0000927016-95-000120.txt : 19950824 0000927016-95-000120.hdr.sgml : 19950824 ACCESSION NUMBER: 0000927016-95-000120 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950809 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDCHEM PRODUCTS INC /MA/ CENTRAL INDEX KEY: 0000711074 STANDARD INDUSTRIAL CLASSIFICATION: 2834 IRS NUMBER: 042471310 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09899 FILM NUMBER: 95560248 BUSINESS ADDRESS: STREET 1: 232 W CUMMINGS PARK CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 6179325900 MAIL ADDRESS: STREET 1: 232 W CUMMINGS PARK STREET 2: 232 W CUMMINGS PARK CITY: WOBURN STATE: MA ZIP: 01801 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report pursuant to Section 13 or 15(d) of ------------ the Securities Exchange Act of 1934 For Quarterly period ended June 30, 1995 or ---------------------------------- Transition report pursuant to Section 13 or 15(d) of ------------ the Securities Exchange Act of 1934 Commission File Number 1-9899 -------------------------- MedChem Products, Inc. ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2471310 ------------------------------------------------------------------------------- (state or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 232 West Cummings Park, Woburn, MA. 01801 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 932-5900 --------------- ------------------------------------------------------------------------------- (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 ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On August 1, 1995, 10,306,096 shares of common stock, par value $0.01 per share, were outstanding. 1 PART 1: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets as of, June 30, 1995 December 31, 1994 -------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $1,335,019 $157,591 Cash escrow agreement 2,000,000 -- Accounts receivable 4,429,211 4,032,487 Inventories 9,347,004 10,739,786 Note receivable -Anika Research, Inc. 1,000,000 -- Prepaid expenses and other current assets 1,809,338 1,494,811 -------------------------------------------------------------------------------------------------------------- Total current assets 19,920,572 16,424,675 -------------------------------------------------------------------------------------------------------------- Property, plant and equipment 13,578,144 12,466,151 Less accumulated depreciation and amortization 3,405,526 3,021,975 -------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 10,172,618 9,444,176 -------------------------------------------------------------------------------------------------------------- Note receivable -Anika Research, Inc. -- 1,000,000 Cost in excess of net assets of businesses acquired 35,256,151 35,887,747 Intangible and other assets 15,681,448 16,274,010 -------------------------------------------------------------------------------------------------------------- Total Assets $81,030,789 $79,030,608 ============================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,386,953 $2,679,607 Accrued expenses 2,969,416 3,370,893 Note payable - Life Medical Sciences, Inc. -- 1,000,000 Current installments of long term debt 2,000,000 2,000,000 -------------------------------------------------------------------------------------------------------------- Total current liabilities 6,356,369 9,050,500 -------------------------------------------------------------------------------------------------------------- Deferred income taxes 577,229 626,809 Long-term debt, excluding current installments 13,350,000 11,000,000 Convertible subordinated debt 4,103,204 4,103,204 -------------------------------------------------------------------------------------------------------------- Total liabilities 24,386,802 24,780,513 -------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock, $.01 par value: authorized 1,000,000 shares; no shares issued and outstanding -- -- Common stock, $.01 par value: authorized 20,000,000 shares; issued 11,304,548 and 11,213,536 shares, respectively 113,045 112,135 Additional paid-in capital 37,905,803 37,493,085 Retained earnings 27,200,281 25,220,017 -------------------------------------------------------------------------------------------------------------- 65,219,129 62,825,237 Treasury stock, 1,024,702 shares, at cost (8,575,142) (8,575,142) -------------------------------------------------------------------------------------------------------------- Total stockholders' equity 56,643,987 54,250,095 -------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $81,030,789 $79,030,608 ==============================================================================================================
See accompanying notes to consolidated financial statements. 2 MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations
Three months ended Six months ended June 30, June 30, 1995 1994 1995 1994 ---------------------------------------------------------------------------------------------------------------------------------- Net sales $9,822,717 $6,926,324 $19,243,987 $14,859,834 Cost of sales 3,162,777 2,118,964 6,181,815 4,657,687 ---------------------------------------------------------------------------------------------------------------------------------- Gross profit 6,659,940 4,807,360 13,062,172 10,202,147 Operating expenses: Research and development 511,681 302,937 1,114,433 481,118 Selling, general and administrative 3,355,940 2,426,770 6,966,176 5,284,253 Depreciation and amortization 669,108 608,147 1,315,895 1,218,802 Other (reorganization costs) -- 510,000 -- 510,000 ---------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 4,536,729 3,847,854 9,396,504 7,494,173 Income from operations before interest and income taxes 2,123,211 959,506 3,665,668 2,707,974 Interest expense, net 395,402 241,404 773,913 489,107 ---------------------------------------------------------------------------------------------------------------------------------- Income from operations before income taxes 1,727,809 718,102 2,891,755 2,218,867 Income tax expense 552,898 199,793 911,491 617,422 ---------------------------------------------------------------------------------------------------------------------------------- Net income $1,174,911 $518,309 $1,980,264 $1,601,445 Income per share, primary and fully diluted: $0.11 $0.05 $0.19 $0.16 Weighted average number of shares outstanding: Primary 10,699,000 10,305,000 10,523,000 10,305,000 Fully diluted 10,932,000 10,305,000 10,641,000 10,305,000 ----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 3 MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows
Six months ended June 30, 1995 1994 ------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $1,980,264 $1,601,445 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,703,525 1,701,100 Deferred income taxes (49,580) (1,374,760) Changes in operating assets and liabilities: Accounts receivable (396,724) 395,817 Inventories 1,392,782 (1,672,947) Prepaid expenses and other current assets (314,527) 445,325 Other assets (95,815) (26,840) Accounts payable and accrued expenses (1,694,131) 731,120 ------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 2,525,794 1,800,260 ------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Additions to property, plant and equipment (1,111,994) (1,087,869) ------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (1,111,994) (1,087,869) ------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Cash in escrow agreement (2,000,000) -- Net borrowing (payments) under revolving line of credit 3,350,000 (600,000) Principal payments on bank debt (1,000,000) -- Principal payment on note payable - Life Medical Sciences, Inc. (1,000,000) -- Proceeds from exercise of stock options 413,628 11,571 ------------------------------------------------------------------------------------------------------------------------ Net cash used by financing activities (236,372) (588,429) ------------------------------------------------------------------------------------------------------------------------ Increase in cash and cash equivalents 1,177,428 123,962 Cash and cash equivalents at beginning of period 157,591 (5,375) ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $1,335,019 $118,587 ======================================================================================================================== Supplemental disclosure of cash flow information: Cash paid for: Interest $675,534 $469,278 Income taxes 578,412 1,607,221 ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 4 PART I: FINANCIAL INFORMATION MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements ------------------------------------------ June 30,1995 (1) Nature of Business ------------------ MedChem Products, Inc. and subsidiaries ("the Company") develop, manufacture and market specialty medical products for use in surgical and non-surgical procedures. The Company's two business groups are the Surgical Specialties Group and the Drug Delivery Group. The Surgical Specialties Group is comprised of the Company's Avitene(R) family of topical hemostasis products used to control bleeding in surgical procedures and the Sure-Closure product line, acquired in July 1994, used to close skin-deficit wounds. The Drug Delivery Group is comprised of intravenous ("I.V")catheter products and disposable medical devices sold to the neonatal, pediatric and adult markets by the Company's wholly owned subsidiary, Gesco International, Inc. ("Gesco"). (2) Basis of Presentation --------------------- The accompanying consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company as of June 30, 1995 and the consolidated results of operations for the three months and six months ended June 30, 1995 and 1994 and consolidated cash flows for the six months ended June 30, 1995 and 1994. The results of operations for the six months ended June 30, 1995 are not necessarily indicative of results to be expected for the full year. The accompanying consolidated financial statements and the related notes should be read in conjunction with the Company's annual financial statements filed with the Annual Report (Form 10-K) for the fiscal year ended August 31, 1994, and the Company's financial statements filed with the Transition Report (Form 10-Q) for the four months ended December 31, 1994. The Company changed its fiscal year end from August 31, to December 31, and accordingly, has restated its prior period results to correspond to the new calendar period. 5 Certain reclassifications were made to the 1994 consolidated financial statements to conform to the current year presentation. (3) Long-Term Debt -------------- Long term debt consists of the following:
June 30, December 31, 1995 1994 ------------ ---------- $9,000,000 bank revolving line of credit at the bank's prime rate plus one quarter percent or cost of funds plus two and a quarter percent (8.27% at June 30, 1995), secured by tangible and intangible property, payable by June, 1997. $ 7,350,000 $ 4,000,000 Term loan payable to a bank, interest at the bank's prime rate plus one-half of one percent or LIBOR plus two percent (8.27% at June 30, 1995) payable in quarterly installments of $500,000, with a final installment of $4,500,000 on May 1, 1997, secured by tangible and intangible property. 8,000,000 9,000,000 ----------- ----------- Total long-term debt 15,350,000 13,000,000 Less: current installments 2,000,000 2,000,000 ----------- ----------- Long-term debt less current installments $13,350,000 $11,000,000 =========== ===========
At June 30, 1995, the Company obtained a waiver of a covenant pertaining to the ratio of indebtedness to net cash flow, and also reached an agreement with the bank to amend that covenant. It is probable that the Company will be in compliance with this amended covenant at the next measurement date. (4) Escrow Agreement ---------------- On April 13, 1995, the Company paid $2,000,000 to an escrow account, pursuant to the terms and conditions of the Distribution Agreement, dated March 31, 1995, between the Company and Coletica, a Lyon, France based manufacturer of medical devices. 6 Under terms of the distribution agreement the Company received an exclusive right to distribute Coletica's Hemostagene(R) collagen hemostatic sponge in the United States for five years. The agreement also contains provisions for the extension of the term beyond five years upon the achievement of certain sales volume goals. (5) Merger Agreement ---------------- On May 24, 1995, the Company announced that the Board of Directors had approved a definitive agreement for a stock-for-stock merger of the Company ("Merger") into C.R. Bard, Inc. ("Bard"). Under the terms of the agreement each MedChem share will be valued at $9.25, subject to adjustment under certain circumstances and will be exchanged for Bard shares. The transaction is expected to be a tax free reorganization and to be accounted for as a pooling of interests. Under certain circumstances, if a transaction does not occur, Bard has an option to purchase the Company's Gesco subsidiary ("Option"). The Company has elected to defer its costs and expenses of the Merger until the transaction closes or it is terminated. As of June 30, 1995 the Company has deferred $405,265 of costs associated with the Merger. (6) Contingencies ------------- On August 1, 1995, Edward J. Borto, who may be a stockholder of the Company, filed a putative class action naming as defendants, the Company, members of the Company's Board of Directors ("Board") and Bard. The plaintiff alleges, among other things, that the Company and the members of the Company's Board breached their fiduciary duties to the Company's stockholders by agreeing to be acquired by Bard for grossly unfair and inadequate consideration and in a manner which is coercive and fundamentally unfair to the Company's stockholders. The complaint seeks declaratory relief, preliminary and permanent injunction of the Merger and the Option, unspecified compensatory damages and costs and disbursements. The Company believes that the claims asserted are without merit and plans to defend against them vigorously. However, the amount of exposure, the outcome, or its effect on the consummation of the Merger, cannot be predicted at this time. 7 In December, 1994, the Internal Revenue Service (the "Service") selected MedChem (P.R.) Inc.'s 1992 tax return and its qualifications under Section 936 for review. As a result of the review, the Service has initiated a request for technical advice from the National Office with respect to MedChem (P.R.), Inc.'s active conduct of a trade or business in Puerto Rico. The active conduct of a trade or business in Puerto Rico is a requirement of Section 936. Additionally, the Massachusetts Department of Revenue has selected for audit the Company's 1992 and 1993 state tax returns. At this time, the ultimate outcome of this review and audit cannot be predicted. The Company is currently involved in four pending product liability claims related to its Drug Delivery Group business. At this time the Company cannot estimate the exposure on its financial statements, if any, if the Company were unsuccessful in its defense of these claims. 8 PART I: FINANCIAL INFORMATION Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Overview ------------------ The Company reported consolidated net income of $1,174,911, or $0.11 per share, for the second quarter ended June 30, 1995, versus consolidated net income of $518,309 or $0.05 per share, for the quarter ended June 30, 1994. For the first six months of 1995, net income was $1,980,264 or $0.19 per share versus $1,601,445 or $0.16 per share in the comparable period last year. On July 29, 1994, the Company purchased substantially all of the assets and assumed certain liabilities of the Sure-Closure product line from Life Medical Sciences, Inc ("L.M.S."). The results of operations of the Sure- Closure product line since the date of acquisition have been included with those of the Company. On May 24, 1995, the Company announced that the Board of Directors had approved a definitive agreement for a stock-for-stock merger of the Company ("Merger") into C.R. Bard, Inc. ("Bard"). Under the terms of the agreement each MedChem share will be valued at $9.25, subject to adjustment under certain circumstances and will be exchanged for Bard shares. The transaction is expected to be a tax free reorganization and to be accounted for as a pooling of interests. Under certain circumstances, if a transaction does not occur, Bard has an option to purchase the Company's Gesco subsidiary ("Option"). Results of Operations --------------------- Net sales for the three month period ended June 30, 1995 increased 42% to $9,822,717 from $6,926,324 in the comparable period last year. During the second quarter of 1995, domestic sales increased 22% to $6,950,099 from $5,690,066 in the previous year's quarter. This increase was primarily due to sales generated by the recently acquired Sure-Closure product line. International sales for the three month period ended June 30, 1995 increased 132% to $2,872,619 from $1,236,258 in the comparable quarter in 1994, primarily due to increased sales to the Company's Avitene partner in Japan. Net sales for the first six months of 1995 increased by $4,384,153 or 30% to $19,243,987 from $14,859,834 in the corresponding period in the prior year. During the first half of 1995, domestic sales increased 15% to $14,332,907 from $12,453,342 in the comparable period in the prior year. This increase was primarily due to sales generated by the recently acquired Sure-Closure product line and increased sales from the Company's Gesco subsidiary. International sales for the first six months of 1995 increased by $2,504,589 or 104% to 9 $4,911,081 from $2,406,492 in the first six months of 1994, primarily due to increased sales to the Company's Avitene partner in Japan. In the first half of 1994, international sales were depressed due to the overstocking position at the Company's Avitene partner in Japan which were previously disclosed and rectified in calendar 1994. The Company anticipates an overall increase in total international sales in calendar 1995 as compared to 1994 primarily due to increased sales volume and more favorable exchange rates. Gross profit, as a percentage of net sales, for the three and six months ended June 30, 1995, each decreased to 68% from 69% in the comparable periods last year. Research and development expense (which includes regulatory and clinical trial expenses) increased to $511,681 and $1,114,433 for the three and six month periods ended June 30, 1995, respectively, from $302,937 and $481,118 in the prior year due mainly to the research and development being conducted in connection with the Sure-Closure product line and increased product development related to the Company's Drug Delivery Group products. The Company expects an increase in research and development expenses for the full 1995 year as compared to 1994 due to the addition of the Sure- Closure product line and increased product development related to its Drug Delivery Group product line. Selling, general and administrative expenses increased by $929,170 to $3,355,940 for the three month period ended June 30, 1995 from $2,426,770 in the prior year. For the first six months of 1995, selling, general and administrative expenses increased by $1,681,923 to $6,966,176 from $5,284,253 in the comparable period in the prior year. The increase is attributable to higher Surgical Specialty sales force selling and marketing expenses resulting from the addition of the Sure-Closure product line and increased corporate administrative expenses. The Company expects no significant increase in selling, general and administrative expenses as a percentage of net sales for 1995 as compared to 1994. Depreciation and amortization expense for the three and six months ended June 30, 1995 totalled $669,108 and $1,315,895, respectively, compared to $608,147 and $1,218,802 in the comparable periods in the prior year. The Company recorded net interest expense for the three and six month periods ended June 30, 1995 of $395,402 and $773,913 versus $199,793 and $617,422 for the comparable periods in 1994. The increase in interest expense for the first half of 1995 versus 1994 was due to higher interest rates and increased debt borrowing. The Company's effective tax rate for the three month and six months ended June 30, 1995, each increased to 32% from 28% in the 10 comparable period last year. The increase was due to the recently enacted changes to Section 936 which reduced the tax benefit to the Company. The Company anticipates its effective tax rate will increase to the statutory rate during the year as the Company completes the move of its Avitene finished goods manufacturing to the United States, as previously disclosed, and accordingly, loses its tax benefit under Section 936. Liquidity and Capital Resources ------------------------------- The Company generated net cash from operating activities of $2,525,794 in the first half of 1995 versus $1,800,260 in the comparable period last year. At June 30, 1995, the Company had a revolving line of credit agreement whereby the bank will lend the Company up to $9,000,000 at the bank's prime rate plus a quarter percent or cost of funds rate plus two and one quarter percent and a $10,000,000 term loan. At June 30, 1995 there was $7,350,000 outstanding under this line and $8,000,000 outstanding under the term loan. The line of credit expires in June 1997 and the $10,000,000 term loan is payable to the bank in quarterly installments of $500,000 through 1997, with a final payment of $4,500,000 due on May 1, 1997. The $4,103,204 of convertible subordinated debt issued to Gesco's principal sellers is convertible at the option of the holders into common stock at $11.73 per share. The note can be prepaid in whole, but not in part, at par at the Company's option, and is payable in full on August 4, 1997. In connection with the purchase of the Sure-Closure product line, the Company issued a non-interest bearing note payable to L.M.S. in the principal amount of $2,000,000. The first installment of $1,000,000 and the last installment of $1,000,000 were paid on October 27, 1994 and January 27, 1995 respectively. The Company believes that cash flow generated from its operating activities, as well as funds available under its bank line of credit, will be sufficient to enable the Company to conduct its operations and repay its indebtedness. 11 PART II: OTHER INFORMATION ----------------- Item 6: Exhibits and Reports on Form 8-K (a) Exhibit No. Description ----------- ----------- 10.1 Raw Material Contract Edible Bovine Corium dated April 18, 1995 10.2 Sixth Amendment to Revolving Credit and Term Financing dated April 14, 1995. 10.3 Amendment to Timothy Patrick's Employment Agreement. 11 Computation of earnings per share. 27 Financial Data Schedule. (b) Reports on Form 8-K ------------------- On June 7, 1995, the Company filed a current report on Form 8-K dated May 24, 1995 reporting the execution and delivery of an agreement and plan of merger among C.R. Bard, Inc., CRB Acquisition Corp., and the Company. 12 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. MEDCHEM PRODUCTS, INC. DATE: August 9, 1995 BY:/s/ Edward J. Quilty ----------------------------- Edward J. Quilty President Chief Executive Officer DATE: August 9, 1995 BY:/s/ John J. McDonough ---------------------------- John J. McDonough Vice President Chief Financial Officer 13 EX-10.1 2 RAW MATERIAL CONTRACT RAW MATERIAL CONTRACT EDIBLE BOVINE CORIUM MedChem Part No. 100-016 April 18, 1995 The Lackawanna Leather Company, a division of United States Leather, Inc., 2420 Z Street, Omaha, Nebraska, 68107, hereinafter called "Seller", agrees to sell, and MedChem Products, Inc., 232 West Cummings Park, Woburn, Massachusetts, 01801, hereinafter called "Buyer", agrees to buy, the following described product subject to the terms and conditions herein set forth: I. PRODUCT ------- Edible Bovine Corium obtained from cattle with an origin in the United States of America and an XXX XXXXXXXXX XXXXX XX XXXXX XX XX XXXX XXXX XXXX XXXXX. of extract made in accordance to Buyer's procedure DCN 94-022 for Edible Bovine Corium, as set forth on Exhibit A attached hereto, which shall be separately acknowledged and agreed to by each, the Seller and Buyer (the "Specifications".) II. WARRANTY -------- Seller warrants that the product delivered hereunder shall meet all Specifications, shall be produced in accordance with applicable GMP's and all other procedures identified by Buyer (pursuant to Article VIII 10) and shall be free of liens and encumbrances. This is the sole warranty provided by Seller and Buyer acknowledges that Seller hereby disclaims any implied warranties under the Uniform Commercial Code. III. LIMITATION OF LIABILITY ----------------------- Notwithstanding anything to the contrary contained herein and solely as it applies to pyrogen specification, Seller shall not be liable to Buyer for failing to produce products which meet the pyrogen specification identified on Exhibit A so long as the failure to meet such specification does not result from Seller's failure to meet all Specifications or to produce the product in accordance with applicable GMP's and all other procedures identified by Buyer (pursuant to Article VIII 10). In the event that Buyer does not accept product because such product does not meet the pyrogen specification, Buyer shall be liable to Seller for the invoice cost of the hides purchased and used to make such product. (X) Confidential material omitted and filed separately with the Securities and Exchange Commission. IV. PRICE AND QUANTITY ------------------ 1. Subject to the terms of this Agreement, Buyer agrees to purchase and Seller agrees to furnish an aggregate of XXXXXX pounds of product over the course of this contract. Additional quantity is negotiable upon Seller's ability to produce more product, and Buyer's desire to purchase a greater quantity. For the purposes of this agreement, all weights refer to wet Edible Bovine Corium weight at the time of packaging at the Seller's Omaha, Nebraska, facility. 2. Delivery schedule is defined in Article VI below. 3. Price per pound is: XXXXXX per pound XXXXX per pound payback of advance for start-up costs ------ XXXXXX per pound net price. 4. Start-up costs of XXXXXXX will be advanced to the Seller by the later of (i) 30 days after notice of the equipment renovation and (ii) 15 days after the date buyer receives an invoice for such advance. During the start-up, the Seller will replace an existing Challenge Mixer with a stainless steel mixer that is currently owned by the Seller. Title to the new stainless steel mixer will pass to the Buyer after installation free and clear of encumbrances. Title to the existing Challenge Mixer will pass to the Seller, free and clear of encumbrances. Seller shall pay back the advance of XXXXXXX by crediting the Buyer with XXXXX per pound for each pound sold hereby as shown in Paragraph 3 above. Up front start-up costs for which the advance may be used shall include the following: - Lease and install Reverse Osmosis Pure Water System XXXXXXX.XX - Trade Challenge Mixer for stainless steel mixer XXXXX.XX - Splitting machine servicing XXXXX.XX - Cleaning and painting materials XXXXX.XX - Cleaning and painting labor(80 hrs @ XXXXXXXX) XXX.XX - Freezer and air conditioner start-up XXX.XX - Calibration of temperature recorders XXX.XX ---------- XXXXXXX.XX
(X) Confidential material omitted and filed separately with the Securities and Exchange Commission. 2 5. The price per pound includes and Seller shall pay, all excise, sales, use, transfer or other taxes, federal, state and local, in connection with the sales or delivery of the product to Buyer. V. TITLE OF EQUIPMENT ------------------ All equipment purchased with the advance shall be retained by Buyer as its property. Buyer recognizes that Seller may use this equipment during the term of this Agreement for processing and products for other customers. However, the Seller must obtain prior written approval from the Buyer for each use. Seller hereby agrees to maintain this equipment in serviceable condition during each use. VI. DELIVERY SCHEDULE AND TERMS OF PAYMENT -------------------------------------- Each lot of product must meet acceptable Quality Control inspection criteria of the Buyer before being transferred from the Seller's Omaha, Nebraska location to the Massachusetts cold storage location. Seller Will: 1. Deliver a XXX pound sample lot to Buyer on or before July 15, 1995. The purpose of this shipment is to verify that the product is able to be processed into flour at Buyer's manufacturing facility at Woburn, Massachusetts. 2. Deliver XXXXX pounds to the Massachusetts cold storage facility by August 31, 1995. Deliver the remaining XXXXXX pounds on or before December 31, 1995. 3. a. Seller will also invoice Buyer on a monthly basis and Buyer will pay such invoices within 15 days from the date that the Buyer receives Seller's invoices; Invoices shall be as of the 1st of the month as sent by Seller as follows: i. For the eight (8) month period August 1995 through March 1996 invoiced at the rate of XXXX pounds per month. ii. For the twenty (20) month period April 1996 through November 1997 at the rate of XXX pounds per month. b. Unless the parties agree otherwise in writing, Seller must deliver the exact quantities specified (plus or minus 1%). Buyer reserves the right to reject incomplete deliveries and to return at Seller's risk and expense excess quantities delivered. (X) Confidential material omitted and filed separately with the Securities and Exchange Commission. 3 c. Buyer's production and marketing schedules are established in part in reliance upon the delivery information specified in this Agreement. If delivery cannot be made at the specified time and place, Seller shall promptly notify Buyer of the earliest possible date for a conforming delivery. Notwithstanding such notice, and unless otherwise agreed by Buyer in writing, Seller's failure to effect a conforming delivery shall entitle Buyer to revoke any acceptance, to terminate the Agreement without liability to Seller, to receive a full refund on any amount paid with respect to such shipment, to purchase substitute products elsewhere, to return at Seller's risk and expense all or any part of a nonconforming delivery and to hold Seller accountable for any loss or additional costs incurred. Buyer's receipt of acceptance of all or a part of a nonconforming delivery shall not constitute a waiver of any claim, right or remedy under the Agreement or under applicable law. VII. SERVICES TO BE PROVIDED BY SELLER AT SELLER'S EXPENSE ----------------------------------------------------- 1. Appropriate clean facility satisfying GMP to conduct production. 2. Obtaining hides. 3. Processing hides. 4. Quality Control services by a sub-contractor approved by Buyer. 5. Training of Seller's work force. 6. Hiring of all labor and support people to manage the activity. 7. Setup and maintenance support for equipment to include calibrations. 8. Temporary cold storage of product at: - Omaha, Nebraska Temperature will be monitored and recorded. Temperature to be maintained in the range of -20 degrees F to +10 degrees F (monitoring specifications are attached hereto in Appendix A). 9. Supplying pure water through a leased Reverse Osmosis System. 10. Disposal of all waste in accordance with governmental and industry regulations. 4 11. Freight charges to deliver product to Massachusetts cold storage facility (monitoring specifications are attached hereto in Appendix A). 12. Insure product for loss while in transit. VIII. GENERAL TERMS ------------- 1. Seller will identify each container of Edible Bovine Corium with the gross weight of the contents of the container, MedChem Part number 100-016 and Lot #_____. All products shall be packaged, marked and otherwise prepared for shipment by Seller in suitable containers in conformity with reasonable commercial practices. Seller shall mark on containers all necessary handling, loading and shipping instructions. An itemized packing list shall be included with each shipment. 2. Seller will provide a certificate of origin with each Lot # delivered to Buyer. This certificate will verify that the cattle, from which the product was harvested, had an origin in the United States of America. 3. For the term of the contract, arrangement and cost of refrigerated transportation of the product to the storage facility at Crystal Cold Storage and Warehouse, Inc., 25 Sycamore Avenue, Medford, Massachusetts, 02155, will be the responsibility of the Seller. Temperature will be monitored in transit and will be maintained between -20 degrees F and +10 degrees F (monitoring specification as attached hereto in Appendix A). 4. Title to product sold hereunder shall pass to Buyer upon delivery by Seller of conforming product and acceptance by Buyer at Crystal Cold Storage and Warehouse. 5. Seller agrees that Buyer, its agents and representatives, including but not limited to, Buyer's insurance representatives and underwriters, may inspect Seller's Omaha, Nebraska premises in a reasonable manner, with reasonable frequency, and for reasonable periods of time, for the purpose of monitoring the manufacture of the product and compliance with the terms of the Agreement and, for the purpose of rendering insurance advice to the Buyer in connection with this Agreement. 5 6. All products shall be received subject to Buyer's inspection, testing, and approval at Seller's premises, and subject to Buyers's acceptance of such products at Crystal Cold Storage and Warehouse after inspection and testing of the conditions of such products after shipping, notwithstanding any prior payment for such products. The test, lab and any other inspection data;recorder data during initial testing, warehousing and transit will be provided to Seller by Buyer to perfect Buyer's claim for product rejected by Buyer upon inspection and testing at the Crystal Cold Storage and Warehouse. Upon a rejection of such a shipment and notice of said rejection by Buyer to Seller it shall be Seller's responsibility to adjust its production schedule to replace such rejected product within the delivery parameters specified under Article VI 3. Products rejected by Buyer as not conforming to the Specifications may be returned to Seller at Seller's risk and expense. 7. Seller's warranties under Article II of this Agreement shall survive any delivery, inspection, acceptance, payment or resale of the products and shall extend to Buyer and its customers. Following such delivery, inspection, acceptance, payment or resale of such products and notwithstanding anything to the contrary set forth herein, Seller shall only be liable with respect to such products in connection with any breach of its warranties in Article II of this Agreement. Seller shall indemnify and hold Buyer harmless against any and all claims, losses, liabilities, damages, costs or expenses, including attorneys' fees and court costs, resulting from the breach of Seller's Article II Warranty(s) under this Agreement. Seller and Buyer shall each maintain with an insurance company or companies comprehensive general liability insurance (including product liability hereunder) in the minimum amount of $2,000,000. Any amount owed to Seller by Buyer shall be subject to deduction for any set-off, counterclaim or indemnification right arising out of this Agreement. 8. Sellers' liability to Buyer for breach of warranty or otherwise shall not include any incidental or consequential damages. 9. Notwithstanding anything to the contrary contained in this agreement, neither party will be liable for any default, damages or expenses under this agreement as a result of such party's failure to perform its duties under this Agreement, due to interruptions of the supply of raw materials, complete or partial destruction of the manufacturing/processing facilities, labor disputes and other matters reasonably beyond the control of either party; provided, however, that the party claiming the foregoing shall make a good faith effort to remedy any of the above contingencies. In such event, the time for performance shall be extended for the period of delay or inability to perform due to such event. During any period of shortage, Seller's first obligation will be to supply Buyer with its requirement as outlined in the PRICE AND QUANTITY section of this agreement. 6 10. The product will be manufactured in conformance with the Specifications. However, the Buyer shall have the right to change the Specifications as reasonably desired by Buyer or as required by Federal regulations upon prior written notice to Seller provided that Buyer shall reimburse Seller for any reasonable additional costs incurred by Seller in meeting such revised Specifications. Seller may not make any changes in the Specifications without the prior written approval of the Buyer. 11. This agreement gives no license to Seller, either expressed or implied, under any patents, patent applications or other intellectual property of Buyer or under which Buyer has a right to grant licenses. 12. Seller acknowledges and agrees that all specifications, drawings, diagrams, schematics, sketches, models, samples, designs, technical information or data, written, oral or otherwise, furnished by Buyer to Seller is and shall remain Buyer's sole and exclusive property, and shall be returned promptly to Buyer upon the earlier of its request or the termination or completion of the agreement. Seller acknowledges and agrees that all such intellectual and industrial property shall be treated as confidential and shall not be used or disclosed by Seller except under this Agreement. Buyer further represents and warrants that the products delivered hereunder do not infringe any United States or foreign patent trademark, trade secret or copyright or any proprietary, intellectual property, industrial property, contract or other right held by any third party. 13. This agreement (other than the first two sentences of Section 12) shall terminate within 30 days after Seller has invoiced Buyer for ----- all of the product required to be delivered by this Agreement unless sooner terminated by Buyer and may be extended upon mutual agreement of the parties. This agreement is not transferable nor assignable by Buyer or Seller without the prior written consent of the other party, but shall be binding upon and inure to the benefit of the parties hereto and their respective successors. 14. All notices to be provided hereunder shall be in writing, and shall be deemed given when addressed to a party hereto at the address set forth above, when deposited with the U.S. Mail, registered or certified, or when deposited with a nationally recognized overnight courier service. 15. This Agreement is to be governed by the laws of the State of Nebraska. 7 16. Termination: ------------ (a) Buyer may, by written notice to Seller, terminate the whole or any portion of this Agreement in the event of (i) proceedings, voluntary or involuntary, in bankruptcy or insolvency, by or against Seller, (ii) the appointment, with or without Seller's consent, of any trustee or receiver for any substantial portion of Seller's assets, (iii) any assignment for the benefit of Seller's creditors, or (iv) Sellers' breach of any provision contained herein; Provided that in the event of a breach by Seller of any provision contained herein, Seller shall have 30 days from notice by Buyer to cure such breach and this Agreement shall only be terminable to the extent that such breach is not cured by such 30 day period. In the event of any such termination, Buyer may procure, upon such terms and in such manner as it may deem appropriate, products comparable to the products covered by the Agreement so terminated, and Seller shall be liable to Buyer for any excess cost of such comparable products. In the event of any such termination, Buyer may require Seller to deliver to it, in the manner and to the extent directed by it, any completed or partially completed products, against Buyer's payment of the portion of the price properly allocable to such products. Seller shall continue performance of this Agreement to the extent not terminated. Except to the extent specifically set forth herein, Buyer shall have no obligation or liability to Seller in respect of the terminated portion of this Agreement. Notwithstanding the foregoing, Seller shall not be liable to Buyer for excess costs or other damages if Seller's default is due to a cause beyond its reasonable control and without its negligence. Such notice shall be in writing and mailed by U.S. Mail addressed to the Seller, and the date of notice shall be the date of mailing. In the event of any such termination, all deposits or prepayments shall be deemed to have been held in trust for Buyer's benefit and shall be returned to Buyer promptly upon request. (b) Subject to Section 7 hereof, all of Seller's representation, warranties and indemnification obligations set forth in this Agreement shall survive the cancellation, termination or completion of this Agreement with respect to any product sold to Buyer prior to cancellation, termination or completion. 8 17. Compliance with Laws: --------------------- Seller shall comply with all applicable governmental laws, ordinances, codes, rules, regulations and orders in the performance of this Agreement, including, without limitation, the Occupational Safety and Health Act, the Fair Labor Standards Act of 1938, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, and Executive Order 11246, along with the implementing rules and regulations of the office of Federal Contracts Compliance. At Buyer' request, Seller shall obtain all permits or licenses required in connection with the manufacture, sale, shipment and installation of the products ordered hereby. 18. Authorization: -------------- Seller represents and warrants that it has been duly authorized to execute, deliver and perform this Agreement, and the person signing on Seller's behalf has the power and authority to do so. 19. Severability; Remedies; Waiver: ------------------------------- In the event that any one or more provisions contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The remedies contained herein are cumulative and in addition to any other remedies at law or equity. Buyer's failure to enforce, or waiver of a breach of, any provision of this Agreement shall not constitute a waiver of any other breach of such provision. 20. Entire Agreement: ----------------- This Agreement is the complete and exclusive statement of the contract between Buyer and Seller with respect to Buyer's purchase of the products. No waiver, consent, modification, amendment or change of the terms of this Agreement shall be binding unless in writing and signed by Buyer and Seller. All of the foregoing is accepted as of the date set forth above. MEDCHEM PRODUCTS, INC. LACKAWANNA LEATHER By: /s/ Edward J. Quilty By: /s/ Jeff Whitver ---------------------------------- ------------------------------- Date: Date: 4/18/95 ------------------------------- ----------------------------- 9 EX-10.2 3 SIXTH AMENDMENT TO REVOLVING CREDIT AND TERM FINANCING DATED APRIL 14, 1995 SIXTH AMENDMENT TO REVOLVING ---------------------------- CREDIT AND TERM LOAN AGREEMENT ------------------------------ THIS AGREEMENT (the "Amendment") is made as of the 14th day of April, 1995 by and among MEDCHEM PRODUCTS, INC., (the "Parent") and its affiliates, MEDCHEM (P.R.), INC. (f/k/a BioChem Products, Inc.) ("MedChem PR"), MEDCHEM SECURITIES CORPORATION, MEDCHEM PRODUCTS FOREIGN SALES CORPORATION; and GESCO INTERNATIONAL, INC. ("Gesco") (all of the foregoing, together with the Parent, the "Borrowers"); and FLEET BANK OF MASSACHUSETTS, N.A. (the "Bank"). RECITALS -------- A. The Bank and the Borrowers are parties to a Revolving Credit and Term Loan Agreement dated as of July 31, 1992, as amended by the First, Second, Third, Fourth and Fifth Amendments (as so amended, the "Loan Agreement"). Capitalized terms used herein without definition shall have the meanings assigned to them in the Loan Agreement. B. The Parent has entered into a Distribution Agreement (the "Distribution Agreement") with Coletica, a French societe anonyme ("Coletica"), and an Escrow Agreement (the "Escrow Agreement") with Coletica and Fleet Bank of Maine ("Escrow Agent"), each dated as of March 31, 1995. C. The Borrowers have requested a $2,000,000 increase in the Commitment to be used as the Deposit (as defined in and required by the Distribution Agreement). D. The Borrowers have also requested that the Bank issue a reducing standby letter of credit for Borrowers' account in favor of its contract manufacturer, Alcon, P.R. E. Subject to certain terms and conditions, the Bank is willing to agree to the same, as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Amendments to Loan Agreement. ---------------------------- The Loan Agreement is hereby amended as follows: (A) Exhibits. Exhibit 1.2(a) to the Loan Agreement is deleted and new -------- Exhibit 1.2(a) attached hereto is substituted therefor (being an amended and restated Revolving Note in the amount of $9,000,000). Exhibit 3.15 to the Loan Agreement is deleted and new Exhibit 3.15 attached hereto is substituted therefor (being an updated patent, trademark, patent application and trademark application list). (B) Revolving Note Interest. Section 1.4(a) of the Loan Agreement is amended ----------------------- by deleting it in its entirety and inserting in its place the following language: "(a) Subject to the terms and conditions of subsection (c) of this Section, the Borrowers shall pay interest on the Revolving Loans outstanding from time to time at a rate per annum as follows: (i) the rate for any portion of each Revolving Loan which is not then subject to a Fixed Rate Option shall be the Prime Rate plus the Prime Rate Applicable Margin, which rate of interest shall change contemporaneously with any change in the Prime Rate. (ii) the rate for any LIBOR Portion shall be the applicable LIBOR Rate plus the Fixed Rate Applicable Margin. (iii) the rate for any Cost of Funds Portion shall be the applicable Cost of Funds Rate plus the Fixed Rate Applicable Margin. For purposes of this Agreement, the term "Applicable Margin" shall mean: ----------------- (i) from and after April 14, 1995 until the first Quarterly date, the Applicable Margin shall be 2.25%; and (ii) from and after June 30, 1995 and each Quarterly Date thereafter until the Expiration Date, the Applicable Margin shall be determined from the following table based upon the ratio of Indebtedness (excluding trade debt and accrued liabilities) on such Quarterly Date to Net Cash Flow for the four-quarter period ending on such Quarterly Date, based on the consolidated financial statements of the Borrowers provided under Section 4.1(a) and (c):
Ratio of Indebtedness Prime Rate Fixed Rate to Net Cash Flow Applicable Margin Applicable Margin --------------------- ------------------ ------------------ Greater than 2.00:1.00 .25% 2.25% Less than or equal to 2.00:1.00 and greater than 1.50:1.00 -0- 2.00% Less than or equal to 1.50:1.00 -0- 1.75%
-2- Notwithstanding the foregoing, no downward adjustment of the Applicable Margin hereunder shall be permitted (a) unless all of the financial statements for the relevant fiscal year have been delivered to the Bank as required in Section 4.1(a) and (c); and (b) if, as of the date of such proposed downward adjustment, there shall exist any Default." (C) Mandatory Commitment Reduction and Prepayments of Loans. Section 1.16 of ------------------------------------------------------- the Loan Agreement is amended by changing the title thereof from "1.16 Mandatory --------- Commitment Reduction and Prepayments of Term Loan." to "1.16 Mandatory ------------------------------------------------- --------- Prepayments of Loans." and by adding the following additional sentences at the -------------------- end of said Section 1.16 as follows: "On the date the Parent is entitled pursuant to the terms of the Escrow Agreement to receive the escrow funds from the Escrow Agent: (a) the Commitment will automatically reduce to a $7,000,000, and (b) the Borrowers jointly and severally shall be required to prepay the outstanding balance of the Revolving Loans in such amount, if any, as is necessary to bring the principal amount thereof within the limits of the Commitment as so reduced, plus accrued and unpaid interest thereon. So long as the Commitment has not been permanently voluntarily reduced to $7,000,000 by the Borrowers, the Parent agrees that it shall not agree with Coletica to extend the "best efforts" date set forth in Section 2.5(c) of the Distribution Agreement for Premarket Approval (as defined in the Distribution Agreement) without the prior written consent of the Bank which consent shall not be unreasonably withheld." (D) Standby Letter of Credit. A new Section 1.18 to the Loan Agreement is ------------------------ added as follows: "1.18 Standby Letter of Credit. Subject to the conditions to Loans set ------------------------ forth in Section 2 of the Loan Agreement, all of which must be met, and subject to the terms of the Bank's letter of credit application and agreement therefor, the Bank shall issue a standby letter of credit (the "Letter of Credit") for the account of the Borrowers for the benefit of Alcon, P.R. with an initial drawing amount of $765,912.58 which reduces to $665,912.58 on April 30, 1995, $465,912.58 on May 31, 1995, $265,912.58 on June 30, 1995 and -0- on July 31, 1995 when it shall terminate. Each draw made on the Letter of Credit shall be due and payable jointly and severally by the Borrowers on the date of such draw. Unpaid draws shall accrue interest at the Revolving Loan default rate set forth in Section 1.4(c) hereunder. A fee of 1.50% on the Letter of Credit shall be paid to the Bank upon its issuance. All Obligations relating to -3- the Letter of Credit shall be secured by all of the collateral now or hereafter granted under the Security Documents. Upon the termination of the Commitment or the acceleration of the Loans, in the event the Letter of Credit has not terminated by its terms, the Borrowers immediately shall jointly and severally pay to the Bank an amount equal to the then available drawing amount on the Letter of Credit to be held as cash collateral for the Borrowers' obligation to pay draws and other Obligations relating to the Letter of Credit." (E) Amended and New Definitions. The following definitions in Section 8 of --------------------------- the Loan Agreement are amended or added to read as follows: "Applicable Margin": See Section 1.4(a). ----------------- "Commitment": $9,000,000, subject to automatic reduction pursuant to ---------- Section 1.16. "Letter of Credit": See Section 1.18. ---------------- "Quarterly Date": March 31, June 30, September 30 and December 31. -------------- 2. No Further Amendments. --------------------- Except as specifically amended hereby, the Loan Agreement and the Security Documents shall remain unmodified and in full force and effect and are hereby ratified and affirmed in all respects, and the indebtedness of the Borrowers to the Bank evidenced thereby and by the Notes is hereby reaffirmed in all respects. 3. Certain Representations of the Borrowers. ---------------------------------------- As a material inducement to the Bank to enter into this Amendment, each of the Borrowers hereby represents and warrants to the Bank (which representations and warranties shall survive the delivery of this Amendment), after giving effect to this Amendment, as follows: (A) The execution and delivery of this Amendment and the revised Notes have been duly authorized by all requisite corporate action on the part of the Borrowers and will not violate any provision of law, any order, judgment or decree of any court or other agency of government, or the articles or bylaws of any of the parties thereto or any indenture, agreement or other instrument to which any of the parties thereto is bound, or be in conflict with, or result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any -4- of the property or assets of any of the parties thereto pursuant to, any such indenture, agreement or instrument. (B) The representations and warranties contained in Section 3 of the Loan Agreement or in Section 3 of the Security Agreement or in any of the other Security Documents and the information set forth in the Exhibits thereto (as previously revised hereunder) and in the Officer's Certificate are true and correct in all material respects on and as of the date of this Amendment as though made at and as of such date (except to the extent that such representations and warranties expressly relate to an earlier date or except to the extent variations therefrom have been permitted under the terms of the Loan Agreement or otherwise in writing by the Bank). No material adverse change has occurred in the assets, liabilities, financial condition, business or prospects of the Parent or the other Borrowers, taken as a whole from that disclosed in the financial statements most recently furnished to the Bank pursuant to Sections 3.5, 4.1(a) or 4.1(c) of the Loan Agreement. No Default has occurred and is continuing. (C) Each of this Amendment and the revised Notes constitutes the legal, valid and binding obligations of each of the Borrowers, enforceable against each of the Borrowers in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors generally or the application of principles of equity, whether in any action at law or proceeding in equity, and subject to the availability of the remedy of specific performance or of any other equitable remedy or relief to enforce any right thereunder. 4. Waivers. ------- The Borrowers have informed the Bank that they changed their fiscal year from a November 30 fiscal year end to a December 31 fiscal year end, effective as of December 1, 1994, without the Bank's prior written consent, in violation of Section 4.6 of the Loan Agreement. The Borrowers have also informed the Bank that they failed to maintain a ratio of Indebtedness (excluding trade debt and accrued liabilities) to Net Cash Flow of no more than 2.00:1.00 for the four- quarter periods ending on December 31, 1994 and March 31, 1995 in violation of Section 5.1(e) of the Loan Agreement. Subject to the terms of this Amendment, the Bank is willing to waive such Events of Default; provided, however, -------- ------- nothing in this Amendment (including without limitation this Section 4 or the interest adjustments set forth in Section 1.4(a) as amended herein) shall constitute a waiver of any other covenant, Default, Event of Default or right or remedy now or hereafter available to the Bank and such waivers set forth herein shall not constitute a waiver of, or consent to, any other fiscal year change or any breach of the maximum permitted Indebtedness to Net Cash Flow ratio of 2.00:1.00 for any four-quarter period ending after March 31, 1995. -5- 5. Conditions. ---------- The willingness of the Bank to agree to the foregoing and to make further Advances under the Loan Agreement are subject to the following conditions: (A) The Borrowers shall have executed and delivered to the Bank (or shall have caused to be executed and delivered to the Bank by the appropriate persons) the following: (i) This Amendment, the revised Revolving Note and a Conditional Assignment of the Parent's rights under the Distribution Agreement and the Escrow Agreement; (ii) True and complete copies of the Distribution Agreement, the Escrow Agreement and any required stockholders' and directors' consents and/or resolutions, authorizing the execution and delivery of this Amendment and other documentation referred to in this Section 4, certified by the respective secretaries of the Borrowers; and (iii) Such other supporting documents and certificates as the Bank or its counsel may reasonably request. (B) The Bank shall have received the favorable written opinion of general counsel for the Borrowers satisfactory to the Bank in scope and substance. (C) The Borrowers shall have paid to the Bank a Commitment increase fee of $10,000 and a waiver fee of $5,000. (D) The proceeds of the $2,000,000 increase in the Commitment provided for hereunder shall be used solely for the Deposit (as defined in the Distribution Agreement) and, subject to the terms of the Loan Agreement, shall be deposited directly into an escrow account at the Escrow Agent pursuant to the Escrow Agreement. (E) All legal matters incident to the transactions contemplated hereby shall be satisfactory to counsel for the Bank. 6. Miscellaneous. ------------- (A) As provided in the Loan Agreement, the Borrowers agree to reimburse the Bank upon demand for all out-of-pocket costs, charges, liabilities, taxes and expenses of the Bank (including reasonable fees and disbursements of counsel to the Bank) in connection with the (a) preparation, negotiation, interpretation, execution and delivery of this Amendment and -6- any other agreements, instruments and documents executed pursuant or relating hereto, and (b) any enforcement hereof. (B) This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. (C) This Amendment may be executed by the parties hereto in several counterparts hereof and by the different parties hereto on separate counterparts hereof, all of which counterparts shall together constitute one and the same agreement. -7- IN WITNESS WHEREOF, the Bank and the Borrowers have caused this Amendment to be duly executed as a sealed instrument by their duly authorized representatives, all as of the day and year first above written. MEDCHEM PRODUCTS, INC. By:/s/ John J. McDonough ----------------------------- Title:V.P. Finance C.F.O. MEDCHEM (P.R.), INC. (f/k/a BioChem Products, Inc.) By:/s/ John J. McDonough ----------------------------- Title: MEDCHEM SECURITIES CORPORATION By:/s/ John J. McDonough ----------------------------- Title: MEDCHEM PRODUCTS FOREIGN SALES CORPORATION By:/s/ John J. McDonough ----------------------------- Title: GESCO INTERNATIONAL, INC. By:/s/ John J. McDonough ----------------------------- Title: FLEET BANK OF MASSACHUSETTS, N.A. By:/s/ Elise M. Russo ----------------------------- Title: -8- Exhibit 1.2(a) -------------- PROMISSORY NOTE --------------- $9,000,000 Dated June 19, 1992 and amended and restated Boston, Massachusetts on April 14, 1995 FOR VALUE RECEIVED, the undersigned (the "Makers") hereby jointly and severally promise to pay to FLEET BANK OF MASSACHUSETTS, N.A. (the "Bank"), or order, at the principal office of the Bank at 75 State Street, Boston, Massachusetts 02109 or to such other address as advised in writing by the Bank, the principal amount of NINE MILLION DOLLARS ($9,000,000) or such lesser amount as shall equal the aggregate unpaid principal amount outstanding of Revolving Loans made by the Bank to the Makers pursuant to and as defined in the Agreement referred to below, in lawful money of the United States of America and in immediately available funds, and to pay interest on the unpaid principal balance hereof from time to time outstanding, at said office and in like money and funds, for the period commencing on June 19, 1992 until paid in full, payable on the dates and at the rate or rates specified in the Agreement. All principal shall be due and payable in accordance with the Agreement, and all principal remaining unpaid and any accrued but unpaid interest shall in any event be due and payable on May 31, 1996. This Note is issued pursuant to, and entitled to the benefits of, and is subject to, the provisions of a certain Revolving Credit and Term Loan Agreement dated as of July 31, 1992 by and among the Makers and the Bank (as amended or extended from time to time, the "Agreement"), but neither this reference to the Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of the Makers jointly and severally to pay the principal of and interest on this Note as herein provided. This Note is a revolving note and, subject to the foregoing and to the terms of the Agreement, the Makers may borrow, pay, prepay and reborrow hereunder, all in accordance with the provisions of this Note and the Agreement; provided, however, the principal balance outstanding shall at no time exceed the -------- face amount of this Note. Under certain circumstances, a portion of the principal amount is also subject to mandatory prepayment under the terms of the Agreement. In case an Event of Default (as defined in the Agreement) shall occur, the aggregate unpaid principal of and accrued interest on this Note shall become or may be declared to be due and payable in the manner and with the effect provided in the Agreement. All agreements involving any of the Makers and the Bank are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid to the Bank for the use or forbearance of the indebtedness evidenced hereby exceed the maximum amount which the Bank is permitted to receive under applicable law. If, from any circumstances whatsoever, fulfillment of any provision hereof or of the Agreement, at the time performance of such provision shall be due, shall involve exceeding such amount, then the obligation to be fulfilled shall automatically be reduced to the limit of such validity, and if from any circumstance the Bank should ever receive as interest an amount which would exceed such maximum amount, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results -------- ------- in a higher permissible rate of interest, then this Note shall be governed by such new law as of its effective date. This provision shall control every provision of all agreements involving any of the Makers and the Bank. No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. Each of the Makers and every endorser or guarantor of this Note, regardless of the time, order or place of signing, waives presentment, demand, protest, notice of dishonor and other demands and notices of every kind (except notices, if any, otherwise expressly provided for in the Agreement) in connection with the delivery, acceptance, performance and enforcement of this Note and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release of any other party or person primarily or secondarily liable. If this Note shall not be paid when due and shall be placed by the Bank in the hands of any attorney for collection, through legal proceedings or otherwise, the Makers jointly and severally will pay reasonable attorneys' fees to the Bank, together with reasonable costs and expenses of collection, including, without limitation, any such attorneys' fees, costs and expenses relating to any proceedings with respect to the -2- bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation of any Maker. This Note shall inure to the benefit of the Bank and its successors and assigns and subsequent holders hereof. This Note shall have the effect of an instrument executed under seal and shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without giving effect to any conflicts of laws provisions contained therein). MEDCHEM PRODUCTS, INC. By: /s/ John J. McDonough ------------------------ Title: V.P. Finance C.F.O. MEDCHEM (P.R.), INC. (f/k/a BioChem Products, Inc.) By: /s/ John J. McDonough ------------------------ Title: MEDCHEM SECURITIES CORPORATION By: /s/ John J. McDonough ------------------------ Title: MEDCHEM PRODUCTS FOREIGN SALES CORPORATION By: /s/ John J. McDonough ------------------------ Title: GESCO INTERNATIONAL, INC. By: /s/ John J. McDonough ------------------------ Title: EX-10.3 4 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- This Agreement (the "Agreement"), made as of this ___ day of March, 1995, is entered into by and between MedChem Products, Inc., a Massachusetts corporation with its principal place of business at 232 West Cummings Park, Woburn, Massachusetts 01801 (the "Company"), and Timothy Patrick, residing at 3785 Newport Bay Drive, Alpharetta, Georgia 30202 (the "Employee"). The Company and the Employee are parties to an Employment Agreement dated February 13, 1995 (the "Employment Agreement"). The Company and the Employee desire to make certain amendments to the Employment Agreement. In consideration of these premises, the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto agree as follows: 1. Section 6.3 of the Employment Agreement is hereby amended by replacing the "." at the very end of such section (after the word "assets") with a semi- colon, ";", and adding the following after the end of clause (iv) thereof: "(v) there is a merger or consolidation of the Company's wholly-owned subsidiary, Gesco International, Inc. ("Gesco") with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of Gesco outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of Gesco or such surviving entity outstanding immediately after such merger or consolidation, (B) a merger or consolidation effected to implement a recapitalization of Gesco (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of Gesco's then outstanding securities or (C) a merger or consolidation with any corporation that controls, is controlled by or is under common control with the Company (including a merger or consolidation with the Company); or (vi) there is a plan of complete liquidation of Gesco or an agreement for the sale or disposition by Gesco of all or substantially all of Gesco's assets (such events in the preceding clauses (v) and (vi) being hereinafter referred to as "Gesco Events"). 2. The Employment Agreement is hereby amended by inserting the following after the end of Section 6.1: "(vi) in the event such Change in Control of the Company results from a Gesco Event, each option to purchase shares of capital stock of the Company previously granted to the Employee pursuant to any stock option plan or other employee benefit arrangement of the Company shall continue to vest, and shall continue to be exercisable, all in accordance with its original terms until its expiration date, notwithstanding any provisions in such option relating to earlier termination of such option upon termination of employment." 3. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to conflict of laws provisions. 4. In all respects other than as specifically provided in this Agreement, the Employment Agreement is hereby ratified and affirmed. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above. MEDCHEM PRODUCTS, INC. By: /s/ James Marten ---------------------------- Title: Chairman --------------------------- /s/ Timothy Patrick --------------------------------- Timothy Patrick -2- EX-11 5 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 MedChem Products, Inc. and Subsidiaries Computation of Primary and Fully Diluted Earnings Per Share
Three months ended Six months ended June 30, June 30, 1995 1994 1995 1994 ------------------------------- ------------------------------- PRIMARY : --------- Net income $1,174,911 $518,309 $1,980,264 $1,601,445 Weighted average number of common shares outstanding 10,252,415 10,091,142 10,242,888 10,091,142 Dilutive effect of outstanding stock options 446,360 213,675 280,042 213,675 ----------- ------------- ----------- -------------- Weighted average number of common shares as adjusted 10,698,775 10,304,817 10,522,930 10,304,817 ----------- ------------- ----------- -------------- Primary earnings per share $0.11 $0.05 $0.19 $0.16 =========== ============= ============ ============== FULLY DILUTED: -------------- Net income $1,174,911 $518,309 $1,980,264 $1,601,445 Weighted average number of common shares outstanding 10,252,415 10,091,142 10,242,888 10,091,142 Dilutive effect of outstanding stock options 679,271 213,675 398,083 213,675 ----------- ------------- ----------- -------------- Weighted average number of common shares as adjusted 10,931,686 10,304,817 10,640,971 10,304,817 ----------- ------------- ----------- -------------- Fully diluted earnings per share $0.11 $0.05 $0.19 $0.16 =========== ============= =========== ==============
EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 APR-01-1995 JUN-30-1995 1,335 0 4,429 0 9,347 19,921 13,578 3,405 81,031 6,356 0 113 0 0 56,644 81,031 9,823 9,823 3,163 3,163 4,537 0 395 1,728 553 1,175 0 0 0 1,175 0.11 0.11