30) days after
written notice of such breach is delivered
to Executive; or
(iii) In its sole discretion cause exists.
"Cause" means (A) conduct amounting to
fraud, embezzlement or misappropriation as
against the Company, (B) the wilful and
knowing material breach of any fiduciary
duty owed to the Company as an officer of
the Company other than done at the direction
of the Board of Directors, (C) having been
convicted of a criminal offence which may
have a material adverse effect on the
Company or the ability of Executive to carry
out his duties of employment, or (D) the
knowing failure of Executive to follow
specific directives of the Board of
Directors of the Company consistent with his
duties. If the Board of Directors
terminates this Agreement pursuant to this
Section 9.1(b)(iii), Executive will be
provided ninety (90) days written notice.
(c) The Board of Directors of the Company shall
determine, in its sole discretion, that the
termination of this Agreement is in the best
interest of the Company, and in which event
Executive shall have no duty to mitigate his
damages. If the Board of Directors terminates this
Agreement pursuant to this Section 9.1(c),
Executive will be provided ninety (90) days written
notice.
(d) Notwithstanding any termination of this Agreement,
Executive, in consideration of his employment
hereunder to the date of such termination, shall
remain bound by the provisions of this Agreement
which specifically relate to periods, activities or
obligations upon or subsequent to the termination
of Executive's employment.
9.2 "Disability" Defined
--------------------
The Board of Directors may determine that Executive has
become disabled, for the purpose of this Agreement, in the
event that Executive shall fail, because of illness or
other physical or mental incapacity, to render services of
the character contemplated by this Agreement for an
aggregate of more than twelve (12) weeks during any twelve
(12) month period.
9.3 Surrender of Records and Property
---------------------------------
Upon termination of his employment with the Company,
Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters,
memoranda, notes, notebooks, reports, data, tables,
calculations or copies thereof, which are the property of
the Company and which relate in any way to the business,
products, practices or techniques of the Company, and all
other property, trade secrets and confidential information
of the Company, including, but not limited to, all
documents which in whole or in part contain any trade
secrets or confidential information of the Company, which
in any of these cases are in his possession or under this
control.
10. Assignment and Enurement
------------------------
This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective
heirs, successors, administrators, and permitted assigns.
The Company may, without the consent of Executive, assign
its rights and obligations under this Agreement to any
corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which
the Company may sell or transfer all or substantially all
of its assets or of which 50% or more of the equity
investment and of the voting control is owned, directly or
indirectly, by, or is under common ownership with, the
Company; provided, however, that if the assignee was not
previously part of a consolidated group with the Company,
Executive will receive payments and benefits as outlined
in Exhibit B attached hereto and incorporated herein.
11. Injunctive Relief
-----------------
Executive agrees that it would be difficult to compensate
the Company fully for damages for any violation of the
provisions of this Agreement, including without limitation
the provisions of Section 7, 8 and 9.3. Accordingly,
Executive specifically agrees that the Company shall be
entitled to temporary and permanent injunctive relief to
enforce the provisions of this Agreement. This provision
with respect to injunctive relief shall not, however,
diminish the right of the Company to claim and recover
damages in addition to injunctive relief.
12. Miscellaneous
-------------
12.1 Governing Law
-------------
This Agreement is made under and shall be governed by and
construed in accordance with the laws of the Province of
Ontario subject to any principles of conflict of laws.
12.2 Prior Agreements
----------------
This Agreement contains the entire agreement of the
parties relating to the subject matter hereof and
supersedes all prior agreements and understandings with
respect to such subject matter, and the parties hereto
have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are
not set forth herein.
12.3 Amendments
----------
No amendment or modification of this Agreement shall be
deemed effective unless made in writing signed by the
party against whom enforcement of the waiver or estoppel
is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall
operate only as to the specific term or condition for the
future or as to any act other than that that specifically
waived.
12.4 Notices
-------
Any notice, request, demand or other document to be given
hereunder shall be in writing, and shall be delivered
personally or sent by registered mail or facsimile
followed by mail as follows:
If to the Company:
Murex Biotech Limited
Central Road
Temple Hill
Dartford
Kent DA1 5LR
If to Executive:
Flat 3
35-37 Grosvenor Square
London W1X 9AE
or to such other address as either party hereto may
hereinafter duly give to the other.
12.5 Severability
------------
To the extent any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full
force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent
of, or business activities covered by any provision of
this Agreement be in excess of that which is valid or
enforceable under applicable law, then such provision
shall be construed to cover only that duration, extent or
activities which may validly and enforceably be covered.
Executive acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be
give the construction which renders its provisions valid
and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.
12.6 Withholding Taxes
-----------------
The Company may withhold from any benefits payable under
this Agreement all federal, state, city and other taxes as
shall be required pursuant to any law or governmental
regulation or ruling.
IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year set forth above.
SCHEDULE
--------
Statement of Terms of Employment
--------------------------------
1. Amplification of Terms of Employment
(a) Name of Employer: Murex Biotech Limited
(b) Address of Employer: Central Road, Temple Hill, Dartford,
Kent DA1 5LR
(c) Name of Executive: Frederic Michael Patrick Warren
(d) Address of Executive: Flat 3, 35-37 Grosvenor Square,
London W1X 9AE
(e) Date of Commencement of Employment with the Company:
January 1 1992
(f) Compensation: See Section 4
(g) Notice: See Section 9
(h) Job Title: See Section 3
2. In accordance with Section 1(3) of the Employment
Protection (Consolidation) Act 1978 the following terms of
the Executive's employment apply on the date of the
agreement to which this is a schedule:
(a) Hours of Work: there are no fixed hours of work provided
that Executive shall be required to devote not less than
25 hours per week to the performance of his duties under
the Agreement.
(b) Holidays: Executive is not entitled to any paid holidays
under the Agreement other than Bank Holidays
(c) Sickness or injury: see Section 5 of the Agreement
(d) Other benefits: see Section 4 of the Agreement
3. The following information is supplied pursuant to the
Employment Protection (Consolidation) Act 1978 (as may be
amended from time to time)
(a) Disciplinary Rules: there are no formal disciplinary
procedures applicable to this employment;
(b) Grievance Procedure: all grievances relating to the
employment under the agreement to which this is a schedule
should be reported to the board of directors of the
Company;
(c) A Contracting Out certificate is not in force in respect
of this employment.
Signed by )
VICTOR A RICE )
for and on behalf of )
MUREX BIOTECH )
LIMITED )
in the presence of:- )
Signed by F MICHAEL P )
WARREN in the presence )
of:- )
EXHIBIT A
---------
DEFERRED COMPENSATION PLAN
--------------------------
1. At the time the Executive elects to defer
compensation pursuant to Section 4.3 of the Employment Agreement,
the Executive shall also elect the percentage of such
compensation to be credited from the date of deferral to the date
it is paid to the Executive with either (a) simple interest at a
rate per annum equal to the average of the rates then being
earned by the Company on deposits with a term of ninety days or
less, adjusted on the first day of each calendar quarter or (b)
the same rate of return experienced by the common stock of the
Company. The portion of the compensation deferred by the
Executive to which the Executive elects to have the Company
common stock rate of return apply shall be hypothetically
invested in shares of the Company's common stock based on the
closing price of the Company's common stock on the Nasdaq
National Market System, or such other exchange that the Company's
common stock may be listed at the time, on the business day prior
to the date on which the compensation would otherwise be paid.
The number of shares of the Company's common stock in which the
Executive has hypothetically invested shall be adjusted to
reflect stock splits, stock dividends and other capital changes
affecting the outstanding common stock of the Company in the same
manner as an equivalent number of actual shares of the Company's
common stock are adjusted. In addition, all cash distributions
and the fair market value (as determined in good faith by the
Company) of any property distributions with respect to shares of
common stock of the Company shall be reinvested in the common
stock of the Company based on the closing price of the common
stock as reported on the Nasdaq National Market System, or such
other exchange that the Company's common stock may be listed at
the time, on the business day prior to the distribution. The
portion of the Executive's compensation deferred hereunder and
credited with simple interest, together with such simple
interest, shall be referred to herein as "Deferred Compensation".
The portion of Executive's compensation deferred hereunder and
credited with the rate of return of the common stock of the
Company shall be reflected in hypothetical shares of the
Company's common stock with each such share being referred to
herein as a "Stock Credit". On December 31st of each year during
which any Deferred Compensation or Stock Credits remain unpaid,
the Company shall provide the Executive with a statement setting
forth the amount of his unpaid Deferred Compensation and the
number of outstanding Stock Credits.
2. The Deferred Compensation shall be paid to
Executive in a lump sum following the termination of his
employment with the Company for any reason on the 30th day
following the date of termination. The number of Stock Credits
credited to the Executive shall be paid to the Executive on the
30th date following the date of his termination, by the release
of common stock to the Executive."
3. Notwithstanding the foregoing, in the event of the
occurrence of an "unforeseeable emergency," as hereinafter
defined, Executive shall be entitled to a payment from the
Deferred Compensation (or release of common stock representing
Stock Credits) prior to the date set forth in paragraph 2 of this
Exhibit A of that amount reasonably required to satisfy the
emergency need. As used herein, "unforeseeable emergency" shall
be limited to (i) severe financial hardship to Executive
resulting from a sudden and unexpected illness or accident of
Executive or of a dependent of Executive, as dependent is defined
in Section 152 of the Internal Revenue Code or any successor
provision thereto, (ii) loss of Executive's property due to
casualty, or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
Executive. The circumstances that will constitute an
unforeseeable emergency will depend upon the facts of each case,
but, in any case, a payment (or release) of all or any portion of
the Deferred Compensation in the event of an unforeseeable
emergency may not be made to the extent that such hardship is or
may be relieved;
(i) Through reimbursement or compensation by
insurance or otherwise,
(ii) By liquidation of Executive's assets, to the
extent the liquidation of such assets would not itself
cause severe financial hardship, or
(iii) By cessation of the deferral of the payment
of the Deferred Compensation pursuant to paragraph 2,
above.
4. The Company's obligation to pay the Deferred
Compensation or release of common stock representing Stock
Credits constitutes a mere promise by the Company to make these
payments at the times specified herein. Accordingly, Executive
shall have the status of a general unsecured creditor with
respect to the Deferred Compensation. Executive's rights to the
payment of Deferred Compensation or the release of common stock
representing Stock Credits shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of Executive
or his estate or any beneficiary of either Executive or his
estate.
THIS AGREEMENT is made the 1st day of August, 1997 (the
"Effective Date") by and between MUREX DIAGNOSTICS CORPORATION a
company incorporated under the laws of Barbados (the "Company")
and F MICHAEL P WARREN ("Executive")
WHEREAS, the Company and Executive previously entered into an
Employment Agreement dated January 1, 1992; and
WHEREAS, the term of the employment relationship created by such
Employment Agreement has not expired; and
WHEREAS, the Company and Executive desire to amend and restate
the terms and conditions of their employment relationship as it
relates to the period subsequent to 1 August, 1997.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the Company and Executive agree as
follows:-
1. Employment
----------
The Company hereby employs Executive, and Executive
accepts such employment and agrees to perform services for
the Company, for the period and upon the other terms and
conditions set forth in this Agreement.
2. Term
----
The initial term of Executive's employment hereunder shall
be for a period of three (3) years, commencing as of 1
August 1997 (the "Commencement Date") subject to earlier
termination as hereinafter specified in Section 8. At
each anniversary date of the Commencement Date (each a
"Renewal Date"), the then remaining term of this Agreement
shall be extended for an additional one year period in
addition to the then remaining term unless either party
hereto shall have provided written notice to the other
party of such non-renewal of this Agreement on or within
three (3) months before such Renewal Date. In the event
that either party shall provide the other party with
written notice of non-renewal of this Agreement, this
Agreement shall not be extended as of any subsequent
Renewal Date but shall remain effective in accordance with
its terms (subject to termination in accordance with
Section 8 hereof) until the end of the then current term
of this Agreement. A non-renewal of this Agreement in
accordance with this Section 2 shall not constitute a
termination of this Agreement for the purpose of Sections
5 or 8.
3. Position and Duties
-------------------
3.1 Service with the Company
------------------------
During the term of this Agreement, Executive shall serve
in such position as Executive and the Board of Directors
shall from time to time agree. In such position,
Executive agrees to perform such executive employment
duties consistent with such positions as the Board of
Directors of the Company shall assign to him from time to
time. Executive also agrees to serve, during the Term
hereof, as requested by the Board, and without any
additional compensation, as a Director of the Company and
as an executive officer and/or director of any
corporations affiliated with the Company. The
compensation payable to Executive herein shall be paid by
the Company or by a subsidiary, holding company or
subsidiary of such holding company of the Company as
designated by Executive.
3.2 Performance of Duties
---------------------
3.2.1 Executive agrees to serve the Company faithfully and to
the best of his ability and to devote the time, attention
and efforts necessary to advance the business and affairs
of the Company during the Term of this Agreement. It is
understood and agreed that Executive may pursue personal
investments requiring time commitments that do not
conflict with his obligations to the Company, including
those in the preceding sentence. Executive hereby
confirms that he is under no contractual commitments
inconsistent with his obligations set forth in this
Agreement, and that during the Term of this Agreement, he
shall not render or perform services, or enter into any
contract to do so, for any other corporation, firm, entity
or person which are inconsistent with the provisions of
this Agreement.
3.2.2 All duties performed by Executive under the terms of this
Agreement (other than incidental duties) shall be
performed at such locations outside the United Kingdom and
Canada as the Board of the Directors of the Company may
from time to time direct.
4. Compensation
------------
4.1 Base Salary
-----------
As compensation for all services to be rendered by
Executive under this Agreement, the Company shall pay to
Executive an initial base annual salary (the "Base
Salary") of US$119,118 which salary shall be paid in semi-
monthly instalments in accordance with the Company's
normal payroll procedures and policies. The base salary
shall be increased on January 1, 1998 and on each January
1 thereafter by the percentage equal to the percentage
increase in the Consumer Price Index maintained by the
United States Bureau of Labour Statistics for the Atlanta,
Georgia metropolitan area or an equivalent index (the
"Index") as of January 1 of such year over the Index for
the immediately preceding January 1. Should the Index be
modified or discontinued, appropriate adjustment shall be
made to reflect such modification or to refer to a similar
index. Additionally, Executive's Base Salary shall be
reviewed annually and may be increased by an amount to be
determined by the Compensation/Option Committee (the
"Committee") on the basis of Executive's performance.
4.2 Incentive Compensation
----------------------
In addition to the Base Salary described in Section 4.1,
Executive shall be eligible to receive incentive
compensation pursuant to the Senior Management Incentive
Plan as agreed by the Committee or such other plans as may
from time to time be available.
4.3 Deferral of Compensation
------------------------
Executive shall be entitled to elect to defer the receipt
of up to seventy-five percent (75%) of his Base Salary and
Incentive Compensation for each calendar year during which
this Agreement is in effect. Executive shall make the
election to defer his compensation for a calendar year by
giving written notice to the Company of his desire to do
so in writing no later than December 31 of the immediately
preceding calendar year. In the event that Executive
elects to defer the payment of any compensation due
hereunder in the manner contemplated by this Section 4.3,
the terms and conditions set forth in Exhibit A hereto
with respect to the circumstances under which Executive
shall be entitled to the payment of the deferred
compensation as well as the interest earned thereon and
the timing and method of those payments shall be
applicable. Also in such event, each of the periodic
payments of Executive's Base Salary for any year in which
Executive has elected to defer receipt of a portion of his
Base Salary shall be reduced by the percentage amount of
his total Base Salary which he has elected to defer.
4.4 Participation in Benefit Plans
------------------------------
Executive shall also be entitled, to the extent that his
position, title, tenure, salary, age, health and other
qualifications make him eligible, to participate in all
employee benefit plans or programs (including
medical/dental and life insurance, retirement pension, and
stock option incentives relating to stock in International
Murex Technologies Corporation) of the Company currently
in existence on the date hereof or as may hereafter be
instituted from time to time. Executives participation in
any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto.
4.5 Expenses
--------
In accordance with the Company's policies established from
time to time, the Company shall pay or reimburse Executive
for all reasonable and necessary out-of-pocket expenses
incurred by him in the performance of his duties under
this Agreement, subject to the timely presentment of
appropriate vouchers and receipts.
4.6 Double Tax Liability
--------------------
In the event that in any year during the term of this
Agreement Executive is required to pay income taxes on any
portion of his income for that year both to Canada and to
the United Kingdom, the Company shall pay to Executive the
amount which, after taking into account the taxes required
to be paid by Executive as a result of Executive's receipt
of such payment from the Company, shall cause Executive's
after-tax return on his income to equal the amount which
would have been available to Executive had no United
Kingdom taxes been due with respect to such income. The
amounts due from the Company pursuant to the immediately
preceding sentence shall be determined by Executive's tax
return preparer, shall take into account any foreign tax
credits or other credits and deductions allowed against
his Canadian tax liability, and shall be paid to Executive
no later than fifteen days following the date on which
Executive files the first tax return in which the income
subject to taxation in both Canada and the United Kingdom
is reported in any year, or within fifteen days following
the date on which the relevant taxing authority determines
that Executive's income is subject to taxation both in
Canada and in the United Kingdom, as the case may be.
4.7 Additional Benefits
-------------------
During the term of this Agreement, Executive shall be
entitled to participate in all present and future employee
benefit plans and all other compensation and benefit
plans, programs and structures as may from time to time be
made available by the Company to all other key corporate
executives of the Company, and on terms and conditions no
less favourable than those generally available to other
such employees. In the event that the Company elects to
obtain key man life insurance insuring Executive,
Executive shall make himself available for the necessary
physical examinations and shall cooperate in all other
respects with the Company's efforts to obtain such
insurance.
5. Compensation upon Termination
-----------------------------
(a) In the event this Agreement is terminated pursuant
to sub-section 8.1(a) hereof, in addition to any
benefits to which Executive may then or following
the termination of his employment be entitled under
any other applicable policy or plan of the Company
then in effect (including basic life insurance
which coverage equals two times annual salary, and
survivor benefits which provide Accidental Death
and Dismemberment for each employee at two times
the annual salary), the Company shall pay to
Executive's estate his Base Salary, incentive
compensation and benefits due through the effective
date of termination. In the event that such
termination occurs on any date other than the last
day of the fiscal year, the incentive compensation
shall be based upon the performance goals achieved
at the end of the fiscal year, but shall be
prorated based upon the number of days which have
elapsed in the fiscal year through the date of
termination. Payment of this incentive compensation
or release of any stock representing incentive
compensation due under this Section 5(a) shall be
made no later than 120 days following the end of
the fiscal year with respect to which it is being
paid. Payment of all other amounts under this
Section 5(a) shall be made not later than the 30th
day following the effective date of termination.
Executive's estate shall be entitled to receive an
amount equal to twenty-four (24) times his then
current monthly Base Salary.
(b) In the event this Agreement is terminated pursuant
to sub-section 8.1(b)(i) hereof, Executive or his
representative shall be entitled to receive an
amount equal to twenty four (24) times his then
current monthly Base Salary, less any disability
insurance benefits payable to Executive during such
twenty-four month period from disability policies
provided by the Company.
(c) In the event this Agreement is terminated pursuant
to sub-section 8.1(b)(ii) or (iii) hereof,
Executive shall not be entitled to any compensation
other than his then current Base Salary which has
accrued through his date of termination, subject to
the Company's right of offset based upon acts of
Executive which gave rise to the termination.
(d) In the event this Agreement is terminated pursuant
to sub-section 8.1(c) hereof, Executive shall be
entitled to a severance allowance equal to the
greater of (i) his Base Salary for all months
remaining in his then current term, or (ii) his
then current monthly Base Salary for twenty four
(24) months.
(e) Subject to sub-section 5(a) payments or the release
of stock representing compensation to Executive
pursuant to this Section 6 shall be made in either
a lump sum payment or, at the sole discretion of
the Company in four (4) equal payments, within six
(6) months of termination of this Agreement.
(f) In the event that Executive is terminated pursuant
to Subsections 8.1(a), 8.1(b)(i) or 8.1(c) hereof,
the expiration dates of Executive's options
currently outstanding pursuant to any of the
Company's stock option plans will be extended
twenty-four (24) months from the date of such
termination.
6. Confidential Information
------------------------
Except as permitted or directed by the Company's Board of
Directors, Executive shall not during the Term of this
Agreement or at any time thereafter divulge, furnish or
make accessible to anyone for use in any way (other than
in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the
Company (for the purposes of Sections 7 through 9 hereof,
the term "Company" shall be deemed to include any
subsidiary or affiliate of the Company) which Executive
has acquired or become acquainted with or will acquire or
become acquainted with prior to the termination of the
period of his employment by the Company, whether developed
by himself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans
devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of
the business of the Company, and confidential customer or
supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other
confidential or secret aspects of the business of the
Company. Executive acknowledges that the above described
knowledge or information constitutes a unique and valuable
asset of the Company acquired at great time and expense by
the Company and its predecessors, and that any disclosure
or other use of such knowledge or information other than
for the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. Both during
and after the Term of this Agreement, Executive shall
refrain from any acts or omissions that would reduce the
value of the use of such knowledge or information to the
Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information
which is now published or which subsequently becomes
generally publicly known, other than as a direct or
indirect result of the breach of this Agreement by
Executive.
7. Non-Competition, Solicitation of Customers, Solicitation
--------------------------------------------------------
of Employees
------------
7.1 Non-Competition
---------------
(a) Executive agrees that, during the period of his
employment hereunder and for a period of one (1)
year following the termination of such employment,
he shall not directly engage in competition with
the Company within the "Territory" (as hereinafter
defined) in any management capacity in any phase of
the Company's business of developing,
manufacturing, distributing, marketing, leasing or
selling any of the products which the Company is in
the business of developing, manufacturing,
distributing, marketing, leasing to others or
selling (the "Competitive Areas") during the Term
of this Agreement or which the Company has
definitive plans to develop, manufacture or market.
(b) The "Territory" shall be that area throughout the
world in which the Company presently markets its
products. This Agreement shall be deemed
automatically amended without the need of further
action by any party to add any new countries or
parts thereof where after the date hereof and prior
to the termination of Executive's employment the
Company begins to market its products and to delete
any countries after no Company products have been
sold there for a period of six months.
(c) The restrictions in this Section 7 shall not apply
with respect to (i) a passive investment by
Executive of less than 5% of the outstanding shares
of capital stock of any corporation, or (ii)
employment by Executive with an entity in a
management capacity in an area of business which is
not, directly or indirectly, a Competitive Area.
7.2 Agreement not to Solicit Customers
----------------------------------
Executive agrees that during his employment by the Company
hereunder and for the two (2) year period following the
termination of such employment, he shall not, without the
prior written consent of the Company, within the
Territory, either directly or indirectly, on his own
behalf or in the service or on behalf of others, solicit,
divert or appropriate, or attempt to solicit, divert or
appropriate, to any competing business any person or
entity whose account with the Company was sold or serviced
by or under the supervision of Executive during the year
preceding the termination of such employment.
7.3 Agreement not to Solicit Employees
----------------------------------
Executive agrees that during his employment by the Company
hereunder and for the two (2) year period following the
termination of such employment, he shall not, either
directly or indirectly, on his own behalf or in the
service or on behalf of others, solicit, divert, or
attempt to solicit or divert any person then employed by
the Company.
8. Termination
-----------
8.1 Grounds for Termination
-----------------------
This Agreement shall terminate prior to the expiration of
the Initial Term set forth in Section 2 or any extension
thereof in the event that at any time during such Initial
Term or any extension thereof:
(a) Executive shall die; or
(b) The Board of Directors of the Company shall
determine that:
(i) Executive has become disabled;
(ii) Executive has breached this Agreement in any
material respect, which breach is not cured
by Executive or is not capable of being
cured (as determined in the sole discretion
or the Company's Board of Directors) by
Executive within thirty (30) days after
written notice of such breach is delivered
to Executive; or
(iii) In its sole discretion cause exists.
"Cause" means (A) conduct amounting to
fraud, embezzlement or misappropriation as
against the Company, (B) the wilful and
knowing material breach of any fiduciary
duty owed to the Company as an officer of
the Company other than done at the direction
of the Board of Directors, (C) having been
convicted of a criminal offence which may
have a material adverse effect on the
Company or the ability of Executive to carry
out his duties of employment, or (D) the
knowing failure of Executive to follow
specific directives of the Board of
Directors of the Company consistent with his
duties. If the Board of Directors terminate
this Agreement pursuant to Section
8.1(b)(iii), Executive will be provided
ninety (90) days written notice.
(c) The Board of Directors of the Company shall
determine, in its sole discretion, that the
termination of this Agreement is in the best
interest of the Company, and in which event
Executive shall have no duty to mitigate his
damages. If the Board of Directors terminate this
Agreement pursuant to this Section 8.1(c),
Executive will be provided ninety (90) days written
notice.
(d) Notwithstanding any termination of this Agreement,
Executive, in consideration of his employment
hereunder to the date of such termination, shall
remain bound by the provisions of this Agreement
which specifically relate to periods, activities or
obligations upon or subsequent to the termination
of Executive's employment.
8.2 "Disability" Defined
--------------------
The Board of Directors may determine that Executive has
become disabled, for the purpose of this Agreement, in the
event that Executive shall fail, because of illness or
other physical or mental incapacity, to render services of
the character contemplated by this Agreement for an
aggregate of more than twelve (12) weeks during any twelve
(12) month period.
8.3 Surrender of Records and Property
---------------------------------
Upon termination of his employment with the Company,
Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters,
memoranda, notes, notebooks, reports, data, tables,
calculations or copies thereof, which are the property of
the Company and which relate in any way to the business,
products, practices or techniques of the Company, and all
other property, trade secrets and confidential information
of the Company, including, but not limited to, all
documents which in whole or in part contain any trade
secrets or confidential information of the Company, which
in any of these cases are in his possession or under this
control.
9. Assignment and Enurement
------------------------
This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective
heirs, successors, administrators, and permitted assigns.
The Company may, without the consent of Executive, assign
its rights and obligations under this Agreement to any
corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which
the Company may sell or transfer all or substantially all
of its assets or of which 50% or more of the equity
investment and of the voting control is owned, directly or
indirectly, by, or is under common ownership with, the
Company; provided, however, that if the assignee was not
previously part of a consolidated group with the Company,
Executive will receive payments and benefits as outlined
in Exhibit B attached hereto and incorporated herein.
10. Injunctive Relief
-----------------
Executive agrees that it would be difficult to compensate
the Company fully for damages for any violation of the
provisions of this Agreement, including without limitation
the provisions of Sections 6, 7 and 8.3. Accordingly,
Executive specifically agrees that the Company shall be
entitled to temporary and permanent injunctive relief to
enforce the provisions of this Agreement. This provision
with respect to injunctive relief shall not, however,
diminish the right of the Company to claim and recover
damages in addition to injunctive relief.
11. Miscellaneous
-------------
11.1 Governing Law
-------------
This Agreement is made under and shall be governed by and
construed in accordance with the laws of the Province of
Ontario subject to any principles of conflict of laws.
11.2 Prior Agreements
----------------
This Agreement contains the entire agreement of the
parties relating to the subject matter hereof and
supersedes all prior agreements and understandings with
respect to such subject matter, and the parties hereto
have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are
not set forth herein.
11.3 Withholding Taxes
-----------------
The Company may withhold from any benefits payable under
this Agreement all federal, state, city and other taxes as
shall be required pursuant to any law or governmental
regulation or ruling.
11.4 Amendments
----------
No amendment or modification of this Agreement shall be
deemed effective unless made in writing signed by the
party against whom enforcement of the waiver or estoppel
is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall
operate only as to the specific term or condition for the
future or as to any act other than that specifically
waived.
11.5 Notices
-------
Any notice, request, demand or other document to be given
hereunder shall be in writing, and shall be delivered
personally or sent by registered mail or facsimile
followed by mail as follows:
If to the Company:
Murex Diagnostics Corporation
White Park House
White Park Road
Bridgetown
Barbados
FAO The Chairman
If to Executive:
Flat 3
35-37 Grosvenor Square
London W1X 9AE
or to such other address as either party hereto may
hereinafter duly give to the other.
11.6 Severability
------------
To the extent any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full
force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent
of, or business activities covered by any provision of
this Agreement be in excess of that which is valid or
enforceable under applicable law, then such provision
shall be construed to cover only that duration, extent or
activities which may validly and enforceably be covered.
Executive acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be
give the construction which renders its provisions valid
and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.
(Signatures on following page)
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year set forth above.
Signed by )/s/ Victor A Rice
VICTOR A RICE )
for and on behalf of )
MUREX DIAGNOSTICS )
CORPORATION in the )
presence of:- )
Signed by F MICHAEL )/s/ F Michael P Warren
P WARREN in the )
presence of:- )
EXHIBIT A
---------
DEFERRED COMPENSATION PLAN
--------------------------
1. At the time the Executive elects to defer
compensation pursuant to Section 4.3 of the Employment Agreement,
the Executive shall also elect the percentage of such
compensation to be credited from the date of deferral to the date
it is paid to the Executive with either (a) simple interest at a
rate per annum equal to the average of the rates then being
earned by the Company on deposits with a term of ninety days or
less, adjusted on the first day of each calendar quarter or (b)
the same rate of return experienced by the common stock of the
Company. The portion of the compensation deferred by the
Executive to which the Executive elects to have the Company
common stock rate of return apply shall be hypothetically
invested in shares of the Company's common stock based on the
closing price of the Company's common stock on the Nasdaq
National Market System, or such other exchange that the Company's
common stock may be listed at the time, on the business day prior
to the date on which the compensation would otherwise be paid.
The number of shares of the Company's common stock in which the
Executive has hypothetically invested shall be adjusted to
reflect stock splits, stock dividends and other capital changes
affecting the outstanding common stock of the Company in the same
manner as an equivalent number of actual shares of the Company's
common stock are adjusted. In addition, all cash distributions
and the fair market value (as determined in good faith by the
Company) of any property distributions with respect to shares of
common stock of the Company shall be reinvested in the common
stock of the Company based on the closing price of the common
stock as reported on the Nasdaq National Market System, or such
other exchange that the Company's common stock may be listed at
the time, on the business day prior to the distribution. The
portion of the Executive's compensation deferred hereunder and
credited with simple interest, together with such simple
interest, shall be referred to herein as "Deferred Compensation".
The portion of Executive's compensation deferred hereunder and
credited with the rate of return of the common stock of the
Company shall be reflected in hypothetical shares of the
Company's common stock with each such share being referred to
herein as a "Stock Credit". On December 31st of each year during
which any Deferred Compensation or Stock Credits remain unpaid,
the Company shall provide the Executive with a statement setting
forth the amount of his unpaid Deferred Compensation and the
number of outstanding Stock Credits.
2. The Deferred Compensation shall be paid to
Executive in a lump sum following the termination of his
employment with the Company for any reason on the 30th day
following the date of termination. The number of Stock Credits
credited to the Executive shall be paid to the Executive on the
30th date following the date of his termination, by the release
of common stock to the Executive."
3. Notwithstanding the foregoing, in the event of the
occurrence of an "unforeseeable emergency," as hereinafter
defined, Executive shall be entitled to a payment from the
Deferred Compensation (or release of common stock representing
Stock Credits) prior to the date set forth in paragraph 2 of this
Exhibit A of that amount reasonably required to satisfy the
emergency need. As used herein, "unforeseeable emergency" shall
be limited to (i) severe financial hardship to Executive
resulting from a sudden and unexpected illness or accident of
Executive or of a dependent of Executive, as dependent is defined
in Section 152 of the Internal Revenue Code or any successor
provision thereto, (ii) loss of Executive's property due to
casualty, or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
Executive. The circumstances that will constitute an
unforeseeable emergency will depend upon the facts of each case,
but, in any case, a payment (or release) of all or any portion of
the Deferred Compensation in the event of an unforeseeable
emergency may not be made to the extent that such hardship is or
may be relieved;
(i) Through reimbursement or compensation by
insurance or otherwise,
(ii) By liquidation of Executive's assets, to the
extent the liquidation of such assets would not itself
cause severe financial hardship, or
(iii) By cessation of the deferral of the payment
of the Deferred Compensation pursuant to paragraph 2,
above.
4. The Company's obligation to pay the Deferred
Compensation or release of common stock representing Stock
Credits constitutes a mere promise by the Company to make these
payments at the times specified herein. Accordingly, Executive
shall have the status of a general unsecured creditor with
respect to the Deferred Compensation. Executive's rights to the
payment of Deferred Compensation or the release of common stock
representing Stock Credits shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of Executive
or his estate or any beneficiary of either Executive or his
estate.
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated this 1st day of August, 1997, by and
between INTERNATIONAL MUREX TECHNOLOGIES CORPORATION,
incorporated under the laws of the Province of British Columbia
(the "Company"), and C. ROBERT CUSICK ("Executive").
WHEREAS, the Company and Executive previously entered into
an Employment Agreement dated January 1, 1995; and
WHEREAS, the term of the employment relationship created by
such Employment Agreement has not expired; and
WHEREAS, the Company and Executive desire to amend and
restate the terms and conditions of their employment relationship
as it relates to the period subsequent to 1 August, 1997.
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the Company and Executive
agree as follows:
1. Employment. The Company hereby employs Executive, and
----------
Executive accepts such employment and agrees to perform services
for the Company, for the period and upon the other terms and
conditions set forth in this Agreement.
2. Term. The initial term of Executive's employment
----
hereunder shall be for a period of three (3) years, commencing as
of 1 August 1997 (the "Commencement Date"), subject to earlier
termination as hereinafter specified in Section 8. At each
anniversary date of the Commencement Date (each a "Renewal
Date"), the then remaining term of this Agreement shall be
extended for an additional one-year period unless either party
hereto shall have provided written notice to the other party of
such non-renewal of this Agreement on or within three (3) months
before such Renewal Date. In the event that either party shall
provide the other party with written notice of non-renewal of
this Agreement, this Agreement shall not be extended as of any
subsequent Renewal Date but shall remain effective in accordance
with its terms (subject to termination in accordance with Section
8 hereof) until the end of the then current term of this
Agreement. A non-renewal of this Agreement in accordance with
this Section 2 shall not constitute a termination of this
Agreement for the purpose of Sections 5 or 8 hereof.
3. Position and Duties.
-------------------
3.01. Service with the Company. During the Term of
------------------------
this Agreement, Executive shall serve as, and his title shall be,
Vice Chairman of the Company or such other position as Executive
and the Board of Directors shall from time to time agree. In
such position, Executive agrees to perform such executive
employment duties consistent with such position as the Board of
Directors of the Company shall assign to him from time to time.
Executive also agrees to serve, during the Term hereof, as
requested by the Board, and without any additional compensation,
as a Director of the Company and as an executive officer and/or
director of any corporations affiliated with the Company. The
compensation payable to Executive herein shall be paid by the
Company or by a subsidiary of the Company as designated by
Executive.
3.02. Performance of Duties. Executive agrees to
---------------------
serve the Company faithfully and to the best of his ability and
to devote the time, attention and efforts necessary to advance
the business and affairs of the Company during the Term of this
Agreement. It is understood and agreed that Executive may pursue
personal investments requiring time commitments that do not
conflict with his obligations to the Company, including those in
the preceding sentence. Executive hereby confirms that he is
under no contractual commitments inconsistent with his
obligations set forth in this Agreement, and that during the Term
of this Agreement, he shall not render or perform services, or
enter into any contract to do so, for any other corporation,
firm, entity or person which are inconsistent with the provisions
of this Agreement.
4. Compensation.
------------
4.01. Base Salary. As compensation for all services
-----------
to be rendered by Executive under this Agreement, the Company
shall pay to Executive an initial base annual salary (the "Base
Salary") of U.S. $265,000, which salary shall be paid in
semi-monthly installments in accordance with the Company's normal
payroll procedures and policies. The base salary shall be
increased on January 1, 1998 and on each January 1 thereafter by
the percentage equal to the percentage increase in the Consumer
Price Index maintained by the United States Bureau of Labor
Statistics for the Atlanta, Georgia metropolitan area or an
equivalent index (the "Index") as of January 1 of such year over
the Index for the immediately preceding January 1. Should the
Index be modified or discontinued, appropriate adjustment shall
be made to reflect such modification or to refer to a similar
index. Additionally, Executive's Base Salary shall be reviewed
annually and may be increased by an amount to be determined by
the Compensation/Option Committee (the "Committee") on the basis
of Executive's performance.
4.02. Incentive Compensation. In addition to the Base
----------------------
Salary described in Section 4.01, Executive shall be eligible to
receive incentive compensation pursuant to the Senior Management
Incentive Plan as approved by the Committee or such other plans
as may from time to time be available.
4.03. Deferral of Compensation. Executive shall be
------------------------
entitled to elect to defer the receipt of up to seventy five
percent (75%) of his Base Salary and Incentive Compensation for
each calendar year during which this Agreement is in effect.
Executive shall make the election to defer his compensation for a
calendar year by giving written notice to the Company of his
desire to do so in writing no later than December 31 of the
immediately preceding calendar year. In the event that Executive
elects to defer the payment of any compensation due hereunder in
the manner contemplated by this Section 4.03, the terms and
conditions set forth in Exhibit A hereto with respect to the
---------
circumstances under which Executive shall be entitled to the
payment of the deferred compensation as well as the interest
earned thereon and the timing and method of those payments shall
be applicable. Also, in such event, each of the periodic
payments of Executive's Base Salary for any year in which
Executive has elected to defer receipt of a portion of his Base
Salary shall be reduced by the percentage amount of his total
Base Salary which he has elected to defer.
4.04. Participation in Benefit Plans. Executive shall
------------------------------
also be entitled, to the extent that his position, title, tenure,
salary, age, health and other qualifications make him eligible,
to participate in all employee benefit plans or programs
(including medical/dental and life insurance, retirement pension,
stock option incentives, vacation time, sick leave and holidays)
of the Company currently in existence on the date hereof or as
may hereafter be instituted from time to time. Executive's
participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto.
4.05. Expenses. In accordance with the Company's
--------
policies established from time to time, the Company shall pay or
reimburse Executive for all reasonable and necessary
out-of-pocket expenses incurred by him in the performance of his
duties under this Agreement, subject to the timely presentment of
appropriate vouchers and receipts.
4.06. Car Allowance. The Company shall provide
-------------
Executive with a car or pay a car allowance in amount recommended
by the Executive Committee and approved by the Committee.
4.07. Vacation. Executive will be also be entitled to
--------
the highest number of vacation days with full pay during each
twelve months in which this Agreement is in effect as are
available to any other key employees of the Company or its
subsidiaries, without any reduction based upon length of service
to the Company.
4.08. Club and Professional Dues. During the term of
--------------------------
this Agreement, Executive will be entitled to the
club/professional society membership dues and monthly charges and
an annual physical examination by the physician of Executive's
choice. Amounts paid for club/professional society membership
dues and monthly charges shall not exceed US $5,000 annually. In
the event that Executive is required to pay any tax on such
reimbursement, the amount to be reimbursed to Executive shall be
grossed up by such amount as shall ensure that Executive receives
the same amount as he would have received had not such tax been
payable.
4.09. Double Tax Liability. In the event that in any
--------------------
year during the term of this Agreement Executive is required to
pay income taxes on any portion of his income for that year both
to the United States and to the United Kingdom, the Company shall
pay to Executive the amount which, after taking into account the
taxes required to be paid by Executive as a result of Executive's
receipt of such payment from the Company, shall cause Executive's
after-tax return on his income to equal the amount which would
have been available to Executive had no United Kingdom taxes been
due with respect to such income. The amounts due from the
Company pursuant to the immediately preceding sentence shall be
determined by Executive's tax return preparer, shall take into
account any foreign tax credits or other credits and deductions
allowed against his United States tax liability, and shall be
paid to Executive no later than fifteen (15) days following the
date on which Executive files the first tax return in which the
income subject to taxation in both the United States and the
United Kingdom is reported in any year, or within fifteen days
following the date on which the relevant taxing authority
determines that Executive's income is subject to taxation both in
the United States and in the United Kingdom, as the case may be.
4.10. Tax and Estate Planning. The Company agrees to
------------------------
reimburse Executive for the cost of financial, tax and estate
planning for each 365-day period in which this Agreement is in
effect in amount not to exceed US $3,000 for each 365-day period.
In the event that Executive is required to pay any tax on such
reimbursement, the amount to be reimbursed to Executive shall be
grossed up by such amount as shall ensure that Executive receives
the same amount as he would have received had not such tax been
payable.
4.11. Additional Benefits. During the term of this
-------------------
Agreement, Executive shall be entitled to participate in all
present and future employee benefit plans and all other
compensation and benefit plans, programs and structures as may
from time to time be made available by the Company to all other
key corporate executives of the Company, and on terms and
conditions no less favorable than those generally available to
other such employees. In the event that the Company elects to
obtain key man life insurance insuring Executive, Executive shall
make himself available for the necessary physical examinations
and shall cooperate in all other respects with the Company's
efforts to obtain such insurance.
5. Compensation upon Termination.
-----------------------------
(a) In the event this Agreement is terminated pursuant
to Subsection 8.01(a) hereof, in addition to any benefits to
which Executive may then or following the termination of his
employment be entitled under any other applicable policy or plan
of the Company then in effect (including basic life insurance
which coverage equals two times annual salary, and survivor
benefits which provide Accidental Death & Dismemberment for each
employee at two times the annual salary), the Company shall pay
to Executive's estate his Base Salary, incentive compensation and
benefits due through the effective date of termination. In the
event that such termination occurs on any date other than the
last day of the fiscal year, the incentive compensation shall be
based upon the performance goals achieved at the end of the
fiscal year, but shall be prorated based upon the number of days
which have elapsed in the fiscal year through the date of
termination. Payment of this incentive compensation, or the
release of any stock representing incentive compensation, due
under this Section 5(a) shall be made no later than 120 days
following the end of the fiscal year with respect to which it is
being paid. Payment of all other amounts under this Section 5(a)
shall be made not later than the 30th day following the effective
date of termination. Executive's estate shall be entitled to
receive an amount equal to twenty-four (24) times his then
current monthly Base Salary.
(b) In the event this Agreement is terminated pursuant
to Subsection 8.01(b)(i) hereof, Executive or his representative
shall be entitled to receive an amount equal to twenty-four (24)
times his then current monthly Base Salary, less any disability
insurance benefits payable to Executive during such twenty-four
month period from disability policies provided by the Company.
(c) In the event this Agreement is terminated pursuant
to Subsection 8.01(b)(ii) or (iii) hereof, Executive shall not be
entitled to any compensation other than his then current Base
Salary which has accrued through his date of termination, subject
to the Company's right of offset based upon acts of Executive
which gave rise to the termination.
(d) In the event that Executive is terminated pursuant
to Subsection 8.01(c) hereof, Executive shall be entitled to a
severance allowance equal to the greater of (i) his Base Salary
for all months remaining in his then current term, or (ii) his
then current monthly Base Salary for twenty-four (24) months.
(e) Subject to Section 5(a), payments or the release
of stock representing incentive compensation to Executive
pursuant to this Section 5 shall be made in either a lump-sum
payment or, at the sole discretion of the Company, in four (4)
equal payments within six (6) months of termination of the
Agreement.
(f) In the event that Executive is terminated pursuant
to Subsections 8.01(a), 8.01(b)(i) or 8.01(c) hereof, the
expiration dates of Executive's options currently outstanding
pursuant to any of the Company's stock option plans will extended
twenty-four (24) months from the date of such termination.
6. Confidential Information. Except as permitted or
------------------------
directed by the Company's Board of Directors, Executive shall not
during the Term of this Agreement or at any time thereafter
divulge, furnish or make accessible to anyone for use in any way
(other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of
the Company (for the purposes of Sections 6 through 8 hereof, the
term "Company" shall be deemed to include any subsidiary or
affiliate of the Company) which Executive has acquired or become
acquainted with or will acquire or become acquainted with prior
to the termination of the period of his employment by the
Company, whether developed by himself or by others, concerning
any trade secrets, confidential or secret designs, processes,
formulae, plans, devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of the
business of the Company, and confidential customer or supplier
lists of the Company, any confidential or secret development or
research work of the Company, or any other confidential or secret
aspects of the business of the Company. Executive acknowledges
that the above-described knowledge or information constitutes a
unique and valuable asset of the Company acquired at great time
and expense by the Company and its predecessors, and that any
disclosure or other use of such knowledge or information other
than for the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. Both during and
after the Term of this Agreement, Executive shall refrain from
any acts or omissions that would reduce the value of the use of
such knowledge or information to the Company. The foregoing
obligations of confidentiality, however, shall not apply to any
knowledge or information which is now published or which
subsequently becomes generally publicly known, other than as a
direct or indirect result of the breach of this Agreement by
Executive.
7. Non-Competition, Solicitation of Customers,
-------------------------------------------
Solicitation of Employees.
-------------------------
7.01. Non-Competition.
---------------
(a) Executive agrees that, during the period of his
employment hereunder and for a period of one (1) year following
the termination of such employment, he shall not directly engage
in competition with the Company within the "Territory" (as
hereinafter defined) in any management capacity in any phase of
the Company's business of developing, manufacturing,
distributing, marketing, leasing or selling any of the products
which the Company is in the business of developing,
manufacturing, distributing, marketing, leasing to others or
selling (the "Competitive Areas") during the Term of this
Agreement or which the Company has definitive plans to develop,
manufacture or market.
(b) The "Territory" shall be that area throughout the
world in which the Company presently markets its products. This
Agreement shall be deemed automatically amended without the need
of further action by any party to add to any new countries or
parts thereof where after the date hereof and prior to the
termination of Executive's employment the Company begins to
market its products and to delete any countries after no Company
products have been sold there for a period of six months.
(c) The restrictions in this Section 7 shall not apply
with respect to (i) a passive investment by Executive of less
than 5% of the outstanding shares of capital stock of any
corporation, or (ii) employment by Executive with an entity in a
management capacity in an area of business which is not, directly
or indirectly, a Competitive Area.
7.02. Agreement Not to Solicit Customers. Executive
----------------------------------
agrees that during his employment by the Company hereunder and
for the two (2) year period following the termination of such
employment, he shall not, without the prior written consent of
the Company, within the Territory, either directly or indirectly,
on his own behalf or in the service or on behalf of others,
solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any competing business any person or entity whose
account with the Company was sold or serviced by or under the
supervision of Executive during the year preceding the
termination of such employment.
7.03. Agreement Not to Solicit Employees. Executive
----------------------------------
agrees that during his employment by the Company hereunder and
for the two (2) year period following the termination of such
employment, he shall not, either directly or indirectly, on his
own behalf or in the service or on behalf of others, solicit,
divert, or attempt to solicit or divert any person then employed
by the Company.
8. Termination.
-----------
8.01. Grounds for Termination. This Agreement shall
-----------------------
terminate prior to the expiration of the initial Term set forth
in Section 2 or any extension thereof in the event that at any
time during such initial Term or any extension thereof:
(a) Executive shall die; or
(b) The Board of Directors of the Company shall
determine that:
(i) Executive has become disabled; or
(ii) Executive has breached this Agreement in any
material respect, which breach is not cured by
Executive or is not capable of being cured (as
determined in the sole discretion of the Company's
Board of Directors) by Executive within thirty (30)
days after written notice of such breach is delivered
to Executive; or
(iii) In its sole discretion, Cause exists. "Cause"
means (A) conduct amounting to fraud, embezzlement or
misappropriation as against the Company, (B) the
willful and knowing material breach of any fiduciary
duty owed to the Company as an officer of the Company
other than done at the direction of the Board of
Directors, (C) having been convicted of a criminal
offense which may have a material adverse effect on the
Company or the ability of Executive to carry out his
duties of employment, or (D) the knowing failure of
Executive to follow specific directives of the Board of
Directors of the Company consistent with his duties.
If the Board of Directors terminates this Agreement
pursuant to this Section 8.01(b)(iii), Executive will
be provided ninety (90) days written notice.
(c) The Board of Directors of the Company shall
determine, in its sole discretion, that the termination of
this Agreement is in the best interest of the Company, and
in which event Executive shall have no duty to mitigate his
damages. If the Board of Directors terminates this
Agreement pursuant to this Section 8.01(c), Executive will
be provided ninety (90) days written notice.
Notwithstanding any termination of this Agreement, Executive, in
consideration of his employment hereunder to the date of such
termination, shall remain bound by the provisions of this
Agreement which specifically relate to periods, activities or
obligations upon or subsequent to the termination of Executive's
employment.
8.02. "Disability" Defined. The Board of Directors
--------------------
may determine that Executive has become disabled, for the purpose
of this Agreement, in the event that Executive shall fail,
because of illness or other physical or mental incapacity, to
render services of the character contemplated by this Agreement
for an aggregate of more than twelve (12) weeks during any twelve
(12) month period.
8.03. Surrender of Records and Property. Upon
---------------------------------
termination of his employment with the Company, Executive shall
deliver promptly to the Company all records, manuals, books,
blank forms, documents, letters, memoranda, notes, notebooks,
reports, data, tables, calculations or copies thereof, which are
the property of the Company and which relate in any way to the
business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of
the Company, including, but not limited to, all documents which
in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in
his possession or under this control.
9. Assignment and Inurement. This Agreement shall enure
------------------------
to the benefit of and be binding upon the parties hereto and
their respective heirs, successors, administrators, successors
and permitted assigns. The Company may, without the consent of
Executive, assign its rights and obligations under this Agreement
to any corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which the
Company may sell or transfer all or substantially all of its
assets or of which 50% or more of the equity investment and of
the voting control is owned, directly or indirectly, by, or is
under common ownership with, the Company; provided, however, that
if the assignee was not previously part of a consolidated group
with the Company, Executive will receive payments and benefits as
outlined in Exhibit B, attached hereto and incorporated herein.
10. Injunctive Relief. Executive agrees that it would be
-----------------
difficult to compensate the Company fully for damages for any
violation of the provisions of this Agreement, including without
limitation the provisions of Sections 6, 7 and 8.03.
Accordingly, Executive specifically agrees that the Company shall
be entitled to temporary and permanent injunctive relief to
enforce the provisions of this Agreement. This provision with
respect to injunctive relief shall not, however, diminish the
right of the Company to claim and recover damages in addition to
injunctive relief.
11. Miscellaneous.
-------------
11.01. Governing Law. This Agreement is made under
-------------
and shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania, United States, subject
to any principles of conflict of laws.
11.02. Prior Agreements. This Agreement contains the
----------------
entire agreement of the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings
with respect to such subject matter, and the parties hereto have
made no agreements, representations or warranties relating to the
subject matter of this Agreement which are not set forth herein.
11.03. Withholding Taxes. The Company may withhold
-----------------
from any benefits payable under this Agreement all federal,
state, city and other taxes as shall be required pursuant to any
law or governmental regulation or ruling.
11.04. Amendments. No amendment or modification of
----------
this Agreement shall be deemed effective unless made in writing
signed by the party against whom enforcement of the waiver or
estoppel is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall operate only
as to the specific term or condition for the future or as to any
act other than that specifically waived.
11.05. Notices. Any notice, request, demand or other
-------
document to be given hereunder shall be in writing, and shall be
delivered personally or sent by registered, certified or express
mail or facsimile followed by mail as follows:
If to the Company:
Board of Directors
650 Woodlawn Road West
Guelph, Ontario
N1K 1B8
CANADA
If to Executive:
C. Robert Cusick
1100 Lancaster Avenue
Pittsburgh, Pennsylvania 15218
or to such other address as either party hereto may hereinafter
duly give to the other.
11.06. Severability. To the extent any provision of
------------
this Agreement shall be invalid or unenforceable, it shall be
considered deleted herefrom and the remainder of such provision
and of this Agreement shall be unaffected and shall continue in
full force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent of, or
business activities covered by any provision of this Agreement be
in excess of that which is valid or enforceable under applicable
law, then such provision shall be construed to cover only that
duration, extent or activities which may validly and enforceably
be covered. Executive acknowledges the uncertainty of the law in
this respect and expressly stipulates that this Agreement be
given the construction which renders its provisions valid and
enforceable to the maximum extent (not exceeding its express
terms) possible under applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year set forth above.
-----------------------------------
C. Robert Cusick
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By:
--------------------------------
Victor A. Rice, on behalf of the Compensation
Committee and the Board of Directors
EXHIBIT "A"
DEFERRED COMPENSATION PLAN
--------------------------
1. At the time the Executive elects to defer compensation
pursuant to Section 4.03 of the Employment Agreement, the
Executive shall also elect the percentage of such compensation to
be credited from the date of deferral to the date it is paid to
the Executive with either (a) simple interest at a rate per annum
equal to the average of the rates then being earned by the
Company on deposits with a term of ninety days or less, adjusted
on the first day of each calendar quarter or (b) the same rate of
return experienced by the common stock of the Company. The
portion of the compensation deferred by the Executive to which
the Executive elects to have the Company common stock rate of
return apply shall be hypothetically invested in shares of the
Company's common stock based on the closing price of the
Company's common stock on the Nasdaq National Market System, or
such other exchange that the Company's common stock may be listed
at the time, on the business day prior to the date on which the
compensation would otherwise be paid. The number of shares of
the Company's common stock in which the Executive has
hypothetically invested shall be adjusted to reflect stock
splits, stock dividends and other capital changes affecting the
outstanding common stock of the Company in the same manner as an
equivalent number of actual shares of the Company's common stock
are adjusted. In addition, all cash distributions and the fair
market value (as determined in good faith by the Company) of any
property distributions with respect to shares of common stock of
the Company shall be reinvested in the common stock of the
Company based on the closing price of the common stock as
reported on the Nasdaq National Market System, or such other
exchange that the Company's common stock may be listed at the
time, on the business day prior to the distribution. The portion
of the Executive's compensation deferred hereunder and credited
with simple interest, together with such simple interest, shall
be referred to herein as "Deferred Compensation". The portion of
Executive's compensation deferred hereunder and credited with the
rate of return of the common stock of the Company shall be
reflected in hypothetical shares of the Company's common stock
with each such share being referred to herein as a "Stock
Credit". On December 31st of each year during which any Deferred
Compensation or Stock Credits remain unpaid, the Company shall
provide the Executive with a statement setting forth the amount
of his unpaid Deferred Compensation and the number of outstanding
Stock Credits.
2. The Deferred Compensation shall be paid to Executive in
a lump sum following the termination of his employment with the
Company for any reason on the 30th day following the date of
termination. The number of Stock Credits credited to the
Executive shall be paid to the Executive on the 30th date
following the date of his termination, by the release of common
stock to the Executive."
3. Notwithstanding the foregoing, in the event of the
occurrence of an "unforeseeable emergency," as hereinafter
defined, Executive shall be entitled to a payment from the
Deferred Compensation (or release of common stock representing
Stock Credits) prior to the date set forth in paragraph 2 of this
Exhibit A of that amount reasonably required to satisfy the
emergency need. As used herein, "unforeseeable emergency" shall
be limited to (i) severe financial hardship to Executive
resulting from a sudden and unexpected illness or accident of
Executive or of a dependent of Executive, as dependent is defined
in Section 152 of the Internal Revenue Code or any successor
provision thereto, (ii) loss of Executive's property due to
casualty, or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
Executive. The circumstances that will constitute an
unforeseeable emergency will depend upon the facts of each case,
but, in any case, a payment (or release) of all or any portion of
the Deferred Compensation in the event of an unforeseeable
emergency may not be made to the extent that such hardship is or
may be relieved;
(i) Through reimbursement or compensation by insurance
or otherwise,
(ii) By liquidation of Executive's assets, to the
extent the liquidation of such assets would not itself cause
severe financial hardship, or
(iii) By cessation of the deferral of the payment
of the Deferred Compensation pursuant to paragraph 2, above.
4. The Company's obligation to pay the Deferred
Compensation or release of common stock representing Stock
Credits constitutes a mere promise by the Company to make these
payments at the times specified herein. Accordingly, Executive
shall have the status of a general unsecured creditor with
respect to the Deferred Compensation. Executive's rights to the
payment of Deferred Compensation or the release of common stock
representing Stock Credits shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of Executive
or his estate or any beneficiary of either Executive or his
estate.
EXHIBIT "B"
CHANGE IN CONTROL PROVISIONS
This Exhibit "B" (the "Provisions") set forth the severance
benefits which the Company agrees will be provided Executive in
the event employment with the Company is terminated subsequent to
a Change in Control of the Company under the circumstances
described below. In order to secure the payment of all
obligations under these Provisions, the Company shall establish
an irrevocable grantor trust and make contributions thereto
sufficient to satisfy its obligations under these Provisions
immediately upon an event which constitutes a Change in Control
(as hereinafter defined).
1. Term of these Provisions. These Provisions shall
------------------------
commence on the date set forth in the Employment Agreement and
shall continue in effect as long as the Employment Agreement is
in effect, or until the Company or Executive shall have given
notice that these Provisions shall not be extended; and provided,
further, that, notwithstanding the delivery of any such notice,
these Provisions shall continue in effect for a period of twenty-
four (24) months after a Change in Control of the Company if such
Change in Control shall have occurred while these Provisions are
in effect. Notwithstanding anything in this Section 1 to the
contrary, these Provisions shall terminate if Executive or the
Company terminates Executive's employment in accordance with the
terms and conditions of the applicable Employment Agreement prior
to a Change in Control of the Company.
2. Change in Control. For purposes of these Provisions, a
-----------------
"Change in Control" means and shall be deemed to occur if any of
the following occurs:
(a) an acquisition, after September 1, 1995, by an
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the outstanding shares of common stock, no
par value, of the Company (the "Common Shares"), or (ii) the
combined voting power of the voting securities of the Company
entitled to vote generally in the election of directors (the
"Voting Securities"); or
(b) individuals who, as of September 1, 1995, constituted
the Board (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board, provided, however,
that any individual becoming a director subsequent to September
1, 1995, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then serving and comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act ) or other actual or
threatened solicitation of proxies or consents; or
(c) approval by the shareholders of the Company of (i) a
tender offer to acquire 20% or more of the Common Shares or
Voting Securities, (ii) a reorganization, (iii) a merger, or (iv)
a consolidation, other than a reorganization, merger or
consolidation with respect to which all or substantially all of
the individuals and entities who were the beneficial owners,
immediately prior to such reorganization, merger or
consolidation, of the Common Shares and Voting Securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than 80% of the
then outstanding Common Shares and Voting Securities (entitled to
vote generally in the election of directors) of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or
consolidation, of the Common Shares or Voting Securities; or
(d) approval by the Company's shareholders of (i) a
complete or substantial liquidation or dissolution of the
Company; or (ii) the sale or other disposition of all or
substantially all of the assets of the Company.
3. Termination Following a Change in Control. If any of
-----------------------------------------
the events described in Section 2 hereof constituting a Change in
Control of the Company shall have occurred, Executive shall be
entitled to the benefits provided in Section 4(c) hereof upon the
termination of employment with the Company after such Change in
Control, unless such termination is because of death, by the
Company for Cause or Disability (as each such term is defined in
the Employment Agreement), or by Executive other than for Good
Reason (as hereinafter defined).
(a) Good Reason. Termination by Executive of employment
-----------
for "Good Reason" for the purpose of these Provisions shall mean
termination based on:
(i) a determination by Executive, in his reasonable
judgment, that there has been a material adverse change in his
status or position(s) with the Company from those in effect
immediately prior to the Change in Control, including, without
limitation, a material adverse change in Executive's status or
position as a result of a diminution of his duties or
responsibilities (other than, if applicable, any such change
directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to him of any duties or
responsibilities which are inconsistent with such status or
position(s), or any removal of Executive from, or any failure to
reappoint or reelect him to, such position(s) (except in
connection with the termination of employment for Cause or
Disability or as a result of death or by Executive other than for
Good Reason);
(ii) a reduction by the Company in base salary from
that in effect immediately prior to the Change in Control;
(iii) the failure by the Company to continue in
effect any Plan (as herein defined) in which Executive
participates in at the time of the Change in Control of the
Company (or plans providing him with substantially similar
benefits), or the taking of any action, or the failure to act, by
the Company which would adversely affect continued participation
in any of such Plans on at least as favorable a basis as is the
case on the date of the Change in Control or which would
materially reduce Executive's benefits in the future under any of
such plans or deprive him of any material benefit enjoyed at the
time of the Change in Control. For purposes of these Provisions,
"Plan" shall mean any compensation plan or any employee benefit
plan such as a thrift, pension, profit sharing, medical,
disability, accident, life insurance plan or a relocation plan or
policy or any other plan, program or policy of the Company
intended to benefit employees;
(iv) the failure by the Company to provide and credit
the number of paid vacation days to which Executive is then
entitled in accordance with the Company's normal vacation policy
in effect immediately prior to the Change in Control;
(v) the Company's requiring Executive to be based at
any office that is greater than fifty (50) miles from where his
office is located immediately prior to the Change in Control
except for required travel on the Company's business to an extent
substantially consistent with the business travel obligations
which he undertook on behalf of the Company prior to the Change
in Control;
(vi) the failure by the Company to obtain from any
Successor (as hereinafter defined) the assent to these Provisions
contemplated by Section 5(a) hereof;
(vii) any termination by the Company of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of paragraph (c) below;
and for purposes of these Provisions, no such termination shall
be effective; or
(viii) any refusal by the Company to continue to
allow Executive to attend to matters or engage in activities not
directly related to the business of the Company which, prior to
the Change in Control, he was previously permitted to attend to
or engage in.
(b) Window Periods. Notwithstanding anything in these
--------------
Provisions to the contrary, any termination by Executive for any
reason during the thirty (30) day period immediately following a
Change in Control of the Company (the "First Window Period")
shall be deemed a termination for Good Reason for all purposes of
these Provisions. In addition, any termination by him for any
reason during the thirty (30) day period immediately following
the first anniversary date of a Change in Control of the Company
(the "Second Window Period") shall be deemed a termination for
Good Reason for all purposes of these Provisions, except all
benefits paid hereunder shall be reduced by twelve (12) months.
(c) Notice of Termination. Any termination by the Company
---------------------
or any termination by Executive following a Change in Control
shall be communicated by written notice to the other party hereto
which indicates the specific termination provision in these
Provisions relied upon (the "Notice of Termination").
(d) Date of Termination. "Date of Termination" following a
-------------------
Change in Control shall mean: (i) if employment is to be
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that Executive shall not have
returned to the performance of his duties on a full-time basis
pursuant to a doctor's release during such thirty (30) day
period), (ii) if employment is to be terminated by the Company
for any reason other than death or Disability or by Executive
pursuant to Sections 3(a)(vi) or 5(a) hereof or for other Good
Reason, the date specified in the Notice of Termination, or (iii)
if employment is terminated on account of death, the day after
death. In the case of termination of employment by the Company
for Cause pursuant to Paragraph 8.01(b)(iii) of the Employment
Agreement, if Executive has not previously expressly agreed in
writing to the termination, then within ninety (90) days after
receipt by him of the Notice of Termination with respect thereto,
Executive may notify the Company that a dispute exists concerning
the Termination, in which even the Date of Termination shall be
the date set either by mutual written agreement of the parties or
by such court having the matter before it. During the pendency
of any such dispute, the Company will continue to pay Executive
his full compensation in effect just prior to the time the Notice
of Termination is given and until the dispute is resolved.
However if such court issues a final and non-appealable order
finding that the Company had Cause to terminate Executive then he
must return all compensation paid after the Date of Termination
specified in the Notice of Termination previously received.
4. Compensation Upon Termination or During Disability;
---------------------------------------------------
Other Agreements.
----------------
(a) During any period following a Change in Control of the
Company that Executive fails to perform his duties as a result of
incapacity due to physical or mental illness, he shall continue
to receive his Base Salary at the rate then in effect and any
benefits or awards under any Plan shall continue to accrue during
such period, to the extent not inconsistent with such Plans,
until and unless his employment is terminated pursuant to and in
accordance with paragraph 4(c) hereof. Thereafter, his benefits
shall be determined in accordance with the Plans then in effect.
(b) If employment is terminated for Cause following a
Change in Control of the Company, the Company shall pay to
Executive's Base Salary through the Date of Termination at the
rate in effect just prior to the time a Notice of Termination is
given, plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have
been earned or become payable, but which have not yet been paid.
Thereupon the Company shall have no further obligations to
Executive under these Provisions.
(c) Subject to Section 8 hereof, if, within twenty-four
(24) months after a Change in Control of the Company has
occurred, Executive's employment by the Company is terminated
other than on account of death and is terminated by the Company
other than for Cause or Disability or by Executive for Good
Reason, including any termination by him during the First Window
Period or the Second Window Period (subject to reduction as set
forth in Section 3(b)), then the Company shall pay to Executive,
no later than the fifth (5th) day following the Date of
Termination, without regard to any contrary provisions of any
Plan, the following, which shall be inclusive and in place of any
other severance benefits to which he may previously have been
entitled under his employment agreement with the Company and
shall constitute all of the severance benefits to which he may be
entitled under all agreements with the Company:
(i) Executive's Base Salary through the Date of
Termination at the rate in effect just prior to the time a Notice
of Termination is given plus any benefits or awards (including
both the cash and stock components) which pursuant to the terms
of any Plans have been earned or become payable, but which have
not yet been paid (including amounts which previously had been
deferred at his request);
(ii) an amount in cash equal to 299% of Executive's
average annual taxable compensation over the base period (within
the meaning of Section 280G(d)(2) of the Internal Revenue Code of
1986, as amended (the "Code")) ending on the effective date of
the Change in Control; provided, however, that the maximum amount
which Executive may receive under this Section 4(c)(ii) shall
not exceed the lowest amount received by any other Company
employee whose employment agreement with the Company contains an
agreement substantially similar to these Provisions. For
purposes of this Section 4(c)(ii), the term "average annual
taxable compensation" shall mean Executive's base salary plus
bonuses, including any amounts deducted by the Company or
contributed by the Company with respect to Executive or for
Executive's account pursuant to Sections 125 and 401(k) of the
Code and excluding the value of any fringe benefits or executive
perquisites, and any gross-up payments thereon, which are
includeable by Executive as taxable compensation.
(d) If, within twenty-four (24) months after a Change in
Control of the Company has occurred, Executive's employment by
the Company is terminated (i) by the Company other than for Cause
or Disability, or (ii) by Executive for Good Reasons, then the
Company shall maintain in full force and effect, for the
continued benefit of Executive and his dependents for a period
terminating on the earliest of (i) two (2) years after the Date
of Termination, or (ii) the commencement date of equivalent
benefits from a new employer, all insured and self-insured
employee welfare benefit Plans in which he was entitled to
participate immediately prior to the Date of Termination,
provided that his continued participation is possible under the
general terms and provisions of such Plans (and any applicable
funding media) and he continues to pay an amount equal to regular
contributions under such Plans for such participation. If two
(2) years after the Date of Termination Executive has not
previously received, nor are then receiving, equivalent benefits
from a new employer, the Company shall offer him continuation of
coverage under COBRA as prescribed under Section 4980B of the
Code. At the expiration of such continuation coverage (or, if
COBRA continuation coverage is not applicable to the Plan, then
upon the expiration of the two (2) year period beginning on the
Termination Date), the Company shall arrange, at its sole cost
and expense, to enable him to convert he and his dependents'
coverage under such plans to individual policies and programs
upon the same terms as employees of the Company may apply for
such conversions. In the event that Executive's participation in
any such Plan is barred, the Company, at its sole cost and
expense, shall arrange to have issued for the benefit of
Executive and his dependents individual policies of insurance
providing benefits substantially similar (on an after-tax basis)
to those which he otherwise would have been entitled to receive
under such Plans pursuant to this paragraph 4(d) or, if such
insurance is not available at a reasonable cost to the Company,
the Company shall otherwise provide Executive and his dependents
with equivalent benefits (on an after-tax basis). Executive shall
not be required to pay any premiums or other charges in an amount
greater than that which he would have paid in order to
participate in such Plans.
(e) Until Executive obtains another full-time job, the
Company shall provide him with professional outplacement services
of his choosing and shall reimburse him for documented incidental
outplacement expenses directly related to his job search such as
resume mailing, interviewing trips, and clerical support, subject
to a maximum cost of $50,000 for such outplacement services and
incidental expenses; provided, however, that the Company shall
not provide him with any such outplacement services or reimburse
him for any such costs under this paragraph 4(e) if employment is
terminated by Executive during the Second Window Period.
Executive's choice of professional outplacement services shall be
subject to the Company's reasonable prior approval. If the
Company has not approved or disapproved of Executive's choice
within ten (10) business days of receiving notice of such choice,
the Company will be deemed to have given its approval. Any
disapproval issued by the Company pursuant to this Section shall
be in writing and state the basis for such disapproval. Executive
shall not be entitled to receive cash in lieu of the professional
outplacement services provided pursuant to this Section.
(f) Except as specifically provided in paragraph 4(d)
above, the amount of any payment provided for in this Section 4
shall not be reduced, offset or subject to recovery by the
Company by reason of any compensation earned as the result of
employment by another employer after the Date of Termination, or
otherwise.
(g) If, by reason of Section 280G of the Code, any payment
or benefit received or to be received in connection with a
Change in Control of the Company of the termination of
Executive's employment (whether payable pursuant to the terms of
these Provisions ("Contract Payments") or any other plan,
arrangement or agreement with the Company, its successors, any
person whose actions result in a Change in Control or any
corporation affiliated, or which, as a result of the completion
of the transactions causing a change in control will become
affiliated, with the Company within the meaning of Section 1504
of the Code ("Affiliate") (which payments collectively with the
Contract Payments are called the "Total Payments")) would not be
deductible, in whole or in part, by the Company an Affiliate or
other person making such payment or providing such benefit, the
Contract Payments shall be reduced until no portion of the Total
Payments is not deductible by reason of Section 280G of the Code.
For purposes of this limitation
(i) no portion of the Total Payments, the receipt or
enjoyment of which Executive shall have effectively waived in
writing prior to the date of payment of the Contract Payments,
shall be taken into account;
(ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to Executive, does
not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code (without regard to subsection
(A)(ii) thereof);
(iii) the Contract Payments shall be reduced only
to the extent necessary so that the Total Payments, other than
those referred to in clauses (i) and (ii), in their entirety
constitute reasonable compensation for services actually rendered
with the meaning of Section 280G(b)(4) of the Code, in the
opinion of the tax counsel referred to in clause (ii); and
(iv) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be
determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
5. Successors Binding Agreement.
----------------------------
(a) The Company will seek, by written request at least five
(5) business days prior to the time a natural person,
corporation, partnership or other business entity (a "Person")
becomes a Successor (as hereinafter defined), to have such
Person, by agreement in form and substance satisfactory to
Executive, assent to the fulfillment of the Company's obligations
under these Provisions. Failure of such Person to furnish such
assent by the later of (i) three (3) business days prior to the
time such Person becomes a successor or (ii) two (2) business
days after such Person receives a written request to so assent
shall constitute Good Reason for termination by Executive of his
employment if a Change in Control of the Company occurs or has
occurred. For purposes of these Provisions, "Successor" shall
mean any person that succeeds to, or has the practical ability to
control (either immediately or with the passage of time), the
Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Company's Voting Securities or
otherwise.
(b) These Provisions shall inure to the benefit of and be
enforceable by Executive's personal legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of these Provisions to
Executive's devisee, legatee or other designee or, if no such
designee exists, to his estate.
(c) For purposes of these Provisions, the "Company" shall
include any subsidiaries of the Company and any corporation or
other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business
combination in which the Company ceases to exist; provided,
however, for purposes of determining whether a Change in Control
has occurred herein, the term "Company" shall refer to
International Murex Technologies Corporation or its successor(s).
6. Fees and Expenses: Mitigation.
-----------------------------
(a) The Company shall reimburse Executive, on a current
basis, for all reasonable legal fees and related expenses
incurred in connection with the Provisions of this Agreement
following a Change in Control of the Company, including without
limitation, (i) all such fees and expenses, if any, incurred in
contesting or disputing any termination of his employment or
incurred by him in seeking advice with respect to the matters set
forth in Section 7 hereof or (ii) his seeking to obtain or
enforce any right or benefit provided by these Provisions, in
each case, regardless of whether or not his claim is upheld by a
court of competent jurisdiction; provided, however, he shall be
required to repay any such amounts to the Company to the extent
that a court issues a final and non-appealable order setting
forth the determination that the position taken by him was
frivolous or advanced in bad faith.
(b) Executive shall not be required to mitigate the amount
of any payment the Company becomes obligated to make in
connection with these Provisions, by seeking other employment or
otherwise.
7. Taxes. All payments to be made to Executive under
-----
these Provisions will be subject to required withholding of
federal, state and local income and employment taxes.
8. Survival. The respective obligations of, and benefits
--------
afforded to, the Company and Executive as provided in Section 4,
5(b), 6 and 7 of these Provisions shall survive termination of
these Provisions.
9. Validity: Conflict with Employment Agreement. The
--------------------------------------------
invalidity or unenforceability of any provision of these
Provisions shall not affect the validity or enforceability of any
other provision of these Provisions, which shall remain in full
force and effect. In the event that any term or provision of
these Provisions shall conflict or be inconsistent with any term
or provision of the Employment Agreement by and between Executive
and the Company, the terms and conditions of these Provisions
shall govern.
AMENDMENT
TO EMPLOYMENT AGREEMENT
THIS AMENDMENT is made as of this 6TH day of November 1997
by INTERNATIONAL MUREX TECHNOLOGIES CORPORATION organized and
existing under the laws of the Province of British Columbia (the
"Company") and C. ROBERT CUSICK (the "Executive").
WHEREAS, the Company and the Executive previously entered
into an Employment Agreement dated July 1, 1995 (the
"Agreement"); and
WHEREAS, the Company and the Executive restated the
Agreement as of August 1, 1997;
WHEREAS, the Company and the Executive desire to amend the
terms of the Agreement;
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the Company and the Executive
agree to amend Section 4(g) of Exhibit A of the Agreement by
deleting the entire section and replacing it with the following:
"(g) If, by reason of Section 28OG of the Code, any
payment or benefit received or to be received in connection with
a Change in Control of the Company of the termination of
Executive's employment (whether payable pursuant to the terms of
these Provisions ("Contract Payments") or any other plan,
arrangement or agreement with the Company, its successors, any
person whose actions result in a Change in Control or any
corporation affiliated, or which, as a result of the completion
of the transactions causing a change in control will become
affiliated, with the Company within the meaning of Section 1504
of the Code ("Affiliate") (which payments collectively with the
Contract Payments are called the "Total Payments")) would not be
deductible, in whole or in part, by the Company, an Affiliate or
other person making such payment or providing such benefit and is
or becomes subject to the tax imposed under Section 4999 of the
Code or any similar tax that may hereafter be imposed (the
"Excise Tax"), the Executive may choose to have the Contract
Payment reduced in accordance with Paragraph (A) hereof or to
receive the Tax Reimbursement Payment described in Paragraph (B)
hereof.
(A) Executive will receive the Total Payments unless
(a) the after-tax amount that would be retained by the Executive
(after taking into account all federal, state and local income
taxes payable by the Executive and the amount of any Excise Taxes
payable by the Executive if he were to receive the Total
Payments) has a lesser after-tax value than (b) the after-tax
amount that would be retained by the Executive (after taking into
account all federal, state and local income taxes payable by the
Executive) if he were to receive the Total Payments reduced by
the minimum amount necessary to result in no portion of the Total
Payments being subject to any Excise Taxes (the "Reduced
Payments"), in which case the Executive may choose to receive
only to the Reduced Payment. If the Executive is to receive the
Reduced Payment, the Executive shall be entitled to determine
which of the Contract Payments, and the relative portions of
each, are to be reduced. For the purposes of this limitation:
(i) no portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have effectively waived in
writing prior to the date of payment of the Contract Payments,
shall be taken into account;
(ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the Executive,
does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code (without regard to subsection
(A)(ii) thereof);
(iii) the Contract Payments shall be reduced only to
the extent necessary so that the Total Paymcnts, other than those
referred to in clauses (i) and (ii), in their entirety constitute
reasonable compensation for services actually rendered with the
meaning of Section 280G(b)(4) of the Code, in the opinion of the
tax counsel referred to in clause (ii);
(iv) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be
determined by the Company's independent auditors (the
"Accountants")in accordance with the principles of Section
280G(d)(3) and (4) of the Code; and
(v) in the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken
into account hereunder in calculating the Contract Payments made,
the Company shall repay to the Executive, at the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of such prior Contract Payments that has not been
paid to the Executive and that would have been paid if such
Excise Tax had been applied in initially calculating such
Contract Payments, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code.
(B) The Executive wi11 receive, at the time the Total
Payments are paid by the Company, a Tax Reimbursement payment (as
defined herein). The Tax Reimbursement Payment is defined as an
amount, which when added to tbe Tota1 Payments and reduced by any
Excise Tax on the Total Payments and Excise Tax on the Tax
Reimbursement Payment provided for by this Agreement shall be
equa1 to the sum of the amount of the Total Payments. For
purposes of this paragraph:
(i) no portion of the Total Payments, the receipt or
enjoyment of which the Executive shal1 have effectively waived in
writing prior to the date of payment of the Contract Payments,
shal1 be taken into account;
(ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the Executive,
does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code (without regard to subsection
(A)(ii) thereof); and
(iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall
be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
(iv) In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken
into account hereunder in calculating the Contract Payments made,
the Company shall repay to the Executive, at the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of such prior Contract Payments that has been paid to
the Company or to federally, state or local tax authorities on
the Executive's behalf and that would not have been paid if such
Excise tax had been applied in initially calculating such
Contract Payments, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the
Contract Payment to be refunded to the Executive has been paid to
any federal, state or local tax authority, repayment thereof
shall not be required until actua1 refund or credit of such
portion has been made to the Company; and interest payable to the
Executive shall not exceed interest received or credited to the
Company by such tax authority for the period it held such
portion. The Executive and the Company shall mutually agree upon
the course of action to be pursued (and the method of allocating
the expenses thereof) if the Company's good faith claim for
refund or credit is denied.
(v) The portion of the Tax Reimbursement Payment
attributable to a Total Payment shall be paid to the Executive
within ten (10) business days following the payment of the Total
Payment. If the amount of such Tax Reimbursement Payment (or
portion thereof) cannot be finally determined on or before the
date on which payment is due, the Company shall either pay to the
Executive or withhold and deposit with the Internal Revenue
Service on behalf of the Executive, an amount estimated in good
faith by the Accountants to be the minimum amount of such Tax
Reimbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (which Tax Reimbursement Payment shall
include interest at the rate provided in Section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined, but in
no event later than forty-five (45) calendar days after payment
of the Total Payment. In the event that the amount of the
estimated Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess sums shal1
be repaid or refunded pursuant to the provisions of Section
(g)(B)(iv) above."
Except as specifically amended hereby, the Agreement shall
remain in full force and effect as prior to this Amendment.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Amendment to be executed on the day and year first
above written.
INTERNATIONAL MUREX TECHNOLOGIES,
INC.
By: ____________________
Title: ___________________
ATTEST:
By: ____________________
Title: ____________________
C. ROBERT CUSICK
By: /s/ C. Robert Cusick
----------------------------
AMENDMENT
TO EMPLOYMENT AGREEMENT
THIS AMENDMENT is made as of this 6TH day of November 1997
by INTERNATIONAL MUREX TECHNOLOGIES CORPORATION organized and
existing under the laws of the Province of British Columbia (the
"Company") and STEVEN C. RAMSEY (the "Executive").
WHEREAS, the Company and the Executive previously entered
into an Employment Agreement dated July 1, 1995 (the
"Agreement"); and
WHEREAS, the Company and the Executive restated the
Agreement as of August 1, 1997;
WHEREAS, the Company and the Executive desire to amend the
terms of the Agreement;
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the Company and the Executive
agree to amend Section 4(g) of Exhibit A of the Agreement by
deleting the entire section and replacing it with the following:
"(g) If, by reason of Section 28OG of the Code, any
payment or benefit received or to be received in connection with
a Change in Control of the Company of the termination of
Executive's employment (whether payable pursuant to the terms of
these Provisions ("Contract Payments") or any other plan,
arrangement or agreement with the Company, its successors, any
person whose actions result in a Change in Control or any
corporation affiliated, or which, as a result of the completion
of the transactions causing a change in control will become
affiliated, with the Company within the meaning of Section 1504
of the Code ("Affiliate") (which payments collectively with the
Contract Payments are called the "Total Payments")) would not be
deductible, in whole or in part, by the Company, an Affiliate or
other person making such payment or providing such benefit and is
or becomes subject to the tax imposed under Section 4999 of the
Code or any similar tax that may hereafter be imposed ("the Excise
Tax"), the Executive may choose to have the Contract Payment
reduced in accordance with Paragraph (A) hereof or to receive the
Tax Reimbursement Payment described in Paragraph (B) hereof.
(A) Executive will receive the Total Payments unless
(a) the after-tax amount that would be retained by the Executive
(after taking into account all federal, state and local income
taxes payable by the Executive and the amount of any Excise Taxes
payable by the Executive if he were to receive the Total
Payments) has a lesser after-tax value than (b) the after-tax
amount that would be retained by the Executive (after taking into
account all federal, state and local income taxes payable by the
Executive) if he were to receive the Total Payments reduced by
the minimum amount necessary to result in no portion of the Total
Payments being subject to any Excise Taxes (the "Reduced
Payments"), in which case the Executive may choose to receive
only to the Reduced Payment. If the Executive is to receive the
Reduced Payment, the Executive shall be entitled to determine
which of the Contract Payments, and the relative portions of
each, are to be reduced. For the purposes of this limitation:
(i) no portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have effectively waived in
writing prior to the date of payment of the Contract Payments,
shall be taken into account;
(ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the Executive,
does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code (without regard to subsection
(A)(ii) thereof);
(iii) the Contract Payments shall be reduced only to
the extent necessary so that the Total Paymcnts, other than those
referred to in clauses (i) and (ii), in their entirety constitute
reasonable compensation for services actually rendered with the
meaning of Section 280G(b)(4) of the Code, in the opinion of the
tax counsel referred to in clause (ii);
(iv) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be
determined by the Company's independent auditors (the
"Accountants") in accordance with the principles of Section
280G(d)(3) and (4) of the Code; and
(v) in the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken
into account hereunder in calculating the Contract Payments made,
the Company shall repay to the Executive, at the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of such prior Contract Payments that has not been
paid to the Executive and that would have been paid if such
Excise Tax had been applied in initially calculating such
Contract Payments, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code.
(B) The Executive wi11 receive, at the time the Total
Payments are paid by the Company, a Tax Reimbursement payment (as
defined herein). The Tax Reimbursement Payment is defined as an
amount, which when added to tbe Tota1 Payments and reduced by any
Excise Tax on the Total Payments and Excise Tax on the Tax
Reimbursement Payment provided for by this Agreement shall be
equa1 to the sum of the amount of the Total Payments. For
purposes of this paragraph:
(i) no portion of the Total Payments, the receipt or
enjoyment of which the Executive shal1 have effectively waived in
writing prior to the date of payment of the Contract Payments,
shal1 be taken into account;
(ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the Executive,
does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code (without regard to subsection
(A)(ii) thereof); and
(iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall
be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
(iv) In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken
into account hereunder in calculating the Contract Payments made,
the Company shall repay to the Executive, at the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of such prior Contract Payments that has been paid to
the Company or to federally, state or local tax authorities on
the Executive's behalf and that would not have been paid if such
Excise tax had been applied in initially calculating such
Contract Payments, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the
Contract Payment to be refunded to the Executive has been paid to
any federal, state or local tax authority, repayment thereof
shall not be required until actua1 refund or credit of such
portion has been made to the Company; and interest payable to the
Executive shall not exceed interest received or credited to the
Company by such tax authority for the period it held such
portion. The Executive and the Company shall mutually agree upon
the course of action to be pursued (and the method of allocating
the expenses thereof) if the Company's good faith claim for
refund or credit is denied.
(v) The portion of the Tax Reimbursement Payment
attributable to a Total Payment shall be paid to the Executive
within ten (10) business days following the payment of the Total
Payment. If the amount of such Tax Reimbursement Payment (or
portion thereof) cannot be finally determined on or before the
date on which payment is due, the Company shall either pay to the
Executive or withhold and deposit with the Internal Revenue
Service on behalf of the Executive, an amount estimated in good
faith by the Accountants to be the minimum amount of such Tax
Reimbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (which Tax Reimbursement Payment shall
include interest at the rate provided in Section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined, but in
no event later than forty-five (45) calendar days after payment
of the Total Payment. In the event that the amount of the
estimated Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess sums shal1
be repaid or refunded pursuant to the provisions of Section
(g)(B)(iv) above."
Except as specifically amended hereby, the Agreement shall
remain in full force and effect as prior to this Amendment.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Amendment to be executed on the day and year first
above written.
INTERNATIONAL MUREX TECHNOLOGIES,
INC.
By: ____________________
Title: ___________________
ATTEST:
By: ____________________
Title: ____________________
STEVEN C. RAMSEY
By: /s/ Steven C. Ramsey
---------------------------
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (this
"Amendment") effective as of the 31st day of December, 1997,
among INTERNATIONAL MUREX TECHNOLOGIES CORPORATION, MUREX
DIAGNOSTICS INTERNATIONAL, INC., MUREX DIAGNOSTICS CORPORATION,
IMTC HOLDINGS (UK) LIMITED, MUREX DIAGNOSTICS, INC. and MUREX
BIOTECH LIMITED, as Borrowers (collectively, the "Borrowers" and
each, a "Borrower"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (as successor by merger to Bank of America Illinois),
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
ACTING THROUGH ITS LONDON BRANCH, as Issuing Banks (collectively,
the "Issuing Banks" and each, an "Issuing Bank"), BANK OF
AMERICA, F.S.B., as Agent (the "Agent") and the financial
institutions listed on the signature pages hereof as Lenders (the
"Lenders"),
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders, the Issuing Bank
and the Agent are parties to that certain Credit Agreement dated
as of November 12, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement");
and
WHEREAS, the Borrowers have requested that certain
terms of the Credit Agreement be amended, and the Agent, the
Issuing Bank and the Lenders have agreed to the requested
amendments on the terms and conditions set forth herein; and
NOW THEREFORE, in consideration of the foregoing
premises and other good and valuable consideration paid by each
party to the other, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. Amendment to Article I. Article I of the Credit
----------------------
Agreement, Definitions, is hereby amended by deleting the
-----------
definitions of "BAI", "Borrower Representative", and "Borrowers"
--- ----------------------- ---------
set forth therein in their entirety and substituting the
following, respectively, in their place:
""BAI" means Bank of America National Trust and Savings
---
Association, as successor by merger to Bank of America
Illinois.
"Borrower Representative" means International Murex
-----------------------
Technologies Corporation, a corporation organized under the
laws of the Province of British Columbia, or any other
Borrower selected by the Borrowers in accordance with
Section 2.20.
------------
"Borrowers" means International Murex Technologies
---------
Corporation, a corporation organized under the laws of the
Province of British Columbia, Murex Diagnostics
International, Inc., a corporation organized under the laws
of Barbados, Murex Diagnostics Corporation, a corporation
organized under the laws of Barbados, IMTC Holdings (UK)
Limited, a corporation organized under the laws of England,
Murex Diagnostics, Inc., a corporation organized under the
laws of the State of Delaware (individually and as the
successor by merger to IMTC Holdings, Inc.) and Murex
Biotech Limited, a corporation organized under the laws of
England, and "Borrower" means any of the foregoing."
--------
2. Amendment to Article VI. Article VI of the Credit
-----------------------
Agreement, Representations and Warranties, is hereby amended by
------------------------------
adding the following Section 6.27 to the end thereof:
"6.27 Year 2000 Compliance. Each Borrower has
--------------------
conducted a comprehensive review and assessment of its
computer applications with respect to the "year 2000
problem" (that is, the risk that computer applications may
not be able to properly perform date-sensitive functions
after December 31, 1999) and, based on that review, such
Borrower does not believe the year 2000 problem will result
in a material adverse change in such Borrower's business
condition (financial or otherwise), operations, properties
or prospects, or ability to repay the Obligations."
3. Amendment to Section 8.9. Section 8.9 of the Credit
------------------------
Agreement, Contingent Obligations, is hereby deleted in its
----------------------
entirety and replaced with the following:
"8.9 Contingent Obligations. IMTC shall not, and
----------------------
shall not suffer or permit any Material Subsidiary to,
create, incur, assume or suffer to exist any Contingent
Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Contingent Obligations of IMTC and its
Material Subsidiaries existing as of the Agreement Date
and listed in Schedule 8.9;
------------
(c) Guaranty Obligations entered into by (i) IMTC
not exceeding $1,450,000 in the aggregate at any time
outstanding with respect to obligations of Murex
Biotech S.A. (Pty) Limited in connection with the
construction of a manufacturing facility in South
Africa, and (ii) IMTC or any Material Subsidiary after
the Agreement Date with respect to any other
obligations of an Affiliate of IMTC and not exceeding
$1,000,000 in the aggregate at any time outstanding."
4. Amendment to Section 8.18. Section 8.18 of the Credit
-------------------------
Agreement, Capital Expenditures, is hereby deleted in its
--------------------
entirety and replaced with the following:
"8.18 Capital Expenditures. IMTC and its Subsidiaries
--------------------
shall not make or incur during (a) the fiscal year ending on
December 31, 1997, in the aggregate any Capital Expenditures
in excess of $10,500,000 and (b) the fiscal year ending on
December 31, 1998, and during each fiscal year thereafter,
in the aggregate any Capital Expenditures in excess of
$7,000,000."
5. No Other Amendment. Except for the amendments
------------------
expressly set forth above, the text of the Credit Agreement and
all other Loan Documents shall remain unchanged and in full force
and effect. Each Borrower acknowledges and expressly agrees that
the Lenders reserve the right to, and do in fact, require strict
compliance with all terms and provisions of the Credit Agreement
and the other Loan Documents.
6. Representations and Warranties. Each Borrower hereby
------------------------------
represents and warrants in favor of the Agent, the Issuing Banks,
and each Lender, as follows:
(a) such Borrower has the corporate power and
authority (i) to enter into this Amendment, and (ii) to do
all acts and things as are required or contemplated
hereunder to be done, observed and performed by it;
(b) this Amendment has been duly authorized, validly
executed and delivered by one or more authorized signatories
of such Borrower, and constitutes the legal, valid and
binding obligation of the Borrower, enforceable against such
Borrower in accordance with its terms;
(c) the execution and delivery of this Amendment and
performance by such Borrower under the Credit Agreement, as
amended hereby, do not and will not require the consent or
approval of any regulatory authority or governmental
authority or agency having jurisdiction over such Borrower
which has not already been obtained, nor contravene or
conflict with the charter documents of such Borrower, or the
provisions of any statute, judgment, order, indenture,
instrument, agreement or undertaking, to which such Borrower
is a party or by which any of its properties are or may
become bound; and
(d) as of the date hereof, and after giving effect to
this Amendment (i) no Default or Event of Default exists
under the Credit Agreement or is caused by this Amendment,
and (ii) each presentation and warranty set forth in Article
VI of the Credit Agreement is true and correct in all
material respects, except (x) to the extent previously
fulfilled in accordance with the terms of the Credit
Agreement, as amended hereby, or (y) to the extent
specifically relating to the Agreement Date.
7. Loan Document. This Amendment shall be deemed to be a
-------------
Loan Document for all purposes.
8. Expenses. The Borrowers agree to pay all reasonable
--------
expenses of the Agent incurred in connection with this Amendment,
including, without limitation, all fees and expenses of counsel
to the Agent.
9. Counterparts. This Amendment may be executed in
------------
multiple counterparts, each of which shall be deemed to be an
original and all of which, taken together, shall constitute one
and the same agreement. Delivery of an executed counterpart of
this Amendment by facsimile transmission shall be as effective as
delivery of a manually executed counterpart hereof.
10. Governing Law. This Amendment shall be deemed to be
-------------
made pursuant to the laws of the State of Georgia with respect to
agreements made and to be performed wholly in the State of
Georgia, and shall be construed, interpreted, performed and
enforced in accordance therewith.
11. Definitions. All capitalized terms not otherwise
-----------
defined herein shall have the meanings set forth in the Credit
Agreement.
12. Effectiveness. This Amendment shall be effective as of
-------------
the date first set forth above upon the Agent's receipt of a
counterpart hereof duly executed by the Borrowers, the Issuing
Banks and the Lenders.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment or caused it to be executed by their duly
authorized officers, effective as of the day and year first
written above.
BORROWERS: INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By: /s/ Steven C. Ramsey
----------------------------
Title: CFO
-------------------------
MUREX DIAGNOSTICS INTERNATIONAL,
INC.
By: /s/ Steven C. Ramsey
---------------------------
Title: Director
------------------------
MUREX DIAGNOSTICS CORPORATION
By: /s/ Steven C. Ramsey
---------------------------
Title: Director
------------------------
IMTC HOLDINGS (UK) LIMITED
By: /s/ Steven C. Ramsey
---------------------------
Title: Director
------------------------
MUREX DIAGNOSTICS, INC.
By: /s/ Steven C. Ramsey
----------------------------
Title: VP Finance
-------------------------
MUREX BIOTECH LIMITED
By: /s/ Steven C. Ramsey
-----------------------------
Title: Director
--------------------------
AGENT: BANK OF AMERICA, FSB
By: /s/ John Yankavskas
-----------------------------
Title: V.P.
--------------------------
LENDERS: BANK OF AMERICA, FSB
By: /s/ John Yankavskas
------------------------------
Title: V.P.
---------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, acting through
its London Branch
By: /s/ Keith Thomas
------------------------------
Title: Vice President
---------------------------
ISSUING BANKS: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Ginger Trimble
------------------------------
Title: Vice President
---------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, acting through
its London Branch
By: /s/ Keith Thomas
------------------------------
Title: Vice President
---------------------------
INTERNATIONAL MUREX TECHNOLOGIES CORPORATION Exhibit 21
Subsidiaries as of December 31, 1997
- --------------------------------------------------------------------------------
Jurisdiction of
Name Incorporation
- --------------------------------------------------------------------------------
SUBSIDIARIES OF INTERNATIONAL MUREX TECHNOLOGIES CORPORATION
IMTC Holdings (U.K.) Limited United Kingdom
Specialist Diagnostics Limited United Kingdom
Murex Biotech Limited United Kingdom
Murex Diagnostics Corporation Barbados
Murex Diagnostics International, Inc. Barbados
Murex Diagnosticos Ltda Brazil
IMTC Holdings Corporation (L) Limited Malaysia
IMTC Holdings BV Netherlands
Murex Diagnostics Benelux BV Netherlands
Murex Diagnostici, S.p.A Italy
Murex Diagnostics France S.A France
Murex Diagnostic S.A Spain
Murex Diagnostica GmbH Germany
Murex Diagnostics A/S Denmark
Murex Diagnostics, Spol. s r.o Czech Republic
Murex Diagnostics, Inc. United States
IMTC Technologies, Inc. United States
Murex Medical Research Limited Isle of Man
Technology Licence Company Limited Isle of Man
Murex Diagnostics Australia Pty Ltd. Australia
Murex Diagnostics Private Limited Singapore
Murex Argentina S.A Argentina
Murex Diagnostics SA (Pty.) Limited South Africa
Murex Biotech SA (Pty.) Limited South Africa
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ C. Robert Cusick
-----------------------------
C. Robert Cusick
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ F. Michael P. Warren
---------------------------------
F. Michael P. Warren
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ J. Trevor Eyton
--------------------------------
J. Trevor Eyton
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ Thomas L. Gavin
--------------------------------
Thomas L. Gavan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ Norbert J. Gilmore
--------------------------------
Norbert J. Gilmore
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ Hartland M. MacDougall
-----------------------------
Hartland M. MacDougall
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ Jay A. Lefton
---------------------------------
Jay A. Lefton
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ Stanley E. Read
--------------------------------
Stanley E. Read
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned
constitutes and appoints Steven C. Ramsey his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
International Murex Technologies Corporation, a British Columbia
corporation, for the year ended December 31, 1997, any or all
amendments and supplements, to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the Nasdaq National Market
System, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-
in-fact and agent or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
DATED March 9, 1998
----
/s/ Victor A. Rice
--------------------------------
Victor A. Rice
