<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934 for the quarterly period ended June 30, 1996
------------------
or
____ Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________________ to
_____________________
Commission file number 0-21776
HEALTHDYNE TECHNOLOGIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 52-1756497
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1255 KENNESTONE CIRCLE, MARIETTA GEORGIA 30066
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(770) 499-1212
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of August 1, 1996, 12,622,413 shares of the Company's Common Stock, $.01 par
value, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
- ------ 1996 1995
--------- -------------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 2,291 287
Trade accounts and notes receivable, less
allowances of $1,366 at June 30, 1996 and $1,161
at December 31, 1995 29,860 32,401
Inventories:
Finished goods 7,107 8,539
Work in process 4,041 3,750
Raw materials 8,299 7,645
------- ------
Total inventories 19,447 19,934
------- ------
Deferred income taxes 1,345 1,744
Prepaid expenses and other current assets 2,995 2,000
------- ------
Total current assets 55,938 56,366
------- ------
Property and equipment 17,780 15,833
Less accumulated depreciation and
amortization (9,976) (8,729)
------- ------
Net property and equipment 7,804 7,104
------- ------
Excess of cost over net assets of businesses acquired,
less accumulated amortization of $1,447 at
June 30, 1996 and $1,138 at December 31, 1995 20,612 17,146
Intangible assets, less accumulated
amortization of $2,870 at June 30, 1996
and $2,744 at December 31, 1995 3,858 2,053
Other assets 765 207
------- ------
$88,977 82,876
======= ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY June 30, December 31,
- ------------------------------------ 1996 1995
-------- ------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 4,375 2,982
Accounts payable, principally trade 8,824 9,285
Accrued liabilities 6,610 7,458
------- ------
Total current liabilities 19,809 19,725
Long-term debt, excluding current installments 28,069 26,250
------- ------
Total liabilities 47,878 45,975
------- ------
Shareholders' equity:
Preferred stock, without par value. Authorized 10,000
shares; issued none - -
Common stock, $.01 par value. Authorized 50,000 shares;
issued and outstanding 12,608 and 12,455 shares at
June 30 1996 and December 31, 1995, respectively 126 125
Additional paid-in capital 22,212 21,112
Retained earnings 18,761 15,664
------- ------
Total shareholders' equity 41,099 36,901
------- ------
$88,977 82,876
======= ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1996 1995 1996 1995
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $28,587 28,194 56,069 55,858
Cost of revenues 17,145 17,345 33,162 34,507
------- ------ ------ ------
Gross profit 11,442 10,849 22,907 21,351
Selling and administrative expenses 7,318 6,519 13,993 12,964
Research and development expenses 1,422 1,126 2,772 2,238
------- ------ ------ ------
Operating earnings 2,702 3,204 6,142 6,149
Interest income 78 93 166 164
Interest expense (572) (509) (1,149) (952)
Other income (expense), net (9) 9 (24) (7)
------- ------ ------ ------
Earnings before income taxes 2,199 2,797 5,135 5,354
Income tax expense 879 1,107 2,038 2,117
------- ------ ------ ------
Net earnings $ 1,320 1,690 3,097 3,237
======= ====== ====== ======
Net earnings per common share and
common share equivalent $.10 .14 .24 .26
======= ====== ====== ======
Weighted average number of common shares
and common share equivalents outstanding 13,110 12,500 13,030 12,475
======= ====== ====== ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,097 3,237
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,682 1,520
Deferred income taxes 399 (417)
(Increase) decrease in:
Trade accounts and notes receivable 3,019 (3,088)
Inventories 650 (3,420)
Other assets (1,548) (1,071)
Increase (decrease) in:
Accounts payable (835) (396)
Accrued liabilities (1,261) 1,570
------- ------
Net cash provided by (used in)
operating activities 5,203 (2,065)
------- ------
Cash flows from investing activities:
Purchase of product rights (1,931) (145)
Purchases of property and
equipment (1,947) (1,451)
Acquisition of business,
net of cash acquired (1,158) --
------- ------
Net cash used in
investing activities $(5,036) (1,596)
------- ------
</TABLE>
(continued)
5
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1996 1995
--------- -------
<S> <C> <C>
Cash flows from financing activities:
Net borrowings under revolving
credit agreement $ 2,000 3,000
Principal repayments of long-term debt (1,936) (1,075)
Proceeds from issuance of long-term debt 672 222
Net borrowings from Healthdyne
and affiliates - 985
Proceeds from issuance of common stock 1,101 44
------- ------
Net cash provided by
financing activities 1,837 3,176
------- ------
Net increase in cash and short-term
investments 2,004 (485)
Cash and short-term investments at
beginning of period 287 620
------- ------
Cash and short-term investments at
end of period $ 2,291 135
======= ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. General
-------
The consolidated condensed financial statements as of June 30, 1996 and
for the three and six months ended June 30, 1996 and 1995 are unaudited. In
the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for the fair presentation of the consolidated financial
position and results of operations and cash flows for the periods presented
have been included. Results for interim periods are not necessarily
indicative of results that may be expected for the full fiscal year.
These consolidated condensed financial statements should be read
in conjunction with the consolidated financial statements and related notes
included in the Annual Report on Form 10-K of Healthdyne Technologies, Inc.
(the "Company") for the year ended December 31, 1995.
2. Earnings Per Share of Common Stock
----------------------------------
Primary earnings per common share and common share equivalent are
based on the weighted average number of shares outstanding and common share
equivalents derived from dilutive stock options. Fully diluted earnings per
share are not significantly different from primary earnings per share.
3. License Agreement
-----------------
In April, 1996 the Company entered into a license agreement under
which the rights to certain proprietary ventilator technologies were
acquired. The license fees are payable over time, up to a maximum of
approximately $4,900.
4. Business Acquisition
--------------------
In June, 1996 the Company acquired Fiberoptic Medical Products,
Inc., a Pennsylvania-based medical device company. Consideration consisted
of cash, notes and deferred payments totaling $3,500.
5. Credit Agreement
----------------
In June, 1996, the Company entered into an amendment to its Secured
Revolving Credit Agreement (the "Credit Agreement") which increased the
total commitment from $35,000 to $50,000. Borrowings under the Credit
Agreement are limited to a borrowing base established by a formula. Based
on this formula, borrowings were limited to approximately $34,300 as of June
30, 1996. Balances under the Credit Agreement will be due in two
installments, $15,000 due in January, 1998 and any remainder due in June,
1999.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (AMOUNTS IN THOUSANDS)
General
- -------
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve a number of risks
and uncertainties. Factors which could cause the Company's actual results in
future periods to differ materially include, but are not limited to, those
discussed below, as well as those discussed or identified from time to time in
the Company's filings with the Securities and Exchange Commission, including,
but not limited to, the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1995.
The Company's revenues are derived from sales of technologically advanced
medical devices primarily for use in the home and alternate care sites. These
products include diagnostic and therapeutic devices for the evaluation and
treatment of sleep disorders, oxygen concentrators, noninvasive ventilators,
medication nebulizers, peak flow meters and drug delivery systems for the
treatment of respiratory disorders, and monitors for infants at risk for Sudden
Infant Death Syndrome ("SIDS"), as well as a limited line of obstetrical care
products. The Company markets its products, both domestically and
internationally, through a dedicated sales force and a network of independent
manufacturers' representatives and distributors.
The Company's present operations and future prospects may be influenced by
several factors, including developments in the healthcare industry, third party
reimbursement policies and practices, and changes in regulatory requirements
with respect to approval and sale of medical devices. As a result of the
increasing cost of health care in the United States, government and third party
payors are becoming increasingly focused on promoting cost-effective health care
services, and payors in particular have become more involved in decisions
regarding diagnosis and treatment to ensure that care is delivered in a cost-
effective manner. As a result of this focus on cost-effective healthcare
delivery, the Company believes that home-based services and medical products
will continue to provide a viable cost-effective alternative to treatment in
traditional institutional care settings in many instances. There is no
assurance, however, that the increased focus on healthcare expenditures will not
decrease the availability of certain equipment, therapies or services offered by
the Company.
The Company's success is dependent to a large extent upon the ability of its
customers to obtain adequate reimbursement from third-party payors, such as
government and private insurance programs, for procedures using the Company's
products. For example, Congress passed legislation in December 1995 (which was
vetoed by the President) which would have imposed a plan for balancing the
federal budget over a seven year period. The plan included major reductions in
Medicare and Medicaid expenditures and would have reduced Medicare payment rates
for oxygen by 20% beginning in 1996, gradually rising to 30% by 2002. President
Clinton's budget plan contained similar provisions, as well as competitive
bidding for selected items of equipment, which would include oxygen. While
Congress has not enacted comprehensive Medicare and Medicaid payment reductions,
similar proposals will likely be included as part of future budget legislation.
Similarly, the Health Care Financing Administration ("HCFA") has announced a
plan to adjust Medicare payment amounts for oxygen and oxygen equipment on the
grounds that such amounts are not "inherently reasonable". Before making any
such adjustments, HCFA will need to consider specific economic factors and
provide notice and an opportunity for public comment. While this plan could be
superseded by Congressional action, HCFA intends to issue a proposed rule with
potential reductions in oxygen payments in the ranges contained in the balanced
budget proposals. Reductions in the reimbursement rates that the Company's
customers receive for services rendered could have an adverse impact on the
Company. The Company, however, is hopeful that the overall cost-effective
nature of diagnosis and treatment in the home will be recognized by any new
initiatives.
The Company's business also may be affected by changes in government
regulation to which the Company's products are subject or changes in the manner
in
8
<PAGE>
which such regulations are enforced or medical devices are approved. The Food
and Drug Administration published for comment proposed performance standards for
monitors for infants at risk for SIDS. The Company is unable to predict whether,
or in what form, these performance standards ultimately will be adopted, but
anticipates that it should be able to design and manufacture products that will
comply with any such standards.
A number of businesses within the healthcare industry, including in some
instances customers of the Company, recently have begun to consolidate in order,
among other things, to increase the size, efficiency and purchasing power of the
entities in question, to broaden the number and nature of products and services
offered to consumers or simply to better serve the changing healthcare industry
with its focus upon cost-effective medical care. The Company's two largest home
care dealer customers, both of which were publicly held and had branch locations
throughout the U.S., merged in August 1995. The Company expects that
consolidation among home care dealers is likely to continue; however, the
Company cannot predict the effect of such mergers and consolidations on its
business or distribution channels.
In an effort to broaden its product offerings, the Company acquired
HealthScan Products, Inc. during 1994 and FiberOptic Medical Products, Inc. in
the second quarter of this year. The Company will continue to examine possible
candidates for acquisitions in the future should the opportunity arise. No
assurances, however, can be given that any such acquisitions will be consummated
by the Company or, if consummated, that they will be financially or
operationally successful.
The Company enters into license agreements from time to time in connection
with the introduction of new products or enhancements of existing products.
These agreements generally do not require the expenditure of material sums;
however, if the commercial introduction of the licensed product is successful,
the licensed product may be important to future Company revenue and profits. No
assurances may be given that any such license agreements will result in the
commercial introduction of a viable product or that the product, once
introduced, will be financially or operationally successful.
On May 22, 1995, Healthdyne, Inc. ("Healthdyne") consummated a transaction
pursuant to which the 10,000 shares of the Company's Common Stock owned at that
time by Healthdyne were distributed to Healthdyne's shareholders as a tax-free
dividend (the "Spin-off"). In an effort to facilitate the Spin-off, the Board
of Directors of the Company adopted a special stock option plan pursuant to
which options to purchase 1,344 shares of the Company's common stock were
granted to holders, including employees of the Company, of outstanding
Healthdyne stock options. The Company believes the Spin-off has been and will
continue to be beneficial to the Company in that, among other things, it will
increase the number of shares of common stock of the Company available for
trading and is expected to permit the Company to raise capital more economically
and with less restrictions than if it were a subsidiary of Healthdyne.
The Company commenced a re-alignment of its sales force in the second
quarter of 1996 in order to better address the home and hospital markets through
a combination of the Company's two primary sales forces, with sales
representatives located in geographic areas designed to enhance efficient sales
activity and growth. The Company also added to its management team in an effort
to better manage the Company's operations. During the second quarter, the
Company added a Vice President of Research and Development, a Vice President of
Manufacturing and a Vice President of North American Sales.
Although the Company derives a portion of its revenues from foreign
customers, substantially all of these sales have historically been invoiced in
U.S. Dollars and therefore the Company has not been exposed to any significant
foreign exchange rate risk. The Company does not expect that a significant
portion of its foreign sales in the future will be invoiced in currencies other
than U.S. Dollars and therefore does not anticipate that it will be exposed to a
material amount of exchange rate risk. However, no assurance can be given that
this will be the case.
9
<PAGE>
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the financial information included
herein and the Company's consolidated financial statements and related notes
presented in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 as filed with the Securities and Exchange Commission.
Operating Results
- -----------------
The following table sets forth the percentage of revenues represented by line
items in the Consolidated Condensed Statements of Earnings for the three and six
months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------- ---------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Cost of revenues 60 62 59 62
---- ---- ---- ----
Gross profit 40 38 41 38
Selling and administrative expenses 26 23 25 23
Research and development expenses 5 4 5 4
---- ---- ---- ----
Operating earnings 9 11 11 11
Interest income (expense), net (1) (1) (2) (1)
---- ---- ---- ----
Earnings before income taxes 8 10 9 10
Income tax expense 3 4 3 4
---- ---- ---- ----
Net earnings 5% 6% 6% 6%
==== ==== ==== ====
</TABLE>
Revenues for the three and six months ended June 30, 1996 increased slightly
to $28,587 and $56,069, respectively, from $28,194 and $55,858 in the equivalent
periods in 1995. These increases in revenues were the result of lower revenue
in the Company's respiratory therapy product line, mitigated by revenue growth
in other areas. Revenues from the respiratory therapy product line decreased 5%
in the first six months of 1996 and remained approximately equal in the second
quarter of 1996, as compared to the similar periods in 1995. These results were
primarily due to lower unit sales of oxygen concentrators and asthma management
products, partially offset by sales of the Company's noninvasive ventilator,
QuantumTM, which was introduced in late 1995. The decrease in oxygen
concentrator volume was due to a significant reduction in sales to the Company's
largest domestic customer combined with a slowdown in purchases by many smaller
customers. The Company believes that these reductions in purchases have resulted
in part from changes in purchasing habits and concerns over potential changes in
government reimbursement for oxygen. The decrease in volume in the asthma
management product line was primarily due to customer delays in the shipment of
certain products. Revenues from the sleep disorders product line increased 22%
in the second quarter of 1996 and 19% in the first six months of 1996 over the
comparable periods in 1995 primarily due to the continued growth of the
TranquilityR CPAP System coupled with sales of the NightWatch and AliceR sleep
diagnostic systems. Revenues from the infant monitor product line increased 2%
and 6%, respectively, in the three and six months ended June 30, 1996 over the
year-earlier periods primarily due to achieving greater market share. In
addition to the factors noted above, the Company experienced a less than
expected increase in international revenues in the second quarter of 1996.
The Company's gross profit margins increased almost 2 percentage points to 40%
during the three months ended June 30, 1996 and almost 3 percentage points to
41% during the six months ended June 30, 1996 as compared to the three and six
months ended June 30, 1995. These increases were primarily due to the results
of the Company's cost reduction program begun during the first quarter of 1995
and to the shift in product sales mix towards higher margin products, such as
sleep disorders products.
Selling and administrative expenses increased as a percentage of revenues in
the three and six months ended June 30, 1996 as compared to the similar periods
of 1995 due primarily to lower than expected revenue for the second quarter
10
<PAGE>
combined with the expansion of the sales staff and expenses to support the
Company's entry into the noninvasive ventilation market.
Research and development expenses as a percentage of revenues increased in the
three and six months ended June 30, 1996 from the year-earlier periods primarily
due to the addition of engineering staff and engineering project costs related
principally to the development and introduction of new products.
The increase in interest expense for the three and six months ended June 30,
1996 as compared to the same periods in 1995 was primarily due to higher average
balances outstanding under the Company's bank credit agreement.
The effective income tax rate remained relatively constant in the three and
six months ended June 30, 1996 as compared to the similar periods in 1995.
Until May 22, 1995, the Company's provision for income taxes was determined
based upon a tax sharing arrangement with Healthdyne due to the inclusion of the
Company's operating results in Healthdyne's consolidated tax return. Under the
arrangement, the Company's provision for income taxes was determined as if the
Company had filed separate federal and state corporate income tax returns. Such
provision may not reflect the Company's actual tax rate had it not been
consolidated with Healthdyne for tax purposes.
The Company had deferred tax assets of $1,345 at June 30, 1996, which resulted
from allowances for uncollectible accounts and accruals and reserves recorded
for financial statement purposes but not yet deducted for income tax purposes.
Management believes such deferred tax assets will be recoverable through reduced
income taxes payable in future periods.
Liquidity and Capital Resources
- -------------------------------
The Company had working capital of approximately $36,100 as of June 30, 1996
and the current ratio was 2.8 to 1.0.
Cash flow provided by operations was $5,203 in the six months ended June 30,
1996, compared to cash flow used in operations of $2,065 in the six months ended
June 30, 1995. The change is principally a result of the decrease in the
Company's trade accounts and notes receivable. Cash used in investing
activities increased to $5,036 in the six months ended June 30, 1996 as compared
to $1,596 in the same period in 1995. This increase was due to the acquisition
of Fiberoptic Medical Products, Inc. in June 1996 and an increase in product
right payments made pursuant to license agreements.
The Company entered into an amendment to its Secured Revolving Credit
Agreement (the "Credit Agreement") during the second quarter of 1996 which
increased the total commitment from $35,000 to $50,000. This facility may be
used for general corporate purposes, with borrowings limited to a borrowing base
established by a formula. Based on this formula, borrowings under the Credit
Agreement were limited to $34,300 as of June 30, 1996. Balances outstanding
under the Credit Agreement will be due in two installments, $15,000 due in
January, 1998 and any remainder due in June, 1999. This facility is secured by
all accounts receivable, inventory, deposit accounts and all intangible assets
of the Company and contains various covenants, including but not limited to, net
worth and financial ratio requirements. The Company had outstanding borrowings
of $27,500 under its line of credit at interest rates ranging from 6.97% to
8.75% as of June 30, 1996.
The Company believes that its existing cash balances, together with internally
generated funds and remaining amounts available under its Credit Agreement, will
be sufficient to meet the Company's operating capital requirements as well as
commitments under license agreements for at least the next twelve months.
Additional indebtedness and/or equity, in all likelihood, would be needed to
finance possible acquisitions should the Company decide to pursue such
transactions in the future.
11
<PAGE>
As of June 30, 1996, the Company had outstanding commitments for capital
expenditures of approximately $1,800 relating primarily to manufacturing
tooling.
Recent Accounting Pronouncements
- --------------------------------
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation". Had SFAS 121 or SFAS 123 been implemented as of
June 30, 1996 by the Company there would have been no material effect to the
consolidated financial statements.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
----------------------------------------------------
The Company's annual meeting of shareholders was held on May 23, 1996. At
the annual meeting, the Company's shareholders voted on (i) the election of
seven directors and (ii) the approval of the Company's 1996 Stock Option Plan.
The results of the voting were as follows:
<TABLE>
<CAPTION>
(i) Election of Directors
For Vote Withheld
----------- ---------------------
<S> <C> <C>
Craig B. Reynolds 10,462,166 66,445
Parker H. Petit 10,459,653 68,958
J. Terry Dewberry 10,461,667 66,944
Alexander H. Lorch 10,459,680 68,931
J. Leland Strange 10,455,880 72,731
Dr. James J. Wellman 10,454,496 74,115
J. Paul Yokubinas 10,458,211 70,400
</TABLE>
(ii) Approval of the 1996 Stock Option Plan
<TABLE>
<CAPTION>
<S> <C>
For: 9,611,521
Against: 431,862
Abstentions: 91,604
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
The following exhibits are filed as part of this Report:
10.1 License Agreement dated April 4, 1996, between the Company
and Metran Medical Instrument Mfg., Co. Ltd.
10.2 Stock Purchase Agreement dated June 27, 1996, between the
Company and Pasquale J. Costa and Richard W. Holt
10.3 Third Amendment to Amended and Restated Revolving Credit
Agreement dated December 19, 1994, between the Company
and Bank of America National Trust and Savings Association
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1996.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTHDYNE TECHNOLOGIES, INC.
August ___, 1996 By: /s/ M. Wayne Boylston
-------------------------------------
M. Wayne Boylston
Vice President - Finance,
Chief Financial Officer and Treasurer
(duly authorized and
principal financial officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Numbered Page
- -------------- ----------- -------------
10.1 License Agreement dated April 4, 1996,
between the Company and Metran Medical
Instrument Mfg., Co. Ltd.
10.2 Stock Purchase Agreement dated June 27,
1996, between the Company and Pasquale J.
Costa and Richard W. Holt
10.3 Third Amendment to Amended and Restated
Revolving Credit Agreement dated December 19,
1994, between the Company and Bank of America
National Trust and Savings Association
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
15
<PAGE>
EXHIBIT 10.1
LICENSE AGREEMENT
BETWEEN
METRAN MEDICAL INSTRUMENT MFG., CO. LTD.
(HEREINAFTER METRAN)
- AND -
HEALTHDYNE TECHNOLOGIES, INC. OF MARIETTA, GEORGIA, U.S.A.
(HEREINAFTER HDTC)
WHEREAS, Metran is the Owner of the entire right, title and interest
in certain TECHNOLOGY (as defined below); and
WHEREAS, Metran is desirous of entering into a license agreement which
will allow the use of the TECHNOLOGY to expand more quickly in order to bring
the benefits of Products which incorporate the TECHNOLOGY to a larger population
base;
WHEREAS, Metran and HDTC are each desirous of making available low
cost ventilators incorporating the TECHNOLOGY which may be used in a variety of
clinical settings to reduce human suffering and promote increased acceptance of
ventilation modalities incorporating the TECHNOLOGY;
WHEREAS, HDTC is desirous of obtaining a license as further described
herein to the TECHNOLOGY (as hereinafter defined) and to certain Products (as
hereinafter defined); and
WHEREAS, Metran is desirous of granting such a license to HDTC in
accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter contained, the parties agree with each other as follows:
1.0 DEFINITIONS
1.1 AFFILIATES shall mean any company, corporation, or business
("Company") in which:
(a) the party owns or controls, directly or indirectly, 50% or
more of the voting stock of that Company;
(b) the party owns or controls, directly or indirectly,
sufficient voting stock in that Company to elect a majority
of the directors of that Company;
(c) that Company owns or controls, directly or indirectly, 50%
or more of the voting stock of the party;
(d) that Company owns or controls, directly or indirectly,
sufficient voting stock in the party to elect a majority of
the directors of the party;
<PAGE>
(e) an organization owns or controls, directly or indirectly,
50% or more of the voting stock of the party and that
Company; or
(f) an organization owns or controls, directly or indirectly,
sufficient voting stock in the party and that Company to
elect a majority of the directors of the party and that
Company.
1.2 BREATH DELIVERY SYSTEM shall mean the inspiration system, the
expiration system, the safety valve, the accumulator, the
condensate management and the oxygen mixing system for the PUMP
VENTILATOR (as hereinafter defined).
1.3 CONTROL ALGORITHMS means the logical rules and transfer functions
that control the BREATH DELIVERY SYSTEM and determine the flows
and pressures delivered by the PUMP VENTILATOR. These CONTROL
ALGORITHMS shall run in the VISSIM development language under
Windows on an IBM compatible PC.
1.4 CONTROLLER ELECTRONICS means the CPU Unit, memory board unit,
motor drive board unit(s) and interface electronics for the PUMP
VENTILATOR. The memory shall be expandable up to eight (8)
megabytes of RAM and four (4) megabytes of FLASH memory. The
CONTROLLER ELECTRONICS shall include the capability for
separately designed circuitry to reset and disable the CPU. In
addition, a watchdog timer function and a bus time-out function
shall be incorporated into the CONTROLLER ELECTRONICS, along with
a separately designed board that interfaces to a PCMCIA card.
1.5 DESIGN VERIFICATION means the HDTC process that demonstrates that
the hardware and software design each meet the design
requirements for the specific component, subsystem or device.
DESIGN VERIFICATION includes software verification in accordance
with good manufacturing practices ("GMP") established by the
United States Food and Drug Administration ("FDA") and shall be
in English and include all documentation for hardware and
software in the Design History File maintained in accordance with
FDA GMP.
1.6 INFORMATION means any and all present and future information
related to the PATENT RIGHTS, LICENSED PRODUCTS, LICENSED
PROCESSES, TECHNOLOGY or the NEW INTELLECTUAL PROPERTY RIGHTS,
including, but not limited to, any and all designs, products,
TECHNOLOGY, concepts, ideas, technical or operating data,
software, source codes, hardware, engineering records,
schematics, improvements, modifications, techniques, processes,
practices, knowledge, know-how, skill, experience, test data,
manufacturing, marketing, sales and distribution data or other
documentation relating to the design, development, manufacture,
assembly, sub-license, modification, sale, commercialization,
distribution or use of products relating to adult, pediatric or
neonatal mechanical ventilation possessed by, known to Metran,
its employees, subcontractors or Kazufuku Nitta, or any
Improvements (as hereinafter defined) to any of the foregoing.
1.7 INITIAL PRODUCT SPECIFICATIONS mean the PRODUCT SPECIFICATIONS as
set out and described in Attachment A for the PUMP VENTILATOR.
2
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INITIAL PRODUCT SPECIFICATIONS for the Humming Vbeta conventional
ventilator and the HM6 conventional ventilator have been
previously provided to Metran in writing. INITIAL PRODUCT
SPECIFICATIONS for the HM6 high frequency oscillation ventilator,
the Humming Vbeta high frequency oscillation ventilator and the
piston ventilator will be supplied to Metran by HDTC in writing.
1.8 LICENSED PROCESSES shall mean the processes utilizing the
TECHNOLOGY or claimed in PATENT RIGHTS.
1.9 LICENSED PRODUCTS shall mean products utilizing the TECHNOLOGY or
PATENT RIGHTS or products made in accordance with or by means of
LICENSED PROCESSES.
1.10 PATENT RIGHTS shall mean any patents filed by a party relating to
the TECHNOLOGY, the inventions described and claimed therein, and
any divisions, patents of addition, continuations, continuations-
in-part, extensions, patents issuing thereon or reissues or re-
examinations thereof; and any and all foreign patents and patent
applications corresponding thereto; which will be automatically
incorporated in and added to this Agreement and shall
periodically be added to Appendix A attached to this Agreement
and made a part thereof.
1.11 MANUFACTURING TRANSFER means the process that transfers the
design into manufacturing and assures that the design basis for
the device and its components have been correctly translated into
production specifications and processes. When this activity is
complete, the design can be released to full-scale production.
Unless otherwise indicated, MANUFACTURING TRANSFER includes
delivery of the Device Master Record maintained in English and in
accordance with FDA GMP, including, but not limited to, the final
Design History File, manufacturing processes, test procedures,
test equipment and documentation.
1.12 NEW INTELLECTUAL PROPERTY RIGHTS means any patent right,
copyright, trade secret or similar right arising out of or in any
way connected with the TECHNOLOGY or INFORMATION including:
(a) patent applications filed by Metran with respect to any
TECHNOLOGY or INFORMATION;
(b) any divisions, patents of addition, continuations in part,
extensions, reissues and re-examinations of the PATENT
RIGHTS or patent applications referred to in (a) hereof;
(c) any patent applications based upon or with the priority date
of the PATENT RIGHTS, or any patent applications referred to
in clauses (a) and (b) hereof.
1.13 PRODUCT SPECIFICATION means a document that describes the
requirements that must be met by the product. It includes the
device performance specifications, features, required
reliability, accuracy, safety requirements, and together with
high frequency oscillation and conventional ventilator
TECHNOLOGY.
3
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1.14 PUMP means the air source for the PUMP VENTILATOR that when
combined with the BREATH DELIVERY SYSTEM is capable of meeting
the pressure and flow requirements set forth in the INITIAL
PRODUCT SPECIFICATIONS for the PUMP VENTILATOR.
1.15 PUMP VENTILATOR shall mean the product incorporating the BREATH
DELIVERY SYSTEM, CONTROL ALGORITHMS, CONTROLLER ELECTRONICS, and
PUMP which meets the INITIAL PRODUCT SPECIFICATIONS described in
Attachment A which is attached hereto and incorporated herein by
reference (as modified in writing in the final PRODUCT
SPECIFICATIONS).
1.16 QUALITY SYSTEM means the system of policies and procedures that
consist of design control, document control, change control, non-
conforming control, production and process control, and auditing,
monitoring and overall management of product design,
manufacturing and medical device facility in accordance with FDA
GMP.
1.17 SOFTWARE DEVELOPMENT PLAN means the HDTC plan that defines the
overall project plan for how the software will be developed. It
details the elements of the design phases. The SOFTWARE
DEVELOPMENT Plan will be written in English by METRAN, proposed
to HDTC by METRAN and approved by HDTC.
1.18 SOFTWARE TEST PLAN means the HDTC document that contains the
overall test plan for the device software. The SOFTWARE TEST PLAN
will be written in English by METRAN, proposed to HDTC by METRAN
and approved by HDTC.
1.19 TERRITORY means the exclusive license for the PUMP VENTILATOR and
the piston delivery system Worldwide. For all other LICENSED
PRODUCTS other than the PUMP VENTILATOR, TERRITORY shall be
divided into three (3) categories: (a) Territory 1 which shall
include Japan and Vietnam for which no license shall be granted
hereunder; (b) Territory 2 which shall include Korea, Taiwan,
Hong Kong, China, Australia and Thailand, for which Metran shall
grant a non-exclusive license to HDTC, i.e., a license shall be
----
granted to HDTC as hereinafter provided, but Metran shall retain
a non-exclusive right to such other LICENSED PRODUCTS within
Territory 2; and (c) Territory 3 which shall include the rest of
the World other than Territory 1 and Territory 2, for which
Metran shall grant an exclusive license to HDTC for such other
LICENSED PRODUCTS (with the sole exception of the license granted
for the Humming V for which the grant of the license in Territory
3 shall be nonexclusive).
1.20 TECHNOLOGY shall mean any and all PATENT RIGHTS, LICENSED
PRODUCTS, LICENSED PROCESSES, INFORMATION, NEW INTELLECTUAL
PROPERTY RIGHTS and any VALID CLAIMS.
1.21 VALID CLAIM means a claim of any issued and unexpired patent
included within the PATENT RIGHTS or the NEW INTELLECTUAL
PROPERTY RIGHTS, which claim has not been held unenforceable,
unpatentable or invalid by a decision of a court or governmental
4
<PAGE>
body of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, which has not been rendered
unenforceable through disclaimer or otherwise, and which has not
been lost through an interference proceeding or by abandonment.
1.22 INFORMATION, LICENSED PROCESSES, LICENSED PRODUCTS, PATENT
RIGHTS, NEW INTELLECTUAL PROPERTY RIGHTS, TECHNOLOGY AND VALID
CLAIMS shall not be construed to include accessories to
mechanical ventilation products such as breathing circuits,
humidification equipment and disposable accessory products.
2.0 GRANT OF LICENSE
2.1 Subject to the terms and conditions hereinafter set forth, Metran
hereby grants to HDTC a perpetual license to the TECHNOLOGY in
the TERRITORY, with exclusivity as set forth in the definition of
TERRITORY; said grant specifically including the right to design,
make, manufacture, assemble, modify, use, sub-license,
commercialize, distribute, sell or have made for it, the
TECHNOLOGY and/or LICENSED PRODUCTS, including all Improvements
(as defined in Section 7).
For purposes of license fees, delivery of LICENSED PRODUCTS, and
termination rights and remedies, the grant of the License is
separated into three (3) categories:
(a) Core TECHNOLOGY. The rights in the TERRITORY as set forth
---------------
above to the TECHNOLOGY, including but not limited to the
PUMP, BREATH DELIVERY SYSTEM, CONTROL ALGORITHMS, CONTROLLER
ELECTRONICS, proportional pressure support ventilation
TECHNOLOGY (also known as natural support ventilation)("PPS
TECHNOLOGY") the piston delivery TECHNOLOGY, high frequency
oscillation ventilator TECHNOLOGY, conventional ventilator
TECHNOLOGY and blower based ventilator TECHNOLOGY. For
avoidance of doubt, the grant of the perpetual license to
the Core TECHNOLOGY described above shall be an exclusive
Worldwide license as it relates to the PUMP VENTILATOR and
any other mechanical ventilators which are designed
primarily for markets other than acute care hospital
settings, e.g., PPS TECHNOLOGY and blower based TECHNOLOGY
----
used in conjunction with or as an alternative power drive
source for a product with the features and performing the
functions of the PUMP VENTILATOR. The grant of the license
to the Core TECHNOLOGY shall otherwise be exclusive or non-
exclusive as set forth in the definition of TERRITORY.
(b) PUMP VENTILATOR and Piston Delivery System. The exclusive
------------------------------------------
rights Worldwide as set forth above to the PUMP VENTILATOR
and the Piston Delivery System.
(c) Humming Vbeta, HM6 and Humming V. The rights in the
--------------------------------
TERRITORY as set forth above to Metran's Humming Vbeta, HM6
and Humming V together with high frequency oscillation and
conventional ventilator TECHNOLOGY.
5
<PAGE>
2.2 HDTC shall promote the commercialization of the LICENSED PRODUCTS
in the TERRITORY, and, in connection therewith, HDTC may grant
sub-licenses of the license granted hereunder. Subject to the
provisions set forth in Section 8 hereof, HDTC may also make such
other arrangements, contracts or agreements involving disclosure
of proprietary TECHNOLOGY to promote the commercialization of the
TECHNOLOGY in the TERRITORY.
3.0 PATENT FILINGS AND MAINTENANCE/U.S. REGULATORY APPROVALS
3.1 Metran, at its expense, will own, file, prosecute and bear all up
front and maintenance costs for the PATENT RIGHTS to the HM6 and
Humming Vbeta in Japan and Vietnam.
3.2 HDTC, at HDTC's expense, shall own, file, prosecute and bear all
up front and maintenance costs for PATENT RIGHTS which HDTC
believes would be beneficial to obtain (i) in all countries for
the PUMP VENTILATOR; and (ii) in all countries other than Japan
and Vietnam for all other LICENSED PRODUCTS. Metran agrees to
cooperate and do and cause others to do all things reasonably
possible to assist HDTC in its efforts to obtain such PATENT
RIGHTS. In the event Metran or HDTC wishes to obtain PATENT
RIGHTS to a LICENSED PRODUCT (other than the PUMP VENTILATOR) in
Territory 2, such party shall so notify the other party; and the
party wishing to obtain such PATENT RIGHTS shall, at its expense,
file, prosecute and bear all up front and maintenance costs for
PATENT RIGHTS in Territory 2. Any such PATENT RIGHTS in Territory
2 shall be in the name of both Metran and HDTC.
3.3 In the event HDTC determines that it is desirable to seek
appropriate regulatory approvals (i) in any country for the PUMP
VENTILATOR; and (ii) in all countries other than Japan and
Vietnam for all other LICENSED PRODUCTS, HDTC shall be
responsible for obtaining all appropriate regulatory approvals in
any such country for such LICENSED PRODUCTS. In the event Metran
or HDTC wishes to obtain regulatory approvals for a LICENSED
PRODUCT (other than the PUMP VENTILATOR) in Territory 2, such
party shall so notify the other party; and the party wishing to
obtain such regulatory approvals, at its expense, shall obtain
all such regulatory approvals in Territory 2.
4.0 INFRINGEMENT
4.1 In the event that HDTC believes a third party to be infringing
one or more of the PATENT RIGHTS or HDTC's exclusive license
granted hereunder ("License Rights"), HDTC shall bring such
infringement to the attention of Metran. If Metran does not
institute infringement proceedings against such third party
within ninety (90) days after written notice from HDTC that such
third party appears to be infringing one or more of the PATENT
RIGHTS or License Rights, HDTC shall have the right to take
whatever steps in its own and sole discretion it shall deem
advisable, including but not limited to, settlement or the filing
of suit for damages, or to enjoin such sales or offers for sale
by such third party.
In the event that HDTC exercises its discretion to bring an
infringement action, Metran shall perform all acts which may
become necessary or desirable to vest in HDTC the right to
institute any such suit and shall, upon reasonable notice,
cooperate and, to the extent deemed necessary or desirable by
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<PAGE>
HDTC and at HDTC's expense, participate in any suit to enjoin
such infringement and to collect, for the benefit of HDTC,
damages, profits and awards of any nature recoverable for such
infringement. In the event the third party infringer is a
licensee of Metran, Metran agrees to take all actions reasonably
requested by HDTC to require such licensee to cease such
infringement and recoup damages, profits and awards of any nature
recoverable for such infringement; such action by Metran may
include, but is not limited to, termination of the license of the
infringing licensee. The costs and expenses of such suit or
settlement shall be borne by HDTC. Recovery of damages in any
such suit or settlement with any third party shall inure to the
benefit of HDTC.
4.2 (a) If an action is brought against HDTC for alleged
infringement and an injunction is sought prohibiting
manufacture or sale of a product utilizing the TECHNOLOGY,
then HDTC shall notify Metran and Metran shall perform all
acts which may become necessary or desirable in HDTC's
defense of the action, and Metran shall upon reasonable
notice, cooperate and, to the extent deemed necessary or
desirable by HDTC, and at HDTC's expense, participate in the
defense of the action.
(b) In the event of a successful action for infringement, Metran
and HDTC shall determine whether the alleged infringement is
as a result of HDTC relying upon the TECHNOLOGY as described
herein. In the event that the alleged infringement is
exclusively as a result of HDTC so relying upon the
TECHNOLOGY, then any damages or ongoing payment ordered by
the Court to be paid by HDTC to the plaintiff will be paid
by Metran not to exceed the amount of license fees paid by
HDTC to Metran hereunder (excluding only those license fees
set forth in Section 6.2).
(c) If an infringement action is brought against HDTC and the
alleged infringement is based partly upon the TECHNOLOGY as
described herein and partially upon modification or changes
to the product incorporated by HDTC, then HDTC and Metran
shall bear the amounts to be paid to the plaintiff for
damages or on-going payments, proportionately. The
proportions shall be determined by binding arbitration
pursuant to the rules of the American Arbitration
Association, such arbitration to be conducted in Georgia,
U.S.A. but in no such circumstance shall Metran be liable to
contribute amounts in excess of the amount of license fees
paid by HDTC to Metran hereunder (excluding only those
license fees set forth in Section 6.2).
5.0 AUTHORITY OF METRAN TO GRANT LICENSES AND RIGHTS TO HDTC
Metran covenants with and represents and warrants to HDTC that Metran has good
right, full title and ownership of the TECHNOLOGY and PATENT RIGHTS. Metran
further covenants with, and represents and warrants to HDTC that Metran has good
right, full power and absolute authority to grant the licenses and rights to the
TECHNOLOGY as provided in Section 2. Metran has no knowledge of any liens,
encumbrances or claims of any nature respecting the TECHNOLOGY, and Metran is
not aware of any suit or litigation pending or commenced which may affect
Metran's ability to grant the license or rights pursuant to Section 2 hereof.
7
<PAGE>
6.0 LICENSE FEES
6.1 Core TECHNOLOGY. HDTC shall pay Metran licensing fees for the
---------------
Core TECHNOLOGY set forth in Section 2(a): $100,000 upon the
execution of this Agreement, $50,000 upon delivery of the
prototype of the PUMP, $50,000 upon delivery of the BREATH
DELIVERY SYSTEM, $50,000 upon delivery of the prototype of the
CONTROLLER ELECTRONICS and $50,000 upon delivery of the final
CONTROL ALGORITHMS to HDTC. Upon payment of such license fees,
HDTC shall have a fully paid up license in perpetuity to the Core
TECHNOLOGY as set forth in 2.1(a).
6.2 PUMP VENTILATOR and Piston Delivery System. HDTC shall pay
------------------------------------------
Metran licensing fees for the PUMP VENTILATOR and the piston
delivery system as set forth in Section 2(b): $450,000 upon
execution of the Agreement and $180,000 each month thereafter for
twelve (12) consecutive months. In the event Metran fails to
deliver the PUMP VENTILATOR to Healthdyne in accordance with
Section 9.2 hereof on or before March 31, 1997, the twelfth
(12th) payment of $180,000.00 will be forfeited. HDTC shall pay
Metran licensing fees of $50,000 when the DESIGN VERIFICATION of
the piston delivery system for the PUMP VENTILATOR is complete.
6.3 Humming Vbeta; HM6 and Humming V. HDTC shall pay Metran
--------------------------------
licensing fees for the Humming V and LICENSED PRODUCTS performing
the essential functions of Metran's Humming Vbeta and the HM6 as
set forth in Section 2(c) (per milestones described below):
(a) $100,000 upon execution of the Agreement.
(b) $50,000 when the PRODUCT SPECIFICATIONS for the HM6 have been
completed for both high frequency oscillation and
conventional ventilation.
(c) $50,000 when the PRODUCT SPECIFICATIONS for the Humming Vbeta
have been completed for both high frequency oscillation and
conventional ventilation.
(d) $450,000 when a SOFTWARE DEVELOPMENT Plan and a SOFTWARE TEST
PLAN for the Humming Vbeta and the HM6 have been completed
for both high frequency oscillation and conventional
ventilation.
(e) $500,000 when the conventional HM6 ventilator DESIGN
VERIFICATION is completed.
(f) $500,000 when the conventional Humming Vbeta ventilator
DESIGN VERIFICATION is completed.
(g) $50,000 when the high frequency oscillation DESIGN
VERIFICATION for the Humming Vbeta ventilator is completed.
(h) $50,000 when the high frequency oscillation DESIGN
VERIFICATION of the HM6 is completed.
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(i) $100,000 when the MANUFACTURING TRANSFER of the Humming Vbeta
is complete for both high frequency oscillation and
conventional ventilation. The MANUFACTURING TRANSFER shall
include the final Design History File but shall not otherwise
include items in the Device Master Record.
(j) $100,000 when the MANUFACTURING TRANSFER of the HM6 is
complete for both high frequency oscillation and conventional
ventilation. The MANUFACTURING TRANSFER shall include the
final Design History File but shall not otherwise include
items in the Device Master Record.
7.0 IMPROVEMENTS
7.1 If, during the first ten (10) years of this Agreement, either
party shall discover, acquire or invent an improvement
(hereinafter called the "Improvement") to the TECHNOLOGY, such
party agrees to promptly disclose to the other party and furnish
to the other party all INFORMATION pertaining thereto, including
but not limited to hardware, software, mechanical design,
blueprints, sketches, drawings, designs, computer programs, and
other data.
HDTC and Metran shall, to the best of their ability, cause its
employees and subcontractors (and such subcontractor's employees)
to disclose only to HDTC and Metran any Improvement made or
developed by them or any of them during the first ten (10) years
of this Agreement and to inform the other party of such
Improvement. During the term of this Agreement, HDTC may use such
Improvements as are discovered or invented by Metran only in
conjunction with the TECHNOLOGY and only for the purposes
contemplated by this Agreement. Metran shall promptly disclose to
HDTC any Improvement upon the TECHNOLOGY Metran makes during the
first ten (10) years of this Agreement within a reasonable time
and such discovery or invention shall be deemed to be part of the
licensed subject matter for all purposes of this Agreement.
Notwithstanding the foregoing, the design by HDTC either before
or after the date of this Agreement of mechanical or electrical
hardware or software to be utilized in connection with the
TECHNOLOGY or enhancements or revisions to the TECHNOLOGY shall
not be considered to be an Improvement or a New Intellectual
Property Right and title thereto shall reside with HDTC.
In the event during the term of the Agreement that both HDTC and
Metran are both involved to a significant extent in the joint
development of such hardware, enhancement or revisions, then
ownership shall reside with both parties and both parties shall
be entitled to utilize the same without the payment of any
royalty of any nature; provided, however, that Metran shall not
make any commercial use thereof if the same competes with any
product of HDTC utilizing the TECHNOLOGY in the TERRITORY.
7.2 If Metran licenses the TECHNOLOGY together with any Improvements
discovered or invented by HDTC, with HDTC permission, to a third
party either during or after the term of this Agreement, HDTC
will be entitled to such portion of the payments made to Metran
as is proportionate to the value of the Improvement to the value
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<PAGE>
of the TECHNOLOGY. If the parties are unable to agree as to the
relative values or as to the sharing of payments, then the matter
will be subject to binding arbitration pursuant to the rules of
the American Arbitration Association; such arbitration to be held
in Georgia, U.S.A.
8.0 CONFIDENTIALITY
(a) Except to the extent expressly authorized by this Agreement, the
parties shall, for the term of the licenses granted pursuant to
Section 2 and for five (5) years thereafter, keep completely
confidential and shall not publish or otherwise disclose and
shall not use for any purpose not contemplated by this Agreement,
any Trade Secrets or Confidential Information that is disclosed
to it by the other party. Metran shall cause each of its
employees and shall cause its subcontractors and each of its
subcontractors' employees to execute a confidentiality agreement,
the form and substance of which shall be reasonably acceptable to
HDTC.
(b) Subsection (a) shall not apply to Trade Secrets or Confidential
Information that either party can establish is or becomes part of
the public domain other than by disclosure by a party in breach
of this Agreement.
(c) The parties may disclose Confidential Information related to the
LICENSED PRODUCTS to the extent such disclosure is reasonably
required:
(i) to comply with applicable government regulations; or
(ii) in judicial or administrative proceedings; or
(iii) for the exercise of its rights or licenses under this
Agreement, provided, however, that any such disclosure
shall only be made pursuant to a confidentiality
agreement coextensive with the terms of this Section 8.0.
(d) For purposes of this Agreement, "Trade Secrets" means information
including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans,
product plans or lists of actual or potential customers or
suppliers which (1) derives economic value, actual or potential,
from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (2) is the subject
of efforts that are reasonable under the circumstances to
maintain its secrecy. The provisions in this Agreement
restricting the use of Trade Secrets shall survive termination of
this Agreement for so long as is permitted by the Georgia Trade
Secrets Act of 1990, O.C.G.A. (S)(S) 10-1-760-10-1-767.
"Confidential Information" means data and information relating to
the business of a party (which does not rise to the status of a
Trade Secret) which is or has been disclosed to the other party
or of which the other party became aware as a consequence of or
through its relationship to the disclosing party and which has
value to the disclosing party and is not generally known to its
competitors. The provisions in this Agreement restricting the use
of Confidential Information shall survive for a period of five
(5) years following termination of this Agreement.
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9.0 PRODUCTS AND CAPITAL EQUIPMENT TO BE DELIVERED.
9.1 CORE TECHNOLOGY. Metran shall deliver to HDTC the Core
----------------
TECHNOLOGY described in Section 2(a) as follows:
(1) PUMP. Metran shall deliver the prototype PUMP with the
----
PUMP DESIGN VERIFICATION completed to HDTC within six (6) months
following the execution of this Agreement by all parties.
(2) BREATH DELIVERY SYSTEM. Metran shall deliver the initial
----------------------
Oxygen Mixing System, the inspiration, expiration and safety
valves to be incorporated in to the BREATH DELIVERY SYSTEM to
HDTC within two (2) months of the execution of this Agreement by
all parties. The final BREATH DELIVERY SYSTEM shall be delivered
to HDTC by Metran within six (6) months following the execution
of this Agreement by all parties.;
(3) CONTROL ALGORITHMS. Metran shall deliver the initial
------------------
CONTROL ALGORITHMS to HDTC within one month following execution
of this Agreement by all parties;
(4) CONTROLLER ELECTRONICS. Metran shall deliver the
prototype for the CONTROLLER ELECTRONICS to HDTC between May 1,
1996 and June 1, 1996;
(5) Metran shall deliver the existing PPS TECHNOLOGY and
blower based ventilator TECHNOLOGY to HDTC within sixty (60) days
following the execution of this Agreement by all parties;
(6) Metran shall deliver one HM6 engineering breadboard to
HDTC within one month following the execution of this Agreement
by all parties.
(7) Metran shall deliver to HDTC its existing TECHNOLOGY for
use with any Licensed Product (whether or not such TECHNOLOGY is
part of a future deliverable to HDTC hereunder) within sixty (60)
days of a written request by HDTC.
9.2 PUMP VENTILATOR and Piston Delivery System. Metran shall deliver
------------------------------------------
to HDTC the following with respect to the Piston Delivery System
and the PUMP VENTILATOR:
(1) Metran shall deliver to HDTC within twelve (12)
months of the execution of this Agreement:
. The complete Manufacturing Transfer and final
Device Master Record for the PUMP VENTILATOR and all
INFORMATION relating thereto;
. Access to Engineering personnel experienced with
the TECHNOLOGY to assist in the MANUFACTURING TRANSFER from
Metran to HDTC; in connection therewith, Metran agrees to
11
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use its best efforts to make such personnel available for
hire by HDTC and, to that end, agrees to waive (or cause its
subcontractors to waive) any provision in any employment-
related agreement which would prevent the hire of such
personnel or restrict such personnel's employment by HDTC in
any manner;
. Metran shall deliver to HDTC a QUALITY SYSTEM for
the PUMP VENTILATOR.
(2) Metran shall deliver the DESIGN VERIFICATION for the
piston delivery system on or before October 1, 1997.
.
9.3 Humming Vbeta, HM6 and Humming V. Metran shall deliver one (1)
--------------------------------
Humming V ventilator to HDTC within sixty (60) days of the
execution of this Agreement by all parties and shall deliver upon
request all existing and available product documentation on the
Humming V including assembly drawings, bills of materials,
engineering component drawings, electrical schematics, software,
hardware, reports, test results, drawings, models, prototypes and
other similar documentation. Metran shall deliver the
MANUFACTURING TRANSFER of the Humming Vbeta and HM6 for both high
frequency oscillation and conventional ventilation on or before
October 1, 1997. The MANUFACTURING TRANSFER shall include the
final design history file but shall not otherwise include items
contained in the Device Master Record.
9.4 Capital Equipment. It is contemplated that HDTC shall pay Metran
-----------------
for the cost of the manufacturing and test equipment purchased by
Metran for use in the FDA registered facility for the manufacture
of the PUMP VENTILATOR. Prior to Metran purchases of such
manufacturing and test equipment for which Metran would seek
payment hereunder, Metran shall provide HDTC with a schedule of
such capital equipment and the cost thereof and shall receive
HDTC's prior written approval for such purchases as a pre-
condition for seeking payment from HDTC for such capital
equipment hereunder. The estimated cost of all such capital
equipment is approximately One Million Four Hundred Thousand
Dollars ($1,400,000). All rights, title and interest to the
capital equipment shall remain with HDTC and each item shall be
stamped, painted or legibly marked "Property of Healthdyne
Technologies", and shall be stored separately when not in use.
Metran shall provide HDTC with a list and location for all such
capital equipment. Such capital equipment shall be used by Metran
or Metran's subcontractors exclusively in connection with
Metran's performance of the Agreement. Metran and Metran's
subcontractors shall be responsible for the protection,
calibration, maintenance, and care of such capital equipment. The
capital equipment shall be subject to surveillance inspection and
shall be returned upon request to HDTC.
9.5 Periodic Meetings. Metran and HDTC agree to meet periodically to
-----------------
review the status of the deliverables under this Section 9.
10.0 RELATED TECHNOLOGY
10.1 Metran hereby grants to HDTC the exclusive option to acquire an
exclusive worldwide license, on substantially the same terms and
conditions, as are set out in this License Agreement to any
medical TECHNOLOGY and intellectual property for which Metran has
12
<PAGE>
right and authority to grant licenses that may be conceived,
invented, reduced to practice, or otherwise come into existence
subsequent to the date of this Agreement by Metran.
10.2 HDTC shall have a three (3) month period after such notification
in which to exercise in writing its option to obtain such
license. Thereafter, Metran may license such development to any
third party on terms no more favorable than those offered to
HDTC. If Metran proposes to offer more favorable terms to a third
party, then HDTC shall be notified of the more favorable terms
and shall have a thirty (30) day period to accept the new terms
after which period Metran may enter into a license with a third
party. For the purposes of clarity, Metran may only enter into a
license with a third party for any related TECHNOLOGY after HDTC
has had the opportunity to accept the license on equivalent or
better terms.
11.0 INDEMNIFICATION
HDTC shall hold Metran free and harmless from liability or responsibility in
connection with claims of any person or persons caused by or arising out of any
defect in or failure of any LICENSED PRODUCT or component of a Licensed Product
manufactured hereunder by HDTC or by any HDTC sub-licensee (with the sole
exception of those LICENSED PRODUCTS or components manufactured by or through
contract with Metran). HDTC further agrees to reimburse Metran for any claims
paid by Metran in good faith under any order of any court to any person with
respect to any defect in or failure of any LICENSED PRODUCTS or component
manufactured hereunder by HDTC or any one or more of HDTC's sub-licensees (with
the sole exception of those LICENSED PRODUCTS or components manufactured by or
through contract with Metran). Metran agrees to inform HDTC about any claim or
action made against Metran for which it may seek indemnification hereunder to
the extent that Metran is notified about such claims or actions and to permit
HDTC to assume the defense thereof. HDTC further agrees to hold Metran free and
harmless from liability or responsibility in connection with claims of any
person or persons arising out of any employment arrangement entered into by
Metran or any of its subcontractors in order to deliver the LICENSED PRODUCTS
set forth in Section 9.2 hereof. Metran agrees to inform HDTC about any claim
or action made against Metran or Metran's subcontractor's for which Metran may
seek indemnification hereunder and to permit HDTC to assume the defense thereof.
12.0 RECORDS
HDTC agrees to keep full, accurate and complete records and books of account
respecting the license hereunder and with respect to each sub-license granted by
HDTC to third parties.
13.0 INTENTIONALLY LEFT BLANK
14.0 TERMINATION
Metran may terminate this Agreement in its entirety by written notice to HDTC
upon the winding-up, liquidation or bankruptcy of HDTC, whether voluntary or
involuntary. Metran may terminate one of the licenses granted in Section 2.1(a),
2.1(b) or 2.1(c) hereof upon the failure or refusal of HDTC to make payment to
Metran of the license fees or to provide records or reports required hereunder
with respect to such license or the default by HDTC in the performance of any of
its obligations under this Agreement with respect to such license. Metran shall
give written notice to HDTC specifying the particulars of such failure, refusal
or default and, in the event that HDTC shall not commence to remedy such
failure, refusal or default within sixty (60) days after receipt of such notice
and to diligently and continuously pursue such remedy, Metran may at its option
either terminate this Agreement with respect to such license by giving sixty
13
<PAGE>
(60) days prior written notice to HDTC to that effect or proceed to enforce the
default obligation of HDTC by any available means at law or in equity. It is
the intent of the parties that the termination provisions with respect to the
licenses granted in Section 2.1(a), 2.1(b) or 2.1(c) shall operate independently
and that, except as specifically provided below, a termination of one license
shall not affect or terminate either of the two other license grants; provided,
however, in the event Metran terminates either of the licenses set forth in
Section 2.1(b) or 2.1(c) hereof, Metran shall be granted a non-exclusive license
to that portion of the core TECHNOLOGY applicable to such terminated license
grant.
HDTC may terminate this Agreement in its entirety by written notice to Metran
upon the winding-up, liquidation or bankruptcy of Metran, whether voluntary or
involuntary. Healthdyne may terminate one of the licenses granted in Section
2.1(a), 2.1(b) or 2.1(c) hereof upon the failure or refusal of Metran to perform
any obligation required hereunder or upon the default in the performance by
Metran of any agreement, covenant, representation, warranty or obligation
hereunder with respect to such license. HDTC shall give written notice to
Metran specifying the particulars of such failure, refusal or default and, in
the event Metran shall not commence to remedy such failure, refusal or default
within sixty (60) days after receipt of such notice and to diligently and
continuously pursue such remedy, HDTC may at its option either terminate this
Agreement with respect to such license by giving sixty (60) days prior written
notice to Metran to that effect and/or to proceed to enforce the default
obligation of Metran by any available means at law or in equity.
It is the intent of the parties that the termination provisions with respect to
the licenses granted in Section 2.1(a), 2.1(b) or 2.1(c) shall operate
independently and that a termination of one license by Healthdyne shall not
terminate either of the other license grants.
In the event HDTC terminates this Agreement or terminates the grant of a license
pursuant to this Section, it shall retain a perpetual license to the TECHNOLOGY
with exclusivity as set forth in the TERRITORY, and Metran shall deliver
immediately upon termination all INFORMATION, LICENSED PROCESSES, PATENT RIGHTS,
NEW INTELLECTUAL PROPERTY RIGHTS, TECHNOLOGY and VALID CLAIMS as related to such
terminated license grant then in the possession of Metran or its subcontractors.
No termination of this Agreement shall affect the right of either party to
enforce any obligation or liability of the other accruing under this Agreement
prior to the effective date of termination thereof.
Notwithstanding the termination of this Agreement for any reason, the provisions
of Section 11 hereof shall continue in full force and effect for a period of ten
(10) years past such termination.
15.0 NOTICES
Any notice or other communication by either party to the other shall be in
writing and shall be given, and be deemed to have been given, if either
delivered personally or, if mailed, five (5) days after mailing, postage
prepaid, registered or certified mail, return receipt requested, addressed as
follows:
14
<PAGE>
METRAN: METRAN MEDICAL INSTRUMENT MFG. CO. LTD.
154, Miyahara-Cho
1 Chome
Omiya-Shi Saitmaken
330 Japan
Attention: Kazufuku Nitta, President
Fax No. 048 (665) 4347
HEALTHDYNE: HEALTHDYNE TECHNOLOGIES, INC.
1255 Kennestone Circle
Marietta, Georgia
U.S.A. 30066
Attention: General Counsel
FAX No: 770-429-2978
Either party may change the address for notice by notifying the other party, in
writing, of the new address.
16.0 MISCELLANEOUS
16.1 This Agreement shall be governed by the laws of the United
States, State of Georgia.
16.2 The waiver of one breach or default under this Agreement shall
not constitute waiver or any subsequent breach or default.
16.3 This Agreement represents the entire Agreement between the
parties and may only be amended in writing by mutual consent of
both parties.
16.4 The provisions contained in this Agreement shall be separately
construed. If any of them is held to be unenforceable, the
remaining provisions shall not be affected, provided the
Agreement remains equitable to both parties without the
unenforceable provision.
16.5 This Agreement may be assigned in whole or in part by HDTC to
an assignee of all or substantially all of the business and
assets of HDTC. It shall otherwise not be assignable by any
party without the prior written consent of the other party.
16.6 In the event of the existence of foreign language versions of
this Agreement, the English language version shall take
precedence.
16.7 The parties shall not use each others name in any advertising
material without the prior written consent of the other party,
which consent may be arbitrarily withheld.
16.8 The parties shall with reasonable diligence take all action, do
all things, attend or cause their representatives to attend all
meetings and execute all further documents, agreements,
assignments and assurances as may be required from time to time
in order to carry out the terms and conditions of this
Agreement in accordance with their true intent.
15
<PAGE>
16.9 This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors and
permitted assigns.
16.10 Notwithstanding any provision of this Agreement to the
contrary, this Agreement and any amendments or modifications
hereto must bear the corporate seal of Healthdyne to be
effective and binding on Healthdyne Technologies.
16.11 This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Facsimile signatures shall be acceptable as originals.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
METRAN MEDICAL INSTRUMENT HEALTHDYNE TECHNOLOGIES, INC.
MFG. CO., LTD..
By: By:
-------------------------------- --------------------------------
Individually and as Craig Reynolds, President & CEO
President of Metran
Date:
-------------------------------
Date:
------------------------------
16
<PAGE>
================================================================================
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
AMONG
HEALTHDYNE TECHNOLOGIES, INC.
PASQUALE J. COSTA
AND
RICHARD W. HOLT
DATED AS OF JUNE 27, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE - SALE AND PURCHASE OF SHARES
1.1 SALE OF SHARES AT THE CLOSING............................. 1
-----------------------------
1.2 PURCHASE PRICE............................................ 1
--------------
1.3 PAYMENT OF PURCHASE PRICE................................. 1
-------------------------
ARTICLE TWO - CLOSING
2.1 CLOSING DATE.............................................. 3
------------
2.2 DELIVERIES OF SELLERS..................................... 3
---------------------
2.3 DELIVERIES OF PURCHASER................................... 3
-----------------------
ARTICLE THREE - ADDITIONAL AGREEMENTS
3.1 CONFIDENTIALITY........................................... 4
---------------
3.2 ACCESS TO PREMISES, RECORDS, PROPERTIES, SUPPLIERS,
---------------------------------------------------
CUSTOMERS AND EMPLOYEES................................... 4
-----------------------
3.3 PUBLICITY................................................. 5
---------
3.4 ACQUISITION PROPOSALS..................................... 5
---------------------
3.5 APPROVALS AND CONSENTS.................................... 5
----------------------
3.6 COOPERATION OF THE PARTIES................................ 5
--------------------------
3.7 EXPENSES.................................................. 5
--------
3.8 BROKERS................................................... 6
-------
3.9 CONSULTING AGREEMENTS..................................... 6
---------------------
3.10 CORPORATE NAMES........................................... 6
---------------
3.11 REDESIGNED WALLABY HALOGEN LIGHT.......................... 6
--------------------------------
3.12 HIGH INTENSITY PRODUCT.................................... 6
----------------------
3.13 BREAK-UP FEES............................................. 6
-------------
3.14 SUPPLY AGREEMENTS......................................... 6
-----------------
3.15 RIGHT TO PRACTICE OPINION................................. 7
-------------------------
3.16 FURTHER ACTION............................................ 7
--------------
ARTICLE FOUR - REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 VALIDITY.................................................. 8
--------
4.2 SCHEDULES................................................. 8
---------
4.3 CORPORATE AND FINANCIAL................................... 8
-----------------------
4.3.1. CORPORATE STATUS................................... 8
----------------
4.3.2 AUTHORITY; NO CONFLICT............................. 9
----------------------
4.3.3 CAPITAL STRUCTURE.................................. 9
-----------------
4.3.4 TITLE TO SHARES.................................... 10
---------------
i
<PAGE>
4.3.5 CORPORATE RECORDS.................................. 10
-----------------
4.3.6 TAXES.............................................. 11
-----
4.3.7 FINANCIAL STATEMENTS............................... 11
--------------------
4.3.8 ACCOUNTS........................................... 12
--------
4.3.9 NOTES AND ACCOUNTS RECEIVABLE...................... 12
-----------------------------
4.3.10 LIABILITIES........................................ 12
-----------
4.3.11 ABSENCE OF CHANGES................................. 13
-----------------
4.3.12 LITIGATION AND PROCEEDINGS......................... 15
--------------------------
4.4 BUSINESS OPERATIONS....................................... 15
-------------------
4.4.1 CUSTOMERS AND ACCOUNTS............................. 15
----------------------
4.4.2 SUPPLIERS.......................................... 15
---------
4.4.3 PERMITS; COMPLIANCE WITH LAW....................... 15
----------------------------
4.4.4 ENVIRONMENTAL...................................... 16
-------------
4.4.5 INSURANCE.......................................... 18
---------
4.5 CONTRACTS; PROPERTIES AND ASSETS.......................... 19
--------------------------------
4.5.1 CONTRACTS AND COMMITMENTS.......................... 19
-------------------------
4.5.2 LICENSES; INTELLECTUAL PROPERTY.................... 19
-------------------------------
4.5.3 TITLE TO PROPERTIES................................ 20
-------------------
4.5.4 CONDITIONS OF PROPERTIES........................... 20
------------------------
4.5.5 REAL PROPERTY AND LEASES........................... 20
------------------------
4.5.6 INVENTORIES........................................ 21
-----------
4.6 EMPLOYEES AND BENEFITS.................................... 21
----------------------
4.6.1 DIRECTORS OR OFFICERS.............................. 21
---------------------
4.6.2 COMPENSATION STRUCTURE............................. 21
----------------------
4.6.3 EMPLOYEE BENEFITS.................................. 22
-----------------
4.6.4 LABOR-RELATED MATTERS.............................. 23
---------------------
4.6.5 TRANSACTIONS WITH MANAGEMENT....................... 23
----------------------------
4.7 OTHER..................................................... 24
-----
4.7.1 APPROVALS AND CONSENTS............................. 24
----------------------
4.7.2 DEFAULT............................................ 24
-------
4.7.3 REPRESENTATIONS AND WARRANTIES..................... 24
------------------------------
ARTICLE FIVE - CONDUCT OF BUSINESS OF FMP PENDING CLOSING
5.1 CONDUCT OF BUSINESS....................................... 25
-------------------
5.2 MAINTENANCE OF PROPERTIES................................. 25
-------------------------
5.3 INSURANCE................................................. 25
---------
5.4 ISSUANCE OF SECURITIES.................................... 25
----------------------
5.5 DIVIDENDS................................................. 25
---------
5.6 AMENDMENT OF CHARTER; CORPORATE EXISTENCE................. 25
-----------------------------------------
5.7 NO ACQUISITIONS........................................... 25
---------------
5.8 DISPOSITION OF ASSETS..................................... 25
---------------------
5.9 COMPENSATION.............................................. 26
------------
5.10 BANKING ARRANGEMENTS...................................... 26
--------------------
ii
<PAGE>
5.11 INDEBTEDNESS.............................................. 26
-------------
5.12 PAYMENT OF DEBT........................................... 26
---------------
5.13 BENEFIT PLANS............................................. 26
-------------
5.14 CONTRACTS................................................. 26
---------
5.15 BOOKS AND RECORDS......................................... 26
-----------------
5.16 OTHER ACTIONS............................................. 26
-------------
5.17 ADVISE OF CHANGES......................................... 27
-----------------
ARTICLE SIX - REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.1 VALIDITY.................................................. 27
--------
6.2 CORPORATE STATUS AND AUTHORITY............................ 27
------------------------------
6.3 DEFAULT................................................... 27
-------
6.4 SECURITIES................................................ 27
----------
6.5 REPRESENTATIONS AND WARRANTIES............................ 27
------------------------------
ARTICLE SEVEN - CONDITIONS TO OBLIGATIONS OF PURCHASER
7.1 REPRESENTATIONS AND WARRANTIES............................ 28
------------------------------
7.2 PERFORMANCE OF AGREEMENTS................................. 28
-------------------------
7.3 CERTIFICATES, RESOLUTIONS, OPINION........................ 28
----------------------------------
7.4 REGULATORY APPROVALS...................................... 28
--------------------
7.5 CONSULTING AGREEMENTS..................................... 28
---------------------
7.6 EMPLOYMENT AGREEMENT...................................... 29
--------------------
7.7 NO INJUNCTIONS............................................ 29
--------------
7.8 CONSENTS AND APPROVALS OF THIRD PARTIES................... 29
---------------------------------------
7.9 RESIGNATIONS AND BOOKS AND RECORDS........................ 29
----------------------------------
7.10 ESTOPPEL CERTIFICATES..................................... 29
---------------------
7.11 OTHER CONSENTS............................................ 29
--------------
7.12 ENVIRONMENTAL AUDITS...................................... 29
--------------------
7.13 SUPPLY AGREEMENTS......................................... 30
-----------------
7.14 PATENT CLEARANCE SEARCH................................... 30
-----------------------
7.15 EVIDENCE REGARDING REPRESENTATIONS AND WARRANTIES......... 30
-------------------------------------------------
7.16 OTHER DOCUMENTS........................................... 30
---------------
ARTICLE EIGHT - CONDITIONS TO OBLIGATIONS OF SELLERS
8.1 REPRESENTATIONS AND WARRANTIES............................ 30
------------------------------
8.2 PERFORMANCE OF AGREEMENTS................................. 30
-------------------------
8.3 CERTIFICATE............................................... 30
-----------
8.4 APPROVALS................................................. 30
---------
8.5 CONSULTING AGREEMENTS..................................... 31
---------------------
8.6 NO INJUNCTIONS............................................ 31
--------------
iii
<PAGE>
ARTICLE NINE - INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLERS................................ 31
--------------------------
9.2 INDEMNIFICATION BY PURCHASER.............................. 32
----------------------------
9.3 THIRD-PARTY CLAIMS........................................ 32
------------------
9.4 OFFSET.................................................... 33
------
ARTICLE TEN - TERMINATION
10.1 MATERIAL ADVERSE CHANGE - FMP............................. 34
-----------------------------
10.2 NONCOMPLIANCE OF SELLERS.................................. 34
------------------------
10.3 NONCOMPLIANCE OF PURCHASER................................ 34
--------------------------
10.4 FAILURE TO DISCLOSE - SELLERS............................. 34
-----------------------------
10.5 FAILURE TO DISCLOSE - PURCHASER........................... 34
-------------------------------
10.6 ADVERSE PROCEEDINGS....................................... 34
-------------------
10.7 TERMINATION DATE.......................................... 34
----------------
ARTICLE ELEVEN - RESTRICTIVE COVENANTS
11.1 DEFINITIONS............................................... 35
-----------
11.2 NON-COMPETITION........................................... 35
---------------
11.3 NON-SOLICITATION.......................................... 35
----------------
11.4 NON-DISCLOSURE............................................ 36
--------------
11.5 GOODWILL.................................................. 36
--------
11.6 ACKNOWLEDGMENTS OF SELLERS................................ 36
--------------------------
ARTICLE TWELVE - MISCELLANEOUS
12.1 SURVIVAL OF REPRESENTATIONS............................... 37
---------------------------
12.2 NOTICES................................................... 37
-------
12.3 ENTIRE AGREEMENT.......................................... 38
----------------
12.4 WAIVER; AMENDMENT......................................... 38
-----------------
12.5 COUNTERPARTS, HEADINGS, ETC............................... 38
---------------------------
12.6 SUCCESSORS AND ASSIGNS.................................... 38
----------------------
12.7 GOVERNING LAW............................................. 39
-------------
12.8 REMEDIES: DAMAGES, INJUNCTIONS AND SPECIFIC PERFORMANCE.. 39
--------------------------------------------------------
12.9 INTERPRETATION............................................ 39
--------------
iv
<PAGE>
Exhibit A-1 Form of Costa Promissory Note
Exhibit A-2 Form of Holt Promissory Note
Exhibit B Form of Costa Consulting Agreement
Exhibit C Form of Holt Consulting Agreement
Schedule 1.2 Allocation of Purchase Price
Schedule 4.3.1 Corporate Status
Schedule 4.3.3 Capital Structure
Schedule 4.3.5 Corporate Records
Schedule 4.3.6 Tax Matters
Schedule 4.3.7 Financial Statements
Schedule 4.3.8 Accounts
Schedule 4.3.10 Liabilities
Schedule 4.3.11 Changes
Schedule 4.3.12 Litigation and Proceedings
Schedule 4.4.1 Customers and Accounts
Schedule 4.4.2 Suppliers
Schedule 4.4.3 Permits
Schedule 4.4.4 Environmental
Schedule 4.4.5 Insurance
Schedule 4.5.1 Contracts and Commitments
Schedule 4.5.2 Licenses; Intellectual Property
Schedule 4.5.3 Exceptions to Title
Schedule 4.5.5 Leases
Schedule 4.5.5 Inventories
Schedule 4.6.1 Officers and Directors
Schedule 4.6.2 Employees and Compensation
Schedule 4.6.3 Employees Benefits
Schedule 4.6.4 Labor-Related Matters
Schedule 4.6.5 Transactions With Management
Schedule 4.7.1 Approvals and Consents
Schedule 11.1 Restricted Territory
v
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 27th day of June, 1996, by and among HEALTHDYNE TECHNOLOGIES, INC., a
Georgia corporation (the "Purchaser"), PASQUALE J. COSTA, a Pennsylvania
resident ("Costa"), and RICHARD W. HOLT, a Pennsylvania resident ("Holt"; Costa
and Holt are sometimes collectively referred to herein as the "Sellers" and
individually as a "Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers own all of the issued and outstanding shares of capital
stock of Fiberoptic Medical Products, Inc., a Pennsylvania corporation ("FMP");
WHEREAS, Sellers desire to sell, and Purchaser desires to purchase, all of
the issued and outstanding shares of capital stock of FMP, all pursuant to the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises, covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE ONE - SALE AND PURCHASE OF SHARES
-----------------------------------------
1.1 SALE OF SHARES AT THE CLOSING. Subject to the terms and conditions
-----------------------------
set forth in this Agreement and on the basis of and in reliance upon the
representations, warranties, obligations and covenants set forth herein, at the
"Closing" (as defined in Section 2.1 hereof), Sellers, and each of them, hereby
agree to sell, assign, transfer, convey and deliver to Purchaser, and Purchaser
hereby agrees to purchase and receive from Sellers, free and clear of any and
all liens, charges, security interests, claims and other encumbrances, all of
the issued and outstanding shares of capital stock of FMP (collectively, the
"Shares").
1.2 PURCHASE PRICE. As consideration for all of the Shares to be
--------------
acquired by Purchaser pursuant to Section 1.1 hereof, Purchaser shall pay to
Sellers the aggregate amount of Three Million Five Hundred Thousand and No/100
Dollars ($3,500,000.00) (the "Purchase Price"). The Purchase Price shall be
paid as provided in Section 1.3 hereof and allocated as provided in Schedule
--------
1.2.
- ----
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable as
-------------------------
follows:
1
<PAGE>
(a) subject to the provisions of Section 3.15 hereof, at the Closing,
Purchaser shall deliver to each of Costa and Holt by wire transfer in
immediately available funds to such banks and accounts in the United States as
shall be designated to Purchaser by Costa and Holt respectively (the "Bank
Accounts") the amount of Seven Hundred Thousand and No/100 Dollars
($700,000.00);
(b) at the Closing, Purchaser shall deliver to each of Costa and Holt
a promissory note in the principal amount of Six Hundred Thousand and No/100
Dollars ($600,000.00) substantially in the forms of Exhibits A-1 and A-2
------------ ---
attached hereto (collectively, the "Notes");
(c) within thirty (30) days following the "commercial introduction"
(as defined in Section 3.11) of the "Wallaby Light" (as defined in Section
3.11), Purchaser shall deliver to each of Costa and Holt by wire transfer in
immediately available funds to the Bank Accounts the amount of Two Hundred
Twenty-Five Thousand and No/100 Dollars ($225,000.00) (the "Wallaby Payments");
provided, however, that in the event Purchaser decides in its discretion not to
- -------- -------
complete the commercial introduction of the Wallaby Light, Purchaser shall,
within thirty (30) days of such decision, deliver to each of Costa and Holt by
wire transfer in immediately available funds to the Bank Accounts the Wallaby
Payments; provided further, that in the event (i) Purchaser has not completed
-------- -------
the commercial introduction of the Wallaby Light by that date which is two (2)
years following the Closing Date, and (ii) Purchaser is unable to reasonably
demonstrate that it is continuing to pursue commercial introduction of the
Wallaby Light, it shall be presumed that Purchaser has decided not to complete
the commercial introduction of the Wallaby Light, and Purchaser shall within
thirty (30) days thereafter deliver to Costa and Holt in immediately available
funds to the Bank Accounts the Wallaby Payments.
(d) within thirty (30) days following receipt by FMP of a 510K
clearance and approval letter from the United States Food and Drug
Administration (the "FDA") for FMP's "High Intensity Product" (as defined in
Section 3.12), Purchaser shall deliver to each of Costa and Holt by wire
transfer in immediately available funds to the Bank Accounts, the amount of Two
Hundred Twenty-Five Thousand and No/100 Dollars ($225,000.00) (the "High
Intensity Product Payments"); provided, however, that in the event Purchaser
-------- -------
decides in its discretion not to seek 510K clearance and approval from the FDA
for the High Intensity Product, Purchaser shall, within thirty (30) days of such
decision, deliver to each of Costa and Holt by wire transfer in immediately
available funds to the Bank Accounts the High Intensity Product Payments;
provided further, that in the event (i) Purchaser has not received 510K
- -------- -------
clearance from the FDA for the High Intensity Product by that date which is two
(2) years following the Closing Date; and (ii) Purchaser is unable to reasonably
demonstrate that it is continuing to pursue 510K clearance for the High
Intensity Product, it shall be presumed that Purchaser has decided not to seek
510K clearance from the FDA, and Purchaser shall within thirty (30) days
thereafter deliver to Costa and Holt in immediately available funds to the Bank
Accounts the High Intensity Product Payments.
2
<PAGE>
ARTICLE TWO - CLOSING
---------------------
2.1 CLOSING DATE. Subject to the fulfillment of the conditions precedent
------------
specified in Articles Seven and Eight of this Agreement (or the waiver thereof
as provided therein), the purchase and sale of the Shares shall be consummated
at a closing (the "Closing") to be held at 10 a.m. prevailing Eastern Standard
time at the offices of Troutman Sanders, Atlanta, Georgia, on or before June 27,
1996, or on such other date or at such other time as Purchaser and Sellers shall
mutually agree (such date and time being referred to herein as the "Closing
Date").
2.2 DELIVERIES OF SELLERS. At the Closing, Sellers shall deliver to
---------------------
Purchaser, in form and substance satisfactory to Purchaser, the following:
(a) stock certificates representing the Shares, which certificates
shall be duly endorsed in blank for transfer or accompanied by properly executed
stock powers, and any other documentation requested by Purchaser necessary or
appropriate to transfer all of the Shares to Purchaser. Any transfer taxes due
and payable upon delivery and transfer of the Shares shall be paid by Sellers,
and the stock certificates representing the Shares shall be accompanied by any
requisite transfer tax stamps;
(b) all of the agreements, documents, instruments, certificates and
opinions required to be delivered by Sellers pursuant to this Agreement,
including, without limitation, Article Seven hereof;
(c) a certificate of Sellers stating that all authorizations,
consents, approvals and waivers or other action required to be obtained or taken
by Sellers, or either of them, in connection with the execution, delivery and
performance of this Agreement and the consummation of all agreements and
transactions contemplated hereby have been obtained or taken; and
(d) a certificate of Sellers stating that there has been no material
adverse change in the business, properties or assets of FMP from November 30,
1995 to the Closing Date.
2.3 DELIVERIES OF PURCHASER. At the Closing, Purchaser shall deliver or
--- -----------------------
cause to be delivered to Sellers the following:
(a) the cash consideration payable pursuant to Section 1.3(a) hereof
and the Notes;
(b) all agreements, documents, instruments, and certificates required
to be delivered by Purchaser pursuant to this Agreement; and
3
<PAGE>
(c) a certificate of Purchaser stating that all authorizations,
consents, approvals and waivers or other action required to be obtained or taken
by Purchaser in connection with the execution, delivery and performance of this
Agreement and the consummation of all agreements and transactions contemplated
hereby have been obtained or taken.
ARTICLE THREE - ADDITIONAL AGREEMENTS
-------------------------------------
3.1 CONFIDENTIALITY. Prior to the Closing, Sellers will provide to
---------------
Purchaser and Purchaser may provide to Sellers information which may be deemed
by the party providing such information to be confidential. Each party agrees
that, except as may be required by law, it will not use or disclose any
information provided to it by another party to this Agreement or such party's
affiliates, and designated in writing by such disclosing party or affiliates as
confidential, for any purpose other than in connection with the transactions
contemplated by this Agreement, except that the obligations contained in this
Section 3.1 shall not in any way restrict the rights of any party or person to
use or disclose information that (a) was known to such party prior to the
disclosure by the other party; (b) is or becomes generally available to the
public other than by breach of this Agreement; (c) otherwise becomes lawfully
available to a party to this Agreement on a non-confidential basis from a third
party who is not under an obligation of confidence to the other parties to this
Agreement; or (d) is independently developed by a party without use of the
confidential information received from another party to this Agreement.
3.2 ACCESS TO PREMISES, RECORDS, PROPERTIES, SUPPLIERS, CUSTOMERS AND
-----------------------------------------------------------------
EMPLOYEES.
- ---------
(a) During the period from the date of this Agreement to the Closing,
Sellers agree to permit and to cause FMP to permit Purchaser, and its
representatives, agents, counsel and accountants, to have full access at all
reasonable times to the premises, business, properties, assets, financial
statements, contracts, books, records and working papers of, and other relevant
information pertaining to, FMP and to cause FMP's officers and employees to
furnish to Purchaser, and its representatives, agents, counsel and accountants,
such financial and operating data and other information with respect to the
business, properties and assets of FMP as Purchaser may request; and Sellers
agree to cause the respective officers and employees of FMP to cooperate with
Purchaser and its representatives, agents, counsel and accountants in order to
enable Purchaser to become fully informed with respect to the business,
earnings, financial condition, prospects, properties, assets, liabilities and
obligations of FMP.
(b) During the period from the date of this Agreement to the Closing,
Sellers agree to permit and to cause FMP to permit Purchaser and its
representatives, agents, counsel and accountants to talk to and meet, at all
reasonable times, with the respective suppliers, customers and employees of FMP.
4
<PAGE>
3.3 PUBLICITY. During the period from the date of this Agreement to the
---------
Closing, each party hereto agrees to obtain the approval of the other parties
hereto prior to issuing any press release, written public statement or
announcement with respect to the transactions contemplated by this Agreement;
provided, however, that the provisions of this Section 3.3 shall not prohibit
- -------- -------
any party from making any such release, statement or announcement if, upon
advice of counsel, it is reasonably believed that such party is required to do
so under any applicable law, rule or regulation.
3.4 ACQUISITION PROPOSALS. Sellers, and each of them, shall not,
---------------------
directly or indirectly, through any officer, director, employee or agent of
Sellers or FMP or otherwise, (a) solicit, initiate or encourage (or authorize
any person to solicit, initiate or encourage) any inquiries, proposals or offers
from any person or entity relating to any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, or any merger,
consolidation or business combination with, FMP; (b) participate in any
discussions or negotiations regarding, or furnish to any other person or entity
any information with respect to, any effort or attempt by any other person or
entity to do or seek any of the foregoing; or (c) enter into any agreement
relating to any of the foregoing. Sellers will promptly notify Purchaser if any
such proposal or offer, or any inquiry or contact with any person or entity with
respect thereto, is made. In the event Sellers breach their obligations under
this Section 3.4, Sellers shall immediately pay to Purchaser liquidated damages
in the amount of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) as
a reasonable estimate of Purchaser's fees, expenses, management time and other
damages that would accrue to Purchaser in the event of breach by Sellers of this
Section 3.4.
3.5 APPROVALS AND CONSENTS. Each party hereto hereby covenants with the
----------------------
other parties hereto that it will cooperate to give all notices and obtain as
soon as is reasonably practicable all approvals, consents and waivers of state
and federal departments or agencies or of any other parties required or deemed
necessary or beneficial for consummation of the transactions contemplated by
this Agreement.
3.6 COOPERATION OF THE PARTIES. The parties shall cooperate with each
--------------------------
other and with their respective counsel and accountants in connection with any
acts or actions required to be taken as part of or as a condition to their
respective obligations under this Agreement.
3.7 EXPENSES. Sellers will pay all fees and expenses, including counsel
--------
and accountants' fees, incurred by them or FMP in connection with this Agreement
and any transaction contemplated by this Agreement. Any such fees or expenses
incurred by Sellers and charged to FMP shall be deducted from the final payments
to be made to Sellers under the Notes; provided, however, that in the event such
-------- -------
fees and expenses exceed the final payments to be made to Sellers under the
Notes, Purchaser may offset the amount of such excess against any other amounts
due and owing by Purchaser to Sellers. Purchaser will pay all fees and
expenses, including counsel and accountants' fees, incurred by it in connection
with this Agreement and any transaction contemplated by this Agreement.
5
<PAGE>
3.8 BROKERS. Each party hereto hereby represents and warrants to the
-------
other parties hereto that no broker, finder or other financial consultant has
acted on its behalf in connection with this Agreement or the transactions
contemplated by this Agreement. Each party hereby agrees to indemnify the other
parties hereto and hold and save the other parties harmless from any claim or
demand for commissions or other compensation by any broker, finder, financial
consultant or similar agent claiming to have been employed by or on behalf of
such indemnifying party and to bear the costs and expenses, including legal fees
and court costs, incurred by the other parties hereto in defending against any
such claim or demand.
3.9 CONSULTING AGREEMENTS. Prior to or at Closing, Costa shall enter
---------------------
into a Consulting Agreement with FMP (the "Costa Consulting Agreement")
substantially in the form of Exhibit B attached hereto, and Holt shall enter
---------
into a Consulting Agreement with FMP (the "Holt Consulting Agreement")
substantially in the form of Exhibit C attached hereto.
---------
3.10 CORPORATE NAMES. Following Closing, Sellers hereby agree that they
---------------
will no longer use any corporate name, trade name, trademark or advertising
symbol associated with, or similar to, those of FMP.
3.11 REDESIGNED WALLABY HALOGEN LIGHT. Each party hereto hereby agrees
--------------------------------
that such party shall cooperate in good faith and use its reasonable business
efforts to complete the product development of FMP's redesigned Wallaby Halogen
Light (the "Wallaby Light") and to cause the commercial introduction of the
Wallaby Light on or before December 1, 1996. For purposes of this Agreement,
"commercial introduction" shall mean the finalization of all specifications and
production tooling for the Wallaby Light together with United Laboratories 544
approval.
3.12 HIGH INTENSITY PRODUCT. Each party hereto hereby agrees that such
----------------------
party shall cooperate in good faith and use its reasonable business efforts to
obtain a 510K clearance and approval letter from the FDA for FMP's High
Intensity Product (the "High Intensity Product") as soon as reasonably
practicable.
3.13 BREAK-UP FEES. The parties hereby agree that Sellers shall be
-------------
jointly and severally liable for the payment of all fees and other amounts, if
any, payable by FMP pursuant to that certain Letter of Intent dated March 21,
1996 (the "Chromatics Letter of Intent"), between Chromatics Color Sciences
International, Inc. ("Chromatics"), Medical Equipment and Diagnostic Systems,
Inc., Sellers and Fiberoptic Medical Products, Inc., a Delaware corporation.
Sellers further agree, jointly and severally, to indemnify and hold harmless
Purchaser and FMP from and against any and all claims, damages, liabilities,
losses and expenses (including, without limitation, attorneys' fees and court
costs) arising out of or in connection with the Chromatics Letter of Intent and
the transactions contemplated thereby.
3.14 SUPPLY AGREEMENTS. From the date hereof to Closing, Sellers shall
-----------------
cooperate with Purchaser and use their best efforts (and cause FMP to use its
best efforts) to
6
<PAGE>
enter into written License and Supply Agreements with each of Fiberstars, Inc.,
a California corporation, Fostec, Inc., a New York corporation, and National
Biological Corporation, an Ohio corporation (respectively, the "Fiberstars
Supply Agreement", the "Fostec Supply Agreement", and the "National Supply
Agreement"), which Supply Agreements shall be in form and substance
satisfactory to Purchaser in its sole discretion.
3.15 RIGHT TO PRACTICE OPINION. Prior to Closing, Purchaser shall conduct
-------------------------
a patent clearance search (the "Patent Clearance Search") utilizing patent
counsel acceptable to Purchaser in its sole discretion to determine whether the
Wallaby Light, the Joey and any other products sold by FMP infringe upon the
patent or other property rights of any third party. Additionally, Purchaser
shall obtain from such patent counsel a right to practice opinion (the "Right To
Practice Opinion") which contains a reasonable analysis of the Wallaby Light,
the Joey and any other products sold by FMP in light of the patents found as a
result of the Patent Clearance Search and indicating whether or not any actual
or potential patent infringement issues exist with respect to the manufacture,
use or sale of the Wallaby Light, the Joey or any other products sold by FMP.
Sellers shall reasonably cooperate with such patent counsel in providing
adequate technical and business information in its possession or control to
allow such patent counsel to conduct the Patent Clearance Search and prepare the
Right To Practice Opinion. To the extent that such Patent Clearance Search
and/or Right To Practice Opinion identifies any actual or potential patent or
other infringement concerns, Sellers shall provide to Purchaser on or prior to
Closing legal opinions of non-infringement reasonably satisfactory to Purchaser
with respect to the patents which were identified as causing such actual or
potential infringement concerns. Notwithstanding the foregoing, in the event
that Purchaser, upon advice of counsel, determines that actual or potential
infringement concerns exist, and that such concerns are not adequately addressed
with the representations, warranties and indemnifications of Sellers provided in
this Agreement, then Purchaser shall have the right to terminate this Agreement
without liability therefor. Any expenses incurred by Purchaser up to a maximum
of Fifteen Thousand and No/100 Dollars ($15,000.00) in conducting the Patent
Clearance Search or having the Right To Practice Opinion prepared shall be
deducted from the final payments to be made to Sellers under the Notes;
provided, however, that in the event such expenses incurred by Purchaser (up to
- -------- -------
a maximum of $15,000.00) exceed the final payments to be made to Sellers under
the Notes, Purchaser may offset the amount of such excess against any other
amounts due and owing by Purchaser to Sellers.
3.16 FURTHER ACTION. Upon the terms and subject to the conditions of this
--------------
Agreement, Sellers, and each of them, agree to use all reasonable efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
and Sellers, and each of them, agree not to take any action inconsistent with
their obligations under this Section 3.16. From and after the Closing Date,
Sellers, and each of them, agree to take such further action or actions and
execute such additional documents or agreements as may be requested by Purchaser
to fully vest in Purchaser all right, title and interest in and to the Shares
and the business of FMP.
7
<PAGE>
ARTICLE FOUR - REPRESENTATIONS AND WARRANTIES OF SELLERS
--------------------------------------------------------
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Sellers, jointly and severally,
hereby represent and warrant to Purchaser that the following representations and
warranties are true and correct as of the date hereof and shall, except as may
be specifically provided for in this Agreement or otherwise specifically agreed
upon or waived, in each case in writing by Purchaser, be true and correct as of
the Closing. Unless the context may otherwise require, "FMP" for purposes of
this Article Four shall be deemed to refer to FMP and its predecessors in
interest, including Medical Equipment and Diagnostic Systems, Inc., a
Pennsylvania corporation, and Fiberoptic Medical Products, Inc., a Delaware
corporation.
4.1 VALIDITY. This Agreement and all documents and agreements to be
--------
executed in connection herewith constitute the legal, valid and binding
obligations of Sellers, and each of them, enforceable in accordance with their
respective terms except as limited by applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance and similar laws affecting
creditors' rights generally and except to the extent general equitable
principles may affect the availability of certain remedies.
4.2 SCHEDULES. The Schedules referred to in this Article Four contain
---------
certain information regarding Sellers, FMP and its predecessors in interest as
indicated at various places in this Agreement and are attached hereto, and all
information set forth in such Schedules is true, correct and complete in all
material respects as of the date of this Agreement, and such Schedules do not
omit to state any material fact necessary in order to make the statements
therein not misleading, and shall be deemed for all purposes of this Agreement
to constitute part of the representations and warranties under this Article
Four. Each of the documents and other writings furnished to Purchaser pursuant
to this Agreement is true, correct and complete in all material respects as of
the date furnished and does not omit to state any material fact necessary in
order to make the statements therein not misleading. Sellers shall promptly
provide Purchaser with written notification of any material event or occurrence
or other information of any kind whatsoever necessary to maintain this Agreement
and all other documents and writings furnished to Purchaser pursuant to this
Agreement as true, correct and complete in all material respects at all times
prior to and including the Closing Date.
4.3 CORPORATE AND FINANCIAL.
-----------------------
4.3.1 CORPORATE STATUS. FMP is a corporation duly organized and
----------------
validly existing under the laws of the Commonwealth of Pennsylvania. FMP does
not have any direct or indirect subsidiaries and does not own any shares of
capital stock of any corporation or any interest in the ownership or management
of any other entity. FMP has full corporate power and authority and possesses
all rights, privileges, franchises, licenses, permits, authorizations and
approvals, governmental or otherwise, necessary to entitle it to use its
8
<PAGE>
corporate name and to own or lease its properties and assets and to carry on its
business as and in the places where such properties or assets are now owned,
leased or operated and such business is conducted. FMP is qualified to transact
business as a foreign corporation in the states listed on Schedule 4.3.1, and
---------------
FMP is not required to be qualified to do business in any other
jurisdiction.
4.3.2 AUTHORITY; NO CONFLICT.
----------------------
(a) Sellers, and each of them, have full legal power and authority to
execute and deliver this Agreement, to perform their obligations hereunder and
to consummate the transactions contemplated hereby, and all action necessary on
the part of Sellers, and each of them, to execute and deliver this Agreement, to
perform their obligations hereunder and to consummate the transactions
contemplated hereby has been taken.
(b) The performance by Sellers, and each of them, of the transactions
contemplated by this Agreement or any other agreement to be executed and
delivered by Sellers, or either of them, in connection herewith will not (i)
conflict with or result in a violation of FMP's Articles of Incorporation or
Bylaws, or (ii) result in any conflict with, breach of, or default or
acceleration under, any mortgage, agreement, lease, indenture, or other
instrument, order, judgment or decree to which FMP or Sellers, or any of them,
are party or by which FMP or Sellers, or any of them, or their respective
properties or assets may be bound or affected, or violate any applicable law or
regulation.
(c) Sellers have furnished Purchaser with a complete and correct copy
of the Articles of Incorporation, as amended to date, of FMP certified by the
Secretary of State of the Commonwealth of Pennsylvania and a complete and
correct copy of the Bylaws of FMP, as presently in effect, certified by FMP's
incumbent secretary.
4.3.3 CAPITAL STRUCTURE.
-----------------
(a) Sellers own of record and beneficially all of the issued and
outstanding shares of capital stock of FMP. The number of Shares held by each
Seller is as set forth on Schedule 1.2.
------------
(b) The authorized capital stock of FMP consists of ten thousand
(10,000) shares of $1.00 par value common stock, of which nine hundred twenty-
six (926) shares are issued and outstanding, and one thousand (1,000) shares of
$1.00 par value preferred stock, of which zero (0) shares are issued and
outstanding. All of the outstanding capital stock of FMP is duly and validly
issued, fully paid and non-assessable and was offered, issued and sold in
compliance with all applicable federal and state securities laws. No person or
entity has any right of rescission or claim for damages under federal or state
securities laws with respect to the issuance of any shares of capital stock of
FMP previously issued. None of the capital stock of FMP has been issued in
violation of any preemptive or other rights of its shareholders.
9
<PAGE>
(c) Except as set forth on Schedule 4.3.3, FMP does not have
--------------
outstanding any securities or other rights which are either by their terms or by
contract convertible or exchangeable into capital stock of or other equity
interest in FMP nor any preemptive or similar rights to subscribe for or to
purchase, or any options or warrants or agreements for the purchase or issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock or other equity interest or securities
convertible into its capital stock or other equity interest. Except as set
forth on Schedule 4.3.3, FMP is not subject to any obligation (contingent or
-----
otherwise) to repurchase or otherwise acquire or retire or to register any
shares of its capital stock.
(d) There is no agreement to which FMP, its predecessors or Sellers,
or any of them, are a party restricting the transfer of any shares of capital
stock of FMP.
(e) Any shares of capital stock of FMP which have been purchased or
redeemed by FMP have been purchased or redeemed in accordance with all
applicable federal and state laws, rules and regulations, including, without
limitation, all federal and state securities laws. The purchase of the shares
of the capital stock of FMP has not resulted in, and will not, with the giving
of notice or lapse of time or both, result in a default or acceleration of the
maturity of, or otherwise modify, any agreement, note, mortgage, bond, security
agreement, loan agreement or other contract or commitment of FMP.
4.3.4 TITLE TO SHARES. Sellers, and each of them, have good, valid
---------------
and marketable title to their respective Shares, free and clear of any and all
restrictions, claims, liens, charges, encumbrances, security interests and other
interests whatsoever; Sellers, and each of them, have full right, power and
authority to sell, transfer and deliver the Shares to Purchaser; and, at
Closing, Sellers, and each of them, will transfer to Purchaser good, valid and
marketable title thereto, free and clear of any and all restrictions, claims,
liens, charges, encumbrances, security interests or other interests whatsoever.
4.3.5 CORPORATE RECORDS. Except as set forth on Schedule 4.3.5, the
----------------- --------------
stock records and minute books of FMP heretofore furnished to Purchaser by
Sellers fully and accurately reflect all issuances, transfers and redemptions of
the capital stock of FMP, correctly show the total number of shares of such
capital stock issued and outstanding on the date hereof, correctly show all
corporate action taken by the directors and shareholders of FMP (including,
without limitation, actions taken by consent without a meeting) and contain true
and complete copies or originals of FMP's Articles of Incorporation and all
amendments thereto, Bylaws as amended and currently in force, and the minutes of
all meetings or consent actions of FMP's directors and shareholders. No
resolutions, regulations or bylaws have been passed, enacted, consented to or
adopted by such directors or shareholders except those contained in the minute
books.
10
<PAGE>
4.3.6 TAXES.
-----
(a) FMP has duly filed and will file when due (i) all required
federal, state, local and foreign tax returns and reports and (ii) all returns
and reports of all other governmental units having jurisdiction with respect to
taxes imposed upon any of its income, properties, revenues, franchises,
operations or other assets or taxes imposed which might create a lien or
encumbrance on any of its assets. Such returns and reports are true, complete
and correct in all material respects, and FMP has paid and will pay when due all
taxes as set forth in such returns or reports, and all such taxes as set forth
constitute all amounts which are due and owing by FMP. All federal, state,
local and foreign taxes and other governmental charges paid or payable by FMP
have been timely paid, or have been accrued or reserved on FMP's books in
accordance with Internal Revenue Service rules and regulations and generally
accepted accounting principles applied on a basis consistent with prior periods
("GAAP"). Adequate reserves for the payment of corporate taxes have been
established on the books of FMP for all periods through the date hereof, whether
or not due and payable and whether or not disputed. Until the Closing, FMP
shall continue to maintain sufficient reserve accounts for the payment of
expected tax liabilities in accordance with GAAP. Except as set forth in
Schedule 4.3.6, FMP has not received any notice of a tax deficiency or
- --------------
assessment of additional taxes of any kind, and there is no threatened claim
against FMP, or any reasonable basis for any such claim, for payment of any
additional federal, state, local or foreign taxes for any period, prior to or
ending on April 30, 1996, in excess of the accruals or reserves with respect to
any such claim shown on the April 30, 1996 Balance Sheet of FMP described in
Section 4.3.7 below or disclosed in the notes with respect thereto, and on the
Closing Date there will be no such notice, no such claim and no basis for any
such claim. FMP has not executed or otherwise agreed to and is not bound by any
currently effective waiver of any statute of limitations with respect to payment
or assessment of taxes or other agreement altering or affecting any otherwise
applicable statute of limitations with respect to the payment of taxes or the
filing of tax returns.
(b) FMP has withheld proper and accurate amounts from its employees
for all periods prior to the date hereof and will withhold proper and accurate
amounts from the date hereof until Closing, all in compliance with the tax
withholding provisions of applicable federal, state and local tax laws, and
federal, state and local tax returns, proper and accurate in all respects, have
been filed by FMP for all periods for which returns were due with respect to
withholding, social security and unemployment taxes, and the amounts shown
thereon to be due and payable have been paid in full.
4.3.7 FINANCIAL STATEMENTS. Sellers have delivered to Purchaser
--------------------
true, correct and complete copies of (a) the audited financial statements of FMP
for the eleven month period ended November 30, 1995, including a balance sheet,
a statement of income and retained earnings, statements of cash flows and
related notes (all of the foregoing described financial statements being herein
collectively referred to as the "Financial Statements"); and (b) an unaudited
balance sheet of FMP dated May 31, 1996 (the "Unaudited Balance Sheet") and an
unaudited statement of income of FMP for the five (5)
11
<PAGE>
months ended May 31, 1996 (the "Unaudited Income Statement") (collectively, the
"Unaudited Financial Statements"). Except as set forth on Schedule 4.3.7, the
--------------
Unaudited Financial Statements have been prepared on a basis consistent with
prior practice, and the Financial Statements and the Unaudited Financial
Statements have been prepared in accordance with GAAP. Except as set forth on
Schedule 4.3.7, the Financial Statements and the Unaudited Financial Statements
- --------------
present fairly the financial condition of FMP as of the dates indicated therein
and the results of operations for the respective periods then ended.
4.3.8 ACCOUNTS. Schedule 4.3.8 contains a list of each and every bank
-------- --------------
and other institution in which FMP maintains an account or safety deposit box,
the account numbers, and the names of all persons who are presently authorized
to draw thereon or have access thereto.
4.3.9 NOTES AND ACCOUNTS RECEIVABLE. All notes receivable, accounts
-----------------------------
receivable and other obligations owned by FMP or due to FMP shown on the
Unaudited Balance Sheet, and all such notes receivable, accounts receivable and
obligations on the date hereof and the Closing Date (a) have been and will be
(except to the extent collected in the ordinary course of business) genuine,
legal, valid and collectible obligations of the respective makers thereof or
debtors thereon except, with respect to the amounts thereof at May 31, 1996, to
the extent of the reserve therefor set forth on the Unaudited Balance Sheet and
(b) are not subject to any material offset or counterclaim. All such notes
receivable, accounts receivable and obligations are evidenced by written
agreements, invoices or other instruments, true and correct copies of which will
be made available to Purchaser for examination prior to the Closing. The
reserves relating to such notes receivable, accounts receivable and other
obligations set forth on the Unaudited Balance Sheet are adequate to cover all
uncollectible amounts thereof.
4.3.10 LIABILITIES. FMP does not have any debt, liability, or
-----------
obligation of any kind, whether accrued, absolute, known or unknown, contingent
or otherwise, including but not limited to (a) liability or obligation on
account of any federal, state, local or foreign taxes or penalties, interest or
fines with respect to such taxes, (b) liability arising from or by virtue of the
production, manufacture, sale, lease, distribution, delivery or other transfer
or disposition of personal property or services of any type, kind or variety, or
(c) unfunded liabilities with respect to any pension, profit sharing or employee
stock ownership plan, whether operated by FMP or any other entity covering
employees of FMP, except (i) those reflected on the Unaudited Balance Sheet,
(ii) liabilities incurred in the ordinary course of business since April 30,
1996 (none of which, individually or in the aggregate, has been or will be
materially adverse to the business or financial condition of FMP), and (iii) as
specifically disclosed in Schedule 4.3.10. Except as set forth on Schedule
--------------- --------
4.3.10, FMP does not have any obligations (absolute or contingent) to provide
- ------
funds on behalf of, or to guarantee or assume any debt, liability or obligation
of any corporation, partnership, association, joint venture, individual or other
person, except for endorsements in connection with the deposit of items for
collection.
12
<PAGE>
4.3.11 ABSENCE OF CHANGES. Except as set forth in Schedule 4.3.11,
------------------ ---------------
since November 30, 1995:
(a) there has been no change in the business, assets, liabilities,
results of operation or financial condition of FMP, or in any of its
relationships with suppliers, customers, employees, lessors or others, which
individually or in the aggregate has had or is likely to have an adverse effect
on such business, assets or properties;
(b) there has been no damage, destruction or loss to the assets,
properties, business or supplier or customer relations of FMP;
(c) except for the transactions provided for in this Agreement, the
business of FMP has been operated in the ordinary course;
(d) the properties and assets of FMP have been maintained in good
order, repair and condition, ordinary wear and tear excepted;
(e) the books, accounts and records of FMP have been maintained in
the usual, regular and ordinary manner on a basis consistent with prior years;
(f) there has been no declaration, setting aside or payment of any
dividend or other distribution on or in respect of the capital stock of FMP nor
has there been any direct or indirect redemption, retirement, purchase or other
acquisition by FMP of any of the capital stock of FMP;
(g) there has been (i) no increase in the compensation or in the rate
of compensation or commissions payable or to become payable by FMP to any
director, officer, salaried employee, salesman, distributor or agent; (ii) no
general increase in the compensation or in the rate of compensation payable or
to become payable to hourly employees ("general increase" for the purpose hereof
means any increase generally applicable to a class or group of employees, but
not including increases granted to individual employees for merit, length of
service, change in position or responsibility or other reasons applicable to
specific employees and not generally to a class or group thereof); (iii) no
director, officer, or employee hired; and (iv) no increase in any payment of or
commitment to pay any bonus, profit sharing or other extraordinary compensation
to any employee;
(h) there has been no change in the Articles of Incorporation or
Bylaws of FMP;
(i) there has been no labor dispute, organizational effort by any
union, unfair labor practice charge or employment discrimination charge, nor
institution or threatened institution of any effort, complaint or other
proceeding in connection therewith, involving FMP or affecting the operations of
FMP;
13
<PAGE>
(j) there has been no issuance or sale by FMP of any of its
authorized capital stock, bonds, notes or other securities of FMP or any
modification or amendment of the rights of the holders of any outstanding
capital stock, bonds, notes or other securities thereof;
(k) there has been no mortgage, lien or other encumbrance or security
interest (other than liens for current taxes not yet due) created on or in any
asset or assets of FMP or assumed by FMP with respect to any asset or assets;
(l) there has been no indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred by FMP which would
be required to be reflected on a balance sheet of FMP as of the date hereof,
prepared in accordance with GAAP, except such as have been incurred in the
ordinary course of business of FMP;
(m) no obligation or liability of FMP has been discharged or
satisfied, other than the current liabilities reflected on the Financial
Statements and current liabilities incurred since the date thereof in the
ordinary course of business;
(n) except for the sale of inventory in the ordinary course of
business, there has been no sale, transfer or other disposition of any asset of
FMP;
(o) there have been no charge-off's of or reserves established with
respect to the accounts receivable shown on the Unaudited Balance Sheet;
(p) there has been no amendment, termination or waiver of any right
of FMP under any contract or agreement or governmental license, permit or
permission which, individually or in the aggregate, has had or will have an
adverse effect on the business or properties of FMP;
(q) there has been no creation of, amendment to or contributions made
to any bonus, incentive compensation, deferred compensation, profit sharing,
retirement, pension, group insurance or other benefit plan, or any union,
employment or consulting agreement or arrangement;
(r) there has been no change in the reimbursement levels for any
products sold, leased, supplied or otherwise distributed by FMP, and Sellers are
unaware of any government or private plan or initiative to materially change the
reimbursement levels for any such product; and
(s) there has been no product performance issues, complaints or
incidents concerning the use of any products sold, manufactured, licensed,
leased or otherwise distributed by FMP nor any product liability or other claims
with respect to the foregoing.
14
<PAGE>
4.3.12 LITIGATION AND PROCEEDINGS. Except as set forth on Schedule
-------------------------- --------
4.3.12, there are no actions, decrees, suits, counterclaims, claims, proceedings
- ------
or governmental or other investigations pending or threatened against, by or
affecting Sellers or FMP in any court or before any arbitrator or governmental
agency, and no judgment, award, order or decree of any nature has been rendered
against Sellers or FMP or with respect thereto by any agency, arbitrator, court,
commission or other authority which has not been paid or discharged, nor does
FMP have any unasserted contingent liabilities which, individually or
collectively, might have a material adverse effect on the assets or on the
operation of FMP or which might prevent or impede the consummation of the
transactions contemplated by this Agreement. FMP has not been charged with and
FMP is not under investigation with respect to any charge concerning any
provision of any federal, state or other applicable law or administrative
regulation with respect to the business of FMP. There are no pending or
threatened claims against any of the officers or directors of FMP in connection
with the business or affairs of FMP. The reserves relating to such actions,
decrees, suits, counterclaims, claims, proceedings, or governmental
investigations which are set forth on Schedule 4.3.12 are adequate to cover all
---------------
liabilities and obligations of FMP.
4.4 BUSINESS OPERATIONS.
-------------------
4.4.1 CUSTOMERS AND ACCOUNTS. Schedule 4.4.1 contains a true,
---------------------- --------------
complete and accurate list of all distributors, customers and accounts of FMP in
descending order of magnitude for the period ended May 22, 1996. Relations with
all such distributors and customers are believed to be good, and no Seller knows
of any distributor or customer who intends to discontinue the distribution or
purchase, as the case may be, of products or services from FMP on a basis
consistent with past practices.
4.4.2 SUPPLIERS. Schedule 4.4.2 contains a true, complete and
--------- --------------
accurate list of all suppliers of FMP for the period ended May 29, 1996.
Relations with each such supplier are believed to be good, and no Seller knows
of any supplier who intends to discontinue to supply products to FMP on a basis
consistent with past practices.
4.4.3 PERMITS; COMPLIANCE WITH LAW.
----------------------------
(a) FMP and each of its officers, directors, employees and agents
have all permits, licenses, approvals and authorizations of and registrations
with and under all federal, state, local and foreign laws, authorities and
agencies (including, without limitation, the FDA) required for FMP and its
officers, directors, employees and agents to carry on each part of their
respective activities as presently conducted in connection with the business of
FMP, and all of such permits, licenses, approvals, authorizations and
registrations are listed on Schedule 4.4.3 and are in full force and effect, and
--------------
no suspension or cancellation of either of them is pending or threatened.
(b) FMP and each of its predecessors in interest have complied in all
material respects with all federal, state and local laws, rules, regulations and
ordinances
15
<PAGE>
applicable to them or their business. No past violation of any such law, rule,
regulation or ordinance, whether known or unknown, has occurred which could or
would impair the right or ability of FMP or its respective officers, directors,
employees or agents to conduct their respective activities in connection with
any business of FMP. All products manufactured, sold, licensed, leased or
otherwise distributed by FMP or any of its predecessors in interest were free of
defects at the time of shipment and were manufactured in accordance with good
manufacturing practices. All such products were labelled, packaged and
distributed in accordance with all applicable laws, rules, regulations and
ordinances, and no such products have been the subject of any recall or any
inquiry or investigation of any federal, state or local governmental authority
or agency (including, without limitation, the FDA). Except as set forth on
Schedule 4.4.3, no product liability claim or any other claim premised in whole
- --------------
or in part on product liability is pending or threatened against Sellers or FMP
with respect to any such products nor are there any unasserted contingent
liabilities involving product liability claims other than with respect to those
certain blankets manufactured by Fostec, Inc., which claims are described on
Schedule 4.4.3 (the "Fostec Blanket Claims"). Sellers shall be liable for and
- --------------
shall indemnify Purchaser for the full cost and expense of the Fostec Blanket
Claims for all blankets sold prior to the Closing Date.
4.4.4 ENVIRONMENTAL.
-------------
(a) Sellers hereby, jointly and severally, warrant and represent to
Purchaser that:
(i) Schedule 4.4.4 contains a complete and correct list of all
--------------
facilities (1) owned or operated by FMP, and (2) formerly owned or operated
by FMP, or any of its predecessors in interest;
(ii) Schedule 4.4.4 contains a complete and correct list of all
--------------
off-site facilities used currently or in the past by FMP or any of its
predecessors in interest to process, recycle, reclaim, refine, transport,
store, dispose of or otherwise handle "Hazardous Substances" (as
hereinafter defined) generated by FMP or any of its predecessors;
(iii) FMP has obtained all permits, licenses, governmental
approvals and other authorizations which are required under "Environmental
Laws" (as hereinafter defined), and FMP and each of its predecessors in
interest have prepared, submitted, made or given all required filings,
reports, disclosures and notifications and maintained all records required
under applicable Environmental Laws relating to the generation, use,
manufacture, refining, transportation, treatment, storage, handling,
cleanup, disposal, transfer, production, processing, release or presence of
any Hazardous Substances on, in, under or from any properties or facilities
currently or previously owned or leased by FMP or any of its predecessors
in interest;
16
<PAGE>
(iv) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, environmental lien, notice
of violation, investigation, or proceeding pending or threatened against or
relating in any way to any of the properties currently or previously owned
or leased by FMP or any of its predecessors in interest involving any
Environmental Laws or Hazardous Substances, except as set forth in Schedule
--------
4.4.4;
-----
(v) FMP and Sellers, and their respective officers, directors,
managers, employees and agents are not aware of, and have not caused,
permitted, nor received notice of the "Release" (as hereinafter defined)
of, any Hazardous Substance on any of the properties or facilities
currently or previously owned or operated or leased by FMP or any of its
predecessors in interest;
(vi) FMP and Sellers, and their respective officers, directors,
managers, employees and agents are not aware of, and have not received
notice of, the Release of Hazardous Substances at, on, under or from any
off-site facility used currently or in the past by FMP or any of its
predecessors in interest, or their respective officers, agents, employees,
and contractors, to process, recycle, reclaim, refine, transport, store,
dispose of or otherwise handle Hazardous Substances generated by FMP or any
of its predecessors in interest;
(vii) FMP and Sellers, and their respective officers, directors,
managers, employees, and agents are not aware of, and have not received
notice of, the disposal, release, spill or presence of any Hazardous
Substances on any of its respective properties, or of any events,
conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance or continued
compliance by the properties with any Environmental Laws, except as set
forth in Schedule 4.4.4;
--------------
(viii) FMP and Sellers, and their respective officers, directors,
managers, employees, and agents are not aware of, and have not received
notice of, any events, conditions, circumstances, activities, practices,
incidents, actions or plans which may give rise to any liability, or
otherwise form the basis of any claim, action, demand, suit, lien,
proceeding, hearing, study or investigation, based on or related to the
manufacture, use, processing, distribution, treatment, storage, disposal,
transport, or handling of Hazardous Substances by FMP or any of its
predecessors in interest or based on or related to the emission, discharge,
release or threatened release into the environment from any of the
properties currently or formerly owned or leased by FMP or any of its
predecessors in interest of Hazardous Substances, except as set forth in
Schedule 4.4.4; and
--------------
(ix) FMP and each of its predecessors in interest is and has
been in compliance with all limitations, restrictions, conditions,
prohibitions, requirements, obligations, schedules and timetables contained
in the Environmental Laws and
17
<PAGE>
permits issued thereunder, with respect to the generation, use,
manufacture, transportation, treatment, storage, handling, disposal,
transfer, production and processing of Hazardous Substances at, on or from
any of the properties currently or previously owned, operated or leased by
FMP or any of its predecessors in interest.
(b) As used herein, "Environmental Laws" shall mean any federal,
state, or local law, statute, decree, ordinance, code, rule, regulation or
order, relating to the emission, discharge, release or threatened release into
the environment of any pollutant, contaminant, chemical, industrial, toxic,
hazardous or regulated substances, materials or wastes (including, without
limitation, ambient air, surface water, ground water or land), or otherwise
relating to the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, industrial toxics, hazardous or regulated substances,
materials, or wastes, and any and all regulations, codes, plans, orders,
decrees, judgments, injunctions, notices or demand letters issued, entered,
promulgated or approved thereunder, including, without limiting the foregoing,
the Resource Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response, Compensation and
-- ---
Liability Act ("CERCLA"), as amended, 42 U.S.C. Section 9601 et seq., the Toxic
-- ---
Substance Control Act ("TSCA"), as amended, 15 U.S.C. Section 2601 et seq., the
-- ---
Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq., the Clean Water Act,
-- ---
as amended, 42 U.S.C. Section 1251 et seq., the Occupational Safety and Health
-- ---
Act, as amended, 29 U.S.C. Section 651 et seq., any other federal, state or
-- ---
local so called "Superfund" or "Superlien" law or ordinance, and any federal,
state or local underground or aboveground storage tank law or ordinance.
(c) As used herein, "Hazardous Substances" shall mean any pollutants,
contaminants, toxic substances, hazardous wastes, hazardous materials, solid
wastes, regulated substances, or hazardous substances as defined in or pursuant
to RCRA, CERCLA, TSCA, or any other Environmental Laws, including without
limitation, asbestos, petroleum, waste oil, and PCB's.
(d) As used herein, "Release" shall have the meaning set forth in
Section 101(22) of CERCLA, 42 U.S.C. Section 9601(22).
4.4.5 INSURANCE. Schedule 4.4.5 contains a complete list and
--------- --------------
description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, FMP or any of its officers, directors or employees, all
of which are and will be maintained through the Closing Date, in full force and
effect, together with a complete list of all pending claims under any of such
policies or bonds. All material terms, obligations and provisions of each of
such policies and bonds (and all policies and bonds formerly maintained by or
providing coverage for any predecessor in interest to FMP) have been complied
with; all premiums due thereon have been paid, and no notice of cancellation
with respect thereto has been received. Such policies and bonds provide
adequate coverage to insure the properties and business of FMP and the
activities of its officers and directors against such risks and in such amounts
as are
18
<PAGE>
prudent and customary. FMP will not as of the Closing Date have any liability
for premiums or for retrospective premium adjustments for any period prior to
the Closing Date. FMP has heretofore delivered to Purchaser a true, correct and
complete copy of each such insurance policy and bond or a summary thereof.
4.5 CONTRACTS; PROPERTIES AND ASSETS.
--------------------------------
4.5.1 CONTRACTS AND COMMITMENTS. Schedule 4.5.1 contains a list which
------------------------- --------------
identifies and briefly describes all written and oral contracts, agreements,
guaranties or commitments to which FMP is a party or by which FMP or its
properties may be bound (including, without limitation, distributorship
agreements, dealer agreements, supply agreements, employment agreements,
consulting agreements and open purchase and sale orders), which are material to
the operation of the business of FMP. There are no written or oral contracts,
agreements, guaranties or commitments to which FMP is a party or by which FMP or
its properties are bound, other than as reflected on Schedule 4.5.1 involving
--------------
payments or obligations in the aggregate for all such contracts, agreements,
guaranties or commitments in excess of $10,000. Each such contract, agreement,
guaranty and commitment is in full force and effect, is valid and enforceable in
accordance with its respective terms, and constitutes a legal and binding
obligation of the respective parties thereto. There is not under any of such
contracts, agreements, guaranties or commitments (i) any default or any claimed
default by FMP or event of default or event which with notice or lapse of time,
or both, would constitute a default by FMP and in respect of which adequate
steps have not been taken to prevent a default on its part from occurring; or
(ii) any existing default by any other party or any event of default or event
which with notice or lapse of time, or both, would constitute a default by any
other party. FMP has complied in all respects with the provisions of such
contracts, agreements, guaranties and commitments. A true and complete copy of
each such document has been made available to Purchaser for examination. FMP
does not have any arrangement (formal or informal) and is not a party to any
agreement with any current or former customer regarding any rebates or other
payments or gifts (in kind or in cash). Neither FMP nor any officer, director,
employee or agent of FMP is engaged in any practice which would constitute a
kickback or fraud under federal, state or local laws.
4.5.2 LICENSES; INTELLECTUAL PROPERTY. Except as described in
-------------------------------
Schedule 4.5.2, FMP is not a party, either as licensor or licensee, to any
- --------------
agreement for any patent, process, trademark, service mark, trade name,
copyright, trade secret or confidential information. All patents, copyrights,
trademarks, service marks, trade names, and applications therefor or
registrations thereof, owned or used by FMP are listed in Schedule 4.5.2 and
--------------
comprise all such patents, copyrights, trademarks, service marks and trade names
required for FMP to conduct, and to continue to conduct, its business as
presently conducted. There are no rights of third parties with respect to any
of, and FMP has the right to use, the trademarks, service marks, trade secrets,
confidential information, trade names, patents, patent applications, copyrights,
inventions, devices or processes owned or used by FMP or presently expected to
be used in the future. FMP has complied in all respects with all
19
<PAGE>
applicable laws relating to the filing or registration of "fictitious names" or
trade names. The sale and distribution of the Wallaby Light and all products
sold or distributed by FMP do not infringe on the claims of any U.S. Patent nor
the property or other rights of any third party.
4.5.3 TITLE TO PROPERTIES. FMP has good and marketable title to all
-------------------
of its properties, real and personal, tangible and intangible, including,
without limitation, those reflected on the Financial Statements (except as since
sold or otherwise disposed of by it in the ordinary course of business), free
and clear of all encumbrances, liens, security interests, claims or charges of
any kind or character except (i) those referred to in Schedule 4.5.3 and (ii)
--------------
liens for real estate taxes not yet due and payable. FMP possesses all property
and rights necessary for the conduct of its business as presently conducted.
4.5.4 CONDITIONS OF PROPERTIES. All of the buildings and equipment
------------------------
owned or leased by FMP and used in its business are in good condition and repair
in all respects, normal wear and tear excepted, suited for the uses intended,
and operated in conformity with all applicable building, zoning and other
applicable ordinances, laws and regulations, and there are no proposed changes
therein that would affect such properties or their use.
4.5.5 REAL PROPERTY AND LEASES.
------------------------
(a) All leases pursuant to which FMP is lessee or lessor of any real
or personal property (the "Company Leases") are valid and enforceable in
accordance with their respective terms; there is not under any of such leases
(i) any default or any claimed default by FMP or event of default or event which
with notice or lapse of time, or both, would constitute a default by FMP and in
respect of which adequate steps have not been taken to prevent a default on its
part from occurring; or (ii) any existing default by any lessee or lessor of FMP
or any event of default or event which with notice or lapse of time or both
would constitute a material default by any such lessee or lessor. A true,
complete and accurate list of the Company Leases, setting forth the lessor and
lessee, property, initial and renewal term, annual rentals, expense and tax
reimbursements, and rent escalations and adjustments, is contained in Schedule
--------
4.5.5.
- -----
(b) The copies of the Company Leases heretofore furnished by Sellers
to Purchaser are true, correct and complete, and such Company Leases have not
been modified in any respect and are in full force and effect in accordance with
their respective terms.
(c) The interests of FMP in and under each of the Company Leases is
unencumbered and subject to no present claim, contest, dispute, action or
threatened action at law or in equity.
(d) The present use and operation of, and improvements upon, all real
properties leased by FMP (the "Leased Properties") are in conformity with all
applicable
20
<PAGE>
building, zoning and other applicable laws, ordinances and regulations, and
there are no proposed changes therein that would affect the Leased Properties or
their use.
(e) Except as set forth in Schedule 4.5.5, no rent has been paid in
--------------
advance and no security deposit has been paid by, nor is any brokerage
commission payable by FMP with respect to any Company Lease pursuant to which
FMP is lessee.
(f) There are no contractual obligations, agreements in principle or
present plans for FMP to enter into new leases of real personal property or to
renew or amend existing Company Leases prior to the Closing Date.
(g) No covenants, easements, restrictions, servitudes, rights of way
or regulations applicable to the real properties of FMP have any adverse effect
on the business, results of operations or financial condition of FMP.
4.5.6 INVENTORIES. Except as set forth on Schedule 4.5.6 hereto, the
----------- --------------
inventory of FMP consists of items of a quality and quantity usable and salable
in the ordinary course of its business, and the values of obsolete materials and
materials below standard quality have been written down on its books of account
on a consistent basis to realizable market value, or adequate reserves have been
provided therefor. All goods sold or otherwise distributed by FMP and all
finished goods in the inventory of FMP conform in all respects to customary
trade standards for marketable goods, subject to returns of goods or warranty
claims in accordance with the prior history of FMP.
4.6 EMPLOYEES AND BENEFITS.
----------------------
4.6.1 DIRECTORS OR OFFICERS.
---------------------
(a) Schedule 4.6.1 correctly lists all of the present officers and
-------------
directors of FMP.
(b) No director or officer of FMP serves as a director or officer of
any other corporation on behalf of or as a designee of FMP.
4.6.2 COMPENSATION STRUCTURE. Schedule 4.6.2 contains a true and
---------------------- --------------
complete list of the names, titles, and compensation arrangements of each
employee of FMP (including, without limitation, all salary, wages, bonuses and
fringe benefits other than those fringe benefits made available to all employees
on a nondiscriminatory basis). No Seller knows of any such employee who intends
to discontinue his or her employment with FMP following the Closing. FMP has
made available to Purchaser copies of all written agreements, correspondence,
memoranda and other written materials currently in effect which have been
provided to such employees relating to their current compensation. A list of
such agreements is included in Schedule 4.6.2.
--------------
21
<PAGE>
4.6.3 EMPLOYEE BENEFITS.
-----------------
(a) Except as set forth in Schedule 4.6.3, FMP does not have or
---------------
maintain a "pension plan" (as such term is defined in Section 3 of ERISA),
"welfare benefit plan" (as such term is defined in Section 3 of ERISA), bonus
plan, stock option plan, deferred compensation plan or other similar plan for
any of its employees.
(b) Each "employee benefit plan" as defined in Section 3(3) of ERISA,
maintained by or on behalf of FMP or by any other party (including any plans
which are "multiemployer plans" under Section 3(37)(A) of ERISA ("Multiemployer
Plans")) and any defined benefit pension plan (as defined in Section 3(35) of
ERISA) terminated by FMP within the five (5) plan years ending immediately
before the Closing Date which covers or covered any employee of FMP or any
predecessor of FMP is listed on Schedule 4.6.3 (all such plans listed on
-------------
Schedule 4.6.3 are sometimes collectively referred to herein as the "Plans" and
- --------------
individually as a "Plan").
(c) True and complete copies of all the Plans and Plan trusts,
Summary Plan Descriptions, Actuarial Reports (if any) and Annual Reports on Form
5500 for the most recent three years with respect to the Plans, Internal Revenue
Service determination letters and any other related documents have been, or
prior to the Closing Date will be, provided to Purchaser.
(d) Except as set forth on Schedule 4.6.3, with respect to each Plan:
--------------
(i) no litigation or administrative or other proceeding is pending or
threatened; (ii) the Plan has been administered in compliance with, and has been
restated or amended so as to comply with, all applicable requirements of law,
including all applicable requirements of ERISA, the Code and regulations
promulgated thereunder by the Internal Revenue Service and the United States
Department of Labor. No Plan nor any trustee, administrator or fiduciary
thereof has at any time been involved in any transaction relating to such Plan
which would constitute a breach of fiduciary duty under ERISA or a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
(e) Each Plan has been administered in all respects in compliance
with applicable law and the terms of the Plan.
(f) Each "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Pension Plan") maintained by or on behalf of FMP is
listed on Schedule 4.6.3, and copies of such Pension Plans have been, or prior
--------------
to the Closing Date will be, provided to Purchaser. The Pension Plans are
qualified plans within the meaning of Section 401(a) of the Code, and the trusts
thereunder are exempt from federal income tax under Section 501(a) of the Code,
and FMP's predecessors, if any, have made or accrued, and as of the Closing Date
will have made or accrued, all payments and contributions required to be made
under the provisions of the Pension Plans or by law with respect to any period
prior to the Closing Date.
22
<PAGE>
(g) Except as disclosed on Schedule 4.6.3 and except for obligations
--------------
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
("COBRA"), FMP does not have any obligation to provide, or liability for, health
care, life insurance or other benefits after termination of employment for
former or present employees. As of the Closing Date, FMP will have cured any
violations or deficiencies under applicable statutes, orders and regulations
relating to its employee benefit plans or its administration thereof and will
have provided adequate reserves, or insurance or qualified trust funds, for all
claims incurred through the Closing Date, based on an actuarial valuation
satisfactory to the actuaries of Purchaser representing a projection of claims
expected to be incurred for such retirees during their period of coverage under
such Plan.
(h) No fact or circumstance exists which could constitute grounds in
the future for the Pension Benefit Guaranty Corporation ("PBGC") (or any
successor to the PBGC) to take any action whatsoever under Section 4042 of ERISA
in connection with any plan which an "Affiliate" (as defined below) of FMP
maintains within the meaning of Section 4062 or 4064 of ERISA, and, in either
case, the PBGC has not previously taken any such action which has resulted in,
or reasonably might result in, any liability of an Affiliate or FMP to the PBGC,
which would have a material adverse effect on the business of FMP. The term
"Affiliate" for purposes of this Section means any trade or business (whether
incorporated or unincorporated) which is a member of a group described in
Section 414(c) of the Code of which FMP is also a member.
(i) Only current and former employees of FMP or their dependents
participate in the Plans.
(j) FMP is not an affiliate with any entity other than entities
required to be aggregated with it pursuant to Sections 414(b), (c), (m) or (o)
of the Code. No Plan is cosponsored or has been adopted by any entity other
than FMP.
4.6.4 LABOR-RELATED MATTERS. Except as set forth on Schedule 4.6.4,
--------------------- --------------
FMP is not a party to any collective bargaining agreement or agreement of any
kind with any union or labor organization. FMP is not in violation of or
default under any such collective bargaining or other agreement. FMP has
complied with all obligations under the National Labor Relations Act, as
amended, Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act, as amended, and all other federal, state and
local labor laws and regulations applicable to employees. There are no unfair
labor practice charges pending or threatened against FMP and there are no
charges, complaints, claims, or proceedings pending or threatened against FMP
with respect to any alleged violation of any legal duty (including, without
limitation, any wage and hour claims, employment discrimination claims or claims
arising out of any employment relationship) by FMP as to any of its employees or
as to any person seeking employment therefrom, and no such violations exist.
4.6.5 TRANSACTIONS WITH MANAGEMENT. Schedule 4.6.5 contains a
---------------------------- --------------
description, by name, amount and type, of all contracts with or commitments to
present or
23
<PAGE>
former shareholders, directors, officers, employees or agents, including any
business directly or indirectly controlled by any such person (other than
contracts or commitments relating to services to be performed by an officer,
director, or employee as a currently employed employee of FMP.)
4.7 OTHER.
-----
4.7.1 APPROVALS AND CONSENTS. Schedule 4.7.1 lists all consents or
---------------------- --------------
other approvals necessary in order for Sellers, and each of them, and FMP to
consummate the transactions contemplated by this Agreement, including, without
limitation, all governmental and other regulatory approvals and consents of
suppliers, lenders, lessors, landlords and governmental entities.
4.7.2 DEFAULT.
-------
(a) Except for those consents, if any, specifically set forth on
Schedule 4.7.1, neither the execution nor the consummation of this Agreement (i)
- --------------
constitutes a breach of or default under any contract to which Sellers, or
either of them, or FMP is a party or by which Sellers, or either of them, or FMP
or their respective properties or assets are bound; (ii) does or will result in
the creation or imposition of any security interest, lien, encumbrance, charge,
equity or restriction of any nature whatsoever in favor of any third party upon
any assets or properties of FMP; or (iii) constitutes an event permitting
termination of any agreement or the acceleration of any indebtedness of Sellers,
or either of them, or FMP.
(b) FMP is not in default under its Certificate or Articles of
Incorporation or Bylaws or under any term or provision of any security deed,
mortgage, indenture or security agreement or of any other material contract or
instrument to which it is a party or by which it or any of its property or
assets are bound.
4.7.3 REPRESENTATIONS AND WARRANTIES. No representation or warranty
------------------------------
contained in this Article Four or in any written statement delivered by or at
the direction of Sellers, or either of them, pursuant hereto or in connection
with the transactions contemplated hereby contains or shall contain any untrue
statement, nor shall such representations and warranties taken as a whole omit
any statement necessary in order to make any statement therein not misleading.
There is no fact known to Sellers, or either of them (other than facts relating
to general business conditions), which adversely affects the business,
operations, or assets or the condition, financial or otherwise, of FMP in any
respect which has not been disclosed in this Agreement or in the Schedules.
Copies of all documents furnished to Purchaser in connection with this Agreement
or pursuant hereto are true, correct and complete.
24
<PAGE>
ARTICLE FIVE - CONDUCT OF BUSINESS OF FMP PENDING CLOSING
---------------------------------------------------------
Except as otherwise expressly provided herein, Sellers, jointly and
severally, covenant and agree that, without the consent of Purchaser, between
the date hereof and the Closing Date:
5.1 CONDUCT OF BUSINESS. FMP shall carry on its business in the usual,
-------------------
regular and ordinary course in substantially the same manner as heretofore
conducted and preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its goodwill and
its relationships with customers, suppliers, lenders and others having business
dealings with it.
5.2 MAINTENANCE OF PROPERTIES. FMP shall maintain its properties and
-------------------------
assets in good operating condition, ordinary wear and tear excepted.
5.3 INSURANCE. FMP shall maintain and keep in full force and effect all
---------
of the insurance referred to in Section 4.4.5 hereof or other insurance
equivalent thereto in all material respects.
5.4 ISSUANCE OF SECURITIES. FMP shall not sell, issue, authorize or
----------------------
propose the sale or issuance of, or purchase or propose the purchase of, any
shares of capital stock or other equity interest or any class of securities
convertible into, or rights, warrants or options to acquire, any such shares or
other convertible securities or enter into any agreement with respect to the
foregoing.
5.5 DIVIDENDS. No dividend, distribution or payment will be declared or
---------
made in respect of the capital stock of FMP, and FMP will not, directly or
indirectly, redeem, purchase or otherwise acquire any of its capital stock or
enter into any agreement with respect to the foregoing.
5.6 AMENDMENT OF CHARTER; CORPORATE EXISTENCE. Except as required by
-----------------------------------------
this Agreement, FMP will not amend or cause to be amended its Articles of
Incorporation or Bylaws, and FMP will maintain its corporate existence and
powers.
5.7 NO ACQUISITIONS. FMP will not acquire by merging or consolidating
---------------
with, or by purchasing a substantial portion of the assets or stock of, or by
any other manner, any business or any corporation, partnership, association or
other entity or division thereof, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to FMP. FMP will
not enter into any agreement with respect to the foregoing.
5.8 DISPOSITION OF ASSETS. Other than in the ordinary course of business
---------------------
and except for transfers expressly permitted pursuant to Section 4.3.11(n)
hereof, FMP will not sell, mortgage, lease, buy or otherwise acquire, transfer
or dispose of any real property or interest therein or sell or transfer,
mortgage, pledge or subject to any lien, charge or other
25
<PAGE>
encumbrance any other tangible or intangible asset or enter into any agreement
with respect to the foregoing.
5.9 COMPENSATION. No increase will be made in the compensation payable
------------
or to become payable by FMP to any director, officer, or salaried employee; no
"general increase" (as defined in Section 4.3.11(g) hereof) will be made in the
compensation payable or to become payable to any hourly or salaried employees of
FMP; no increase will be made in any payment of or commitment to pay any bonus,
profit sharing or other extraordinary compensation to any employee of FMP; and
FMP will not enter into any agreement with respect to the foregoing.
5.10 BANKING ARRANGEMENTS. No change will be made in the banking and safe
--------------------
deposit arrangements referred to in Section 4.3.8 hereof, except in the ordinary
course of business and then only after notifying Purchaser of such change.
5.11 INDEBTEDNESS. FMP will not incur any indebtedness for borrowed money
------------
or purchase money indebtedness or capital lease obligations or guarantee any
such indebtedness or issue or sell any of its debt securities or guarantee any
debt securities of others or enter into any agreement with respect to the
foregoing.
5.12 PAYMENT OF DEBT. FMP will not pay any claim or discharge or satisfy
---------------
any lien or encumbrance or pay any obligation or liability or enter into any
agreement with respect to the foregoing other than in the ordinary course of
business or as required by the terms of any instrument evidencing or governing
the same.
5.13 BENEFIT PLANS. FMP will not enter into or amend, or make or
-------------
authorize the making of any contributions to, any bonus, incentive compensation,
deferred compensation, profit sharing (including, without limitation, the
adoption of any resolution or taking of any other action for or with respect to
the contribution of any sum pursuant to the terms of any existing profit sharing
or similar plan), retirement, pension, group insurance or other benefit plan, or
any union, employment or consulting agreement or arrangement, including, without
limitation, any employee benefit plan, except as and to the extent required by
law or regulation.
5.14 CONTRACTS. FMP will not enter into any contract of the kind
---------
described in Section 4.5.1 hereof.
5.15 BOOKS AND RECORDS. The books and records of FMP will be maintained
-----------------
in the usual, regular and ordinary course of business on a basis consistent with
prior years.
5.16 OTHER ACTIONS. Neither FMP nor Sellers, nor either of them, will
-------------
take any action that would or could reasonably be expected to result in any of
the representations and warranties concerning FMP or Sellers, or either of them,
set forth in this Agreement becoming untrue in any respect at any time on or
prior to the date this Agreement terminates.
26
<PAGE>
5.17 ADVISE OF CHANGES. Sellers shall promptly advise Purchaser in
-----------------
writing of any change or event having, or which can reasonably be foreseen to
have, a material adverse effect on the assets, liabilities, business, operations
or financial condition of FMP.
ARTICLE SIX - REPRESENTATIONS AND WARRANTIES OF PURCHASER
---------------------------------------------------------
As an inducement to Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants that the following are true and correct as of the date hereof and
shall, except as may be specifically provided for in this Agreement or otherwise
specifically agreed upon or waived, in each case in writing by Sellers, be true
and correct as of the Closing:
6.1 VALIDITY. This Agreement constitutes the legal, valid and binding
--------
obligation of Purchaser enforceable in accordance with its terms except as
limited by applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance and similar laws affecting creditors' rights generally and
except to the extent general equitable principles may affect the availability of
certain remedies.
6.2 CORPORATE STATUS AND AUTHORITY. Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Georgia. Purchaser has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
6.3 DEFAULT. Neither the execution and delivery of this Agreement nor
-------
performance by Purchaser hereunder will result in a breach of the terms or
conditions of, or constitute a default under, any mortgage, note, bond,
indenture, agreement, license, instrument, undertaking, judgment, decree,
governmental order or other restriction or obligation to which Purchaser is a
party or by which it or any of its properties or assets may be bound or
affected.
6.4 SECURITIES. Purchaser is acquiring the securities for its own
----------
account for investment purposes only and not with a view to, or for resale in
connection with, any distribution of such securities within the meaning of the
Georgia Securities Act of 1973, as amended, or the Securities Act of 1933, as
amended, and that it does not presently intend to resell, assign, or otherwise
dispose of all or any part of the securities to be acquired hereunder.
6.5 REPRESENTATIONS AND WARRANTIES. No representation or warranty by
------------------------------
Purchaser contained in this Article Six or any written statement delivered by
Purchaser pursuant hereto or in connection with the transactions contemplated
hereby contains or shall contain any untrue material statement, nor shall such
representations and warranties taken as a whole omit any statement necessary in
order to make any statement not misleading. Copies of all documents furnished
to Sellers by Purchaser in connection with this Agreement or pursuant hereto are
true, correct and complete.
27
<PAGE>
ARTICLE SEVEN - CONDITIONS TO OBLIGATIONS OF PURCHASER
------------------------------------------------------
All of the obligations of Purchaser under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the following conditions,
any one or more of which may be waived, in whole or in part, in writing by
Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
concerning FMP and Sellers, or any of them, contained herein or in any
certificate, schedule or other document delivered pursuant to the provisions
hereof, or in connection herewith, shall be true in all respects as of the date
when made and shall be deemed to be made again as of the Closing Date and shall
be true in all respects at and as of such time, except as a result of changes or
events expressly permitted or contemplated herein.
7.2 PERFORMANCE OF AGREEMENTS. FMP and Sellers shall have performed and
-------------------------
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by such parties prior to or on the
Closing Date.
7.3 CERTIFICATES, RESOLUTIONS, OPINION. Sellers shall have delivered to
----------------------------------
Purchaser:
(a) a certificate, dated as of the Closing Date, certifying in such
detail as Purchaser may reasonably request to the fulfillment of the conditions
specified in Sections 7.1 and 7.2 hereof;
(b) a certificate from the Secretary of State of Pennsylvania and each
other State in which FMP is qualified to conduct business, dated not more than
five (5) business days prior to the Closing Date, certifying that FMP is a
validly subsisting corporation;
(c) an opinion of counsel for Sellers dated the Closing Date, in form
and substance satisfactory to Purchaser.
7.4 REGULATORY APPROVALS. FMP and Sellers shall have received from any
--------------------
and all governmental authorities, bodies or agencies having jurisdiction over
the transactions contemplated by this Agreement such consents, authorizations
and approvals as are necessary for the consummation thereof and all applicable
waiting or similar periods required by law shall have expired, and such
regulatory consents, authorizations and approvals shall not contain conditions
or restrictions unduly burdensome on the operations or business of FMP to be
conducted following the Closing Date.
7.5 CONSULTING AGREEMENTS. Costa and FMP shall have entered into the
---------------------
Costa Consulting Agreement, and Holt and FMP shall have entered into the Holt
Consulting Agreement.
28
<PAGE>
7.6 EMPLOYMENT AGREEMENT. FMP shall have entered into an employment
--------------------
agreement with Sandy Landry which shall be in form and substance satisfactory to
Purchaser in its sole discretion.
7.7 NO INJUNCTIONS. No preliminary or permanent injunction or other
--------------
order by any federal or state court or governmental agency which prevents the
consummation of the transactions contemplated by this Agreement shall have been
issued and remain in effect, and no action to obtain any such injunction or
order shall have been filed and remain pending.
7.8 CONSENTS AND APPROVALS OF THIRD PARTIES. All consents,
---------------------------------------
authorizations and approvals to the transactions contemplated by this Agreement
reasonably necessary or beneficial to the consummation of such transactions or
that are required pursuant to the terms of any material agreement or arrangement
to which FMP is a party or by which FMP or its assets are bound or in order to
preserve any right, license or franchise held or owned by FMP shall have been
duly obtained, and such consents, authorizations and approvals shall be in form
and substance satisfactory to Purchaser and without condition, cost or expense
to Purchaser or FMP.
7.9 RESIGNATIONS AND BOOKS AND RECORDS. Purchaser shall have received
----------------------------------
copies of written resignations from all persons serving as directors and
officers of FMP except for such officers and directors as Purchaser shall
designate in writing to Sellers; such resignations shall be effective on or
prior to the Closing Date; and Sellers shall have caused the election of such
directors and officers for FMP as may be designated by Purchaser to Sellers. On
or prior to the Closing Date, Sellers shall have delivered to Purchaser all
minute books, stock record books, books of account, bank accounts, corporate
seals, leases, contracts, agreements, customer lists, files and other documents,
instruments and papers of FMP and any of its predecessors in interest.
7.10 ESTOPPEL CERTIFICATES. Purchaser shall have received an estoppel
---------------------
certificate, in form and substance satisfactory to Purchaser, from such parties
as Purchaser may reasonably require.
7.11 OTHER CONSENTS. Purchaser shall have received the written consent
--------------
and approval of the transactions contemplated hereby and continued agreement to
supply goods, all in form and substance satisfactory to Purchaser, from such
suppliers of FMP as Purchaser may reasonably require, all without cost or
expense to Purchaser or FMP.
7.12 ENVIRONMENTAL AUDITS. Purchaser shall have conducted such
--------------------
environmental audits of locations of FMP as Purchaser shall have deemed
appropriate, and the results of such audits shall be satisfactory to Purchaser
in its sole discretion. Sellers, at their sole cost and expense, shall have
ensured that all of the locations of FMP are in full compliance with all
applicable Environmental Laws, or made such arrangements for such compliance as
are acceptable to Purchaser, in its sole discretion, including, without
limitation, the escrow of funds sufficient to accomplish such removal and
disposition and to ensure such compliance.
29
<PAGE>
7.13 SUPPLY AGREEMENTS. On or prior to Closing, FMP shall have entered
-----------------
into the Fiberstars Supply Agreement, the Fostec Supply Agreement and the
National Supply Agreement, all of which shall be in form and substance
satisfactory to Purchaser in its sole discretion.
7.14 PATENT CLEARANCE SEARCH. Purchaser shall have completed the Patent
-----------------------
Clearance Search and received the Right To Practice Opinion, which shall be in
form and substance satisfactory to Purchaser, and Purchaser shall have received
such other evidence as Purchaser may require that all products and services
designed, manufactured, supplied, distributed or performed by FMP do not
infringe upon the intellectual or other property rights of any third party.
7.15 EVIDENCE REGARDING REPRESENTATIONS AND WARRANTIES. Purchaser shall
-------------------------------------------------
have received such evidence as Purchaser may reasonably request that the
representations and warranties of Sellers set forth in Article Four hereof are
true and correct.
7.16 OTHER DOCUMENTS. On or prior to Closing, Sellers, and each of them,
---------------
shall have delivered such other documents, agreements and certificates as may
have been reasonably requested by Purchaser.
ARTICLE EIGHT - CONDITIONS TO OBLIGATIONS OF SELLERS
----------------------------------------------------
All of the obligations of Sellers under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the following conditions,
any one or more of which may be waived, in whole or in part, in writing by them:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of Purchaser contained herein or in any certificate, schedule or other document
delivered pursuant to the provisions hereof, or in connection herewith, shall be
true in all respects as of the date when made and shall be deemed to be made
again at and as of the Closing Date and shall be true in all respects at and as
of such time.
8.2 PERFORMANCE OF AGREEMENTS. Purchaser shall have performed and
-------------------------
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
8.3 CERTIFICATE. Purchaser shall have delivered to Sellers a
-----------
certificate, dated as of the Closing Date, certifying in such detail as Sellers
may reasonably request to the fulfillment of the conditions specified in
Sections 8.1 and 8.2 hereof.
8.4 APPROVALS. Any and all governmental authorities, bodies or agencies
---------
having jurisdiction over the transactions contemplated by this Agreement shall
have granted such consents, authorizations and approvals as are necessary for
the consummation thereof, and all applicable waiting or similar periods required
by law shall have expired.
30
<PAGE>
8.5 CONSULTING AGREEMENTS. Costa and FMP shall have entered into the
---------------------
Costa Consulting Agreement, and Holt and FMP shall have entered into the Holt
Consulting Agreement.
8.6 NO INJUNCTIONS. No preliminary or permanent injunction or other
--------------
order by any federal or state court which prevents the consummation of the
transactions contemplated by this Agreement shall have been issued and remain in
effect, and no action to obtain any such injunction or order shall have been
filed and remain pending.
ARTICLE NINE - INDEMNIFICATION
------------------------------
9.1 INDEMNIFICATION BY SELLERS. Sellers, jointly and severally, hereby
--------------------------
indemnify and agree to hold harmless and defend Purchaser and FMP against and in
respect of the following:
(a) any loss, claim, liability, expense or other damage incurred by
Purchaser or FMP caused by, resulting from or arising out of any failure on the
part of Sellers, or either of them, to perform any covenant in this Agreement or
any document, instrument or certificate delivered pursuant hereto or any breach
of warranty or any inaccurate or erroneous representation made by or on behalf
of FMP or Sellers, or any of them, in this Agreement, the Schedules attached
hereto or in any other instrument or certificate delivered pursuant hereto;
(b) any loss, claim, liability, expense, cleanup cost, or other
damage, including claims for personal injury or property damage, incurred by
Purchaser or FMP caused by, resulting from or arising out of (i) the Release of
Hazardous Substances at, on or from any on-site or off-site facility used, owned
or leased prior to Closing by FMP or its respective officers, directors, agents,
employees and contractors, to process, recycle, reclaim, refine, transport,
store, dispose of or otherwise handle Hazardous Substances generated by FMP; or
(ii) the Release of Hazardous Substances at, on or from any property contingent
to, adjacent to or near any facility used, owned or leased prior to Closing by
FMP or its respective officers, directors, agents, employees and contractors; or
(iii) the failure of FMP to comply with any limitations, restrictions,
conditions, prohibitions, requirements, obligations, schedules, and timetables
contained in the Environmental Laws and any permits or licenses issued
thereunder;
(c) any loss, claim, liability, expense or other damage incurred by
Purchaser or FMP resulting from or arising out of any claim premised in whole or
in part on product liability and involving products manufactured, sold,
licensed, leased or otherwise distributed by FMP prior to the Closing Date; and
(d) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses, including attorneys' fees,
incidental to any of the foregoing.
31
<PAGE>
9.2 INDEMNIFICATION BY PURCHASER. Purchaser hereby indemnifies and agrees
----------------------------
to hold harmless and defend Sellers at all times from and after the date of this
Agreement, against and in respect of the following:
(a) any loss, claim, liability, expense or other damage incurred by
Sellers caused by, resulting from or arising out of any failure on Purchaser's
part to perform any covenant in this Agreement or any other instrument or
certificate delivered pursuant hereto or any breach of warranty or any
inaccurate or erroneous representation made by Purchaser in this Agreement or in
any other instrument or certificate delivered pursuant hereto; and
(b) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses, including attorneys' fees,
incidental to any of the foregoing.
9.3 THIRD-PARTY CLAIMS. If a claim by a third party is made against any
------------------
of the indemnified parties, and if such indemnified party intends to seek
indemnity with respect thereto under this Article Nine, such indemnified party
shall promptly notify the indemnifying party(ies) of such claim. The
indemnifying party(ies) shall have thirty (30) days after receipt of the above-
mentioned notice to undertake, conduct and control, through counsel of its or
their own choosing (subject to the consent of the indemnified party, such
consent not to be unreasonably withheld) and at its or their expense, the
settlement or defense therefor, and the indemnified party shall cooperate with
it or them in connection therewith, provided that: (i) the indemnifying
party(ies) shall not thereby permit to exist any lien, encumbrance or other
adverse charge upon any asset of the indemnified party, (ii) the indemnifying
party(ies) shall permit the indemnified party to participate in such settlement
or defense through counsel chosen by the indemnified party, provided that the
fees and expenses of such counsel shall be borne by the indemnified party, and
(iii) the indemnifying party(ies) shall agree promptly to reimburse the
indemnified party for the full amount of any loss resulting from such claim and
all related expense incurred by the indemnified party. So long as the
indemnifying party(ies) is reasonably contesting any such claim in good faith,
the indemnified party shall not pay or settle any such claim. Notwithstanding
the foregoing, in the event the indemnifying party(ies) assumes responsibility
for defending any third-party claims, the indemnified party shall have the right
to pay or settle any such claim, provided that in such event the indemnified
party shall waive any right to indemnity therefor by the indemnifying
party(ies). If the indemnifying party(ies) does not notify the indemnified
party within thirty (30) days after receipt of the indemnified party's notice of
a claim of indemnity hereunder that it elects to undertake the defense thereof,
the indemnified party shall have the right to contest, settle or compromise the
claim in the exercise of its exclusive discretion at the expense of the
indemnifying party(ies). The indemnified party shall, however, notify the
indemnifying party of any compromise or settlement of any such claim. Nothing
contained in this Section 9.3 shall be construed as a limitation on the right of
any party to indemnification under Sections 9.1 or 9.2 hereof.
32
<PAGE>
9.4 OFFSET. Purchaser shall have the right to offset against any amounts
-------
due Sellers, or either of them, hereunder any amounts owing to Purchaser by
Sellers, or either of them, pursuant to the terms of this Article Nine or any
other provision hereof.
9.5 LIMITATIONS.
------------
(a) Except with respect to a breach by Sellers of (i) any
representation or warranty contained in Sections 4.3.4 or 4.3.6 hereof; (ii) any
of their obligations under Section 3.7 hereof; or (iii) Sellers' obligation to
indemnify Purchaser for the full cost and expense of the Fostec Blanket Claims
with respect to blankets sold prior to the Closing Date pursuant to Section
4.4.3 hereof (for which Purchaser shall be entitled to recover the full amount
of any losses, claims, liabilities or expenses arising pursuant to such breach),
the total amount payable by Sellers for indemnification pursuant to Section 9.1
hereof shall be limited to Five Hundred Thousand and No/100 Dollars
($500,000.00). Except with respect to a breach by Sellers of those
representations, warranties and obligations described in subsections (i) through
(iii) of the immediately preceding sentence (for which Purchaser shall be
entitled to recover the full amount of any losses, claims, liabilities or
expenses arising pursuant to such breach), no claims for indemnification shall
be payable by Sellers pursuant to Section 9.1 unless and until the aggregate
amount of all such claims for indemnification equal or exceeds the amount of
Fifty Thousand and No/100 Dollars ($50,000.00). At such time, the Sellers shall
be jointly and severally liable for all claims hereunder, including the initial
Fifty Thousand and No/100 Dollars ($50,000.00).
(b) Except with respect to a breach by Sellers of any representation
or warranty contained in Section 4.3.4 (for which the time period for bringing a
claim for indemnity hereunder shall be unlimited) or Section 4.3.6 (for which
the time period for bringing a claim for indemnity hereunder shall be the
applicable statute of limitations applicable with respect to such claim, no
claims for indemnity pursuant to this Article 9 shall be effective unless notice
of such claim is given to the indemnifying party within two (2) years following
the Closing Date. No claim shall be disallowed hereunder, however, if a party
has notified the other parties of the facts giving rise to such claim on or
prior to the date by which a claim is required to be submitted hereunder, even
if the amount of such claim is unknown.
ARTICLE TEN - TERMINATION
-------------------------
This Agreement may be terminated by Purchaser or Sellers for the reasons
set forth in this Article Ten at any time prior to or on the Closing Date upon
written notice to the other as follows and, upon any such termination of this
Agreement (other than pursuant to Sections 10.2 and 10.3), no party hereto shall
have any liability to the other, except that the provisions of Sections 3.1 and
3.4 hereof shall survive the termination of this Agreement for any reason.
These events of termination are intended to operate independently from any other
agreements, representations, warranties and/or conditions contained in this
Agreement.
33
<PAGE>
10.1 MATERIAL ADVERSE CHANGE - FMP. By Purchaser if, after the date
-----------------------------
hereof, a material adverse change in the financial condition, business or
prospects of FMP shall have occurred or if FMP shall have suffered a material
loss of or damage to any of its properties or assets, which change, loss or
damage materially affects or impairs the ability of FMP to conduct its business.
10.2 NONCOMPLIANCE OF SELLERS. By Purchaser, if the terms, covenants or
------------------------
conditions of this Agreement to be complied with or performed by Sellers, or
either of them, before the Closing shall not have been complied with or
performed in all material respects on or prior to the Closing Date and such non-
compliance or non-performance shall not have been waived by Purchaser.
10.3 NONCOMPLIANCE OF PURCHASER. By Sellers, if the terms, covenants or
--------------------------
conditions of this Agreement to be complied with or performed by Purchaser
before the Closing shall not have been complied with or performed in all
material respects on or prior to the Closing Date and such non-compliance or
non-performance shall not have been waived by Sellers, or either of them.
10.4 FAILURE TO DISCLOSE - SELLERS. By Purchaser, if it learns of any
-----------------------------
material fact or condition not disclosed in this Agreement or the Schedules
which was required to be disclosed by Sellers pursuant to any provision of this
Agreement with respect to the business, properties, assets or earnings of FMP
which materially and adversely affects such business, properties, assets or
earnings (or the prospects thereof) or the ownership, value or continuance
thereof.
10.5 FAILURE TO DISCLOSE - PURCHASER. By Sellers, if they learn of any
-------------------------------
material fact or condition not disclosed in this Agreement which was required to
be disclosed by Purchaser.
10.6 ADVERSE PROCEEDINGS. By Sellers or Purchaser, if any action, suit or
-------------------
proceeding shall have been instituted or threatened against any party to this
Agreement to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated hereby,
which, in the good faith opinion of Sellers or Purchaser, makes consummation of
the transactions herein contemplated inadvisable.
10.7 TERMINATION DATE. By Sellers or Purchaser, if the Closing has not
----------------
been consummated on or prior to July 31, 1996.
34
<PAGE>
ARTICLE ELEVEN - RESTRICTIVE COVENANTS
--------------------------------------
11.1 DEFINITIONS.
-----------
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Confidential Information" shall mean proprietary and
------------------------
confidential data or information of FMP, other than "Trade Secrets" (as
defined under applicable law), which is of tangible or intangible value to
FMP and is not public information or generally known or available to FMP's
competitors but is generally known only to FMP and those of its employees,
independent contractors, representatives and agents to whom such data or
information must be confided in order to apply it to the uses intended.
(ii) "Restricted Territory" shall mean the United States of
--------------------
America and those countries set forth on Schedule 11.1.
-------------
11.2 NON-COMPETITION. Sellers, and each of them, acknowledge and agree
---------------
that the business of FMP is conducted and is known throughout the Restricted
Territory and that FMP's reputation and goodwill are an integral part of its
business success throughout the Restricted Territory. If Sellers, or either of
them, deprive Purchaser of any of FMP's goodwill or in any manner utilize FMP's
reputation and goodwill in competition with FMP, Purchaser will be deprived of
the benefits it has bargained for pursuant to this Agreement. Accordingly, as a
covenant ancillary to the purchase of the Shares and as an inducement for
Purchaser to enter into this Agreement, Sellers, and each of them, agree that
for a period of ten (10) years after the Closing Date (the "Non-Competition
Period") no Seller will, without Purchaser's prior written consent, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation or control of, or be connected as a director, officer,
employee, partner, consultant or otherwise with, any profit or non-profit
business or organization in the Restricted Territory, that, directly or
indirectly, competes with FMP in the detection, diagnosis or treatment of
neonatal jaundice or offers products or services the same as, or competitive
with those of FMP as it shall exist immediately prior to the Closing or as
contemplated by FMP to be developed as of the Closing Date; provided, however,
-------- -------
that nothing herein shall prohibit Sellers from accepting a position with any
person or entity outside of North America involving only the detection and
diagnosis of neonatal jaundice provided that such person or entity has a valid
license agreement with Purchaser with respect to the detection and diagnosis of
neonatal jaundice. Notwithstanding the foregoing provisions of this Section
11.2, nothing herein shall be deemed to prohibit Sellers from accepting a
position with any business including a competitor of FMP or Purchaser, so long
as Sellers do not perform services related (i) to the manufacturing, selling or
distributing of phototherapy equipment used to treat neonatal jaundice, (ii) the
treatment of neonatal jaundice, or (iii) detection or diagnosis of neonatal
jaundice within North America.
35
<PAGE>
11.3 NON-SOLICITATION. During the Non-Competition Period, neither Seller
----------------
shall (a) solicit, raid, entice, induce or contact any person, firm or
corporation that is a customer of FMP to become a customer of any other person,
firm or corporation for products or services the same as, or competitive with,
those products and services sold, rendered or otherwise made available to
customers by FMP as of the Closing Date, as well as products and services in any
stage of development by FMP as of the Closing Date although not yet
commercialized or not generally available, or approach any such person, firm or
corporation for such purpose or authorize the taking of such actions by any
other person, firm or corporation or assist or participate with any such person,
firm or corporation in taking such action; (b) solicit, entice, divert,
appropriate, contact or request any present supplier of FMP to curtail or cancel
its business with FMP; or (c) solicit, raid, entice, induce or contact any
person, firm or corporation that currently is or at any time during such Non-
Competition Period shall be an employee, agent or consultant of or to FMP to do
anything from which such Seller is restricted by reason of this Article Eleven,
and no Seller shall approach any such employee, agent or consultant for such
purpose or authorize or participate in the taking of such actions by any other
person, firm or corporation or assist or participate with any such person, firm
or corporation in taking such action. The term "customer" shall include with
respect to FMP: (i) customers of FMP existing immediately prior to the Closing;
(ii) customers that have used services or purchased products of FMP within the
twelve (12)-month period prior to the Closing Date; and (iii) those entities
that have committed to using services or purchasing products of FMP or that have
been identified by FMP as potential users of services or purchasers of products
of FMP but for which FMP has not yet commenced providing such services or
products.
11.4 NON-DISCLOSURE. Sellers, and each of them, acknowledge and agree
--------------
that FMP would be damaged if the Confidential Information or Trade Secrets of
FMP were disclosed or utilized on behalf of others in competition with FMP.
Accordingly, as a covenant ancillary to this Agreement, Sellers, and each of
them, hereby covenant and agree that, as to the Confidential Information, for a
period of three (3) years from the date hereof, and as to the Trade Secrets, for
such time as the same shall constitute a Trade Secret under Georgia law, no
Seller shall, either directly or indirectly, use, distribute, sell, license,
transfer, assign, disclose, disseminate, copy, appropriate or otherwise
communicate any Trade Secrets or Confidential Information to any person, firm,
corporation, association or other entity nor shall any Seller make use of any
such Trade Secrets or Confidential Information for his, her or its own purpose
or for the benefit of any other person, firm, corporation or other entity.
11.5 GOODWILL. During the Non-Competition Period, neither Seller shall
--------
make any statement or other communication that impugns or attacks the reputation
or character of FMP, or damages the goodwill of FMP; take any action that would
interfere with any contractual, customer or supplier relationships of FMP,
including, without limitation, any action that would result in a diminution of
business; or otherwise take any action that is detrimental to the best interests
of FMP.
36
<PAGE>
11.6 ACKNOWLEDGMENTS OF SELLERS. Sellers, and each of them, acknowledge
--------------------------
that a breach of any covenant contained in this Article Eleven would cause
irreparable damage to FMP and Purchaser, the exact amount of which would be
difficult to ascertain, and that the remedies at law for any such breach would
be inadequate. Accordingly, if Sellers, or either of them, breach any covenant
contained in this Article Eleven, in addition to any other remedy that may be
available at law or in equity, FMP and/or Purchaser shall be entitled to
specific performance and injunctive relief. In the event any covenant or
agreement in this Article Eleven shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too great a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the maximum period of time for which it may be enforceable and/or over the
maximum geographical area as to which it may be enforceable and/or to the
maximum extent in all other respects as to which it may be enforceable, all as
determined by such court in such action.
ARTICLE TWELVE - MISCELLANEOUS
------------------------------
12.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties,
---------------------------
covenants, and agreements made by any party hereto in or pursuant to this
Agreement or in any instrument, exhibit, or certificate delivered pursuant
hereto shall be deemed to have been relied upon by the party(ies) to which made.
All of the representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing in accordance with the provisions
hereof.
12.2 NOTICES. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or mailed, first class, certified mail, postage
prepaid as to each of the parties hereto or by facsimile transmission, receipt
acknowledged, at the respective addresses and facsimile numbers set forth below
(or at such other address as to which any such party may have theretofore
notified the other party(ies) pursuant to the terms hereof):
(a) To Purchaser:
Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
Attn: President
Telephone Number: (770) 499-1212
Facsimile Number: (770) 421-1684
37
<PAGE>
With a copy to:
Troutman Sanders
600 Peachtree Street, N.E.
Suite 5200 NationsBank Plaza
Atlanta, Georgia 30308-2216
Attn: James L. Smith, III, Esquire
Telephone Number: (404) 885-3000
Facsimile Number: (404) 885-3900
(b) To Sellers:
Pasquale J. Costa
4382 Farmington Circle
Allentown, Pennsylvania 18104
Richard W. Holt
4134 Cambridge Court
Schnecksville, Pennsylvania 18078
With a copy to:
Dominic S. Liberi, Esq.
2005 Market Street, 22nd Floor
One Commerce Square
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 241-1896
Facsimile Number: (215) 241-1857
12.3 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
----------------
and agreements between the parties hereto with respect to the matters contained
herein, and this Agreement and the agreements referred to herein including all
Exhibits and Appendices hereto (which are incorporated herein by this reference)
contain the sole and entire agreement among the parties hereto with respect to
the subject matter hereof and the transactions contemplated herein.
12.4 WAIVER; AMENDMENT. Prior to or on the Closing Date, each party
-----------------
hereto shall have the right to waive any default in the performance of any term
of this Agreement by any other party hereto, to waive or extend the time for the
fulfillment by such other party of any or all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to such party's
obligations under this Agreement, except any condition which, if not satisfied,
would result in the violation of any law or applicable governmental regulation.
This Agreement may be amended by a subsequent writing signed by all of the
parties hereto.
38
<PAGE>
12.5 COUNTERPARTS, HEADINGS, ETC. This Agreement may be executed
----------------------------
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings herein are for convenience of reference only and shall not be deemed a
part of this Agreement. A pronoun in one gender includes and applies to the
other gender as well.
12.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of Purchaser and Sellers and their respective
successors and permitted assigns; provided, however, that this Agreement may not
-------- -------
be assigned by Sellers, or either of them, without the prior written consent of
Purchaser.
12.7 GOVERNING LAW. The validity and effect of this Agreement and the
-------------
rights and obligations of the parties hereto shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia.
12.8 REMEDIES: DAMAGES, INJUNCTIONS AND SPECIFIC PERFORMANCE.
--------------------------------------------------------
(a) It is expressly understood and agreed that many of the covenants,
agreements and services to be rendered and performed by Sellers pursuant to this
Agreement shall survive the Closing Date and are special, unique, and of an
extraordinary character, and in the event of any default, breach or threatened
breach by Sellers, or either of them, of any term, provision or Section of this
Agreement to be performed by Sellers, or either of them, hereunder, including,
without limitation, any of the provisions of Article Eleven hereof, Purchaser
shall be entitled, if it so elects, to institute and prosecute proceedings in
any court of competent jurisdiction, either at law or in equity, and shall be
entitled to such relief as may be available to it pursuant hereto, at law or in
equity, including, without limiting the generality of the foregoing, any
proceedings to: (i) obtain damages for any breach of this Agreement; (ii) order
the specific performance thereof by Sellers, or either of them; or (iii) enjoin
Sellers, or either of them, from breaching such provisions.
(b) In the event that any legal proceeding is initiated by Purchaser
to enforce any of the provisions of Article Eleven hereof, the term of any
temporal restrictions which may be set forth in such provisions shall be
extended by a period of time equivalent to that period of time from the date of
filing of any legal or equitable action for the enforcement of such provisions
of Article Eleven until the date on which said proceedings, including all
allowable appeals, are completed or terminated and either a final judgment is
entered or the action is dismissed, with or without prejudice; it being the
specific intention of the parties to this Agreement that the above referenced
temporal restrictions shall be tolled during the pendency of any legal or
equitable proceeding instituted to enforce any of the provisions of Article
Eleven and that upon the termination of any such action the temporal
restrictions shall once again commence. If Purchaser shall seek to enjoin
Sellers, or either of them, from defaulting in the performance of or breaching
any provision or Section of this Agreement, Sellers, and each of them, shall
waive and hereby waive the defense that Purchaser has or will then have an
adequate remedy at law.
39
<PAGE>
12.9 INTERPRETATION. All Sections, sub-Sections, paragraphs, terms and
--------------
provisions of this Agreement are severable, and the unenforceability or
invalidity of any of the terms, provisions, Sections, sub-Sections or paragraphs
of this Agreement shall not affect the validity or enforceability of the
remaining terms, provisions, Sections, sub-Sections or paragraphs of this
Agreement, but such remaining terms, provisions, Sections, sub-Sections or
paragraphs shall be interpreted and construed in such a manner as to carry out
fully the intention of the parties hereto. Sellers acknowledge and agree that
the covenants and agreements contained in this Agreement, including, without
limitation, the covenants and agreements contained in Article Eleven hereof,
shall be construed as covenants and agreements independent of each other and of
any other provision of this Agreement or any other contract between the parties
hereto and that the existence of any claim or cause of action by Sellers, or
either of them, against Purchaser or FMP whether predicated upon this Agreement
or any other contract, shall not constitute a defense to the enforcement by
Purchaser of said covenants, agreements and the provisions of Article Eleven.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement under seal as of the day and year first above written.
"PURCHASER"
---------
HEALTHDYNE TECHNOLOGIES, INC.
By:
-----------------------------------
Its:
-----------------------------------
"SELLERS"
-------
[SEAL]
---------------------------------
PASQUALE J. COSTA
[SEAL]
---------------------------------
RICHARD W. HOLT
40
<PAGE>
EXHIBIT A-1
-----------
NON-NEGOTIABLE PROMISSORY NOTE
$600,000.00 Atlanta, Georgia
June 27, 1996
1. Principal and Interest
----------------------
FOR VALUE RECEIVED, the undersigned, HEALTHDYNE TECHNOLOGIES, INC., a
Georgia corporation (the "Maker"), promises to pay to PASQUALE J. COSTA, a
Pennsylvania resident (the "Holder"), at 4382 Farmington Circle, Allentown,
Pennsylvania 18104, or at such other address as Holder may designate to Maker
from time to time in writing, the principal sum of Six Hundred Thousand and
No/100 Dollars ($600,000.00), or such lesser amount as may be outstanding
hereunder (the "Principal"), together with accrued interest thereon from the
date hereof payable at the rate of six percent (6%) per annum.
Principal shall be payable, together with accrued and unpaid interest, in
two (2) equal installments of $300,000.00 on June 27, 1997 and June 27, 1998.
If any scheduled payment date falls on a day on which banks are authorized to be
closed in Atlanta, Georgia, then such payment date shall be deemed to be the
next business day on which such banks are not so authorized.
2. Subordination
-------------
(a) "Senior Indebtedness" means the principal of and premium, if any, and
interest on indebtedness of the Maker for money borrowed from commercial banks,
equipment lessors or other financial institutions under a secured or unsecured
line of credit, term loan or equipment lease.
(b) The Maker agrees and the Holder by acceptance hereof, agrees,
expressly for the benefit of the present and future holders of Senior
Indebtedness that, except as otherwise provided herein, upon (i) an event of
default under any Senior Indebtedness, or (ii) any dissolution, winding up, or
liquidation of the Maker, whether or not in bankruptcy, insolvency or
receivership proceedings, the Maker shall not pay, and the Holder shall not be
entitled to receive any amount in respect of the principal and interest of this
Non-Negotiable Promissory Note (this "Note") unless and until the Senior
Indebtedness shall have been paid or otherwise discharged. Upon (1) an event of
default under any Senior Indebtedness, or (2) any dissolution, winding up or
liquidation of the Maker, any payment or distribution of assets of the Maker,
which the Holder of this Note would be entitled to receive but for the
provisions hereof, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution directly to the holders of Senior
Indebtedness ratably according to the aggregate amounts remaining unpaid on
Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of Senior Indebtedness. Subject to the payment in
full of the Senior Indebtedness and until this Note is paid in full, the Holder
of this Note shall be subrogated to the rights of the holders of the Senior
Indebtedness (to the extent of payments or distributions previously made to the
holders of Senior Indebtedness
41
<PAGE>
pursuant to this paragraph 2(b) to receive payments or distributions of assets
of the Maker applicable to the Senior Indebtedness).
(c) This Section 2 is not intended to impair, as between the Maker, its
creditors (other than the holders of Senior Indebtedness) and the Holder of this
Note, the unconditional and absolute obligation of the Maker to pay the
principal of and interest on the Note or affect the relative rights of the
Holder of this Note and the other creditors of the Maker, other than the holders
of Senior Indebtedness. Nothing in this Note shall prevent the Holder of this
Note from exercising all remedies otherwise permitted by applicable law upon
default under the Note, subject to the rights, if any, of the holders of Senior
Indebtedness in respect to cash, property or securities of the Maker received
upon the exercise of any such remedy.
3. Miscellaneous
-------------
This Note is issued pursuant to that certain Stock Purchase Agreement dated
as of June 27, 1996 (the "Purchase Agreement"), by and among Maker, Holder and
Richard W. Holt, and is entitled to all benefits thereof. Capitalized terms
used in this Note but not otherwise defined herein shall have the respective
meanings assigned to such terms in the Purchase Agreement. Maker shall have the
right to setoff against any payments due or to become due under this Note any
and all amounts due and owing from Holder to Maker, including, without
limitation, any amounts with respect to which Maker is entitled to be
indemnified by Holder pursuant to the Purchase Agreement.
Maker hereby reserves the right to prepay the indebtedness evidenced by
this Note, in whole or in part, at any time without penalty, premium or payment
of interest.
This Note shall be governed by and construed in accordance with the laws of
the State of Georgia.
IN WITNESS WHEREOF, Maker has caused this Non-Negotiable Promissory Note to
be executed by its duly authorized officer as of the day and year first above
written.
HEALTHDYNE TECHNOLOGIES, INC.
By:
----------------------------------
Name:
--------------------------------
Title
-------------------------------
42
<PAGE>
EXHIBIT A-2
-----------
NON-NEGOTIABLE PROMISSORY NOTE
$600,000.00 Atlanta, Georgia
June 27, 1996
1. Principal and Interest
----------------------
FOR VALUE RECEIVED, the undersigned, HEALTHDYNE TECHNOLOGIES, INC., a
Georgia corporation (the "Maker"), promises to pay to RICHARD W. HOLT, a
Pennsylvania resident (the "Holder"), at 4134 Cambridge Court, Schnecksville,
Pennsylvania 18078, or at such other address as Holder may designate to Maker
from time to time in writing, the principal sum of Six Hundred Thousand and
No/100 Dollars ($600,000.00), or such lesser amount as may be outstanding
hereunder (the "Principal"), together with accrued interest thereon from the
date hereof payable at the rate of six percent (6%) per annum.
Principal shall be payable, together with accrued and unpaid interest, in
two (2) equal installments of $300,000.00 on June 27, 1997 and June 27, 1998.
If any scheduled payment date falls on a day on which banks are authorized to be
closed in Atlanta, Georgia, then such payment date shall be deemed to be the
next business day on which such banks are not so authorized.
2. Subordination
-------------
(a) "Senior Indebtedness" means the principal of and premium, if any, and
interest on indebtedness of the Maker for money borrowed from commercial banks,
equipment lessors or other financial institutions under a secured or unsecured
line of credit, term loan or equipment lease.
(b) The Maker agrees and the Holder by acceptance hereof, agrees,
expressly for the benefit of the present and future holders of Senior
Indebtedness that, except as otherwise provided herein, upon (i) an event of
default under any Senior Indebtedness, or (ii) any dissolution, winding up, or
liquidation of the Maker, whether or not in bankruptcy, insolvency or
receivership proceedings, the Maker shall not pay, and the Holder shall not be
entitled to receive any amount in respect of the principal and interest of this
Non-Negotiable Promissory Note (this "Note") unless and until the Senior
Indebtedness shall have been paid or otherwise discharged. Upon (1) an event of
default under any Senior Indebtedness, or (2) any dissolution, winding up or
liquidation of the Maker, any payment or distribution of assets of the Maker,
which the Holder of this Note would be entitled to receive but for the
provisions hereof, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution directly to the holders of Senior
Indebtedness ratably according to the aggregate amounts remaining unpaid on
Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of Senior Indebtedness. Subject to the payment in
full of the Senior Indebtedness and until this Note is paid in full, the Holder
of this Note shall be subrogated to the rights of the holders of the Senior
Indebtedness (to the extent of payments or distributions previously made to the
holders of Senior Indebtedness
43
<PAGE>
pursuant to this paragraph 2(b) to receive payments or distributions of assets
of the Maker applicable to the Senior Indebtedness).
(c) This Section 2 is not intended to impair, as between the Maker, its
creditors (other than the holders of Senior Indebtedness) and the Holder of this
Note, the unconditional and absolute obligation of the Maker to pay the
principal of and interest on the Note or affect the relative rights of the
Holder of this Note and the other creditors of the Maker, other than the holders
of Senior Indebtedness. Nothing in this Note shall prevent the Holder of this
Note from exercising all remedies otherwise permitted by applicable law upon
default under the Note, subject to the rights, if any, of the holders of Senior
Indebtedness in respect to cash, property or securities of the Maker received
upon the exercise of any such remedy.
3. Miscellaneous
-------------
This Note is issued pursuant to that certain Stock Purchase Agreement dated
as of June 27, 1996 (the "Purchase Agreement"), by and among Maker, Holder and
Pasquale J. Costa, and is entitled to all benefits thereof. Capitalized terms
used in this Note but not otherwise defined herein shall have the respective
meanings assigned to such terms in the Purchase Agreement. Maker shall have the
right to setoff against any payments due or to become due under this Note any
and all amounts due and owing from Holder to Maker, including, without
limitation, any amounts with respect to which Maker is entitled to be
indemnified by Holder pursuant to the Purchase Agreement.
Maker hereby reserves the right to prepay the indebtedness evidenced by
this Note, in whole or in part, at any time without penalty, premium or payment
of interest.
This Note shall be governed by and construed in accordance with the laws of
the State of Georgia.
IN WITNESS WHEREOF, Maker has caused this Non-Negotiable Promissory Note to
be executed by its duly authorized officer as of the day and year first above
written.
HEALTHDYNE TECHNOLOGIES, INC.
By:
---------------------------
Name:
-------------------------
Title
-------------------------
44
<PAGE>
EXHIBIT B
---------
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
this 27th day of June, 1996 (the "Effective Date"), by and between HEALTHDYNE
TECHNOLOGIES, INC., a Georgia corporation ("Healthdyne"), and PASQUALE J. COSTA,
a Pennsylvania resident ("Costa").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Costa has previously been employed by Fiberoptic Medical
Products, Inc., a Pennsylvania corporation ("FMP") as its vice president;
WHEREAS, concurrently herewith, all of the issued and outstanding
shares of capital stock of FMP are being purchased by Healthdyne pursuant to
that certain Stock Purchase Agreement (the "Purchase Agreement"), by and among
Healthdyne, Costa and Richard W. Holt, a Pennsylvania resident;
WHEREAS, pursuant to the Purchase Agreement and subject to the terms
and conditions set forth in this Agreement, Healthdyne desires to retain Costa
to perform certain consulting services for Healthdyne and FMP, all as more fully
set forth herein; and
WHEREAS, Costa desires to provide such consulting services for
Healthdyne and FMP, all upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. CONSULTING SERVICES.
-------------------
(A) Subject to the terms and conditions set forth in this Agreement,
Healthdyne hereby retains Costa during the term of this Agreement to provide to
Healthdyne and FMP the consulting services more particularly described on
Exhibit A attached hereto and incorporated herein by reference (the "Consulting
- ---------
Services"), and Costa hereby agrees to perform such Consulting Services. During
the term of this Agreement, Costa agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talents, perform
and discharge the Consulting Services and all other duties that may be required
of and from him pursuant to the terms hereof in compliance with all applicable
laws, rules and regulations and so as to promote the profit, benefit and
business of Healthdyne and FMP and their affiliates and so as to represent
Healthdyne and FMP and their affiliates in the most professional manner
possible. The Consulting Services shall be rendered at the offices of
Healthdyne and FMP, their affiliates, customers and clients and their respective
job sites, and
45
<PAGE>
at such other place or places as the interests, needs, businesses or
opportunities of Healthdyne and FMP and their affiliates, customers and clients
shall require or as may be reasonably requested by the Board of Directors of
Healthdyne. Healthdyne shall be entitled to all benefits, profits or other
issues arising from or incident to all work, service and advice of Costa
relating to Healthdyne or FMP during the term of this Agreement
(B) Costa further agrees that during the term of this Agreement he
shall devote eighty percent (80%) of his full business time, attention,
knowledge, effort and skills solely to the business and interests of Healthdyne
and FMP and their affiliates. During the term of this Agreement, Costa shall
not devote significant business time to activities that would inhibit or
otherwise interfere with the proper performance of his duties and, except as
expressly provided herein, shall not be directly or indirectly concerned or
interested in any other occupation or business; provided, however, that Costa
-------- -------
shall be entitled to maintain investments and interests in corporations or
business ventures (other than a "Competitor" as defined in Section 5(a) hereof),
provided that such investments or interests do not interfere with his ability to
devote eighty percent (80%) of his full business time to Healthdyne and FMP and
to perform the Consulting Services and his other duties hereunder.
2. WORK STANDARD. During the term of this Agreement, Costa hereby
-------------
agrees that he will at all times comply with and abide by all lawful terms and
conditions set forth in this Agreement and all applicable lawful work policies,
procedures and rules as may be issued by Healthdyne or established by Healthdyne
from time to time.
3. COMPENSATION.
------------
(A) Subject to the terms and conditions set forth in this Agreement,
and as full and complete compensation for the Consulting Services and all other
services to be rendered by Costa hereunder, Healthdyne shall pay or cause to be
paid to Costa, and Costa shall accept, an annual consulting fee (the "Consulting
Fee") of One Hundred Thousand and No/100 Dollars ($100,000.00). The Consulting
Fee shall be payable in twelve (12) equal monthly payments in arrears on the
last day of each month during the term of this Agreement; provided, however,
-------- -------
that if any scheduled payment falls on a Saturday, Sunday or holiday, such
payment shall be made on the last business day immediately preceding such
Saturday, Sunday or holiday.
(B) During the term of this Agreement, Healthdyne shall pay or
reimburse Costa for all reasonable travel, entertainment and other expenses
reasonably incurred by Costa in performing his duties under this Agreement;
provided, however, that such expenses are approved in advance and appropriately
- -------- -------
documented and submitted to Healthdyne in accordance with Healthdyne's policies
in effect from time to time.
4. STATUS OF PARTIES. Both Costa and Healthdyne, in the performance
-----------------
of this Agreement, will be acting in their own separate capacities and not as
agents, employees, partners, joint venturers or associates of one another. It
is expressly understood and agreed
46
<PAGE>
that Costa is an independent contractor of Healthdyne in all manners and
respects and that Costa shall have no power or authority, nor represent that he
has the power or authority, to bind Healthdyne, FMP or any of their affiliates
to any contract or agreement. During the term of this Agreement, Costa shall be
solely responsible for all applicable withholding, social security, unemployment
and other taxes, and worker's compensation insurance premiums.
5. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION COVENANTS.
--------------------------------------------------------------
(A) DEFINITIONS. For purposes of this Section 5, the following
-----------
terms shall have the following respective meanings:
(i) "Competitive Position" shall mean (i) the direct or indirect
equity ownership or control of all or any portion of a "Competitor" (as
hereinafter defined), or (ii) any employment, consulting, partnership,
advisory, directorship, agency, promotional or independent contractor
arrangement between Costa and any Competitor whereby Costa is required to
perform services substantially similar to those that he is to perform for
Healthdyne and FMP hereunder.
(ii) "Competitor" shall refer to any person or entity engaged,
wholly or partly, in the business of (i) manufacturing, producing,
distributing, selling, licensing or otherwise supplying phototherapy
equipment related to the treatment of neonatal jaundice or (ii) the
detection, diagnosis or treatment of neonatal jaundice.
(iii) "Confidential Information" shall mean any and all
proprietary and confidential data or information of Healthdyne, FMP or any
of their affiliates, other than "Trade Secrets" (as hereinafter defined),
which is of tangible or intangible value to Healthdyne, FMP or any of their
affiliates and is not public information or is not generally known or
available to Healthdyne's or FMP's competitors but is known only to
Healthdyne, FMP or their affiliates and their employees, independent
contractors or agents to whom it must be confided in order to apply it to
the uses intended.
(iv) "Restricted Territory" shall mean the United States of
America and those countries set forth on Exhibit B attached hereto and
---------
incorporated herein by reference.
(v) "Trade Secrets" shall mean all knowledge, data and
information of Healthdyne, FMP or any of their affiliates which is defined
as a "trade secret" under applicable law.
(vi) "Work Product" shall mean all work product, property, data,
documentation, "know-how", concepts, plans, inventions, improvements,
techniques,
47
<PAGE>
processes or information of any kind, prepared, conceived, discovered,
developed or created by Costa in connection with the performance of the
Consulting Services.
(B) ACKNOWLEDGEMENTS. Costa hereby acknowledges and agrees that
----------------
during the term of this Agreement (i) Costa will frequently be exposed to
certain Trade Secrets and Confidential Information; (ii) Costa's
responsibilities on behalf of Healthdyne and FMP will extend to all geographical
areas of the Restricted Territory; and (iii) any competitive activity on Costa's
part during the term of this Agreement, or any competitive activity on Costa's
part in the Restricted Territory for a reasonable period thereafter, would
necessarily involve Costa's use of Healthdyne's or FMP's Trade Secrets and
Confidential Information and would unfairly threaten Healthdyne's or FMP's
legitimate business interests, including their substantial investment in the
proprietary aspects of their business and the goodwill associated with their
customer base. Moreover, Costa acknowledges that, in the event of the
termination of this Agreement, Costa would have sufficient skills to find
alternative, commensurate work in his field of expertise that would not involve
a violation of any of the provisions of this Section 5. Therefore, Costa
acknowledges and agrees that it is reasonable for Healthdyne and FMP to require
Costa to abide by the covenants set forth in this Section 5. The parties
acknowledge and agree that if the nature of Costa's responsibilities for or on
behalf of Healthdyne or FMP or the geographical areas in which Costa must
fulfill such responsibilities materially change, the parties will execute
appropriate amendments to the scope of the covenants in this Section 5.
(C) NONDISCLOSURE; OWNERSHIP OF PROPRIETARY PROPERTY.
------------------------------------------------
(i) In recognition of Healthdyne's and FMP's need to protect
their legitimate business interests, Costa hereby covenants and agrees
that: (A) with regard to each item constituting a Trade Secret, at all
times during which such item shall constitute a Trade Secret (before or
after termination of this Agreement); and (B) with regard to any
Confidential Information, at all times during the term of this Agreement
and for a period of three (3) years following the expiration or termination
of this Agreement for any reason, Costa shall regard and treat each item
constituting a Trade Secret and all Confidential Information as strictly
confidential and wholly-owned by Healthdyne or FMP, as the case may be, and
will not, for any reason, in any fashion, either directly or indirectly,
use, sell, lend, lease, distribute, license, give, transfer, assign, show,
disclose, disseminate, reproduce, copy, misappropriate or otherwise
communicate any such item or information to any third party for any purpose
other than in accordance with this Agreement or as required by applicable
law.
(ii) Costa shall immediately notify Healthdyne of any intended or
unintended, unauthorized disclosure or use of any Trade Secrets or
Confidential Information by Costa or any other person or entity of which
Costa becomes aware. Costa shall assist Healthdyne to the extent
Healthdyne deems reasonably necessary in the procurement of any protection
of Healthdyne's or FMP's rights to or in any of the Trade Secrets or
Confidential Information.
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(iii) Immediately upon expiration or termination of this Agreement
for any reason, or if notice of termination is required hereunder, upon
receipt of such notice, or at any time after such termination or notice
upon the specific request of Healthdyne, Costa shall return to Healthdyne
and FMP all written or descriptive materials of any kind in Costa's
possession or to which Costa has access that constitute or contain any
Confidential Information or Trade Secrets, and the confidentiality
obligations described in this Agreement shall continue until their
expiration under the terms of this Agreement.
(iv) To the greatest extent possible, any Work Product shall be
deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. Section 101 et seq., as amended) and owned exclusively by
-- ---
Healthdyne. Costa hereby unconditionally and irrevocably transfers and
assigns to Healthdyne all rights, title and interest Costa currently has or
in the future may have, by operation of law or otherwise, in or to any Work
Product, including, without limitation, all patents, copyrights,
trademarks, service marks and other intellectual property rights. Costa
agrees to execute and deliver to Healthdyne any transfers, assignments,
documents or other instruments which Healthdyne may deem necessary or
appropriate to vest complete title and ownership of any Work Product, and
all rights therein, exclusively in Healthdyne.
(D) NON-COMPETITION. In recognition of Healthdyne's need to protect
---------------
its legitimate business interests, Costa hereby covenants and agrees that during
the term of this Agreement, Costa will not, either directly or indirectly, alone
or in conjunction with any other party, accept, enter into or take any action in
furtherance of a Competitive Position; provided, however, that consistent with
-------- -------
his other obligations hereunder, Costa shall be entitled to accept a position
with a person or entity outside of North America involving the detection or
diagnosis of neonatal jaundice only provided that such person or entity has a
valid license agreement with Healthdyne with respect to the detection or
diagnosis of neonatal jaundice. Costa further agrees that for three (3) years
following expiration or termination of this Agreement for any reason, Costa will
not, either directly or indirectly, alone or in conjunction with any other
party, accept, enter into or take any action in furtherance of a Competitive
Position within the Restricted Territory (other than action to reject an offer
of a Competitive Position or to notify Healthdyne of the offer pursuant to the
requirements of the next sentence of this subsection (d)); provided, however,
-------- -------
that consistent with his other obligations hereunder, Costa shall be entitled to
accept a position with a person or entity outside of North America involving the
detection or diagnosis of neonatal jaundice only provided that such person or
entity has a valid license agreement with Healthdyne with respect to the
detection or diagnosis of neonatal jaundice. Costa shall notify Healthdyne
promptly in writing if Costa receives an offer of a Competitive Position within
three (3) years following expiration or termination of this Agreement for any
reason, and such notice shall describe all salient terms of such offer.
Notwithstanding the foregoing provisions of this Section 5(d), nothing herein
shall be deemed to prohibit Costa from accepting a position with any person or
entity, including a Competitor, so long as Costa does not perform
49
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services for such person or entity related to (i) the manufacturing, selling,
licensing or distributing of phototherapy equipment used to treat neonatal
jaundice, (ii) the treatment of neonatal jaundice, or the detection or diagnosis
of neonatal jaundice within North America.
(E) NON-SOLICITATION OF CLIENTS. Costa hereby covenants and agrees
---------------------------
that (i) during the term of this Agreement, Costa will not, either directly or
indirectly, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate any customer or
actively sought prospective customer of Healthdyne or FMP for the purpose of
providing such customer or actively sought prospective customer with services or
products competitive with those offered by FMP during the term of this
Agreement; and (ii) for a period of three (3) years following expiration or
termination of the term of this Agreement for any reason, Costa will not, either
directly or indirectly, alone or in conjunction with any other party, solicit,
divert or appropriate, or attempt to solicit, divert or appropriate any customer
or actively sought prospective customer of Healthdyne or FMP for the purpose of
providing such customer or actively sought prospective customer with services or
products competitive with those offered by FMP during the term of this
Agreement. Costa shall promptly notify Healthdyne in writing if: (1) during the
three (3) years following the expiration or termination of this Agreement for
any reason, Costa is contacted by any customer or actively sought prospective
customer of Healthdyne or FMP with a request that Costa provide such customer or
actively sought prospective customer with any competitive services or products;
and (2) provision of such services or products, as requested, would constitute a
violation of Costa's covenants in this Section 5. Such notice shall include all
salient information associated with such customer's request, including, without
limitation, the identity of such customer, the exact services or products
requested and the party or parties on behalf of such customer who contacted
Costa.
(F) NONSOLICITATION OF FMP PERSONNEL. Costa hereby agrees that
--------------------------------
during the term of this Agreement, except to the extent that he is required to
do so in connection with his responsibilities hereunder, Costa will not, either
directly or indirectly, alone or in conjunction with any other party, solicit or
attempt to solicit any employee, consultant, contractor or other personnel of
Healthdyne or FMP to terminate, alter or lessen such party's affiliation with
Healthdyne or FMP or to violate the terms of any agreement or understanding
between such party and Healthdyne or FMP. Costa further agrees that during the
three (3) year period following expiration or termination of this Agreement for
any reason, Costa will not, either directly or indirectly, alone or in
conjunction with any other party, solicit or attempt to solicit any employee,
consultant, contractor or other personnel of Healthdyne or FMP residing at the
time of the solicitation in the Restricted Territory to terminate, alter or
lessen that party's affiliation with Healthdyne or FMP or to violate the terms
of any agreement or understanding between such party and Healthdyne or FMP.
(G) REMEDIES. Costa agrees that damages at law for Costa's violation
--------
of any of the covenants in this Section 5 would not be an adequate or proper
remedy and that, should Costa violate or threaten to violate any of the
provisions of such covenants, Healthdyne or its successors or assigns shall be
entitled to obtain a temporary or permanent
50
<PAGE>
injunction against Costa in any court having jurisdiction prohibiting any
further violation of any such covenants, in addition to any award or damages
(compensatory, exemplary or otherwise) for such violation.
(H) PARTIAL ENFORCEMENT. Healthdyne has attempted to limit the rights
-------------------
of Costa to compete only to the extent necessary to protect Healthdyne and FMP
from unfair competition. Healthdyne, however, agrees that, if the scope of
enforceability of any of these restrictive covenants is in any way disputed at
any time, a court or other trier of fact may modify and enforce such covenant to
the extent that it believes to be reasonable under the circumstances existing at
the time.
6. TERM. Unless sooner terminated pursuant to Section 7 hereof, the term
----
of this Agreement shall begin as of the Effective Date and shall continue for a
period of one (1) year; provided, however, that upon the mutual agreement of the
-------- -------
parties hereto, the term of this Agreement may be extended for an additional one
(1) year period.
7. TERMINATION.
-----------
(A) DEATH. This Agreement shall automatically and immediately
-----
terminate upon the death of Costa.
(B) DISABILITY. This Agreement may be terminated by either party
----------
hereto upon written notice to the other in the event Costa becomes "Disabled"
(as hereinafter defined). For purposes of this Agreement, "Disabled" shall be
defined as either: (a) the reasonable, good faith determination by a majority
of the members of the Board of Directors of Healthdyne that due to a mental or
physical impairment or disability, Costa has been incapable or unable to fully
perform the material duties performed by Costa for Healthdyne or FMP immediately
prior to such disability for a period of at least one hundred eighty (180) days
in the aggregate (although not necessarily consecutively) within any consecutive
three hundred sixty-five (365)-day period; or (b) a determination that Costa is
disabled pursuant to the terms of any long term disability insurance policy
which Healthdyne or FMP has purchased and which covers Costa.
(C) CAUSE. In addition to any other rights or remedies available to
-----
Healthdyne at law, in equity or pursuant hereto, Healthdyne may, in its sole
discretion, terminate this Agreement for "Cause" (as hereinafter defined)
effective immediately upon delivery of written notice to Costa. For purposes of
this Agreement, "Cause" shall mean any of:
(i) the imposition by any governmental authority of any material
restriction or limitation on Costa's ability to perform the Consulting
Services;
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(ii) the reasonable, good faith determination by a majority of
the Board of Directors of Healthdyne that: (A) Costa has committed an
act constituting fraud, deceit or material misrepresentation with
respect to Healthdyne or FMP or any client, customer or supplier of
Healthdyne or FMP; or (B) Costa has embezzled funds or assets from
Healthdyne or FMP or any client or customer of Healthdyne or FMP;
(iii) Costa's material breach or default in the performance of
any provision of this Agreement; or
(iv) the reasonable, good faith determination by a majority of
the Board of Directors of Healthdyne that: (A) Costa's conduct is
unprofessional, unethical or fraudulent in any way; (B) Costa's
conduct discredits Healthdyne or FMP or is detrimental to the
reputation, character or standing of Healthdyne or FMP; or (C) Costa's
conduct is found unprofessional or unethical by a court or
administrative agency having jurisdiction over Costa.
(D) SUBSTANCE ABUSE. In addition to any other rights or remedies
---------------
available to FMP at law, in equity or pursuant hereto, Healthdyne may, in its
sole discretion, terminate this Agreement, effective immediately upon delivery
of written notice to Costa, upon the reasonable, good faith determination of a
majority of the Board of Directors of Healthdyne that Costa has abused or become
addicted to any alcoholic, controlled or illegal substance or drug.
8. RELEASE. Costa hereby unconditionally and irrevocably compromises,
-------
settles and fully and forever releases and discharges FMP and its parent,
subsidiaries and affiliates, and their respective directors, officers,
shareholders, agents, employees, representatives, attorneys (collectively, the
"Indemnified Parties") from and against any and all claims, demands, causes of
action, remedies, suits, debts, damages, liabilities and obligations
(collectively, the "Claims") of any and every character, known or unknown,
suspected or claimed, direct or indirect, at law or in equity, of whatever kind
or nature, whether heretofore or hereafter accruing or arising, which Costa ever
had, now has or could in the future claim to have against any of the Indemnified
Parties in connection with, arising out of or related to Costa's employment with
FMP prior to the date of this Agreement. Costa hereby acknowledges that his
release of the Claims is a condition of Healthdyne entering into this Agreement.
Costa and Healthdyne further acknowledge that this Section 8 is not a release by
Costa of any claims in connection with, arising out of or related to Costa's
independent contractor relationship with Healthdyne after the date of this
Agreement or any other agreement between Costa and Healthdyne.
52
<PAGE>
9. NOTICES.
-------
(A) All notices and all other communications provided for herein shall
be in writing and delivered personally to the other designated party, or mailed
by certified or registered mail, return receipt requested, or delivered by a
recognized national overnight courier service, as follows:
If to Costa to: Pasquale J. Costa
4382 Farmington Circle
Allentown, Pennsylvania 18104
with a copy to: Dominic Liberi, Esquire
2005 Market Street, 22nd Floor
One Commerce Square
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 241-1896
Facsimile Number: (215) 241-1857
If to Healthdyne: Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
Attn: President
Telephone Number: (770) 499-1212
Facsimile Number: (770) 421-1684
with a copy to: James L. Smith, III, Esquire
Troutman Sanders
600 Peachtree Street, N.E.
5200 NationsBank Plaza
Atlanta, Georgia 30308-2216
(B) Either party hereto may change the address to which notice is to
be sent hereunder by written notice to the other party in accordance with the
provisions of this Section 9.
10. SURVIVAL. Notwithstanding any expiration or termination of this
--------
Agreement, the provisions of Section 5 hereof shall survive and remain in full
force and effect, as shall any other provision hereof that, by its terms or
reasonable interpretation thereof, sets forth obligations that extend beyond the
termination of this Agreement.
53
<PAGE>
11. GENERAL PROVISIONS.
------------------
(A) BINDING EFFECT AND ASSIGNABILITY. The rights and obligations
--------------------------------
under this Agreement shall inure to the benefit of and be binding upon Costa,
Healthdyne and their respective heirs, representatives, successors and permitted
assigns. Neither this Agreement, nor any rights or obligations of Costa herein
shall be transferable or assignable by Costa without Healthdyne's prior written
consent, and any attempted transfer or assignment hereof by Costa not in
accordance herewith shall be null and void and of no force or effect.
Healthdyne may freely assign this Agreement and its rights or obligations set
forth herein to any affiliate or successor to Healthdyne's business.
(B) ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
---------------------------
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, letters or understandings, oral or written, to
the contrary and may be altered, amended or modified only by a writing executed
by both parties hereto.
(C) WAIVER. The waiver of the breach of any term or condition of this
------
Agreement shall not be deemed to constitute the waiver of any other or
subsequent breach of the same or any other term or condition.
(D) GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Georgia.
(E) SEVERABILITY. The unenforceability or invalidity of any provision
------------
of this Agreement shall not affect the validity or enforceability of the
remaining provisions hereof, but such remaining provisions shall be construed
and interpreted in such a manner as to carry out fully the intent of the parties
hereto; provided, however, that should any judicial body interpreting this
-------- -------
Agreement deem any provision hereof to be unreasonably broad in time, territory,
scope or otherwise, it is the intent and desire of the parties hereto that such
judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
(F) CAPTIONS AND COUNTERPARTS. The Section headings set forth herein
-------------------------
are for convenience of reference purposes only and are not to be used in the
interpretation of this Agreement whatsoever. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same Agreement; and any signature page from
any such counterpart or any electronic facsimile thereof may be attached or
appended to any other counterpart to complete a fully executed counterpart of
this Agreement and any telecopy or other facsimile transmission of any signature
shall be deemed an original and shall bind such party.
(G) INTERPRETATION. Should a provision of this Agreement require
--------------
judicial interpretation, it is agreed that the judicial body interpreting or
construing the Agreement
54
<PAGE>
shall not apply the assumption that the terms hereof shall be more strictly
construed against one party by reason of the rule of construction that an
instrument is to be construed more strictly against the party which itself or
through its agents prepared the agreement, it being agreed that all parties
and/or their agents have participated in the preparation of this Agreement
equally.
(H) APPLICABLE LAW. Should any provision of this Agreement,
--------------
including, without limitation, any provision relating to compensation, be found
to be in violation of any applicable law, rule or regulation, the parties hereto
agree to execute an amendment to this Agreement to bring such provision into
compliance with any such law, rule or regulation, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement to be effective as of the
Effective Date.
"Healthdyne"
HEALTHDYNE TECHNOLOGIES, INC.
By:
-------------------------------
Title:
----------------------------
"COSTA"
---------------------------------
PASQUALE J. COSTA
55
<PAGE>
EXHIBIT A
---------
CONSULTING SERVICES
A. Wallaby Halogen Light. Costa shall assist FMP and/or Healthdyne, at
---------------------
Healthdyne's direction, in completing the product development and
commercial introduction of FMP's redesigned Wallaby halogen light (the
"Wallaby Light") and shall use his reasonable business efforts to assist
Healthdyne and FMP in causing the commercial introduction of the Wallaby
Light to occur on or before December 1, 1996.
B. High Intensity Product. Costa shall assist FMP and/or Healthdyne, at
----------------------
Healthdyne's direction, in obtaining 510K clearance and approval from the
United States Food and Drug Administration for FMP's High Intensity Product
as soon as reasonably practicable.
C. General. Costa shall assist Healthdyne and/or FMP, at Healthdyne's
-------
direction, with the transition of FMP's business and operations and in
achieving product development and sales objectives for FMP's products. In
connection therewith, Costa shall perform such duties and have such
responsibilities as may be reasonably prescribed by Healthdyne from time to
time, including, without limitation, the following: (1) sales product
training; (2) customer relations; (3) new product development and launch
activities; (4) supplier relations; (5) national account relations; (6)
transition related issues; (7) trade show activities; (8) thought and
leader development; and (9) clinical studies. Costa acknowledges that the
scope of such duties and responsibilities may include both domestic and
international travel.
56
<PAGE>
EXHIBIT B
---------
RESTRICTED TERRITORY
Argentina
Australia
Belgium
Brazil
Canada
Czechoslovakia
Cyprus
Denmark
Egypt
Finland
France
Germany
Hong Kong
Ireland
Italy
Japan
Korea
Kuwait
Lebanon
Netherlands
New Zealand
Norway
Russia
Philippines
South Africa
Spain
Sweden
Switzerland
Syria
Taiwan
Thailand
Turkey
United Kingdom
Portugal
57
<PAGE>
EXHIBIT C
---------
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
this 27th day of June, 1996 (the "Effective Date"), by and between HEALTHDYNE
TECHNOLOGIES, INC., a Georgia corporation ("Healthdyne"), and RICHARD W. HOLT, a
Pennsylvania resident ("Holt").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Holt has previously been employed by Fiberoptic Medical
Products, Inc., a Pennsylvania corporation ("FMP") as its president;
WHEREAS, concurrently herewith, all of the issued and outstanding
shares of capital stock of FMP are being purchased by Healthdyne pursuant to
that certain Stock Purchase Agreement (the "Purchase Agreement"), by and among
Healthdyne, Holt and Pasquale J. Costa, a Pennsylvania resident;
WHEREAS, pursuant to the Purchase Agreement and subject to the terms
and conditions set forth in this Agreement, Healthdyne desires to retain Holt to
perform certain consulting services for Healthdyne and FMP, all as more fully
set forth herein; and
WHEREAS, Holt desires to provide such consulting services for
Healthdyne and FMP, all upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. CONSULTING SERVICES.
-------------------
(A) Subject to the terms and conditions set forth in this Agreement,
Healthdyne hereby retains Holt during the term of this Agreement to provide to
Healthdyne and FMP the consulting services more particularly described on
Exhibit A attached hereto and incorporated herein by reference (the "Consulting
- ---------
Services"), and Holt hereby agrees to perform such Consulting Services. During
the term of this Agreement, Holt agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talents, perform
and discharge the Consulting Services and all other duties that may be required
of and from him pursuant to the terms hereof in compliance with all applicable
laws, rules and regulations and so as to promote the profit, benefit and
business of Healthdyne and FMP and their affiliates and so as to represent
Healthdyne and FMP and their affiliates in the most professional manner
possible. The Consulting Services shall be rendered at the offices of
Healthdyne and FMP, their affiliates, customers and clients and their respective
job sites, and
58
<PAGE>
at such other place or places as the interests, needs, businesses or
opportunities of Healthdyne and FMP and their affiliates, customers and clients
shall require or as may be reasonably requested by the Board of Directors of
Healthdyne. Healthdyne shall be entitled to all benefits, profits or other
issues arising from or incident to all work, service and advice of Holt relating
to Healthdyne or FMP during the term of this Agreement
(B) Holt further agrees that during the term of this Agreement he
shall devote eighty percent (80%) of his full business time, attention,
knowledge, effort and skills solely to the business and interests of Healthdyne
and FMP and their affiliates. During the term of this Agreement, Holt shall not
devote significant business time to activities that would inhibit or otherwise
interfere with the proper performance of his duties and, except as expressly
provided herein, shall not be directly or indirectly concerned or interested in
any other occupation or business; provided, however, that Holt shall be entitled
-------- -------
to maintain investments and interests in corporations or business ventures
(other than a "Competitor" as defined in Section 5(a) hereof), provided that
such investments or interests do not interfere with his ability to devote eighty
percent (80%) of his full business time to Healthdyne and FMP and to perform the
Consulting Services and his other duties hereunder.
2. WORK STANDARD. During the term of this Agreement, Holt hereby
-------------
agrees that he will at all times comply with and abide by all lawful terms and
conditions set forth in this Agreement and all applicable lawful work policies,
procedures and rules as may be issued by Healthdyne or established by Healthdyne
from time to time.
3. COMPENSATION.
------------
(A) Subject to the terms and conditions set forth in this Agreement,
and as full and complete compensation for the Consulting Services and all other
services to be rendered by Holt hereunder, Healthdyne shall pay or cause to be
paid to Holt, and Holt shall accept, an annual consulting fee (the "Consulting
Fee") of One Hundred Thousand and No/100 Dollars ($100,000.00). The Consulting
Fee shall be payable in twelve (12) equal monthly payments in arrears on the
last day of each month during the term of this Agreement; provided, however,
-------- -------
that if any scheduled payment falls on a Saturday, Sunday or holiday, such
payment shall be made on the last business day immediately preceding such
Saturday, Sunday or holiday.
(B) During the term of this Agreement, Healthdyne shall pay or
reimburse Holt for all reasonable travel, entertainment and other expenses
reasonably incurred by Holt in performing his duties under this Agreement;
provided, however, that such expenses are approved in advance and appropriately
- -------- -------
documented and submitted to Healthdyne in accordance with Healthdyne's policies
in effect from time to time.
4. STATUS OF PARTIES. Both Holt and Healthdyne, in the performance
-----------------
of this Agreement, will be acting in their own separate capacities and not as
agents, employees, partners, joint venturers or associates of one another. It
is expressly understood and agreed
59
<PAGE>
that Holt is an independent contractor of Healthdyne in all manners and respects
and that Holt shall have no power or authority, nor represent that he has the
power or authority, to bind Healthdyne, FMP or any of their affiliates to any
contract or agreement. During the term of this Agreement, Holt shall be solely
responsible for all applicable withholding, social security, unemployment and
other taxes, and worker's compensation insurance premiums.
5. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION COVENANTS.
--------------------------------------------------------------
(A) DEFINITIONS. For purposes of this Section 5, the following
-----------
terms shall have the following respective meanings:
(i) "Competitive Position" shall mean (i) the direct or indirect
equity ownership or control of all or any portion of a "Competitor" (as
hereinafter defined), or (ii) any employment, consulting, partnership,
advisory, directorship, agency, promotional or independent contractor
arrangement between Holt and any Competitor whereby Holt is required to
perform services substantially similar to those that he is to perform for
Healthdyne and FMP hereunder.
(ii) "Competitor" shall refer to any person or entity engaged,
wholly or partly, in the business of (i) manufacturing, producing,
distributing, selling, licensing or otherwise supplying phototherapy
equipment related to the treatment of neonatal jaundice or (ii) the
detection, diagnosis or treatment of neonatal jaundice.
(iii) "Confidential Information" shall mean any and all
proprietary and confidential data or information of Healthdyne, FMP or any
of their affiliates, other than "Trade Secrets" (as hereinafter defined),
which is of tangible or intangible value to Healthdyne, FMP or any of their
affiliates and is not public information or is not generally known or
available to Healthdyne's or FMP's competitors but is known only to
Healthdyne, FMP or their affiliates and their employees, independent
contractors or agents to whom it must be confided in order to apply it to
the uses intended.
(iv) "Restricted Territory" shall mean the United States of
America and those countries set forth on Exhibit B attached hereto and
---------
incorporated herein by reference.
(v) "Trade Secrets" shall mean all knowledge, data and
information of Healthdyne, FMP or any of their affiliates which is defined
as a "trade secret" under applicable law.
(vi) "Work Product" shall mean all work product, property, data,
documentation, "know-how", concepts, plans, inventions, improvements,
techniques, processes or information of any kind, prepared, conceived,
discovered, developed or created by Holt in connection with the performance
of the Consulting Services.
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(B) ACKNOWLEDGEMENTS. Holt hereby acknowledges and agrees that during
----------------
the term of this Agreement (i) Holt will frequently be exposed to certain Trade
Secrets and Confidential Information; (ii) Holt's responsibilities on behalf of
Healthdyne and FMP will extend to all geographical areas of the Restricted
Territory; and (iii) any competitive activity on Holt's part during the term of
this Agreement, or any competitive activity on Holt's part in the Restricted
Territory for a reasonable period thereafter, would necessarily involve Holt's
use of Healthdyne's or FMP's Trade Secrets and Confidential Information and
would unfairly threaten Healthdyne's or FMP's legitimate business interests,
including their substantial investment in the proprietary aspects of their
business and the goodwill associated with their customer base. Moreover, Holt
acknowledges that, in the event of the termination of this Agreement, Holt would
have sufficient skills to find alternative, commensurate work in his field of
expertise that would not involve a violation of any of the provisions of this
Section 5. Therefore, Holt acknowledges and agrees that it is reasonable for
Healthdyne and FMP to require Holt to abide by the covenants set forth in this
Section 5. The parties acknowledge and agree that if the nature of Holt's
responsibilities for or on behalf of Healthdyne or FMP or the geographical areas
in which Holt must fulfill such responsibilities materially change, the parties
will execute appropriate amendments to the scope of the covenants in this
Section 5.
(C) NONDISCLOSURE; OWNERSHIP OF PROPRIETARY PROPERTY.
------------------------------------------------
(i) In recognition of Healthdyne's and FMP's need to protect
their legitimate business interests, Holt hereby covenants and agrees that:
(A) with regard to each item constituting a Trade Secret, at all times
during which such item shall constitute a Trade Secret (before or after
termination of this Agreement); and (B) with regard to any Confidential
Information, at all times during the term of this Agreement and for a
period of three (3) years following the expiration or termination of this
Agreement for any reason, Holt shall regard and treat each item
constituting a Trade Secret and all Confidential Information as strictly
confidential and wholly-owned by Healthdyne or FMP, as the case may be, and
will not, for any reason, in any fashion, either directly or indirectly,
use, sell, lend, lease, distribute, license, give, transfer, assign, show,
disclose, disseminate, reproduce, copy, misappropriate or otherwise
communicate any such item or information to any third party for any purpose
other than in accordance with this Agreement or as required by applicable
law.
(ii) Holt shall immediately notify Healthdyne of any intended or
unintended, unauthorized disclosure or use of any Trade Secrets or
Confidential Information by Holt or any other person or entity of which
Holt becomes aware. Holt shall assist Healthdyne to the extent Healthdyne
deems reasonably necessary in the procurement of any protection of
Healthdyne's or FMP's rights to or in any of the Trade Secrets or
Confidential Information.
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(iii) Immediately upon expiration or termination of this
Agreement for any reason, or if notice of termination is required
hereunder, upon receipt of such notice, or at any time after such
termination or notice upon the specific request of Healthdyne, Holt shall
return to Healthdyne and FMP all written or descriptive materials of any
kind in Holt's possession or to which Holt has access that constitute or
contain any Confidential Information or Trade Secrets, and the
confidentiality obligations described in this Agreement shall continue
until their expiration under the terms of this Agreement.
(iv) To the greatest extent possible, any Work Product shall be
deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. Section 101 et seq., as amended) and owned exclusively by
-- ---
Healthdyne. Holt hereby unconditionally and irrevocably transfers and
assigns to Healthdyne all rights, title and interest Holt currently has or
in the future may have, by operation of law or otherwise, in or to any Work
Product, including, without limitation, all patents, copyrights,
trademarks, service marks and other intellectual property rights. Holt
agrees to execute and deliver to Healthdyne any transfers, assignments,
documents or other instruments which Healthdyne may deem necessary or
appropriate to vest complete title and ownership of any Work Product, and
all rights therein, exclusively in Healthdyne.
(D) NON-COMPETITION. In recognition of Healthdyne's need to protect
---------------
its legitimate business interests, Holt hereby covenants and agrees that during
the term of this Agreement, Holt will not, either directly or indirectly, alone
or in conjunction with any other party, accept, enter into or take any action in
furtherance of a Competitive Position; provided, however, that consistent with
-------- -------
his other obligations hereunder, Holt shall be entitled to accept a position
with a person or entity outside of North America involving the detection or
diagnosis of neonatal jaundice only provided that such person or entity has a
valid license agreement with Healthdyne with respect to the detection or
diagnosis of neonatal jaundice. Holt further agrees that for three (3) years
following expiration or termination of this Agreement for any reason, Holt will
not, either directly or indirectly, alone or in conjunction with any other
party, accept, enter into or take any action in furtherance of a Competitive
Position within the Restricted Territory (other than action to reject an offer
of a Competitive Position or to notify Healthdyne of the offer pursuant to the
requirements of the next sentence of this subsection (d)); provided, however,
-------- -------
that consistent with his other obligations hereunder, Holt shall be entitled to
accept a position with a person or entity outside of North America involving the
detection or diagnosis of neonatal jaundice only provided that such person or
entity has a valid license agreement with Healthdyne with respect to the
detection or diagnosis of neonatal jaundice. Holt shall notify Healthdyne
promptly in writing if Holt receives an offer of a Competitive Position within
three (3) years following expiration or termination of this Agreement for any
reason, and such notice shall describe all salient terms of such offer.
Notwithstanding the foregoing provisions of this Section 5(d), nothing herein
shall be deemed to prohibit Holt from accepting a position with any person or
entity, including a Competitor, so long as Holt does not perform services for
such person or entity related to (i) the manufacturing, selling, licensing or
distributing of phototherapy equipment
62
<PAGE>
used to treat neonatal jaundice, (ii) the treatment of neonatal jaundice, or the
detection or diagnosis of neonatal jaundice within North America.
(E) NON-SOLICITATION OF CLIENTS. Holt hereby covenants and agrees
---------------------------
that (i) during the term of this Agreement, Holt will not, either directly or
indirectly, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate any customer or
actively sought prospective customer of Healthdyne or FMP for the purpose of
providing such customer or actively sought prospective customer with services or
products competitive with those offered by FMP during the term of this
Agreement; and (ii) for a period of three (3) years following expiration or
termination of the term of this Agreement for any reason, Holt will not, either
directly or indirectly, alone or in conjunction with any other party, solicit,
divert or appropriate, or attempt to solicit, divert or appropriate any customer
or actively sought prospective customer of Healthdyne or FMP for the purpose of
providing such customer or actively sought prospective customer with services or
products competitive with those offered by FMP during the term of this
Agreement. Holt shall promptly notify Healthdyne in writing if: (1) during the
three (3) years following the expiration or termination of this Agreement for
any reason, Holt is contacted by any customer or actively sought prospective
customer of Healthdyne or FMP with a request that Holt provide such customer or
actively sought prospective customer with any competitive services or products;
and (2) provision of such services or products, as requested, would constitute a
violation of Holt's covenants in this Section 5. Such notice shall include all
salient information associated with such customer's request, including, without
limitation, the identity of such customer, the exact services or products
requested and the party or parties on behalf of such customer who contacted
Holt.
(F) NONSOLICITATION OF FMP PERSONNEL. Holt hereby agrees that during
--------------------------------
the term of this Agreement, except to the extent that he is required to do so in
connection with his responsibilities hereunder, Holt will not, either directly
or indirectly, alone or in conjunction with any other party, solicit or attempt
to solicit any employee, consultant, contractor or other personnel of Healthdyne
or FMP to terminate, alter or lessen such party's affiliation with Healthdyne or
FMP or to violate the terms of any agreement or understanding between such party
and Healthdyne or FMP. Holt further agrees that during the three (3) year
period following expiration or termination of this Agreement for any reason,
Holt will not, either directly or indirectly, alone or in conjunction with any
other party, solicit or attempt to solicit any employee, consultant, contractor
or other personnel of Healthdyne or FMP residing at the time of the solicitation
in the Restricted Territory to terminate, alter or lessen that party's
affiliation with Healthdyne or FMP or to violate the terms of any agreement or
understanding between such party and Healthdyne or FMP.
(G) REMEDIES. Holt agrees that damages at law for Holt's violation of
--------
any of the covenants in this Section 5 would not be an adequate or proper remedy
and that, should Holt violate or threaten to violate any of the provisions of
such covenants, Healthdyne or its successors or assigns shall be entitled to
obtain a temporary or permanent injunction against Holt in any court having
jurisdiction prohibiting any further violation of any such
63
<PAGE>
covenants, in addition to any award or damages (compensatory, exemplary or
otherwise) for such violation.
(H) PARTIAL ENFORCEMENT. Healthdyne has attempted to limit the rights
-------------------
of Holt to compete only to the extent necessary to protect Healthdyne and FMP
from unfair competition. Healthdyne, however, agrees that, if the scope of
enforceability of any of these restrictive covenants is in any way disputed at
any time, a court or other trier of fact may modify and enforce such covenant to
the extent that it believes to be reasonable under the circumstances existing at
the time.
6. TERM. Unless sooner terminated pursuant to Section 7 hereof, the term
----
of this Agreement shall begin as of the Effective Date and shall continue for a
period of one (1) year; provided, however, that upon the mutual agreement of the
-------- -------
parties hereto, the term of this Agreement may be extended for an additional one
(1) year period.
7. TERMINATION.
-----------
(A) DEATH. This Agreement shall automatically and immediately
-----
terminate upon the death of Holt.
(B) DISABILITY. This Agreement may be terminated by either party
----------
hereto upon written notice to the other in the event Holt becomes "Disabled" (as
hereinafter defined). For purposes of this Agreement, "Disabled" shall be
defined as either: (a) the reasonable, good faith determination by a majority
of the members of the Board of Directors of Healthdyne that due to a mental or
physical impairment or disability, Holt has been incapable or unable to fully
perform the material duties performed by Holt for Healthdyne or FMP immediately
prior to such disability for a period of at least one hundred eighty (180) days
in the aggregate (although not necessarily consecutively) within any consecutive
three hundred sixty-five (365)-day period; or (b) a determination that Holt is
disabled pursuant to the terms of any long term disability insurance policy
which Healthdyne or FMP has purchased and which covers Holt.
(C) CAUSE. In addition to any other rights or remedies available to
-----
Healthdyne at law, in equity or pursuant hereto, Healthdyne may, in its sole
discretion, terminate this Agreement for "Cause" (as hereinafter defined)
effective immediately upon delivery of written notice to Holt. For purposes of
this Agreement, "Cause" shall mean any of:
(i) the imposition by any governmental authority of any material
restriction or limitation on Holt's ability to perform the Consulting
Services;
64
<PAGE>
(ii) the reasonable, good faith determination by a majority of
the Board of Directors of Healthdyne that: (A) Holt has committed an
act constituting fraud, deceit or material misrepresentation with
respect to Healthdyne or FMP or any client, customer or supplier of
Healthdyne or FMP; or (B) Holt has embezzled funds or assets from
Healthdyne or FMP or any client or customer of Healthdyne or FMP;
(iii) Holt's material breach or default in the performance of
any provision of this Agreement; or
(iv) the reasonable, good faith determination by a majority of
the Board of Directors of Healthdyne that: (A) Holt's conduct is
unprofessional, unethical or fraudulent in any way; (B) Holt's conduct
discredits Healthdyne or FMP or is detrimental to the reputation,
character or standing of Healthdyne or FMP; or (C) Holt's conduct is
found unprofessional or unethical by a court or administrative agency
having jurisdiction over Holt.
(D) SUBSTANCE ABUSE. In addition to any other rights or remedies
---------------
available to FMP at law, in equity or pursuant hereto, Healthdyne may, in its
sole discretion, terminate this Agreement, effective immediately upon delivery
of written notice to Holt, upon the reasonable, good faith determination of a
majority of the Board of Directors of Healthdyne that Holt has abused or become
addicted to any alcoholic, controlled or illegal substance or drug.
8. RELEASE. Holt hereby unconditionally and irrevocably compromises,
-------
settles and fully and forever releases and discharges FMP and its parent,
subsidiaries and affiliates, and their respective directors, officers,
shareholders, agents, employees, representatives, attorneys (collectively, the
"Indemnified Parties") from and against any and all claims, demands, causes of
action, remedies, suits, debts, damages, liabilities and obligations
(collectively, the "Claims") of any and every character, known or unknown,
suspected or claimed, direct or indirect, at law or in equity, of whatever kind
or nature, whether heretofore or hereafter accruing or arising, which Holt ever
had, now has or could in the future claim to have against any of the Indemnified
Parties in connection with, arising out of or related to Holt's employment with
FMP prior to the date of this Agreement. Holt hereby acknowledges that his
release of the Claims is a condition of Healthdyne entering into this Agreement.
Holt and Healthdyne further acknowledge that this Section 8 is not a release by
Holt of any claims in connection with, arising out of or related to Holt's
independent contractor relationship with Healthdyne after the date of this
Agreement or any other agreement between Holt and Healthdyne.
65
<PAGE>
9. NOTICES.
-------
(A) All notices and all other communications provided for herein shall
be in writing and delivered personally to the other designated party, or mailed
by certified or registered mail, return receipt requested, or delivered by a
recognized national overnight courier service, as follows:
If to Holt to: Richard W. Holt
4134 Cambridge Court
Schnecksville, Pennsylvania 18078
with a copy to: Dominic Liberi, Esquire
2005 Market Street, 22nd Floor
One Commerce Square
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 241-1896
Facsimile Number: (215) 241-1857
If to Healthdyne: Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
Attn: President
Telephone Number: (770) 499-1212
Facsimile Number: (770) 421-1684
with a copy to: James L. Smith, III, Esquire
Troutman Sanders
600 Peachtree Street, N.E.
5200 NationsBank Plaza
Atlanta, Georgia 30308-2216
(B) Either party hereto may change the address to which notice is to
be sent hereunder by written notice to the other party in accordance with the
provisions of this Section 9.
10. SURVIVAL. Notwithstanding any expiration or termination of this
--------
Agreement, the provisions of Section 5 hereof shall survive and remain in full
force and effect, as shall any other provision hereof that, by its terms or
reasonable interpretation thereof, sets forth obligations that extend beyond the
termination of this Agreement.
66
<PAGE>
11. GENERAL PROVISIONS.
------------------
(A) BINDING EFFECT AND ASSIGNABILITY. The rights and obligations
--------------------------------
under this Agreement shall inure to the benefit of and be binding upon Holt,
Healthdyne and their respective heirs, representatives, successors and permitted
assigns. Neither this Agreement, nor any rights or obligations of Holt herein
shall be transferable or assignable by Holt without Healthdyne's prior written
consent, and any attempted transfer or assignment hereof by Holt not in
accordance herewith shall be null and void and of no force or effect.
Healthdyne may freely assign this Agreement and its rights or obligations set
forth herein to any affiliate or successor to Healthdyne's business.
(B) ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
---------------------------
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, letters or understandings, oral or written, to
the contrary and may be altered, amended or modified only by a writing executed
by both parties hereto.
(C) WAIVER. The waiver of the breach of any term or condition of this
------
Agreement shall not be deemed to constitute the waiver of any other or
subsequent breach of the same or any other term or condition.
(D) GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Georgia.
(E) SEVERABILITY. The unenforceability or invalidity of any provision
------------
of this Agreement shall not affect the validity or enforceability of the
remaining provisions hereof, but such remaining provisions shall be construed
and interpreted in such a manner as to carry out fully the intent of the parties
hereto; provided, however, that should any judicial body interpreting this
-------- -------
Agreement deem any provision hereof to be unreasonably broad in time, territory,
scope or otherwise, it is the intent and desire of the parties hereto that such
judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
(F) CAPTIONS AND COUNTERPARTS. The Section headings set forth herein
-------------------------
are for convenience of reference purposes only and are not to be used in the
interpretation of this Agreement whatsoever. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same Agreement; and any signature page from
any such counterpart or any electronic facsimile thereof may be attached or
appended to any other counterpart to complete a fully executed counterpart of
this Agreement and any telecopy or other facsimile transmission of any signature
shall be deemed an original and shall bind such party.
(G) INTERPRETATION. Should a provision of this Agreement require
--------------
judicial interpretation, it is agreed that the judicial body interpreting or
construing the Agreement shall not apply the assumption that the terms hereof
shall be more strictly construed against one party by reason of the rule of
construction that an instrument is to be construed more strictly against the
party which itself or through its agents prepared the agreement, it being agreed
that all parties and/or their agents have participated in the preparation of
this Agreement equally.
67
<PAGE>
(H) APPLICABLE LAW. Should any provision of this Agreement,
--------------
including, without limitation, any provision relating to compensation, be found
to be in violation of any applicable law, rule or regulation, the parties hereto
agree to execute an amendment to this Agreement to bring such provision into
compliance with any such law, rule or regulation, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement to be effective as of the
Effective Date.
"Healthdyne"
HEALTHDYNE TECHNOLOGIES, INC.
By:
------------------------------
Title:
----------------------------
"HOLT"
--------------------------------
RICHARD W. HOLT
68
<PAGE>
EXHIBIT A
---------
CONSULTING SERVICES
A. Wallaby Halogen Light. Holt shall assist FMP and/or Healthdyne, at
---------------------
Healthdyne's direction, in completing the product development and
commercial introduction of FMP's redesigned Wallaby halogen light (the
"Wallaby Light") and shall use his reasonable business efforts to assist
Healthdyne and FMP in causing the commercial introduction of the Wallaby
Light to occur on or before December 1, 1996.
B. High Intensity Product. Holt shall assist FMP and/or Healthdyne, at
----------------------
Healthdyne's direction, in obtaining 510K clearance and approval from the
United States Food and Drug Administration for FMP's High Intensity Product
as soon as reasonably practicable.
C. General. Holt shall assist Healthdyne and/or FMP, at Healthdyne's
-------
direction, with the transition of FMP's business and operations and in
achieving product development and sales objectives for FMP's products. In
connection therewith, Holt shall perform such duties and have such
responsibilities as may be reasonably prescribed by Healthdyne from time to
time, including, without limitation, the following: (1) sales product
training; (2) customer relations; (3) new product development and launch
activities; (4) supplier relations; (5) national account relations; (6)
transition related issues; (7) trade show activities; (8) thought and
leader development; and (9) clinical studies. Holt acknowledges that the
scope of such duties and responsibilities may include both domestic and
international travel.
69
<PAGE>
EXHIBIT B
---------
RESTRICTED TERRITORY
Argentina
Australia
Belgium
Brazil
Canada
Czechoslovakia
Cyprus
Denmark
Egypt
Finland
France
Germany
Hong Kong
Ireland
Italy
Japan
Korea
Kuwait
Lebanon
Netherlands
New Zealand
Norway
Russia
Philippines
South Africa
Spain
Sweden
Switzerland
Syria
Taiwan
Thailand
Turkey
United Kingdom
Portugal
70
<PAGE>
EXHIBIT 10.3
THIRD AMENDMENT TO
------------------
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
-----------------------------------------------
This Agreement, dated as of June 28, 1996 (this "Amendment") is
entered into by and among HEALTHDYNE TECHNOLOGIES, INC., a Georgia corporation
(the "Company"), the financial institutions parties to this Agreement
-------
(collectively, the "Banks"; individually, a "Bank") and BANK OF AMERICA NATIONAL
----- ----
TRUST AND SAVINGS ASSOCIATION, as Agent for the Banks (the "Agent").
-----
RECITALS
--------
The Company, the Agent and the Banks are parties to an Amended and
Restated Secured Revolving Credit Agreement dated as of December 29, 1994 as
amended by a First Amendment dated as of July 31, 1995, a Second Amendment dated
as of November 10, 1995 and a Letter Agreement and Waiver dated February 9, 1996
(the "Credit Agreement"). Capitalized terms used and not otherwise defined or
----------------
amended in this Amendment shall have the meanings respectively assigned to them
in the Credit Agreement.
The Company and the Banks desire to amend the Credit Agreement in
certain respects as hereinafter set forth.
AGREEMENT
---------
In consideration of the mutual covenants and agreement hereinafter set
forth, the parties hereto mutually agree as follows:
A. AMENDMENTS
----------
1. Amendment of Section 1.1
------------------------
(a) Section 1.1 of the Credit Agreement is hereby amended by inserting
the following definitions in the proper alphabetical order:
"Alternate Reference Rate Loan" means any Loan which bears interest at
-----------------------------
a rate determined with reference to the Alternate Reference Rate.
"Alternate Reference Rate Term Loan" means any Term Loans which bear
----------------------------------
interest at a rate determined with reference to the Alternate Reference Rate.
"Consolidated Interest Coverage Ratio" means the ratio of the
------------------------------------
Company's consolidated net earnings before interest expense and provision for
income taxes for the 12-month period ending on the last day of each quarter to
the Company's consolidated interest expense for such 12-month period.
<PAGE>
"EBITR" means the Company's consolidated earnings for any fiscal
-----
quarter before deduction of cash interest expense, provision for income taxes,
rental expense under Operating Leases which are not cancelable by the Company
for such Calculation Period and any gains or losses from the sale of assets.
"Eurodollar Loan" means any Loan which bears interest at a rate
---------------
determined with reference to the Interbank Rate (Reserve Adjusted).
"Eurodollar Term Loan" means any Term Loans which bear interest at a
--------------------
rate determined with reference to the Interbank Rate (Reserve Adjusted).
"Maximum Debt to Cash Flow" is defined in Section 8.15.
------------------------- ------------
"Term Loan" means the loans by the Banks to the Company under Section
--------- -------
2.1(b), and shall be denominated as Alternate Reference Rate Term Loans or
- ------
Eurodollar Term Loans (each of which shall be a "type" of Term Loan).
"Term Loan Maturity Date" is defined in Section 2.6.
------------------------ -----------
"Term Notes" means the Company's promissory notes, substantially in
----------
the form set forth as Exhibit B with appropriate insertions, as such promissory
---------
notes may be amended, modified or supplemented from time to time, and the term
"Term Notes" shall include any substitutions for, or renewals of, such
promissory notes.
(b) Section 1.1 of the Credit Agreement is further amended by the
amendment and restatement of each of the following existing definitions in the
form set forth below:
"Agreement" means this Secured Revolving Credit and Term Loan
---------
Agreement, as it may be amended, modified or supplemented from time to time.
"Alternate Reference Rate Revolving Loan" means any Revolving Loan
---------------------------------------
which bears interest at a rate determined with reference to the Alternative
Reference Rate.
"Applicable Margin" shall mean, at any time, for Alternate Reference
-----------------
Rate Loans ("ARR"), Eurodollar Loans ("Eurodollar") and for the Non-Use Fee set
forth in Section 3.2, the margin set forth below opposite the applicable
-----------
-2-
<PAGE>
Consolidated Interest Coverage Ratio and the Maximum Debt to Cash Flow Ratio
Levels:
<TABLE>
<CAPTION>
Ratios Margins
- ---------------------------------- ------------------------------
Cons. Max. Debt to Euro- ARR Non-Use
Interest Cash Flow Ratio dollar ----- Fee
Coverage ----------------- ------ -------
Ratio
- ----------
<S> <C> <C> <C> <C> <C>
(Greater than
(Less than) or equal to)
4.0 to 1.0 and 2.75 to 1 2.00% 0.50% 0.50%
("Level I")
(Greater than
or equal to) (Less than)
4.0 to 1.0 and 2.75 to 1 1.50% 0.25% 0.375%
(Greater than
(Less than) or equal to)
5.0 to 1.0 1.75 to 1
("Level II")
(Greater than
or equal to) (Less than)
5.0 to 1.0 and 1.75 to 1.00 1.00% 0% 0.375%
(Greater than
(Less than) or equal to)
6.0 to 1.0 1.00 to 1.00
("Level III")
(Greater than
or equal to) (Less than)
6.0 to 1.0 and 1.00 to 1.00 0.75% 0% 0.250%
("Level IV")
</TABLE>
(in the event that the Company's ratios fall between two levels, the applicable
level shall be that level which results in the higher margin being applied)
provided that the Applicable Margin shall be increased by .5% only as to the
- --------
amount of outstanding Loans at any time in excess of the Borrowing Base;
provided, further, that each change in the Applicable Margin shall become
- -------- -------
effective on the first Business Day of the fiscal quarter following required
receipt of the quarterly financial statements, except with respect to the fiscal
year end, in which case the change shall be applicable on the first Business Day
of the second fiscal quarter following the fiscal year end.
"Business Day" means any day other than a Saturday, Sunday or legal
------------
holiday on which banks are authorized or required to be closed in Chicago, New
York or San Francisco and, with respect to Eurodollar Loans, a day on which
dealings in Dollars may be carried on by the Banks in the interbank eurodollar
market.
"Credit" means the Banks' commitment to make Revolving Loans and Term
------
Loans under the terms of this Agreement.
"Interbank Rate (Reserve Adjusted)" means, with respect to each
---------------------------------
Interest Period for a Eurodollar Loan, a rate per annum (rounded upward, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Interbank Rate = Interbank Rate
--------------
(Reserve Adjusted) 1-Eurocurrency Reserve Requirement
-3-
<PAGE>
"Interest Period" means, with respect to any Eurodollar Loan, the
---------------
period commencing on the borrowing date of such Eurodollar Loan or the date an
Alternate Reference Rate Loan is converted into such Eurodollar Loan or the last
day of the prior Interest Period for such Eurodollar Loan, as the case may be,
and ending on the numerically corresponding day one, two, three or six months
thereafter, as selected by the Company pursuant to Section 2.3 or Section 2.4;
----------- -----------
provided, however, that:
- -------- -------
(i) any Interest Period which would otherwise end on a day which
is not a Business Day shall end on the next succeeding Business Day unless
such next succeeding Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day;
(ii) any Interest Period which begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar month at the end of such
Interest Period;
(iii) no Interest Period for a Eurodollar Revolving Loan shall
extend beyond the Termination Date; and
(iv) no Interest Period for a Term Loan shall extend beyond the
Term Loan Maturity Date.
"Loans" means the Revolving Loans made pursuant to Section 2.1(a) and
----- --------------
the Term Loans made pursuant to Section 2.1(b). Each Loan shall be an Alternate
--------------
Reference Rate Loan or a Eurodollar Loan (each of which shall be a "type" of
Loan).
"Notes" means the Revolving Notes and the Term Notes.
-----
"Payment Date" means (i) with respect to any Eurodollar Loan, the last
------------
day of each Interest Period with respect thereof and, if such Interest Period is
in excess of three (3) months, the date that is three (3) months after the
commencement of such Interest Period and thereafter the three (3) months after
each succeeding Payment Date; (ii) with respect to any Alternate Reference Rate
Loan, the last Business Day of each March, June, September and December,
commencing on the first such date to occur after such Alternate Reference Rate
Loan is made or a Eurodollar Loan is converted into such Alternate Reference
Rate Loan; and (iii) as to any fees, the first Business Day after the last
Business Day of each March, June, September and December, commencing on the
first such date to occur after the date hereof.
-4-
<PAGE>
"Permitted Secured Interest Rate Protection Agreement" means an
----------------------------------------------------
Interest Rate Protection Agreement between the Company and any of (x) the Banks
or (y) the Agent.
"Revolving Loan" means the loans by the Banks to the Company under
--------------
Section 2.1(a), which shall be denominated as Alternate Reference Rate Revolving
- --------------
Loans or Eurodollar Revolving Loans (each of which shall be a "type" of
Revolving Loan).
"Termination Date" means (i) June 30, 1999, (ii) such earlier date
----------------
(which shall be a Business Day) as may be fixed by the Company on at least five
(5) Business Days' prior written or telephonic notice received by the Agent or
(iii) such later date as shall be determined pursuant to Section 4.6 hereof.
The Company shall promptly confirm any telephonic notice in writing.
"Total Capitalization" means Indebtedness for Borrowed Money plus the
--------------------
Redeemable Preferred Stock and the Consolidated Net Worth.
(c) Section 1.1 of the Credit Agreement is further amended by deleting
the definitions of "Senior Consolidated Funded Indebtedness" and "Healthdyne" in
their entirety.
2. Amendment of Section 2.1
------------------------
Section 2.1 is hereby amended and restated in its entirety as follows:
"2.1 Commitment of the Banks. Subject to the terms and
-----------------------
conditions of this Agreement and in reliance upon the warranties of the
Company herein set forth, each Bank, severally but not jointly, agrees:
(a) Revolving Loans. To make its Pro Rata Share of loans
---------------
(collectively called the "Revolving Loans" and individually called a
"Revolving Loan") to the Company, which Revolving Loans the Company may
prepay and reborrow during the period from the date hereof to, but not
including, the Termination Date, in such amounts as the Company may from
time to time request, but not exceeding in the aggregate at any time
outstanding with respect to each Bank, an amount equal to the lesser of (i)
the amounts set forth in the column "Amount of Revolving Commitment"
opposite such Bank's name on the signature page hereof (or such reduced
amount as may be fixed by the Company pursuant to Section 4.4), or (ii) its
-----------
Pro Rata Share of the sum of the Borrowing Base, less its Pro Rata Share of
the outstanding principal amount of its Term Loans plus its Pro Rata share
of the Overadvance.
(b) Term Loans. To make its Pro Rata Share of a loan (the "Term
---------- ----
Loan") on the Third Amendment Effective Date in the amount set forth in the
----
column "Amount of Term Commitment" opposite such Bank's name on the
signature page hereof (or such reduced amount as may be fixed by the
Company pursuant to Section 4.4)."
-----------
-5-
<PAGE>
3. Amendment of Section 2.2
------------------------
Section 2.2 is hereby amended by deleting the word "Revolving" in each
----------------------------------------------------------------------
place where it appears.
- -----------------------
4. Amendment of Section 2.3
------------------------
Section 2.3 is hereby amended by deleting the word "Revolving" in each
place where it appears and by deleting "9:00 a.m." in each place where it
appears and inserting "8:00 a.m." therefor.
5. Amendment of Section 2.4
------------------------
Section 2.4 is hereby amended and restated in its entirety as follows:
"2.4 Continuation and/or Conversion of Loans. The Company may elect
---------------------------------------
to (i) continue any outstanding Eurodollar Loan from the current Interest
Period for such Loan into a subsequent Interest Period to begin on the last
day of such current Interest Period, or (ii) convert any outstanding
Alternate Reference Rate Loan into a Eurodollar Loan, or (iii) convert any
outstanding Eurodollar Loan into a Loan of another type on the last day of
the current Interest Period for such Eurodollar Loan, by giving the Agent
(which shall promptly advise each Bank) an irrevocable prior written or
telephonic notice of such continuation or conversion, which shall be
received by the Agent not later than 8:00 a.m., San Francisco time, three
Business Days prior to the effective date of continuation or conversion.
Each such notice shall specify (a) the effective date of continuation or
conversion (which shall be a Business Day), (b) the type of Loan the Loan
is to be continued as or converted into and the amount of such Loan, and
(c) the Interest Period for such Loan, if applicable. The Company shall
promptly confirm each such telephonic notice in writing. Absent timely
notice of continuation or conversion, each Eurodollar Loan shall
automatically convert into an Alternate Reference Rate Loan on the last day
of the current Interest Period for such Loan unless paid in full on such
last day. No Revolving Loan shall be converted into a Eurodollar Revolving
Loan and no Eurodollar Revolving Loan shall be continued less than one (1)
month before the Termination Date or at any TIME THAT AN EVENT OF DEFAULT
or an Unmatured Event of Default shall exist. No Term Loan shall be
converted into a Eurodollar Term Loan and no Eurodollar Term Loan shall be
continued less than one (1) month before the Term Loan Maturity Date or at
any time that an Event of Default or an Unmatured Event of Default shall
exist."
6. Amendment of Section 2.6
------------------------
Section 2.6 is hereby amended by inserting the following as a new Section
2.6 and by renumbering the existing Sections 2.6 and 2.7 accordingly. In each
instance in the Agreement where existing Sections 2.6 and 2.7 are referred to,
such references shall be deemed to be to the re-numbered Sections 2.7 and 2.8,
respectively.
-6-
<PAGE>
"2.6 Notes Evidencing Term Loans. The Term Loans made by each Bank
---------------------------
shall be evidenced by the Term Notes, payable to the order of that Bank in
an amount equal to its Pro Rata Share of the Term Commitment and shall
mature on January 31, 1998 (the "Term Loan Maturity Date")."
-----------------------
7. Amendment of Sections 3.1, 3.2 and 3.3
--------------------------------------
Sections 3.1, 3.2 and 3.3 are hereby amended and restated in their
entirety as follows:
"3. INTEREST AND FEES
3.1 (a) Interest - Revolving Loans.
--------------------------
(i) Alternate Reference Rate Revolving Loans. The unpaid
----------------------------------------
principal amount of each Alternate Reference Rate Revolving Loan shall
bear interest prior to maturity at a rate per annum equal to the
Alternate Reference Rate in effect from time to time plus the
----
Applicable Margin. Accrued interest on each Alternate Reference Rate
Revolving Loan shall be payable on each Payment Date and at maturity.
(ii) Eurodollar Revolving Loans. The unpaid principal
--------------------------
amount of each Eurodollar Revolving Loan shall bear interest prior to
maturity at a rate per annum equal to the Interbank Rate (Reserve
Adjusted) in effect for each Interest Period with respect to such
Eurodollar Revolving Loan plus the Applicable Margin. Accrued
----
interest on each Eurodollar Revolving Loan shall be payable on each
Payment Date and at maturity.
(iii) Interest After Maturity. The Company shall pay to the
-----------------------
Banks interest on any amount of principal of any Revolving Loans which
are not paid when due, whether at stated maturity, by acceleration or
otherwise, accruing from and including the date such amount shall have
become due to, but not including, the date of payment thereof in full
at the rate per annum which is equal to two percent (2%) in excess of
the rate which would otherwise be applicable to Alternate Reference
Rate Revolving Loans from time to time. After maturity, accrued
interest shall be payable on demand from time to time.
-7-
<PAGE>
3.1 (b) Interest - Term Loans.
---------------------
(i) Alternate Reference Rate Term Loans. The unpaid
-----------------------------------
principal amount of each Alternate Reference Rate Term Loan shall bear
interest prior to maturity at a rate per annum equal to the Alternate
Reference Rate in effect from time to time plus the Applicable Margin.
----
Accrued interest on each Alternate Reference Rate Term Loan shall be
payable on each Payment Date and at maturity.
(ii) Eurodollar Term Loans. The unpaid principal amount of
---------------------
each Eurodollar Term Loan shall bear interest prior to maturity at a
rate per annum equal to the Interbank Rate (Reserve Adjusted) in
effect for each Interest Period with respect to such Eurodollar Term
Loan plus the Applicable Margin. Accrued interest on each Eurodollar
----
Term Loan shall be payable on each Payment Date and at maturity.
(iii) Interest After Maturity. The Company shall pay to the
-----------------------
Banks interest on any amount of principal of any Term Loans which are
not paid when due, whether at stated maturity, by acceleration or
otherwise, accruing from and including the date such amount shall have
become due to, but not including, the date of payment thereof in full
at the rate per annum which is equal to two percent (2%) in excess of
the rate which would otherwise be applicable to Alternate Reference
Rate Term Loans from time to time. After maturity, accrued interest
shall be payable on demand from time to time.
3.2 Non-Use Fee. The Company hereby agrees to pay to the Agent
-----------
for the account of each Bank, in accordance with its Pro Rata Share of the
Credit, a non-use fee on the daily average of the unused amount of the
Revolving Loans (without regard to any reduction based upon the Borrowing
Base) at the percentage per annum set forth in the definition of
"Applicable Margin". Such non-use fee shall be calculated quarterly in
arrears to the last Business Day of the quarter and such non-use fee shall
be payable on each Payment Date and on the Termination Date or the date of
termination of the Credit for any period then ending for which such non-use
fee shall not have been theretofore paid."
-8-
<PAGE>
3.3 Agent's Fee. The Company agrees to pay the Agent an agent's
-----------
fee when and in the amounts set forth in the letter agreement dated as of
June 28, 1996 between the Company and the Agent.
8. Amendment of Section 4.2
------------------------
Section 4.2 is hereby amended by deleting the word "Revolving" in each
place where it appears and by inserting the following after the penultimate
sentence:
"Any prepayment of the principal of the Term Loans shall include
accrued interest to the date of prepayment on the principal amount being
prepaid."
9. Amendment of Section 4.3
------------------------
Section 4.3 is hereby amended by deleting the word "Revolving" in each
place where it appears, and by deleting the last sentence of such section and
inserting the following therefor:
"All payments under this Section 4.3 shall be applied first,
-----------
against outstanding Alternate Reference Rate Revolving Loans, second,
against outstanding Eurodollar Revolving Loans, third, against outstanding
Alternate Reference Rate Term Loans, and thereafter, against outstanding
Eurodollar Term Loans, unless otherwise directed by the Company. Payments
to the Term Loans once made may not be reborrowed."
10. Amendment of Section 4.4
------------------------
Section 4.4 is hereby amended by deleting the word "Revolving" in
each place where it appears.
11. Amendment of Article 5
----------------------
Article 5 is hereby amended by deleting the word "Revolving" in each
place where it appears.
12. Amendment of Section 8.1
------------------------
Section 8.1 is hereby amended by deleting the phrases "and Healthdyne
and its subsidiaries", "and Healthdyne", "or Healthdyne's" and "as applicable"
in each place where they appear.
13. Amendment of Section 8.11
-------------------------
Section 8.11 is hereby amended by deleting clause (iv) in its entirety
and inserting the following therefor:
"(iv) expend in the fiscal year ending December 31, 1996 an
amount in excess of $6,000,000 plus for each fiscal year thereafter, an
amount in excess of the sum of (A) $6,000,000 plus (B) 15% of any increase
in the tangible net worth of the Company, as reported at each fiscal year
end, from the tangible net worth of the Company as reported at the fiscal
1995 year end.
-9-
<PAGE>
14. Amendment of Section 8.12
-------------------------
Section 8.12 is hereby amended and restated to read in its entirety as
follows:
"8.12. Consolidated Net Worth. Not permit the Company's
----------------------
Consolidated Net Worth to be less than (i)(A) $35,000,000 at any time from
December 31, 1995 through the period ending March 31, 1996 and (B)
thereafter from any fiscal quarter end until the next fiscal quarter, an
amount equal to $35,000,000 plus 75% of the net income of the Company and
its Subsidiaries for each fiscal quarter after December 31, 1995 but
without deduction for any quarterly loss plus (ii) the amount of any net
proceeds to the Company of any equity issued by the Company or any of its
Subsidiaries after December 31, 1995."
15. Amendment of Section 8.13
-------------------------
Section 8.13 is hereby amended by deleting "EBITDA" and inserting
therefor "EBITR".
16. Amendment of Section 8.14
-------------------------
Section 8.14 is hereby amended and restated to read in its entirety as
follows:
"Total Debt to Capitalization Ratio. Not permit the ratio (the
----------------------------------
"Total Debt to Capitalization Ratio") of (a) Indebtedness For Borrowed
-----------------------------------
Money to (b) Total Capitalization to exceed .50 to 1.0 through the period
ending December 31, 1996, and .45 to 1.0 at any time thereafter."
-10-
<PAGE>
17. Amendment of Section 8.15
-------------------------
Section 8.15 is hereby amended and restated to read in its entirety as
follows:
"Maximum Debt to Cash Flow. Not permit the ratio of consolidated
-------------------------
Indebtedness for Borrowed Money to EBITDA less capital expenditures and
cash dividends in any four fiscal quarter period to exceed 3.5 to 1.0."
18. Amendment of Section 8.16
-------------------------
Section 8.16 is hereby amended by deleting the following phrase from
the end thereof:
"unless such purchase or redemption shall be necessary for
Healthdyne to preserve an 80% ownership interest in the Company."
19. Amendment of Section 8.17
-------------------------
Section 8.17 is hereby amended by deleting "$2,500,000" from clause
(v) and inserting therefor "$5,000,000".
20. Amendment of Sections 8.22
--------------------------
Section 8.22 is hereby amended and restated in its entirety as
follows:
"Not and not permit any Subsidiary to, enter into or be a party
to any transaction or arrangement, including, without limitation, the
purchase, sale, lease, or exchange of property or the rendering of any
service, with any Related Party, except in the ordinary course of and
pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms less favorable to
the Company or such Subsidiary than would obtain in a comparable arm's-
length transaction with a Person not a Related Party, it being understood
that the Company is precluded from selling certain obstetrical products to
any vendor other than a Related Party without the consent of such Related
Party."
-11-
<PAGE>
21. Amendment of Section 8.23
-------------------------
Section 8.23 is hereby amended and restated in its entirety as
follows:
"8.23. The Company will cause the Term Loan portion of the Credit to
be covered by one or more Interest Rate Protection Agreements having terms
and with counterparties satisfactory to the Company and the Banks."
22. Amendment of Section 11.1
-------------------------
Section 11.1 is hereby amended by amending and restating clause (iv)
as follows:
"If at any time any Person, or two or more Persons acting in
concert, shall acquire beneficial ownership (within the meaning of Rule
13d.-3 of The Securities and Exchange Commission under the Securities and
Exchange Act of 1934) of 25% or more of the outstanding voting stock of the
Company."
23. Amendment of Signature Page
---------------------------
The "Amount of Commitment" and "Pro Rata Share" for each Bank on the
signature page of the Credit Agreement shall be amended to the "Amount of
Revolving Commitment", "Amount of Term Commitment" and "Pro Rata Share" on the
signature page of the Third Amendment and shall be rounded to the eighth decimal
place.
24. Amendment of Exhibits
---------------------
A new Exhibit B, "Form of Term Note", is hereby added in the form
attached hereto as Exhibit B, and Exhibits B through N are hereby re-named C
through O.
B. REPRESENTATIONS AND WARRANTIES
------------------------------
The Company hereby represents and warrants to the Agent and Banks
that:
1. No Event of Default or Unmatured Event of Default shall have then
occurred and be continuing, and neither the Company nor any of its Subsidiaries
is in material violation of any law or governmental regulation or court order or
decree.
-12-
<PAGE>
2. The representations and warranties of the Company pursuant to
Article 7 of the Credit Agreement are true and correct with the same effect as
if then made (unless stated to relate solely to an earlier date in which case
such representations and warranties shall be true and correct as of such earlier
date).
3. The making and performance by the Company of this Amendment have
been duly authorized by all corporate action; and
4. No consent, approval, authorization, permit or license from any
federal or state regulatory authority is required in connection with the making
or performance of the Credit Agreement as amended hereby.
C. CONDITIONS PRECEDENT
--------------------
This Amendment will become effective as of June 28, 1996 upon
execution by all of the Banks, provided that the Agent shall have received in
form and substance satisfactory to the Agent and the Banks, all of the
following:
1. A copy of a resolution passed by the Board of Directors of the
Company, certified by the Secretary or an Assistant Secretary of the Company as
being in full force and effect on the date hereof, authorizing the borrowing
herein provided for and the execution, delivery and performance of the Credit
Agreement as hereby amended.
2. A certificate of incumbency certifying the names of the officers
of the Company authorized to sign this Amendment, together with the true
signatures of such officers.
3. Executed counterparts of this Amendment.
4. Executed Revolving Notes payable to the order of each Bank in the
form attached as Exhibit A.
---------
5. Executed Term Notes payable to the order of each Bank in the form
attached as Exhibit B.
---------
6. Consent of each Material Subsidiary in the form attached as
Exhibit C hereto.
- ---------
7. The Company shall have paid to the Agent for the account of the
Banks a non-refundable closing fee of $37,500, to be shared by each Bank
signatory hereto based upon its Pro Rata Share of the Credit.
-13-
<PAGE>
8. The Company shall have paid the Agent an administrative fee, when
and in the amounts set forth in the letter agreement dated as of the date hereof
between the Company and the Agent.
D. MISCELLANEOUS
-------------
1. As soon as available but in any event no later than sixty (60)
days from the date hereof, the Company shall deliver to the Agent the opinion of
Leslie Jones, Esq., General Counsel to the Company, addressed to the Agent and
the Banks, with respect to the Amendment in form satisfactory to the Agent and
the Banks. Failure to so deliver an opinion shall constitute an Event of
Default.
2. This Amendment shall be deemed to be an amendment to the Credit
Agreement, and the Credit Agreement, as amended hereby, shall remain in full
force and effect and is hereby ratified, approved and confirmed in each and
every respect. After the effectiveness of this Amendment in accordance with its
terms, all references to the Credit Agreement in the Loan Documents or in any
other document, instrument, agreement or writing shall be deemed to refer to the
Credit Agreement as amended hereby.
3. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Amendment
or affecting the validity or enforceability of such provision in any other
jurisdiction.
4. The various headings of this Amendment are inserted for
convenience only and shall not affect the meaning or interpretation of this
Amendment or any provision hereof.
5. This Amendment may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written.
HEALTHDYNE TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
----------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent
By:
-------------------------------------
Title:
----------------------------------
-15-
<PAGE>
Amount of
Revolving
Commitment Pro Rata Share
- ---------- --------------
$21,000,000 60.00000000% BANK OF AMERICA ILLINOIS
Amount of
Term
Commitment Pro Rata Share By:
- ---------- -------------- ----------------------------
9,000,000 60.00000000% Title:
-------------------------
Amount of
Revolving
Commitment Pro Rata Share FIRST UNION NATIONAL BANK OF
- ---------- -------------- GEORGIA
$14,000,000 40.00000000%
Amount of
Term
Commitment Pro Rata Share By:
- ---------- -------------- ----------------------------
$6,000,000 40.00000000% Title:
-------------------------
Total
Revolving
Commitment Pro Rata Share
- ---------- --------------
$35,000,000 100%
Total Term
Commitment Pro Rata Share
- ---------- --------------
$15,000,000 100%
-16-
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
-------------------------
[$ ] Due: June 30, 1999
FOR VALUE RECEIVED, on or before June 30, 1999 (as such date may be
extended in accordance with the terms of the Credit Agreement defined below) the
undersigned HEALTHDYNE TECHNOLOGIES, INC. (the "Company") hereby promises to pay
-------
to the order of [__________________________] (the "Bank") the principal sum of
----
[___________ MILLION DOLLARS] ($_________) or if less, the aggregate principal
amount of all Revolving Loans made under the Amended and Restated Secured
Revolving Credit and Term Loan Agreement referred to below (the "Credit
------
Agreement").
- ---------
The Company promises to pay interest on the unpaid principal amount of the
Revolving Loans from time to time outstanding from the date hereof until payment
in full at the rates per annum determined in accordance with the provisions of
the Credit Agreement. Said interest shall be payable on each date provided for
in said Credit Agreement; provided, however, that interest on any principal
-------- -------
portion which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time denominated as
Alternate Reference Rate Revolving Loans or Eurodollar Revolving Loans and
payments of principal or interest thereof shall be noted by the holder of this
Note in its records, or at its option, on Schedule A attached hereto.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association (the "Agent") at 1455 Market Street, 12th Floor, San
-----
Francisco, California 94103, or at such other place as the Agent shall notify
the Company in writing.
This Note is one of the Notes referred to in, and is subject to the terms
and provisions of, the Amended and Restated Secured Revolving Credit and Term
Loan Agreement dated as of December 29, 1994 (as the same may be amended,
modified or supplemented from time to time, herein called the "Credit
------
Agreement") among the Company, certain banks (including the Bank) and the Agent,
to which Credit Agreement reference is hereby made for a statement of the terms
and provisions thereof. This Note is secured pursuant to certain Security
Documents (as such term is defined in the Credit Agreement) to which reference
is made for a description of the collateral provided thereby and the rights of
the Bank and the Company in respect of such collateral.
<PAGE>
The Company expressly waives any presentment, demand, protest or notice in
connection with this Note.
This Note is made under and governed by the internal laws of the State of
Illinois.
HEALTHDYNE TECHNOLOGIES, INC.
By:
-------------------------------
Title:
----------------------------
Address:
1255 Kennestone Circle
Marietta, GA 30066
-2-
<PAGE>
SCHEDULE A
Schedule attached to Note dated as of _________, 1996 of Healthdyne
Technologies, Inc., payable to the order of [ ].
LOANS AND PRINCIPAL PAYMENTS
==============================================================================
| | | Type of Loan | Amount of | Unpaid | |
| | Amount of | & Applicable | Principal | Principal | Notation |
| Date | Loan Made | Interest Rate | Repaid | Balance | Made By |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
- ------------------------------------------------------------------------------
| | | | | | |
==============================================================================
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on this
Note. The failure to record the date and amount of any Term Loan on this
schedule shall not, however, limit or otherwise affect the obligations of the
Company under the Credit Agreement or under this Note to repay the principal
amount of the Loan together with all interest accruing thereon.
<PAGE>
EXHIBIT B
TERM NOTE
$____________.00 Due: January 31, 1998
FOR VALUE RECEIVED, the undersigned, HEALTHDYNE TECHNOLOGIES, INC. (the
"Company"), promises to pay to the order of [ ] (the "Bank"), the
principal sum of ________________ AND 00/100 DOLLARS ($________.00), payable on
January 31, 1998.
The Company further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date hereof until paid in full at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement hereinafter
referred to. Accrued interest shall be payable on the dates specified in the
Credit Agreement.
Each denomination of the Term Loan made pursuant to the Credit Agreement as
an Alternate Reference Rate Term Loan or a Eurodollar Term Loan (as such terms
are defined in the Credit Agreement) and all payments of principal shall be
recorded by the holder in its records or, at its option, on the schedule (or any
continuation thereof) attached to this Note.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association (the "Agent") at 1455 Market Street, 12th Floor, San
Francisco, California 94103, or at such other place as may be designated by the
Agent to the Company in writing.
This Note is one of the Term Notes referred to in, and evidences
indebtedness incurred under, the Amended and Restated Secured Revolving Credit
and Term Loan Agreement dated as of December 29, 1994 (as the same may be
amended, modified or supplemented from time to time, herein called the "Credit
Agreement") among the Company, certain Banks (including the Bank) and the Agent,
to which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Company is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due payable.
This Note is secured pursuant to certain Security Documents (as such term
is defined in the Credit Agreement), to which reference is made for a
description of the collateral provided thereby and the rights of the Bank and
the Company in respect of such collateral.
<PAGE>
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State of
Illinois.
HEALTHDYNE TECHNOLOGIES, INC.
By:
-------------------------------
Title:
----------------------------
Address:
1255 Kennestone Circle
Marietta, GA 30066
-2-
<PAGE>
Schedule attached to Term Note dated __________________, 199__ of ____________,
payable to the order of [ ].
DENOMINATIONS OF TERM LOAN AND PRINCIPAL PAYMENTS
Type of
Amount Term Loan Interest Amount of Unpaid
of Term & Applicable Period (if Principal Principal Notation
Date Loan Interest Rate Applicable) Repaid Balance Made By
- ---- ------- ------------- ----------- --------- --------- --------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this Note. The
failure to record the date and amount of any Term Loan on this schedule shall
not, however, limit or otherwise affect the Company's obligations under the
Credit Agreement or this Note to repay the principal amount of the Term Loan
together with all interest accruing thereon.
-3-
<PAGE>
EXHIBIT C
CONSENT
-------
The undersigned hereby agrees and consents to the terms and provisions of
the foregoing Third Amendment to Credit Agreement, and agrees that the
Subsidiary Guaranty and Loan Documents executed by the undersigned shall remain
in full force and effect notwithstanding the provisions of the foregoing Third
Amendment to Credit Agreement.
Dated: ____________, 1996
HEALTHSCAN PRODUCTS, INC.
By:
---------------------------------
Title:
------------------------------
<PAGE>
Exhibit 11
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
- -------
Net earnings $ 1,320 1,690 3,097 3,237
======= ====== ====== ======
Shares:
Weighted average number of
common shares outstanding 12,575 12,348 12,528 12,347
Shares issuable from assumed
exercise of options
and warrants 535 152 502 128
------- ------ ----- ------
Weighted average number of
common shares and common
share equivalents 13,110 12,500 13,030 12,475
======= ====== ======= ======
Net earnings per common share
and common share equivalent .10 .14 .24 .26
======= ====== ====== ======
Fully Diluted
- --------------
Net earnings $ 1,320 1,690 3,097 3,237
======= ====== ====== ======
Shares:
Weighted average number of
common shares outstanding as
adjusted per primary
computation above 13,110 12,500 13,030 12,475
Additional shares issuable from
assumed exercise of options and
warrants computed on a fully
diluted basis 46 -- 53 12
------- ------ ------ ------
13,156 12,500 13,083 12,487
======= ====== ====== ======
Net earnings per common share
and common share equivalent $ .10 .14 .24 .26
======= ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HEALTHDYNE TECHNOLOGIES, INC. AND
SUBSIDIARIES FOR THE PERIOD ENDED JUN 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,291
<SECURITIES> 0
<RECEIVABLES> 31,226
<ALLOWANCES> 1,366
<INVENTORY> 19,447
<CURRENT-ASSETS> 55,938
<PP&E> 17,780
<DEPRECIATION> 9,976
<TOTAL-ASSETS> 88,977
<CURRENT-LIABILITIES> 19,809
<BONDS> 28,069
0
0
<COMMON> 126
<OTHER-SE> 40,973
<TOTAL-LIABILITY-AND-EQUITY> 88,977
<SALES> 28,587
<TOTAL-REVENUES> 28,587
<CGS> 17,145
<TOTAL-COSTS> 17,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 572
<INCOME-PRETAX> 2,199
<INCOME-TAX> 879
<INCOME-CONTINUING> 1,320
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,320
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
