-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QE8K/JNMBHR6hcWz6FfQVMRhEdrzrmlUeGPX1h4P1XCVZVxVRGkZ0fmLPekKOrrq R3iWIhmQFQtg7lJgevvU1w== 0000912057-96-017863.txt : 19960816 0000912057-96-017863.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017863 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED MEDICAL INC CENTRAL INDEX KEY: 0000817161 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 133492624 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10207 FILM NUMBER: 96614055 BUSINESS ADDRESS: STREET 1: 9775 BUSINESSPARK AVE. CITY: SAN DIEGO STATE: CA ZIP: 92131 BUSINESS PHONE: 6195660426 MAIL ADDRESS: STREET 1: 9775 BUSINESS PAK AVENUE CITY: SAN DIEGO STATE: CA ZIP: 92131 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 19901116 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (MARK ONE) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________ to ___________ Commission File Number: 33-26398 --------------- ADVANCED MEDICAL, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-3492624 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9775 Businesspark Avenue, San Diego, CA 92131 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (619) 566-0426 ---------------------------------------------------- (Registrant's telephone number, including area code) Not applicable ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No On August 8, 1996, 16,138,525 shares of Registrant's Common Stock were outstanding. Page 1 of 18 ADVANCED MEDICAL, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- INDEX PART I. FINANCIAL INFORMATION Item 1 - Financial Statements: Page ---- Condensed consolidated balance sheets at December 31, 1995 and June 30, 1996. . . . . . . . . . . . 3 Condensed consolidated statements of operations for the three and six months ended June 30, 1995 and 1996. . . . . 4 Condensed consolidated statements of cash flows for the six months ended June 30, 1995 and 1996. . . . . . . . . . 5 Condensed consolidated statement of changes in stockholders' equity for the period from December 31, 1995 to June 30, 1996 . . . . . . . . . . . . 6 Notes to the condensed consolidated financial statements . 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . 10 PART II. OTHER INFORMATION Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . 15 Item 2 - Changes in Securities . . . . . . . . . . . . . . Not applicable Item 3 - Defaults Upon Senior Securities . . . . . . . . . 15 Item 4 - Submission of Matters to a Vote of Security Holders 15 Item 5 - Other Information . . . . . . . . . . . . . . . . Not applicable Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . 16 -2- FORM 10 - Q PART 1 - ITEM 1 FINANCIAL INFORMATION ADVANCED MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------
ASSETS DECEMBER 31, JUNE 30, 1995 1996 ------------ --------- Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . $ 1,862 $ 2,108 Restricted cash and investment securities . . . . . . . . . . . . . . . . . . . . . . 2,218 2,274 Securities available for sale. . . . . . . . . . . . . . 6,975 4,649 Receivables, net . . . . . . . . . . . . . . . . . . . . 27,023 23,984 Inventories. . . . . . . . . . . . . . . . . . . . . . . 15,829 17,964 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . 3,651 4,736 -------- -------- Total current assets . . . . . . . . . . . . . . . . . 57,558 55,715 Restricted cash. . . . . . . . . . . . . . . . . . . . . . 25,000 12,500 Net investment in sales-type and direct financing leases . . . . . . . . . . . . . . . . . . . . 15,179 14,055 Property, plant and equipment, net . . . . . . . . . . . . 12,653 13,116 Other non-current assets . . . . . . . . . . . . . . . . . 11,834 10,494 Intangible assets, net . . . . . . . . . . . . . . . . . . 47,406 47,197 -------- -------- $169,630 $153,077 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt. . . . . . . . . . . . $ 322 $ 149 Accounts payable . . . . . . . . . . . . . . . . . . . . 7,881 7,416 Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . 17,417 15,984 -------- -------- Total current liabilities. . . . . . . . . . . . . . . 25,620 23,549 -------- -------- Long-term debt . . . . . . . . . . . . . . . . . . . . . . 86,789 84,667 Other non-current liabilities. . . . . . . . . . . . . . . 6,972 6,683 -------- -------- 93,761 91,350 -------- -------- Minority interests in consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . 11,500 -------- -------- Contingent liabilities (Note 5) Mandatorily redeemable equity securities . . . . . . . . . . . . . . . . . . . . . . . 7,217 7,543 -------- -------- Non-redeemable preferred stock, common stock and other stockholders' equity: Preferred stock, authorized 6,000 and 3,000 shares at $.001 and $.01 par value, respectively; issued and outstanding -- none Common stock, authorized 75,000 shares at $.01 par value; issued and outstanding -- 16,214 shares and 16,221 shares at December 31, 1995 and June 30, 1996, respectively . . . . . . . . . . . . . . . . . . . . . 162 162 Capital in excess of par value . . . . . . . . . . . . . 62,965 61,654 Accumulated deficit. . . . . . . . . . . . . . . . . . . (34,468) (32,459) Treasury stock . . . . . . . . . . . . . . . . . . . . . (734) (734) Unrealized holding gains from securities available for sale, net of tax . . . . . . . . . . . . . . . . . . . . . . . . 3,577 1,800 Other equity . . . . . . . . . . . . . . . . . . . . . . 30 212 -------- -------- Total non-redeemable preferred stock, common stock and other stockholders' equity . . . . . . . . . . . . . . . . 31,532 30,635 -------- -------- $169,630 $153,077 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -3- ADVANCED MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------ 1995 1996 1995 1996 ------- ------- ------- ------- Sales. . . . . . . . . . . . . . . . . . . . . . . . $29,166 $28,105 $57,756 $53,870 Cost of sales. . . . . . . . . . . . . . . . . . . . 16,383 15,756 33,414 29,651 ------- ------- ------- ------- Gross margin. . . . . . . . . . . . . . . . . . . . 12,783 12,349 24,342 24,219 ------- ------- ------- ------- License fees revenue . . . . . . . . . . . . . . . . 110 111 220 221 ------- ------- ------- ------- Selling expenses . . . . . . . . . . . . . . . . . . 4,694 4,655 8,914 8,862 General and administrative expenses. . . . . . . . . 2,328 2,579 5,201 5,545 Research and development expenses. . . . . . . . . . 1,905 1,977 3,991 3,789 ------- ------- ------- ------- Total operating expenses. . . . . . . . . . . . . . 8,927 9,211 18,106 18,196 ------- ------- ------- ------- Income from operations. . . . . . . . . . . . . . . 3,966 3,249 6,456 6,244 ------- ------- ------- ------- Other income (expense): Interest income . . . . . . . . . . . . . . . . . . 626 957 1,189 1,914 Interest expense. . . . . . . . . . . . . . . . . . (2,354) (2,184) (4,096) (4,399) Other, net. . . . . . . . . . . . . . . . . . . . . 6 304 (153) 306 ------- ------- ------- ------- (1,722) (923) (3,060) (2,179) ------- ------- ------- ------- Income before income taxes and extraordinary item. . 2,244 2,326 3,396 4,065 Provision for income taxes . . . . . . . . . . . . . 206 1,176 335 2,056 ------- ------- ------- ------- Income before extraordinary item . . . . . . . . . . 2,038 1,150 3,061 2,009 Extraordinary item - gain on early retirement of debt, net of taxes . . . . . . . . . . . . . . . . 6,370 15,177 ------- ------- ------- ------- Net income . . . . . . . . . . . . . . . . . . . . . 8,408 1,150 18,238 2,009 Dividends and accretion on mandatorily redeemable preferred stock. . . . . . . . . . . . . . . . . . 162 163 325 325 ------- ------- ------- ------- Net income applicable to common stock. . . . . . . . $ 8,246 $ 987 $17,913 $ 1,684 ------- ------- ------- ------- ------- ------- ------- ------- Income per common share assuming no dilution: Income before extraordinary item. . . . . . . . . . $ .12 $ .06 $ .18 $ .10 Extraordinary item. . . . . . . . . . . . . . . . . .40 1.01 ------- ------- ------- ------- Net income per common share assuming no dilution $ .52 $ .06 $ 1.19 $ .10 ------- ------- ------- ------- ------- ------- ------- ------- Income per common share assuming full dilution: Income before extraordinary item. . . . . . . . . . $ .06 $ .03 $ .09 $ .06 Extraordinary item. . . . . . . . . . . . . . . . . .20 .48 ------- ------- ------- ------- Net income per common share assuming full dilution. . . . . . . . . . . . . . . . . . . . $ .26 $ .03 $ .57 $ .06 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares outstanding assuming no dilution . . . . . . . . . . . . . . . . . . . 15,942 16,402 15,018 16,432 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares outstanding assuming full dilution . . . . . . . . . . . . . . . . . . 32,560 42,593 31,743 42,589 ------- ------- ------- ------- ------- ------- ------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -4- ADVANCED MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS) - -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, ------------------ 1995 1996 ------- -------- Net cash provided by operating activities. . . . . . . $ 8,631 $ 6,656 ------- -------- Cash flows from investing activities: Net (increase) decrease in restricted cash and investments. . . . . . . . . . . . . . . . . . . . (305) 12,444 Capital expenditures . . . . . . . . . . . . . . . . (2,657) (2,793) Payment for product distribution rights. . . . . . . (3,358) (1,503) Proceeds from sale of investments. . . . . . . . . . 154 Proceeds from disposal of property . . . . . . . . . 28 37 ------- -------- Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . (6,292) 8,339 ------- -------- Cash flows from financing activities: Net repayments under credit facilities . . . . . . . (1,659) (1,973) Principal payments on long-term debt . . . . . . . . (866) (322) Purchase of IMED common stock warrants . . . . . . . (12,500) Offering costs . . . . . . . . . . . . . . . . . . . (443) Other. . . . . . . . . . . . . . . . . . . . . . . . 15 ------- -------- Net cash used in financing activities. . . . . . . . . (2,968) (14,780) ------- -------- Effect of exchange rate changes on cash. . . . . . . . (69) 31 ------- -------- Net increase (decrease) in cash and cash equivalents . (698) 246 Cash and cash equivalents at beginning of period . . . 1,340 1,862 ------- -------- Cash and cash equivalents at end of period . . . . . . $ 642 $ 2,108 ------- -------- ------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -5- ADVANCED MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (DOLLAR AND SHARE AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------
UNREALIZED HOLDING GAINS FROM COMMON STOCK CAPITAL IN TREASURY STOCK SECURITIES --------------- EXCESS OF ACCUMULATED ---------------- AVAILABLE OTHER SHARES AMOUNT PAR VALUE DEFICIT SHARES AMOUNT FOR SALE EQUITY TOTAL ------ ------ ---------- ----------- ------ ------ ----------- ------ ------- Balance at December 31, 1995 16,214 $162 $62,965 $(34,468) 83 $(734) $ 3,577 $30 $31,532 Issuance of common stock 7 14 14 Dividends on mandatorily redeemable preferred stock (325) (325) Unrealized holding loss from securities available for sale (1,777) (1,777) Repurchase of stock warrants (1,000) (1,000) Other equity transactions 182 182 Net income for the period 2,009 2,009 ------ ---- ------- -------- -- ----- ------- ---- ------- Balance at June 30, 1996 16,221 $162 $61,654 $(32,459) 83 $(734) $ 1,800 $212 $30,635 ------ ---- ------- -------- -- ----- ------- ---- ------- ------ ---- ------- -------- -- ----- ------- ---- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -6- ADVANCED MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------- NOTE 1 -- BUSINESS AND STATEMENT OF ACCOUNTING POLICY BUSINESS: Advanced Medical, Inc. ("Advanced Medical"), operating through its major operating subsidiary, IMED Corporation ("IMED"), is a leading developer and manufacturer of infusion products and related technologies for the health care industry (Advanced Medical and its subsidiaries are collectively referred to herein as "the Company"). STATEMENT OF ACCOUNTING POLICY: The accompanying financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures herein are adequate to make the information not misleading. In the opinion of the Company, the accompanying financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position as of June 30, 1996, and the results of its operations and its cash flows for the six months ended June 30, 1995 and 1996. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform to the classifications used in 1996. NET INCOME PER COMMON SHARE: Net income per common share assuming no dilution is computed using the weighted average number of common and common stock equivalent shares outstanding during the period. If dilutive, net income per common share assuming full dilution is computed using the weighted average number of common and common stock equivalent shares outstanding during the period plus the shares that would be outstanding assuming conversion of the $6,000 secured promissory note ("$6,000 Note") issued to Decisions Incorporated, a corporation affiliated with Jeffry M. Picower, Chairman and CEO of the Company ("Decisions"), during January 1994, conversion of the $6,500 secured promissory note ("$6,500 Note") issued to Decisions during August 1994, and conversion of the $25,000 secured promissory note ("$25,000 Note") (collectively, "the Notes") issued to Decisions during December 1995. Assuming conversion of the Notes, interest expense (net of taxes) on the convertible debt has been added to the net income applicable to common stock in the amount of $150 and $412 for the three months ended June 30, 1995 and 1996, respectively, and $299 and $824 for the six months ended June 30, 1995 and 1996, respectively. Common stock equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. -7- NOTE 2 -- INVENTORIES Inventories comprise the following:
DECEMBER 31, JUNE 30, 1995 1996 ------------ -------- Raw materials. . . . . . . . . . . . . $ 6,946 $ 7,012 Work-in-process. . . . . . . . . . . . 1,686 3,057 Finished goods . . . . . . . . . . . . 7,197 7,895 ------- ------- $15,829 $17,964 ------- ------- ------- -------
NOTE 3 -- INTANGIBLE ASSETS Pursuant to the exclusive distribution agreement with Debiotech SA ("Debiotech") ("the Agreement"), IMED paid Debiotech $1,500 during the six months ended June 30, 1996 upon the attainment of certain milestones. The additional payment has been classified as an intangible asset with previous payments made under the Agreement, and is being amortized on a straight-line basis over the 15-year term of the Agreement. NOTE 4 -- PURCHASE OF IMED COMMON STOCK WARRANT On June 28, 1996, Advanced Medical purchased General Electric Capital Corporation's ("GECC") warrant to acquire common shares equal to 10% of IMED's common stock, on a fully diluted basis, for $12,500. The proceeds from the $25,000 Note were used to make this acquisition. The IMED common stock warrant held by GECC had been valued at $11,500 and included in minority interest in consolidated subsidiaries in the condensed consolidated balance sheet at December 31, 1995. The purchase of the warrant has been treated as an equity transaction. Accordingly, the $1,000 difference between the carrying value of the minority interest and the purchase price was charged directly to stockholders' equity. NOTE 5 -- LITIGATION AND CONTINGENCIES The Company is a defendant in various actions, claims and legal proceedings arising from normal business operations. Management believes they have meritorious defenses and intends to vigorously defend against all allegations and claims. As the ultimate outcome of these matters is uncertain, no contingent liabilities or provisions have been recorded in the accompanying financial statements for such matters. However, in management's opinion, based upon discussion with legal counsel, liabilities arising from these matters, if any, will not have a material adverse affect on consolidated financial position, results of operations or cash flows. NOTE 6 -- MANDATORILY REDEEMABLE EQUITY SECURITIES As of June 30, 1996, dividends in arrears on the $.01 par value mandatorily redeemable preferred stock ("10% Preferred Stock") and the $.01 par value mandatorily redeemable convertible preferred stock ("Convertible Preferred Stock") were approximately $1,072 and $1,039, respectively. Additionally, the Company did not declare the March 28, 1994 redemption of its 10% Preferred Stock (redemption price of approximately $3,300). On June 18, 1996, the Company and its directors entered into a Stipulation and Agreement of Compromise and Settlement (the "Stipulation") with respect to the settlement of an action based upon the Company's failure to redeem its outstanding shares of 10% Preferred Stock and certain loans of Decisions to the Company. Pursuant to the Stipulation, the Company agreed to (i) redeem its outstanding 10% Preferred Stock, plus accrued and unpaid dividends, less an amount (not to exceed $1.50 per share), if any, the court may award as fees to counsel for plaintiff, (ii) the payment of up to $500 in attorneys fees and (iii) amend its by-laws to add a provision concerning material transactions between the Company and any control person. Pursuant to an order of the court dated June 28, 1996, a hearing will be held on August 29, 1996 to determine whether the terms of the settlement contained in the Stipulation should be approved by the court. -8- NOTE 7 -- SALE OF MARKETABLE SECURITIES Other income for the three and six months ended June 30, 1996 includes gains on the sale of marketable securities of $116. NOTE 8 -- SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS Income taxes paid during the six months ended June 30, 1995 and 1996 totaled $1,232 and $3,077, respectively. Interest paid during the six months ended June 30, 1995 and 1996 totaled $3,566 and $3,315, respectively. Depreciation and amortization expense for the six months ended June 30, 1995 and 1996 totaled $3,996 and $4,145, respectively, which amounts included debt issue cost amortization of $290 and $232, respectively. NOTE 9 -- PURCHASE OF EUROPEAN DISTRIBUTION RIGHTS On June 27, 1996, IMED entered into an agreement with its European marketing and distribution partner, Pharmacia & Upjohn ("Pharmacia"), to acquire the European Distribution Rights to its IMED line of intravenous infusion pumps and related disposable administration sets. Under the agreement, IMED will pay, at closing, approximately $11,000 to Pharmacia for the distribution rights and certain assets relating to the distribution of IMED's products in Europe. The transaction is expected to close by August 30, 1996. -9- PART I -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- OVERVIEW Advanced Medical is a holding company for IMED, Fidata Corporation ("Fidata") and several investments. It also identifies and evaluates potential acquisitions and investments and performs various corporate functions. As a holding company, Advanced Medical currently has no revenues to fund its operating and interest expenses and relies on cash generated by cash flow from IMED, external borrowings, sale of investments and other external sources of funds to meet its obligations. For purposes of this discussion and analysis, the three months ended June 30, 1995 and 1996 are referred to as the 1995 Second Quarter and 1996 Second Quarter, respectively, and the six months ended June 30, 1995 and 1996 are referred to as 1995 and 1996, respectively. LIQUIDITY AND CAPITAL RESOURCES Management currently believes that sufficient cash will be available through IMED, based upon current operations, to satisfy debt service and other corporate expenses of Advanced Medical in the foreseeable future. In particular, the loan agreement between IMED and General Electric Capital Corporation ("GECC") ("Amended Loan Agreement") permits IMED to transfer to Advanced Medical up to $9.25 million annually to fund Advanced Medical's cash requirements for operating and interest expenses. In 1996, IMED's cash flow from operations was $10.1 million which was used for (i) repayments of $2.0 million under the revolving credit facility, (ii) advances of $3.9 million to Advanced Medical, as permitted under the Amended Loan Agreement, (iii) payments of $1.5 million for the Debiotech Agreement, and (iv) capital expenditures of $2.7 million. In addition to IMED's cash flow from operations, IMED has readily available financial resources under a $35.0 million revolving credit facility. As of June 30, 1996, IMED had $21.9 million available for use under its revolving credit facility. IMED relies on cash generated from operations, together with funds available from the revolving credit facility, to fund its working capital requirements, interest on the GECC credit facility, capital expenditures and transfers to Advanced Medical. In addition to financial resources available to IMED from operations and the revolving credit facility, management considers it important for Advanced Medical to maintain financial resources to take advantage of growth and investment opportunities. Accordingly, in December 1995, the Company borrowed $25.0 million from Decisions Incorporated ("Decisions") (the "$25 Million Note"). On June 28, 1996, Advanced Medical purchased GECC's warrant to acquire common shares equal to 10% of IMED's common stock, on a fully diluted basis, for $12.5 million. The proceeds from the $25 Million Note were used to make this acquisition. As of June 30, 1996, $12.5 million remain from the proceeds of the $25 Million Note and are available to satisfy growth and investment opportunities, with some restrictions. The remaining proceeds are classified as restricted cash (non-current) in the condensed consolidated balance sheet. The Company considers its investment in the common stock of Alteon, Inc. ("Alteon") to be a significant source of capital and liquidity. Under the loan agreements, the Alteon common stock holdings and the proceeds from any sales are pledged as security and are restricted to the satisfaction of working capital requirements. As of June 30, 1996, the Company owned approximately 423,000 shares of Alteon common stock which were registered under the Securities Act on October 1, 1993, and had an aggregate market value of approximately $4.7 million based upon the closing price per share on the NASDAQ National Market System ("NASDAQ"). Prices obtainable in any private sales of such securities are likely to be lower than those quoted on the NASDAQ. Alteon is engaged in the research and development of medical and pharmaceutical products and as such has not yet successfully brought products to the market. Therefore, -10- failure of Alteon to develop and market their products successfully could adversely affect the ability of the Company to dispose of its investments therein upon favorable terms. The Company had working capital of $31.9 million as of December 31, 1995 compared with working capital of $32.2 million as of June 30, 1996. The increase in working capital resulted primarily from an increase in inventory levels and a reduction in taxes payable due to tax payments. The increase in working capital resulting from these items was nearly offset by the decrease in the market value of Advanced Medical's investment in Alteon common stock and the reduction in accounts receivable due to the collection of year-end receivables. The Company did not pay the March 28, 1994 mandatory redemption of all outstanding shares of $.01 par value mandatorily redeemable preferred stock ("10% Preferred Stock") and has not declared and paid dividends since March 1993. As of June 30, 1996, there were 329,913 shares of 10% Preferred Stock currently outstanding with a liquidation preference of $10 per share and accrued and unpaid dividends were approximately $1.1 million. In addition to the 10% Preferred Stock, as of June 30, 1996, there were 333,000 shares of 15% convertible preferred stock currently outstanding with a liquidation preference of $6.40 per share and accrued and unpaid dividends were approximately $1.0 million. Since the Company has obtained the consent of the holders of the $25 Million Note to do so, the Company intends to redeem the outstanding 10% Preferred Stock, the 15% convertible preferred stock and to pay all accrued dividends thereon in the near future from a portion of the proceeds from the $25 Million Note. (See Part 1, Item 1, Note 6.) RESULTS OF OPERATIONS SALES The Company's sales, cost of sales, and selling expenses for the historical periods shown consist exclusively of IMED's sales, cost of sales and selling expenses and are presented in the table below.
1995 1996 SECOND SECOND QUARTER QUARTER 1995 1996 ------- ------- ------ ------ (IN MILLIONS) United States. . . . . . . . . . . . . . $ 24.0 $ 22.4 $ 47.5 $ 42.5 International. . . . . . . . . . . . . . 5.2 5.7 10.3 11.4 ------ ------ ------ ------ Total sales. . . . . . . . . . . . . . $ 29.2 $ 28.1 $ 57.8 $ 53.9 ------ ------ ------ ------ ------ ------ ------ ------ Total sales. . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% Cost of sales. . . . . . . . . . . . . . 56.2 56.1 57.9 55.0 ------ ------ ------ ------ Gross margin . . . . . . . . . . . . . . 43.8% 43.9% 42.1% 45.0% ------ ------ ------ ------ ------ ------ ------ ------ Selling expenses . . . . . . . . . . . . $ 4.7 $ 4.7 $ 8.9 $ 8.9 ------ ------ ------ ------ ------ ------ ------ ------ Selling expenses as a percentage of sales 16.1% 16.6% 15.4% 16.5% ------ ------ ------ ------ ------ ------ ------ ------
-11- The following table sets forth IMED sales by major product groups for the periods presented. 1995 1996 SECOND SECOND QUARTER QUARTER 1995 1996 ------- ------- ----- ----- (IN MILLIONS) Piston Cassette Disposables. . . . . . . $ 3.8 $ 3.5 $ 9.2 $ 7.1 Peristaltic Disposables. . . . . . . . . 15.6 15.9 29.3 32.0 Piston Cassette Pumps. . . . . . . . . . 0.4 0.1 Peristaltic Pumps. . . . . . . . . . . . 7.6 6.3 13.8 10.0 ReadyMED . . . . . . . . . . . . . . . . 0.6 0.8 1.5 1.3 Other (1). . . . . . . . . . . . . . . . 1.6 1.6 3.6 3.4 ----- ----- ----- ----- Total. . . . . . . . . . . . . . . . . . $29.2 $28.1 $57.8 $53.9 ----- ----- ----- ----- ----- ----- ----- ----- (1) Primarily includes operating lease income relating to pumps, service fees and accessory sales. The Company's major source of revenue is the sale of proprietary disposable administration sets for its installed infusion instrument base. The overall volume of disposables sold has grown from 1995 to 1996. This growth has been achieved despite a change in protocol at certain hospitals increasing the maximum time between set changes from every 24 hours to as much as every 72 hours, and results primarily from an increase in IMED's installed base, including the addition of new accounts. The Company is unable to predict the potential effect of this change in protocol, which is expected to continue with respect to certain applications of IMED's products, on the Company's future financial condition or results of operations. IMED's products are at the high end of the industry price range and compete on the basis of technological sophistication, quality, safety and flexibility in application. Disposable administration sets used with IMED's piston cassette pumps had generated, prior to the third quarter of 1992, a majority of IMED's overall sales of disposables and of IMED's total revenues. Virtually all placements to new customers during 1995 and 1996 consisted of Gemini instruments. Therefore, sales of piston cassette products (pumps and disposables) are expected to continue to decline as demand for IMED's pumps and proprietary disposable administration sets reflects, to an increasing extent, the expected gradual shift away from piston cassette technology and toward peristaltic technology, such as that used in IMED's Gemini series of instruments, and other newer technology. IMED's current sales efforts, which emphasize its Gemini series of products, are both consistent with and encourage this shift. There can be no assurance that future sales of peristaltic products will be sufficient to offset the anticipated continued decline in sales of older technology. The decrease in U.S. sales from the 1995 Second Quarter to the 1996 Second Quarter and from 1995 to 1996 is due primarily to a decrease in the volume of instrument shipments and the decline in the average selling prices of disposable administration sets. Both 1995 Second Quarter and 1995 reflected instrument volume with several large transactions. Efforts by hospitals to control operating expenses continue to put pressure on the selling prices of disposable administration sets. Disposable administration set volume increased from 1995 to 1996 partially offsetting the decline in average selling prices. The increase in international sales from the 1995 Second Quarter to the 1996 Second Quarter and from 1995 to 1996 is due primarily to the increase in the volume of disposable administration sets which resulted from increases in the number of instruments installed and utilizing disposable administration sets in Canada, Australia, Latin America and the Middle East. The disposable administration set volume of IMED's European marketing and distribution partner, Pharmacia & Upjohn ("Pharmacia"), increased from the 1995 Second Quarter to the 1996 Second Quarter and from 1995 to 1996, but the volume of instrument shipments -12- continued to decline during both periods. The decline in instrument shipments by Pharmacia were partially offset by shipments in other territories, particularly Latin America and the Far East. GROSS MARGIN The gross margin percentage increased from the 1995 Second Quarter to the 1996 Second Quarter and from 1995 to 1996 due to the reductions in the manufacturing costs of disposable administration sets resulting from (i) the increased outsourcing of molded parts and components, (ii) negotiated price reductions from suppliers and (iii) the favorable effects of increased manufacturing volume. In addition, the gross margin percentage increased from 1995 to 1996 due to the lower unit cost for inventory at December 31, 1995 that were sold in 1996 compared to the unit cost for inventory at December 31, 1994 that were sold in 1995. The gross margin percentage from the 1995 Second Quarter to the 1996 Second Quarter and from 1995 to 1996 increased despite the decline in the selling prices in the U.S. market discussed above. GENERAL AND ADMINISTRATIVE EXPENSES The following table sets forth general and administrative ("G&A") expenses for Advanced Medical and its subsidiaries for the periods presented. 1995 1996 SECOND SECOND QUARTER QUARTER 1995 1996 ------- ------- ---- ---- (IN MILLIONS) IMED . . . . . . . . . . . . . . . . . $2.0 $2.3 $4.4 $4.6 Advanced Medical . . . . . . . . . . . .2 .3 .6 .9 Fidata. . . . . . . . . . . . . . . . . .1 .2 ---- ---- ---- ---- Total G&A expenses. . . . . . . . . $2.3 $2.6 $5.2 $5.5 ---- ---- ---- ---- ---- ---- ---- ---- The increase in IMED's G&A expenses from the 1995 Second Quarter to the 1996 Second Quarter and from 1995 to 1996 results from the recruitment and relocation expenses of development personnel and certain expenses related to the Company's investment in information technology. Due to the nature of Advanced Medical's operations, G&A expenses fluctuate from period to period as the majority of its costs are comprised of (i) professional and consulting fees and indirect costs (such as travel costs) associated with identifying, evaluating and making acquisitions and investments, (ii) communication and meeting costs of shareholder and investor relations and (iii) other costs of performing general holding company functions. Advanced Medical has been winding down Fidata's remaining operations and settling its remaining claims since it was acquired in March 1989. Due to unresolved claims and lack of court and regulatory approval, the liquidation of Fidata did not occur in 1995. Management expects to settle certain remaining claims and liquidate Fidata completely in 1996. However, there can be no assurance that Fidata will be completely liquidated in 1996 as such will require court and regulatory approval. RESEARCH AND DEVELOPMENT EXPENSES The Company's research and development ("R&D") expenses, which consist exclusively of IMED's R&D, increased slightly from the 1995 Second Quarter to the 1996 Second Quarter and decreased from 1995 to 1996 due to the timing of certain expenses associated with the development of a new line of hospital infusion pumps and associated disposable administration sets. R&D expenses for the year ending December 31, 1996 are expected to be comparable to those for the year ended December 31, 1995. -13- RESTRUCTURINGS During 1993, the Company recorded a $3.5 million restructuring charge in connection with the sale of IMED Ireland and relocation of its molding operations to the United States. The charge included accruals of $1.3 million related to estimated relocation costs and professional fees. Cash payments of approximately $.1 million were made during 1995 and no cash payments were made in 1996. As of June 30, 1996, the remaining accrual of $.5 million is expected to be paid during 1996. SEASONALITY Infusion instrument sales are typically higher in the fourth quarter due to sales compensation plans which reward the achievement of annual quotas and the seasonal characteristics of the industry, including hospital purchasing patterns. First quarter sales are traditionally not as strong as the fourth quarter. The Company anticipates that this trend will continue but is unable to predict the effect, if any, from health care reform and increased competitive pressures. OTHER MATTERS In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument. It also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). The Company has elected to continue to measure its stock-based compensation in accordance with APB 25. Certain pro forma disclosures required by SFAS 123 will be made in 1996 in accordance with SFAS 123. The Company does not expect the adoption of SFAS 123 to have a significant effect on its financial position or results of operations. HEALTH CARE REFORM Heightened public awareness and concerns regarding the growth in overall health care expenditures in the United States may result in the enactment of national health care reform or other legislation affecting payment mechanisms and health care delivery. Legislation which imposes limits on the number and type of medical procedures which may be performed or which has the effect of restricting a provider's ability to select specific devices or products for use in administrating medical care may adversely impact the demand for the Company's products. In addition, legislation which imposes restrictions on the price which may be charged for medical products may adversely affect the Company's results of operations. It is not possible to predict the extent to which the Company or the health care industry in general may be adversely affected by the aforementioned in the future. FORWARD-LOOKING STATEMENTS Forward-Looking Statements in this report are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Persons reading this report are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, the effect of legislative and regulatory changes effecting the health care industry; the potential of increased levels of competition; technological changes; the dependence of the Company upon the success of new products and ongoing research and development efforts; restrictions contained in the instruments governing the Company's indebtedness; the significant leverage to which the Company is subject; and other matters referred to in this report. -14- PART II OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS See Item 3. of the Company's December 31, 1995 Form 10-K and Item 3. of the June 30, 1996 Form 10-Q, below. ITEM 3. DEFAULTS UPON SENIOR SECURITIES (B) ARREARAGES IN THE PAYMENT OF PREFERRED STOCK DIVIDENDS The Company did not pay the March 28, 1994 mandatory redemption of all outstanding shares of $.01 par value mandatorily redeemable preferred stock ("10% Preferred Stock") and has not declared and paid dividends since March 1993. As of June 30, 1996, there were 329,913 shares of 10% Preferred Stock currently outstanding with a liquidation preference of $10 per share and accrued and unpaid dividends were approximately $1,072,000. In addition to the 10% Preferred Stock, as of June 30, 1996, there were 333,000 shares of 15% convertible preferred stock currently outstanding with a liquidation preference of $6.40 per share and accrued and unpaid dividends were approximately $1,039,000. On June 18, 1996, the Company and its directors entered into a Stipulation and Agreement of Compromise and Settlement (the "Stipulation") with respect to the settlement of an action based upon the Company's failure to redeem its outstanding shares of 10% Preferred Stock and certain loans of Decisions to the Company. Pursuant to the Stipulation, the Company agreed to (i) redeem its outstanding 10% Preferred Stock, plus accrued and unpaid dividends, less an amount (not to exceed $1.50 per share), if any, the court may award as fees to counsel for plaintiff, (ii) the payment of up to $500,000 in attorneys fees and (iii) amend its by-laws to add a provision concerning material transactions between the Company and any control person. Pursuant to an order of the court dated June 28, 1996, a hearing will be held on August 29, 1996 to determine whether the terms of the settlement contained in the Stipulation should be approved by the court. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Annual Meeting of Stockholders of Advanced Medical, Inc. (the "Company") was held on May 29, 1996. (c) The following resolutions were voted upon and the results of the voting were as follows: 1. Election of directors VOTES VOTES FOR WITHHELD ---------- -------- Jeffry M. Picower 12,067,953 40,969 Anthony Cerami 12,067,867 41,055 Norman M. Dean 12,066,643 42,279 Henry Green 11,959,447 149,475 Frederic Greenberg 12,067,467 41,455 Richard B. Kelsky 12,067,453 41,469 2. Ratification of appointment of Price Waterhouse LLP as independent accountants VOTES VOTES FOR AGAINST ABSTAIN ---------- ------- ------- 12,057,507 33,505 17,910 -15- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.15 -- Notice of Pendency of Class Action, Class Determination, Settlement of Class and Derivative Action, Settlement Hearing and Right to Appear to all holders of the Company's 10% Cumulative Preferred Stock and common stock as of March 20, 1996 (and their successors in interest) and all current shareholders of the Company. 10.27 -- Memorandum of Understanding dated March 19, 1996, by and between the Company and plaintiff class represented by Richard C. Goodwin, with respect to the settlement of a class action lawsuit. 10.28 -- Asset Transfer Agreement dated June 26, 1996 by and between the Company and Pharmacia & Upjohn Limited with respect to the acquisition of certain European assets. 10.29 -- Assignment Agreement dated June 26, 1996 by and between the Company and Pharmacia, AB with respect to the acquisition of European distribution rights. 11.1 -- Computation of Net Income per share for the three and six month periods ended June 30, 1995 and 1996. _________________________________________ (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is being filed. -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ADVANCED MEDICAL, INC. (REGISTRANT) Date: August 14, 1996 By: /s/ JOSEPH W. KUHN ------------------------- Joseph W. Kuhn PRESIDENT (PRINCIPAL FINANCIAL OFFICER) -17- EXHIBIT INDEX - ------------------------------------------------------------------------------- Exhibit No. - ------- 4.15 -- Notice of Pendency of Class Action, Class Determination, Settlement of Class and Derivative Action, Settlement Hearing and Right to Appear to all holders of the Company's 10% Cumulative Preferred Stock and common stock as of March 20, 1996 (and their successors in interest) and all current shareholders of the Company. 10.28 -- Asset Transfer Agreement dated June 26, 1996 by and between the Company and Pharmacia & Upjohn Limited with respect to the acquisition of certain European assets. 10.29 -- Assignment Agreement dated June 26, 1996 by and between the Company and Pharmacia, AB with respect to the acquisition of European distribution rights. 11.1 -- Computation of Net Income per share for the three and six month periods ended June 30, 1995 and 1996. -18- EX-4.15 2 EXHIBIT 4.15 IMPORTANT NOTICE -- READ CAREFULLY IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY RICHARD C. GOODWIN, et al., ) ) Plaintiff, ) ) C.A. No. 14618 v. ) ) JEFFRY M. PICOWER, et al., ) ) Defendants. ) NOTICE OF PENDENCY OF CLASS ACTION, CLASS DETERMINATION, SETTLEMENT OF CLASS AND DERIVA- TIVE ACTION, SETTLEMENT HEARING AND RIGHT TO APPEAR TO: ALL HOLDERS OF ADVANCED MEDICAL, INC. ("ADVANCED MEDICAL") 10% CUMULATIVE PREFERRED STOCK ("PREFERRED STOCK") AND ADVANCED MEDICAL COMMON STOCK ("COMMON STOCK") AS OF MARCH 20, 1996 AND THEIR SUCCESSORS IN INTEREST (AND ALL TRANSFEREES OF SUCH SHARES ON OR AFTER THAT DATE) AND ALL CURRENT SHAREHOLDERS OF ADVANCED MEDICAL. THIS NOTICE IS BEING GIVEN TO INFORM YOU OF: (1) THE TERMS OF THE PROPOSED SETTLEMENT OF THE CLASS AND DERIVATIVE CLAIMS ASSERTED BY IN THE ACTION REFERRED TO IN THE CAPTION AND THE PROPOSED DISMISSAL OF THE ACTION; (2) A HEARING TO BE HELD ON AUGUST 29, 1996, AT 11:00 A.M. BEFORE THE HONORABLE MYRON T. STEELE OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE, IN AND FOR NEW CASTLE COUNTY, AT 1020 KING STREET, WILMINGTON, DELAWARE 19801 TO DETERMINE WHETHER THE PROPOSED SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE AND IN THE BEST INTERESTS OF ADVANCED MEDICAL AND THE SETTLEMENT CLASSES (AS DEFINED BELOW); (3) YOUR RIGHT TO APPEAR AT SAID HEARING AND THE PROCEDURES AND DEADLINES FOR FILING OBJECTIONS TO THE PROPOSED SETTLEMENT; AND (4) THE AMOUNT OF FEES, COSTS AND EXPENSES THAT PLAINTIFF'S COUNSEL INTENDS TO REQUEST IN AN AWARD FROM THE COURT. PLEASE READ THIS NOTICE CAREFULLY. IF THE COURT APPROVES THE PROPOSED SETTLEMENT DESCRIBED HEREIN, YOU WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS, REASONABLENESS OR ADEQUACY OF THE PROPOSED SETTLEMENT, OR FROM PURSUING THE SETTLED CLAIMS. NOTICE IS HEREBY GIVEN pursuant to Delaware Chancery Court Rules 23 and 23.1, and an Order of the Court dated June 28, 1996 (the "Order") in the above-captioned action (the "Action"), that a hearing (the "Settlement Hearing") will be held at 11:00 a.m. on August 29, 1996, Court of Chancery, 1020 King Street, Wilmington, Delaware 19801, before the Honorable Myron T. Steele, Vice-Chancellor, to determine (a) whether a proposed settlement of all claims asserted in this Action, on the terms and conditions set forth in a Stipulation and Agreement of Compromise and Settlement, dated June 18, 1996 (the "Stipulation" or "Settlement") and summarized below, is fair, reasonable, and adequate and reached in the best interest of Advanced Medical and the Temporary Common Class and the Temporary Preferred Class (as defined below) (collectively referred to herein as the "Temporary Classes"), and should be approved by this Court and the Temporary Classes formally certified (the "Settlement Classes"); (b) whether all claims asserted in the Action on behalf of Advanced Medial, the named plaintiff and the Temporary Classes should be dismissed on the merits as to all defendants and with prejudice; (c) whether to release and discharge the Settling Defendants (as defined below) from all Settled Claims (as defined below); (d) whether to permanently bar and enjoin the named plaintiff and each and every member of the Temporary Classes from individually, directly, representatively or in any other capacity, prosecuting in the Action or in any other action or proceeding in any forum against any of the Settling Defendants any claims relating to or arising out of or in connecting with the Settled Claims; and (e) if the Settlement is approved, to pass upon the application of attorneys for the plaintiff and the Temporary Classes for an allowance of reasonable attorney's fees and expenses incurred on behalf of the plaintiff and the Temporary Classes to be paid as set forth herein. THIS NOTICE IS NOT AND SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES. NOTICE IS ONLY PROVIDED SO THAT YOU MAY DECIDE WHAT STEPS, IF ANY, TO TAKE IN RELATION TO THE PROPOSED SETTLEMENT OF THE ACTION. IF A PERSON OTHER THAN YOU IS THE RECORD HOLDER OR BENEFICIAL HOLDER OF THE PREFERRED OR COMMON STOCK OF ADVANCED MEDICAL TO WHICH THIS NOTICE REFERS, YOU ARE REQUESTED TO FORWARD THIS NOTICE TO THE RECORD HOLDER OR BENEFICIAL OWNER. BROKERAGE FIRMS, BANKS AND/OR OTHER PERSONS OR ENTITIES WHO HELD SHARES OF ADVANCED MEDICAL ON OR AFTER MARCH 20, 1996, FOR THE BENEFIT OF OTHERS ARE DIRECTED PROMPTLY TO SEND THIS NOTICE TO ALL OF THEIR RESPECTIVE BENEFICIAL OWNERS. IF ADDITIONAL COPIES OF THE NOTICE ARE NEEDED FOR FORWARDING, ANY REQUESTS FOR SUCH ADDITIONAL COPIES MAY BE MADE TO ADVANCED MEDICAL'S TRANSFER AGENT AT THE FOLLOWING ADDRESS: MR. EMANUEL GALFO CHASEMELLON SHAREHOLDER SERVICES 450 WEST 33RD STREET NEW YORK, NEW YORK 10001 IN THE ALTERNATIVE, RECORD HOLDERS MAY FORWARD THE NAMES AND ADDRESSES OF THE BENEFICIAL OWNERS TO ADVANCED MEDICAL'S TRANSFER AGENT AT THE FOREGOING ADDRESS WHO WILL CAUSE THE NOTICE TO BE SENT. -2- BACKGROUND INFORMATION AND DESCRIPTION OF THE ACTION Plaintiff filed his complaint in the Action on October 16, 1995, and a motion to amend the complaint on January 17, 1996, which motion was consented to without prejudice by defendants. Plaintiff's amended complaint (the "Complaint") alleges individual and class claims on behalf of plaintiff, all persons who owned shares of Preferred Stock of Advanced Medical at any time during the period from March 29, 1994 to the present, or their successors-in-interest, excluding the defendants herein and other current directors and officers of Advanced Medical, all persons who owned shares of Common Stock of Advanced Medical at any time from February, 1995 to the present, or their successors-in-interest, excluding the defendants herein and other current directors and officers of Advanced Medical, and stockholder derivative claims on behalf of Advanced Medical, and names as defendants Advanced Medical, members of Advanced Medical's Board of Directors, and Decisions Incorporated ("Decisions"). The Complaint seeks relief for alleged breaches of contract and breaches of fiduciary duty by the defendants in connection with (i) Advanced Medical's failure to redeem the outstanding shares of Preferred Stock; (ii) certain loans by Decisions to Advanced Medical, the first ("Loan I") being a seven (7%) percent loan in the principal amount of $6 million made on January 4, 1994, the principal amount of which is convertible into Advanced Medical Common Stock at a price of $1.00 per share, the second ("Loan II") being a nine (9%) percent loan in the principal amount of $6.5 million made on August 12, 1994, the principal amount of which is convertible into Advanced Medical Common Stock at a price of .62CENTS per share, and the third ("Loan III") being a seven (7%) percent loan in the principal amount of $25 million made on December 5, 1995, the principal amount of which is convertible into Advanced Medical Common Stock at a price of $2.625 per share; and (iii) the March 1991 exchange of 262,260 shares of Preferred Stock issued to Jeffery Picower, Decisions and JA Special Partnership for 333,000 shares of a new class of subordinate convertible preferred stock (the "Convertible Preferred Stock"), each share of which is convertible into shares of Common Stock of Advanced Medical at a specified conversion rate. More specifically, the Complaint alleges, among other things, that at all times relevant to the Action, Advanced Medical was obligated to redeem pursuant to the certificate of voting powers, designation, rights, preferences and restrictions of 10% cumulative preferred stock governing the Preferred Stock (the "Certification of Designation"), and that Loans I, II and III and the Convertible Preferred Stock grant the holders thereof conversion rights at below market prices which, if exercised in the future, would constitute an unfair waste of Advanced Medical's assets and which, plaintiff also claims, resulted in sales of stock and violations of the dividend preference under the Certificate of Designation governing the Preferred Stock. Plaintiff prays in the Complaint (a) that the Action be certified as a class action on behalf of all persons who have owned shares of Advanced Medical Preferred Stock at any time between March 29, 1994 and the present or their successors-in-interest;(b) that the Action be certified as a class action on behalf of all persons who have owned shares of Advanced Medical Common Stock at any time between February 1995 and the present or their successors-in-interest;(c) that the Court order that Advanced Medical redeem the outstanding shares of Advanced Medical Preferred Stock in an amount sufficient to pay the mandatory redemption price and all accrued dividends with interest;(d) that the Court order a reformation of Loans I, II and III to eliminate Decisions' right to convert any principal portion of the loans into Common Stock;(e) that the Court reform the Convertible Preferred to eliminate any and all right to convert the Convertible Preferred to Common Stock; and (f) that the Court award plaintiff costs and expenses of this Action, including attorney, accountant and expert fees. On or about November 30, 1995, plaintiff moved for a temporary restraining order seeking to enjoin the consummation of Loan III, which was denied by the Court on December 4, 1995. Thereafter, plaintiff moved for a preliminary injunction seeking to void Loan III or compel Advanced Medical to set aside $5 million of the proceeds of Loan III pending the trial of the Action. In connection with the preliminary injunction motion, the -3- Court granted plaintiff's motion for expedited discovery and the parties set a schedule for (and began to engage in) expedited discovery. During the course of the expedited discovery, plaintiff's counsel and defendants' counsel agreed that plaintiff's motion for a preliminary injunction would be withdrawn without prejudice provided defendants agreed to provide plaintiff's counsel with ten (10) days prior notice of the exercise of any conversion rights with respect to Loans I, II and III or the Convertible Preferred, and the parties set a schedule for discovery, briefing and the trial of the Action. On January 26, 1996, plaintiff moved for partial summary judgment seeking an order compelling Advanced Medical to redeem the outstanding shares of Preferred Stock in accordance with the Certificate of Designation, and the parties agreed upon a tentative briefing schedule on plaintiff's motion for partial summary judgment. Following extensive negotiations and discovery, the parties agreed to the principal terms of the Settlement of the Action as set forth in a Memorandum of Understanding dated March 19, 1996. This tentative agreement was announced in a Press Release issued by Advanced Medical on March 20, 1996. PLAINTIFF'S INVESTIGATION AND DISCOVERY Since initiation of the Action, counsel for plaintiff has vigorously pursued the various claims. Prior to and after the execution of the Memorandum of Understanding plaintiff engaged in significant discovery including receipt and review of documents obtained from the defendants pursuant to plaintiff's document request and depositions of the President and an independent director of Advanced Medical. Moreover, plaintiff's counsel have investigated, studied and analyzed the public documents concerning the matters alleged in the Complaint, moved for partial summary judgment and, subsequent to their motion for a preliminary injunction, arranged with defendants' counsel for expedited discovery and a pre-trial and trial schedule. Plaintiff's counsel also retained a financial expert to whom they provided the material obtained from disclosure and their investigation, and have had extensive consultation with and received reports from their expert as to the matters alleged in the Complaint. DENIAL OF LIABILITY AND WRONGDOING BY DEFENDANTS Defendants specifically deny all the material allegations of the complaint in the Action; deny that they have violated any law or regulation; deny that they have committed any wrongdoing; and deny all liability to the plaintiff and the Temporary Classes. The defendants assert that their conduct has at all times proper and lawful and believe that there are valid and meritorious defenses as a matter of fact and law to the claims asserted in the Action. The Court has made no findings that the defendants have engaged in any wrongdoing or in any wrongful conduct or have otherwise acted improperly or in violation of any law or regulation in any respect. -4- THE PROPOSED SETTLEMENT A. Within ten (10) days following Final Court Approval of the Settlement (as defined below) (the date of such approval being referred to herein as the "Approval Date"), Advanced Medical shall establish: (i) a record date (the "Record Date") for holders of Preferred Stock to receive notice of redemption which Record Date shall be not more than twenty (20) days following the Approval Date; and (ii) a redemption date (the "Redemption Date") for the redemption of the Preferred Stock, which Redemption Date shall be not less than fifteen (15) nor more than fifty (50) days following the mailing of such notice of redemption. Within ten (10) days following the Record Date, Advanced Medical shall in accordance with the procedures set forth in, and in satisfaction of the terms of, the Certificate of Designation governing the Preferred Stock, mail notice of redemption so as to cause the Preferred Stock to be redeemed on the Redemption Date at a per share price of $10.00 plus accrued dividends pro-rated as of the Redemption Date and no more (the "Base Amount"), less any amount paid from and deducted pro-rata from the payment of the Base Amount as the Court may award to plaintiff's counsel (see "ATTORNEYS' FEES AND EXPENSES" below), which payment shall be deemed to satisfy all of the obligations of Advanced Medical in respect of the Preferred Stock. B. Within ten (10) days following the Approval Date, Advanced Medical shall pay plaintiff's attorneys' fees and expenses in an amount to be awarded by the Court (see "ATTORNEYS' FEES AND EXPENSES" below). C. Within ten (10) days following the Approval Date, Advanced Medical shall amend its by-laws to provide that Advanced Medical will not subsequently enter into any additional material transactions with any control person or any entity controlled by such control person without the approval of a "special committee" of not less than two directors of Advanced Medical, deemed to be independent pursuant to or in satisfaction of the rules or policy of the exchange on which Advanced Medical's Common Stock is then currently listed (or otherwise satisfactory to such exchange), appointed to review, negotiate and make recommendations to Advanced Medical's Board of Directors concerning the proposed material transaction, which special committee, in connection with the foregoing, shall: (i) retain independent legal counsel, at Advanced Medical's expense, to advise it with respect to such transaction; and (ii) retain an independent financial advisor, at Advanced Medical's expense, to advise it with respect to such transaction, if such action is determined by the committee to be advisable upon consultation with its independent counsel. A "material transaction" shall mean any transaction which has a material affect on the business, operations, financial condition or prospects of Advanced Medical. For this purpose, any transaction involving total payments in excess of $1 million shall be deemed to be material. "Control person" means any person controlling Advanced Medical. For the purposes of this definition, "control", as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management of another person whether through the ownership of voting securities, by agreement or otherwise. The redemption set forth in (A) above (the "Redemption") shall be made if the Settlement is approved and becomes final. As used herein, "Final Court Approval" of the Settlement means that the Court has entered an Order and Final Judgment approving the Settlement and that Order and Final Judgment becomes final and is no longer subject to appeal. The parties to the Settlement intend the Order and Final Judgment herein to have maximum preclusive effect (I.E., to act as res judicata and/or collateral estoppel) and thereby act as a bar to the commencement or prosecution of any other action in any forum by any member of either of the Settlement Classes asserting any claims either directly, representatively, derivatively or in any other capacity, against any defendant herein which have been or could have been asserted in the Action, or which arise from or relate to any of the Settled Claims. In the event that the Court fails to approve the Settlement or if the Order and Final Judgment referred to above is not entered or does not become final and non-appealable or if the Stipulation is terminated as -5- provided therein or otherwise by order of the Court, then Advanced Medical will make no payments of any kind (other than payments for costs already incurred in connection with the mailing of notice and administration of the Settlement), and the parties shall be restored to the status quo existing as of the date of this Stipulation. The Redemption will be effected on the Redemption Date subject to and in accordance with the terms of the Certificate of Designation governing the Preferred Stock, the Stipulation, the Order dated June 28, 1996, and any subsequent order of the Court, provided, however, that no party shall have withdrawn from the Settlement as provided therein and the Settlement shall not otherwise have been terminated. TEMPORARY CLASS CERTIFICATION In the Order, this Court temporarily certified the Action for purposes of settlement to be a class action pursuant to Del. Ch. Ct. R. 23(a) and 23(b)(1) and (b)(2). The Temporary Common Class consists of all record holders and beneficial owners (including their legal representatives and heirs) of Advanced Medical Common Stock as of March 20, 1996 and their successors-in-interest (including all transferees of such shares on or after that date). The Temporary Preferred Class consists of all record holders and beneficial owners (including their legal representatives and heirs) of Advanced Medical Preferred Stock as of March 20, 1996 and their successors-in-interest (including all transferees of such shares on or after that date). Excluded from the Temporary Classes are the defendants herein and other current directors and officers of Advanced Medical. POSITION OF THE COURT This Court's Order certifying the Temporary Classes and directing the Settlement Hearing should not be construed or considered in any way as an expression or indication of the Court's views as to the merits of any claims or defenses asserted by any parties in this litigation. The Court has not determined the merits of any of the issues in this Action. OTHER FACTORS CONSIDERED BY PLAINTIFF OR DEFENDANTS Based upon, among other things, plaintiff's attorneys' review of documents and depositions taken; filings with the SEC and other relevant and publicly available materials; the record in this Action; discussions with their expert, named plaintiff and representatives of defendants; and an assessment of the likelihood of success and the significant risks inherent in further litigation of the issues, including those relating to the defendants' alleged breaches of contract and of fiduciary duties of loyalty and care, and the fairness of Loans I, II and III and the Convertible Preferred Stock, plaintiff's attorneys have concluded that the Settlement is highly desirable and is therefore in the best interest of Advanced Medical, the named plaintiff and members of the Settlement Classes. Plaintiff has agreed to settle this action pursuant to the terms and provisions of the Stipulation after considering: (1) the likelihood of success and the significant risks of litigation; (2) the desirability of permitting the Settlement to be consummated in accordance with the terms of the Stipulation; (3) the further protracted pretrial proceedings which would necessary to resolve the issued in the Action; (4) the likelihood that such issues would become the subject of appellate review, with the attendant delay until final adjudication of the claims and defenses asserted; and (5) the conclusion of plaintiff's attorneys that the Settlement is fair, reasonable and adequate and in the best interests of Advanced Medical and the members of the Settlement Classes. -6- Defendants acknowledge that the amendment to the by-laws of Advanced Medical is being made as a result of the aforementioned negotiations with plaintiff's counsel and the pendency and prosecution of the Action, and that the amendment is appropriate for inclusion therein. Although denying any wrongdoing whatsoever and believing that Action to be without merit, defendants consider that it is nevertheless desirable that the Action be settled in the manner and upon the terms and conditions of the Stipulation in order to avoid the burden and expense of further legal proceedings and to put to rest all claims which have been, could have been, or might in the future be asserted arising from or in any way relating to the Settled Claims (as defined below), which defendants believe is in the best interests of Advanced Medical and all of its shareholders. EFFECT OF COURT APPROVAL OF THE SETTLEMENT If the Court approves the Settlement and if the Settlement becomes effective, all claims, rights or causes of action whether under any state, foreign or federal statutory or common law that have been, could have been, or in the future might have been asserted in any forum by plaintiff herein, Advanced Medical or any members of the Settlement Classes, known or unknown, whether directly, representatively, derivatively or in any other capacity, against any defendant named in the Action, or against any of their respective parents, subsidiaries, affiliates, divisions, predecessors, heirs, successors, assigns, and present and former officers, directors, partners, principals, employees, representatives and each and all of their agents, financial advisors, legal counsels, employees, officers, directors, partners and assigns (collectively, the "Settling Defendants"), directly or indirectly relating to or arising out of or in connection with any of the claims, transactions, disclosures, facts, matters or occurrences referred to in the Complaint in the Action and all matters associated therewith or related thereto (collectively, the "Settled Claims"), shall be compromised, settled, released and dismissed with prejudice. The Settlement will not become effective unless and until it is finally approved by the Court, and the Court enters an Order and Final Judgment substantially as described herein, and all objections, if any, an all appeals involved, if any, have been determined, or the time in which to appeal has expired. If the Court approves the proposed Settlement, the parties shall jointly request the Court to enter an Order and Final Judgment providing for the following: (a) formally certifying the Temporary Common Class and the Temporary Preferred Class each as a separate class meeting all of the requisites of Del. Ch. Ct. R. 23(a), (b)(1) and (b)(2) (the Settlement Classes); (b) approving the Settlement as fair, reasonable and adequate and reached in the best interest of Advanced Medical and the Settlement Classes, and directing consummation of the Settlement in accordance with the terms and provisions of the Stipulation; (c) adjudging that the method of providing notice of the Settlement and the Settlement Hearing thereon to current shareholders of Advanced Medical and members of the Temporary Classes, as set forth herein, was the best notice practicable under the circumstances; (d) dismissing all claims asserted in the Action on behalf of Advanced Medical, the named plaintiff and the Settlement Classes on the merits as to all defendants and with prejudice; (e) releasing and discharging the Settling Defendants from all Settled Claims; -7- (f) permanently barring and enjoining the named plaintiff and each and every member of the Settlement Classes, individually, directly, representatively or in any other capacity, from prosecuting in the Action or in any other action or proceeding in any forum against any of the Settling Defendants any claims relating to or arising out of or in connection with the Settled Claims. (g) awarding to the attorneys for the plaintiff and the Settlement Classes reasonable attorneys' fees and expenses incurred on behalf of the plaintiff and the Settlement Classes to be paid as set forth below; and (h) containing such other further provisions consistent with the terms and provisions of the Stipulation as the Court may deem advisable, and to which the parties to the Settlement consent. THE RIGHT TO BE HEARD AT THE SETTLEMENT HEARING IF YOU DO NOT WISH TO OBJECT TO THE PROPOSED SETTLEMENT, YOU NEED NOT APPEAR AT THE HEARING. A hearing shall be held on August 29, 1996, at 11:00 a.m. (the "Hearing") in the Court of Chancery of the State of Delaware, 1020 King Street, Wilmington, Delaware 19801, to determine the fairness, reasonableness and adequacy of the terms and conditions of the Settlement, and whether the Settlement should be approved by the Court and judgment entered thereon. The Court reserves the right to adjourn the Hearing or any adjournment thereof, including consideration of the application for attorneys' fees and expenses, without further notice other than an oral announcement at the Hearing or any adjournment thereof. The Court also reserves the right to approve the Settlement at or after the Hearing with such modification as may be consented to by the parties to the Stipulation and without further notice to the members of the classes. Any shareholder of Advanced Medical or member of either of the Settlement Classes who objects to the (i) Settlement; (ii) dismissal; (iii) release; (iv) judgments to be entered with respect thereto; (v) plaintiff's counsels' application for fees and reimbursement of costs and expenses in the Action; or (vi) who otherwise wishes to be heard, may appear in person or by his, her or its attorney at the Hearing and present evidence or argument that may be proper and relevant; provided, however, that no person other than counsel for the named plaintiff and defendants in the Action shall be heard and no papers, briefs, pleadings or other documents submitted by any such person shall be received and considered by the Court of Chancery (unless the Court of Chancery in its discretion shall thereafter otherwise direct, upon application of such person and for good cause shown), unless not later than ten (10) calendar days prior to the Hearing a written notice of intention to appear including a statement of such person's objections to any matters before the Court and the grounds therefor or the reasons for such person's desiring to appear and be heard, as well as all documents or writings such person desires the Court to consider, shall be filed by such person with the Register in Chancery and, on or before the date of such filing, shall be served upon the following counsel of record: Thomas R. Hunt, Jr., Esq. MORRIS, NICHOLS, ARSHT & TUNNEL 1201 N. Market Street -8- Wilmington, DE 19899 Samuel L. Barkin, Esq. GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN 114 West 47th Street New York, NY 10036 Jay W. Eisenhofer, Esq. BLANK ROME COMISKY & McCAULEY 1220 Market Street Wilmington, DE 19801 -and- Ann D. White, Esq. MAGER, LIEBENBERG and WHITE Two Penn Center Philadelphia, PA 19102 Unless the Court otherwise directs, no person shall be entitled to object to the approval of any of the Settlement, any judgment entered thereon, any award of attorneys' fees and reimbursement of expenses, or otherwise to be heard, except by serving and filing a written objection and supporting papers and documents as prescribed above. Any person who fails to object in the manner and within the time prescribed above shall be deemed to have waived the right to object (including the right to appeal) and forever shall be barred, in this proceeding or in any other proceeding, from raising such objection. ATTORNEYS' FEES AND EXPENSES Plaintiff and the Settlement Classes are represented by Blank Rome Comisky & McCauley, 1220 Market Street, Wilmington, DE 19801, Mager Liebenberg and White, Two Penn Center, Philadelphia, PA 19102 and Kalikman & Masnik, 2 Kings Highway West, Haddonfield, NJ 08033. Plaintiff's counsel intend to make an application to the Court for an award of counsel fees, expenses, allowances, and disbursements to be paid out by Advanced Medical in the event that the proposed Settlement is approved by the Court. Plaintiff's counsel in the Action will apply to the Court, at or subsequent to the Settlement Hearing, for an award of attorney's fees and expenses in an amount not to exceed $500,000.00 to be paid by Advanced Medical, and an additional award of attorney's fees and expenses of up to $1.50 per share of Preferred Stock redeemed pursuant to and in accordance with the terms of the Settlement, which shall be paid from, and deducted pro-rata (on a per share basis) from, the payment of the Base Amount payable in respect of each share of Preferred Stock to be redeemed pursuant to and in accordance with the terms of the Settlement. It is contemplated that the Settlement will be administered by or at the direction of defendants, and all expenses incurred in connection with the administration of the Settlement shall be borne by Advanced Medical. -9- SCOPE OF THIS NOTICE The references in this Notice to the pleadings in the Action, the Stipulation and other papers and proceedings are only summaries and do not purport to be comprehensive. Further details concerning the Action, the claims have been asserted by the parties and the terms and conditions of the Settlement, including a complete copy of the Stipulation, are contained in the Court's files with respect to the Action under Civil Action No. 14618. You may examine the file on any weekday during regular business hours at the office of the Register in Chancery, Daniel L. Hermman Courthouse, 1000 King Street, Wilmington, Delaware 19801. Should you have any questions with respect to this Notice, the proposed Settlement or the Action generally, you should raise them with your own attorney or counsel for the classes. Class counsel to whom questions concerning this Notice, the proposed Settlement or the status of the Action may be directed is Blank Rome Comisky & McCauley, 1220 Market Street, Wilmington, DE 19801 (302) 425-6400 Attn: Jay W. Eisenhofer, Esq. or Mager Liebenberg and White, Two Penn Center, Philadelphia, PA 19102 (215) 569-6921 Attn: Ann D. White, Esq. DO NOT CONTACT THE COURT REGARDING SUCH QUESTIONS. Dover, Delaware June 28, 1996 By Order of the Court MYRON T. STEELE VICE CHANCELLOR -10- EX-10.28 3 EXHIBIT 10.28 EXHIBIT 10.28 ASSET TRANSFER AGREEMENT DATED JUNE 26, 1996 BY AND AMONG IMED LTD. IMED CORPORATION, PHARMACIA AB AND PHARMACIA & UPJOHN LIMITED ASSET TRANSFER AGREEMENT THIS AGREEMENT ("AGREEMENT") dated June 26, 1996 is made by and among IMED Limited (registered number 1570905) whose registered office is at 35 St. Thomas Street, London SE1 9SN, United Kingdom ("BUYER"); Pharmacia & Upjohn Limited (registered number 506792) whose registered office is at Fleming Way, Crawley, West Sussex RH10 2LZ, United Kingdom ("SELLER"); IMED Corporation, a Delaware (USA) corporation ("IMED"); and Pharmacia AB (publ.), a Swedish limited liability company ("PHARMACIA"). BACKGROUND Seller is a wholly-owned subsidiary of Pharmacia, and Buyer is a wholly-owned subsidiary of IMED. Pharmacia, IMED and Advanced Medical, Inc. ("AM") entered into an Amended and Restated Distribution Agreement, dated as of August 12, 1994 (the "DISTRIBUTION AGREEMENT") under which Pharmacia distributes IMED's infusion pumps, administration sets and related products in Europe. The Distribution Agreement was originally entered into as of October 28, 1991. In connection therewith, Pharmacia and certain of its subsidiaries also acquired as of October 28, 1991, IMED's European business and assets relating to the distribution of IMED's infusion pumps, administration sets and related products in Europe. Pharmacia, IMED and AM have now agreed to assign Pharmacia's interest in the Distribution Agreement pursuant to the terms of a certain assignment agreement, dated the date hereof (the "ASSIGNMENT AGREEMENT"). In connection with the assignment of the Distribution Agreement, Pharmacia has, among other things, agreed to cause Seller to sell and transfer to Buyer certain of Seller's assets related to its business (the "BUSINESS") of distributing IMED's infusion pumps, administration sets and related products in Europe. NOW, THEREFORE, the parties hereto agree as follows: 1. INTERPRETATION. Terms defined in the Distribution Agreement shall, save the context otherwise requires, bear the same meanings herein. "AFFILIATE" shall mean any entity controlled, controlling or under common control with the designated party, where "control" means the direct or indirect ownership of more than 50% of the equity or voting interests. 2. TRANSFER OF ASSETS. 2.1 SALE OF ASSETS. Subject to the terms and provisions of this Agreement, Seller shall or shall procure to sell to Buyer, and Buyer shall purchase on the Completion Date (as defined in Clause 4.1 below), the following properties and assets as they shall exist on the Completion Date (the "ASSETS"): (a) the benefit subject to the burden (so far as same is capable of assignment) of all contracts for the supply of Disposables to which Seller or any of its Affiliates is a party, including, without limitation, all contracts for the supply of Disposables in connection with the lease, sale of other disposition of infusion pumps manufactured by IMED, whether or not separate or any consideration is stated to be paid for such pumps, including, without limitation, the unperformed portion of the contracts referred to on SCHEDULE 2.1(A) ("IOC'S"), and all infusion pumps owned by Seller which are in the possession of the hospitals or other parties to the IOC's; (b) the benefit subject to the burden (so far as same is capable of assignment) of:(i) all other contracts (and outstanding proposals and tenders therefor) for the supply of and/or service of Products and Disposables by Pharmacia or its Affiliates, including those set forth in SCHEDULE 2.1(b); and (ii) the distributor and other agreements and contracts of Seller referred to in SCHEDULE 2.1(b) (collectively with the IOC's and the contracts referred to in clause (i) above, the "ASSIGNED CONTRACTS"); (c) all Products (including spare parts therefor) and Disposables owned or possessed by Seller on the Completion Date and all such Products and Disposables owned or in the possession of Pharmacia or any of its Affiliates on the Completion Date; (d) all regulatory licenses, approvals and registrations for the Products (so far as same is capable of assignment) held in the name of Pharmacia or any its Affiliates, including, without limitation, those listed on SCHEDULE 2.1(d); (e) all promotional materials relating solely to the Products; (f) copies of and the nonexclusive right to use all customer lists and other customer account information relating to the Products; 2 (g) the computer equipment, vehicles, demonstration units, testing and service equipment and other fixed assets of Seller and its French and German Affiliate described in SCHEDULE 2.1(G) (the "FIXED ASSETS"); (h) copies of all books and records possessed by Seller (or any of its Affiliates) relating to the Assets and the Assumed Liabilities, including, without limitation, training and service manuals, service history records, claims from customers, personnel records of the Transferred Employees, and correspondence and other documents with governmental authorities concerning regulatory approvals and registrations for the Products; PROVIDED, that the foregoing shall not include financial and tax information (other than sales invoices and customer payment records), and other information not relating in each case solely to the Products, Disposables, Assets or Assumed Liabilities. To the extent such books and records contain information relating to other products or businesses, Seller and such Affiliates shall cooperate with Buyer to provide, in the form of extracts or in any other reasonable manner, the relevant books and records relating to the Products, Disposables, Assets and Assumed Liabilities. 2.2 RETAINED ASSETS. All properties and assets of Seller or Pharmacia or any of its Affiliates, other than the Assets (the "RETAINED ASSETS") are expressly excluded from the purchase and sale contemplated hereby, including: (a) all cash of Seller on hand, on deposit or in transit; (b) all bank accounts, securities and investments of Seller and other cash equivalents; (c) all amounts receivable arising out of the sale of Products shipped by Seller (or Pharmacia or any of its Affiliates) prior to the Completion Date, other than in respect of IOC's, receivables arising on or after the Completion Date; (d) all patents, copyrights, license rights and any and all intellectual property of Seller; and (e) all other property, assets, rights and interests of Seller, of any type and wherever located, other than as specifically set forth in Clause 2.1 above. 2.3 ASSUMPTION OF LIABILITIES. Upon Completion (as defined in Clause 4.1 below), Buyer shall assume, pay and discharge when due only the following liabilities and obligations of Seller or one or more of its Affiliates, except to the extent any such liability or obligations 3 arises by reason of or constitutes a breach of one or more of Seller's representations or warranties in Section 6 below (the "ASSUMED LIABILITIES"): (a) all liabilities and obligations accruing after the Completion Date under the Assigned Contracts; (b) all obligations accruing after the Completion Date with respect to the supply of replacement parts and service of Products shipped prior to such date, (including without limitation, any obligations to service Products and provide replacement parts during or following expiration of applicable warranty periods, whether or not attributable to a nonconformity with any warranty to Pharmacia, its Affiliates or their customers) as required by law or under any Assigned Contract, including all extended warranty contracts included within the Assigned Contracts referred to on SCHEDULE 2.1(b); and (c) subject to Clause 3.4 below, all liabilities and obligations to all of the Transferred Employees (as defined in Clause 8.2 below). 2.4 RETAINED LIABILITIES. Save for the Assumed Liabilities and as otherwise provided in the Assignment Agreement, Buyer does not hereby assume any other liabilities or obligations of Seller or any of its Affiliates (all such liabilities and obligations being sometimes collectively referred to as the "RETAINED LIABILITIES"), all of which Seller shall continue to be solely responsible for, including, without limitation, all liabilities and obligations relating to employees other than Transferred Employees. 2.5 SALE OF ASSETS AND LIABILITIES OF SELLER'S AFFILIATES. Seller shall procure that each of its Affiliates which possess any of the Assets execute such transfer instruments and other agreements which are required to transfer such Assets to Buyer or its designee. At the Completion, the parties shall execute such transfer instruments which may be required in accordance with local law. 3. PURCHASE PRICE. 3.1 PURCHASE PRICE. (a) The purchase price for the Assets (the "PURCHASE PRICE") shall be US$1,037,000 plus the Inventory Value, plus the Fixed Assets Value (as such terms are defined in Clause 3.2 below). Buyer shall pay to Seller, by way of provisional payment, the sum of US$2,583,000 (the "UNADJUSTED PURCHASE PRICE") at Completion. 4 (b) The parties have agreed that the Unadjusted Purchase Price shall be fairly allocated to the Assets in the manner set forth in SCHEDULE 3.1. Such allocation to inventory shall be adjusted to the extent required as a result of any adjustments to the Unadjusted Purchase Price which are made in accordance with Clause 3.3 below. 5 3.2 INVENTORY AND FIXED ASSETS VALUE. The Inventory Value and the Fixed Assets Value shall be determined as follows: (a) The "INVENTORY VALUE" shall mean the value of all Products and Disposables described in Clause 2.1(c) (exclusive of the infusion pumps subject to the IOC's). The Inventory Value shall be determined after a physical inventory in the United Kingdom and France (and applicable inventory control records in other countries) and valuing all Products at the Product Price then in effect, plus all duty and freight charges incurred to import and transport such Products to the warehouse of Seller or its Affiliate. Products and Disposables in transit to Seller from IMED shall be excluded. The parties have tentatively established an Inventory Value of US$1,500,000, which amount shall be used for the purpose of determining the Unadjusted Purchase Price. Such amount shall be subject to adjustment as provided in Clause 3.3 below. (b) The "FIXED ASSETS VALUE" shall mean the book value of the Fixed Assets as reflected in Seller's accounting records, which the parties have established at $46,000. 3.3 PURCHASE PRICE ADJUSTMENT. The Unadjusted Purchase Price shall be subject to adjustment as follows: (a) Within thirty (30) days after the Completion Date, Seller shall cause to be prepared a statement (the "PRELIMINARY STATEMENT") specifying the Inventory Value as at the Completion Date. When completed, the Preliminary Statement shall promptly be delivered to Buyer for review, together with all material work papers, calculations and other records or information used to prepare the Preliminary Statement. (b) If Buyer does not dispute Seller's calculation of the Inventory Value, the Preliminary Statement shall be conclusive and binding on the parties. If Buyer disagrees with Seller's calculation of the Inventory Value as of the Completion Date, it shall so notify Seller in writing within thirty (30) days following delivery of the Preliminary Statement by Seller to Buyer and the parties will use all reasonable efforts to resolve any such disputes. If any such dispute can not be resolved within thirty (30) days after submission of the written objections of Buyer to Seller, the parties agree that they will submit the matter to Arthur Andersen (the "ACCOUNTING FIRM"). The resolution of the dispute by the Accounting Firm will be conclusive and binding upon the parties hereto, notwithstanding any later allegation or determination of error, mistake or miscalculation, whether willful or negligent, by any person, in connection with the determination made by the Accounting Firm. The fees and expenses of the Accounting Firm will be paid one-half by Buyer and one-half by Seller. The 6 Preliminary Statement as finally determined pursuant to this subsection (b) is hereinafter referred to as the "FINAL STATEMENT". (c) For purposes of this Agreement, the "ADJUSTED PURCHASE PRICE" shall be equal to the sum of (i) US$1,083,000, plus (ii) the Inventory Value set forth on the Final Statement, less (iii) the aggregate amount of prepayments to Seller for extended warranty contracts included among the Assigned Contracts allocable on a pro rata basis (based on the number of days) to the remaining term of such warranties as of the Completion Date, plus or minus (iv) the aggregate amount of any adjustment to the Inventory Value resulting from the adjustments required under Section 4.1 and Exhibit 1.16 of the Distribution Agreement. All amounts in the Final Statement which are stated in Pounds Sterling or other currency shall be converted into U.S. Dollars at the exchange rate set forth in the Eastern Edition of THE WALL STREET JOURNAL on the Completion Date. (d) If the Adjusted Purchase Price is greater than the Unadjusted Purchase Price, Buyer shall pay to Seller the amount by which the Adjusted Purchase Price exceeds the Unadjusted Purchase Price. (e) If the Adjusted Purchase Price is less than the Unadjusted Purchase Price, Seller shall pay to Buyer an amount equal to the difference between the Unadjusted Purchase Price and the Adjusted Purchase Price. (f) For the purpose of effecting the payments due under subsections (d) or (e) above, Buyer shall have the right to offset the aggregate amount of all invoices then unpaid which were issued under the Distribution Agreement for Products delivered to Seller prior to the Completion Date. (g) Any payment required to be made under subsections (d) or (e) above, as the case may be, shall be made within two (2) business days of the determination of the Adjusted Purchase Price, by wire transfer to an account designated by the person entitled to receive such payment. Any payment to be made pursuant to subsections (d) or (e) above, as the case may be, which is not made when due shall bear interest at the rate of fifteen percent (15%) per annum from the due date thereof until the date paid. 3.4 APPORTIONMENT OF COSTS. All wages, salaries and other periodic outgoings in respect of the Transferred Employees and other periodic outgoings in respect of the Assets and the Assumed Liabilities for any period of time before the Completion Date shall be borne by Seller and for any period of time after that time shall be borne by Buyer. Such outgoings in 7 respect of any period starting on or before the Completion Date and ending after it shall be apportioned accordingly. 3.5 TRANSFER TAXES. Buyer shall pay all stamp duty, registration fees and other sales, transfer, stamp, use, excise, value added or other similar taxes, and all notarial, recording, registration and filing fees, arising out of, or imposed by reason of the sale, transfer, assignment and delivery of the Assets required by law to be paid by the Buyer in connection with the sale or transfer of the Assets and the Assumed Liabilities. Seller shall pay all such taxes and fees required by law to be paid by it. 4. COMPLETION. 4.1 COMPLETION. Subject to the provisions of Section 5, completion of the sale and purchase of the Assets (hereinafter called "COMPLETION") shall take place at the offices of Simmons & Simmons on August 30, 1996 (the "Completion Date") or such other mutually acceptable date within 10 days after the satisfaction of the each of the conditions referred to in Section 5 below. 4.2 CONVEYANCE INSTRUMENTS. Upon Completion: (a) Seller shall execute such documents and take all other action as may be reasonably requested by Buyer to vest title to the Assets in Buyer; (b) All Products (and spare parts therefor) and Disposables held by Seller shall be delivered Ex Works at Seller's warehouse in Milton Keynes, England (INCOTERMS 1990); (c) The Unadjusted Purchase Price shall be paid by Buyer by wire transfer of immediately available funds to the bank account designated in writing by Seller. (d) The parties shall exchange the other documents and take the other actions referred to in SCHEDULE 4.2; (e) Each of Seller and Buyer (and any applicable Affiliate) shall execute such transfer instruments and other agreements which may be required under local law to transfer to Buyer all Assets located outside of the United Kingdom. 4.3 FURTHER ASSURANCES. Seller and Buyer, as the case may be, at the request of the other, at or after the Completion Date, will execute and deliver, or cause to be executed and 8 delivered, to the other such documents and instruments, in addition to those specifically required by the provisions of this Agreement, in form and substance reasonably satisfactory to the other, as may reasonably be necessary or desirable to carry out or implement any provision of this Agreement. 4.4 CONSENT AND APPROVAL. (a) Each party hereto hereby agrees to use reasonable efforts to (i) obtain any and all third party consents and approvals required in connection with the performance by it of the transactions contemplated by this Agreement; and (ii) do all such other acts as are necessary or advisable in order to cause the consummation of the transactions contemplated hereby and thereby. (b) The foregoing notwithstanding, where any consent or agreement of a third party is required for the transfer of the benefit of any Assigned Contract or any other Assets to Buyer or the assumption by Buyer of any Assumed Liabilities and the release of Pharmacia or its Affiliates from such liabilities, and despite the parties' reasonable endeavors, such consent or agreement is not forthcoming, the parties shall conduct themselves on the basis that such assets will be held by Seller (free and clear of any liens and other encumbrances, other than claims of the other contract party) on behalf of Buyer and liabilities performed by Buyer on behalf of any of Pharmacia or its Affiliates. The parties agree to act in a manner consistent with reasonable business practices; such measures shall include (where permitted by legal and regulatory requirements) abstaining from seeking consents to assign IOC's and other contracts until such time, if any, that the third party to the contract objects, at which time each party shall use reasonable efforts to obtain such consent. 4.5 TRANSITION PERIOD. (a) From the date hereof until the Completion Date (the "TRANSITION PERIOD") Seller and Buyer shall cooperate to formulate and implement plans to (i) relocate the Assets to the premises of Buyer and (ii) relocate those of the Transferred Employees who are to be relocated from the premises of Seller to the offices of Buyer. All moving and relocation costs and expenses as contemplated by (i) and (ii) above shall be paid by Buyer. (b) In relation to the distributor agreements referred to in SCHEDULE 2.1(b) (the "DISTRIBUTOR AGREEMENTS"), IMED hereby undertakes to Seller and Pharmacia to use its best endeavors to enter into, or to procure that Buyer or one of its affiliates enters into, new distributor agreements with the relevant distributors and to provide (at the expense of Buyer) such release of Seller from its liabilities and obligations under the Distributor Agreements as Seller may reasonably require, provided that, in the event that such release is not obtained by 9 Buyer within 90 days after the Completion Date, Seller shall be entitled to terminate such Distributor Agreements by giving the relevant distributors notice of termination (the notice to be such period as Seller shall on a case by case basis deem reasonable). Seller assumes all risks and liabilities arising out of any such termination by it. 5. CONDITIONS TO COMPLETION. 5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of Buyer under this Agreement shall be subject to the following conditions being completed to Buyer's satisfaction on or prior to the Completion Date: (a) CERTIFICATES. The representations and warranties of Seller contained in this Agreement and in any Schedule, certificate or other document delivered in connection with the transactions contemplated by this Agreement shall be true and correct in all material respects on and as of the Completion Date, except as affected by the consummation of the transactions contemplated by this Agreement, and Seller shall have furnished a certificate to Buyer so stating and affirming that all obligations and covenants required to be performed by Seller prior to the Completion Date have been (and the same shall in fact have been) performed in all material respects. (b) ABSENCE OF LITIGATION. No litigation, governmental investigation or other proceeding arising out of or relating to Seller or any of its Affiliates or this Agreement and the transactions contemplated hereunder shall have been instituted or threatened in a manner which, in the reasonable judgment of Buyer, renders it inadvisable to proceed with the consummation of the transactions contemplated by this Agreement. (c) OTHER CONSENTS AND APPROVALS. Any consents and approvals required in connection with the consummation of the transactions contemplated by this Agreement shall have been obtained, including those described on SCHEDULES 6.5 AND 7.3. (d) ASSIGNMENT AGREEMENT. IMED, Pharmacia and AM shall have executed and delivered the Assignment Agreement. (e) COMPLETION DOCUMENTS. Seller and IMED shall have executed and delivered such other certificates and other instruments and agreements and documents as the respective counsel for the parties may reasonably request for the purpose of carrying out the transactions contemplated by this Agreement, including without limitation, any and all instruments and documents reasonably required or requested by Buyer from any third party in connection with 10 this transaction and determined by Buyer in good faith to be necessary for the consummation of this transaction. 5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of Seller under this Agreement shall be subject to the satisfaction, at or prior to the Completion, of each of the following conditions: (a) CERTIFICATES. The representations and warranties of Buyer contained in this Agreement and in any Schedule, certificate or other document delivered in connection with the transactions contemplated by this Agreement shall be true and correct in all material respects on and as of the Completion Date except as affected by the consummation of the transactions contemplated by this Agreement and Buyer shall have furnished a certificate to Seller so stating and affirming that all obligations and covenants required to be performed by Buyer prior to the Completion Date have been (and the same shall in fact have been) performed in all material respects. (b) ABSENCE OF LITIGATION. No litigation, investigation or other governmental proceeding arising out of or relating to Buyer or any of its Affiliates or this Agreement and the transactions contemplated by this Agreement shall have been instituted or threatened in a manner which, in the reasonable judgment of Seller, renders it inadvisable to proceed with the consummation of the transactions contemplated hereunder. (c) OTHER CONSENTS AND APPROVALS. Any consents and approvals on SCHEDULE 6.5 required to be obtained by Seller in connection with the transactions contemplated by this Agreement shall have been obtained. (d) ASSIGNMENT AGREEMENT. IMED, Pharmacia and AM shall have executed and delivered the Assignment Agreement. (e) COMPLETION DOCUMENTS. Buyer and Pharmacia shall have executed and delivered such other certificates and other instruments and agreements and documents as the respective counsel for the parties may reasonably request for the purpose of carrying out the transactions contemplated by this Agreement, including without limitation, any and all instruments and documents reasonably required or requested by Seller from any third party in connection with this transaction and determined by Seller in good faith to be necessary for the consummation of this transaction. 6. REPRESENTATIONS AND WARRANTIES OF SELLER. 11 Seller represents and warrants to Buyer that: 6.1 ORGANIZATION AND EXISTENCE. Seller is a limited liability company organized and validly existing under the laws of England and has all requisite power and authority to own, lease and operate the Assets and its other properties and to carry on its business as now being conducted. The Documents (as defined in Clause 6.3 below) executed and delivered by Seller constitute, or when executed and delivered will constitute, the legal, valid and binding agreements of Seller. The execution, delivery and performance by Seller of the Documents to be executed and delivered by Seller are within its powers. 6.2 NO CONFLICT. Neither the execution and delivery of this Agreement or any of the other Documents, the performance by Seller of its obligations hereunder and thereunder, nor the consummation of the transactions contemplated hereby or thereby will:(a) violate any provisions in Seller's Memorandum or Articles of Association;(b) subject to Clause 4.4(b) above, require notice to or the consent of any party to any agreement to which Seller is a party, or by which it or any of its properties is bound or subject;(c) constitute a default under, any loan or credit agreement, indenture, mortgage, deed of trust or other contract or agreement to which Seller (or any of its Affiliates) is a party or by which it or its property is bound, or result in the creation, imposition, or enforcement of any encumbrance on any of the Assets; or (d) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which Seller (or any of its Affiliates) or any of its properties is bound or subject. 6.3 DOCUMENTS. As used in this Agreement, the term "DOCUMENTS" means this Agreement and all other instruments, agreements and documents executed and delivered or to be executed and delivered by any one or more of the parties hereto in connection with the transactions contemplated hereby. 6.4 TITLE AND CONDITION OF THE ASSETS. Seller has good and marketable title to all of the Assets and such title is in all material respects free and clear of any mortgages, deeds of trust, pledges, vendors' or other liens, claims, leases, subleases, assignments, security interests or encumbrances of any kind other than materialmens', workmens' and other similar statutory liens arising in the ordinary course of business, except that Seller's title to the infusion pumps placed under IOC's shall be subject to the IOC's and all rights of third parties arising therefrom. The Products were maintained and stored under secure, sanitary storage conditions, and are substantially in the same condition as they were when delivered by IMED to Seller's warehouse. 6.5 CONSENTS. SCHEDULE 6.5 sets forth a list of all of the approvals, consents, filings, registrations and releases of third parties (including, without limitation, any 12 government or governmental or regulatory agency) which are required for the execution or delivery by Seller of this Agreement or the Documents or the consummation by Seller of the transactions contemplated herein and therein, including, without limitation, the sale, transfer or assignment of the Assets to Buyer (including, without limitation, under any contract or agreement to which Seller is a party or to which the Assets are subject). 6.6 FINDERS. None of Seller nor any of its Affiliates have dealt with any broker, finder, investment bank or financial adviser as to whom Buyer may have an obligation to pay any broker's or finder's fee in connection with the origin, negotiation, execution or performance of this Agreement. 6.7 EMPLOYMENT. (a) The Transferred Employees (as defined in Clause 8.2 below) were all employed by Seller immediately before the execution of this Agreement, there are no other persons to whom the Regulations (as defined in Clause 8.2 below) might apply and no Transferred Employee has given or been given written notice of termination of employment. (b) Details of the written terms of employment (including the emoluments and the age and date of commencement of continuous employment) of every Transferred Employee are set out in, or attached to, the separate letter, dated June 20, 1996, previously provided to IMED by Seller's counsel (the "Compensation Letter"). (c) In respect to the Transferred Employees, there is no dispute between Seller and any trade unions or other organization formed for a purpose similar to a trade union, existing, pending or threatened, and there is no collective bargaining agreement or other arrangement to which Seller is a party. (d) Seller does not have in existence nor is it proposing to introduce any share incentive scheme, share option scheme or profit sharing bonus or other incentive scheme for all or any of the Transferred Employees. (e) All contracts of service with the Transferred Employees may be terminated by not more than three months' notice without giving rise to any claim for damages or compensation (other than a statutory redundancy payment or statutory compensation for unfair dismissal). (f) No moneys or benefits other than in respect of contractual emoluments are payable to any of the Transferred Employees and Seller is not under any present, future or contingent liability to pay compensation for loss of office or employment to any ex-officer or 13 ex-employee and no payments are due under the Employment Protection (Consolidation) Act 1978. (g) No Transferred Employee is absent from work for any reason other than normal paid holiday or short-term sickness absence (i.e., absence of less than three days). 6.8 PENSIONS. (a) DEFINITIONS. For the purpose of this Clause 6.8 and Clause 8.8 below, the terms set forth below shall be defined as follows: (i) "PENSION SCHEME" means the Kabi Pharmacia Limited Retirement Benefits Scheme (or the trustees from time to time of that scheme as the context requires); summary terms of which are set out in the explanatory booklet entitled, "Retirement Benefits Scheme" (dated August 1994) which was previously supplied to Buyer; (ii) "PENSIONABLE EMPLOYEES" means a person who is both a Transferred Employee and is, or apart from being absent from work would be, in pensionable service under the Pension Scheme; (iii) "BUYER'S SCHEME" means the retirement benefits scheme nominated by or at the instance of the Buyer pursuant to Clause 8.8(a) or as the context requires the trustees from time to time of such scheme; (iv) "STATUTORY TRANSFER CONDITIONS" means the provisions contained in Chapter IV Part IV of the Pension Schemes Act 1993. (v) "Seller's Actuary" means Michael Sharpe of Scottish Widows or such other actuary appointed by the Seller for the purpose of this Agreement. (vi) "Buyer's Actuary" means Nick Buckland of Bacon & Woodrow or such other actuary appointed by the Buyer for the purpose of this Agreement. (2) Save for the Pension Scheme and pension provided by the state, the Seller: 14 (i) is not under any obligation to pay or provide pension or other retirement, sickness disability or death benefits to any of the Transferred Employee or to any person in respect of such Transferred Employee; and (ii) is not a party nor does or has it contributed to any scheme or arrangement for the provision of pension or other retirement, sickness disability or death benefits and under which any Transferred Employee or person in respect of him is actually prospectively or contingently entitled to benefit. (c) No Transferred Employee enjoys any special terms of membership of the Pension Scheme and the Seller is not paying any benefit of a kind described in (b)(i) or (ii) above to any Transferred Employee or to any person in respect of such Transferred Employee. (d) Neither the Seller nor the Pension Scheme is engaged in any litigation or arbitration proceedings in relation to any of the Transferred Employees and, so far as the Seller is aware, no litigation or arbitration proceedings is pending or threatened by or against the Pension Scheme in relation to the Transferred Employees. (e) Seller will not before Completion enter into any obligation or agreement (whether legally binding or not) to provide or procure the provision of benefits in the nature of those described in Clauses 6.8(b)(i) or (ii) above in respect of any Transferred Employee save in accordance with the provisions of the Pension Scheme. (f) Seller is not making and has not regularly made and will not before Completion make any ex gratia payments to any Transferred Employees or to any person in respect of any of them. (g) No power under the Pension Scheme to augment benefits accrued before Completion has been or will be exercised before Completion in favor of any of the Transferred Employees (or any person in respect of any of them). (h) Insofar as the Transferred Employees are concerned, the Pension Scheme will be maintained in full force until Completion and, except with the consent of Buyer (such consent not to be reasonably withheld or delayed), its provisions will not be amended before Completion nor will any power or discretion be exercised before Completion which may affect materially the interests under the Pension Scheme of any of the Transferred Employees (or any person in respect of any of them other than to comply with any requirement of the Inland Revenue or statute or other legal requirements). (i) The Pension Scheme is an exempt approved scheme. 15 (j) The Pension Scheme is contracted-out and the Seller holds or is named in and will until Completion continue to hold or be named in an appropriate contracting-out certificate (within the meaning of the Pension Schemes Act 1993) in respect of those of the Transferred Employees who are members of the Pension Scheme. (k) Except as provided in Clause 8.8 below, no undertaking or assurance has been given by Seller to any Transferred Employee as to the introduction or increase or improvements of any pension rights or entitlements which Buyer would be required to implement in accordance with good industrial relations practice whether or not there is any legal obligation to do so. (l) Except for those identified on Schedule 8.2 as now employed by its French affiliate, Seller does not participate in any retirement benefits scheme established under or regulated by the laws of any jurisdiction outside of the United Kingdom in respect of any Transferred Employee. 6.9 ASSIGNED CONTRACTS. Except as expressly stated in either SCHEDULE 2.1(a) or 2.1(b): (a) None of the Assigned Contracts is of a long term (namely, in excess of 5 years) nature or involves: (i) any contract entered into otherwise than in the ordinary course of business; (ii) any agreement or arrangement otherwise than on arm's length terms; (iii) any sale or purchase option or similar contract or arrangement affecting any of the Assets; (iv) any distributorship or agency agreement. (b) Seller has no knowledge of the invalidity of or grounds for recision, avoidance or repudiation of any of the Assigned Contracts and has not received notice of any intention to terminate any of such Assigned Contracts. (c) Save for any condition or warranty implied by law or contained in its standard terms of business or otherwise given in the ordinary course of business, so far as 16 Seller is aware, there is no guarantee, warranty or representation in respect of the Products or services supplied or contracted to be supplied by the Business nor save as aforesaid any obligation relating to the business which could give rise to any liability after any such goods or services have been supplied by it. (d) Seller has complied in all material respects with its obligations contained in the IOC's. (e) All Assigned Contracts are in full force and effect; neither Seller nor, to Seller's knowledge, any other party thereto is in default in any material respect under any Assigned Contract and there are not any outstanding material disputes thereunder; and so far as Seller is aware, there has been no threatened cancellation of any Assigned Contract. Except as provided in Clause 3.3(c)(iii), none of Seller nor any of its Affiliates have received any advance payments under any of the Assigned Contracts or with respect to any Assumed Liability for the performance of obligations after the Completion Date. 6.10 LITIGATION AND GOVERNMENT PROCEEDINGS. To the extent relating to the Products or the Business, none of Seller nor any of its Affiliates is a party (whether directly or as a cross-defendant or liable under any written indemnity agreement) nor, to the best of its knowledge, threatened with: any litigation, suit, action or legal, administrative, arbitration or other proceeding or governmental investigation. Seller is not in default with respect to any judgment, order or decree of any court of any other governmental body concerning the Products in any way. 6.11 REGULATORY APPROVALS. Schedule 2.1(d) contains a complete list of all regulatory approvals, licenses and registrations for the Products obtained by Seller or any of its Affiliates for the Products and which are now held in any of their names, other than registrations obtained by notification only. 7. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Seller that: 7.1 ORGANIZATION AND EXISTENCE. Buyer is a limited liability company organized and validly existing under the laws of England and has all requisite power to enter into and perform the Documents. The Documents executed and delivered by Buyer constitute, or when executed and delivered will constitute, the legal, valid and binding agreements of Buyer. The 17 execution, delivery and performance by Buyer of the Documents to be executed and delivered by Buyer are within its powers. 7.2 NO CONFLICT. Neither the execution and delivery of this Agreement or any of the other Documents, the performance by Buyer of its obligations hereunder and thereunder, nor the consummation of the transactions contemplated hereby or thereby will:(a) violate any provisions in Buyer's Memorandum or Articles of Association;(b) require notice to or the consent of any party to any agreement to which Buyer is a party, or by which it or any of its properties is bound or subject;(c) constitute a default under, any loan or credit agreement, indenture, mortgage, deed of trust or other contract or agreement to which Buyer is a party or by which it or its property is bound; or (d) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which Buyer or any of its properties is bound or subject. 7.3 CONSENTS. SCHEDULE 7.3 sets forth a list of all of the approvals, consents, filings, registrations and releases of third parties (including, without limitation, any government or governmental or regulatory agency) which are required for the execution or delivery by Buyer of this Agreement or the Documents or the consummation by Buyer of the transactions contemplated herein and therein. 7.4 FINDERS. None of Buyer nor any of its Affiliates have dealt with any broker, finder, investment bank or financial adviser as to whom Seller may have an obligation to pay any broker's or finder's fee in connection with the origin, negotiation, execution or performance of this Agreement. 8. ADDITIONAL COVENANTS. 8.1 CONDUCT OF BUSINESS PRIOR TO COMPLETION. Except as specifically provided in this Agreement, from the date hereof to Completion and to the extent relating to the Products or the Business, Seller shall (a) operate its business only in the normal course and not undertake any action not routine; (b) maintain its properties in customary repair, order and condition; (c) maintain its books, accounts and records in the usual and ordinary manner; and (d) use reasonable commercial efforts to (1) keep available the services of its present employees and (2) preserve its present relationships with customers, suppliers and others having business dealings with it. 18 8.2 PERSONNEL AND LABOR MATTERS. (a) Seller and Buyer shall discharge all their respective obligations arising under or by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the "REGULATIONS") prior to Completion. Seller and Buyer acknowledge that by virtue of the Regulations (and equivalent requirements in France), the contracts of service of the employees of Seller (and Seller's French Affiliate) who are listed in SCHEDULE 8.2 (the "TRANSFERRED EMPLOYEES") shall have effect as if originally made between the Transferred Employees and Buyer save insofar as the terms of those contracts of service relate to occupational pension schemes. Pending Completion, Seller (and Seller's French Affiliate) shall not, save with the prior written consent of Buyer, alter or enter into new contracts of employment with the Transferred Employees or any collective agreements governing employment relationships between Seller (and Seller's French Affiliate) and the Transferred Employees and will not offer a contract of employment to any person who following acceptance of such offer would, upon completion, become an employee of Buyer by virtue of the Regulations. (b) Seller (and its French Affiliate) shall perform and shall be fully liable for all of its obligations and liabilities in respect of its employees up to and including the Completion Date, under or by virtue of the terms and conditions of the contracts of those employees. (c) Except for the Transferred Employees, for a period of eighteen (18) months after Completion, neither party nor any of its Affiliates shall, directly or indirectly, solicit or otherwise induce any employee of another party or any of its Affiliates engaged in such entities' infusion product business to terminate or change his or her employment. (d)(i) Seller shall be responsible for and shall fully indemnify and keep indemnified the Buyer from and against all liabilities and obligations whensoever they arise arising, directly or indirectly, from any act or omission of the Seller in relation to the Transferred Employees prior to the Completion Date, including those which are deemed by virtue of the Regulations to be an act or omission of the Buyer after the Completion Date. (ii) Buyer shall be responsible for and shall fully indemnify and keep indemnified the Seller from and against all liabilities and obligations whensoever they arise arising, directly or indirectly, from any act or omission of the Buyer in relation to the Transferred Employees. 8.3 ACCESS. Seller shall give Buyer and its attorneys, accountants and other representatives full access, during normal business hours, to its and its Affiliates' premises and books and records, and to cause its officers, attorneys and certified public accountants to furnish such representatives with such financial and other information with respect to the Assets and the Assumed Liabilities as such representatives shall reasonably request. 19 8.4 VAT PROVISIONS. (a) All amounts expressed in this Agreement as payable by Buyer are expressed exclusive of any valued added tax ("VAT") which may be chargeable thereon. (b) Seller and Buyer shall use all reasonable endeavors to procure that the sale of the Assets hereunder is treated by H.M. Customs & Excise as a transfer of assets within both section 4-9 of the Value Added Tax Act 1994 ("VATA 94") and article 5 of the Value Added Tax (Special Provisions Order 1995) ("SPO 95"), save that Seller shall not be required by virtue of this subsection to make any appeal to any court or tribunal against any determination of H.M. Customs & Excise that such sale does not fall to be so treated. (c) Buyer declares that it is duly registered for VAT purposes under registration number ___________ and that Buyer shall upon and immediately after the Completion use the Assets to carry on the same kind of business (whether or not as part of any existing business of Buyer) as Seller's prior business relating to the Products. (d) Seller shall at Completion deliver to Buyer all of its records for VAT purposes relating to the Assets that are required under Schedule 11 paragraph 6 VATA 94 to be preserved by Buyer in place of Seller and Seller will not thereafter make a request to H.M. Customs & Excise for such records to be taken out of the custody of Buyer. (e) Buyer shall, for such period as may be required by law, preserve the records delivered to it by Seller pursuant to subsection (d) and, upon being given reasonable notice by Seller or its agents or Pharmacia, Buyer shall make those records available to Seller or its agents or Pharmacia for inspection or copying. (f) If, notwithstanding the provisions of subsection (b), H.M. Customs & Excise shall determine that VAT is properly chargeable in respect of the transfer of all or any part of the Assets hereunder, Seller shall notify Buyer of that determination and shall supply Buyer with a copy of such determination within seven days of its being so advised by H.M. Customs & Excise and Buyer shall pay to Seller a sum equal to the amount of VAT properly determined by H.M. Customs & Excise to be so chargeable within fourteen days of Seller notifying Buyer of that determination (against delivery by Seller of an appropriate tax invoice for VAT purposes). Buyer is also obliged to pay at the same time a sum equivalent to any penalty and any interest (chargeable pursuant to section 74 VATA 94) incurred by Seller solely as a result of a failure to account at the proper time to H.M. Customs & Excise for the VAT properly chargeable in respect of the transfer of all or any part of the Assets hereunder (provided always that Buyer shall not be liable to Seller in respect of any penalty or interest which arises by reason of any delay or default or error on the part of Seller in accounting for 20 the said VAT to H.M. Customs & Excise once Seller has been put in funds by Buyer pursuant to this sub-clause). (g) Seller and Buyer shall together send a letter substantially in the form of SCHEDULE 8.4 to H.M. Customs & Excise immediately after the Completion seeking confirmation that the transfer of the Assets is treated as neither a supply of goods nor a supply of service under article 5 SPO 95. (h) Where one party is required by the terms of this Agreement to reimburse or indemnify another for the costs or expenses of any supplies made to that other party, the reimbursing party shall (unless otherwise agreed) also at the same time pay and indemnify such other party against all the VAT input tax incurred by that other party provided that within seven days after the reimbursed party has obtained credit or repayment of the whole or any part of such Value Added Tax input tax, such reimbursed party shall pay over an amount equal to such repayment or credit to the reimbursing party. 8.5 ANNOUNCEMENTS. Except as provided below, any public disclosure of the transactions contemplated hereby and the terms hereof or results obtained hereunder (including but not limited to press releases or other statements made available generally by a party hereto to the public) will be reviewed and consented to by each party prior to such disclosure. Such consent shall not be untimely or unreasonably withheld by any party hereto. Notwithstanding the foregoing, any party hereto may, without the prior consent of the other parties hereto: (a) disclose (i) the existence of the Agreement (and the aggregate purchase price payable hereunder), (ii) the general subject matter hereof (other than material business, technical and commercial terms hereof or related hereto) and (iii) the identity of the parties hereto or (b) make public disclosure of this Agreement and of the transactions contemplated hereby or, the terms hereof to the extent that such public disclosure is required by any law, or rule or regulation of any agency, including without limitation to the generality of the foregoing, the United States Securities and Exchange Commission or any securities exchange on which securities of the disclosing party are then listed. At the request of Buyer and to the extent now possessed by Seller's counsel, Seller shall provide copies of this Agreement and all Documents on computer readable diskettes. 8.6 BOOKS AND RECORDS. The Seller shall make a request to HM Customs & Excise under Section 49(1)(b) VATA 1994 and shall if HM Customs & Excise so direct retain all records referred to in the said Section 49(1) relating to the business and shall upon the Buyer's written requests and at the Buyer's expense deliver copies of the said records to the Buyer and shall also allow the Buyer or its agents upon giving reasonable notice to the Seller as to the originals of such records. Except as otherwise required by the foregoing provisions of this 21 Clause 8.6, Buyer shall retain the books and records included within the Assets as they physically exist upon Completion for a period of five (5) years from Completion, and Seller shall retain its books and records (pertaining to its conduct of business prior to Completion relating to the sale and servicing of the Products) as they physically exist upon Completion for a period of five (5) years from Completion. Each party shall have access to such of the other's books and records on reasonable notice during normal business hours for any reasonable and necessary purpose. If either party desires copies of any such books and records after such retention period, it shall notify the other and will be permitted to have copies or make copies of such books and records, provided that the requesting party bears the costs and expenses of such copying. 8.7 ACTIONS DURING TRANSITION PERIOD AND AFTER THE COMPLETION. (a) The Seller and Buyer shall consult and confer concerning the procedure, content and timing for notification of employees, customers, distributors, regulatory authorities and others concerning the transfer of the Assets and the assignment of the Distribution Agreement. (b) IMED or, where required by law, the parties jointly shall notify regulatory authorities in each country within the Territory of the change in the distribution of IMED's infusion products in such country. To the extent required by law in any country, IMED shall designate a local representative to be the legally responsible person in such country for regulatory matters relating to the Products. (c) For a period not to exceed 90 days after Completion, Pharmacia and its Affiliates in the Territory outside the United Kingdom and, unless the parties otherwise agree, France shall provide certain services to Buyer and its designee as further described in SCHEDULE 8.7(C), subject to the terms set forth in such Schedule. Such services shall include warehousing, receipt and shipment of Products, and invoicing, all of which shall be provided on behalf of Buyer. Unless otherwise agreed, Pharmacia and its Affiliates shall have the right, at Buyer's expense, to ship to Buyer all inventory and other Assets in their possession at the end of such 90 days period. (d) Buyer shall provide Seller the service work described on SCHEDULE 8.7(d) concerning compounding equipment sold by such Affiliate, subject to the terms set forth in such Schedule. (e) Each party shall remit promptly to the other party any checks or other payments it receives which properly belong to the other party, including any payments directed to Buyer for payment of Seller's accounts receivable outstanding on the 22 Completion Date and, subject to the terms referred to in Clause 8.7(c) above, those directed to Seller for payment of Buyer's invoices issued after the Completion Date. 8.8 PENSION SCHEMES. (a) The Buyer shall on or before Completion (or as soon thereafter as possible) nominate or procure the nomination of a retirement benefits scheme which is or which is designed to be capable of approval as an exempt approved scheme under s.592, Income and Corporation Taxes Act 1988 and is contracted-out within the meaning of the Pension Schemes Act 1993. (b) (i) The Buyer undertakes to the Seller to procure that the Pensionable Employees are at the time of Completion (or as soon thereafter as possible) offered membership of the Buyer's Scheme on terms as to benefits and contributions for services, as on the Completion Date, which are identical to those applicable to the Pensionable Employees under the Pension Scheme immediately prior to execution of this agreement. (ii) The Buyer undertakes to the Seller to procure that the cover for all risk benefits is maintained for the Pensionable Employees from Completion to the date which is one month after the date invitation to join Buyer's Scheme has been issued to the Pensionable Employees. (iii) The Buyer shall indemnify the Seller and hold the Seller harmless against all and any costs, claims, expenses and liabilities whatsoever arising out of or in connection with pension, retirement or death benefits not being provided on or after Completion (whether in respect of any period before or after Completion) for or in respect of the Transferred Employees or any of them, at the same level and on the same terms as such benefits are provided prior to Completion (to the extent such benefits were previously disclosed by Seller to Buyer or are otherwise required to be provided by law). (c) The Buyer shall procure that in respect of service before Completion, subject to the transfer being made and monies received in accordance with paragraph (e) below, each Pensionable Employee is credited under the Buyer's Scheme in respect of pensionable service up to Completion with benefits which would (if the credit had been made on Completion, have had on that date a capital value which equals (or as nearly as may be) that part of the transfer value which relates to him and for this purpose the actuarial assumptions and methodology set out in the Compensation Letter shall apply MUTATIS MUTANDIS. (d) The Seller shall use its reasonable endeavors to procure that: 23 (i) The Pension Scheme notifies each Pensionable Employee in writing as soon as practicable after he ceases to be in pensionable service under the Pension Scheme of the options available to him under the Pension Scheme; (ii) Any Pensionable Employee who on ceasing to be in pensionable service under the Pension Scheme does not acquire a right to a transfer value under the Statutory Transfer Conditions is given the option under the Pension Scheme of a transfer value as if he had acquired such a right; (iii) The transfer value paid in respect of any Pensionable Employee shall be an enhanced transfer value calculated in accordance with Clause 8.8(e) with reference to completed pensionable service and allowing for future salary increases and pension increases but excluding any surplus. The principal actuarial assumptions and methodology used in the calculation are as set out in the Compensation Letter and (iv) If a Pensionable Employee (including one within Clause 8.8(d)(ii) above) requests in writing that a transfer value be paid in respect of him in a manner permitted under the Statutory Transfer Conditions the Pension Scheme gives effect to that request as soon as practicable. (e) Immediately after Completion, Seller shall instruct Seller's Actuary to determine the enhanced transfer value referred to in 8.8(d)(iii) within 56 days after Completion. (i) Seller and the Buyer shall procure that all such information as is in their respective possession, custody or control as Seller's Actuary or Buyer's Actuary may reasonable request for the purpose of calculating the transfer value available promptly to such actuary. (ii) Seller shall use their respective best endeavors to expedite the determination of the transfer value. (iii) Buyer's Actuary shall have the right to review the determination made by Seller's Actuary. He may dispute such determination only to the extent he finds that Seller's Actuary did not follow the principal assumptions set forth in the Compensation Letter. Any dispute between Seller's Actuary and Buyer's Actuary concerning the determination of the transfer values shall, in the absence of an agreement between them, be referred to an independent actuary. The independent actuary shall be nominated jointly by Seller and Buyer or, failing such nomination within 14 days from the first nomination of and actuary by one 24 party or the other, shall be nominated jointly by Seller and Buyer or, failing such nomination, shall be nominated by the President for the time being of The Institute of Actuaries at the instances of the party first applying to him. The independent actuary so appointed shall act as an expert and not as an arbitrator. His decision shall be final and binding. His costs shall be borne between Seller of the one part and Buyer of the other part as the independent Actuary may direct. (iv) Within 10 days after the final determination of the enhanced transfer value, Seller shall transfer in cash the amount of such value to the Buyer's Scheme. 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made under Sections 6 and 7 or in any Document delivered hereunder shall not terminate, but shall survive the Completion Date and continue in effect until the expiration of 12 months following the Completion Date (other than the representations set forth in Sections 6.1, 6.2, 6.4, 7.1 and 7.2, all of which shall continue until their applicable limitation period under law) at which time they shall expire; PROVIDED, HOWEVER, that any such representation or warranty as to which a BONA FIDE claim shall have been notified in writing to the other party during such survival period shall continue in effect. 9.2 SURVIVAL OF COVENANTS AND AGREEMENTS. Except as expressly stated otherwise, all covenants and agreements made hereunder or pursuant to the Documents shall not terminate but shall survive the Completion. 9.3 INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold harmless Buyer, its affiliates, their respective officers, directors and principal stockholders and their respective successors and assigns from and against any claims, liabilities, losses (including diminished value), damages or expenses (any one such item being herein called a "LOSS" and all such items being herein collectively called "LOSSES") which are caused by or arise out of: (a)any breach or default in the performance by Seller of any covenant or agreement made by Seller under this Agreement or any Document;(b) subject to Clause 9.1, any breach of warranty or representation made by Seller under Section 6 or in any Document;(c) any Retained Liabilities or any other liabilities or obligations of Seller or any of its Affiliates (whether absolute or contingent) other than the Assumed Liabilities; and (d) any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees) incident to any of the foregoing. Notwithstanding the foregoing provisions of this Clause 9.3, no claim for indemnification shall be made by Buyer with respect to Clause 9.3(b) or Clause 9.3(d) to the extent incident or otherwise related to the breach of a warranty or representation covered by Clause 9.3(b), unless and until the aggregate amount of all Losses of Buyer in respect 25 thereof shall exceed $200,000 (the "Required Minimum"). If the Required Minimum shall be exceeded, Buyer shall be entitled to seek and obtain indemnification from Seller for any and all Losses, including those within the Required Minimum, exceeding $50,000. 9.4 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold harmless Seller, its affiliates, their respective officers, directors and principal stockholders and their respective successors and assigns from and against any Losses which are caused by or arise out of:(a) any breach or default in the performance by Buyer of any covenant or agreement made by Buyer under this Agreement or any Document;(b) subject to Clause 9.1, any breach of warranty or representation made by Buyer under Section 6 or in any Document;(c) any Assumed Liabilities;(d) any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees) incident to any of the foregoing; or (e) any act by Buyer after the Completion Date arising out, or related to, the operation by Buyer of its business related to the Products. Notwithstanding the foregoing provisions of this Clause 9.4, no claim for indemnification shall be made by Seller with respect to Clause 9.4(b) or Clause 9.4(d) to the extent incident or otherwise related to the breach of a warranty or representation covered by Clause 9.4(b), unless and until the aggregate amount of all Losses of Seller in respect thereof shall exceed the Required Minimum. If the Required Minimum shall be exceeded, Seller shall be entitled to seek and obtain indemnification from Buyer for any and all Losses, including those within the Required Minimum, exceeding $50,000. 9.5 DEFENSE BY INDEMNIFYING PARTIES. An indemnified party shall notify the indemnifying party of any claim of such indemnified party for indemnification under this Agreement within thirty (30) days of the date on which an executive officer of such indemnified party first becomes aware of the existence of such claim whether such claim would be subject to the Required Minimum or otherwise. Such notice shall specify the nature of such claim in reasonable detail and the indemnifying party shall be given reasonable access to any documents or properties within the control of the indemnified party as may be useful in the investigation of the basis for such claim. The failure to so notify the indemnifying party within such thirty-day period shall not constitute a waiver of such claim (provided that it does not interfere with the right of the indemnifying party to defend such action) but an indemnified party shall not be entitled to receive any indemnification with respect to any Loss that occurred as a result of the failure of such person to give such notice. In the event any indemnified party is entitled to indemnification hereunder based upon a claim asserted by a third party the indemnifying party shall be given prompt notice thereof, in reasonable detail. The failure to so notify the indemnifying party shall not constitute a waiver of such claim but an indemnified party shall not be entitled to receive any indemnification with respect to any Loss that occurred as a result of the failure of such person to give such notice. The indemnifying party shall have the right (without prejudice to the right of any indemnified 26 party to participate at its expense through counsel of its own choosing) to defend or prosecute such claim at its expense and through counsel of its own choosing if it gives written notice of its intention to do so not later than twenty (20) days following notice thereof by the indemnified party or such shorter time period as required so that the interests of the indemnified party would not be materially prejudiced as a result of its failure to have received such notice; PROVIDED, HOWEVER, that if the defendants in any action shall include both an indemnifying party and an indemnified party and the indemnified party shall have reasonably concluded that counsel selected by the indemnifying party has a conflict of interest because of the availability of different or additional defenses to the indemnified party, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on its behalf, at the expense of the indemnifying party. If the indemnifying party does not so choose to defend or prosecute any such claim asserted by a third party for which any indemnified party would be entitled to indemnification hereunder, then the indemnified party shall be entitled to recover from the indemnifying party, on a monthly basis, all of its attorneys' reasonable fees and other costs and expenses of litigation of any nature whatsoever incurred in the defense of such claim. Notwithstanding the assumption of the defense of any claim by the indemnified party pursuant to this subsection, the indemnifying party shall have the right to approve the terms of any settlement of a claim (which approval shall not be unreasonably withheld). 9.6 COOPERATION. The indemnifying party and the indemnified party shall cooperate in furnishing evidence and testimony and in any other manner which the other may reasonably request, and shall in all other respects have an obligation of good faith dealing, one to the other, so as not to unreasonably expose the other to an undue risk of loss. The indemnified party shall be entitled to reimbursement for out-of-pocket expenses incurred by it in connection with such cooperation. Except for fees and expenses for which indemnification is provided pursuant to Clause 9.3 or Clause 9.4 , as the case may be, and as provided in the preceding sentence, each party shall bear its own fees and expenses incurred pursuant to this Clause 9.6. 9.7 REMEDIES EXCLUSIVE. Subject to the last sentence of this Clause 9.7, from and after the Completion Date, the rights and remedies under Clauses 9.3 and 9.4 shall be deemed to be exclusive of all other rights and remedies that would otherwise be available to the parties hereto for breach of the representations and warranties under Sections 6 and 7, respectively. The exercise or attempted exercise by either party of any such rights or remedies shall not preclude the simultaneous or later exercise by such party of any or all other such rights or remedies as provided in Section 9. No course of dealing by either party, or any delay or omission of any party in exercising any rights or remedies under this Agreement shall operate as a waiver of such right or remedy or any other rights or remedies of such party provided in this Section 9. Notwithstanding the foregoing, the parties agree that remedies at law may be 27 inadequate, and accordingly, each of the parties hereto, in addition to other remedies they may have, shall have the right to enforce their respective rights hereunder by an action or actions for specific performance, injunction or other appropriate equitable remedies. 9.8 NO WARRANTY. Except as expressly provided in this Agreement, the Documents and the Schedules, the Assets are sold "AS IS, WHERE IS," AND WITH ALL FAULTS. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 9.9 ALLOCATION. Although the consideration for the Assets is allocated as provided in Schedule 3.1, its is nevertheless agreed that such consideration is a single price and for the purpose of determining any Loss, the compensation payable shall be determined accordingly. 28 10. MISCELLANEOUS. 10.1 CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the laws of England. 10.2 JURISDICTION. In relation to any legal action or proceeding to enforce this Agreement or arising out of or in connection with this Agreement ("PROCEEDINGS") each of the parties irrevocably submits to the jurisdiction of the English courts and waives any objection to Proceedings in such courts. Without prejudice to the generality of the foregoing, each of the parties irrevocably waives any objection to such jurisdiction on the grounds of venue or on the grounds the proceedings have been brought in an inconvenient forum or on the ground that proceedings between the parties involving the same cause of action are already before the courts of another jurisdiction. Such submissions shall not affect the right of any party to take Proceedings in any other jurisdiction nor shall the taking of proceedings in any jurisdiction preclude any party from taking Proceedings in any other jurisdiction. 10.3 PROCESS AGENT. IMED and Buyer, and Pharmacia and Seller irrevocably appoint Edward Banks of Slaughter & May and Richard Slater of Simmons & Simmons, respectively, as their process agents respectively to accept on their behalf service of process in any Proceedings in England. Such service shall be deemed effective on delivery to such process agent (whether or not it is forwarded to and received by such party). If for any reason such process agent ceases to be able to act as process agent, or no longer has an address in England, the relevant party irrevocably agrees to appoint a substitute process agent in England acceptable to the other parties and to deliver to the other parties a copy of the new process agent's acceptance of that appointment within 30 days stating the new process agent's address. In default of such substitute being appointed, and notified to the other parties, service of process shall be deemed effective upon delivery to the address of process agent as may be notified to the other parties, notwithstanding that such process agent is no longer found at such address or has ceased to act. 10.4 OTHER METHODS OF PROCESS. The relevant parties hereto irrevocably consents to any process in any Proceedings anywhere being served in accordance with the provisions of this Agreement relating to the service of notices. Such service shall become effective 30 days after dispatch. Nothing herein contained shall affect the right to serve process in any other manner permitted by law. 10.5 EXPENSES. The parties shall each pay their own expenses in connection with the negotiation, preparation and carrying out of this Agreement. 29 10.6 NOTICES. All notices, requests, demands, waivers, consents, approvals or other communications to either party hereunder shall be in writing in English and shall be deemed to have been duly given if delivered personally to such party or sent to such party by Federal Express, DHL or other reputable overnight courier service, telegram or telex, or by registered or certified mail, postage prepaid, to the following addresses: If to Buyer or IMED: IMED Corporation 9775 Businesspark Avenue San Diego, California 92131 Attention: Office of General Counsel with a copy to: Gordon Altman Butowsky Weitzen Shalov & Wein 114 West 47th Street New York, NY 10036 Attention: Keith L. Schaitkin, Esq. If to Seller or Pharmacia: Pharmacia AB S-171 97 Stockholm Sweden Attention: General Counsel with a copy to: Wiggin & Dana 301 Tresser Blvd. Stamford, CT 06901 USA Attention: James F. Farrington, Jr. or to such other address as the addressee may have specified in notice duly given to the sender as provided herein. Such notice, request, demand, waiver, consent, approval or other communications will be deemed to have been given as of the date so delivered, telegraphed, telexed, or five (5) days after so mailed. 30 10.7 ENGLISH LANGUAGE. If this Agreement is translated into any language, the English language version shall govern in the event of any conflict or question of construction or interpretation. 10.8 SEVERABILITY. In the event that any provision of this Agreement shall be found in any jurisdiction to be illegal, void, invalid or unenforceable, such finding shall in no event invalidate any other provision of this Agreement in that jurisdiction, and the legality, validity and enforceability of the entire Agreement shall not be affected in any other jurisdiction. 10.9 ENTIRE AGREEMENT. This Agreement and the other documents referred to herein state the entire agreement reached between the parties hereto with respect to the transactions contemplated hereby and may not be amended or modified except by written instrument duly executed by the parties hereto. Any and all previous agreements and understandings between the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement. 10.10 NO WAIVER. The failure of either party hereto to enforce at any time, or for any period of time, any provision of this Agreement shall not be construed as a waiver of such provision or of the right of such party thereafter to enforce each and every provision. 10.11 ASSIGNMENT, BINDING EFFECT. Neither of the parties hereto shall assign this Agreement nor any of their respective rights or obligations hereunder without the prior written consent of the other party, which consent shall not be withheld unreasonably. Any such attempted assignment without such consent shall be void. Notwithstanding the foregoing, either party hereto shall be entitled to assign this Agreement to another person without such consent upon thirty (30) days prior written notice, if such person (i) acquires (by purchase or merger) all or substantially all of such party's business and assets and (ii) assumes all of the obligations of such party hereunder. This Agreement and the rights granted herein shall be binding upon and shall inure to the benefit of Seller, Buyer and their respective successors and permitted assigns. Any party hereto may assign, or grant a security interest in, its rights hereunder to a lender as collateral security for a loan, as part of a financing involving a similar collateral assignment or grant with respect to a substantial portion of its assets. 10.12 HEADINGS. All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 10.13 COUNTERPARTS. This Agreement may be executed in any number of counterparts and each party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall 31 constitute but one and the same instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to account for any of the other counterparts. 10.14 CURRENCY. All payments due under Section 3 shall be made in lawful coin and currency of the United States of America. In respect of any calculation contemplated by this Agreement of any amount denominated in British Pounds which is payable under such Section, such calculation shall be based upon the exchange rate for British Pounds and United States of America Dollars contained in the Eastern Edition of THE WALL STREET JOURNAL on the day which comes closest to preceding the Completion Date. All payments of Losses under Clauses 9.3 and 9.4 shall be determined and payable in the currencies in which the Losses were incurred. 10.15 IMED GUARANTY. (a) OBLIGATIONS GUARANTEED. IMED unconditionally and irrevocably: (i) guarantees to Seller and Pharmacia as principal obligor and not merely as surety (with the intention that any amount not recoverable for any reason from IMED under this clause on the basis of a guarantee shall nevertheless be recoverable on the basis of an indemnity) the due and punctual payment by Buyer of all sums payable under this Agreement as and when the same fall due; (ii) guarantees to Seller and Pharmacia as principal obligor and not merely as surety the due and punctual performance by Buyer of all other acts, covenants and obligations to be performed, given or observed by it under this Agreement; and (iii) undertakes to keep Seller and Pharmacia fully and effectually indemnified against all losses, damages, costs, claims and expenses whatsoever arising out of or in connection with any failure on the part of Buyer to effect due and punctual payment of any sum as aforesaid or to perform or observe all or any of the other acts, covenants and obligations aforesaid. (b) NO DISCHARGE. The obligations of IMED under this Agreement shall not be discharged except by performance and then only to the extent of such performance. Such obligations: (i) shall not be subject to any prior notice to or demand upon the IMED with regard to any default on the part of Buyer or otherwise; (ii) shall not be impaired by: 32 (A) any extension of time, forbearance or concession given to Buyer; or (B) any assertion of or failure to assert any right or remedy against Buyer; or (C) any modification or variation of the provisions of this Agreement; or (D) the administration, insolvency or liquidation of Buyer; or (E) by any other thing which might otherwise wholly or partially discharge IMED from its obligations under this Agreement or affect its liability if IMED were the sole principal debtor. (c) CONTINUING GUARANTEE. The guarantee and indemnity contained in this clause shall be a continuing guarantee and indemnity and shall remain in full force and effect until all moneys payable to Seller and Pharmacia by Buyer under the provisions of this Agreement shall have been duly paid and all acts, covenants and obligations described in sub-Clause 10.16(a)(ii) have been duly performed. 10.16 PHARMACIA GUARANTY. (a) OBLIGATIONS GUARANTEED. Pharmacia unconditionally and irrevocably: (i) guarantees to Buyer and IMED as principal obligor and not merely as surety (with the intention that any amount not recoverable for any reason from Pharmacia under this clause on the basis of a guarantee shall nevertheless by recoverable on the basis of an indemnity) the due and punctual payment by Seller of all sums payable under this Agreement as and when the same fall due; (ii) guarantees to Buyer and IMED as principal obligor and not merely as surety the due and punctual performance by Seller of all other acts, covenants and obligations to be performed, given or observed by it under this Agreement; and (iii) undertakes to keep Buyer and IMED fully and effectually indemnified against all losses, damages, costs, claims and expenses whatsoever arising out of or in connection with any failure on the part of Seller to effect due and punctual payment of any sum as aforesaid or to perform or observe all or any of the other acts, covenants and obligations aforesaid. 33 (b) NO DISCHARGE. The obligations of Pharmacia under this Agreement shall not be discharged except by performance and then only to the extent of such performance. Such obligations: (i) shall not be subject to any prior notice to or demand upon Pharmacia with regard to any default on the part of Seller or otherwise; (ii) shall not be impaired by: (A) any extension of time, forbearance or concession given to Seller; or (B) any assertion of or failure to assert any right or remedy against Seller; or (C) any modification or variation of the provisions of this Agreement; or (D) the administration, insolvency or liquidation of Seller; or (E) by any other thing which might otherwise wholly or partially discharge Pharmacia from its obligations under this Agreement or affect its liability if Pharmacia were the sole principal debtor. (c) CONTINUING GUARANTEE. The guarantee and indemnity contained in this clause shall be a continuing guarantee and indemnity and shall remain in full force and effect until all moneys payable to Buyer and IMED by Seller under the provisions of this Agreement shall have been duly paid and all acts, covenants and obligations described in sub-Clause 10.17(a)(ii) have been duly performed. THE NEXT PAGE IS THE SIGNATURE PAGE 34 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. IMED LIMITED By:____________________________________ Name: Title: IMED CORPORATION By:_____________________________________ Name: Title: PHARMACIA & UPJOHN LIMITED By:____________________________________ Name: Title: PHARMACIA AB By:____________________________________ Name: Title: 35 LIST OF SCHEDULES Schedule 2.1(a) IOC Contracts Schedule 2.1(b) Other Assigned Contracts Schedule 2.1(d) Regulatory Approvals Schedule 2.1(g) Fixed Assets Schedule 3.1 Purchase Price Allocation Schedule 4.2 Completion Documents Schedule 6.5 Consents Required by Seller Schedule 7.3 Consents Required by Buyer Schedule 8.2 Transferred Employees Schedule 8.4 VAT Notification Letter Schedule 8.7(c) Transition Services for IMED Schedule 8.7(d) Service Work for Pharmacia Schedule 8.8 Pension Scheme Valuation 36 SCHEDULE 2.1(a) IOC CONTRACTS SEE ATTACHED 4 PAGES IDENTIFYING IOC'S AS OF 2/96 Other IOC's were entered into (or have expired) in the ordinary course of business on substantially similar terms since that date. 37 SCHEDULE 2.1(b) OTHER ASSIGNED CONTRACTS DISTRIBUTOR AGREEMENTS - ---------------------- COUNTRY COMPANY SPECIFIC WRITTEN CONTRACT - ------- ------- ------------------------- Portugal Iberdata LdA no Malta Technoline Ltd no Cyprus Pap Medical no Israel Levant Tech Ltd no Palestine Intermed no Ireland Intraveno yes Sweden Gote Johansson yes OTHER AGREEMENTS - ---------------- (1) Extended Warranty Contracts as described in the enclosed list and typical letter agreements (2) Car leases described in the enclosed list and Contract Hire Master Agreement (3) Miscellaneous contracts referred to in the enclosed intracompany correspondence 38 SCHEDULE 2.1(d) REGULATORY APPROVALS SEE THE ENCLOSED PAGES CONCERNING FRANCE AND ITALY. Seller does not hold any registrations or other regulatory approvals to sell the Products which were obtained by it, other than those requiring notification only.. Notifications - either by Buyer or jointly - to regulatory authorities may be required in one of more countries. 39 SCHEDULE 2.1(g) FIXED ASSETS TO BE TRANSFERRED AS DESCRIBED ON THE ENCLOSED LIST AS OF 4/30/96 PLUS - ---- (1) Seller-owned vehicles identified on the enclosed list (2) Equipment used solely for the testing or servicing of IMED Products which is possessed by Seller's French or German affiliate 40 SCHEDULE 3.1 PURCHASE PRICE ALLOCATION
ASSETS HELD BY SELLER - --------------------- ASSET USD (000's) ----- ----------- IOC's (plus pumps placed with contract parties) 1,037 Inventory 700 Fixed Assets 46 ----- SUBTOTAL 1,783 ASSETS HELD BY SELLER'S FRENCH AFFILIATE - ---------------------------------------- Inventory 300 Fixed Assets 0 --- ASSETS HELD BY SELLER'S OTHER AFFILIATES - ---------------------------------------- Inventory 500 Fixed Assets 0 TOTAL 2,583
41 NOTE: The transfer of all intangibles and goodwill, and the consideration therefor, are provided for in the Assignment Agreement 42 SCHEDULE 4.2 OTHER COMPLETION DOCUMENTS Acte de Cession D'Elements de Fonds de Commerce (Asset Sale Agreement) for the Assets held by Seller's French affiliate Bills of sale or other assignment instruments to transfer to Buyer all Inventory Notifications to regulatory authorities concerning the change in the distributor of the IMED Products. 43 SCHEDULE 6.5 CONSENTS REQUIRED BY SELLER French Treasury (concerning the transfer of the Assets held by Seller's French affiliate) Consents are required under the terms of most of the Assigned Contracts. The parties shall follow the procedure set forth in Clause 4.4(b). 44 SCHEDULE 7.3 CONSENTS REQUIRED BY BUYER 45 SCHEDULE 8.2 TRANSFERRED EMPLOYEES TRANSFERRED EMPLOYEES OF SELLER - ------------------------------- R Bradshaw D Grant D Holden C McLean K Hemmings N Moore K Watts M Barclay E Dawson P Highmoor T Holyday M Rowley G Walker M Harper C Wass TRANSFERRED EMPLOYEES OF SELLER'S FRENCH AFFILIATE - -------------------------------------------------- P. Andre L. Veron 46 SCHEDULE 8.4 VAT NOTIFICATION LETTER SEE THE ENCLOSED FORM OF LETTER 47 SCHEDULE 8.7(c) TRANSITION SERVICES FOR IMED Pharmacia market companies on the Continent (excluding of the UK and France, and those markets listed in Schedule 2.1(b) as served by distributors) shall invoice IMED customers for a period of ninety (90) days after the Completion Date. Pharmacia market companies shall perform warehouse services by holding levels of product inventory requested by IMED. Pharmacia shall ship all product to IMED customers on behalf of IMED. IMED will not require Pharmacia to actively sell products to new or existing customers. This will include no active promotion of the IMED instrument line. Pharmacia personnel shall process all incoming orders through its Customer Service Departments. All service requirements for installed equipment will be performed by IMED's new service center in the U.K. All product in need of servicing should be collected by Pharmacia personnel and sent freight collect to IMED U.K. Operations. IMED will then return the equipment to Pharmacia freight prepaid. All freight charges incurred by Pharmacia to return the product to the customers once, and not recovered by Pharmacia, will be billed to IMED Ltd. IMED will invoice sales of products to Pharmacia market companies at 70% of Pharmacia third party pricing to the end user. Approximate pricing levels will be provided to IMED by Pharmacia to permit IMED to invoice at 70% of third party pricing. At the end of ninety (90) days, IMED and Pharmacia will reconcile pricing so that Pharmacia is ensured of receiving 30% of net sales service fee. Should IMED not require the services of Pharmacia prior to the end of ninety (90) days, IMED shall notify the Pharmacia market company fifteen (15) working days in advance and make arrangements for all inventory to be transferred to the appropriate destination. All reconciliation of pricing will be completed earlier per the above paragraph. 48 All such services shall be provided by Pharmacia as an agent and for the benefit of IMED. IMED shall indemnify and defend Pharmacia and its affiliates from and against all claims and liabilities arising out of the performance of such services, including all claims for product defects and infringement of the intellectual property rights of any third party. SCHEDULE 8.7(d) SERVICE WORK FOR PHARMACIA SEE THE ATTACHED LIST OF OUTSTANDING VACUMAT CONTRACTS AND THE CONTRACT TERMS FOR SERVICE 49 EX-10.29 4 EXHIBIT 10.29 EXHIBIT 10.29 ASSIGNMENT AGREEMENT DATED JUNE 26, 1996 BY AND AMONG IMED INTERNATIONAL TRADING CORP., IMED CORPORATION, PHARMACIA AB AND ADVANCED MEDICAL, INC. ASSIGNMENT AGREEMENT THIS AGREEMENT ("AGREEMENT") dated June 26, 1996 is made by and among IMED International Trading Corp., a Delaware corporation ("IMED TRADING"), IMED Corporation, a Delaware (USA) corporation ("IMED"); Pharmacia AB [publ.], a Swedish limited liability company ("PHARMACIA"); and Advanced Medical, Inc., a Delaware corporation ("AM"). BACKGROUND Pharmacia, IMED and AM entered into an Amended and Restated Distribution Agreement, dated as of August 12, 1994 (the "DISTRIBUTION AGREEMENT") under which Pharmacia distributes IMED's infusion pumps, administration sets and related products in Europe. The Distribution Agreement was originally entered into as of October 28, 1991. All capitalized and otherwise undefined terms in this Agreement shall have the meanings set forth in the Distribution Agreement. In connection therewith, Pharmacia and certain of its subsidiaries also acquired as of October 28, 1991, IMED's European business and assets relating to the distribution of IMED's infusion pumps, administration sets and related products in Europe. Pursuant to the terms of a certain Asset Transfer Agreement, dated the date hereof (the "TRANSFER AGREEMENT"), Pharmacia has agreed to cause one of its affiliates to sell and transfer to one of IMED's affiliates, and IMED has agreed to cause one of its affiliates to purchase certain assets related to its distribution of IMED's infusion pumps, administration sets and related products in Europe. In connection with the transfer of certain assets related to Pharmacia's distribution of IMED's infusion pumps, administration sets and related products, Pharmacia has now agreed to assign the Distribution Agreement to IMED Trading, a wholly-owned subsidiary of IMED. NOW, THEREFORE, the parties hereto agree as follows: 1. ASSIGNMENT OF THE DISTRIBUTION AGREEMENT. 1.1 ASSIGNMENT. The legal effectiveness of the parties' rights and obligations set forth below shall be subject to the occurrence of Completion (as defined in the Transfer Agreement). Subject to such effectiveness, Pharmacia agrees to assign, and hereby assigns, all right, title and interest under the Distribution Agreement, free and clear of all liens, claims and encumbrances, to IMED Trading as of August 30, 1996 (the "COMPLETION DATE"). Pharmacia further agrees to cause its UK and French Affiliates upon Completion to assign to IMED Trading all of their respective rights and interest to distribute the Products and all intangible rights and goodwill relating thereto. From and after the Completion Date, Pharmacia shall not have any obligations or other liabilities to IMED or AM, and AM and IMED shall not have any obligation or other liabilities to Pharmacia, under the Distribution Agreement, except as follows: (a) Pharmacia shall pay the unpaid Product Price and Additional Payment payable in respect to all Products sold by Pharmacia and its Affiliates prior to the Completion Date, and shall pay the unpaid Product Price payable in respect to all Products delivered to Pharmacia or its Affiliates, but not yet sold, prior to the Completion Date; PROVIDED, that, notwithstanding anything to the contrary contained in Section 12.6 of the Distribution Agreement, Pharmacia shall not have any payment or other obligation as a result of Products ordered by Pharmacia or its Affiliates prior to the Completion Date, but not yet delivered to Pharmacia or its Affiliates. To the extent applicable to the foregoing payments, Article 4 of the Distribution Agreement shall survive. (b) Each party shall remain liable for any adjustments to the Product Price as provided in Section 4.1 and Exhibit 1.16 of the Distribution Agreement; (c) In respect to Products sold by Pharmacia and its Affiliates prior to the Completion Date, IMED shall (a) be liable to remedy any nonconformance with the warranty obligations set forth in Sections 8.1 through 8.5 of the Distribution Agreement; and (b) perform all service obligations required to be performed by it or Pharmacia under Section 8.6 of the Distribution Agreement; (d) Each party shall continue to be bound under the confidentiality obligations set forth in Section 10 of the Distribution Agreement, and, except to the extent required to comply with any requirements of law, each party shall promptly return to the other party all documents or other tangible materials representing such other party's Proprietary Information; (e) Each party shall remain liable for certain product liability claims, including those arising under Section 11 of the Distribution Agreement, but only to the extent set forth in SCHEDULE 1.1(e) hereto; and (f) The parties shall provide such notices and take such other actions as may be required in connection with the transfer of the Distribution Agreement to IMED Trading under Clause 8.7 of the Asset Transfer Agreement. 1.2 CONSIDERATION. In consideration for the assignment of the Distribution Agreement, IMED Trading shall pay Pharmacia a payment in an aggregate amount of $US 8,463,000 at Completion (as defined in the Asset Transfer Agreement). The payment due 2 under this Clause 1.2 shall be made in cash by wire transfer of immediately available funds to the accounts designated by Pharmacia as follows: (a) $US 1,363,000 to Pharmacia & Upjohn Ltd., (b) $US 100,000 to Pharmacia France S.A., and (c) $US 7,000,000 to Pharmacia AB. IMED Trading may offset against such amount $US 218,674, the aggregate amount now payable to IMED by Pharmacia or one or more of its Affiliates under the outstanding invoices referred to in SCHEDULE 1.2. 1.3 MUTUAL RELEASES. Except as expressly set forth in Section 1.1 above or Section 2 below: (a) For and in consideration of the sum of One Dollar ($1.00) in lawful money of the United States of America, and other valuable consideration, received to their full satisfaction, each of the IMED Trading, IMED and AM and each of their affiliates, successors and assigns, hereby remise, release and forever discharge Pharmacia, its affiliates, successors and assigns and their officers, employees, and agents of and from any and all claims, rights, liabilities, obligations or other matters arising out of or relating to the Distribution Agreement; and (b) For and in consideration of the sum of One Dollar ($1.00) in lawful money of the United States of America, and other valuable consideration, received to their full satisfaction, each of the Pharmacia and its affiliates, successors and assigns, hereby remise, release and forever discharge each of IMED Trading, IMED and AM and each of their affiliates, successors and assigns and their officers, employees, and agents of and from any and all claims, rights, liabilities, obligations or other matters arising out of or relating to the Distribution Agreement. 2. RELATED AGREEMENTS. Except as specifically provided herein, any and all previous agreements and understandings between the parties regarding the subject matter hereof, whether written or oral, are hereby terminated and the respective terms and provisions contained therein are null and void and of no further force or effect. The agreements and understandings set forth in the following agreements are not terminated or modified by this Agreement: (a) the Transfer Agreement,(b) the Asset Transfer Agreement, dated as of August 15, 1995, by and among IMED Ireland, IMED, Pharmacia and Gaeleo Investments Ltd. ("GAELEO"),(c) the Supply Agreement, dated as of August 15, 1995, by and among IMED, Pharmacia and Gaeleo, (d)the Final Agreement, dated as of August 12, 1994, by and 3 among AM, AM General Development Corp., AM Development Limited, Dean Kamen, Deka Products Limited Partnership, Deka Research & Development Corp and Pharmacia (including, without limitation, Pharmacia's rights under Section 9.8 therein). 3. ARBITRATION. 3,1 RULES. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by arbitration in London, England in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with said Rules. The decision reached by such arbitrators in any such proceeding shall be final and binding upon the parties thereto. The parties shall, however, remain free to apply to any competent judicial authority for interim or conservatory measures, even after the transmittal of the file to the aforesaid arbitrators and even if there are no exceptional circumstances. The arbitration proceeding shall be conducted in the English language, with each party responsible for its own legal expenses. 3.2 NOTICE. Whenever a party shall decide to institute arbitration proceedings, it shall give thirty (30) days' prior written notice to that effect to the other party. 3.3 AWARD. Any monetary award shall bear interest at a rate fixed by the arbitrators from the date the arbitration proceeding is commenced to the date on which the award is paid in full. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. 3.4 NOT TO AFFECT OTHER ACTIVITIES. Performance under this Agreement shall continue, if reasonably possible, during any disagreement or arbitration proceedings and no funds payable to either party under this Agreement shall be withheld on account of such disagreement or proceedings. 4. MISCELLANEOUS. 4.1 CHOICE OF LAW. This Agreement shall be governed and interpreted, and all rights and obligations of the parties hereunder, shall be governed and determined in accordance with the laws of the Kingdom of Sweden, without regard to its conflict of laws rules (and without limiting the foregoing, the United Nations Convention On Contracts for International Sale of Goods [1980] shall not govern this Agreement). 4.2 NOTICES. All notices, requests, demands, waivers, consents, approvals or other communications to any party hereunder shall be in writing and shall be deemed to have been 4 duly given if delivered personally to such party or sent to such party by telegram or telex or by registered or certified mail, postage prepaid, to the following addresses: If to IMED: IMED Corporation 9775 Businesspark Avenue San Diego, California 92131 Attention: Office of General Counsel with a copy to: Gordon Altman Butowsky Weitzen Shalov & Wein 114 West 47th Street New York, NY 10036 Attention: Keith L. Schaitkin, Esq. If to Pharmacia: Pharmacia AB S-171 97 Stockholm Sweden Attention: General Counsel with a copy to: Wiggin & Dana 301 Tresser Blvd. Stamford, CT 06901 USA Attention: James F. Farrington, Jr. If to AM: Advanced Medical Inc. c/o IMED Corporation 9775 Businesspark Avenue San Diego, California 92131 Attention: Office of the President 5 with a copy to: Gordon Altman Butowsky Weitzen Shalov & Wein 114 West 47th Street New York, New York 10036 Attention: Keith L. Schaitkin, Esq. or to such other address as the addressee may have specified in notice duly given to the sender as provided herein. Such notice, request, demand, waiver, consent, approval or other communications will be deemed to have been given as of the date so delivered, telegraphed, telexed, or five (5) days after so mailed. 4.3 ENGLISH LANGUAGE. If this Agreement is translated into any language, the English language version shall govern in the event of any conflict or question of construction or interpretation. 4.4 SEVERABILITY. In the event that any provision of this Agreement shall be found in any jurisdiction to be in violation of public policy or illegal or unenforceable in law or equity, such finding shall in no event invalidate any other provision of this Agreement in that jurisdiction, and this Agreement shall be deemed amended to the minimum extent required to comply with the law of such jurisdiction. 4.5 ENTIRE AGREEMENT. This Agreement and the other documents referred to herein state the entire agreement reached between the parties hereto with respect to the transactions contemplated hereby and may not be amended or modified except by written instrument duly executed by the parties hereto. Any and all previous agreements and understandings between the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement. 4.6 NO WAIVER. The failure of either party hereto to enforce at any time, or for any period of time, any provision of this Agreement shall not be construed as a waiver of such provision or of the right of such party thereafter to enforce each and every provision. 4.7 ASSIGNMENT, BINDING EFFECT. None of the parties hereto shall assign this Agreement nor any of their respective rights or obligations hereunder without the prior written consent of the other parties, which consent shall not be withheld unreasonably. Any such attempted assignment without such consent shall be void. This Agreement and the rights herein granted shall be binding upon and shall inure to the benefit of IMED, AM, Pharmacia and their respective successors and permitted assigns. Notwithstanding the foregoing, either party hereto shall be entitled to assign this Agreement to another person without such consent upon thirty (30) days prior written notice, if such person (i) acquires (by purchase or merger) all or substantially all of such party's business and assets and (ii) assumes all of the obligations of such party hereunder. Any party hereto may assign, or grant a security interest in, its 6 rights hereunder to a lender as collateral security for a loan, as part of a financing involving a similar collateral assignment or grant with respect to a substantial portion of its assets. 4.8 HEADINGS. All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 4.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall have been executed and delivered by the parties. It shall not be necessary in making proof of this Agreement or any counterpart hereof to account for any of the other counterparts. 7 4.10 FURTHER ASSURANCES. The parties shall from time to time execute all such documents and do all such things as any of the other parties hereto may reasonably require for perfecting the transactions intended to be effected under or pursuant to this Agreement. IMED CORPORATION By:_____________________________________ Name: Title: IMED INTERNATIONAL TRADING CORP. By: _____________________________________ Name: Title: PHARMACIA AB By:____________________________________ Name: Title: ADVANCED MEDICAL, INC. By:____________________________________ Name: Title: 8 SCHEDULE 1.1(e) PRODUCT LIABILITY CLAIMS 1. IMED INDEMNITY. IMED shall indemnify and hold Pharmacia and its Affiliates, and their respective directors, officers and employees harmless from and against any and all loss, liability, damage, expense and cost (including, without limitation, reasonable attorneys' fees and other costs of defense, but net of any associated tax benefits) (collectively, "LOSSES") arising out of: (a) except to the extent caused by Pharmacia's or its Affiliates' servicing of Products prior to the Completion Date other than in accordance with IMED's service instructions, bodily injuries to customers or users in respect of, resulting from or relating to a defect, nonconformity or deficiency in the Products; and (b) bodily injury or property damage caused by Pharmacia's or its Affiliates' servicing of Products prior to the Completion Date in accordance with IMED's service instructions. IMED shall defend at its own expense any actions brought against Pharmacia, its Affiliates or permitted sub-distributors or any of their customers alleging that any Product infringes any claim of a patent or other intellectual property rights and shall pay all damages and costs awarded in said actions. 2. PHARMACIA INDEMNITY. Except for those matters set forth in Section 1, for which IMED has agreed to provide indemnification, Pharmacia shall indemnify and hold IMED, Advanced Medical, Inc., their Affiliates, and their respective directors, officers and employees harmless from and against any and all Losses arising out of: (a) third party claims (including, without limitation, bodily injuries and property damage) in respect of, resulting from or relating to Pharmacia's or its Affiliates' conduct of their business prior to the Completion Date, including, without limitation, servicing, advertising, repacking, storage or handling of the Products, excluding all Losses in respect of, relating to or arising out of: (i) infringement of any Product or any IMED Trademark with the rights of third parties; (ii) restrictive trade practices or other claims in the nature of "anti-trust" or trade regulation arising out of the entering into this Agreement (the "REGULATORY MATTERS"); (iii) any matter to the extent IMED or any of its Subsidiaries provided indemnification in respect of such matter under the Asset Sale Agreement, dated as of October 28, 1991, by and among IMED Ltd., IMED France S.N.C., IMED Medizintechnik GmbH, Kabi Pharmacia Limited, Pharmacia France S.A., Kabi Pharmacia GmbH, Pharmacia and IMED; or (iv) any claim to the extent arising out of acts or omissions of IMED or its Affiliates or other matters for which IMED is liable under the express terms of this Agreement. Pharmacia shall indemnify and hold IMED and AM and their affiliates, and their respective directors, officers and employees harmless from and against any and all Losses arising out of claims asserted by Baxter Medical AB ("BAXTER") or any of its affiliates in any way related to a certain Exclusive Distributorship Agreement, dated as of November 30, 1989, by and between Baxter and Pharmacia (the "BAXTER AGREEMENT"), including without limitation, any claim that Pharmacia breached or was induced to breach any of its obligations under the Baxter Agreement. 9 3. DEFENSE OF ACTIONS. Each party indemnified hereunder (an "INDEMNIFIED PARTY") will give the indemnifying party written notice of any action or proceeding relating to any claim or loss for which indemnity is or may be sought hereunder within ten (10) Business Days after any such indemnified party shall have had actual notice thereof and the indemnifying party, at its option, shall be entitled to participate in or direct the defense or settlement of such action; PROVIDED, the indemnifying party employs counsel reasonably acceptable to the Indemnified Party. The Indemnified Party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be borne by it. The indemnifying party shall not be liable to the Indemnified Party in respect of settlements effected by the Indemnified Party without the written consent of the indemnifying party, which will not be unreasonably withheld or delayed. In the event that any indemnifying party shall undertake to compromise or defend any action or proceeding, it shall promptly notify the Indemnified Party of its intention to do so and the indemnified party agrees to cooperate fully with the indemnifying party and its counsel in any such compromise or defense; PROVIDED, that the Indemnified Party shall not be required to incur any costs or other unreasonable obligations. 4. INSURANCE. IMED and Pharmacia shall self-insure or obtain and keep in force until the third anniversary of the Completion Date, general comprehensive liability insurance covering each occurrence of bodily injury and property damage in an amount of not less than $10,000,000 combined single limit with special endorsements providing coverage for: (a) Products and Completed Operations Liability; and (b) Blanket Contractual Liability including an additional endorsement deleting the Contractual Liability exclusion for Products and Completed Operations Liability. If such insurance is procured, the insurance policy shall be endorsed to provide for: (a) written notification by the insurer not less than 30 days prior to cancellation, expiration or modification and (b) naming the other party as an additional insured for the original insured's acts or omissions without limiting any of the original insured's indemnity obligations hereunder. A certificate of insurance evidencing compliance with this paragraph and referencing this Agreement shall be furnished to the other party within 10 days after the date hereof, or the date on which such insurance is effective. 5. PRODUCT RECALL. The following provisions apply to all Products shipped by Pharmacia and its Affiliates prior to the Completion Date: (A) MANDATORY RECALL. In the event that a nonappealable administrative or judicial order (the "RECALL ORDER") is issued or requested by an entity or authority having jurisdiction in the matter, IMED shall be responsible, at its sole cost and expense, for complying with the Recall Order, including, without limitation, expenses or obligations to third parties, the cost of notifying customers and the costs associated with shipment of that recalled Product (and all products shipped by IMED or any of its Subsidiaries prior to October 28, 1991, which products shall be referred to in this Section 5 as "OLD PRODUCTS") from a customer to IMED; PROVIDED, HOWEVER, that Pharmacia shall bear the costs and expenses associated with implementing any such corrective action (other than those relating to Old 10 Products) to the extent resulting from the acts or omissions of Pharmacia unless such acts or omissions were in conformity with instructions from IMED. (B) VOLUNTARY RECALL. In the event that IMED or Pharmacia reasonably believes that a Product or any of the Old Products violate any provision of applicable law or should be recalled due to health or safety considerations, IMED and Pharmacia shall consult in good faith concerning the necessity for implementing any corrective action and the means of implementing the same; PROVIDED, HOWEVER, that IMED shall be entitled to make the final determination as to whether to effect any such corrective action. IMED shall be responsible, at its sole cost and expense, for implementing any such corrective action, including without limitation, expenses or obligations to third parties, the cost of notifying customers and the costs associated with shipment of the Product and the Old Products subject to such corrective action from a customer to IMED; PROVIDED, HOWEVER, that Pharmacia shall bear the costs and expenses associated with implementing any such corrective action (other than those relating to Old Products) to the extent resulting from the acts or omissions of Pharmacia unless: (i) Pharmacia does not agree to effect such corrective action; or (ii) such acts or omissions were in conformity with instructions from IMED. Notwithstanding the foregoing, the parties agree that IMED shall be responsible for all such costs and expenses arising out of the pending recall of the Gemini PC-1 infusion pumps. (C) RECALL COOPERATION. IMED and Pharmacia will keep one another fully informed with respect to any information, inquiry or correspondence from any government, agency or authority having jurisdiction in the Territory relating to the investigation or review of Product compliance with applicable legal, health or safety requirements. 11 SCHEDULE 1.2 PAST DUE INVOICES SEE ATTACHED MEMO FROM GRANT BRYCE, DATED MAY 21, 1996 12 EX-11.1 5 EXHIBIT 11.1 COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11.1 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1996 - --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 1995 1996 1995 1996 ------- ------- ------- ------- INCOME PER COMMON SHARE ASSUMING NO DILUTION Income before extraordinary item and dividends on mandatorily redeemable preferred stock............... $ 2,038 $ 1,150 $ 3,061 $ 2,009 Dividends on mandatorily redeemable preferred stock....... (162) (163) (325) (325) ------- ------- ------- ------- Income before extraordinary item.......................... 1,876 987 2,736 1,684 Extraordinary item - gain on early retirement of debt, net of taxes............................................ 6,370 15,177 ------- ------- ------- ------- Net income applicable to common stock..................... $ 8,246 $ 987 $17,913 $ 1,684 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares outstanding (1)............ 15,942 16,402 15,018 16,432 ------- ------- ------- ------- ------- ------- ------- ------- Income per common share assuming no dilution: Income before extraordinary item.......................... $ .12 $ .06 $ .18 $ .10 Extraordinary item........................................ .40 1.01 ------- ------- ------- ------- Net income per common share assuming no dilution.......... $ .52 $ .06 $ 1.19 $ .10 ------- ------- ------- ------- ------- ------- ------- ------- INCOME PER COMMON SHARE ASSUMING FULL DILUTION Income before extraordinary item and dividends on mandatorily redeemable preferred stock.................. $ 2,038 $ 1,150 $ 3,061 $ 2,009 Dividends on mandatorily redeemable preferred stock....... (162) (163) (325) (325) Add back interest expense, net of taxes, on convertible promissory notes........................................ 150 412 299 824 ------- ------- ------- ------- Income before extraordinary item.......................... 2,026 1,399 3,035 2,508 Extraordinary item - gain on early retirement of debt, net of taxes............................................ 6,370 15,177 ------- ------- ------- ------- Net income applicable to common stock..................... $ 8,396 $ 1,399 $18,212 $ 2,508 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares outstanding prior to conversion of convertible promissory notes (1) 15,995 16,504 15,218 16,500 Add weighted average shares issued upon conversion of convertible promissory notes......................... 16,565 26,089 16,525 26,089 ------- ------- ------- ------- Weighted average common shares outstanding................ 32,560 42,593 31,743 42,589 ------- ------- ------- ------- ------- ------- ------- ------- Income per common share assuming full dilution: Income before extraordinary item.......................... $ .06 $ .03 $ .09 $ .06 Extraordinary item........................................ .20 .48 ------- ------- ------- ------- Net income per common share assuming full dilution........ $ .26 $ .03 $ .57 $ .06 ------- ------- ------- ------- ------- ------- ------- -------
(1) INCLUDES THE COMMON STOCK EQUIVALENT OF DILUTIVE OPTIONS OUTSTANDING AT THE END OF EACH PERIOD. EX-27.1 6 EXHIBIT 27.1
5 The Schedule contains summary financial information extracted from the Condesed Consolidated Balance sheet and Condensed Consolidated Statement of Operations and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 4,382 4,649 17,485 (900) 17,964 55,715 33,052 (19,936) 153,077 23,549 84,667 7,543 0 162 30,473 153,077 53,870 54,091 29,651 29,651 18,146 50 4,399 4,065 2,056 2,009 0 0 0 1,684 .10 .06
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