-----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, Ty/jnrKXK4L93k6dPaBD6MKoaDnSayJ/7GNXoTlqvw8pkPNIYAIaAy3Xq7bzWyhc 4inExIc8hNhcPHxxm6GBhw== 0000927016-98-004379.txt : 19981231 0000927016-98-004379.hdr.sgml : 19981231 ACCESSION NUMBER: 0000927016-98-004379 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19981003 FILED AS OF DATE: 19981230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUTRAMAX PRODUCTS INC /DE/ CENTRAL INDEX KEY: 0000818467 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 061200464 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18671 FILM NUMBER: 98778603 BUSINESS ADDRESS: STREET 1: 9 BLACKBURN DRIVE CITY: GLOUCESTER STATE: MA ZIP: 01930 BUSINESS PHONE: 5082831800 MAIL ADDRESS: STREET 1: 9 BLACKBURN DRIVE CITY: GLOUCESTER STATE: MA ZIP: 01930 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: October 3, 1998 Commission File Number O-18671 NUTRAMAX PRODUCTS, INC. (Exact name of registrant as specified in its charter) Delaware 061200464 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) identification No.) 51 Blackburn Drive, Gloucester, Massachusetts 01930 (Address of Principal executive offices) (Zip code) Registrant's telephone number, including area code: (978) 282-1800 --------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act Common Stock, par value $.001 per share Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [_] No [X] The aggregate market value of the registrant's voting stock held by non- affiliates (based upon the closing price of $5.13 on December 24, 1998) was approximately $12,324,861. As of December 24, 1998 there were 5,672,501 shares of Common Stock, par value $.001 per share, outstanding. Indicate by check mark if disclosure of delinquent filer pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [_] NO [X] -------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Portion of the Proxy Statement for the Annual Meeting of Stockholders to be held in 1999 are incorporated by reference into Part III. The Index to Exhibits begins on Page 30. PART I ITEM 1. BUSINESS GENERAL NutraMax Products, Inc. (the "Company") was incorporated on April 20, 1987 under the laws of the State of Delaware and is the successor by merger in July 1990 to Aid-Pack, Inc., formally a wholly-owned subsidiary of MEDIQ Incorporated ("MEDIQ"). The Company is a private label health and personal care products company. The Company's strategy is to offer a line of quality products equivalent to national brands at lower cost to consumers while providing greater profit potential to retailers than the national brands. National brands dominate health and personal care product categories. However, in recent years private label products have captured increased market share by appealing to value conscious consumers seeking lower cost products of comparable quality. PRODUCTS Feminine Needs - The Company manufactures disposable douches for sale under its value brands Sweet' n Fresh(R) and Sweet Love(R) and on a private label basis. In February 1996, the Company acquired certain assets of the Hospital Specialty Company Division of the Tranzonic Companies related to the manufacture and sale of feminine hygiene products. Sales of douche products in fiscal 1998 were 13% on net sales, as compared to 19% in 1997 and 23% in 1996. Cough/Cold products- The Company is the leading manufacturer and distributor of private label cough drops and throat lozenges, and also manufactures cough drops on a contract basis. The Company offers and extensive line of solid dosage cough/cold products, including cough drops, throat lozenges, sugar-free products, vitamin C drops and liquid center items. Sales of cough/cold products represented 27%, 34% and 31% of net sales in fiscal 1998, 1997 and 1996, respectively. Baby Care- The Company manufactures disposable baby bottle liners on a private label basis and under its value brand Fresh n Easy(R). The Company manufactures pediatric electrolyte oral maintenance solution, a product which is used to replace minerals lost by children who suffer from diarrhea and vomiting, for sales under its value brand NutraMax Baby Care Pediatric Electrolyte and on a private label basis. During fiscal years 1998, 1997 and 1996, sales of baby care products represented 11%, 15% and 15% of net sales, respectively. Ophthalmics - The Company manufactures private label over-the-counter and prescription ophthalmic products for retail and industrial customers, including over-the-counter contact lens solutions, artificial tears and eye drops, as well as generic prescription eye care products. Sales of ophalmic products represented 8%, 10% and 9% of net sales in fiscal 1998, 1997 and 1996 respectively. Adult Nutrition Products - in March 1995, the Company introduced a new line of adult high calorie liquid nutrition products which were sold under its value brand NutraMax Plus High Calorie Liquid Nutrition and on a private label basis. During fiscal 1996, the Company introduced a lower calorie version of this same product sold under its value brand name NutraMax Complete Liquid Nutrition. These products were manufactured by a third party and marketed by the Company through its distribution channels. During fiscal 1998, 1997 and 1996 sales of adult liquid nutrition products represented 1%, 4% and 5% of net sales, respectively. The Company withdrew from this market in 1998. Personal Care - The Company manufactures ready-to-use disposable enemas for sale under its value brand Pure & Gentle, on a private label basis and for the institutional market. During fiscal 1998, 1997 and 1996 sales of Personal Care products represented 4%, 5% and 5% of net sales, respectively. 1 Oral Care - In October 1995, the Company acquired the assets and assumed certain liabilities of Mi-Lor Corporation, Professional Brushes, Inc. and Codent Dental Products, Inc., companies engaged in the manufacturing and marketing of tooth brushes, dental floss and related products for the store brand market. The acquisition was the Company's entry into the private label oral care segment. Oral care products sales represented 6%, 8% and 9% of net sales for fiscal 1998, 1997 and 1996, respectively. First Aid Products- In September 1997 the Company acquired certain assets and assumed certain liabilities of American White Cross, Inc. and Weaver Manufacturing Corporation (collectively "AWC"), companies engaged in the manufacturing and marketing of adhesive bandages and related products for both the store brand and institutional markets. The acquisition marked the Company's entry into the private label first aid market. these products are manufactured in a 253,000 square foot leased facility in Houston, Texas. The first aid products are being marketed by the Company through its existing distribution channels. Sales of first aid products represented 28% and 2% of net sales for fiscal 1998 and 1997, respectively. Other Products -The Company's other products consist principally of a patented line of sterile, profiled, disposable dilution bottles used in laboratory testing of water, waste water, foods, drug products, pharmaceuticals and cosmetics. Sales of these other products totaled 2%, 3% and 3% of net sales in fiscal 1998, 1997 and 1996, respectively. NEW PRODUCT STRATEGY The Company's growth strategy includes the acquisition and development of new products,and the extension and modification of existing product lines to correspond with national branded products and product variations. The Company expects to add new product lines through Internal development, acquisition and joint venture or partnership agreements. The Company contemplates that product line expansion will enable the Company to capitalize on its established distribution channels and manufacturing marketing expertise. New products will most likely focus on consumer packaged goods, including health and personal care products. MARKETING AND DISTRIBUTION The Company utilizes national brand marketing methods to meet the specific needs of its customers. Such marketing methods include designing contemporary packaging to improve point-of-purchase impact and increase consumer appeal. Teh Company also uses price, display, packaging, bonus and multi-pack promotions to increase sales and retailer support. Sales are made through the Company's sales representatives and independent brokers. CUSTOMERS For fiscal years 1998, 1997 and 1996, Walmart Stores, Inc. accounted for 9%, 11% of net sales respectively, and American Home Products, Inc. accounted for 7%, 10% and 11% of net slaes respectively. While the Company seeks to continually expand its distribution and customer base, the loss of one or more of its largest customers, if not replaced with other comparable businesses, could have a material addverse affect on the Company's results of operations. COMPETITION The markets in which the Company competed are dominated by nationally advertised brand name products marketed by established consumer packaged goods companies, most of which have greater marketing, financial and human resources than the Company. The Company also competed with several other private label manufacturers and marketers. Competition for consumer health and personal care products is based primarily on product reability, price, customer service, and the ability to provide tamper resistant/evident packing. Growth in sales of private label products is also dependent on increasing the amount of shelf space available at retail stores in order to maximize brand awareness and consumer trial. The Company experiences aggressive price competition from time to time from branded and other private label competitors. There can be no assurance that such price competition will not have a material adverse effect on the Company's results of operations (sec "ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation"). 2 GOVERNMENT REGULATION AND HEALTH ISSUES The Company is registered with the Food & Drug Administration ("FDA") as a manufacturer for certain of its products. The primary forms of governmental regulation are the current "good manufacturing practices" and "good laboratory practices" guidelines administered by the FDA, which set forth the protocols to be followed in the manufacture, storage, packaging and distribution of medical products for human use. Certain of the Company's ophthalmic products are subject to additional FDA regulations relating to pre-market approval of products. The Company's operations are also subject to periodic inspections by the FDA. Promotional claims made with respect to health and personal care products are also subject to regulations by the FDA, and by the Federal Trade Commission. The use of health and personal care products may result in allergic or other adverse reactions in users. Since 1952, a number of studies have been published in medical journals concerning the relationship of douching to the incidence of pelvic inflamatory disease. These studies provide no conclusive results on the issue of whether douching causes this disease. A 1990 study showed an association between douching and the disease and concluded that further studies were needed. A 1993 study stated that the results of the study lend support to the hypotheses that douching can predispose a women to pelvic inflammatory disease. Although the Company believes its douche products are safe when used in accordance with instructions accompanying the product package, negative, publicity resulting from such studies and any future studies and affect sales of douche products. In such event there could be a material adverse effect on the Company's results of operations. EMPLOYEES The Company has approximately 1,200 full-time employees engaged in quality control, marketing and sales, general corporate and administrative positions and manufacturing operations. The Company is currently negotiating a collective bargaining agreement with the United Food and Commercial Workers Local 328 covering approximately 235 employees at the Brockton, Massachusetts facility. The Company believes that relations with its employees are satisfactory. ITEM 2. PROPERTIES The Company currently operates the following facilities (which are owned unless otherwise indicated): Approximate Location Type of Facility Square Feet - -------------------- ---------------- ----------- Gloucester, Massachusetts (1) Corporate and Administrative Officers Manufacturing and Distribution 131,000 Fairton, New Jersey Manufacturing 48,000 Brockton, Massachusetts Manufacturing 89,000 Florance, Massachusetts (2) Manufacturing 88,000 Houston, Texas (3) Distribution and Manufacturing 253,000 Elmwood Park, NJ Manufacturing 10,000 - -------------------------------------------------------------------------------- (1) Consists of four facilities, of which two are leased, including a lease effective January 1, 1998 for an 80,000 square foot distribution center which provides consolidated warehousing and shipping of finished goods. (2) Acquired in October 1995. (3) Leased facility effective September 1997. The Company believes that its presents facilities will be adequate for all of its reasonably foreseeable manufacturing, warehousing and distribution requirements, or that alternative facilities can be obtained at a reasonable costs. ITEM 3. LEGAL PROCEEDINGS The Company, like other companies in the store brand industry, has been the subject of claims and litigation brought by national brand name companies based on packaging alleged to be similar to competing brand name products. The Company is also subject to certain claims and informal complaints relating to its products which are incidental and routine to its business and for which the Company maintains insurance coverage. The Company knows of no litigation, either pending or threatened, which is likely to have a material adverse effect on the Company's financial position, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1998. 3 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS MARKET INFORMATION The following table sets forth, for the periods indicated, the high and low prices for the Company's common stock as reported by The Nasdaq stock Market, Inc. ("NASDAQ"). The Company's common stock is traded on the NASDAQ SmallCap Market System under the Symbol "NMPC". Fiscal 1998 High Low ----------- ---- --- First Quarter $14.750 $11.500 Second Quarter 15.000 12.313 Third Quarter 12.625 9.000 Fourth Quarter 9.750 5.375 Fiscal 1997 High Low ----------- ---- --- First Quarter $11.000 $8.500 Second Quarter 12.875 10.000 Third Quarter 14.000 11.125 Fourth Quarter 16.000 12.500 COMMON STOCK HOLDERS The Company believes there are approximately 1,500 holders of common stock, including individual's shares held in street name by brokers. DIVIDENDS The Company has never declared or paid any cash dividends. The declaration of dividends by the Company in the future will at all times be subject to the sole discretion of the Company's Board of Directors, and will depend upon operating results, capital requirements, financial position and bank covenant compliance. The Company's Senior and Subordinated Debt agreements prohibit the payment of dividends. See note to the consolidated financial statements included elsewhere herein. RECENT SALES OF UNREGISTERED SECURITIES In order to finance in part the Company's acquisition of certain assets related to the First Aid business of American White Cross, Inc., on September 11, 1997, pursuant to the terms of a Stock Purchase Agreement dated as of August 12, 1997, as amended (the "1997 Stock Purchase Agreement"), by and between the Company and Cape Ann Investors, L.L.C. ("Cape Ann"). Cape Ann purchased 846,154 shares of Common stock from the Company in a private placement transaction for an aggregate purchase price of $11,000,000. On October 29, 1997, the Company offered to purchase up to an aggregate of 450,000 shares of the Company's then outstanding Common Stock within a price range of $11.00 per share up to $12.75 per share pursuant to a modified Dutch auction issuer tender offer (the "Tender Offer"). Upon completion of the Tender Offer on November 28, 1997, the Company purchased and resold an aggregate of 250,668 shares of outstanding Common Stock at a purchase price of $12.75 per share. The shares were sold by the Company to: (i) Cape Ann Investors, L.L.C., the Company's largest stockholder (an affiliate); (ii) Bernard J. Korman, the Company's Chairman of the Board, (iii) Donald E. Lepone, the Company's Chief Executive Officer; and (iv) Donald M. Gleklen, a member of the Board of Directors of the Company. The Company undertook the Tender Offer in order to provide added market liquidity for the existing stockholders of the Company who wished to sell their shares as a result of the Company's 1997 fourth quarter performance. On December 14, 1997 the Company issued 225,000 warrants to purchase shares of the Company's common stock to Cape Ann and certain parties. The warrants are exercisable at $3.60 per share for a period of 5 years commencing on October 14, 1998. 4 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below has been derived from the audited financial statements of the Company. This data is qualified in its entirety by reference to, and should be read in conjunction with, Management's Discussion and Analysis of Financial Condition and Results of Operations and the Company's Consolidated Financial Statements included elsewhere herein.
Fiscal Year Ended --------------------------------------------------------------------------------- Oct. 3, Sept. 27, Sept. 28, Sept. 30, Oct. 1, 1998 (1) 1997 (2)(3) 1996(4)(5) 1995 1994 (6) ------------ ----------- ---------- --------- -------- (in thousands, except per share data) Income Statement Data: Net Sales $128,434 $94,331 $80,479 $63,111 $55,958 Cost of sales 95,463 71,728 57,686 45,916 38,752 Cost of sales-inventory adjustments-AWC 6,649 -- -- -- -- -------- ------- ------- ------- ------- Gross profit 26,322 22,603 22,793 17,195 17,206 Selling, general and administrative expenses 21,118 13,947 11,662 8,694 9,281 Accounts receivable and other adjustments-AWC 1,065 -- -- -- -- -------- ------- ------- ------- ------- Operating income 4,139 8,656 11,131 8,501 7,925 Other income (expense): Interest expense (8,449) (5,042) (1,479) (1,427] (928) Other (36) 184 (289) 316 95 -------- ------- ------- ------- ------- Income (loss) before income tax (benefit) expense (4,346) 3,798 9,363 7,390 7,092 Income tax (benefit) expense (1,475] 1,536 3,680 2,916 2,832 -------- ------- ------- ------- ------- Net income (loss) $ (2,871) $ 2,262 $ 5,683 $ 4,474 $ 4,260 ======== ======= ======= ======= ======= Basic Earnings (Loss) Per Share: Per share amount $ (.51) $ .38 $ .66 $ .52 $ .50 ======== ======= ======= ======= ======= Weighted average shares 5,650 5,797 8,531 8,520 8,480 ======== ======= ======= ======= ======= Diluted Earnings (Loss) Per Share: Per share amount $ (.51) .39 .67 .53 .50 ======== ======= ======= ======= ======= Weighted average shares 5,650 5,797 8,531 8,520 8,480 Effect of dilutive securities: Stock options -- 79 63 77 114 Warrants -- 47 -- -- -- -------- ------- ------- ------- ------- Adjusted weighted average shares 5,650 5,923 8,594 8,597 8,594 ======== ======= ======= ======= ======= As of --------------------------------------------------------------------------------- Oct. 3, Sept. 27, Sept. 28, Sept. 30, Oct. 1, 1998 (1) 1997 (2)(3) 1996(4)(5) 1995 1994 (6) ------------ ----------- ---------- --------- -------- (in thousands, except per share data) Balance Sheet Data: Working capital $29,899 $38,602 $9,491 $14,152 $13,172 Total assets 138,751 132,759 82,878 63,074 60,450 Long-term debt, less current maturites 81,625 85,542 11,780 12,550 16,183 Stockholders' equity 21,194 23,479 45,817 39,233 34,757
(1) In the fourth fiscal quarter of fiscal 1998, the Company adjusted inventory and accounts receivable of AWC by $6,649,000 and $1,065,000, respectively. See discussion in Note B to the consolidated financial statements. (2) In September 1997, the Company acquired certain assets of a manufacturer of first aid products for $37,170,000 in cash plus transaction related expenses of approximately $700,000, which was financed by additional term loans and revolving credit facility borrowings and the private placement of 846,154 shares of the Company's common stock. (See note B to the consolidated financial statements) (3) In December 1996, the Company repurchased 4,037,258 shares of its common stock from MEDIQ, Inc. for $36,335,000. The transaction was financed by a combination of term loans and subordinated debt. (See note M to the consolidated financial statements) (4) In February 1996, the Company acquired certain assets of a manufacturer of feminine hygiene products for $2,367,000 in cash which was financed by additional term loan borrowings. (5) In October 1995, the Company acquired the assets of a manufacturer of private label toothbrushes and dental floss for $1,800,00 in cash and liabilities assumed of $363,000, and the transaction resulted in related expenses of $681,000 which was financed from the Company's revolving credit facility. (6) In December 1993, the Company acquired a manufacturer and distributor of private label cough/cold products for $13,500,000 which was financed with proceeds from a revolving credit facility. 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements and notes (hereto, contained elsewhere herein. References to a year means the Company's fiscal year, unless the context otherwise requires. RESULTS OF OPERATIONS The consolidated Statements of Operations include the results of operations of acquired companies and businesses from the dates acquired; certain assets of American White Cross, Inc. and Weaver Manufacturing Corporation ("AWC")(September 1997); and certain assets of the Hospital Specialty Company Division of the Tranzonic Companies (February 1996); certain assets of Mi-Lor Corporation, ("Mi-Lor"), Professional Brushes, Inc. ("Professional Brushes") and Codent Dental Products, Inc. ("Codent")(October 1995). The following table sets forth, for all periods indicated, the percentage relationship that items in the Consolidated Statements of Operations bear to net sales. Year Ended ------------------------------------ Oct. 3, Sept. 27, Sept. 28, 1998 1997 1996 -------- ---------- ---------- Net Sales 100% 100% 100% Cost of sales 75 76 72 Cost of sales-inventory adjustments-AWC 5 -- -- -------- ---------- ---------- Gross profit 20 24 28 Selling, general and administrative expenses 16 15 14 Accounts receivable and other adjustments--AWC 1 -- -- -------- ---------- ---------- Operating income 3 9 14 Other expense (6) (5) (2) -------- ---------- ---------- Income (loss) before income tax (benefit) expense (3) 4 12 Income tax (benefit) expense (1) 2 5 -------- ---------- ---------- Net income (loss) 2% 2% 7% ======== ========== ========== Fiscal Year 1998 Compared to Fiscal Year 1997 Net sales for 1998 were $128,434,000, an increase of $34,103,000 or 36% over 1997 net sales of $94,331,000. The net sales increase is primarily attributable to the inclusion of AWC ("the First Aid business") the First Aid business for a full year ($34,400,000), increased Ophthalmic business revenue due to increased distribution and Cough/Cold sales volume increases resulting from increased distribution both in the private label and contract manufacturing markets, offset by decreases in sales of Feminine Needs products as a result of decreased promotional activity during the year. Gross profit for 1998 was $26,322,000 or 20% of net sales, as compared to $22,603,000 or 24% of net sales in 1997. The increase in gross profit dollars is primarily a result of the inclusion of the First Aid business for a full year in 1998. The decrease in gross profit percentage relates primarily to $6,600,000 of fourth quarter adjustments associated with the First Aid business inventory. Without these adjustments, the results would have indicated an improvement in gross profit from 24% in 1997 to 25% in 1998. This improvement would have been the result of the inclusion of the First Aid business for a full year, which has a higher gross margin than the Company's historic gross margin, as well as operational efficiencies in the Personal Care, Ophthalmic and Oral Care facilities, offset by higher costs of operations in the Cough/Cold facility in the first and second quarters of 1998 related to the delayed shipments and under-absorbed labor and overhead costs. For further discussion on adjustments associated with the First Aid business see Note B to the consolidated financial statements. Total selling, general and administrative expense for 1998 was $22,183,000 or 17% of net sales as compared to $13,947,000 or 15% of net sales for 1997. Included in this amount is $1,065,000 related to accounts receivable and other adjustments associated with the First Aid business. For further discussion see Note B to the consolidated financial statements. The dollar increase is primarily attributed to the inclusion of the First Aid business for a full year ($2,510,000), increase goodwill amortization related to the First Aid business ($527,000), an increase of $850,000 in bad debt expense related to the Company's exit of the Adult Liquid Nutritional market and increased freight, commission, professional fees and promotional expense related to increased volume ($3,427,000). The percentage increase is primarily related to increased bad debt expense associated with the Company's exit of the Adult Liquid Nutritional market, and a full year of goodwill amortization related to the acquisition of the First Aid business. Interest expense for 1998 was $8,449,000 as compared to $5,042,000 for 1997. The increase is primarily attributable to the increase borrowings associated with the acquisition of the First Aid business (see Purchase of American White Cross, Inc. and Weaver Manufacturing Corporation). 6 Income tax benefit for 1998 was $1,475,000 as compared with income tax expense of $1,536,000 for 1997. The decrease is primarily attributed to the loss in 1998 with respect to adjustments to assets associated with the First Aid business (see Note B to the consolidated financial statements) as well as the impact of state tax planning strategies implemented during the year. The effective tax rate in 1998 was 33.9% compared with 40.4% in 1997 as a result of state tax planning strategies offset by valuation allowances recorded in 1998. Fiscal Year 1997 Compared to Fiscal Year 1996 Net sales for 1997 were $94,331,000, an increase of $13,852,000 or 17% over 1996 net sales of $80,479,000. The net sales increase is primarily attributable to Cough/Cold sales volume increases resulting from increased distribution both in the private label and contract manufacturing markets and Ophthalmics and Pediatric Electrolyte sales volume increases as a result of increased distribution. Gross profit for 1997 was $22,603,000 or 24% of net sales, as compared to $22,793,000 or 28% of net sales in 1996. The decrease in gross margin is primarily attributable to a delay in the completion of a major capital expansion program at the Cough/Cold division. New production capacity, centered around a new continuous cooking line used to manufacture cough drops, became operational later than planned. This delay, coupled with increased Cough/Cold product orders resulted in delayed shipments and under absorbed labor and overhead. Selling, general and administrative expense for 1997 was $13,947,000 or 15% of net sales as compared to $11,662,000 or 14% of net sales for 1996. The dollar increase is primarily attributed to increase in freight expense, broker commissions, amortization of financing costs, professional services and promotion expense related to increased sales volumes and additional debt refinancing costs. The percentage increase is primarily related to increased freight expense resulting from shipping inefficiencies related to the capacity expansion delay at the Cough/Cold division. Interest expense for 1997 was $5,042,000 as compared to $1,479,000 for 1996. The increase is primarily attributable to the increased borrowings associated with the MEDIQ Stock Repurchase (see note M to the consolidated financial statements). Income tax expense for 1997 was $1,536,000 compared with $3,680,000 in 1996. This reduction is primarily related to the reduction in pretax income. The effective tax rate was 40.4% in 1997 compared with 39.3% for 1996. The increase relates to an increase in the overall state tax rate in 1997. SEASONALITY During the last four months of the calendar year, retailers focus their merchandising efforts on, and devote more shelf space to, seasonal and holiday merchandise. As a result, sales of certain of the Company's products tend to be weaker in the Company's first quarter (ending in December), and normally strengthen in the second quarter as retailers replenish their shelves with health and personal care products. Sales of Pediatric Electrolyte and Cough/Cold products may help mitigate weaker sales in the Company's first quarter, as the Company's customers purchase such products to stock inventories in anticipation of an increase in winter sales. The Company's First Aid business sales are higher in its fourth fiscal quarter. Consequently, the results of any one quarter may not necessarily be indicative of results of future quarters. LIQUIDITY AND CAPITAL RESOURCES As of October 3, 1998, the Company's working capital decreased to $29,899,000 from $38,602,000 on September 27, 1997. The net decrease in working capital is the result of an increase in the current portion of long-term debt, an increase in accrued payroll and related taxes and a decrease in accounts receivable and escrow receivable, partially offset by increases in prepaid expenses and other current assets including $2,800,000 of estimated federal income tax refund associated with the tax lost generated in fiscal 1998. Net cash provided by operating activities decreased to $2,964,000 in 1998 from $4,249,000 in 1997 which was primarily attributable to an increase in depreciation and amortization expense related to increased capital expenditures as well as a full year of amortization of goodwill related to the First Aid acquisition, an increase in deferred taxes primarily related to an increase in depreciation, amortization and other timing differences offset by increased investment tax credits, a decrease in accounts receivable related to improved collection efforts offset by a decrease in net income, an increase in prepaid expenses and other current assets primarily related to an income tax receivable and prepaid insurance as well as a decrease in accounts payable and accrued expenses related primarily to a decrease in accrued interest payable. Net cash used in investing activities was $6,050,000 and consists primarily of capital expenditures (primarily for additional capacity) and an increase in deferred packaging costs related to new items offset by escrow cash received related to the AWC acquisition. The Company anticipates capital expenditures of approximately $2,300,000 in fiscal 1999 for additional manufacturing capacity. Management anticipates that these expenditures will be financed with existing working capital. 7 Net cash provided from financing activities totaled $3,604,000 and include borrowings of $13,227,000; proceeds of $666,000 from the exercise of stock options; offset by debt repayments of $9,312,000 and deferred financing costs. On December 31, 1996 pursuant to the terms of an Amended and Restated Stock Purchase Agreement (the "Stock Purchase Agreement") dated November 20, 1996 among MEDIQ, Inc. MEDIQ Investment Services, Inc. and the Company, the Company purchased and retired (except as noted below) from MEDIQ all 4,037,258 shares of the Company's common stock owned by MEDIQ (the "MEDIQ Shares"), of which 33,597 and 657,194 were held in escrow (the "MEDIQ Escrowed Shares") as of October 3, 1998 and September 27, 1997, respectively, in support of MEDIQ's 7.5% Subordinated Debentures due 2003 (the "MEDIQ Bond"). The aggregate purchase price of the MEDIQ Shares was $36,335,000 representing a purchase price of $9.00 per share (the "Purchase Price"). The Company paid MEDIQ $19,963,000 of the $36,335,000 purchase price in cash and delivered to MEDIQ a promissory note (the "MEDIQ Note") for the remaining $16,372,000 of the purchase price. The balance of the note as of October 3, 1998 and September 27, 1997 was $302,000 and $5,915,000 respectively. The MEDIQ Note is payable in installments as MEDIQ Escrowed Shares are released from escrow, pursuant to the indenture (the MEDIQ Indenture") and escrow agreement to relating the MEDIQ Bonds, together with interest at the annual rate of 7.5%, reduced, however, to 5%, 4% and 3% if the note remains outstanding longer than 18, 30 and 42 months. The current interest rate is 5%. Pursuant to the Stock Purchase Agreement, to the extent that any holder of a MEDIQ Bond (other than MEDIQ) presents such MEDIQ Bond for exchange for MEDIQ Escrowed Shares in accordance with the terms of the MEDIQ Indenture and MEDIQ delivers MEDIQ Escrowed Shares to such holder, (i) the principal amount of the MEDIQ Note shall be reduced by an amount equal to the product of the number of MEDIQ Escrowed Shares so delivered by MEDIQ to such holder and $9.00, and (ii) the principal amount of the MEDIQ Note shall further be reduced by an amount (the "Excess Cash Amount") equal to the product of the number of Escrowed Shares so delivered by MEDIQ and the number which is equal to the difference between (x) $1,000 divided by the then exchange rate of the MEDIQ Bonds provided in the indenture, and (y) $9.00; provided, however, that in lieu of such further reduction in the principal amount of the MEDIQ note under the foregoing clause (ii), the Company may elect to receive an amount in cash from MEDIQ equal to the Excess Cash Amount. There has been no conversion of MEDIQ Escrowed Shares through October 3, 1998. The Company's revolving credit facility expired on December 31, 1996 and was refinanced in connection with the MEDIQ Stock Repurchase. In addition, the Company had term loans with the same commercial lender which were also refinanced. In connection with the MEDIQ Stock Repurchase, the Company obtained senior financing in the aggregate principal amount of $60,000,000 (the "Senior Debt Financing") and senior subordinated financing in the aggregate principal amount of $10,000,000 (the "Subordinated Debt Financing"). Pursuant to the Senior Debt Financing, the Company had senior secured credit facilities in the aggregate principal amount of $60,000,000 (the "Senior Debt"), consisting of (i) a $20,000,000 term loan (the "Term Loan A"), (ii) a $15,000,000 term loan (the "Term Loan B" and, together with the Term Loan A, the "Term Loans"), (iii) a $20,000,000 letter of credit to support the MEDIQ Note relating to the MEDIQ Stock Repurchase (the "Stock Repurchase Letter of Credit"), (iv) a $17,300,000 revolving credit facility (the "Revolving Credit Facility"), and (v) a $8,100,000 letter of credit to support the Company's Industrial Development Bonds (the "IDB Letter of Credit" and, together with the Stock Repurchase Letter of Credit, the "Letters of Credit"). The purpose of obtaining the Senior Debt Financing was to permit the Company to finance the MEDIQ Stock Repurchase, to refinance the Company's existing indebtedness and to satisfy the Company's working capital requirements. At the closing of the Senior Debt Financing on December 31, 1996 (the "Senior Debt Closing"), $18,628,000 of the Term Loan A was drawn by the Company and the Stock Repurchase Letter of Credit was issued by the senior lender. As of September 27, 1997, $19,250,000 was outstanding under Term Loan A, $9,085,000 was outstanding under Term Loan B and $12,790,000 was outstanding under the Revolving Credit Facility, with interest rates of 8.27%, 9.5% and 9.5% respectively. As of October 3, 1998 $17,075,000 was outstanding under Term Loan A, $14,698,000 was outstanding under Term Loan B and $19,763,000 was outstanding under Revolving Credit Facility, with interest rates of 8.19%, 8.69% and 8.19%, respectively. 8 Pursuant to the Subordinated Debt Financing, the Company's subordinated lender has provided the Company with an aggregate principal amount of $10,000,000 (the "Senior Subordinated Debt") in the form of senior subordinated notes (the "Senior Subordinated Notes") issued to the subordinated lender. The Senior Subordinated Notes mature on March 31, 2005 and bear interest at 11.5%. Interest on the Senior Subordinated Notes is payable quarterly in arrears, commencing on the first calendar quarter of calendar 1997. In connection with the Subordinated Debt Financing, the Company issued to the subordinated lender warrants to purchase 273,419 shares of common stock of the Company (representing approximately 4.5% (on a fully diluted basis) of the total outstanding common stock as of December 31, 1996) at $9.00 per share, subject to certain adjustments to prevent dilution, exercisable for a ten year period beginning with the date of issue. In connection with the acquisition of certain of the assets of the first aid business of American White Cross, the Company amended its Senior Debt agreement to provide for an increase in the Senior Secured Credit Facility consisting of (i) a $30,000,000 term loan (the "Additional Term Loan A"), (ii) a $27,000,000 term loan (the "Additional Term Loan B" and, together with Term Loan A, the "Additional Term Loans") and (iii) a $25,000,000 revolving credit facility (the "Additional Revolving Credit Facility"). As of October 3, 1998 and September 27, 1997, $10,000,000 was outstanding under the Additional Term Loan A, $12,000,000 under the Additional Term Loan B and $4,243,000 under the Additional Revolving Credit Facility with interest rates of 8.19%, 8.69% and 8.19%, respectively for 1998 and 8.75%, 10% and 9.5%, respectively for 1997. The agreements evidencing the Senior Debt and the Senior Subordinated Debt contain certain restrictive covenants including, without limitation, covenants with respect to the ratio of total debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"), operating cash flow, interest coverage, capital expenditures and prevent the payment of dividends. The Company was in default of its total debt to EBITDA, operating cash flows, minimum interest coverage, maximum capital expenditures and minimum net worth covenants as of and for the period ended October 3, 1998. The Company requested and was granted waivers of these covenants as of and for the period ended October 3, 1998. The Company has also obtained from the Company's senior and subordinated lenders, amendments to such covenants. (see Recent Developments and note P to the consolidated financial statements). On October 29, 1997 the Company announced that it would purchase from its stockholders in a Dutch auction self tender up to 450,000 shares of its common stock at a purchase price not greater that $12.75 per share nor less that $11.00 per share. The purpose of the offer was to provide added market liquidity for stockholders who wished to sell their shares as a result of the Company's 1997 fourth quarter performance. The offer expired on November 28, 1997. A total of 250,668 shares were purchased and resold by the Company at a price of $12.75 per share. The shares were sold by the Company to: (i) Cape Ann Investors, L.L.C., the Company's largest stockholder (an affiliate); (ii) Bernard J. Korman, the Company's Chairman of the Board; (iii) Donald E. Lepone, the Company's Chief Executive Officer; and (iv) Donald M. Gleklen, a member of the Board of Directors of the Company. Due to the utilization of tax loss carry forwards and an overpayment from the prior year, the Company paid no Federal Income taxes during 1998. In connection with the Dutch Auction self tender, the Company received from Senior and Subordinated lenders waivers to allow for the purchase of its common stock. During 1998, the Company obtained a five year mortgage totalling $2,800,000 for purposes of refinancing an existing mortgage as well as for the purchase of one of its manufacturing facilities that was previously leased. The interest rate was fixed upon closing at 8.1%. The mortgage is payable for the first year in quarterly installments $25,000 plus interest, thereafter payable in monthly installments of $15,500 plus interest, with a final payment of approximately $1,980,000 due June 22, 2003. The Company believes that its existing working capital, anticipated funds to be generated from future operations and funds available under the Senior and Subordinated Debt Financing will be sufficient to meet all of the Company's operating and capital needs through fiscal 1999. However, depending upon future growth of the business, additional financing may be required. (see Recent Developments below). 9 YEAR 2000 COMPLIANCE - The statements in the following section include "Year 2000 Readiness Disclosure" within the meaning of the Year 2000 Information and Readiness Disclosure Act. The Company's State of Readiness - The Company has undertaken an assessment of the ability of its mission critical information and non-information systems to function properly with respect to dates in the Year 2000 and thereafter. Mission critical systems are those systems the failure of which pose a risk of disruption to the company's ability to manufacture and ship product, collect revenue, meet safety standards and comply with legal requirements. The Company's mission critical information systems include its integrated manufacturing, accounting, order entry and distribution systems. The Company's mission critical non-information systems include the machinery and equipment used to manufacture and distribute its products, its telephone systems, and its alarm and sprinkler systems. The assessment is based upon communication with software vendors, literature supplied with software, literature received in connection with maintenance contracts and test evaluations of the Company's systems'. The Company has substantially completed its Year 2000 assessment with respect to its mission critical information systems and anticipates completion of its assessment with respect to its mission critical non-information systems by March 1, 1999. the Company is also currently assessing the Year 2000 risks of its material third parties as discussed below. The Company identified potential problems in its electronic data interface order entry system. The Company has replaced this software system and has completed testing of the new system both individually and on an integrated basis in order to ensure the remediation of all Year 2000 risks. In all other mission critical information systems, the Company believes that Year 2000 compliance has been achieved with the existing systems, replacement components or upgrades of software or embedded technology. As noted above, the Company has not yet completed assessment of its mission critical non-information systems; however, to date the Company has not identified any Year 2000 complications with respect to such systems. Costs to Remedy the Company's Year 2000 Issues - The Company anticipates that the total costs to remedy Year 2000 issues with respect to its information systems will be approximately $100,000, which includes approximately $20,000 in accelerated replacement costs for technology which the company would have other wise replaced within three years after the Year 2000. The Company is currently not able to ascertain its potential remediation costs with respect to its mission critical non-information systems. To date Company has incurred $65,000 in total remediation costs. Such costs are primarily related to the replacement or upgrade of components, systems and software and the payroll of employees of the Company's information technology department. The Company does not separately track the internal costs of its Year 2000 compliance program. The Company's Year 2000 remediation costs are expensed as incurred. Year 2000 Risks of Material Third Parties - The Company is also in the process of assessing the Year 2000 risks of third parties with whom the Company has a material relationship. These material third parties include vendors, major customers, service suppliers, communications providers and banks. The Company is in the process of circulating Year 2000 questionnaires of each of these parties in order to verify their Year 2000 readiness. In addition, the Company is testing interaction of the Company's systems with such third parties' systems where appropriate. The assessment is expected to be completed by March 31, 1999 utilizing the Company's existing resources. Year 2000 Risks; Contingency Plan - It is the Company's belief that the results of the assessment to date indicate that all of the Company's mission critical information systems, including its integrated manufacturing, accounting, distribution and order entry systems, are Year 2000 compliant, and that the Year 2000 issue is not likely to have a material impact on the Company's operations. However, there can be no assurances that the systems or software of third parties on which the Company relies will be timely converted or that the Company will not be adversely affected by the failure of such systems and software to be made Year 2000 compliant. The Company believes that its most reasonably likely worst case scenario is the potential inability of material third parties to obtain Year 2000 complaint components and software or take other remediatory measures which may inhibit the Company's ability to maintain its manufacturing processes or a reliable means of invoicing customers, transporting products and collecting payments. In the event major customers experience Year 2000 complications, such customers may be come unable to process orders or receive shipments. As a result, the Company could experience a backlog of inventory and lost revenue. In the event vendors, service suppliers, communication providers and banks experience Year 2000 difficulties, the Company's ability to manufacture, process and ship product maybe impeded and the Company may experience lost revenues and increased expenses. The Company is not currently able to quantify the potential loses upon the failure of material third parties to be Year 2000 compliant; however, the Company believes that any such failure could have a material adverse effect on the business, operations and financial performance of the Company. The Company is in the process of developing a contingency plan in the event that its Year 2000 conversion is unsuccessful or untimely. Currently, the Company's contingency plan includes the manual performance of certain tasks which would otherwise be automated, additional staffing of such tasks and increased product inventories. The company anticipates completion of its contingency plan by March 31, 1999. The company is currently unable to ascertain the additional costs it will incur if it is required to implement its contingency plan. There can be no assurance that the Company's contingency plan will successfully avoid disruption of the Company's business and operations or that such disruption would not have a material adverse effect on the financial performance of the Company. 10 PURCHASE OF AMERICAN WHITE CROSS, INC. AND WEAVER MANUFACTURING CORPORATION On September 11, 1997, the Company purchased certain assets and assumed certain liabilities related to the first aid business of American White Cross, Inc. and Weaver Manufacturing Corporation for $37,170,000 in cash plus transaction related expenses of approximately $700,000. The transaction was accounted for using the purchase method of accounting (see footnote B to the consolidated financial statements). In addition to the increased Senior Debt Financing, the Company, pursuant to the Stock Purchase Agreement by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C., dated August 12, 1997, (the "Stock Purchase Agreement"), sold 846,154 shares of its stock at $13.00 per share yielding $11,000,000 of total proceeds used in conjunction with the additional Senior Debt proceeds to finance the transaction. RECENT DEVELOPMENTS On November 6, 1998, the company entered into stock purchase agreements with Cape Ann Investors, L.L.C. ("Cape Ann"), the Company's largest stockholder, Donald E. Lepone, the Chief Executive Officer, President and a Director of the Company, and Bernard J. Korman, the Chairman of the Board of the Company (Cape Ann, Mr. Lepone and Mr. Korman are collectively referred to herein as the "Purchasers"), pursuant to which the Purchasers agreed to purchase in a private placement (the "Equity Investment") an aggregate 1,441,860 shares of Common Stock at a price per share of $4.30, for an aggregate purchase price of approximately $6,200,000. The purchase price of $4.30 per share represented a premium of 11% to the closing price per share of $3.875 on October 21, 1998, the date on which the Board agreed in principle to the terms of the Private Placement. The proceeds of the Equity Investment will be used to pay down $4,500,000 of indebtedness outstanding under its senior credit facilities and up to $1,500,000 of trade payables. Due to its 4th quarter financial results, the Company was in default with certain financial covenants set forth in the Company's senior credit facilities and subordinated debt agreement. The Company executed amendments to the financial covenants for total debt to EBITDA, operating cash flows, minimum interest coverage and minimum net worth contained in the Company's existing senior and subordinated credit agreements (the "Credit Facility Amendments"). Consummation of the Equity Investment is conditioned upon, among other things, the approval by the stockholders of the Company of the Equity Investment proposal at the Annual Meeting (see note P to the consolidated financial statements). New Accounting Pronouncements--Effective September 28, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." The Company changed the method used to compute earnings per share and restated all prior periods in accordance with SFAS No. 128. SFAS 128 supersedes Accounting Principles Board Opinion No 25. and is intended to simplify the computation of earnings per share and to make the U.S. computations more comparable with the international computations by requiring the presentation of basic and fully diluted earnings per share. The Company's only dilutive common stock equivalents are stock options and warrants. Not included in the Company's calculation for diluted earnings per share for 1998 were the effects of options (16,000 shares) and warrants (30,000 shares). Such instruments were not included due to their anti-dilutive effect in the current period. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This statement, which establishes standards for reporting and disclosure of comprehensive income, is effective for annual periods beginning after December 15, 1997, although earlier adoption is permitted. Reclassification of financial information for earlier periods presented for comparative purposes is required under SFAS No. 130. As this statement only requires additional disclosures in the Company's consolidated financial statements, its adoption will not have any impact on the Company's consolidated financial position or results of operations. The Company adopted SFAS No. 130 effective October 4, 1998. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement, which establishes standards for the reporting of information about operating segments and requires the reporting of selected information about operating segments in interim financial statements, is effective for fiscal years beginning after December 15, 1997, although earlier application is permitted. Reclassification of segment information for earlier periods presented for comparative purposes is required under SFAS No. 131. The Company has not yet completed its analysis of the operating segments it will report on. The Company will adopt SFAS No. 131 effective October 4, 1998. In June 1988, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. The new standard requires that all companies record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Management is currently assessing the impact of SFAS No. 133 on the financial statements of the Company. The Company expects to adopt this accounting standard in its first quarter of its fiscal year ending in September 2000. 11 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to interest rate risk primarily through its borrowing activities. The Company's policy has been to utilize United States dollar denominated borrowings to fund its working capital and investment needs. Short term debt, if required, is used to meet working capital requirements and long term debt is generally used to finance long term investments. There is inherent roll-over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Company's future financing requirements. At October 3, 1998, the Company had total long term debt outstanding of $96,500,000 of which $14,920,000 is current. Currently, the majority of the Company's outstanding debt instruments have a variable interest rate or a variable interest rate component. Using a yield to maturity analysis and assuming a 10% upward fluctuation in the interest rate on this debt, interest rate variability on this debt could have a material adverse effect on the Company's financial results. Currently, the Company does not enter into financial instruments transactions for trading or other speculative purposes or the manage interest rate exposure. CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Section 21E of the Exchange Act. Although the Company believes its expectations are based upon reasonable assumptions within the bounds of its knowledge of its business operations, there can be no assurance that actual results will not differ materially from those set fourth in the forward-looking statements. Certain factors that might cause such a difference include the following: the timing of new products introduced by the Company, the timing of orders received from customers, the gain or loss of significant customers, changes in the products sold, competition from other private label manufacturers, seasonal changes in the demand for the Company's products, increases in the cost of raw materials, changes in the retail market for health and beauty aids in general and changes in the expenses of or delays in; the identification and upgrade or replacement by the company of its non-year 2000 compliance systems, including embedded technology and year 2000 compliance of material third parties. For additional information concerning these and other important factors which may cause the Company's actual results to differ materially from expectations and underlying assumptions, please refer to the reports filed by the Company with the Securities and Exchange Commission. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA Independent Auditor's Report 13 Consolidated Statements of Operations - Three Fiscal Years Ended October 3, 1998 14 Consolidated Balance Sheets - October 3, 1998 and September 27, 1997 15 Consolidated Statements of Stockholders' Equity - Three Fiscal Years Ended October 3, 1998 16 Consolidated Statements of Cash Flows - Three Fiscal Years Ended October 3, 1998 17 Notes to Consolidated Financial Statements 18-29 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. Not applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The response to this item is incorporated herein by reference from the discussion responsive thereto under the caption "Election of Directors" in the Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders. ITEM 11. EXECUTIVE COMPENSATION The response to this item is incorporated by reference from the discussion responsive thereto under the following captions in the Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders. "Election of Directors" and "Executive Compensation" ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The response to this item is incorporated by reference from the discussion thereto under the caption "Principal Shareholders and Management" in the Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The response to this item is incorporate by reference from the discussion responsive thereto under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders. 12 INDEPENDENT AUDITOR'S REPORT Board of Directors and Stockholders NutraMax Products, Inc. Gloucester, Massachusetts We have audited the accompanying consolidate balance sheets of NutraMax Products, Inc. and subsidiaries (the "Company") as of October 3, 1998 and September 27, 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three fiscal years in the period ended October 3, 1998. Our audits also included the financial statements schedule listed in Item 14(a)(2). These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of NutraMax Products, Inc. and subsidiaries as of October 3, 1998 and September 27, 1997, and the results of their operations and their cash flows for each of the three fiscal years in the period ended October 3, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basis consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Boston, Massachusetts November 24, 1998 (December 29, 1998 as to Note P and the second to the last paragraph of note F) 13 NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES . CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended --------------------------------------------------------- Oct. 3, Sept. 27, Sept. 28, 1998 1997 1996 -------- -------- -------- (in thousands, except per share data) Net Sales $128,434 $ 94,331 $ 80,479 Cost of Sales (see note B) 102,112 71,728 57,686 -------- -------- -------- Gross Profit 26,322 22,603 22,793 Selling, General and Administrative Expenses (see note B) 22,183 13,947 11,662 -------- -------- -------- Operating Income 4,139 8,656 11,131 Other Income (expenses): Interest expense (8,449) (5,042) (1,479) Interest income 12 282 95 Other (48) (98) (384) -------- -------- -------- Income (Loss) Before Income Tax Expenses (4,346) 3,798 9,363 Income Tax (Benefit) Expenses (1,475) 1,536 3,680 -------- -------- -------- Net Income (Loss) $ (2,871) $ 2,262 $ 5,683 ======== ======== ======== Basic Earnings (Loss) Per Share: Per share amount $ (.51) $ .39 $ .67 ======== ======== ======== Weighted average shares 5,650 5,797 8,531 ======== ======== ======== Dilutive Earnings (Loss) Per Share Per share amount $ (.51) $ .38 $ .66 ======== ======== ======== Weighted average shares 5,650 5,797 8,531 Effect of dilutive securities: Stock options -- 79 63 Warrants -- 47 -- -------- -------- -------- Adjusted weighted average shares 5,650 5,923 8,594 ======== ======== ========
See notes to consolidated financial statements. 14 NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES . CONSOLIDATED BALANCE SHEETS October 3, September 27, ASSETS 1998 1997 ---------- ------------- (In thousands, except share data) Current Assets: Cash $ 761 $ 243 Accounts receivable, less allowance for doubtful accounts of $758 in 1998 and $605 in 1997 17,286 19,618 Inventories 36,879 36,135 Deferred income taxes 1,263 823 Escrow receivable (see Note B) 200 2,876 Refundable income taxes 2,800 -- Prepaid expenses and other 2,990 655 -------- -------- Total Current Assets 62,179 60,350 Property, Plant and Equipment, net 45,903 44,456 Restricted cash 413 316 Goodwill, net of accumulated amortization of $4,682 in 1998 and $3,672 in 1997 25,075 22,934 Other Assets 5,181 4,703 -------- -------- $138,751 $132,759 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 13,758 $ 13,427 Accrued payroll and related taxes 1,256 936 Accrued interest expense 656 1,325 Accrued expenses - other 1,690 1,709 Current maturities of long-term debt 14,920 4,351 -------- -------- Total Current Liabilities 32,280 21,748 Long-Term Debt, less current maturities 81,625 85,542 Other Long Term Liabilities -- 106 Deferred Income Taxes 3,652 1,884 Stockholders' Equity: Common stock - $.001 par value: Authorized - 20,000,000 shares Issued 5,672,000 in 1998 and 5,620,000 shares in 1997 6 6 Additional paid-in capital -- 5,069 Retained earnings 21,631 24,602 -------- -------- Total 21,637 29,677 Less: Treasury stock at cost, 43,300 shares in 1998 and 657,000 shares in 1997 (443) (6,198) -------- -------- Total Stockholder's Equity 21,194 23,479 -------- -------- $138,751 $132,759 ======== ======== See notes to consolidated financial statements. 15 NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES - CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock ----------------------- (in thousands) Treasury Stock Shares Additional Retained --------------------------- Outstanding Amount Paid-In Capital Earnings Shares Amount Total ----------- -------- --------------- -------- -------- -------- -------- Balance at September 30, 1995 8,520 $ 9 $ 22,567 $ 16,657 -- $ -- $ 39,233 Exercise of stock options 150 -- 790 -- -- -- 790 Tax benefit of options exercised -- -- 220 -- -- -- 220 Stock redeemed (12) -- (109) -- -- -- (109) Net income -- -- -- 5,683 -- -- 5,683 ----------- -------- --------------- -------- -------- -------- -------- Balance at September 28, 1996 8,658 9 23,468 22,340 -- -- 45,817 Exercise of stock options 153 -- 1,090 -- -- -- 1,090 Tax benefit of options exercised -- -- 304 -- -- -- 304 Issuance of warrants (2) -- -- 1,094 -- -- -- 1,094 Issuance of Stock- Acquisition (1) 846 1 10,999 -- -- -- 11,000 Repurchase of stock- MEDIQ repurchase (3) (4,037) (4) (31,886) -- (657) (6,198) (38,088) Net income -- -- -- 2,262 -- -- 2,262 ----------- -------- --------------- -------- -------- -------- -------- Balance at September 27, 1997 5,620 6 5,069 24,602 (657) (6,198) 23,479 Exercise of stock options 62 -- 666 -- -- -- 666 Tax benefit of options exercised -- -- 46 -- -- -- 46 Repurchase stock (10) -- -- -- (10) (126) (126) Release of escrowed shares- MEDIQ repurchase (3) -- -- (5,781) (100) 624 5,881 -- Net loss -- -- -- (2,871) -- -- (2,871) ----------- -------- --------------- -------- -------- -------- -------- Balance at October 3, 1998 5,672 $ 6 $ -- $ 21,631 (43) $ (443) $ 21,194 =========== ======== =============== ======== ======== ======== ========
(1) See Note F to the consolidated financial statements (2) See Note B to the consolidated financial statements (3) See Note M to the consolidated financial statements See notes to consolidated financial statements. 16 NUTRAMAX PRODUCTS, INC., AND SUBSIDIARIES . CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended --------------------------------------------------- Oct. 3, Sept. 27, Sept. 28, 1998 1997 1996 ---------- --------- -------- (in thousands) Cash Flows from Operating Activities: Net income (loss) $ (2,871) $ 2,262 $ 5,683 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,530 5,063 4,427 Deferred taxes 1,328 258 228 Inventory adjustments - AWC (see note B) 6,649 -- -- Accounts receivable and other adjustments - AWC (see note B) 1,065 -- -- Other -- 9 (132) Increase (decrease), net of effect of acquisitions: Accounts receivable 1,267 (319) (2,016) Inventories (7,393) (6,529) (4,480) Prepaid expenses and other (2,337) (37) (88) Refundable income taxes (2,800) -- -- Accounts payable 331 3,032 872 Accrued payroll and related taxes 320 271 169 Accrued expenses - other 592 1,042 35 Income taxes payable (717) (803) 16 ---------- --------- -------- Net cash provided by operating activities 2,964 4,249 4,724 Cash Flows Investing Activities: Acquisition of American White Cross, Inc. and Weaver Manufacturing, Inc. ("AWC") net of cash acquired -- (37,170) -- Acquisition of Oral Care net of cash acquired -- -- (2,230) Escrow received 2,676 -- (2,367) Purchases of property, plant and equipment (7,025) (9,109) (6,130) Restricted cash (97) 4,426 (4,742) Deferred packaging costs (1,142) -- (860) Other (462) 212 20 ---------- --------- -------- Net cash used in investing activities (6,050) (41,641) (16,309) Cash Flows from Financing Activities: Borrowings 13,227 74,615 13,733 Sale of common stock -- 11,000 -- Proceeds from exercise of stock options 666 1,090 257 Debt repayments (9,312) (26,428) (1,908) Stock repurchase (126) (21,716) -- Deferred financing costs (387) (958) (679) Other (464) (262) (27) ---------- --------- -------- Net cash provided by financing activities 3,604 37,341 11,376 ---------- --------- -------- Net Increase (Decrease) in cash $ 518 (51) (209) Cash: Beginning of year 242 294 503 ---------- --------- -------- End of year $ 761 $ 243 $ 294 ---------- --------- -------- Supplemental Disclosure of Cash Flow Information Income taxes paid $ 176 $ 1,845 $ 3,487 ---------- --------- -------- Interest paid $ 8,885 $ 3,807 $ 1,310 ---------- --------- -------- Supplemental Disclosure on Non-Cash Financing and Investing Activities: Issuance on note for stock repurchase $ -- $ 16,372 $ -- ---------- --------- -------- Issuance of warrants $ -- $ 944 $ -- ---------- --------- -------- Exercise of stock options paid for in October 1996 $ -- $ -- $ 644 ---------- --------- -------- Redemptions in connection with exercise of stock options $ -- $ -- $ 109 ---------- --------- -------- Equipment financed with capital lease obligations $ 419 $ -- $ -- ---------- --------- -------- Building purchase financed with mortgage $ 2,159 $ -- $ -- ---------- --------- -------- Adjustment of property, plant and equipment - AWC $ (3,149) $ -- $ -- ---------- --------- --------
See notes to consolidated financial statements. 17 NUTRAMAX PRODUCTS, INC., AND SUBSIDIARIES . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business - NutraMax Products, Inc. is a manufacturer and marketer of private label health and personal care products. Principles of Consolidation - The consolidated financial statements include the accounts of NutraMax Products, Inc. and its subsidiaries (the "Company"). In consolidation, all significant intercompany transactions and balances have been eliminated. New Accounting Pronouncements - Effective September 28, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." The Company changed the method used to compute earnings per share and restated all prior periods in accordance with SFAS No. 128. SFAS 128 supersedes Accounting Principles Board Opinion No. 25, and is intended to simplify the computation of earnings per share and to make the U.S. computations more comparable with the international computations by requiring the presentation of basic and fully diluted earnings per share. The Company's only dilutive common stock equivalents are stock options and warrants. Not included in the Company's calculation for diluted earnings per share for 1998 were the effects of options (16,000 shares) and warrants (30,000 shares). Such instruments were not included due to their anti-dilutive effect in the current period. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This statement, which establishes standards for reporting and disclosure of comprehensive income, is effective for annual periods beginning after December 15, 1997, although earlier adoption is permitted. Reclassification of financial information for earlier periods presented for comparative purposes is required under SFAS No. 130. As this statement only requires additional disclosures in the Company's consolidated financial statements, its adoption will not have any impact on the Company's consolidated financial position or results of operations. The Company adopted SFAS No. 130 effective October 4, 1998. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement, which establishes standards for the reporting of information about operating segments and requires the reporting of selected information about operating segments in interim financial statements, is effective for fiscal years beginning after December 15, 1997, although earlier application is permitted. Reclassification of segment information for earlier periods presented for comparative purposes is required under SFAS No. 131. The Company has not yet completed its analysis of the operating segments it will report on. The Company will adopt SFAS No. 131 effective October 4, 1998. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. The new standard requires that all companies record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Management is currently assessing the impact of SFAS No. 133 on the financial statements of the Company. The Company expects to adopt this accounting standard in its first quarter of its fiscal year ending in September 2000. Inventories - Inventories are stated at the lower of cost (first-in, first-out method) or market. Property, Plant and Equipment - Property, plant and equipment are stated at cost. The Company's policy of providing for depreciation and amortization is as follows: Buildings 20 years on a straight-line basis Liquid packaging machines 32,000 to 48,000 machine hours which approximate a five to eight and one- half year life Machinery, equipment, molds 5 to 10 years on a straight-line basis and furniture and fixtures Leasehold improvements The remaining term of the lease or the estimated useful life, whichever is shorter Vehicles 3 to 5 years on a straight-line basis 18 Goodwill - The purchase price in excess of net assets acquired is amortized on a straight-line basis over periods from twenty-five to forty years. The Company evaluates the carrying value of goodwill based upon current and anticipated net income and undiscounted cash flows, and recognizes any impairment when it is probable that such estimated future net income and/or cash flows will be less than the carrying value of goodwill. Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair value. Other Assets - Other assets include intangible and deferred financing assets which are amortized on a straight-line basis over the estimated periods of related benefit, ranging from three to twenty years. Accumulated amortization was $402,000 and $340,000 as of October 3, 1998 and September 27, 1997, respectively. Other assets also include external costs deferred in connection with tools, dies and the design of packaging materials for the Company's products ("deferred packaging costs") which are amortized on a straight-line basis over four years. Revenue Recognition - The Company generates revenues from sales of products produced. Revenues from sales of products produced are recognized when the product has been delivered, customer acceptance has occurred and all significant Company obligations have been satisfied. Payment is generally due within 30 days. Concentration of Credit Risk - The majority of the Company's revenues are from customers in the retail consumer products industry, who are not required to provide collateral for amounts owed to the Company. The Company's customers are dispersed over a wide geographic area and are subject to periodic review under the Company's credit policies. The Company does not believe that it is subject to any unusual credit risks, other than the normal level of risk attendant to operating its business. Fair Value of Financial Instruments - Financial instruments held or used by the Company consist of cash, accounts receivable, accounts payable, long-term debt and borrowings under revolving credit facilities. Given the nature of the items considered financial instruments and the variable rate borne by the line of credit and term loans, management believes that carrying value approximates fair value for all financial instruments. Stock-Based Compensation - The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123, "Accounting for Stock-Based Compensation," has been adopted by the Company for disclosure of certain additional information related to its stock option plan. Income Taxes - The Company and its subsidiaries file a consolidated federal income tax return. Deferred taxes are provided for certain income and expense items which are accounted for differently for financial reporting and income tax purposes. Use of Estimates - In preparing financial statements in conformity with general accepted accounting principles, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification of Accounts - Certain reclassifications have been made to conform prior years' balances to the current year presentation. 19 NOTE B - ACQUISITION On September 11, 1997, the Company acquired certain assets and assumed certain liabilities related to the first aid business of American White Cross, Inc. and Weaver Manufacturing Corporation ("AWC"). The business is engaged in the manufacture and distribution of adhesive bandages and related products. The AWC acquisition has been accounted for as a purchase business combination pursuant to the principles of APB Opinion No. 16 "Business Combinations." In applying APB No. 16, all identifiable assets acquired and liabilities assumed were assigned a portion of the cost of acquiring AWC, equal to their fair values at the date of the acquisition. The total cost of the acquisition was allocated as follows: Escrow Cash Receivable 1,125,000 Accounts Receivable 5,972,000 Inventory 11,324,000 Other Current Assets 390,000 Property, Plant and Equipment 6,708,000 Other Assets - Long Term 1,409,000 Accounts Payable (3,130,000) Accrued Expenses - other (848,000) Excess of cost over fair value of net assets acquired 13,169,000 ------------ Purchase Price $ 36,119,000 ------------ Transaction Related Expenses (700,000) Purchase price adjustment refunded to the Company 1,751,000 ------------ Initial Cash Outlay $ 37,170,000 ============ The fair value of property, plant and equipment as well as other long term assets is depreciated or amortized in accordance with the Company's accounting policies (see note A). During the fourth quarter of 1998, the Company completed its review of the assets acquired and the liabilities assumed in the acquisition of the First Aid business of AWC. This review resulted in an adjustment to the AWC assets of approximately $7,700,000; of this amount approximately $1,100,000 related primarily to accounts receivable adjustments for promotional allowance deductions; $6,200,000 related to inventory valuation and obsolescence, and $400,000 related to the write-off of machinery spare parts inventory for which there was no apparent value. The adjustments constituted changes in the original estimates to the preliminary purchase price allocation and therefore have been charged to the Statement of Operations in fiscal 1998. In addition to the adjustments discussed above, the Company also adjusted the preliminary allocation made to Property, Plant and Equipment by writing down fixed assets by approximately $3,149,000 and increasing the amount allocated to Goodwill, which is being amortized over a 25 year period using the straight- line method. The determination of the appropriate allocation was made based upon an independent third party appraisal received by the Company in the fourth quarter. The acquisition was financed by additional term loan and revolving credit facility borrowings totaling $25,119,000 as well as a private placement sale of 846,154 shares of the Company's common stock as $13.00 per share. Unaudited pro forma combined revenue, net income, basic and fully diluted earnings per share of the Company and AWC for the twelve months ended September 27, 1997 was $136,000,000, $3,549,000, $.52 and $.51, respectively, and for September 28, 1996 was $129,000,000, $7,899,000, $.85 and $.84, respectively, as if the acquisition had occurred at the beginning of fiscal year 1996, after giving effect to certain pro form adjustments related to the acquisition. Pro forma basic and fully diluted earnings per share was based upon pro forma weighted average share outstanding and pro form adjusted weighted average shares outstanding of 6,764,000 and 6,940,000, respectively, for 1997 and 9,340,000 and 9,372,000, respectively, for 1996. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made as of October 1, 1995 or of results which may occur in the future. On February 29, 1996, the Company purchased certain of the assets, including machinery and inventory, of the Hospital Specialty Company Division of the Tranzonic Companies related to the manufacture and sale of feminine hygiene products. The purchase price consisted of $2,367,000 in cash which was financed with long term debt (see Note F). 20 NOTE C - RESTRICTED CASH In connection with the proceeds received from two Massachusetts Industrial Finance Agency Variable Rate Industrial Development Bonds (collectively, the "IDB") (see Note F) a total of $413,000 and $316,000 has been paid to the trustee related to monthly payments held for the annual principal payment to bond holders. These funds are invested in the Treasury Money Market at a current yield of 3.7% and 5.2% as of October 3, 1998 and September 27, 1997, respectively. These funds are also included in the restricted cash balance. NOTE D - INVENTORIES Oct. 3, Sept. 27, 1998 1997 ----------- ----------- Raw materials $15,934,000 $14,552,000 Finished goods 17,375,000 16,223,000 Work in process 1,467,000 3,322,000 Machinery parts, factory supplies 2,103,000 2,038,000 ----------- ----------- Total $36,879,000 $36,135,000 =========== =========== NOTE E - PROPERTY, PLANT AND EQUIPMENT Oct. 3, Sept. 27, 1998 1997 ----------- ----------- Machinery and equipment $47,096,000 $43,322,000 Land, buildings and improvements 16,046,000 11,897,000 Molds 3,695,000 3,537,000 Furniture and fixtures 1,177,000 2,751,000 Vehicles 129,000 182,00 ----------- ----------- $68,143,000 $61,689,000 Less: Accumulated depreciation and amortization (22,240,000) (17,233,000) ----------- ----------- $45,903,000 $44,456,000 =========== =========== Depreciation and amortization expense for property, plant and equipment for 1998, 1997 and 1996 was $5,078,000, $3,688,000 and, $3,180,000, respectively. 21 NOTE F - LONG TERM DEBT Oct. 3, Sept. 27, 1998 1997 ----------- ----------- Revolving credit facility $24,006,000 $17,033,000 Industrial Development Bonds 6,100,000 6,900,000 Term loans 53,773,000 50,335,000 Subordinated debt 9,215,000 9,056,000 MEDIQ Note (see Note M) 302,000 5,915,000 Mortgages 2,775,000 641,000 Capital lease obligation 374,000 13,000 ----------- ----------- $96,545,000 $89,893,000 Less: Current maturities of long-term debt 14,920,000 4,351,000 ----------- ----------- $81,625,000 $85,542,000 =========== =========== Maturities of long-term debt are as follows: Fiscal Year 1999 $14,920,000 2000 8,217,000 2001 7,000,000 2002 26,554,000 2003 15,040,000 Thereafter 24,814,000 ----------- $96,545,000 =========== The Company's former revolving credit facility expired on December 31, 1996 and was refinanced in connection with the MEDIQ Stock Repurchase (see Note M). In addition, the Company had term loans with the same commercial lender which were also refinanced. In connection with the MEDIQ Stock Repurchase, the Company obtained senior financing in the aggregate principal amount of $60,000,000 (the "Senior Debt Financing") and senior subordinated financing in the aggregate principal amount of $10,000,000 (the "Subordinated Debt Financing"). Pursuant to the Senior Debt Financing, the Company had senior secured credit facilities in the aggregate principal amount of $60,000,000 (the "Senior Debt"), consisting of (i) a $20,000,000 variable rate term loan (the "Term Loan A"), (ii) a $15,000,000 variable rate term loan (the "Term Loan B" and, together with the Term Loan A, the "Term Loans"), (iii) a $20,000,000 variable rate letter of credit to support the MEDIQ Note relating to the MEDIQ Stock Repurchase (the "Stock Repurchase Letter of Credit"), (iv) a $17,300,000 variable rate revolving credit facility (the "Revolving Credit Facility"), and (v) a $8,100,000 letter of credit to support the Company's Industrial Development Bonds (the "IDB Letter of Credit" and, together with the Stock repurchase Letter of Credit, the "Letters of Credit"). The purpose of obtaining the Senior Debt Financing was to permit the Company to finance the MEDIQ Stock Repurchase, to refinance the Company's existing indebtedness and to satisfy the Company's working capital requirements. As of September 27, 1997, $19,250,000 was outstanding under Term Loan A, $9,085,000 was outstanding under Term Loan B and $12,790,000 was outstanding under the Revolving Credit Facility, with interest rates of 8.27%, 9.5% and 9.5%, respectively. As of October 3, 1998 $17,075,000 was outstanding under Term Loan A, $14,698,000 was outstanding under Term Loan B and $19,763,000 was outstanding under Revolving Credit Facility, with interest rates of 8.19%, 8.69% and 8.19%, respectively. 22 In connection with the acquisition of certain of the assets of the first aid business of American White Cross, the Company amended its Senior Debt agreement to provide for an increase in the Senior Secured Credit Facility consisting of a $30,000,000 variable rate term loan (the "Additional Term Loan A"), (ii) a $27,000,000 variable rate term loan (the "Additional Term Loan B" and, together with term Loan A, the "Additional Term Loans") and (iii) a $25,000,000 variable rate revolving credit facility (the "Additional Revolving Credit Facility"). As of October 3, 1998 and September 27, 1997, $10,000,000 was outstanding under the Additional Term Loan A, $12,000,0000 under the Additional Term Loan B and $4,243,000 under the Additional Revolving Credit Facility was outstanding with interest rates of 8.19%, 8.69% and 8.19%, respectively for 1998 and 8.75%, 10% and 9.5%, respectively for 1997. Pursuant to the Subordinated Debt Financing, the Company's subordinated lender has provided the Company with an aggregate principal amount of $10,000,000 (the "Subordinated Debt") in the form of senior subordinated notes (the "Senior Subordinated Notes") issued to the subordinated lender. The Senior Subordinated Notes mature on March 31, 2005 and bear interest at 11.5%. Interest on the Senior Subordinated Notes is payable quarterly in arrears, commencing on the first calendar quarter of calendar 1997. In connection with the Subordinated Debt Financing, the Company issued to the Subordinated lender warrants to purchase 273,419 shares of common stock of the Company (representing approximately 4.5% (on a fully diluted basis) of the total outstanding common stock as of December 31, 1996) at $9.00 per share, subject to certain adjustments to prevent dilution exercisable at date of issue for a period of ten years. The company is required to pay an agent's fee of $10,000 per annum and a commitment fee payable quarterly at a rate of .375% per annum on the average daily unused portion of the Revolving Credit Facility and Term Loan B during the period for which the ratio (the "Funded Debt Ratio") of the Company's total funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") is less than 3.5, and at a rate of .50% per annum if the Funded Debt Ratio is greater than or equal to 3.5. In addition, the Company pays fees on the Letter of Credit quarterly in arrears at a per annum rate equal to 1.75% to 2.50% (depending on the Funded Debt Ratio) times the maximum amount to be drawn under the applicable Letter of Credit. The agreements evidencing the Senior Debt and the Senior Subordinated Debt contain certain restrictive convenants including, without limitation, convenants with respect to the ratio of total debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"), operating cash flow, interest coverage, capital expenditures and prevent the payment of dividends. The Company was in default of its total debt to EBITDA, operating cash flows, minimum interest coverage, maximum capital expenditures, and minimum net worth covenants as of and for the period ended October 3, 1998. The Company requested and was granted waivers of these covenants as of and for the period ended October 3, 1998. Amendments to these covenants were executed in December 1998 (see Note P). During 1998, the Company obtained a five year mortgage totalling $2,800,000 for purposes of refinancing an existing mortgage as well as for he purchase of one of its manufacturing facilities previously leased. The interest rate was fixed upon closing at 8.1%. The mortgage is payable for the first year in quarterly installments of $25,000 plus interest, thereafter payable in monthly installments of $15,500 plus interest, with a final payment of approximately $1,980,000 due June 22, 2003. 23 NOTE G - COMMITMENTS Leases - The company leases certain of its administrative, manufacturing, distribution and warehouse facilities under operating leases. The Company also leases certain equipment under operating and capital leases. Future minimum payments under noncancelable operating and capital leases are as follows: Operating Capital Leases Leases Fiscal Year --------- ------- 1999 1,450,000 104,000 2000 1,439,000 104,000 2001 1,437,000 104,000 2002 1,362,000 104,000 2003 1,344,000 38,000 Thereafter 10,300,000 -- ----------- --------- Total minimum lease payments $17,332,000 $ 454,000 =========== Amount representing interest 80,000 --------- Present value of minimum lease payments $ 374,000 ========= Rental expense for operating lease was $1,728,000, $698,000, and $462,000 for 1998, 1997 and 1996, respectively. NOTE H - INCOME TAXES Income tax expense (benefit) consisted of the following: Year Ended ----------------------------------------- Oct. 3, Sept. 27, Sept. 28, 1998 1997 1996 ------------ ---------- ---------- Current: Federal $(2,833,000) $ 629,000 $2,621,000 State 16,000 324,000 507,000 ------------ --------- ---------- (2,817,000) 953,000 3,128,000 Deferred: Federal 812,000 534,000 537,000 State 143,000 49,000 15,000 Change in valuation allowance (368,000) -- -- ------------ ---------- ---------- 587,000 583,000 552,000 Tax credits: 755,000 -- -- ------------ ---------- ---------- $(1,475,000) $1,536,000 $3,680,000 ============ ========== ========== 24 The difference between the Company's income tax and the statutory federal tax (benefit) is reconciled below:
Year Ended ---------------------------------------------------------- Oct. 3, Sept. 27, Sept. 28, 1998 1997 1996 ----------- ---------- ---------- Statutory federal tax $(1,478,000) $1,291,000 $3,183,000 Nondeductible goodwill amortization 483,000 69,000 189,000 State tax, net of federal benefit (13,000) 219,000 345,000 Tax credits (755,000) -- -- Valuation allowance 368,000 -- -- Other (80,000) (43,000) (37,000) ----------- ---------- ---------- Income tax (benefit) expense $(1,475,000) $1,536,000 $3,680,000 =========== ========== ==========
As of October 3, 1998, the Company had Federal net operating carryforward of $1,195,000 which are available to offset future taxable income. The Company also had Federal and State tax credit carryforward of $1,109,000. Utilization of the operating loss carryforwards, which expire in fiscal years 1999 to 2018, is limited to $1,049,000 annually. For further discussion of state taxes see Note O. As of October 3, 1998 the Company has recognized deferred income tax assets related to deductible temporary differences, investment and other tax credits and cumulative net operating losses. The ability of the Company to fully realize deferred tax assets in future years is contingent upon its success in generating sufficient levels of taxable income before the statutory expiration periods for utilizing such credit and net operating losses lapse. After an assessment of all available evidence, including historical and projected operating trends, the Company concluded that realization of all such deferred tax assets in the near future, except for approximately $368,000 relating to tax credits, was more likely than not. According, a valuation allowance of approximately 50% of certain of the Company's investment tax credit carryforwards was recorded to offset deferred tax assets. Significant components of the Company's deferred tax assets and liabilities are as follows: Oct. 3, Sept. 27, 1998 1997 ---------- ---------- Assets: Net operating loss carryforwards $480,000 $480,000 Allowance for bad debts 303,000 243,000 Inventory 470,000 226,000 Tax credits 1,109,000 354,000 Benefit of stock options exercised 115,000 304,000 Other 186,000 237,000 ---------- ---------- 2,663,000 1,844,000 Valuation allowance (368,000) -- ---------- ---------- Deferred tax assets $2,295,000 $1,844,000 Liabilities: Depreciation and amortization 3,924,000 2,767,000 Other 760,000 138,000 ---------- ---------- Deferred tax liabilities 4,684,000 2,905,000 ---------- ---------- Net deferred tax liability $2,389,000 $1,061,000 ========== ========== NOTE I - EMPLOYEE BENEFIT PLANS The Company has a 401(k) savings plan, covering substantially all employees. The plan is subject to certain minimum age and length of employment requirements. Under the plan, the Company matches 50% of each participant's eligible contributions for the plan year, subject to certain limitations. In addition, the Company has a profit sharing plan; the Company's contributions to the plan are discretionary. Contributions of $253,000, $252,000 and $171,000 were made to the plans in 1998, 1997 and 1996, respectively. 25 NOTE J - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financIal data for fiscal years 1998 and 1997 is as follows: 1998 - ----
First Second Third Fourth Quarter Quarter Quarter Quarter(1) ----------- ----------- ----------- ----------- Net sales $34,463,000 $33,956,000 $27,355,000 $32,660,000 Gross profit 8,589,000 8,147,000 7,218,000 2,368,000 Net income (lose 810,000 624,000 206,000 (4,511,000) Fully diluted earnings (loss) per share $.14 $.11 $.04 $(.80) Adjusted weighted average shares outstanding 5,745,000 5,785,000 5,715,000 5,672,000
(1) includes inventory and accounts receivable adjustments or $7.7 million -- see note B 1997 - ----
First Second Third Fourth Quarter Quarter Quarter Quarter ----------- ----------- ----------- ----------- Net sales $22,035,000 $25,178,000 $23,006,000 $24,112,000 Cross profit 6,051,000 6,537,000 6,022,000 3,993,000 Net Income (loss) 1,540,000 1,003,000 763,000 (1,044,000) Fully diluted earnings (loss) per share $.18 $.20 $.15 $(.21) Adjusted weighted average shares outstanding 8,723,000 4,962,000 5,064,000 4,914,000
NOTE K - RELATED PARTY TRANSACTIONS Services Agreement -- Through December 31, 1995, the Company obtained certain legal, accounting, tax, insurance and human resource services from MEDIQ Incorporated ("MEDIQ"), the owner at that time (see Note M) of approximately 47% of the outstanding common stock of the Company. Subsequent to December 31, 1995 the Company received only certain tax and insurance services from MEDIQ. Costs for such services were $51,000, and 85,000 in fiscal 1997, and 1996 respectively. The Company believes that MEDIQ's charges for such services were on terms no less favorable to the Company than those that could have been obtained from unaffiliated third parties for comparable services. All services ceased to be effective on September 30, 1997. Insurance -- The Company obtained certain insurance coverages through programs administered by MEDIQ. Insurance expense under these programs was $42,000 for fiscal year 1996. In 1997 and 1998, the Company did not obtain insurance coverage through MEDIQ. Dutch Auction Self Tender -- On October 29, 1997 the Company announced that it would purchase from its stockholders in a Dutch Auction self tender up to 450,000 shares of its common stock (see Note L of the consolidated financial statements). 26 NOTE L - STOCKHOLDERS' EQUITY The Company maintains a Stock Option Plan which includes an Incentive Stock Option Program and a Non-Qualified Stock Option Program. Incentive stock options may be granted to key employees, including the Company's officers, at the discretion of the Stock Option Plan Committee, until termination of the Plan. Non-qualified stock options may be granted to employees, employee directors, advisors and independent consultants at the discretion of the Committee. No options may be granted under the programs for a term in excess of five years from the date of grant. A summary of stock option activity under the Plan is as follows:
Weighted average Number Exercise Price Exercise Price of Shares Per Share Per Share --------- -------------- ---------------- Outstanding at September 30, 1995 905,000 $6.00-$12.25 $9.66 Granted 10,000 $9.875 $9.88 Exercised (150,000) $6.00 $6.00 Terminated (3,000) $7.50-$8.00 $8.40 --------- Outstanding at September 28, 1996 762,000 $6.00-$12.25 $10.39 Granted 298,000 $8.125-$9.875 $9.58 Exercised (153,000) $6.00-$12.25 $7.14 Terminated (3,000) $12.25 $12.25 --------- Outstanding at September 27, 1997 904,000 $9.38-$12.25 $10.67 Granted 102,000 $12.625-$13.25 $12.93 Exercised (62,000) $9.375-$12.25 $10.67 Terminated (139,000) $9.875-$13.25 $11.21 --------- Outstanding at October 3, 1998 805,000 $9.375-$13.25 $10.86 ========= Exercisable at October 3, 1998 632,200 $9.375-$13.25 $10.85 =========
The Company apples Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option and other employee stock based compensation plans. Had compensation cost for the Company's stock option plans been determined based on fair value at the grant dates for awards under those plans which were granted on or after October 1, 1995 consistent with the method of SFAS No. 123, the Company's net income (loss) and basic earnings (loss) per share for 1998, 1997 and 1996 would have been reduced to ($3,182,000) and ($0.56), respectively, in 1998, $2,015,000 and $0.35, respectively, in 1997 and $5,675,000 and $0.66, respectively in 1996. The proforma results are not necessarily indicative of results that would have been reported if all options had been measured under SFAS No. 123. The weighted average remaining contractual life of options outstanding at October 3, 1998 was 2.25 years. The weighted average fair value of options granted during 1998, 1997 and 1996 was $4.57, $4.09 and $4.24 per share, respectively. The fair value of options granted under the Company's stock option plans during 1996, 1997 and 1998 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used: No dividend yield, expected volatility of 26% in 1998 and 38% in 1997 and 1996, risk free interest rate of 6%, expected life of 5 years, and a forfeiture rate of 15%. On October 29, 1997 the company announced that it would purchase from its stockholders in a Dutch Auction self tender up to 450,000 shares of its common stock at a purchase price not greater than $12.75 per share nor less than $11.00 per share. The purpose of the offer was to provide added market liquidity for stockholders who wished to sell their shares as a result of the Company's 1997 fourth quarter performance. The offer expired on November 28, 1997. A total of 250,668 shares were purchased and resold by the Company at a price of $12.75 per share. The shares were sold by the Company to: (i) Cape Ann Investors, L.L.C., the Company's largest stockholder (an affiliate); (ii) Bernard J. Korman, the Company's Chairman of the Board, (iii) Donald E. Lepone, the Company's Chief Executive Officer, and (iv) Donald M. Gleklen, a member of the Board of Directors of the Company. In connection with the Dutch Auction self tender, the Company received from Senior and Subordinated lenders a waiver to allow for the purchase of its common stock. 27 NOTE L - STOCKHOLDERS' EQUITY (cont.) On August 7, 1998, the Company entered into an amendment to the Stock Purchase Agreement with Cape Ann Investors to permit Cape Ann and its affiliates to purchase from time to time, in the open market or in privately negotiated transactions, up to an additional 245,000 shares of common stock of the Company. As of November 16, 1998, Cape Ann beneficially owned 1,106,168 shares of common stock of the Company and held warrants issued by the Company, to purchase 215,425 shares of common stock of the Company and held warrants issued by the Company, to purchase 215,425 shares of common stock of the Company exercisable at $3.60 per share for a period of 5 years commencing on October 14, 1998. NOTE M - THE STOCK PURCHASE AGREEMENT On December 31, 1996 pursuant to the terms of an Amended and Restated Stock Purchase Agreement (the "Stock Purchase Agreement") dated November 20, 1996 among MEDIQ Inc. MEDIQ Investment Services, Inc. and the Company, the Company purchased and retired (except as noted below) from MEDIQ all 4,037,258 shares of the Company's common stock owned by MEDIQ (the "MEDIQ Shares"), of which 33,597 and 657,194 were held in escrow (the"MEDIQ Escrowed Shares") as of October 3, 1998 and September 27, 1997, respectively, in support of MEDIQ's 7.5% Subordinated Debentures due 2003 (the "MEDIQ Bonds"). The Aggregate purchase price of the MEDIQ Shares was $36,335,000 representing a purchase price of $9.00 per share (the "Purchase Price"). The Company paid MEDIQ $19,963,000 of the $36,335,000 purchase price in cash and delivered to MEDIQ a promissory note (the "MEDIQ Note") for the remaining $16,372,000 of the purchase price. The balance of the note as of October 3, 1998 and September 27, 1997 was $302,000 and $5,915,000, respectively. The MEDIQ Note is payable in installments as MEDIQ Escrowed Shares are released from escrow, pursuant to the indenture (the "MEDIQ Indenture") and escrow agreement relating to the MEDIQ Bonds, together with Interest at the annual rate of 7.5%, reduced, however, to 5%, 4% and 3% if the note remains outstanding longer than 18, 30 and 42 months, respectively. The current interest rate is 5%. Pursuant to the Stock Purchase Agreement, to the extent that any holder of a MEDIQ Bond (other than MEDIQ) presents such MEDIQ Bond for exchange for MEDIQ Escrowed Shares in accordance with the terms of the MEDIQ Indenture and MEDIQ delivers MEDIQ Escrowed Shares to such holder, (i) the principle amount of the MEDIQ Note shall be reduced by an amount equal to the product of the number of MEDIQ Escrowed Shares so delivered by MEDIQ to such holder and $9.00, and (ii) the principal amount of the MEDIQ Note shall further be reduced by an amount (the "Excess Cash Amount") equal to the product of the number of Escrowed Shares so delivered by MEDIQ and the number which is equal to the difference between (x) $1,000 divided by the then exchange rate of the MEDIQ Bonds as provided in the indenture and (y) $9.00; provided, however, that in lieu of such further reduction in the principal amount of the MEDIQ note under the foregoing clause (ll), the Company may elect to receive an amount in cash from MEDIQ equal to the Excess Cash Amount. There has been no conversion of MEDIQ Escrowed Shares through October 3, 1998. The stock repurchase was financed with $20,000,000 from the proceeds of the Company's Additional Term Loan A, $9,085,000 of the Additional Term Loan B and the balance utilizing the Company's revolving credit facility (see Note F). NOTE N - MAJOR CUSTOMERS Substantially all of the Company's customers are retailers. No base of customers in one geographic area constitutes a significant portion of sales. American Home Products, Inc. accounted for 7%, 10% and 11% of net sales in 1998, 1997 and 1996, respectively, and Walmart Stores, Inc. accounted for 9%, 11% and 11% of net sales in 1998, 1997 and 1996, respectively. NOTE O - LITIGATION AND CONTINGENCIES The Company, like other companies in the store brand industry, has been the subject of claims and litigation brought by national brand name companies based on packaging alleged to be similar to competing brand name products. The Company is also subject to certain claims and informal complaints relating to its products which are incidental and routine to its business and for which the Company maintains insurance coverage. The Company knows of no litigation, either pending or threatened, which is likely to have a material adverse effect on the Company's financial position, results of operations or cash flows. On July 8, 1997, the Commonwealth of Massachusetts Department of Revenue ("DOR") notified the Company of its intent to assess the Company approximately $374,000, including interest and penalties, relating to tax audits for fiscal years ending 1992 through 1994. Tax years 1995 and 1996 remain open. The amount relates principally to the deductibility of certain expenses related to the Company's wholly owned subsidiary, NutraMax Holdings, Inc., a Delaware company. The Company attended a pre-assessment conference with the DOR on March 18, 1998, at which the Company continued to vigorously defend its tax position. The Company has not received an further notice from the DOR regarding its intent to assess. Due to the uncertainties surrounding any assessments, no accrual has been recorded in the accompanying financial statements. NOTE P - SUBSEQUENT EVENTS On November 6, 1998, the company entered into stock purchase agreements with Cape Ann Investors, L.L.C. ("Cape Ann"), the Company's largest stockholder, Donald E. Lepone, the Chief Executive Officer, President and a Director of the Company, and Bernard J. Korman, the Chairman of the Board of the Company (Cape Ann, Mr. Lepone and Mr. Korman are collectively referred to herein as the "Purchasers"), pursuant to which the Purchasers agreed to purchase in a private placement (the "Equity Investment") an aggregate of 1,441,860 shares of Common Stock at a price per share of $4.30, for an aggregate purchase price of approximately $6,200,000. The purchase price of $4.30 per share represented a premium of 11% to the closing price per share of $3,875 on October 21, 1998, the date on which the Board agreed in principle to the terms of the Equity Investment. The proceeds of the Equity Investment ("Equity Investment") are required to be used to pay $4,500,000 of indebtedness outstanding under its senior credit facilities and up to $1,500,000 of trade payables. Due to its 4th quarter financial results, the Company did not comply with certain financial covenants set forth in the Company's senior credit facilities and subordinated debt agreement. (Note F). The Company executed in December 1998 amendments to the financial covenants for total debt to EBITDA, operating cash flows, minimum interest coverage and minimum net worth covenants contained in the Company's existing senior and subordinated credit agreements (the "Credit Facility Amendments"). In addition, an event of default would exist should the Equity Investment not be successfully consummated on or before January 15, 1999 or if the borrower shall fail to have received on or before January 15, 1999 net proceeds from the Equity Investment of $6,200,000 of which up to $1,500,000 shall have been paid to its trade creditors and $4,500,000 shall have been applied to outstanding revolving loans. Upon an event of default and upon the agents declaration; (i) the banks' commitment to make further loans shall terminate and (ii) the unpaid principal amount of the loans together with accrued interest shall become immediately due and payable. Consummation of the Equity Investment is conditioned upon, among other things, the approval by the stockholders of the Company of the Equity Investment proposal at the annual meeting. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) None (a) (2) Financial Statement Schedules Schedule II Valuation and Qualifying Accounts and Reserves Other schedules are omitted because of the absence of conditions under which they are required. (a) (3) and (c) Exhibits (numbered in accordance with item 601 of Regulation S-K) 29 SIGNATURES Pursuant to requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: December 28, 1998 NUTRAMAX PRODUCTS, INC. By: /s/ Donald E. Lepone ------------------------------------- Donald E. Lepone, President and Chief Executive Officer By: /s/ Robert F. Burns ------------------------------------- Robert F. Burns, Vice President, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, which include at least a majority of the Board of Directors on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date - ---------- ----- ---- /s/ Bernard J. Korman Chairman of the Board December 28, 1998 - --------------------- Bernard J. Korman /s/ Donald E. Lepone President, Chief December 28, 1998 - -------------------- Executive Officer and Donald E. Lepone Director /s/ Donald M. Gleklen Director December 28, 1998 - --------------------- Donald M. Gleklen /s/ Dennis M. Newnham Director December 28, 1998 - --------------------- Dennis M. Newnham /s/ David M. Schulte Director December 28, 1998 - -------------------- David M. Schulte 30 NUTRAMAX PRODUCTS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FISCAL YEARS 1998, 1997 AND 1996
COL. A COL. B COL. C - ADDITIONS COL. D COL. E - ------ ------ ------------------ -------- -------- (1) (2) Description Balance at Charges to Charged to Balance Beginning Costs and Other at End of Period Expenses Accounts Deductions of Period --------- -------- -------- ---------- --------- Year ended October 3, 1998: Allowance for doubtful accounts $605,000 $2,218,000 -- $(2,065,000) $758,000 ======== ========== ======== =========== ======== Year ended September 27, 1997: Allowance for doubtful accounts $709,000 $300,000 -- $(404,000) $605,000 ======== ======== ======== ========= ======== Year ended September 28, 1596: Allowance for doubtful accounts $601,000 $425,000 $296,000 $(613,000) $709,000 ======== ======== ======== ========= ========
(1) Includes allowance from acquisition of Oral Care in 1996. (2) Represents accounts directly written-off net of recoveries and adjustments. 31 EXHIBIT INDEX Exhibit Number Description Method of Filing - -------------- ----------- ---------------- 2(a) MEDIQ Stock Purchase Agreement (13) 3(a) Restated and Amended Certificate of Incorporation (1) 3(b) Amendment, filed June 12, 1991, to the Company's Certificate of Incorporation (1) 3(c) Amendment, filed March 5, 1992, to the Company's Certificate of Incorporation (2) 3(d) By-Laws (1) 10(a) Employment Agreement between the Company and Donald E. Lepone, dated November 28, 1993 (3) 10(b) Employment Agreement between the Company and Richard Zakin, dated January 1, 1994 (3) 10(d) Asset Purchase Agreement dated as of July 21, 1997 (the "Asset Purchase Agreement") by and among NutraMax Products, Inc., American White Cross, Inc. and Weaver Manufacturing Corp. (11) 10(e) Amendment No. 1 to Asset Purchase Agreement dated as of August 15, 1997, by and among NutraMax Products, Inc. American White Cross, Inc. and Weaver Manufacturing Corp. (11) 10(f) Stock Purchase Agreement dated as of August 12, 1997 (the "Stock Purchase Agreement") by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. (11) 10(g) Amendment No. 1 to Stock Purchase Agreement dated as of September 9, 1997 by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. (11) 10(h) 1988 Stock Option Plan (adopted April 28, 1988) (5) 10(i) Amendment No. 1 to the 1988 Stock Option Plan (2) 10(j) Amendment No. 2 to the 1988 Stock Option Plan (2) 10(k) Amendment No. 3 to the 1988 Stock Option Plan (2) 10(l) Amendment No. 4 to the 1988 Stock Option Plan (3) 10(m) Tax Allocation/Sharing Agreement between the Company and MEDIQ Incorporated, dated July 25, 1990 (1) 10(n) Lease Agreement, dated January 1, 1987 between The Aid-Pack Limited Partnership and Aid-Pack, Inc. (6) 10(o) Lease Extension Agreement, dated May 1, 1991, between The Aid-Pack Limited Partnership and the Company (6) 10(p) Registration Rights Agreement, dated July 1, 1991 between MEDIC Incorporated and the Company (7) 10(q) Amendment to Registration Rights Agreement, dated July 1, 1991 among MEDIQ, MEDIQ Investment Services, Inc. and the Company (8) 10(r) Services Agreement, dated August 22, 1991 between MEDIQ Incorporated and the Company (7) 10(s) Revolving Credit and Security agreement between the Company and State Street Bank and Trust Company (8) 10(t) Revolving Credit and Security Agreement between State Street Bank and Trust Company (8) 10(u) Letter to State Street Bank and Trust dated February 29, 1996, re: Amendment No. 2 to Revolving Credit, Term Loan and Security Agreement and Trademark Assignment Agreement (10) 32 EXHIBIT INDEX
Exhibit Number Description Method of Filing - -------------- ----------- ---------------- 10(v) Letter to State Street Bank and Trust dated March 4, 1996, re: Amendment No. 3 to Revolving Credit, Term Loan and Security Agreement and Revolving Time Note (10) 10(w) Form of Secured Acquisition Promissory Note (10) 10(x) Form of Amended and Restated Revolving Time Note (14) 10(y) Amendment No. 1 dated as of September 11, 1997 to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996 among NutraMax Products, Inc., the banks (a defined therein) and BankBoston, N.A. as agent (11) 10(z) Agreement dated as of October 14, 1997 by and between the Company and Cape Ann Investors, L.L.C. ("Cape Ann") (12) 10(aa) Amendment to Cape Agreement dated as of October 16, 1997 by and between the Company and Cape Ann (12) 10(bb) Registration Rights Agreement dated as of October 16, 1997 by and between the Company and Mr. Korman (12) 10(cc) Amendment No. 2. To the August 12, 1997 Stock Purchase Agreement by and, between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. dated as of August 7, 1998. (9) 10(dd) Stock Purchase Agreement by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. dated as of November 6, 1998. (9) 10(ee) Stock Purchase Agreement by and between NutraMax Products, Inc. and Bernard J. Korman dated as of November 6, 1998. (9) 10(ff) Stock Purchase Agreement by and between NutraMax Products, Inc. and Donald E. Lepone dated as of November 6, 1998. (9) 10(gg) Amendment No. 3 to the December 30, 1996 Revolving Credit and Term Loan Agreement by an among NutraMax products, Inc., the banks (defined therein) and BankBoston, N.A. as agent dated as of January 20, 1998. (9) 10(hh) Amendment No. 4 to the December 30, 1996 Revolving Credit and Term Loan Agreement by and among NutraMax products, Inc., the banks (defined therein) and BankBoston, N.A. as agent dated as of March 31, 1998. (9) 10(ii) Amendment No. 5 to the December 30, 1996 Revolving Credit and Term Loan Agreement by and among NutraMax products, Inc., the banks (defined therein) and BankBoston, N.A. as agent dated as of May 7, 1998. (9) 10(jj) Agreement by and between NutraMax Products, Inc. and Bernard J. Korman dated as of October 14, 1997. (12) 10(kk) Agreement by and between Nutramax Products, Inc. and Donald E. Lepone dated as of October 14, 1997. (12) 10(ll) Agreement by and between NutraMax Products, Inc. and Donald M. Gleklen dated as of October 14, 1997. (12) 10(mm) Amendment No. 2 to the December 30, 1996 Revolving Credit and Term Loan Agreement by and among NutraMax Products, Inc., the banks (defined therein) and BankBoston, N.A. as agent dated as of November 26, 1997. (9) 10(nn) Form of Warrant Certificate dated October 14, 1997. (9) 10(oo) Amendment No. 6 to the December 30, 1996 Revolving Credit and Term Loan Agreement by and among NutraMax Products, Inc., the banks (defined therein) and BankBoston, N.A. as agent dated as of August 31, 1998. (9) 21 Subsidiaries of the Company (9) 23 Consent of Deloitte & Touche LLP, Independent Certified Public Accountants (9) 27.1 Financial Data Schedule, for the period ending October 3, 1998. (9)
33 EXHIBIT INDEX
Exhibit Number Description Method of Filing - -------------- ----------- ---------------- 27.2 Restated Financial Data Schedule, for the period ending September 27, 1997 (9) 27.3 Restated Financial Data Schedule, for the period ending March 29, 1997 (9) 27.4 Restated Financial Data Schedule, for the period ending September 28, 1996 (9) 27.5 Restated Financial Data Schedule, for the period ending September 30, 1995 (9)
EXHIBIT INDEX (1) Filed as an Exhibit to the Company's Registration Statement on Form S-1 on July 5, 1991, and incorporated herein by reference. (2) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal year 1992, and incorporated herein by reference. (3) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal year 1994, and incorporated herein by reference. (5) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1990, and Incorporated herein by reference. (6) Filed as an Exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1 on August 15, 1991, and incorporated herein by reference. (7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal year 1991, and incorporated herein by reference. (8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for fiscal 1993, and incorporated herein by reference. (9) Filed herewith. (10) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended June 29, 1996. (11) Filed as an exhibit to the Company's Current Report on Form 8-K dated September 11, 1997 and incorporated herein by reference. (12) Filed as an exhibit to the Company's Issued Tender Offer Statement on Schedule 13E-4 dated October 29, 1997 and incorporated herein by reference. (13) Filed as an exhibit to the Company's Annual Report on Form 10-K for fiscal year 1996, and incorporated herein by reference. (14) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the period ending June 29, 1996, and incorporated herein by reference. 34 EX-10.(CC) 2 AMEND. #2 TO THE 8/12/97 STOCK PURCHASE AGREEMENT Exhibit 10(cc) AMENDMENT (this "Amendment"), dated as of August 7, 1998, to the Stock --------- Purchase Agreement (the "Stock Purchase Agreement") dated as of August 12, 1997, ------------------------ as previously amended, by and between NutraMax Products, Inc., a Delaware corporation (the "Company"), and Cape Ann Investors, L.L.C., a Delaware limited ------- liability company (the "Purchaser"). All capitalized terms used in this --------- Amendment and not otherwise defined herein shall have the meanings set forth in the Stock Purchase Agreement. 1. The first sentence of Section 5.6(b) of the Stock Purchase Agreement is hereby amended to read in its entirety as follows: "Each of the Stockholders hereby jointly and severally covenants and agrees that from and after the date hereof none of the Stockholders or their Affiliates will, without the prior written consent of the Company specifically expressed in a vote adopted after the Closing by the Board, directly or indirectly, purchase or cause to be purchased or otherwise acquire (other than pursuant to a stock split, stock dividend or similar transaction) or agree to acquire, or become or agree to become the beneficial owner of, any additional Stock, except that the Stockholders and their Affiliates may purchase shares of Common Stock (A) pursuant to Section 2.2 of the Agreement between the Company and Purchaser, dated as of October 14, 1997 (the "October Agreement"), (B) upon exercise of ----------------- some or all of the warrants granted pursuant to the October Agreement (the "Warrants"), (C) from time to time, in the open market or in privately - --------- negotiated transactions, up to an aggregate of 245,000 shares of Common Stock, and (D) from time to time, in the open market or in privately negotiated transactions, up to an aggregate number of shares of Common Stock which, when added to the Shares of Common Stock then owned by the Stockholders and their Affiliates, would result in the Stockholders owning no more than the highest percentage of voting securities of the Company held by the Stockholders and their Affiliates immediately following any purchase permitted by clauses (A), (B) or (C) above. 2. Notwithstanding anything in the Stock Purchase Agreement to the contrary, any member of the Advisory Board of Chilmark who acquired shares of Common Stock from Purchaser on September 18, 1997 in accordance with the Stock Purchase Agreement may, from time to time, in the open market or privately negotiated transactions, purchase up to an aggregate number of shares of Common Stock equal to 50% of the number of shares so acquired from Chilmark. 3. Except as expressly provided herein, the Stock Purchase Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has duly executed and delivered this Amendment as of the date first above written. NUTRAMAX PRODUCTS, INC. By: /s/ Donald E. Lepone -------------------- Name: Donald E. Lepone Title: President/CEO CAPE ANN INVESTORS, L.L.C. By: Chilmark Fund II, L.P., its Managing Member By: Chilmark II, L.L.C., its General Partner By: /s/ David Schulte ----------------- Name: David Schulte Title: President 2 EX-10.(DD) 3 STOCK PURCHASE AGREEMENT NUTRAMAX/CAPE ANN INVESTO Exhibit 10(dd) STOCK PURCHASE AGREEMENT by and between NUTRAMAX PRODUCTS, INC., and CAPE ANN INVESTORS, L.L.C. Dated as of November 6, 1998 TABLE OF CONTENTS ----------------- Page ---- I. PURCHASE AND SALE 2 1.1. Purchase and Sale 2 1.2. Purchase Price 3 1.3. Closing 3 II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7 2.1. Due Organization, etc. 7 2.2. Compliance with Law 8 2.3. Authorization; Execution and Delivery of Agreement 9 2.4. No Conflict; No Consent 10 2.5. Capital Stock 11 2.6. SEC Reports 12 2.7. Financial Statements 12 2.8. No Brokers 13 2.9. Litigation and Claims 13 2.10. Use of Proceeds 14 i III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 14 3.1. Due Organization, etc. 14 3.2. Authorization; Execution and Delivery of Agreement 14 3.3. No Conflict; No Consent 15 3.4. No Brokers 16 3.5. Litigation and Claims 16 3.6. Investment Purposes 16 IV. COVENANTS OF THE COMPANY 17 4.1. Conduct of Business 17 4.2. Exchange of Stock Certificates 18 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates 18 4.4. Course of Dealings with Lenders 18 4.5. Board Representation 19 4.6. Other Purchase Agreements 19 ii V. COVENANTS OF THE PURCHASER AND THE COMPANY 19 5.1. Access; Confidentiality 19 5.2. Hart-Scott-Rodino Act Filings 20 5.3. Public Disclosure and Confidentiality 21 5.4. Certain Notifications 21 5.5. Efforts to Consummate; Further Actions 21 5.6. Standstill Obligations of the Purchaser 22 5.7. Proxy Statement; Stockholder Approval 29 VI. REGISTRATION RIGHTS 30 6.1. "Piggyback" Registration 30 6.2. Demand Registration 31 6.3. General Provisions 32 6.4. Information, Documents, Etc. 34 6.5. Expenses 35 6.6. Cooperation 36 6.7. Action to Suspend Effectiveness; Supplement to Registration Statement 37 6.8. Indemnification 39 iii VII. INDEMNIFICATION 45 7.1. Indemnification by the Company 45 7.2. Indemnification by the Purchaser 45 VIII. TERMINATION 46 8.1 Termination 46 IX. GENERAL PROVISIONS 47 9.1. Survival of Representations, Warranties and Agreements 47 9.2. Notices 47 9.3. General 49 9.4. Governing Law 51 9.5. Severability of Provisions 51 9.6. Captions 51 9.7. Expenses 51 9.8. Equitable Relief 52 9.9. Definitions 52 SCHEDULE 2.5(b) SCHEDULE 2.7(c) iv STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November 6, --------- 1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the "Company"), and CAPE ANN INVESTORS, L.L.C., a Delaware limited liability company - -------- (the "Purchaser"). --------- WHEREAS, the parties hereto are party to a Stock Purchase Agreement dated as of August 12, 1997 (as amended through the date hereof, the "1997 Stock ---------- Purchase Agreement"), pursuant to which the Purchaser purchased from the Company - ------------------ shares of the Company's Common Stock, par value $0.001 per share (the "Common ------ Stock"); - ----- WHEREAS, the parties hereto are also party to an Agreement dated as of October 14, 1997 (as amended through the date hereof, the "October Agreement"), ----------------- pursuant to which, among other things, the Purchaser purchased from the Company additional shares of Common Stock and the Company granted to the Purchaser and others certain warrants to purchase an aggregate of up to 225,000 shares of Common Stock (the "Warrants"); -------- WHEREAS, the Company recently has defaulted on certain financial covenants contained in the Company's Credit Facilities (as hereinafter defined), waivers of which defaults were obtained from the Company's lenders under such credit agreements (the "Lenders"); ------- WHEREAS, subject to the terms and conditions of this Agreement, the Purchaser wishes to purchase from the Company, and the Company wishes to sell to the Purchaser, additional shares (the "Shares") of Common Stock; ------ 1 WHEREAS, the Purchaser and the Company are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith; WHEREAS, in conjunction with the transactions contemplated by this Agreement, the Company is also entering into agreements with each of Donald E. Lepone, the President and Chief Executive Officer of the Company, and Bernard J. Korman, the Chairman of the Board of Directors of the Company, with respect to the purchase from the Company by Messrs. Lepone and Korman (the "Lepone ------ Purchase" and the "Korman Purchase," respectively) of approximately 279,070 - -------- --------------- additional shares of Common Stock (such agreements, the "Lepone Purchase --------------- Agreement" and the "Korman Purchase Agreement," respectively, and, collectively, - --------- ------------------------- the "Purchase Agreements"); and ------------------- WHEREAS, the proceeds from the sale of the Shares, together with the proceeds from the sale of shares of Common Stock pursuant to the Purchase Agreements, shall be used to facilitate the Company's negotiation of amendments to the financial covenants and other terms of the Credit Facilities and to enable the Company to retire existing indebtedness and to provide the Company with additional working capital; NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the parties hereto hereby agree as follows: 2 I. PURCHASE AND SALE 1.1. Purchase and Sale. Upon the terms and subject to the ----------------- conditions set forth in this Agreement, the Company agrees to issue, sell and deliver to the Purchaser, and the Purchaser agrees to purchase from the Company, 1,162,790 Shares. The Shares purchased and sold hereunder shall be free and clear of any liens, security interests, pledges, voting agreements, claims, options and encumbrances of every kind, character and description whatsoever ("Encumbrances"), except as contemplated by this Agreement. - -------------- 1.2. Purchase Price. As consideration for the sale of the Shares, -------------- at the Closing (as hereinafter defined) the Purchaser shall pay the Company, in immediately available funds, a purchase price of $4.30 per share. 1.3. Closing. (a) The closing of the transactions provided for in ------- this Agreement (the "Closing") shall take place on the second business day after ------- the satisfaction or waiver of the conditions set forth in Sections 1.3(b) and 1.3(c) of this Agreement at the offices of Goodwin, Procter & Hoar, LLP, Exchange Place, Boston, Massachusetts, or at such other time and place as the parties may mutually agree. (b) Conditions Precedent to the Purchaser's --------------------------------------- Obligations. The obligation of the Purchaser to consummate the transactions - ----------- described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Company contained in this 3 Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Company on or prior to the Closing; (iii) the Company shall have delivered to the Purchaser a certificate, dated the date of Closing and signed by a duly authorized officer of the Company, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any court, administrative body or governmental agency (a "Governmental Entity") which seeks to restrain the consummation of, prohibit or ------------------- declare illegal, or obtain a material amount of damages arising from the transactions contemplated by this Agreement and which is likely, in the Purchaser's reasonable judgment, to be successful on the merits, and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement (as hereinafter defined) shall have come into effect making illegal, the performance of this Agreement or the consummation of any of 4 the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority (as hereinafter defined) in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart- ---- Scott-Rodino Act")), and all extensions thereof, the passing of which is - ---------------- required for such consummation, shall have passed, except as to such consents, approvals, permits, authorizations or filings that, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), business, operations, properties, assets or liabilities of the Company and its Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse Effect"); (vi) the issuance and sale of Common Stock - ------------------------ contemplated by this Agreement shall have been approved by the requisite affirmative vote of the stockholders of the Company; (vii) from and after the date of this Agreement, there shall not have occurred any changes concerning the Company that, when combined, without duplication, with 5 all other changes concerning the Company from and after the date of this Agreement, have had or would reasonably be expected to have a Material Adverse Effect; (viii) the Company shall have obtained a waiver from the Lenders of any covenant defaults under the Credit Facilities during the fourth quarter of fiscal 1998 and shall have entered into amendments (the "Credit Facility --------------- Amendments") to each of the Revolving Credit and Term Loan Agreement, dated as - ---------- of December 30, 1996, as amended, between the Company, The First National Bank of Boston ("FNBB"), Fleet National Bank, National Bank of Canada, The Sumitomo ---- Bank, Limited, and FNBB, as Agent (the "Loan Agreement"), and the Purchase -------------- Agreement, dated as of December 30, 1996, as amended, between the Company and ING (U.S.) Capital Corporation (together with the Loan Agreement, the "Credit ------ Facilities"), the terms of which amendments shall be reasonably satisfactory to - ---------- the Purchaser, and such waiver and amendments shall be in full force and effect without waiver or change in the material terms thereof; and (viii) all conditions precedent to consummation of the Lepone Purchase and the Korman Purchase shall have been satisfied or waived by the appropriate party, and no amendment to the Lepone Purchase Agreement or the Korman Purchase Agreement 6 shall have been executed or agreed to that changes the material terms thereof in a manner adverse to the Company without the Purchaser's prior written consent. In the event any of the foregoing conditions to the Purchaser's obligation to close hereunder is not satisfied on or before the Closing, the Purchaser may waive such condition and proceed to Closing. As used herein, "Legal ----- Requirements" shall include laws, regulations, ordinances, orders, decrees, - ------------ permits, licenses, consents, approvals, registrations, authorizations and qualifications required by or from any federal, state, local or foreign governmental or regulatory authority (each, an "Authority"). --------- (c) Conditions Precedent to the Company's Obligations. The obligation ------------------------------------------------- of the Company to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Purchaser contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Purchaser shall have performed and complied in all material respects with all covenants and 7 agreements required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing; (iii) the Purchaser shall have delivered to the Company a certificate, dated the date of Closing and signed by a duly authorized signatory of the Purchaser, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any Governmental Entity which seeks to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the transactions contemplated by this Agreement and which is likely, in the Company's reasonable judgment, to be successful on the merits and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements 8 (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing of which is required for such consummation, shall have passed, except as to such consents, approvals, permits, authorizations or filings that, individually or in the aggregate would not have a Material Adverse Effect; (vi) the issuance and sale of Common Stock contemplated by this Agreement shall have been approved by the requisite affirmative vote of the stockholders of the Company; and (vii) from and after the date of this Agreement, there shall not have occurred any changes concerning the Purchaser that, when combined, without duplication, with all other changes concerning the Purchaser from and after the date of this Agreement, have had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, operations, properties, assets or liabilities of the Purchaser (a "Purchaser Material ------------------ Adverse Effect"). In the event any of the foregoing conditions to the Company's - -------------- obligation to close hereunder is not satisfied on or before the Closing, the Company may waive such condition and proceed to Closing. 9 (d) Company Closing Deliveries. At the Closing, the Company will -------------------------- deliver to the Purchaser the following: (i) a stock certificate or certificates representing the Shares; and (ii) a certificate of the Secretary of the Company certifying as to the adoption and effect of resolutions of the Board of Directors of the Company (the "Board") authorizing the ----- execution, delivery and performance of this Agreement. (e) Purchaser Closing Deliveries. At the Closing, the Purchaser will ---------------------------- deliver to the Company the following: (i) a certificate of the Managing Member of the Purchaser certifying as to the adoption and effect of resolutions of the Purchaser authorizing the execution, delivery and performance of this Agreement; and (ii) payment of the purchase price provided by Section 1.2. II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2.1. Due Organization, etc. The Company and each of its Subsidiaries --------------------- (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and each has all requisite corporate power and authority to own, operate and lease its respective properties and assets and to conduct its respective businesses as now conducted and is qualified to do business in each state or other jurisdiction where the nature of its properties, assets or businesses requires such qualification 10 other than where the failure to be so qualified would not, individually or in the aggregate have a Material Adverse Effect. All of the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and non-assessable, other than the shares of capital stock of foreign Subsidiaries which are not fully paid and which failure to be fully paid, individually or in the aggregate, does not have a Material Adverse Effect, and all of such outstanding shares are owned, directly or indirectly, by the Company free and clear of all Encumbrances, except for liens or security interests or pledge arrangements involving the capital stock of the Subsidiaries in favor of the Company's lenders. "Subsidiary" means a corporation or other business ---------- arrangement a majority of the outstanding voting securities or ownership interests of which is owned, directly or indirectly, by the Company, by one or more other Subsidiaries or by the Company and one or more other Subsidiaries. 2.2. Compliance with Law. The Company and each Subsidiary has ------------------- obtained and maintains in full force and effect all permits, licenses, consents, approvals, registrations, memberships, authorizations and qualifications under all federal, state, local and foreign laws and regulations, and with all Authorities, required for the conduct by it of its businesses and the ownership or possession by it of its properties and assets other than where the failure to obtain or maintain such permits, licenses, consents, approvals, registrations, memberships, authorizations or qualifications would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each Subsidiary are in compliance with all laws, regulations, ordinances, 11 orders and decrees (including, without limitation, all environmental and occupational, health and safety laws) of any Authority applicable to the conduct by the Company and each Subsidiary of their respective businesses and to their ownership and possession of their respective properties and assets, other than where the failure so to comply would not, individually or in the aggregate, have a Material Adverse Effect. 2.3. Authorization; Execution and Delivery of Agreement. (a) Except -------------------------------------------------- to the extent that the By-laws of, or other rules or regulations promulgated by, the National Association of Securities Dealers ("NASD") applicable to Nasdaq ---- SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby (i) do not require the approval or consent of any stockholders of the Company and (ii) have been duly authorized by all necessary corporate action on the part of the Company for all purposes, including Section 203 of the Delaware General Corporation Law. Except to the extent that the By- laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, this Agreement has been duly executed and delivered by the Company and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Company, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. The Company has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 12 (b) Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, (i) the Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration therefor set forth herein, the Shares will be validly issued, fully paid and non-assessable and (ii) the Purchaser will acquire valid and marketable title to the Shares, free and clear of any Encumbrances except as contemplated by this Agreement. 2.4. No Conflict; No Consent. Except to the extent that the By-laws ----------------------- of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Company or any Subsidiary under, (i) any provision of the certificate of incorporation or by-laws or similar constituent documents of the Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, 13 registration, membership, authorization or qualification from any Authority, of the Company or any Subsidiary or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Company or any of its Subsidiaries is a party or by which any of them is bound, other than, in the case of clause (ii) above, where such conflict, violation, default, acceleration or Encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. No consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority or third party is required to be made or obtained by the Company or any Subsidiary (including, without limitation, under any environmental or occupational, health and safety laws) in order to execute or deliver this Agreement, issue and sell the Shares or to consummate the transactions contemplated hereby, other than (A) as may be required by the Hart-Scott-Rodino Act, (B) as a result of the periodic reporting requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (C) the listing requirements of the NASDAQ SmallCap ------------ Market, or except where the failure to make or obtain any such consent, approval, order, authorization, registration, declaration, filing or notice would not have a Material Adverse Effect. 2.5. Capital Stock. (a) The authorized capital stock of the Company ------------- consists of 20,000,000 shares of Common Stock, of which, as of October 3, 1998, 5,682,168 shares were outstanding and 9,665 shares were held in treasury and 1,296,633 shares are reserved for future issuance pursuant to any option, warrant or other rights agreement, arrangement or other 14 commitment. All of the issued and outstanding shares of Common Stock have been validly issued and are fully paid and non-assessable. (b) (i) Other than this Agreement, the Lepone Purchase Agreement, the Korman Purchase Agreement and the Warrants or as set forth on Schedule 2.5(b) hereto, there are not authorized or outstanding any subscriptions, options, conversion rights, warrants or other agreements, securities or commitments of any nature whatsoever (whether oral or written and whether firm or conditional) obligating the Company or any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, to any person any shares of Common Stock or any other shares of the capital stock of the Company or any shares of the capital stock of any Subsidiary, or any securities convertible into or exchangeable for any such shares, or obligating any such person to grant, extend or enter into any such agreement or commitment; and (ii) except as set forth on Schedule 2.5(b) hereto, there is no obligation, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any share of capital stock or other equity interests of the Company or any Subsidiary. No class of capital stock of the Company is entitled to preemptive rights. 2.6. SEC Reports. Except with respect to the amendment to the ----------- Current Report on Form 8-K dated September 11, 1998 (filed with the Commission (as hereinafter defined) on September 26, 1998) contemplated by the disclosure contained in Items 7(a) and (b) thereof, the Company has filed with the Securities and Exchange Commission (the "Commission") all proxy ---------- 15 statements, reports, forms and other documents required to be filed by it after January 1, 1995 under the Exchange Act (collectively, the "SEC Reports"). As of ----------- their respective dates, the SEC Reports (i) complied as to form in all material respects with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.7. Financial Statements. (a) The financial statements -------------------- (including any related notes) included in the SEC Reports (the "Financial --------- Statements") have been prepared in accordance with generally accepted accounting - ---------- principles consistently applied throughout the periods involved (except as may be noted therein) and fairly present the consolidated financial condition, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates thereof and for the periods ended on such dates (in each case subject, as to interim statements, to changes resulting from year-end adjustments (none of which were or, except as otherwise disclosed to the Purchaser in writing, will be material in amount or effect) and except as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act). (b) On the date hereof, except as disclosed in the SEC Reports, neither the Company nor any Subsidiary has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due and whether or not required 16 to be disclosed in the SEC Reports, other than liabilities that have been disclosed to the Purchaser in writing, have been incurred in the ordinary course of business or are not in the aggregate material to the Company and its Subsidiaries taken as a whole. Since September 28, 1996, the Company has not declared or paid any dividends to any of its stockholders. (c) Except as set forth on Schedule 2.7(c), since September 28, 1996, the Company and each of its Subsidiaries have conducted their respective businesses only in the ordinary course in substantially the same manner as theretofore conducted and the Company and its Subsidiaries, taken as a whole, have not undergone or suffered any Material Adverse Effect, except as otherwise disclosed to the Purchaser in writing. 2.8. No Brokers. No broker, finder or investment banker is entitled ---------- to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 2.9. Litigation and Claims. There is no claim, prosecution, suit, --------------------- action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Company, threatened against or affecting the Company, any of its Subsidiaries or any of their respective properties or assets (nor, to the knowledge of the Company, are there any facts or circumstances providing a basis for any such claim, prosecution, suit, action, arbitration, proceeding, investigation or review) which, if adversely determined, would be reasonably likely to have a Material Adverse Effect or would prohibit or impose any limitations on the Purchaser's 17 ownership of the Shares or would prohibit or make illegal the acceptance for payment, purchase of or payment for the Shares. Neither the Company nor any of its Subsidiaries is in default with respect to any judgment, decree, injunction, rule or order of any court, arbitrator or Authority outstanding against or binding upon the Company or any of its Subsidiaries, other than where any such defaults would not, individually or in the aggregate, have a Material Adverse Effect. 2.10. Use of Proceeds. The Company intends to use the proceeds from --------------- the sale of Shares to retire debt of the Company under the revolving credit facility under the Loan Agreement and for other general corporate purposes. III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Company that: 3.1. Due Organization, etc. The Purchaser is a limited liability --------------------- company duly organized, validly existing and in good standing under the laws of the State of Delaware. The Purchaser has no direct or indirect subsidiaries. 3.2. Authorization; Execution and Delivery of Agreement. The -------------------------------------------------- Purchaser has all requisite power and authority to execute this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and this Agreement constitutes the legal, valid, binding 18 and enforceable obligation of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 3.3. No Conflict; No Consent. The execution and delivery of this ----------------------- Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Purchaser under, (i) any provision of the certificate of organization and limited liability company agreement or similar constituent documents of the Purchaser, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, registration, membership, authorization or qualification from any Authority, of the Purchaser or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Purchaser is a party or by which it is bound, other than, in the case of clause (ii) above, where such conflict, violation, default, acceleration or Encumbrance would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. Other than as required by the Hart-Scott-Rodino Act or as a result of the reporting requirements of the Exchange Act, no consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority is required to be made or obtained by the Purchaser in order to execute or deliver this Agreement or to consummate the transactions contemplated hereby. 19 3.4. No Brokers. No broker, finder or investment banker is ---------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Purchaser. 3.5. Litigation and Claims. There is no claim, prosecution, suit, --------------------- action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Purchaser, threatened against or affecting the Purchaser, or any of its properties or assets which, if adversely determined, would prohibit or make illegal the purchase of or payment for the Shares. 3.6. Investment Purposes. (a) The Purchaser, by reason of its ------------------- business and financial experience, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of its investment in the Shares, and is purchasing the Shares hereunder for its own account, for investment only and not with a view to, or any present intention of, effecting a distribution of such securities or any part thereof. The Purchaser acknowledges that the Shares to be purchased hereunder have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other -------------- jurisdiction and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. (b) The Purchaser is an "accredited investor" as that term is defined in Rule 501 promulgated under the Securities Act. (c) The Purchaser has had the opportunity to ask questions and to receive 20 answers concerning the financial condition, operations and prospects of the Company and the terms and conditions of the Purchaser's investment, as well as the opportunity to obtain any additional information necessary to verify the accuracy of information furnished in connection therewith that the Company possesses or can acquire without unreasonable effort or expense. IV. COVENANTS OF THE COMPANY The Company covenants and agrees that: 4.1. Conduct of Business. Except as specifically consented to in ------------------- writing by the Purchaser or expressly contemplated by this Agreement, during the period from the date of this Agreement up to and including the date of the Closing, the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its business in the usual and ordinary course consistent with past practice and use its reasonable best efforts to preserve its business organization intact, to keep available the services of its key employees, material independent contractors and material consultants currently employed, to preserve the present relationships with customers, suppliers and other Persons (as hereinafter defined) with whom it has significant business relations, to maintain books and records in the usual and ordinary manner, and to preserve the goodwill and ongoing business; and (ii) except pursuant to agreements or commitments entered into by the Company or its Subsidiaries prior to the date of this Agreement and listed on Schedule 2.5(b) hereto, not issue or sell (or agree to issue or sell) any stock of any class or any other securities, or any options, warrants, conversion or other rights to purchase any such securities, or grant, or 21 agree to grant, any such options or modify or alter the terms of any of the above. As used herein, "Person" means any individual, partnership, joint ------ venture, firm, corporation, association, trust or other entity or any government or political subdivision or agency, department or instrumentality thereof. 4.2. Exchange of Stock Certificates. Promptly upon surrender of ------------------------------ any certificates representing Shares at the office of the Company, the Company will, at its expense, execute and deliver to the Purchaser a new certificate or certificates in denominations specified by the Purchaser for an aggregate number of Shares equal to the number of Shares represented by the certificates surrendered. 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon ------------------------------------------------------- receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate for Shares and, in the case of loss, theft or destruction, upon delivery of an indemnity satisfactory to the Company (which, in the case of the Purchaser may be an undertaking by the Purchaser to so indemnify the Company), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new certificate of like tenor for a number of Shares equal to the number of Shares represented by the certificate lost, stolen, destroyed or mutilated. 4.4. Course of Dealings with Lenders. The Company shall use its ------------------------------- reasonable best efforts to obtain the consents and approvals of the Lenders, and to negotiate and enter into 22 Credit Facility Amendments, necessary for the consummation of the transactions contemplated by this Agreement. The Company shall keep the Purchaser apprised of all material developments in connection with the negotiation of the Credit Facility Amendments. Without limiting the foregoing, the Company shall provide to the Purchaser, promptly after receipt thereof by the Company, a copy of each draft of the proposed amendments to the Credit Facilities and shall consult with the Purchaser in connection with the negotiation thereof. 4.5. Board Representation. At each annual meeting of the -------------------- stockholders of the Company after the Closing, so long as the Purchaser shall own Shares representing 5% or more of the total issued and outstanding shares of Common Stock as of the date which is thirty (30) days immediately preceding the record date of such meeting, the Company shall include in the slate of nominees for election as the Board at such meeting, David M. Schulte or one other officer or individual member of the Purchaser designated by the Purchaser (which designee shall not include any individual whose membership on the Board would be a violation of law), provided that the Company has consented to such other designee, which consent shall not be unreasonably withheld. 4.6. Other Purchase Agreements. The Company shall provide to the ------------------------- Purchaser, promptly after receipt or completion thereof by the Company, a copy of the proposed final draft of each of the Lepone Purchase Agreement and the Korman Purchase Agreement and of any proposed amendment of either thereof (or any proposed waiver of any of the terms or conditions of either thereof). 23 V. COVENANTS OF THE PURCHASER AND THE COMPANY 5.1. Access; Confidentiality. (a) At the reasonable request of ----------------------- the Purchaser, the Company shall give the officers, attorneys, accountants and other authorized representatives of the Purchaser access, during normal business hours and upon reasonable notice, to all of the Company's, and the Subsidiaries' offices, facilities, properties and personnel. The Company will furnish the representatives of the Purchaser with all such information concerning the Company and its Subsidiaries as such representatives may reasonably request and cause the employees, accountants, independent accountants and attorneys of the Company and its Subsidiaries to cooperate fully with such representatives in connection with such review and examination and to make full disclosure to the Purchaser of all material facts concerning the Company and its Subsidiaries; provided, however, that the Purchaser will hold in strict confidence and not use - -------- ------- for its own benefit (other than in connection with the transactions contemplated by this Agreement), prior to the Closing, the documents and information (including all evaluation material relating to employees) furnished to the Purchaser concerning the Company and its Subsidiaries; and, if the transactions contemplated by this Agreement shall not be consummated, such confidence shall be maintained and all such documents and all copies thereof shall promptly thereafter be returned to the Company. The Purchaser further agrees that it shall be responsible for any breach of this Section 5.1 by any of its officers, attorneys, accountants and other authorized representatives. 24 No investigation by the Purchaser or any of its representatives pursuant to this Section 5.1 shall affect any representation, warranty or closing condition of any party hereto. (b) Chilmark Fund II, L.P. ("Chilmark") agrees that it shall be --------- bound by the obligations of the Purchaser set forth in Section 5.1(a) as if it were the Purchaser for purposes of said section. 5.2. Hart-Scott-Rodino Act Filings. Each party covenants and ----------------------------- agrees to file, if required, on a date no later than ten days from the date hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with respect to the purchase by the Purchaser of the Shares pursuant to this Agreement and will provide promptly any supplemental information that may be requested in connection therewith. Each party will comply with all reasonable requests of the other party for information necessary in connection with the preparation by such other party of its notification and report form. 5.3. Public Disclosure and Confidentiality. Each party hereby ------------------------------------- agrees that, prior to the Closing, except as required by applicable law (or under the rules and regulations of the Nasdaq Stock Market (or any national securities exchange on which the Common Stock is listed)), no press release or public announcement or communication will be made or caused to be made concerning the execution or performance of this Agreement, the terms hereof or the transactions contemplated hereby unless specifically approved in advance by both parties. In the event that a party views disclosure as required by applicable law (or the rules and regulations of 25 the Nasdaq Stock Market or any such national stock exchange) as contemplated by the previous sentence, such disclosing party shall provide a copy of such disclosure to the other party within a reasonable period of time prior to such disclosure. 5.4. Certain Notifications. At all times prior to the Closing, --------------------- each party hereto shall promptly notify the other party in writing of the occurrence of any event which will or could reasonably result in the failure of any of the conditions contained in Article I hereof to be satisfied. Such notice shall be in additional to and not in lieu of the other notices and communications provided for herein. 5.5. Efforts to Consummate; Further Actions. Subject to the terms -------------------------------------- and conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 5.6. Standstill Obligations of the Purchaser. (a) As of the date --------------------------------------- of this Agreement, none of the Purchaser, Chilmark or any Affiliate (as hereinafter defined) thereof beneficially owns any shares of Common Stock, except as disclosed in filings through the date hereof on Schedule 13D under the Exchange Act or as may be deemed to exist under the Exchange Act in respect of the Warrants. From and after the date of this Agreement until the Closing, none of the Purchaser or Chilmark (collectively, the "Stockholders") or any of their ------------ Affiliates will acquire any securities issued by the Company or convertible into or exchangeable 26 for any equity securities of the Company (collectively referred to as "Stock"), ----- except pursuant to the terms of this Agreement. For purposes of this Agreement, an "Affiliate" of any person, entity or corporation shall mean and include (i) --------- any person, entity or corporation, now or hereafter, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with (through the ownership of voting securities or interests, by contract or otherwise) such person, entity or corporation, or (ii) any other person, entity or corporation acting in concert with such person, entity or corporation in connection with the Company with respect to any matter referred to in Section 5.6(d) of this Agreement or clauses (a)-(j) of Item 4 of Schedule 13D under the Exchange Act, or with respect to acquiring, holding, voting or disposing of any Stock. Each of the Stockholders acknowledges and agrees that a breach of any provision of this Agreement by any Stockholder or any Affiliate thereof shall constitute a breach by each Stockholder and that each Stockholder shall be fully liable for any breach of this Agreement by any other Stockholder or by any Affiliate of any Stockholder, it being understood that notwithstanding any other provision of this Agreement, any of the Stockholders and their Affiliates shall be entitled to act in concert with one another with respect to any action which a Stockholder or an Affiliate of a Stockholder would be permitted to take individually hereunder. For the purposes of this Agreement, beneficial ownership shall be determined pursuant to Rule 13d-3 ("Rule 13d-3") ---------- promulgated by the Commission pursuant to the Exchange Act. 27 (b) Each of the Stockholders hereby jointly and severally covenants and agrees that from and after the date hereof none of the Stockholders or their Affiliates will, without the prior written consent of the Company specifically expressed in a vote adopted after the Closing by the Board, directly or indirectly, purchase or cause to be purchased or otherwise acquire (other than pursuant to a stock split, stock dividend or similar transaction) or agree to acquire, or become or agree to become the beneficial owner of, any additional Stock, except that the Stockholders and their Affiliates may purchase shares of Common Stock (A) upon exercise of some or all of the Warrants, (B) from time to time, in the open market or in privately negotiated transactions, up to an aggregate of 146,700 shares of Common Stock, and (C) from time to time, in the open market or in privately negotiated transactions, up to an aggregate number of shares of Common Stock which, when added to the shares of Common Stock then owned by the Stockholders and their Affiliates, would result in the Stockholders and their Affiliates owning no more than the highest percentage of voting securities of the Company held by the Stockholders and their Affiliates immediately following the Closing or any purchase permitted by clauses (A) or (B) above. Nothing contained in Section 5.6(a) or the preceding sentence of this Section 5.6(b) shall limit the ability under the 1997 Stock Purchase Agreement of any member of the Advisory Board of Chilmark who acquired shares of Common Stock from the Purchaser on September 18, 1997 in accordance with the 1997 Stock Purchase Agreement to acquire, from time to time, in the open market or privately negotiated transactions, up to an aggregate number of shares of Common Stock equal to 50% of the number of shares so acquired 28 from the Purchaser or otherwise prohibit the acquisition of Shares by any such member in accordance with Section 9.3(d) hereof. Each of the Stockholders agrees that none of the Stockholders or their Affiliates will, without the prior written consent of the Board specifically expressed in a vote adopted by the Board, directly or indirectly, transfer any shares of Stock now owned or hereafter acquired by them, except for transfers made: (i) pursuant to the provisions of Section 5.6(c) below, (ii) pursuant to a publicly announced tender offer for any shares of Stock by any corporation, entity, person or group (other than any of the Stockholders or their Affiliates) which the Board has voted to recommend to holders of any shares of Stock, (iii) pursuant to the exercise of the registration rights provided in Article VI hereof, (iv) pursuant to open market sales made in accordance with Rule 144 under the Securities Act, including, if applicable, paragraph (k) thereof or (v) to the members or investors of the Purchaser, and to their members or investors, by distribution, dissolution or otherwise; provided, however, that in no event shall any such -------- ------- member or investor referred to in clause (v) above who is an Affiliate of either of the Stockholders be permitted to, directly or indirectly, transfer any shares of Stock now owned or hereafter acquired, except in accordance with this Section 5.6(b). For purposes of this Agreement, "transfer" shall mean and include any sale, assignment, gift, pledge, the imposition of any other encumbrance or any other disposition or any agreement or obligation to do any of the foregoing. 29 (c) If any Stockholder or any Affiliate thereof desires to sell any shares of Stock (a "Selling Stockholder") (other than pursuant to clause (ii), ------------------- (iii), (iv) or (v) of Section 5.6(b) hereof), the following requirements shall be satisfied: (i) The Selling Stockholder shall notify the Company in writing of the proposed sale (the "Notice of Proposed Transfer"). The Notice of Proposed --------------------------- Transfer shall identify and provide reasonable information concerning the background, business experience and business affiliations of the proposed transferee (the "Transferee"), the purchase price or other consideration, if ---------- any, the number of shares and type of Stock to be transferred and the complete terms of the proposed transaction. (ii) For a period of ten (10) business days following the receipt of the Notice of Proposed Transfer, the Company and/or any substitute purchaser(s) as designated by the Company (the Company and/or such substituted purchaser is hereinafter sometimes called the "Buyer") shall have the option to purchase all, ----- but not less than all, the Stock specified in the Notice of Proposed Transfer at the price and upon the terms set forth in the Notice of Proposed Transfer; provided, however, that if the type of consideration that was to be paid was non-cash consideration, then the amount payable by the Buyer for such Stock shall be determined in good faith by the Board, after consultation with the Company's investment banker. In the event that Buyer elects to purchase all, but not less than all, of the Stock specified in the Notice of Proposed Transfer, it shall give written notice to the Selling Stockholder of its election, in which case settlement for said Stock shall be made and the Buyer shall purchase such Stock for such price, 30 in cash within ten (10) business days after the date the Company receives the Notice of Proposed Transfer. In the event that Buyer elects not to purchase all of the Stock specified in the Notice of Proposed Transfer, the Selling Stockholder may consummate the proposed transfer of said Stock with the Transferee, provided, however, that such transfer shall not be consummated unless and until such Transferee agrees in writing to be bound by all of the terms of and to perform all of the obligations of the Stockholders contained in Section 5.6(b), this Section 5.6(c) and in Section 5.6(d) of this Agreement in the same manner as if such Transferee were a party to this Agreement. (d) Each of the Stockholders hereby agrees that, prior to the date on which the Stockholders beneficially own collectively less than 0.5% of the total issued and outstanding shares of Common Stock, none of the Stockholders or their Affiliates will, directly or indirectly, or will solicit, request, advise, assist or encourage others, directly or indirectly, to: (i) form, join in or in any other way participate in a "partnership, limited partnership, syndicate or other group" within the meaning of Section 13(d)(3) of the Exchange Act with respect to shares of Stock or deposit any Stock in a voting trust or similar arrangement or subject any Stock to any voting agreement or pooling arrangement, other than solely with one or more other Stockholders or Affiliates with respect to shares of Common Stock permitted to be owned hereunder; 31 (ii) solicit proxies or written consents of shareholders with respect to Stock under any circumstances, or make, or in any way participate in, any "solicitation" of any "proxy" to vote any shares of Stock, or become a "participant" in any election contest with respect to the Company (as such terms are defined or used in Rules 14a-1 and 14a-11 under the Exchange Act); (iii) seek to call, or to request the call of, a special meeting of the shareholders of the Company or seek to make, or make, a shareholder proposal, or seek to make or make, any nomination of any candidate as a director of the Company other than a designee of the Purchaser pursuant to Section 4.5 hereof or any candidate nominated by the Board, at any meeting of the shareholders of the Company; (iv) commence or announce any intention to commence any tender offer for any shares of Stock; (v) make a proposal or bid with respect to, announce any intention or desire to make, or discuss with any person, or publicly make or disclose, cause to be made or disclosed publicly, facilitate the making public or public disclosure of, any proposal or bid with respect to, the acquisition of any substantial portion of the assets of the Company or of the assets or stock of any of its Subsidiaries or of all or any portion of the outstanding Stock, or any merger, consolidation, other business combination, restructuring, recapitalization, liquidation or other extraordinary transaction involving the Company or any of its Subsidiaries; 32 (vi) otherwise act alone or in concert with others to seek to control or influence in any manner the management or the Board (including the composition thereof) or the business, operations or affairs of the Company; provided, however, that this provision shall not prevent the Purchaser's designee on the Board from participating in, or otherwise seeking to affect the outcome of, discussions and votes of the Board with respect to matters coming before it; (vii) arrange, or in any way participate in, any financing for any transaction referred to in clauses (i) through (vi) above inclusive; (viii) make public, or cause or facilitate the making public (including by disclosure to any journalist or other representative of the media) of, any request, or otherwise seek, to obtain any waiver or amendment of any provision of this Agreement, or to take any action restricted hereby. Notwithstanding the foregoing, (i) the Stockholders may make such filings with the Commission pursuant to Sections 13(d) and 16(a) of the Exchange Act to reflect changes in the beneficial ownership of any shares of Stock of any Stockholder (to the extent such changes reflect action taken by such Stockholder which is permitted by this Agreement) and (ii) the Purchaser may exercise its rights with respect to the election of a director to the Board pursuant to Section 4.5 of this Agreement. (e) So long as the Stockholders beneficially own collectively 5.0% or more of the total issued and outstanding shares of Common Stock or an individual designated by the 33 Purchaser pursuant to Section 4.5 is a member of the Board, whenever there shall be submitted to the stockholders of the Company nominees for election to the Board, each of the Stockholders and any Affiliate of such Stockholder controlled directly or indirectly by such Stockholder hereby agrees to vote, or to cause to be voted, all Stock then held by such Stockholder, whether beneficially or of record, and entitled to vote on such matter, in favor of such nominees designated or nominated by the Board, and, unless otherwise requested by the Company, not in favor of any other nominee or nominees other than a designee of the Purchaser pursuant to Section 4.5. (f) Each of the Stockholders hereby covenants and agrees that each Stockholder will promptly notify the Company when and if such Stockholder receives or learns of (A) any oral or written request to any of the Stockholders or any of their Affiliates to participate in any of the transactions or actions referred to in paragraphs (i) through (viii) of subsection (d) above inclusive or (B) any oral or written communication from or by any person or entity (other than the Company) with respect to any of the transactions or actions referred to in paragraphs (i) through (viii) of subsection (d) above inclusive, if such person or entity could reasonably be deemed to be capable of effecting, participating in or materially assisting in such an action or transaction (through one or more Affiliates or otherwise) and such oral or written communication was of a nature that could reasonably be deemed to indicate a serious interest in effecting, participating in or materially assisting in such an action or transaction. 34 5.7. Proxy Statement; Stockholder Approval. (a) The Company ------------------------------------- shall, as promptly as practicable following the date of this Agreement, prepare and file with the Commission, and will use its best efforts to have cleared by the Commission and thereafter shall mail to its stockholders as promptly as practicable a proxy statement and a form of proxy in connection with, among other things, the vote of the Company's stockholders to approve the issuance and sale of Common Stock contemplated by this Agreement. The proxy statement, and any amendments thereof or supplements thereto, will not, at the time of the mailing of the proxy statement or any amendments thereof or supplements thereto and at the time of the Stockholders Meeting (as hereinafter defined), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to information supplied in writing by the Purchaser or any affiliate of the Purchaser specifically for inclusion in the proxy statement. The proxy statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder. (b) The Company shall duly call, give notice of, convene and hold its annual, or a special, meeting of its stockholders (the "Stockholders ------------ Meeting") and shall use its best efforts to obtain the requisite affirmative - ------- approval of its stockholders at the Stockholders Meeting of the issuance and sale of the Common Stock contemplated by this Agreement. The Purchaser and 35 Chilmark shall be present, in person or by proxy, at the Stockholders Meeting and shall vote or cause to be voted all shares of Common Stock held of record or beneficially owned (with the power to vote or direct the vote) by it and eligible to vote as of the record date for such meeting in favor of the proposal seeking such approval. VI. REGISTRATION RIGHTS The Company covenants and agrees to provide the following registration rights: 6.1. "Piggyback" Registration. If, at any time while the Purchaser ----------------------- shall hold shares of Common Stock or Warrants, the Company proposes to file a registration statement relating to the offering of any of its capital stock under the Securities Act (other than (i) a registration statement required to be filed in respect of employee benefit plans of the Company on Form S-8 or any similar form from time to time in effect, (ii) any registration statement on Form S-4 or similar successor form, or (iii) a registration statement relating to a transaction pursuant to Rule 145 of the Securities Act), whether or not for sale for its own account, the Company shall, at least twenty-one days (or if such twenty-one day period is not practicable, then a reasonable shorter period which shall not be less than seven days) prior to such filing, give written notice of such proposed filing to the Purchaser. Upon receipt by the Company not more than seven days (unless the notice given to the Purchaser pursuant to the previous sentence is less than ten days, in which case such seven-day period shall be shortened to five days) after such notice of a written request from the Purchaser for registration of Purchaser's Stock (as hereinafter 36 defined), (i) the Company shall, subject to Section 6.3, include such Purchaser's Stock in such registration statement, and shall use all reasonable efforts to cause such registration statement to become effective with respect to such Purchaser's Stock, unless the managing underwriter therefor concludes in its reasonable judgment that the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in (or during the time of) such offering, in which case the Company may (i) include all securities initially proposed by the Company to be sold for its own account and (ii) decrease the number of shares of Purchaser's Stock and any other securities (other than securities included by virtue of clause (i) above) proposed to be sold to the extent necessary to reduce the number of securities to be included in the registration to the level recommended by the managing underwriter; provided, however, that there shall be no such decrease in the number of shares of Purchaser's Stock unless the number of shares of Purchaser's Stock and such other securities (other than the securities included by virtue of clause (i) above) proposed to be sold has been decreased on a pro rata basis, calculated according to the number of shares of Purchaser's Stock and other securities requested to be included by the respective holders of each. "Purchaser's Stock" ----------------- means any Warrants or shares of Common Stock acquired by the Purchaser pursuant to this Agreement or the 1997 Stock Purchase Agreement, or by a Stockholder in accordance with Section 5.6(b) hereof or Section 5.6(b) of the 1997 Stock Purchase Agreement, for which any Stockholder requests registration pursuant to Section 6.1 or 6.2. 37 6.2. Demand Registration. If the Company shall receive at any time ------------------- or from time to time a written request from the Purchaser requesting the Company to register any shares of Purchaser's Stock under the Securities Act on Form S-3 (or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or any other similar form then in effect, the Company agrees that it will use all reasonable efforts to cause the prompt registration of all shares of Purchaser's Stock as to which such request is made (or will amend or supplement an effective registration statement to include Purchaser's Stock). The Company may postpone for a limited time, which in no event shall be longer than 90 days, compliance with a request for registration pursuant to this Section 6.2 if (i) the Company shall have given notice to the Purchaser of the occurrence of a Suspension Event (as hereinafter defined) or (ii) the Company is conducting a public offering of capital stock and the managing underwriter concludes in its reasonable judgment that such compliance would materially adversely affect such offering. Notwithstanding anything in this Section 6.2 to the contrary, the Company shall not be required to: (a) comply with more than three (3) requests of the Purchaser pursuant to this Section 6.2 or (b) prepare or cause to be prepared audited financial statements of the Company other than those prepared in the normal course of the Company's business at its fiscal year end. Any underwriter selected by the Purchaser to act as such in connection with a registration pursuant to this Section 6.2 shall be reasonably acceptable to the Company. The Company shall not be required to file and effect a new registration pursuant to this Section 6.2(b) until a period of nine (9) months has 38 elapsed from the termination of the registration statement with respect to Purchaser's Stock covered by a prior registration request. The Company agrees that in the event the Purchaser makes a request under this Section 6.2 to cause the Company to effect a demand registration and the Company is precluded from effecting such registration with respect to 25% or more of the shares of Purchaser's Stock subject to such request as a consequence of the terms of registration rights previously granted by the Company to any of the Other Holders, then, under such circumstances, such request shall not be counted against the number of demand requests granted to Purchaser under this Section 6.2. 6.3. General Provisions. (a) The Company will use all reasonable ------------------ efforts to cause any registration statement referred to in Sections 6.1 and 6.2 to become effective and to remain effective (with a prospectus at all times meeting the requirement of the 1933 Act) until the earlier of 180 days from the effective date of the registration statement and the date the Purchaser completes its distribution of Purchaser's Stock, subject, however, to the Company's suspension rights set forth in Section 6.7(b). The Company will use all reasonable efforts to effect such qualifications under applicable Blue Sky or other state securities laws as may be reasonably requested by the Purchaser (provided that the Company shall not be obligated to file a general consent to service of process or qualify to do business as a foreign corporation or otherwise subject itself to taxation in any jurisdiction solely for the purpose of any such qualification) to permit or facilitate such sale or other distribution. The Company will cause the Purchaser's Stock to be listed on the principal stock exchange on which the shares of Common Stock are listed. 39 (b) The Purchaser acknowledges that the Company has previously granted registration rights to other holders of Common Stock and/or other securities issued by the Company that are convertible into or exercisable for shares of Common Stock (collectively, the "Other Holders"). The Purchaser ------------- further acknowledges that, notwithstanding anything to the contrary provided in this Agreement, the registration rights granted to the Purchaser under this Agreement shall, in every case, be subject to the rights of the Other Holders and, to the extent, if any, that any of the provisions of this Article VI conflict or are inconsistent with any of such rights of the Other Holders, such rights of the Other Holders shall govern with respect to the subject matter of such conflict or inconsistency. (c) The Purchaser agrees, if requested by the managing underwriter or underwriters in an underwritten offering (an "Offering"), not to effect any -------- public sale or distribution of any of the securities of the Company of any class included in such Offering, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of such Offering), during the 15-day period prior to, and during the 90-day period beginning on, the date of pricing of each Offering, to the extent timely notified in writing by the Company or the managing underwriters. Furthermore, notwithstanding anything to the contrary set forth in the Agreement, the Company's obligation under this Agreement to cause a registration statement and 40 any filings with any state securities commission to be made or to become effective or to amend or supplement such registration statement shall be suspended in the event and during such period as the Company is proceeding with an Offering if the Company is advised by the underwriters that the sale of shares of Purchaser's Stock under such registration statement would have a material adverse effect on the Offering. (d) Following the effectiveness of a registration statement and the filings with any state securities commissions, the Purchaser agrees that it will not effect any sales of the Purchaser's Stock pursuant to such registration statement or any such filings at any time after it has received notice from the Company to suspend sales (i) as a result of the occurrence or existence of any Suspension Event, or (ii) so that the Company may amend or supplement such registration statement or such filing. The Purchaser may recommence effecting sales of the Purchaser's Stock pursuant to the registration statement or such filings following further notice to such effect from the Company, which notice shall be given by the Company not later than three (3) business days after the conclusion of any such Suspension Event or amendment or supplement. 6.4. Information, Documents, Etc. Upon making a request for --------------------------- registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the Company such information regarding its holdings and the proposed manner of distribution thereof as the Company may reasonably request and as shall be required in connection with any registration, qualification or 41 compliance referred to in this Article VI. The Company agrees that it will furnish to the Purchaser the number of prospectuses, offering circulars or other documents, or any amendments or supplements thereto, incident to any registration, qualification or compliance referred to in this Article VI as the Purchaser from time to time may reasonably request. 6.5. Expenses. The Company will bear all expenses of registrations -------- pursuant to Section 6.1 and one-half of all expenses of the first two registrations (and amendments and supplements related thereto) pursuant to Section 6.2 (in each case, other than underwriting discounts and commissions and brokerage commissions and fees, if any, payable with respect to shares of Purchaser's Stock sold by the Purchaser, and fees and expenses of any accountants, counsel or other parties retained or employed by holders of Purchaser's Stock) including, without limitation, registration fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company in connection with such registration and amendments or supplements in connection therewith. The Purchaser will bear one-half of all expenses of the first two registrations (and amendments and supplements related thereto) and all expenses of the third registration (and amendments and supplements related thereto) pursuant to Section 6.2, including, without limitation, registration fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company and the Purchaser and the holders of Purchaser's Stock. Notwithstanding the foregoing, the Company agrees that in the event that subsequent to the date 42 hereof the Company shall grant demand registration rights to a third party and shall agree in connection therewith to bear all or a greater portion of the expenses of such demand registrations than as set out above, then this Section 6.5 shall be deemed to have been amended to provide for the Company to bear, and the Company shall bear, the same portion of the expenses of any subsequent registration pursuant to Section 6.2 of this Agreement as the Company shall have agreed to bear for such third party. 6.6. Cooperation. In connection with any registration of ----------- Purchaser's Stock pursuant to this Article VI, the Company agrees to: (a) enter into such customary agreement (including an underwriting agreement containing such representations and warranties by the Company and such other terms and provisions, including indemnification provisions, as are customarily contained in underwriting agreements for comparable offerings and, if no underwriting agreement is entered into, an indemnification agreement on such terms as is customary in transactions of such nature) and take all such other actions as the Purchaser or the underwriters, if any, participating in such offering and sale may reasonably request in order to expedite or facilitate such offering and sale; (b) furnish, at the request of the Purchaser or any underwriters participating in such offering and sale, (i) a comfort letter or letters, dated the date of the final prospectus with respect to the Purchaser's Stock and/or the date of the closing for the sale of the Purchaser's Stock from the independent certified public accountants of the Company and addressed to the 43 Purchaser and any underwriters participating in such offering and sale, which letter or letters shall state that such accountants are independent with respect to the Company within the meaning of Rule 1.01 of the Code of Professional Ethics of the American Institute of Certified Public Accountants and shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall cover matters of the type customarily covered in "cold comfort" letters in connection with transactions of a similar nature for similar entities and (ii) an opinion, dated the date of the closing for the sale of the Purchaser's Stock, of the counsel representing the Company with respect to such offering and sale (which counsel may be the General Counsel of the Company or other counsel reasonably satisfactory to the Purchaser), addressed to the Purchaser and any such underwriters, which opinion shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall address such matters as are customary in transactions of a similar nature for similar entities; (c) make available for inspection by the Purchaser, the underwriters, if any, participating in such offering and sale (which inspecting underwriters shall, if reasonably possible, be limited to any manager or managers for such participating underwriters), the counsel for the Purchaser, one accountant or accounting firm retained by the Purchaser and any such underwriters, or any other agent retained by the Purchaser or such underwriters, all financial and other records, corporate documents and properties of the Company, and supply such additional information, as they shall reasonably request; provided that any such party shall keep the contents thereof -------- confidential in the manner prescribed by Section 5.1. 44 6.7. Action to Suspend Effectiveness; Supplement to Registration ----------------------------------------------------------- Statement. (a) The Company will notify the Purchaser and its counsel - --------- promptly of (i) any action by the Commission to suspend the effectiveness of the registration statement covering the Purchaser's Stock or the institution or threatening of any proceeding for such purpose (a "Stop Order") or (ii) the ---------- receipt by the Company of any notification with respect to the suspension of the qualification of the Purchaser's Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. Immediately upon receipt of any such notice, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to the registration statement in the jurisdiction to which such Stop Order or suspension relates. The Company will use all reasonable efforts to prevent the issuance of any such Stop Order or the suspension of any such qualification and, if any such Stop Order is issued or any such qualification is suspended, to obtain as soon as possible the withdrawal or revocation thereof, and will notify the Purchaser and its counsel at the earliest practicable date of the date on which the Purchaser may offer and sell Purchaser's Stock pursuant to the registration statement. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation under this Agreement to cause the registration of Purchaser's Stock and any filings with any state securities commission to be made or to become effective or to amend or supplement a registration statement shall be suspended in the event and during such period 45 that there are pending negotiations relating to, or consummation of, a transaction or the occurrence of an event that would require additional disclosure of material information by the Company in such registration statement or such filing (such circumstances being hereinafter referred to as a "Suspension Event") that would make it impractical or inadvisable to cause such - ----------------- registration statement or such filings to be made or to become effective or to amend or supplement such registration statement, but such suspension shall continue only for so long as such event or its effect is continuing but in no event will that suspension exceed ninety (90) days. Immediately upon receipt by the Purchaser of notice of a Suspension Event, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to such registration statement, cease to deliver or use such registration statement and, if so requested by the Company, return to the Company, at its expense, all copies (other than permanent file copies) of such registration statement. (c) In the event the Company shall determine that it is necessary to amend or supplement any registration statement relating to Purchaser's Stock, the Company will furnish copies of such proposed amendment or supplement to the Purchaser and its counsel and will not file or distribute such amendment or supplement without the prior consent of the Purchaser, which consent shall not be unreasonably withheld. 6.8. Indemnification. In the event any Purchaser's Stock is --------------- included in a registration statement under this Article VI: 46 (a) To the full extent permitted by law, the Company will indemnify and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock as set forth in Section 9.3(d) hereof (each, a "Holder") and the affiliates of ------ such Holder, and their respective directors, officers, employees, general and limited partners, members, agents and representatives (and the directors, officers, affiliates and controlling persons thereof), and each other person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act, from and against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a - ---------- material fact contained in such registration statement, including any preliminary prospectus, any final prospectus contained therein or any amendments or supplements thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company in connection with the registration of Purchaser's Stock under the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, affiliate or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with 47 investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable hereunder in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Purchaser or controlling person; and provided, further, that the Company -------- ------- shall not be liable hereunder in any such case to the extent it is determined that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made: (A) in any such preliminary prospectus, if (I) it was the responsibility of such Holder to provide the person asserting such loss, claim, damage, liability or expense with a current copy of the prospectus and such Holder failed to deliver or cause to be delivered a current copy of the prospectus to such person after the Company had furnished such Holder with a sufficient number of copies of the same and (II) the current prospectus corrected such untrue statement or omission; or (B) in such prospectus, if such untrue statement or omission is corrected in an amendment or supplement to such prospectus and the Holder thereafter fails to deliver the 48 prospectus as so amended or supplemented prior to or concurrently with the sale of Purchaser's Stock to the person asserting such loss, claim, damage, liability or expense after the Company had furnished such Holder with a sufficient number copies of the same. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any such director, officer, employee, general or limited partner, member, agent, representative or controlling person and shall survive the transfer of such securities by such Holder. Each Holder shall furnish such information regarding itself or the claim in question as the Company may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (b) To the full extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon 49 (i) any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration or (ii) an untrue statement or alleged untrue statement or omission or alleged omission made in the circumstances described in clauses (A) or (B) of Section 6.8(a); and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 6.8(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under -------- this Section 6.8(b) exceed the gross proceeds from the offering received by such Holder; and provided, further, that the obligation to provide indemnification -------- ------- pursuant to this Section 6.8(b) shall be several, and not joint and several, among such indemnifying parties. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer, representative or controlling person and shall survive the transfer of such securities by such prospective seller. (c) Promptly after receipt by an indemnified party under this Section 6.8 of notice of the commencement of any action (including any governmental action), such 50 indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel selected by the indemnifying party or parties. The failure to deliver written notice to the indemnifying party within a reasonable time after the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.8 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 6.8. The indemnified party shall have the right, but not the obligation, to participate in the defense of any action referred to above through counsel of its own choosing and shall have the right, but not the obligation, to assert any and all separate defenses, cross claims or counterclaims which it may have, and the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of such counsel has been specifically authorized in advance by the indemnifying party, (ii) there is a conflict of interest that prevents counsel for the indemnifying party from adequately representing the interests of the indemnified party or there are defenses available to the indemnified party that are different from, or additional to, the defenses that are available to the indemnifying party, or 51 (iii) the indemnifying party fails to assume the defense or does not reasonably contest such action in good faith, in which case, if the indemnified party notifies the indemnifying party that it elects to employ separate counsel, the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party and the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party; provided, however, that, the indemnifying party shall not, in connection with any proceeding or related proceedings, be liable for the reasonable fees and expenses of more than one separate firm (in addition to one firm acting as local counsel) for all indemnified parties. (d) Contribution. If for any reason (other than the reasons expressly ------------ specified in this Section 6.8) the foregoing indemnity and payment obligation is unavailable or is insufficient to hold harmless an indemnified party under paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any loss, claim, damage or liability (or actions or proceedings in respect thereof), including, without limitation, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding, in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other. The relative fault shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a 52 material fact has been taken or made by, or relates to information supplied by, the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, or if the allocation provided in the second preceding sentence provides a lesser sum to the indemnified party than the amount hereinafter calculated, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative fault but also the relative benefits to the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties agree that it would not be just and equitable if contributions pursuant to this Section 6.8(d) were to be determined by pro rata allocation or by any --- ---- other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 6.8(d). Notwithstanding anything in this Section 6.8(d) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 6.8(d) to contribute any amount in excess of the gross proceeds received by such indemnifying party from the sale of Purchaser's Stock in the offering to which the losses, claims, damages or liabilities of the indemnified parties relate. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 53 (e) The obligations of the Company and the Holders under this Section 6.8 shall survive the completion of any offering of Purchaser's Stock in a registration statement under this Article VI. (f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement (if any) entered into in connection with any underwritten public offering of the Purchaser's Stock are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall control. VII. INDEMNIFICATION 7.1. Indemnification by the Company. The Company shall indemnify ------------------------------ and hold the Purchaser and each of its members, employees, officers and agents harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by any of them based upon, resulting from or arising out of (i) any material breach of any representation, warranty, covenant or agreement of the Company contained in this Agreement or (ii) except as provided in Section 7.2, any claim brought, directly or indirectly, by a third party relating to the transactions contemplated by this Agreement. 7.2. Indemnification by the Purchaser. The Purchaser (and with -------------------------------- respect to Sections 5.1, 5.2, 5.6 and 5.7, Chilmark) shall indemnify and hold the Company and each of its employees, directors, officers and agents harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by any of them 54 (i) in the case of the Purchaser, resulting from or arising out of any material breach of any representation, warranty, covenant or agreement of the Purchaser contained in this Agreement and (ii) in the case of Chilmark, resulting from or arising out of any material breach of any covenant or agreement of Chilmark contained in Sections 5.1, 5.2, 5.6 or 5.7 of this Agreement. VIII. TERMINATION 8.1 Termination. (a) This Agreement may be terminated and the ----------- transactions contemplated herein may be abandoned at any time prior to the Closing: (i) by the Company or the Purchaser, if the Closing has not occurred by January 31, 1999; (ii) by mutual written consent of the Company and the Purchaser; (iii) by the Company, if there has been a material misrepresentation or breach of warranty on the part of the Purchaser in the representations and warranties contained herein or a material breach of covenants on the part of the Purchaser and the same has not been cured within 30 days after notice thereof; (iv) by the Purchaser, if there has been a material misrepresentation or breach of warranty on the part of the Company in the representations and warranties contained herein or a material breach of covenants on the part of the Company and the same has not been cured within 30 days after notice thereof; (v) by the Purchaser, if the terms of the Credit Facility Amendments are not reasonably satisfactory to the Purchaser; or 55 (vi) by either the Purchaser or the Company, if any Governmental Entity shall have issued a final order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable, provided that the party seeking to terminate shall have used its best efforts to appeal such order, decree, ruling or other action. (b) Notwithstanding anything herein to the contrary, the right to terminate this Agreement under this Section 8.1 shall not be available to any party to the extent the failure of such party to fulfill any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date (as a result, for example, of an action or failure to act causing a failure of a condition precedent). (c) A party terminating this Agreement pursuant to this Section 8.1 shall give written notice thereof the other party hereto, whereupon this Agreement shall terminate and be of no further force and effect, the transactions contemplated hereby shall be abandoned without further action by any party and there shall be no liability on the part of the Company or the Purchaser, except as provided in Section 9.7 hereof and except for any liability for any willful breach hereof; provided however that the provisions of Sections 5.1, 7.1 and 7.2 shall survive any such termination. 56 IX. GENERAL PROVISIONS 9.1. Survival of Representations, Warranties and Agreements. ------------------------------------------------------ Notwithstanding any investigation conducted or notice or knowledge obtained by or on behalf of any party hereto, each representation and warranty in this Agreement and each agreement or covenant in this Agreement which does not by its own terms expire on or prior to the Closing shall survive the Closing without limitation as to time, except as specifically referred to herein. 9.2. Notices. Any notice, request, instruction or other document ------- to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (i) when received if given in person, or (ii) on the date of transmission if sent by nationally recognized overnight courier, certified or registered mail, return receipt requested or (iii) three days after being deposited in the U.S. mail, postage prepaid: (a) if to the Purchaser, addressed as follows: Cape Ann Investors, L.L.C. c/o Chilmark Fund II, L.P. 875 North Michigan Avenue Suite 2100 Chicago, Illinois 60611 Attention: Mr. David M. Schulte with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: William A. Groll, Esq. 57 (b) if to the Company, addressed as follows: NutraMax Products, Inc. 51 Blackburn Drive Gloucester, Massachusetts 01930 Attention: Robert F. Burns, Vice President and Chief Financial Officer with a copy to: Eugene M. Schloss, Jr., Esq. 1700 Cary Road Huntingdon Valley, Pennsylvania 19006-5002 and Goodwin, Procter & Hoar, LLP Exchange Place 53 State Street Boston, Massachusetts 02109 Attention: Joseph L. Johnson III, Esq. 58 or to such other individual or address as a party hereto my designate for itself by notice given as herein provided. 9.3. General. (a) This Agreement (including the documents and ------- instruments referred to or incorporated herein, including the Warrants) constitutes the entire agreement, and supersedes all of the prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof; provided, however, if this Agreement is terminated, it will not be deemed to supersede prior agreements between the parties, including the 1997 Stock Purchase Agreement and the October Agreement, and such agreements will continue in full force and effect. (b) This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder other than as contemplated in Article VI, Article VII and Section 9.3(d) and shall not be assigned by any party by operation of law or otherwise. 59 (c) This Agreement may be executed in two or more counterparts which together shall constitute a single agreement. (d) This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs and permitted assigns. This Agreement is not assignable except by consent of each of the parties hereto or operation of law; provided that in the event Purchaser shall distribute the Shares to its investors (whether as a result of dissolution or otherwise), (i) the holders of such Shares shall succeed to the rights and obligations of the Purchaser contained in Article VI hereof and (ii) Chilmark Fund II, L.P. shall succeed to the rights and obligations of the Purchaser contained in Section 4.5 hereof so long as it shall hold any Shares; and provided further that the members of the Advisory Board of Chilmark to whom the Purchaser transferred shares of Common Stock in accordance with the 1997 Stock Purchase Agreement shall have the rights and obligations of the Purchaser with respect to such shares contained in Section 5.6 and Article VI hereof, other than Section 6.2 hereof; and provided further that, prior to the Closing, the Purchaser may, without the prior written consent of the Company and without relieving the Purchaser of its obligations hereunder, assign to such members of the Advisory Board of Chilmark the right and obligation to purchase up to 75,060 Shares as long as such member agrees in writing to be bound by all of the terms of and to 60 perform all of the obligations of the Purchaser with respect to such Shares contained in Section 5.6 and Article VI hereof, other than Section 6.2 hereof, and makes a representation as to such member to the same effects set forth for the Purchaser in Section 3.6 hereof or otherwise provides written evidence, reasonably satisfactory to the Company, that such transfer may be effected in compliance with the federal securities laws and applicable state securities laws, in which case, upon consummation of the purchase of Shares by any such member, such member shall have the rights and obligations of the Purchaser with respect to such Shares contained in Section 5.6 and Article VI hereof, other than Section 6.2 hereof. Any purported assignment of this Agreement in violation of this Section 9.3 shall be null and void. 9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND ------------- OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (b) Each party agrees that any proceeding relating to this Agreement shall be brought in a state court of Delaware. Each party hereby consents to personal jurisdiction in any such action brought in any such Delaware court, consents to service of process by mail made upon such party and such party's agent and waives any objection to venue in any such Delaware court or to any claim that any such Delaware court is an inconvenient forum. 9.5. Severability of Provisions. If any provision or any portion of --------------------------- 61 any provision of this Agreement or the application of any such provision or any portion thereof to any person or circumstance, shall be held invalid or unenforceable, to the extent permitted by law, the remaining portion of such provision and the remaining provisions of this Agreement, or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby. 9.6. Captions. All section titles or captions contained in this -------- Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement. All references herein to Sections shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. 9.7. Expenses. Except as otherwise expressly provided in this -------- Agreement, the Company shall pay the expenses incidental to the preparation of this Agreement, the carrying out of the provisions hereof and the consummation of the transactions contemplated hereby. 9.8. Equitable Relief. Each party acknowledges that, in the event ---------------- of any breach of this Agreement by a party, the other party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that such other party, in addition to any other remedy to which it may be entitled, shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to compel specific performance of this Agreement. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto. 62 9.9. Definitions. The following terms shall have the respective ----------- meanings specified in the indicated Sections of this Agreement: Term Agreement Section - ----- ----------------- 1997 Stock Purchase Agreement Recitals Affiliate 5.6(a) Agreement Recitals Authority 1.3(b) Board 1.3(d)(ii) Buyer 5.6(c)(ii) Chilmark 5.1(b) Closing 1.3(a) Commission 2.6 Common Stock Recitals Company Recitals Credit Facilities 1.3(b) Credit Facility Amendments 1.3(b) Encumbrances 1.1 Exchange Act 2.4 Financial Statements 2.7(a) FNBB 1.3(b) Governmental Entity 1.3(b) Hart-Scott-Rodino Act 1.3(b) Holder 6.8(a) Korman Purchase Recitals Korman Purchase Agreement Recitals Legal Requirements 1.3(b) Lenders Recitals 63 Lepone Purchase Recitals Lepone Purchase Agreement Recitals Loan Agreement 1.3(b) Material Adverse Effect 1.3(b) NASD 2.3(a) Notice of Proposed Transfer 5.6(c)(i) October Agreement Recitals Offering 6.3(c) Other Holders 6.3(b) Person 4.1 Purchase Agreements Recitals Purchaser Recitals Purchaser Material Adverse Effect 1.3(c) Purchaser's Stock 6.1 Rule 13d-3 5.6(a) SEC Reports 2.6 Securities Act 3.6(a) Selling Stockholder 5.6(c) Shares Recitals Stock 5.6(a) Stockholders 5.6(a) Stockholders Meeting 5.7(b) Stop Order 6.7(a) Subsidiary 2.1 Suspension Event 6.7(b) Transferee 5.6(c)(i) Violation 6.8(a) Warrants Recitals 64 IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered this Agreement as of the date first above written. NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns ------------------- Name: Robert F. Burns Title: Vice President, Chief Financial Officer and Treasurer CAPE ANN INVESTORS, L.L.C. By: Chilmark Fund II, L.P., its Managing Member By: Chilmark II, L.L.C., its General Partner By: /s/ David Schulte ----------------- Name: David Schulte Title: President SOLELY FOR PURPOSES OF SECTIONS 5.1, 5.2, 5.6, 5.7 AND 7.2: CHILMARK FUND II, L.P. By: Chilmark II, L.L.C., its General Partner By: /s/ David Schulte ----------------- Name: David Schulte Title: President 65 EX-10.(EE) 4 STOCK PURCHASE AGRMT. NUTRAMAX & KORMAN Exhibit 10(ee) STOCK PURCHASE AGREEMENT by and between NUTRAMAX PRODUCTS, INC., and BERNARD J. KORMAN Dated as of November 6, 1998 TABLE OF CONTENTS ----------------- Page ---- I. PURCHASE AND SALE 2 1.1. Purchase and Sale 2 1.2. Purchase Price 2 1.3. Closing 2 II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 6 2.1. Due Organization, etc. 6 2.2. Compliance with Law 7 2.3. Authorization; Execution and Delivery of Agreement 8 2.4. No Conflict; No Consent 9 2.5. Capital Stock 10 2.6. SEC Reports 11 2.7. Financial Statements 11 2.8. No Brokers 12 2.9. Litigation and Claims 12 2.10. Use of Proceeds 13 Page ---- III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 13 3.1. Authorization; Execution and Delivery of Agreement 13 3.2. No Conflict; No Consent 14 3.3. No Brokers 14 3.4. Litigation and Claims 14 3.5. Investment Purposes 15 IV. COVENANTS OF THE COMPANY 15 4.1. Conduct of Business 15 4.2. Exchange of Stock Certificates 16 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates 16 4.4. Course of Dealings with Lenders 17 4.5. Other Purchase Agreements 17 V. COVENANTS OF THE PURCHASER AND THE COMPANY 17 5.1. Hart-Scott-Rodino Act Filings 17 5.2. Public Disclosure and Confidentiality 18 5.3. Certain Notifications 18 ii Page ---- 5.4. Efforts to Consummate; Further Actions 18 5.5. Proxy Statement; Stockholder Approval 19 VI. REGISTRATION RIGHTS 20 6.1. "Piggyback" Registration 20 6.2. Demand Registration 21 6.3. General Provisions 22 6.4. Information, Documents, Etc. 24 6.5. Expenses 25 6.6. Cooperation 26 6.7. Action to Suspend Effectiveness; Supplement to Registration Statement 27 6.8. Indemnification 29 VII. INDEMNIFICATION 35 7.1. Indemnification by the Company 35 7.2. Indemnification by the Purchaser 35 VIII. TERMINATION 35 8.1 Termination 35 iii Page ---- IX. GENERAL PROVISIONS 37 9.1. Survival of Representations, Warranties and Agreements 37 9.2. Notices 37 9.3. General 38 9.4. Governing Law 39 9.5. Severability of Provisions 39 9.6. Captions 40 9.7. Expenses 40 9.8. Equitable Relief 40 9.9. Definitions 41 SCHEDULE 2.5(b) SCHEDULE 2.7(c) iv STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November 6, --------- 1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the "Company"), and BERNARD J. KORMAN (the "Purchaser"). - -------- --------- WHEREAS, the Company recently has defaulted on certain financial covenants contained in the Company's Credit Facilities (as hereinafter defined), waivers of which defaults were obtained from the Company's lenders under such credit agreements (the "Lenders"); ------- WHEREAS, subject to the terms and conditions of this Agreement, the Purchaser wishes to purchase from the Company, and the Company wishes to sell to the Purchaser, additional shares (the "Shares") of the Company's Common Stock, ------ par value $0.001 per share (the "Common Stock"); ------------ WHEREAS, the Purchaser and the Company are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith; WHEREAS, in conjunction with the transactions contemplated by this Agreement, the Company is also entering into agreements with each of Cape Ann Investors, L.L.C. ("Cape Ann") and Donald E. Lepone, the President and Chief -------- Executive Officer of the Company, with respect to the purchase from the Company by Cape Ann and Mr. Lepone (the "Cape Ann Purchase" and the "Lepone Purchase," ----------------- --------------- respectively) of approximately 1,162,790 and 46,512 additional shares of Common Stock, respectively (such agreements, the "Cape Ann -------- 1 Purchase Agreement" and the "Lepone Purchase Agreement," respectively, and, - ------------------ ------------------------- collectively, the "Purchase Agreements"); and ------------------- WHEREAS, the proceeds from the sale of the Shares, together with the proceeds from the sale of shares of Common Stock pursuant to the Purchase Agreements, shall be used to facilitate the Company's negotiation of amendments to the financial covenants and other terms of the Credit Facilities and to enable the Company to retire existing indebtedness and to provide the Company with additional working capital; NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the parties hereto hereby agree as follows: I. PURCHASE AND SALE 1.1. Purchase and Sale. Upon the terms and subject to the ----------------- conditions set forth in this Agreement, the Company agrees to issue, sell and deliver to the Purchaser, and the Purchaser agrees to purchase from the Company, 232,558 Shares. The Shares purchased and sold hereunder shall be free and clear of any liens, security interests, pledges, voting agreements, claims, options and encumbrances of every kind, character and description whatsoever ("Encumbrances"), except as contemplated by this Agreement. - -------------- 1.2. Purchase Price. As consideration for the sale of the Shares, -------------- at the Closing (as hereinafter defined) the Purchaser shall pay the Company, in immediately available funds, a purchase price of $4.30 per share. 1.3. Closing. (a) The closing of the transactions provided for in ------- this 2 Agreement (the "Closing") shall take place on the second business day after ------- the satisfaction or waiver of the conditions set forth in Sections 1.3(b) and 1.3(c) of this Agreement at the offices of Goodwin, Procter & Hoar, LLP, Exchange Place, Boston, Massachusetts, or at such other time and place as the parties may mutually agree. (b) Conditions Precedent to the Purchaser's Obligations. --------------------------------------------------- The obligation of the Purchaser to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Company contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Company on or prior to the Closing; (iii) the Company shall have delivered to the Purchaser a certificate, dated the date of Closing and signed by a duly authorized officer of the Company, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any court, 3 administrative body or governmental agency (a "Governmental Entity") which seeks ------------------- to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the transactions contemplated by this Agreement and which is likely, in the Purchaser's reasonable judgment, to be successful on the merits, and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement (as hereinafter defined) shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority (as hereinafter defined) in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act")), and all extensions thereof, the passing of which is --------------------- required for such consummation, shall have passed, except as to such consents, approvals, 4 permits, authorizations or filings that, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), business, operations, properties, assets or liabilities of the Company and its Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse ---------------- Effect"); (vi) the issuance and sale of Common Stock contemplated by this - ------ Agreement shall have been approved by the requisite affirmative vote of the stockholders of the Company; (vii) from and after the date of this Agreement, there shall not have occurred any changes concerning the Company that, when combined, without duplication, with all other changes concerning the Company from and after the date of this Agreement, have had or would reasonably be expected to have a Material Adverse Effect; (viii) the Company shall have obtained a waiver from the Lenders of any covenant defaults under the Credit Facilities during the fourth quarter of fiscal 1998 and shall have entered into amendments (the "Credit Facility Amendments") to each of the Revolving Credit -------------------------- and Term Loan Agreement, dated as of December 30, 1996, as amended, between the Company, The First National Bank of Boston ("FNBB"), Fleet National Bank, ---- National Bank of Canada, The Sumitomo Bank, Limited, and FNBB, as Agent (the "Loan Agreement"), and the Purchase -------------- 5 Agreement, dated as of December 30, 1996, as amended, between the Company and ING (U.S.) Capital Corporation (together with the Loan Agreement, the "Credit ------ Facilities"), the terms of which amendments shall be reasonably satisfactory to - ---------- the Purchaser, and such waiver and amendments shall be in full force and effect without waiver or change in the material terms thereof; and (viii) all conditions precedent to consummation of the Cape Ann Purchase and the Lepone Purchase shall have been satisfied or waived by the appropriate party, and no amendment to the Cape Ann Purchase Agreement or the Lepone Purchase Agreement shall have been executed or agreed to that changes the material terms thereof in a manner adverse to the Company without the Purchaser's prior written consent. In the event any of the foregoing conditions to the Purchaser's obligation to close hereunder is not satisfied on or before the Closing, the Purchaser may waive such condition and proceed to Closing. As used herein, "Legal ----- Requirements" shall include laws, regulations, ordinances, orders, decrees, - ------------ permits, licenses, consents, approvals, registrations, authorizations and qualifications required by or from any federal, state, local or foreign governmental or regulatory authority (each, an "Authority"). --------- 6 (c) Conditions Precedent to the Company's Obligations. The obligation of the ------------------------------------------------- Company to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Purchaser contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Purchaser shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing; (iii) the Purchaser shall have delivered to the Company a certificate, dated the date of Closing and signed by a duly authorized signatory of the Purchaser, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any Governmental Entity which seeks to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the transactions contemplated by this Agreement and which is likely, in the Company's reasonable judgment, to be successful on the merits and 7 no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing of which is required for such consummation, shall have passed, except as to such consents, approvals, permits, authorizations or filings that, individually or in the aggregate would not have a Material Adverse Effect; and (vi) the issuance and sale of Common Stock contemplated by this Agreement shall have been approved by the requisite affirmative vote of the stockholders of the Company. In the event any of the foregoing conditions to the Company's obligation to close hereunder is not satisfied on or before the Closing, the Company may waive such condition and proceed to Closing. 8 (d) Company Closing Deliveries. At the Closing, the Company will deliver -------------------------- to the Purchaser the following: (i) a stock certificate or certificates representing the Shares; and (ii) a certificate of the Secretary of the Company certifying as to the adoption and effect of resolutions of the Board of Directors of the Company (the "Board") authorizing the execution, delivery and performance of this ----- Agreement. (e) Purchaser Closing Deliveries. At the Closing, the Purchaser will ---------------------------- deliver to the Company payment of the purchase price provided by Section 1.2. II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2.1. Due Organization, etc. The Company and each of its --------------------- Subsidiaries (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and each has all requisite corporate power and authority to own, operate and lease its respective properties and assets and to conduct its respective businesses as now conducted and is qualified to do business in each state or other jurisdiction where the nature of its properties, assets or businesses requires such qualification other than where the failure to be so qualified would not, individually or in the aggregate have a Material Adverse Effect. All of the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and non-assessable, other than the shares of capital stock 9 of foreign Subsidiaries which are not fully paid and which failure to be fully paid, individually or in the aggregate, does not have a Material Adverse Effect, and all of such outstanding shares are owned, directly or indirectly, by the Company free and clear of all Encumbrances, except for liens or security interests or pledge arrangements involving the capital stock of the Subsidiaries in favor of the Company's lenders. "Subsidiary" means a corporation or other ---------- business arrangement a majority of the outstanding voting securities or ownership interests of which is owned, directly or indirectly, by the Company, by one or more other Subsidiaries or by the Company and one or more other Subsidiaries. 2.2. Compliance with Law. The Company and each Subsidiary has ------------------- obtained and maintains in full force and effect all permits, licenses, consents, approvals, registrations, memberships, authorizations and qualifications under all federal, state, local and foreign laws and regulations, and with all Authorities, required for the conduct by it of its businesses and the ownership or possession by it of its properties and assets other than where the failure to obtain or maintain such permits, licenses, consents, approvals, registrations, memberships, authorizations or qualifications would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each Subsidiary are in compliance with all laws, regulations, ordinances, orders and decrees (including, without limitation, all environmental and occupational, health and safety laws) of any Authority applicable to the conduct by the Company and each Subsidiary of their respective businesses and to their ownership and possession of their respective properties and assets, other than where the failure so to comply would not, individually or in the aggregate, have a Material Adverse Effect. 10 2.3. Authorization; Execution and Delivery of Agreement. (a) -------------------------------------------------- Except to the extent that the By-laws of, or other rules or regulations promulgated by, the National Association of Securities Dealers ("NASD") ---- applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby (i) do not require the approval or consent of any stockholders of the Company and (ii) have been duly authorized by all necessary corporate action on the part of the Company for all purposes, including Section 203 of the Delaware General Corporation Law. Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, this Agreement has been duly executed and delivered by the Company and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Company, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. The Company has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder. (b) Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require 11 stockholder approval of the issuance of shares hereunder, (i) the Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration therefor set forth herein, the Shares will be validly issued, fully paid and non-assessable and (ii) the Purchaser will acquire valid and marketable title to the Shares, free and clear of any Encumbrances except as contemplated by this Agreement. 2.4. No Conflict; No Consent. Except to the extent that the By- ----------------------- laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Company or any Subsidiary under, (i) any provision of the certificate of incorporation or by-laws or similar constituent documents of the Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, registration, membership, authorization or qualification from any Authority, of the Company or any Subsidiary or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Company or any of its Subsidiaries is a party or by which any of 12 them is bound, other than, in the case of clause (ii) above, where such conflict, violation, default, acceleration or Encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. No consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority or third party is required to be made or obtained by the Company or any Subsidiary (including, without limitation, under any environmental or occupational, health and safety laws) in order to execute or deliver this Agreement, issue and sell the Shares or to consummate the transactions contemplated hereby, other than (A) as may be required by the Hart- Scott-Rodino Act, (B) as a result of the periodic reporting requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (C) the ------------ listing requirements of the NASDAQ SmallCap Market, or except where the failure to make or obtain any such consent, approval, order, authorization, registration, declaration, filing or notice would not have a Material Adverse Effect. 2.5. Capital Stock. (a) The authorized capital stock of the ------------- Company consists of 20,000,000 shares of Common Stock, of which, as of October 3, 1998, 5,682,168 shares were outstanding and 9,665 shares were held in treasury and 1,296,633 shares are reserved for future issuance pursuant to any option, warrant or other rights agreement, arrangement or other commitment. All of the issued and outstanding shares of Common Stock have been validly issued and are fully paid and non-assessable. 13 (b) (i) Other than this Agreement, the Cape Ann Purchase Agreement, the Lepone Purchase Agreement and the warrants to purchase Common Stock issued to Cape Ann and others or as set forth on Schedule 2.5(b) hereto, there are not authorized or outstanding any subscriptions, options, conversion rights, warrants or other agreements, securities or commitments of any nature whatsoever (whether oral or written and whether firm or conditional) obligating the Company or any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, to any person any shares of Common Stock or any other shares of the capital stock of the Company or any shares of the capital stock of any Subsidiary, or any securities convertible into or exchangeable for any such shares, or obligating any such person to grant, extend or enter into any such agreement or commitment; and (ii) except as set forth on Schedule 2.5(b) hereto, there is no obligation, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any share of capital stock or other equity interests of the Company or any Subsidiary. No class of capital stock of the Company is entitled to preemptive rights. 2.6. SEC Reports. Except with respect to the amendment to the ----------- Current Report on Form 8-K dated September 11, 1998 (filed with the Commission (as hereinafter defined) on September 26, 1998) contemplated by the disclosure contained in Items 7(a) and (b) thereof, the Company has filed with the Securities and Exchange Commission (the "Commission") all proxy statements, ---------- reports, forms and other documents required to be filed by it after January 1, 1995 under the Exchange Act (collectively, the "SEC Reports"). As of their ----------- respective dates, the SEC Reports (i) complied as to form in all material respects with the applicable requirements of the 14 Exchange Act and the rules and regulations of the Commission thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.7. Financial Statements. (a) The financial statements -------------------- (including any related notes) included in the SEC Reports (the "Financial --------- Statements") have been prepared in accordance with generally accepted accounting - ---------- principles consistently applied throughout the periods involved (except as may be noted therein) and fairly present the consolidated financial condition, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates thereof and for the periods ended on such dates (in each case subject, as to interim statements, to changes resulting from year-end adjustments (none of which were or, except as otherwise disclosed to the Purchaser in writing, will be material in amount or effect) and except as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act). (b) On the date hereof, except as disclosed in the SEC Reports, neither the Company nor any Subsidiary has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due and whether or not required to be disclosed in the SEC Reports, other than liabilities that have been disclosed to the Purchaser in writing, have been incurred in the ordinary course of business or are not in the aggregate material to the Company and its Subsidiaries taken as a whole. Since September 28, 1996, the Company has not declared or paid any dividends to any of its stockholders. 15 (c) Except as set forth on Schedule 2.7(c), since September 28, 1996, the Company and each of its Subsidiaries have conducted their respective businesses only in the ordinary course in substantially the same manner as theretofore conducted and the Company and its Subsidiaries, taken as a whole, have not undergone or suffered any Material Adverse Effect, except as otherwise disclosed to the Purchaser in writing. 2.8. No Brokers. No broker, finder or investment banker is ---------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 2.9. Litigation and Claims. There is no claim, prosecution, suit, --------------------- action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Company, threatened against or affecting the Company, any of its Subsidiaries or any of their respective properties or assets (nor, to the knowledge of the Company, are there any facts or circumstances providing a basis for any such claim, prosecution, suit, action, arbitration, proceeding, investigation or review) which, if adversely determined, would be reasonably likely to have a Material Adverse Effect or would prohibit or impose any limitations on the Purchaser's ownership of the Shares or would prohibit or make illegal the acceptance for payment, purchase of or payment for the Shares. Neither the Company nor any of its Subsidiaries is in default with respect to any judgment, decree, injunction, rule or order of any court, arbitrator or Authority 16 outstanding against or binding upon the Company or any of its Subsidiaries, other than where any such defaults would not, individually or in the aggregate, have a Material Adverse Effect. 2.10. Use of Proceeds. The Company intends to use the proceeds --------------- from the sale of Shares to retire debt of the Company under the revolving credit facility under the Loan Agreement and for other general corporate purposes. III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Company that: 3.1. Authorization; Execution and Delivery of Agreement. The -------------------------------------------------- Purchaser has all requisite power and authority to execute this Agreement, to perform his obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 3.2. No Conflict; No Consent. The execution and delivery of this ----------------------- Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any 17 Encumbrance on any of the properties or assets of the Purchaser under, (i) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, registration, membership, authorization or qualification from any Authority, of the Purchaser or (ii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Purchaser is a party or by which he is bound. Other than as required by the Hart-Scott-Rodino Act or as a result of the reporting requirements of the Exchange Act, no consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority is required to be made or obtained by the Purchaser in order to execute or deliver this Agreement or to consummate the transactions contemplated hereby. 3.3. No Brokers. No broker, finder or investment banker is ---------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Purchaser. 3.4. Litigation and Claims. There is no claim, prosecution, suit, --------------------- action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Purchaser, threatened against or affecting the Purchaser, or any of his properties or assets which, if adversely determined, would prohibit or make illegal the purchase of or payment for the Shares. 3.5. Investment Purposes. (a) The Purchaser, by reason of his ------------------- business and financial experience, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of his investment in the Shares, and is 18 purchasing the Shares hereunder for his own account, for investment only and not with a view to, or any present intention of, effecting a distribution of such securities or any part thereof. The Purchaser acknowledges that the Shares to be purchased hereunder have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other -------------- jurisdiction and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. (b) The Purchaser is an "accredited investor" as that term is defined in Rule 501 promulgated under the Securities Act. (c) The Purchaser has had the opportunity to ask questions and to receive answers concerning the financial condition, operations and prospects of the Company and the terms and conditions of the Purchaser's investment, as well as the opportunity to obtain any additional information necessary to verify the accuracy of information furnished in connection therewith that the Company possesses or can acquire without unreasonable effort or expense. IV. COVENANTS OF THE COMPANY The Company covenants and agrees that: 4.1. Conduct of Business. Except as specifically consented to in ------------------- writing by the Purchaser or expressly contemplated by this Agreement, during the period from the date of this Agreement up to and including the date of the Closing, the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its business in the usual and ordinary course consistent with past practice and use its reasonable best efforts to preserve its business organization intact, to 19 keep available the services of its key employees, material independent contractors and material consultants currently employed, to preserve the present relationships with customers, suppliers and other Persons (as hereinafter defined) with whom it has significant business relations, to maintain books and records in the usual and ordinary manner, and to preserve the goodwill and ongoing business; and (ii) except pursuant to agreements or commitments entered into by the Company or its Subsidiaries prior to the date of this Agreement and listed on Schedule 2.5(b) hereto, not issue or sell (or agree to issue or sell) any stock of any class or any other securities, or any options, warrants, conversion or other rights to purchase any such securities, or grant, or agree to grant, any such options or modify or alter the terms of any of the above. As used herein, "Person" means any individual, partnership, joint venture, firm, ------ corporation, association, trust or other entity or any government or political subdivision or agency, department or instrumentality thereof. 4.2. Exchange of Stock Certificates. Promptly upon surrender of ------------------------------ any certificates representing Shares at the office of the Company, the Company will, at its expense, execute and deliver to the Purchaser a new certificate or certificates in denominations specified by the Purchaser for an aggregate number of Shares equal to the number of Shares represented by the certificates surrendered. 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon ------------------------------------------------------- receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any 20 certificate for Shares and, in the case of loss, theft or destruction, upon delivery of an indemnity satisfactory to the Company (which, in the case of the Purchaser may be an undertaking by the Purchaser to so indemnify the Company), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new certificate of like tenor for a number of Shares equal to the number of Shares represented by the certificate lost, stolen, destroyed or mutilated. 4.4. Course of Dealings with Lenders. The Company shall use its ------------------------------- reasonable best efforts to obtain the consents and approvals of the Lenders, and to negotiate and enter into Credit Facility Amendments, necessary for the consummation of the transactions contemplated by this Agreement. The Company shall keep the Purchaser apprised of all material developments in connection with the negotiation of the Credit Facility Amendments. Without limiting the foregoing, the Company shall provide to the Purchaser, promptly after receipt thereof by the Company, a copy of each draft of the proposed amendments to the Credit Facilities and shall consult with the Purchaser in connection with the negotiation thereof. 4.5. Other Purchase Agreements. The Company shall provide to the ------------------------- Purchaser, promptly after receipt or completion thereof by the Company, a copy of the proposed final draft of each of the Cape Ann Purchase Agreement and the Lepone Purchase Agreement and of any proposed amendment of either thereof (or any proposed waiver of any of the terms or conditions of either thereof). 21 V. COVENANTS OF THE PURCHASER AND THE COMPANY 5.1. Hart-Scott-Rodino Act Filings. Each party covenants and ----------------------------- agrees to file, if required, on a date no later than ten days from the date hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with respect to the purchase by the Purchaser of the Shares pursuant to this Agreement and will provide promptly any supplemental information that may be requested in connection therewith. Each party will comply with all reasonable requests of the other party for information necessary in connection with the preparation by such other party of its notification and report form. 5.2. Public Disclosure and Confidentiality. Each party hereby ------------------------------------- agrees that, prior to the Closing, except as required by applicable law (or under the rules and regulations of the Nasdaq Stock Market (or any national securities exchange on which the Common Stock is listed)), no press release or public announcement or communication will be made or caused to be made concerning the execution or performance of this Agreement, the terms hereof or the transactions contemplated hereby unless specifically approved in advance by both parties. In the event that a party views disclosure as required by applicable law (or the rules and regulations of the Nasdaq Stock Market or any such national stock exchange) as contemplated by the previous sentence, such disclosing party shall provide a copy of such disclosure to the other party within a reasonable period of time prior to such disclosure. 22 5.3. Certain Notifications. At all times prior to the Closing, --------------------- each party hereto shall promptly notify the other party in writing of the occurrence of any event which will or could reasonably result in the failure of any of the conditions contained in Article I hereof to be satisfied. Such notice shall be in additional to and not in lieu of the other notices and communications provided for herein. 5.4. Efforts to Consummate; Further Actions. Subject to the terms -------------------------------------- and conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 5.5. Proxy Statement; Stockholder Approval. (a) The Company ------------------------------------- shall, as promptly as practicable following the date of this Agreement, prepare and file with the Commission, and will use its best efforts to have cleared by the Commission and thereafter shall mail to its stockholders as promptly as practicable a proxy statement and a form of proxy in connection with, among other things, the vote of the Company's stockholders to approve the issuance and sale of Common Stock contemplated by this Agreement. The proxy statement, and any amendments thereof or supplements thereto, will not, at the time of the mailing of the proxy statement or any amendments thereof or supplements thereto and at the time of the Stockholders Meeting (as hereinafter defined), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to information supplied in writing by the 23 Purchaser specifically for inclusion in the proxy statement. The proxy statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder. (b) The Company shall duly call, give notice of, convene and hold its annual, or a special, meeting of its stockholders (the "Stockholders Meeting") -------------------- and shall use its best efforts to obtain the requisite affirmative approval of its stockholders at the Stockholders Meeting of the issuance and sale of the Common Stock contemplated by this Agreement. The Purchaser shall be present, in person or by proxy, at the Stockholders Meeting and shall vote or cause to be voted all shares of Common Stock held of record or beneficially owned (with the power to vote or direct the vote) by him and eligible to vote as of the record date for such meeting in favor of the proposal seeking such approval. VI. REGISTRATION RIGHTS The Company covenants and agrees to provide the following registration rights: 6.1. "Piggyback" Registration. If, at any time while the Purchaser ----------------------- shall hold shares of Common Stock, the Company proposes to file a registration statement relating to the offering of any of its capital stock under the Securities Act (other than (i) a registration statement required to be filed in respect of employee benefit plans of the Company on Form S-8 or any similar form from time to time in effect, (ii) any registration statement on Form S-4 or similar successor form, or (iii) a registration statement relating to a transaction pursuant to Rule 145 of the Securities Act), whether or not for sale for its own account, the Company shall, at least 24 twenty-one days (or if such twenty-one day period is not practicable, then a reasonable shorter period which shall not be less than seven days) prior to such filing, give written notice of such proposed filing to the Purchaser. Upon receipt by the Company not more than seven days (unless the notice given to the Purchaser pursuant to the previous sentence is less than ten days, in which case such seven-day period shall be shortened to five days) after such notice of a written request from the Purchaser for registration of Purchaser's Stock (as hereinafter defined), (i) the Company shall, subject to Section 6.3, include such Purchaser's Stock in such registration statement, and shall use all reasonable efforts to cause such registration statement to become effective with respect to such Purchaser's Stock, unless the managing underwriter therefor concludes in its reasonable judgment that the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in (or during the time of) such offering, in which case the Company may (i) include all securities initially proposed by the Company to be sold for its own account and (ii) decrease the number of shares of Purchaser's Stock and any other securities (other than securities included by virtue of clause (i) above) proposed to be sold to the extent necessary to reduce the number of securities to be included in the registration to the level recommended by the managing underwriter; provided, however, that there shall be no such decrease in the number of shares of Purchaser's Stock unless the number of shares of Purchaser's Stock and such other securities (other than the securities included by virtue of clause (i) above) proposed to be sold has been decreased on a pro rata basis, calculated 25 according to the number of shares of Purchaser's Stock and other securities requested to be included by the respective holders of each. "Purchaser's Stock" ----------------- means any shares of Common Stock acquired by the Purchaser pursuant to this Agreement or otherwise for which the Purchaser requests registration pursuant to Section 6.1 or 6.2. 6.2. Demand Registration. If the Company shall receive at any time ------------------- or from time to time a written request from the Purchaser requesting the Company to register any shares of Purchaser's Stock under the Securities Act on Form S-3 (or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or any other similar form then in effect, the Company agrees that it will use all reasonable efforts to cause the prompt registration of all shares of Purchaser's Stock as to which such request is made (or will amend or supplement an effective registration statement to include Purchaser's Stock). The Company may postpone for a limited time, which in no event shall be longer than 90 days, compliance with a request for registration pursuant to this Section 6.2 if (i) the Company shall have given notice to the Purchaser of the occurrence of a Suspension Event (as hereinafter defined) or (ii) the Company is conducting a public offering of capital stock and the managing underwriter concludes in its reasonable judgment that such compliance would materially adversely affect such offering. Notwithstanding anything in this Section 6.2 to the contrary, the Company shall not be required to: (a) comply with more than two (2) requests of the Purchaser pursuant to this Section 6.2 or (b) prepare or cause to be prepared audited financial statements of the Company other than those 26 prepared in the normal course of the Company's business at its fiscal year end. Any underwriter selected by the Purchaser to act as such in connection with a registration pursuant to this Section 6.2 shall be reasonably acceptable to the Company. The Company shall not be required to file and effect a new registration pursuant to this Section 6.2(b) until a period of nine (9) months has elapsed from the termination of the registration statement with respect to Purchaser's Stock covered by a prior registration request. The Company agrees that in the event the Purchaser makes a request under this Section 6.2 to cause the Company to effect a demand registration and the Company is precluded from effecting such registration with respect to 25% or more of the shares of Purchaser's Stock subject to such request as a consequence of the terms of registration rights previously granted by the Company to any of the Other Holders, then, under such circumstances, such request shall not be counted against the number of demand requests granted to Purchaser under this Section 6.2. 6.3. General Provisions. (a) The Company will use all reasonable ------------------ efforts to cause any registration statement referred to in Sections 6.1 and 6.2 to become effective and to remain effective (with a prospectus at all times meeting the requirement of the 1933 Act) until the earlier of 180 days from the effective date of the registration statement and the date the Purchaser completes its distribution of Purchaser's Stock, subject, however, to the Company's suspension rights set forth in Section 6.7(b). The Company will use all reasonable efforts to effect such qualifications under applicable Blue Sky or other state securities laws as may be 27 reasonably requested by the Purchaser (provided that the Company shall not be obligated to file a general consent to service of process or qualify to do business as a foreign corporation or otherwise subject itself to taxation in any jurisdiction solely for the purpose of any such qualification) to permit or facilitate such sale or other distribution. The Company will cause the Purchaser's Stock to be listed on the principal stock exchange on which the shares of Common Stock are listed. (b) The Purchaser acknowledges that the Company has previously granted registration rights to other holders of Common Stock and/or other securities issued by the Company that are convertible into or exercisable for shares of Common Stock (collectively, the "Other Holders"). The Purchaser further ------------- acknowledges that, notwithstanding anything to the contrary provided in this Agreement, the registration rights granted to the Purchaser under this Agreement shall, in every case, be subject to the rights of the Other Holders and, to the extent, if any, that any of the provisions of this Article VI conflict or are inconsistent with any of such rights of the Other Holders, such rights of the Other Holders shall govern with respect to the subject matter of such conflict or inconsistency. (c) The Purchaser agrees, if requested by the managing underwriter or underwriters in an underwritten offering (an "Offering"), not to effect any -------- public sale or distribution of any of the securities of the Company of any class included in such Offering, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of 28 such Offering), during the 15-day period prior to, and during the 90-day period beginning on, the date of pricing of each Offering, to the extent timely notified in writing by the Company or the managing underwriters. Furthermore, notwithstanding anything to the contrary set forth in the Agreement, the Company's obligation under this Agreement to cause a registration statement and any filings with any state securities commission to be made or to become effective or to amend or supplement such registration statement shall be suspended in the event and during such period as the Company is proceeding with an Offering if the Company is advised by the underwriters that the sale of shares of Purchaser's Stock under such registration statement would have a material adverse effect on the Offering. (d) Following the effectiveness of a registration statement and the filings with any state securities commissions, the Purchaser agrees that he will not effect any sales of the Purchaser's Stock pursuant to such registration statement or any such filings at any time after he has received notice from the Company to suspend sales (i) as a result of the occurrence or existence of any Suspension Event, or (ii) so that the Company may amend or supplement such registration statement or such filing. The Purchaser may recommence effecting sales of the Purchaser's Stock pursuant to the registration statement or such filings following further notice to such effect from the Company, which notice shall be given by the Company not later than three (3) business days after the conclusion of any such Suspension Event or amendment or supplement. 29 6.4. Information, Documents, Etc. Upon making a request for --------------------------- registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the Company such information regarding its holdings and the proposed manner of distribution thereof as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Article VI. The Company agrees that it will furnish to the Purchaser the number of prospectuses, offering circulars or other documents, or any amendments or supplements thereto, incident to any registration, qualification or compliance referred to in this Article VI as the Purchaser from time to time may reasonably request. 6.5. Expenses. The Company will bear all expenses of registrations -------- pursuant to Section 6.1 and one-half of all expenses of the registrations (and amendments and supplements related thereto) pursuant to Section 6.2 (in each case, other than underwriting discounts and commissions and brokerage commissions and fees, if any, payable with respect to shares of Purchaser's Stock sold by the Purchaser, and fees and expenses of any accountants, counsel or other parties retained or employed by the Purchaser) including, without limitation, registration fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company in connection with such registration and amendments or supplements in connection therewith. The Purchaser will bear one-half of all expenses of the registrations (and amendments and supplements related thereto) pursuant to Section 6.2, including, without limitation, registration fees, printing expenses, expenses of 30 compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company and the Purchaser. Notwithstanding the foregoing, the Company agrees that in the event that subsequent to the date hereof the Company shall grant demand registration rights to a third party and shall agree in connection therewith to bear all or a greater portion of the expenses of such demand registrations than as set out above, then this Section 6.5 shall be deemed to have been amended to provide for the Company to bear, and the Company shall bear, the same portion of the expenses of any subsequent registration pursuant to Section 6.2 of this Agreement as the Company shall have agreed to bear for such third party. 6.6. Cooperation. In connection with any registration of ----------- Purchaser's Stock pursuant to this Article VI, the Company agrees to: (a) enter into such customary agreement (including an underwriting agreement containing such representations and warranties by the Company and such other terms and provisions, including indemnification provisions, as are customarily contained in underwriting agreements for comparable offerings and, if no underwriting agreement is entered into, an indemnification agreement on such terms as is customary in transactions of such nature) and take all such other actions as the Purchaser or the underwriters, if any, participating in such offering and sale may reasonably request in order to expedite or facilitate such offering and sale; (b) furnish, at the request of the Purchaser or any underwriters participating in such offering and sale, (i) a comfort letter or letters, dated the date of the final prospectus with 31 respect to the Purchaser's Stock and/or the date of the closing for the sale of the Purchaser's Stock from the independent certified public accountants of the Company and addressed to the Purchaser and any underwriters participating in such offering and sale, which letter or letters shall state that such accountants are independent with respect to the Company within the meaning of Rule 1.01 of the Code of Professional Ethics of the American Institute of Certified Public Accountants and shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall cover matters of the type customarily covered in "cold comfort" letters in connection with transactions of a similar nature for similar entities and (ii) an opinion, dated the date of the closing for the sale of the Purchaser's Stock, of the counsel representing the Company with respect to such offering and sale (which counsel may be the General Counsel of the Company or other counsel reasonably satisfactory to the Purchaser), addressed to the Purchaser and any such underwriters, which opinion shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall address such matters as are customary in transactions of a similar nature for similar entities; (c) make available for inspection by the Purchaser, the underwriters, if any, participating in such offering and sale (which inspecting underwriters shall, if reasonably possible, be limited to any manager or managers for such participating underwriters), the counsel for the Purchaser, one accountant or accounting firm retained by the Purchaser and any such underwriters, or any other agent retained by the Purchaser or such underwriters, all financial and 32 other records, corporate documents and properties of the Company, and supply such additional information, as they shall reasonably request; provided that any --------- such party shall keep the contents thereof confidential. 6.7. Action to Suspend Effectiveness; Supplement to Registration ----------------------------------------------------------- Statement. (a) The Company will notify the Purchaser and its counsel - --------- promptly of (i) any action by the Commission to suspend the effectiveness of the registration statement covering the Purchaser's Stock or the institution or threatening of any proceeding for such purpose (a "Stop Order") or (ii) the ---------- receipt by the Company of any notification with respect to the suspension of the qualification of the Purchaser's Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. Immediately upon receipt of any such notice, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to the registration statement in the jurisdiction to which such Stop Order or suspension relates. The Company will use all reasonable efforts to prevent the issuance of any such Stop Order or the suspension of any such qualification and, if any such Stop Order is issued or any such qualification is suspended, to obtain as soon as possible the withdrawal or revocation thereof, and will notify the Purchaser and his counsel at the earliest practicable date of the date on which the Purchaser may offer and sell Purchaser's Stock pursuant to the registration statement. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation under this Agreement to cause the registration of Purchaser's Stock and 33 any filings with any state securities commission to be made or to become effective or to amend or supplement a registration statement shall be suspended in the event and during such period that there are pending negotiations relating to, or consummation of, a transaction or the occurrence of an event that would require additional disclosure of material information by the Company in such registration statement or such filing (such circumstances being hereinafter referred to as a "Suspension Event") that would make it impractical or ---------------- inadvisable to cause such registration statement or such filings to be made or to become effective or to amend or supplement such registration statement, but such suspension shall continue only for so long as such event or its effect is continuing but in no event will that suspension exceed ninety (90) days. Immediately upon receipt by the Purchaser of notice of a Suspension Event, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to such registration statement, cease to deliver or use such registration statement and, if so requested by the Company, return to the Company, at its expense, all copies (other than permanent file copies) of such registration statement. (c) In the event the Company shall determine that it is necessary to amend or supplement any registration statement relating to Purchaser's Stock, the Company will furnish copies of such proposed amendment or supplement to the Purchaser and his counsel and will not file or distribute such amendment or supplement without the prior consent of the Purchaser, which consent shall not be unreasonably withheld. 34 6.8. Indemnification In the event any Purchaser's Stock is --------------- included in a registration statement under this Article VI: (a) To the full extent permitted by law, the Company will indemnify and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock as set forth in Section 9.3(d) hereof (each, a "Holder") from and against any ------ losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement --------- or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus, any final prospectus contained therein or any amendments or supplements thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company in connection with the registration of Purchaser's Stock under the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(a) shall not apply to amounts paid in 35 settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable hereunder in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Purchaser; and provided, further, that -------- ------- the Company shall not be liable hereunder in any such case to the extent it is determined that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made: (A) in any such preliminary prospectus, if (I) it was the responsibility of such Holder to provide the person asserting such loss, claim, damage, liability or expense with a current copy of the prospectus and such Holder failed to deliver or cause to be delivered a current copy of the prospectus to such person after the Company had furnished such Holder with a sufficient number of copies of the same and (II) the current prospectus corrected such untrue statement or omission; or (B) in such prospectus, if such untrue statement or omission is corrected in an amendment or supplement to such prospectus and the Holder thereafter fails to deliver the prospectus as so amended or supplemented prior to or concurrently with the sale of Purchaser's Stock to the person asserting such loss, claim, damage, liability or expense after the Company had furnished such Holder with a sufficient number copies of the same. 36 Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any such director, officer, employee, general or limited partner, member, agent, representative or controlling person and shall survive the transfer of such securities by such Holder. Each Holder shall furnish such information regarding itself or the claim in question as the Company may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (b) To the full extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon (i) any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for 37 use in connection with such registration or (ii) an untrue statement or alleged untrue statement or omission or alleged omission made in the circumstances described in clauses (A) or (B) of Section 6.8(a); and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 6.8(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no -------- event shall any indemnity under this Section 6.8(b) exceed the gross proceeds from the offering received by such Holder; and provided, further, that the -------- ------- obligation to provide indemnification pursuant to this Section 6.8(b) shall be several, and not joint and several, among such indemnifying parties. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer, representative or controlling person and shall survive the transfer of such securities by such prospective seller. (c) Promptly after receipt by an indemnified party under this Section 6.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.8, deliver to the indemnifying party a written notice of the commencement 38 thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel selected by the indemnifying party or parties. The failure to deliver written notice to the indemnifying party within a reasonable time after the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.8 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 6.8. The indemnified party shall have the right, but not the obligation, to participate in the defense of any action referred to above through counsel of its own choosing and shall have the right, but not the obligation, to assert any and all separate defenses, cross claims or counterclaims which it may have, and the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of such counsel has been specifically authorized in advance by the indemnifying party, (ii) there is a conflict of interest that prevents counsel for the indemnifying party from adequately representing the interests of the indemnified party or there are defenses available to the indemnified party that are different from, or additional to, the defenses that are available to the indemnifying party, or (iii) the indemnifying party fails to assume the defense or does not reasonably contest such action in good faith, in which case, if the indemnified party notifies the indemnifying party that it elects 39 to employ separate counsel, the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party and the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party; provided, however, that, the indemnifying party shall not, in connection with any proceeding or related proceedings, be liable for the reasonable fees and expenses of more than one separate firm (in addition to one firm acting as local counsel) for all indemnified parties. (d) Contribution. If for any reason (other than the reasons expressly ------------ specified in this Section 6.8) the foregoing indemnity and payment obligation is unavailable or is insufficient to hold harmless an indemnified party under paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any loss, claim, damage or liability (or actions or proceedings in respect thereof), including, without limitation, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding, in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other. The relative fault shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been taken or made by, or relates to information supplied by, the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information 40 and opportunity to correct or prevent such action, untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, or if the allocation provided in the second preceding sentence provides a lesser sum to the indemnified party than the amount hereinafter calculated, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative fault but also the relative benefits to the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties agree that it would not be just and equitable if contributions pursuant to this Section 6.8(d) were to be determined by pro rata allocation or by any other method of allocation which --- ---- does not take account of the equitable considerations referred to in the preceding sentences of this Section 6.8(d). Notwithstanding anything in this Section 6.8(d) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 6.8(d) to contribute any amount in excess of the gross proceeds received by such indemnifying party from the sale of Purchaser's Stock in the offering to which the losses, claims, damages or liabilities of the indemnified parties relate. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company and the Holders under this Section 6.8 shall survive the completion of any offering of Purchaser's Stock in a registration statement under this Article VI. 41 (f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement (if any) entered into in connection with any underwritten public offering of the Purchaser's Stock are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall control. VII. INDEMNIFICATION 7.1. Indemnification by the Company. The Company shall indemnify ------------------------------ and hold the Purchaser harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by him based upon, resulting from or arising out of (i) any material breach of any representation, warranty, covenant or agreement of the Company contained in this Agreement or (ii) except as provided in Section 7.2, any claim brought, directly or indirectly, by a third party relating to the transactions contemplated by this Agreement. 7.2. Indemnification by the Purchaser. The Purchaser shall -------------------------------- indemnify and hold the Company and each of its employees, directors, officers and agents harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by any of them resulting from or arising out of any material breach of any representation, warranty, covenant or agreement of the Purchaser contained in this Agreement. VIII. TERMINATION 8.1 Termination. (a) This Agreement may be terminated and the ----------- transactions contemplated herein may be abandoned at any time prior to the Closing: 42 (i) by the Company or the Purchaser, if the Closing has not occurred by January 31, 1999; (ii) by mutual written consent of the Company and the Purchaser; (iii) by the Company, if there has been a material misrepresentation or breach of warranty on the part of the Purchaser in the representations and warranties contained herein or a material breach of covenants on the part of the Purchaser and the same has not been cured within 30 days after notice thereof; (iv) by the Purchaser, if there has been a material misrepresentation or breach of warranty on the part of the Company in the representations and warranties contained herein or a material breach of covenants on the part of the Company and the same has not been cured within 30 days after notice thereof; (v) by the Purchaser, if the terms of the Credit Facility Amendments are not reasonably satisfactory to the Purchaser; or (vi) by either the Purchaser or the Company, if any Governmental Entity shall have issued a final order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable, provided that the party seeking to terminate shall have used its best efforts to appeal such order, decree, ruling or other action. 43 (b) Notwithstanding anything herein to the contrary, the right to terminate this Agreement under this Section 8.1 shall not be available to any party to the extent the failure of such party to fulfill any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date (as a result, for example, of an action or failure to act causing a failure of a condition precedent). (c) A party terminating this Agreement pursuant to this Section 8.1 shall give written notice thereof the other party hereto, whereupon this Agreement shall terminate and be of no further force and effect, the transactions contemplated hereby shall be abandoned without further action by any party and there shall be no liability on the part of the Company or the Purchaser, except as provided in Section 9.7 hereof and except for any liability for any willful breach hereof; provided however that the provisions of Sections 7.1 and 7.2 shall survive any such termination. IX. GENERAL PROVISIONS 9.1. Survival of Representations, Warranties and Agreements. ------------------------------------------------------ Notwithstanding any investigation conducted or notice or knowledge obtained by or on behalf of any party hereto, each representation and warranty in this Agreement and each agreement or covenant in this Agreement which does not by its own terms expire on or prior to the Closing shall survive the Closing without limitation as to time, except as specifically referred to herein. 44 9.2. Notices. Any notice, request, instruction or other document ------- to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (i) when received if given in person, or (ii) on the date of transmission if sent by nationally recognized overnight courier, certified or registered mail, return receipt requested or (iii) three days after being deposited in the U.S. mail, postage prepaid: (a) if to the Purchaser, addressed as follows: Bernard J. Korman c/o NutraMax Products, Inc. 51 Blackburn Drive Gloucester, Massachusetts 01930 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: William A. Groll, Esq. (b) if to the Company, addressed as follows: NutraMax Products, Inc. 51 Blackburn Drive Gloucester, Massachusetts 01930 Attention: Robert F. Burns, Vice President and Chief Financial Officer with a copy to: Eugene M. Schloss, Jr., Esq. 1700 Cary Road Huntingdon Valley, Pennsylvania 19006-5002 and 45 Goodwin, Procter & Hoar, LLP Exchange Place 53 State Street Boston, Massachusetts 02109 Attention: Joseph L. Johnson III, Esq. 46 or to such other individual or address as a party hereto my designate for itself by notice given as herein provided. 9.3. General. (a) This Agreement (including the documents and ------- instruments referred to or incorporated herein) constitutes the entire agreement, and supersedes all of the prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof; provided, however, if this Agreement is terminated, it will not be deemed to supersede prior agreements between the parties, including the Registration Rights Agreement dated as of October 16, 1997 between the Company and the Purchaser, and such agreements will continue in full force and effect. (b) This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder other than as contemplated in Article VI, Article VII and Section 9.3(d) and shall not be assigned by any party by operation of law or otherwise. (c) This Agreement may be executed in two or more counterparts which together shall constitute a single agreement. (d) This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs and permitted assigns. This Agreement is not assignable except by consent of each of the parties hereto or operation of law; provided that the heirs or legatees of the Purchaser shall succeed to the rights and obligations of the Purchaser contained in Article VI hereof. Any purported assignment of this Agreement in violation of this Section 9.3 shall be null and void. 47 9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND ------------- OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (b) Each party agrees that any proceeding relating to this Agreement shall be brought in a state court of Delaware. Each party hereby consents to personal jurisdiction in any such action brought in any such Delaware court, consents to service of process by mail made upon such party and such party's agent and waives any objection to venue in any such Delaware court or to any claim that any such Delaware court is an inconvenient forum. 9.5. Severability of Provisions. If any provision or any portion -------------------------- of any provision of this Agreement or the application of any such provision or any portion thereof to any person or circumstance, shall be held invalid or unenforceable, to the extent permitted by law, the remaining portion of such provision and the remaining provisions of this Agreement, or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby. 9.6. Captions. All section titles or captions contained in this -------- Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement. All references herein to Sections shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. 48 9.7. Expenses. Except as otherwise expressly provided in this -------- Agreement, the Company shall pay the expenses incidental to the preparation of this Agreement, the carrying out of the provisions hereof and the consummation of the transactions contemplated hereby. 9.8. Equitable Relief. Each party acknowledges that, in the event ---------------- of any breach of this Agreement by a party, the other party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that such other party, in addition to any other remedy to which it may be entitled, shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to compel specific performance of this Agreement. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto. 49 9.9. Definitions. The following terms shall have the respective ----------- meanings specified in the indicated Sections of this Agreement: Term Agreement Section - ---- ----------------- Agreement Recitals Authority 1.3(b) Board 1.3(d)(ii) Cape Ann Recitals Cape Ann Purchase Recitals Cape Ann Purchase Agreement Recitals Closing 1.3(a) Commission 2.6 Common Stock Recitals Company Recitals Credit Facilities 1.3(b) Credit Facility Amendments 1.3(b) Encumbrances 1.1 Exchange Act 2.4 Financial Statements 2.7(a) FNBB 1.3(b) Governmental Entity 1.3(b) Hart-Scott-Rodino Act 1.3(b) Holder 6.8(a) Legal Requirements 1.3(b) Lenders Recitals Lepone Purchase Recitals Lepone Purchase Agreement Recitals Loan Agreement 1.3(b) Material Adverse Effect 1.3(b) NASD 2.3(a) Offering 6.3(c) 50 Other Holders 6.3(b) Person 4.1 Purchase Agreements Recitals Purchaser Recitals Purchaser's Stock 6.1 SEC Reports 2.6 Securities Act 3.5(a) Shares Recitals Stockholders Meeting 5.5(b) Stop Order 6.7(a) Subsidiary 2.1 Suspension Event 6.7(b) Violation 6.8(a) 51 IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered this Agreement as of the date first above written. NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns ------------------- Name: Robert F. Burns Title: Vice President, Chief Financial Officer and Treasurer /s/ Bernard J. Korman --------------------- Name: Bernard J. Korman 52 EX-10.(FF) 5 STOCK PURCHASE AGRMT. NUTRAMAX & LEPONE Exhibit 10(ff) STOCK PURCHASE AGREEMENT by and between NUTRAMAX PRODUCTS, INC., and DONALD E. LEPONE Dated as of November 6, 1998 TABLE OF CONTENTS ----------------- Page ---- I. PURCHASE AND SALE 2 1.1. Purchase and Sale 2 1.2. Purchase Price 1.3. Closing 2 II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7 2.1. Due Organization, etc. 7 2.2. Compliance with Law 8 2.3. Authorization; Execution and Delivery of Agreement 8 2.4. No Conflict; No Consent 9 2.5. Capital Stock 10 2.6. SEC Reports 11 2.7. Financial Statements 12 2.8. No Brokers 13 2.9. Litigation and Claims 13 2.10. Use of Proceeds 13 i Page ---- III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 14 3.1. Authorization; Execution and Delivery of Agreement 14 3.2. No Conflict; No Consent 14 3.3. No Brokers 14 3.4. Litigation and Claims 15 3.5. Investment Purposes 15 IV. COVENANTS OF THE COMPANY 16 4.1. Conduct of Business 16 4.2. Exchange of Stock Certificates 17 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates 17 4.4. Course of Dealings with Lenders 17 4.5. Other Purchase Agreements 18 V. COVENANTS OF THE PURCHASER AND THE COMPANY 18 5.1. Hart-Scott-Rodino Act Filings 18 5.2. Public Disclosure and Confidentiality 18 5.3. Certain Notifications 19 ii Page ---- 5.4. Efforts to Consummate; Further Actions 19 5.5. Proxy Statement; Stockholder Approval 19 VI. REGISTRATION RIGHTS 20 6.1. "Piggyback" Registration 20 6.2. Demand Registration 22 6.3. General Provisions 23 6.4. Information, Documents, Etc. 25 6.5. Expenses 25 6.6. Cooperation 26 6.7. Action to Suspend Effectiveness; Supplement to Registration Statement 28 6.8. Indemnification 29 VII. INDEMNIFICATION 36 7.1. Indemnification by the Company 36 7.2. Indemnification by the Purchaser 36 VIII. TERMINATION 36 8.1 Termination 36 iii Page ---- IX. GENERAL PROVISIONS 38 9.1. Survival of Representations, Warranties and Agreements 38 9.2. Notices 38 9.3. General 39 9.4. Governing Law 40 9.5. Severability of Provisions 40 9.6. Captions 41 9.7. Expenses 41 9.8. Equitable Relief 41 9.9. Definitions 41 SCHEDULE 2.5(b) SCHEDULE 2.7(c) iv STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November 6, --------- 1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the "Company"), and DONALD E. LEPONE (the "Purchaser"). - -------- --------- WHEREAS, the Company recently has defaulted on certain financial covenants contained in the Company's Credit Facilities (as hereinafter defined), waivers of which defaults were obtained from the Company's lenders under such credit agreements (the "Lenders"); ------- WHEREAS, subject to the terms and conditions of this Agreement, the Purchaser wishes to purchase from the Company, and the Company wishes to sell to the Purchaser, additional shares (the "Shares") of the Company's Common Stock, ------ par value $0.001 per share (the "Common Stock"); ------------ WHEREAS, the Purchaser and the Company are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith; WHEREAS, in conjunction with the transactions contemplated by this Agreement, the Company is also entering into agreements with each of Cape Ann Investors, L.L.C. ("Cape Ann") and Bernard J. Korman, the Chairman of the Board -------- of Directors of the Company, with respect to the purchase from the Company by Cape Ann and Mr. Korman (the "Cape Ann Purchase" and the "Korman Purchase," ----------------- --------------- respectively) of approximately 1,162,790 and 232,558 additional shares of Common Stock, respectively (such agreements, the "Cape Ann -------- 1 Purchase Agreement" and the "Korman Purchase Agreement," respectively, and, - ------------------ -------------------------- collectively, the "Purchase Agreements"); and ------------------- WHEREAS, the proceeds from the sale of the Shares, together with the proceeds from the sale of shares of Common Stock pursuant to the Purchase Agreements, shall be used to facilitate the Company's negotiation of amendments to the financial covenants and other terms of the Credit Facilities and to enable the Company to retire existing indebtedness and to provide the Company with additional working capital; NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the parties hereto hereby agree as follows: I. PURCHASE AND SALE 1.1. Purchase and Sale. Upon the terms and subject to the ----------------- conditions set forth in this Agreement, the Company agrees to issue, sell and deliver to the Purchaser, and the Purchaser agrees to purchase from the Company, 46,512 Shares. The Shares purchased and sold hereunder shall be free and clear of any liens, security interests, pledges, voting agreements, claims, options and encumbrances of every kind, character and description whatsoever ("Encumbrances"), except as contemplated by this Agreement. - -------------- 1.2. Purchase Price. As consideration for the sale of the Shares, -------------- at the Closing (as hereinafter defined) the Purchaser shall pay the Company, in immediately available funds, a purchase price of $4.30 per share. 2 1.3. Closing. (a) The closing of the transactions provided for in ------- this Agreement (the "Closing") shall take place on the second business day after ------- the satisfaction or waiver of the conditions set forth in Sections 1.3(b) and 1.3(c) of this Agreement at the offices of Goodwin, Procter & Hoar, LLP, Exchange Place, Boston, Massachusetts, or at such other time and place as the parties may mutually agree. (b) Conditions Precedent to the Purchaser's Obligations. The --------------------------------------------------- obligation of the Purchaser to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Company contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Company on or prior to the Closing; (iii) the Company shall have delivered to the Purchaser a certificate, dated the date of Closing and signed by a duly authorized officer of the Company, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, 3 investigation or proceeding shall have been instituted before any court, administrative body or governmental agency (a "Governmental Entity") which seeks ------------------- to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the transactions contemplated by this Agreement and which is likely, in the Purchaser's reasonable judgment, to be successful on the merits, and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement (as hereinafter defined) shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority (as hereinafter defined) in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart- ----- Scott-Rodino Act")), and all extensions thereof, the passing of which is - ---------------- required for such 4 consummation, shall have passed, except as to such consents, approvals, permits, authorizations or filings that, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), business, operations, properties, assets or liabilities of the Company and its Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse Effect"); (vi) the issuance and sale of Common Stock - ------------------------ contemplated by this Agreement shall have been approved by the requisite affirmative vote of the stockholders of the Company; (vii) from and after the date of this Agreement, there shall not have occurred any changes concerning the Company that, when combined, without duplication, with all other changes concerning the Company from and after the date of this Agreement, have had or would reasonably be expected to have a Material Adverse Effect; (viii) the Company shall have obtained a waiver from the Lenders of any covenant defaults under the Credit Facilities during the fourth quarter of fiscal 1998 and shall have entered into amendments (the "Credit Facility Amendments") to each of the -------------------------- Revolving Credit and Term Loan Agreement, dated as of December 30, 1996, as amended, between the Company, The First National Bank of Boston ("FNBB"), Fleet ---- National Bank, National Bank of Canada, The Sumitomo Bank, Limited, 5 and FNBB, as Agent (the "Loan Agreement"), and the Purchase Agreement, dated as -------------- of December 30, 1996, as amended, between the Company and ING (U.S.) Capital Corporation (together with the Loan Agreement, the "Credit Facilities"), the ----------------- terms of which amendments shall be reasonably satisfactory to the Purchaser, and such waiver and amendments shall be in full force and effect without waiver or change in the material terms thereof; and (viii) all conditions precedent to consummation of the Cape Ann Purchase and the Korman Purchase shall have been satisfied or waived by the appropriate party, and no amendment to the Cape Ann Purchase Agreement or the Korman Purchase Agreement shall have been executed or agreed to that changes the material terms thereof in a manner adverse to the Company without the Purchaser's prior written consent. In the event any of the foregoing conditions to the Purchaser's obligation to close hereunder is not satisfied on or before the Closing, the Purchaser may waive such condition and proceed to Closing. As used herein, "Legal Requirements" shall include laws, ------------------ regulations, ordinances, orders, decrees, permits, licenses, consents, approvals, registrations, authorizations and qualifications required by or from any federal, state, local or foreign governmental or regulatory authority (each, 6 an "Authority"). --------- (c) Conditions Precedent to the Company's Obligations. The obligation ------------------------------------------------- of the Company to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Purchaser contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Purchaser shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing; (iii) the Purchaser shall have delivered to the Company a certificate, dated the date of Closing and signed by a duly authorized signatory of the Purchaser, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any Governmental Entity which seeks to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the transactions contemplated by this Agreement and which is likely, 7 in the Company's reasonable judgment, to be successful on the merits and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing of which is required for such consummation, shall have passed, except as to such consents, approvals, permits, authorizations or filings that, individually or in the aggregate would not have a Material Adverse Effect; and (vi) the issuance and sale of Common Stock contemplated by this Agreement shall have been approved by the requisite affirmative vote of the stockholders of the Company. In the event any of the foregoing conditions to the Company's obligation to close hereunder is 8 not satisfied on or before the Closing, the Company may waive such condition and proceed to Closing. (d) Company Closing Deliveries. At the Closing, the Company will -------------------------- deliver to the Purchaser the following: (i) a stock certificate or certificates representing the Shares; and (ii) a certificate of the Secretary of the Company certifying as to the adoption and effect of resolutions of the Board of Directors of the Company (the "Board") authorizing the ----- execution, delivery and performance of this Agreement. (e) Purchaser Closing Deliveries. At the Closing, the Purchaser will ---------------------------- deliver to the Company payment of the purchase price provided by Section 1.2. II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2.1. Due Organization, etc. The Company and each of its --------------------- Subsidiaries (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and each has all requisite corporate power and authority to own, operate and lease its respective properties and assets and to conduct its respective businesses as now conducted and is qualified to do business in each state or other jurisdiction where the nature of its properties, assets or businesses requires such qualification other than where the failure to be so qualified would not, individually or in the aggregate have a 9 Material Adverse Effect. All of the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and non-assessable, other than the shares of capital stock of foreign Subsidiaries which are not fully paid and which failure to be fully paid, individually or in the aggregate, does not have a Material Adverse Effect, and all of such outstanding shares are owned, directly or indirectly, by the Company free and clear of all Encumbrances, except for liens or security interests or pledge arrangements involving the capital stock of the Subsidiaries in favor of the Company's lenders. "Subsidiary" means a corporation or other business arrangement a ---------- majority of the outstanding voting securities or ownership interests of which is owned, directly or indirectly, by the Company, by one or more other Subsidiaries or by the Company and one or more other Subsidiaries. 2.2. Compliance with Law. The Company and each Subsidiary has ------------------- obtained and maintains in full force and effect all permits, licenses, consents, approvals, registrations, memberships, authorizations and qualifications under all federal, state, local and foreign laws and regulations, and with all Authorities, required for the conduct by it of its businesses and the ownership or possession by it of its properties and assets other than where the failure to obtain or maintain such permits, licenses, consents, approvals, registrations, memberships, authorizations or qualifications would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each Subsidiary are in compliance with all laws, regulations, ordinances, orders and decrees (including, without limitation, all environmental and occupational, health and 10 safety laws) of any Authority applicable to the conduct by the Company and each Subsidiary of their respective businesses and to their ownership and possession of their respective properties and assets, other than where the failure so to comply would not, individually or in the aggregate, have a Material Adverse Effect. 2.3. Authorization; Execution and Delivery of Agreement. (a) -------------------------------------------------- Except to the extent that the By-laws of, or other rules or regulations promulgated by, the National Association of Securities Dealers ("NASD") ---- applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby (i) do not require the approval or consent of any stockholders of the Company and (ii) have been duly authorized by all necessary corporate action on the part of the Company for all purposes, including Section 203 of the Delaware General Corporation Law. Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, this Agreement has been duly executed and delivered by the Company and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Company, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. The Company has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder. 11 (b) Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, (i) the Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration therefor set forth herein, the Shares will be validly issued, fully paid and non-assessable and (ii) the Purchaser will acquire valid and marketable title to the Shares, free and clear of any Encumbrances except as contemplated by this Agreement. 2.4. No Conflict; No Consent. Except to the extent that the By- ----------------------- laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require stockholder approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Company or any Subsidiary under, (i) any provision of the certificate of incorporation or by-laws or similar constituent documents of the Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, registration, membership, authorization or qualification from any Authority, of the Company or 12 any Subsidiary or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Company or any of its Subsidiaries is a party or by which any of them is bound, other than, in the case of clause (ii) above, where such conflict, violation, default, acceleration or Encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. No consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority or third party is required to be made or obtained by the Company or any Subsidiary (including, without limitation, under any environmental or occupational, health and safety laws) in order to execute or deliver this Agreement, issue and sell the Shares or to consummate the transactions contemplated hereby, other than (A) as may be required by the Hart-Scott-Rodino Act, (B) as a result of the periodic reporting requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (C) the listing requirements of the NASDAQ SmallCap ------------ Market, or except where the failure to make or obtain any such consent, approval, order, authorization, registration, declaration, filing or notice would not have a Material Adverse Effect. 2.5. Capital Stock. (a) The authorized capital stock of the ------------- Company consists of 20,000,000 shares of Common Stock, of which, as of October 3, 1998, 5,682,168 shares were outstanding and 9,665 shares were held in treasury and 1,296,633 shares are reserved for future issuance pursuant to any option, warrant or other rights agreement, arrangement or other commitment. All of the issued and outstanding shares of Common Stock have been validly 13 issued and are fully paid and non-assessable. (b) (i) Other than this Agreement, the Cape Ann Purchase Agreement, the Korman Purchase Agreement and the warrants to purchase Common Stock issued to Cape Ann and others or as set forth on Schedule 2.5(b) hereto, there are not authorized or outstanding any subscriptions, options, conversion rights, warrants or other agreements, securities or commitments of any nature whatsoever (whether oral or written and whether firm or conditional) obligating the Company or any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, to any person any shares of Common Stock or any other shares of the capital stock of the Company or any shares of the capital stock of any Subsidiary, or any securities convertible into or exchangeable for any such shares, or obligating any such person to grant, extend or enter into any such agreement or commitment; and (ii) except as set forth on Schedule 2.5(b) hereto, there is no obligation, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any share of capital stock or other equity interests of the Company or any Subsidiary. No class of capital stock of the Company is entitled to preemptive rights. 2.6. SEC Reports. Except with respect to the amendment to the ----------- Current Report on Form 8-K dated September 11, 1998 (filed with the Commission (as hereinafter defined) on September 26, 1998) contemplated by the disclosure contained in Items 7(a) and (b) thereof, the Company has filed with the Securities and Exchange Commission (the "Commission") all proxy statements, ---------- reports, forms and other documents required to be filed by it after January 1, 1995 14 under the Exchange Act (collectively, the "SEC Reports"). As of their respective ----------- dates, the SEC Reports (i) complied as to form in all material respects with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.7. Financial Statements. (a) The financial statements -------------------- (including any related notes) included in the SEC Reports (the "Financial --------- Statements") have been prepared in accordance with generally accepted accounting - ---------- principles consistently applied throughout the periods involved (except as may be noted therein) and fairly present the consolidated financial condition, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates thereof and for the periods ended on such dates (in each case subject, as to interim statements, to changes resulting from year-end adjustments (none of which were or, except as otherwise disclosed to the Purchaser in writing, will be material in amount or effect) and except as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act). (b) On the date hereof, except as disclosed in the SEC Reports, neither the Company nor any Subsidiary has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due and whether or not required to be disclosed in the SEC Reports, other than liabilities that have been disclosed to the 15 Purchaser in writing, have been incurred in the ordinary course of business or are not in the aggregate material to the Company and its Subsidiaries taken as a whole. Since September 28, 1996, the Company has not declared or paid any dividends to any of its stockholders. (c) Except as set forth on Schedule 2.7(c), since September 28, 1996, the Company and each of its Subsidiaries have conducted their respective businesses only in the ordinary course in substantially the same manner as theretofore conducted and the Company and its Subsidiaries, taken as a whole, have not undergone or suffered any Material Adverse Effect, except as otherwise disclosed to the Purchaser in writing. 2.8. No Brokers. No broker, finder or investment banker is ---------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 2.9. Litigation and Claims. There is no claim, prosecution, suit, --------------------- action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Company, threatened against or affecting the Company, any of its Subsidiaries or any of their respective properties or assets (nor, to the knowledge of the Company, are there any facts or circumstances providing a basis for any such claim, prosecution, suit, action, arbitration, proceeding, investigation or review) which, if adversely determined, would be reasonably likely to have a Material Adverse Effect or would prohibit or impose any limitations on the Purchaser's ownership of the Shares or would prohibit or make illegal the acceptance for payment, purchase 16 of or payment for the Shares. Neither the Company nor any of its Subsidiaries is in default with respect to any judgment, decree, injunction, rule or order of any court, arbitrator or Authority outstanding against or binding upon the Company or any of its Subsidiaries, other than where any such defaults would not, individually or in the aggregate, have a Material Adverse Effect. 2.10. Use of Proceeds. The Company intends to use the proceeds --------------- from the sale of Shares to retire debt of the Company under the revolving credit facility under the Loan Agreement and for other general corporate purposes. III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Company that: 3.1. Authorization; Execution and Delivery of Agreement. The -------------------------------------------------- Purchaser has all requisite power and authority to execute this Agreement, to perform his obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 3.2. No Conflict; No Consent. The execution and delivery of this ----------------------- Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions 17 contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Purchaser under, (i) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, registration, membership, authorization or qualification from any Authority, of the Purchaser or (ii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Purchaser is a party or by which he is bound. Other than as required by the Hart-Scott-Rodino Act or as a result of the reporting requirements of the Exchange Act, no consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority is required to be made or obtained by the Purchaser in order to execute or deliver this Agreement or to consummate the transactions contemplated hereby. 3.3. No Brokers. No broker, finder or investment banker is ---------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Purchaser. 3.4. Litigation and Claims. There is no claim, prosecution, suit, --------------------- action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Purchaser, threatened against or affecting the Purchaser, or any of his properties or assets which, if adversely determined, would prohibit or make illegal the purchase of or payment for the Shares. 3.5. Investment Purposes. (a) The Purchaser, by reason of his ------------------- business and 18 financial experience, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of his investment in the Shares, and is purchasing the Shares hereunder for his own account, for investment only and not with a view to, or any present intention of, effecting a distribution of such securities or any part thereof. The Purchaser acknowledges that the Shares to be purchased hereunder have not been registered under the Securities Act of 1933, as amended (the "Securities ---------- Act"), or the securities laws of any state or other jurisdiction and cannot be - --- disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. (b) The Purchaser is an "accredited investor" as that term is defined in Rule 501 promulgated under the Securities Act. (c) The Purchaser has had the opportunity to ask questions and to receive answers concerning the financial condition, operations and prospects of the Company and the terms and conditions of the Purchaser's investment, as well as the opportunity to obtain any additional information necessary to verify the accuracy of information furnished in connection therewith that the Company possesses or can acquire without unreasonable effort or expense. IV. COVENANTS OF THE COMPANY The Company covenants and agrees that: 4.1. Conduct of Business. Except as specifically consented to in ------------------- writing by the Purchaser or expressly contemplated by this Agreement, during the period from the date of this 19 Agreement up to and including the date of the Closing, the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its business in the usual and ordinary course consistent with past practice and use its reasonable best efforts to preserve its business organization intact, to keep available the services of its key employees, material independent contractors and material consultants currently employed, to preserve the present relationships with customers, suppliers and other Persons (as hereinafter defined) with whom it has significant business relations, to maintain books and records in the usual and ordinary manner, and to preserve the goodwill and ongoing business; and (ii) except pursuant to agreements or commitments entered into by the Company or its Subsidiaries prior to the date of this Agreement and listed on Schedule 2.5(b) hereto, not issue or sell (or agree to issue or sell) any stock of any class or any other securities, or any options, warrants, conversion or other rights to purchase any such securities, or grant, or agree to grant, any such options or modify or alter the terms of any of the above. As used herein, "Person" means any individual, partnership, joint venture, firm, corporation, association, trust or other entity or any government or political subdivision or agency, department or instrumentality thereof. 4.2. Exchange of Stock Certificates. Promptly upon surrender of ------------------------------ any certificates representing Shares at the office of the Company, the Company will, at its expense, execute and deliver to the Purchaser a new certificate or certificates in denominations specified by the Purchaser for an aggregate number of Shares equal to the number of Shares represented by 20 the certificates surrendered. 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon ------------------------------------------------------- receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate for Shares and, in the case of loss, theft or destruction, upon delivery of an indemnity satisfactory to the Company (which, in the case of the Purchaser may be an undertaking by the Purchaser to so indemnify the Company), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new certificate of like tenor for a number of Shares equal to the number of Shares represented by the certificate lost, stolen, destroyed or mutilated. 4.4. Course of Dealings with Lenders. The Company shall use its ------------------------------- reasonable best efforts to obtain the consents and approvals of the Lenders, and to negotiate and enter into Credit Facility Amendments, necessary for the consummation of the transactions contemplated by this Agreement. The Company shall keep the Purchaser apprised of all material developments in connection with the negotiation of the Credit Facility Amendments. Without limiting the foregoing, the Company shall provide to the Purchaser, promptly after receipt thereof by the Company, a copy of each draft of the proposed amendments to the Credit Facilities and shall consult with the Purchaser in connection with the negotiation thereof. 4.5. Other Purchase Agreements. The Company shall provide to the ------------------------- Purchaser, promptly after receipt or completion thereof by the Company, a copy of the proposed final draft 21 of each of the Cape Ann Purchase Agreement and the Korman Purchase Agreement and of any proposed amendment of either thereof (or any proposed waiver of any of the terms or conditions of either thereof). V. COVENANTS OF THE PURCHASER AND THE COMPANY 5.1. Hart-Scott-Rodino Act Filings. Each party covenants and ----------------------------- agrees to file, if required, on a date no later than ten days from the date hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with respect to the purchase by the Purchaser of the Shares pursuant to this Agreement and will provide promptly any supplemental information that may be requested in connection therewith. Each party will comply with all reasonable requests of the other party for information necessary in connection with the preparation by such other party of its notification and report form. 5.2. Public Disclosure and Confidentiality. Each party hereby ------------------------------------- agrees that, prior to the Closing, except as required by applicable law (or under the rules and regulations of the Nasdaq Stock Market (or any national securities exchange on which the Common Stock is listed)), no press release or public announcement or communication will be made or caused to be made concerning the execution or performance of this Agreement, the terms hereof or the transactions contemplated hereby unless specifically approved in advance by both parties. In the event that a party views disclosure as required by applicable law (or the rules and regulations of the Nasdaq Stock Market or any such national stock exchange) as contemplated by the previous 22 sentence, such disclosing party shall provide a copy of such disclosure to the other party within a reasonable period of time prior to such disclosure. 5.3. Certain Notifications. At all times prior to the Closing, --------------------- each party hereto shall promptly notify the other party in writing of the occurrence of any event which will or could reasonably result in the failure of any of the conditions contained in Article I hereof to be satisfied. Such notice shall be in additional to and not in lieu of the other notices and communications provided for herein. 5.4. Efforts to Consummate; Further Actions. Subject to the terms -------------------------------------- and conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 5.5. Proxy Statement; Stockholder Approval. (a) The Company ------------------------------------- shall, as promptly as practicable following the date of this Agreement, prepare and file with the Commission, and will use its best efforts to have cleared by the Commission and thereafter shall mail to its stockholders as promptly as practicable a proxy statement and a form of proxy in connection with, among other things, the vote of the Company's stockholders to approve the issuance and sale of Common Stock contemplated by this Agreement. The proxy statement, and any amendments thereof or supplements thereto, will not, at the time of the mailing of the proxy statement or any amendments thereof or supplements thereto and at the time of the Stockholders 23 Meeting (as hereinafter defined), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to information supplied in writing by the Purchaser specifically for inclusion in the proxy statement. The proxy statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder. (b) The Company shall duly call, give notice of, convene and hold its annual, or a special, meeting of its stockholders (the "Stockholders Meeting") -------------------- and shall use its best efforts to obtain the requisite affirmative approval of its stockholders at the Stockholders Meeting of the issuance and sale of the Common Stock contemplated by this Agreement. The Purchaser shall be present, in person or by proxy, at the Stockholders Meeting and shall vote or cause to be voted all shares of Common Stock held of record or beneficially owned (with the power to vote or direct the vote) by him and eligible to vote as of the record date for such meeting in favor of the proposal seeking such approval. VI. REGISTRATION RIGHTS The Company covenants and agrees to provide the following registration rights: 6.1. "Piggyback" Registration. If, at any time while the Purchaser ----------------------- shall hold shares of Common Stock, the Company proposes to file a registration statement relating to the 24 offering of any of its capital stock under the Securities Act (other than (i) a registration statement required to be filed in respect of employee benefit plans of the Company on Form S-8 or any similar form from time to time in effect, (ii) any registration statement on Form S-4 or similar successor form, or (iii) a registration statement relating to a transaction pursuant to Rule 145 of the Securities Act), whether or not for sale for its own account, the Company shall, at least twenty-one days (or if such twenty-one day period is not practicable, then a reasonable shorter period which shall not be less than seven days) prior to such filing, give written notice of such proposed filing to the Purchaser. Upon receipt by the Company not more than seven days (unless the notice given to the Purchaser pursuant to the previous sentence is less than ten days, in which case such seven-day period shall be shortened to five days) after such notice of a written request from the Purchaser for registration of Purchaser's Stock (as hereinafter defined), (i) the Company shall, subject to Section 6.3, include such Purchaser's Stock in such registration statement, and shall use all reasonable efforts to cause such registration statement to become effective with respect to such Purchaser's Stock, unless the managing underwriter therefor concludes in its reasonable judgment that the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in (or during the time of) such offering, in which case the Company may (i) include all securities initially proposed by the Company to be sold for its own account and (ii) decrease the number of shares of Purchaser's Stock and any other securities (other than securities included by virtue of clause (i) above) 25 proposed to be sold to the extent necessary to reduce the number of securities to be included in the registration to the level recommended by the managing underwriter; provided, however, that there shall be no such decrease in the number of shares of Purchaser's Stock unless the number of shares of Purchaser's Stock and such other securities (other than the securities included by virtue of clause (i) above) proposed to be sold has been decreased on a pro rata basis, calculated according to the number of shares of Purchaser's Stock and other securities requested to be included by the respective holders of each. "Purchaser's Stock" means any shares of Common Stock acquired by the Purchaser ----------------- pursuant to this Agreement or otherwise for which the Purchaser requests registration pursuant to Section 6.1 or 6.2. 6.2. Demand Registration. If the Company shall receive at any time ------------------- or from time to time a written request from the Purchaser requesting the Company to register any shares of Purchaser's Stock under the Securities Act on Form S-3 (or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or any other similar form then in effect, the Company agrees that it will use all reasonable efforts to cause the prompt registration of all shares of Purchaser's Stock as to which such request is made (or will amend or supplement an effective registration statement to include Purchaser's Stock). The Company may postpone for a limited time, which in no event shall be longer than 90 days, compliance with a request for registration pursuant to this Section 6.2 if (i) the Company shall have given notice to the Purchaser of the occurrence of a Suspension Event (as hereinafter defined) or (ii) the Company is conducting a 26 public offering of capital stock and the managing underwriter concludes in its reasonable judgment that such compliance would materially adversely affect such offering. Notwithstanding anything in this Section 6.2 to the contrary, the Company shall not be required to: (a) comply with more than two (2) requests of the Purchaser pursuant to this Section 6.2 or (b) prepare or cause to be prepared audited financial statements of the Company other than those prepared in the normal course of the Company's business at its fiscal year end. Any underwriter selected by the Purchaser to act as such in connection with a registration pursuant to this Section 6.2 shall be reasonably acceptable to the Company. The Company shall not be required to file and effect a new registration pursuant to this Section 6.2(b) until a period of nine (9) months has elapsed from the termination of the registration statement with respect to Purchaser's Stock covered by a prior registration request. The Company agrees that in the event the Purchaser makes a request under this Section 6.2 to cause the Company to effect a demand registration and the Company is precluded from effecting such registration with respect to 25% or more of the shares of Purchaser's Stock subject to such request as a consequence of the terms of registration rights previously granted by the Company to any of the Other Holders, then, under such circumstances, such request shall not be counted against the number of demand requests granted to Purchaser under this Section 6.2. 6.3. General Provisions. (a) The Company will use all reasonable ------------------ efforts to cause any registration statement referred to in Sections 6.1 and 6.2 to become effective and to 27 remain effective (with a prospectus at all times meeting the requirement of the 1933 Act) until the earlier of 180 days from the effective date of the registration statement and the date the Purchaser completes its distribution of Purchaser's Stock, subject, however, to the Company's suspension rights set forth in Section 6.7(b). The Company will use all reasonable efforts to effect such qualifications under applicable Blue Sky or other state securities laws as may be reasonably requested by the Purchaser (provided that the Company shall not be obligated to file a general consent to service of process or qualify to do business as a foreign corporation or otherwise subject itself to taxation in any jurisdiction solely for the purpose of any such qualification) to permit or facilitate such sale or other distribution. The Company will cause the Purchaser's Stock to be listed on the principal stock exchange on which the shares of Common Stock are listed. (b) The Purchaser acknowledges that the Company has previously granted registration rights to other holders of Common Stock and/or other securities issued by the Company that are convertible into or exercisable for shares of Common Stock (collectively, the "Other Holders"). The Purchaser further ------------- acknowledges that, notwithstanding anything to the contrary provided in this Agreement, the registration rights granted to the Purchaser under this Agreement shall, in every case, be subject to the rights of the Other Holders and, to the extent, if any, that any of the provisions of this Article VI conflict or are inconsistent with any of such rights of the Other Holders, such rights of the Other Holders shall govern with respect to the 28 subject matter of such conflict or inconsistency. (c) The Purchaser agrees, if requested by the managing underwriter or underwriters in an underwritten offering (an "Offering"), not to effect any -------- public sale or distribution of any of the securities of the Company of any class included in such Offering, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of such Offering), during the 15-day period prior to, and during the 90-day period beginning on, the date of pricing of each Offering, to the extent timely notified in writing by the Company or the managing underwriters. Furthermore, notwithstanding anything to the contrary set forth in the Agreement, the Company's obligation under this Agreement to cause a registration statement and any filings with any state securities commission to be made or to become effective or to amend or supplement such registration statement shall be suspended in the event and during such period as the Company is proceeding with an Offering if the Company is advised by the underwriters that the sale of shares of Purchaser's Stock under such registration statement would have a material adverse effect on the Offering. (d) Following the effectiveness of a registration statement and the filings with any state securities commissions, the Purchaser agrees that he will not effect any sales of the Purchaser's Stock pursuant to such registration statement or any such filings at any time after he has received notice from the Company to suspend sales (i) as a result of the occurrence or existence of any Suspension Event, or (ii) so that the Company may amend or supplement such 29 registration statement or such filing. The Purchaser may recommence effecting sales of the Purchaser's Stock pursuant to the registration statement or such filings following further notice to such effect from the Company, which notice shall be given by the Company not later than three (3) business days after the conclusion of any such Suspension Event or amendment or supplement. 6.4. Information, Documents, Etc. Upon making a request for --------------------------- registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the Company such information regarding its holdings and the proposed manner of distribution thereof as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Article VI. The Company agrees that it will furnish to the Purchaser the number of prospectuses, offering circulars or other documents, or any amendments or supplements thereto, incident to any registration, qualification or compliance referred to in this Article VI as the Purchaser from time to time may reasonably request. 6.5. Expenses. The Company will bear all expenses of registrations -------- pursuant to Section 6.1 and one-half of all expenses of the registrations (and amendments and supplements related thereto) pursuant to Section 6.2 (in each case, other than underwriting discounts and commissions and brokerage commissions and fees, if any, payable with respect to shares of Purchaser's Stock sold by the Purchaser, and fees and expenses of any accountants, counsel or other parties retained or employed by the Purchaser) including, without limitation, registration 30 fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company in connection with such registration and amendments or supplements in connection therewith. The Purchaser will bear one-half of all expenses of the registrations (and amendments and supplements related thereto) pursuant to Section 6.2, including, without limitation, registration fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company and the Purchaser. Notwithstanding the foregoing, the Company agrees that in the event that subsequent to the date hereof the Company shall grant demand registration rights to a third party and shall agree in connection therewith to bear all or a greater portion of the expenses of such demand registrations than as set out above, then this Section 6.5 shall be deemed to have been amended to provide for the Company to bear, and the Company shall bear, the same portion of the expenses of any subsequent registration pursuant to Section 6.2 of this Agreement as the Company shall have agreed to bear for such third party. 6.6. Cooperation. In connection with any registration of ----------- Purchaser's Stock pursuant to this Article VI, the Company agrees to: (a) enter into such customary agreement (including an underwriting agreement containing such representations and warranties by the Company and such other terms and provisions, including indemnification provisions, as are customarily contained in underwriting agreements for comparable offerings and, if no underwriting agreement is entered 31 into, an indemnification agreement on such terms as is customary in transactions of such nature) and take all such other actions as the Purchaser or the underwriters, if any, participating in such offering and sale may reasonably request in order to expedite or facilitate such offering and sale; (b) furnish, at the request of the Purchaser or any underwriters participating in such offering and sale, (i) a comfort letter or letters, dated the date of the final prospectus with respect to the Purchaser's Stock and/or the date of the closing for the sale of the Purchaser's Stock from the independent certified public accountants of the Company and addressed to the Purchaser and any underwriters participating in such offering and sale, which letter or letters shall state that such accountants are independent with respect to the Company within the meaning of Rule 1.01 of the Code of Professional Ethics of the American Institute of Certified Public Accountants and shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall cover matters of the type customarily covered in "cold comfort" letters in connection with transactions of a similar nature for similar entities and (ii) an opinion, dated the date of the closing for the sale of the Purchaser's Stock, of the counsel representing the Company with respect to such offering and sale (which counsel may be the General Counsel of the Company or other counsel reasonably satisfactory to the Purchaser), addressed to the Purchaser and any such underwriters, which opinion shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall address such matters as are customary in transactions of a similar nature for similar entities; 32 (c) make available for inspection by the Purchaser, the underwriters, if any, participating in such offering and sale (which inspecting underwriters shall, if reasonably possible, be limited to any manager or managers for such participating underwriters), the counsel for the Purchaser, one accountant or accounting firm retained by the Purchaser and any such underwriters, or any other agent retained by the Purchaser or such underwriters, all financial and other records, corporate documents and properties of the Company, and supply such additional information, as they shall reasonably request; provided that any --------- such party shall keep the contents thereof confidential. 6.7. Action to Suspend Effectiveness; Supplement to Registration ----------------------------------------------------------- Statement. (a) The Company will notify the Purchaser and its counsel - --------- promptly of (i) any action by the Commission to suspend the effectiveness of the registration statement covering the Purchaser's Stock or the institution or threatening of any proceeding for such purpose (a "Stop Order") or (ii) the ---------- receipt by the Company of any notification with respect to the suspension of the qualification of the Purchaser's Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. Immediately upon receipt of any such notice, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to the registration statement in the jurisdiction to which such Stop Order or suspension relates. The Company will use all reasonable efforts to prevent the issuance of any such Stop Order or the suspension of any such qualification and, if any such Stop Order is issued or any such qualification is suspended, to 33 obtain as soon as possible the withdrawal or revocation thereof, and will notify the Purchaser and his counsel at the earliest practicable date of the date on which the Purchaser may offer and sell Purchaser's Stock pursuant to the registration statement. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation under this Agreement to cause the registration of Purchaser's Stock and any filings with any state securities commission to be made or to become effective or to amend or supplement a registration statement shall be suspended in the event and during such period that there are pending negotiations relating to, or consummation of, a transaction or the occurrence of an event that would require additional disclosure of material information by the Company in such registration statement or such filing (such circumstances being hereinafter referred to as a "Suspension Event") that would make it impractical or inadvisable to cause such - ----------------- registration statement or such filings to be made or to become effective or to amend or supplement such registration statement, but such suspension shall continue only for so long as such event or its effect is continuing but in no event will that suspension exceed ninety (90) days. Immediately upon receipt by the Purchaser of notice of a Suspension Event, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to such registration statement, cease to deliver or use such registration statement and, if so requested by the Company, return to the Company, at its expense, all copies (other than permanent file copies) of such registration statement. 34 (c) In the event the Company shall determine that it is necessary to amend or supplement any registration statement relating to Purchaser's Stock, the Company will furnish copies of such proposed amendment or supplement to the Purchaser and his counsel and will not file or distribute such amendment or supplement without the prior consent of the Purchaser, which consent shall not be unreasonably withheld. 6.8. Indemnification. In the event any Purchaser's Stock is --------------- included in a registration statement under this Article VI: (a) To the full extent permitted by law, the Company will indemnify and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock as set forth in Section 9.3(d) hereof (each, a "Holder") from and against any ------ losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement --------- or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus, any final prospectus contained therein or any amendments or supplements thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company in connection with the registration of Purchaser's Stock under the Securities Act, the 35 Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable hereunder in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Purchaser; and provided, further, that -------- ------- the Company shall not be liable hereunder in any such case to the extent it is determined that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made: (A) in any such preliminary prospectus, if (I) it was the responsibility of such Holder to provide the person asserting such loss, claim, damage, liability or expense with a current copy of the prospectus and such Holder failed to deliver or cause to be delivered a current copy of the prospectus to such person after the Company had furnished such Holder with a sufficient number of copies of the same and (II) the current prospectus 36 corrected such untrue statement or omission; or (B) in such prospectus, if such untrue statement or omission is corrected in an amendment or supplement to such prospectus and the Holder thereafter fails to deliver the prospectus as so amended or supplemented prior to or concurrently with the sale of Purchaser's Stock to the person asserting such loss, claim, damage, liability or expense after the Company had furnished such Holder with a sufficient number copies of the same. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any such director, officer, employee, general or limited partner, member, agent, representative or controlling person and shall survive the transfer of such securities by such Holder. Each Holder shall furnish such information regarding itself or the claim in question as the Company may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (b) To the full extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, 37 damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon (i) any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration or (ii) an untrue statement or alleged untrue statement or omission or alleged omission made in the circumstances described in clauses (A) or (B) of Section 6.8(a); and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 6.8(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this Section 6.8(b) exceed - -------- the gross proceeds from the offering received by such Holder; and provided, -------- further, that the obligation to provide indemnification pursuant to this Section - ------- 6.8(b) shall be several, and not joint and several, among such indemnifying parties. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer, representative or controlling person and shall survive the transfer of such securities by 38 such prospective seller. (c) Promptly after receipt by an indemnified party under this Section 6.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel selected by the indemnifying party or parties. The failure to deliver written notice to the indemnifying party within a reasonable time after the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.8 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 6.8. The indemnified party shall have the right, but not the obligation, to participate in the defense of any action referred to above through counsel of its own choosing and shall have the right, but not the obligation, to assert any and all separate defenses, cross claims or counterclaims which it may have, and the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of such counsel has been specifically authorized in advance by the indemnifying party, (ii) there is a 39 conflict of interest that prevents counsel for the indemnifying party from adequately representing the interests of the indemnified party or there are defenses available to the indemnified party that are different from, or additional to, the defenses that are available to the indemnifying party, or (iii) the indemnifying party fails to assume the defense or does not reasonably contest such action in good faith, in which case, if the indemnified party notifies the indemnifying party that it elects to employ separate counsel, the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party and the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party; provided, however, that, the indemnifying party shall not, in connection with any proceeding or related proceedings, be liable for the reasonable fees and expenses of more than one separate firm (in addition to one firm acting as local counsel) for all indemnified parties. (d) Contribution. If for any reason (other than the reasons expressly ------------ specified in this Section 6.8) the foregoing indemnity and payment obligation is unavailable or is insufficient to hold harmless an indemnified party under paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any loss, claim, damage or liability (or actions or proceedings in respect thereof), including, without limitation, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding, in such proportion as is appropriate to reflect the relative fault of the indemnifying 40 party on the one hand and the indemnified party on the other. The relative fault shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been taken or made by, or relates to information supplied by, the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, or if the allocation provided in the second preceding sentence provides a lesser sum to the indemnified party than the amount hereinafter calculated, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative fault but also the relative benefits to the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties agree that it would not be just and equitable if contributions pursuant to this Section 6.8(d) were to be determined by pro rata allocation or by any other method of -------- allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 6.8(d). Notwithstanding anything in this Section 6.8(d) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 6.8(d) to contribute any amount in excess of the gross proceeds received by such indemnifying party from the sale of Purchaser's Stock in the offering to which the losses, claims, damages or liabilities of the 41 indemnified parties relate. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company and the Holders under this Section 6.8 shall survive the completion of any offering of Purchaser's Stock in a registration statement under this Article VI. (f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement (if any) entered into in connection with any underwritten public offering of the Purchaser's Stock are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall control. VII. INDEMNIFICATION 7.1. Indemnification by the Company. The Company shall indemnify ------------------------------ and hold the Purchaser harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by him based upon, resulting from or arising out of (i) any material breach of any representation, warranty, covenant or agreement of the Company contained in this Agreement or (ii) except as provided in Section 7.2, any claim brought, directly or indirectly, by a third party relating to the transactions contemplated by this Agreement. 7.2. Indemnification by the Purchaser. The Purchaser shall -------------------------------- indemnify and hold 42 the Company and each of its employees, directors, officers and agents harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by any of them resulting from or arising out of any material breach of any representation, warranty, covenant or agreement of the Purchaser contained in this Agreement. VIII. TERMINATION 8.1 Termination. (a) This Agreement may be terminated and the ----------- transactions contemplated herein may be abandoned at any time prior to the Closing: (i) by the Company or the Purchaser, if the Closing has not occurred by January 31, 1999; (ii) by mutual written consent of the Company and the Purchaser; (iii) by the Company, if there has been a material misrepresentation or breach of warranty on the part of the Purchaser in the representations and warranties contained herein or a material breach of covenants on the part of the Purchaser and the same has not been cured within 30 days after notice thereof; (iv) by the Purchaser, if there has been a material misrepresentation or breach of warranty on the part of the Company in the representations and warranties contained herein or a material breach of covenants on the part of the Company and the same has not been cured within 30 days after notice thereof; (v) by the Purchaser, if the terms of the Credit Facility Amendments are not 43 reasonably satisfactory to the Purchaser; or (vi) by either the Purchaser or the Company, if any Governmental Entity shall have issued a final order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable, provided that the party seeking to terminate shall have used its best efforts to appeal such order, decree, ruling or other action. (b) Notwithstanding anything herein to the contrary, the right to terminate this Agreement under this Section 8.1 shall not be available to any party to the extent the failure of such party to fulfill any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date (as a result, for example, of an action or failure to act causing a failure of a condition precedent). (c) A party terminating this Agreement pursuant to this Section 8.1 shall give written notice thereof the other party hereto, whereupon this Agreement shall terminate and be of no further force and effect, the transactions contemplated hereby shall be abandoned without further action by any party and there shall be no liability on the part of the Company or the Purchaser, except as provided in Section 9.7 hereof and except for any liability for any willful breach hereof; provided however that the provisions of Sections 7.1 and 7.2 shall survive any such termination. 44 IX. GENERAL PROVISIONS 9.1. Survival of Representations, Warranties and Agreements. ------------------------------------------------------ Notwithstanding any investigation conducted or notice or knowledge obtained by or on behalf of any party hereto, each representation and warranty in this Agreement and each agreement or covenant in this Agreement which does not by its own terms expire on or prior to the Closing shall survive the Closing without limitation as to time, except as specifically referred to herein. 9.2. Notices. Any notice, request, instruction or other document ------- to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (i) when received if given in person, or (ii) on the date of transmission if sent by nationally recognized overnight courier, certified or registered mail, return receipt requested or (iii) three days after being deposited in the U.S. mail, postage prepaid: (a) if to the Purchaser, addressed as follows: Donald E. Lepone c/o NutraMax Products, Inc. 51 Blackburn Drive Gloucester, Massachusetts 01930 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: William A. Groll, Esq. 45 (b) if to the Company, addressed as follows: NutraMax Products, Inc. 51 Blackburn Drive Gloucester, Massachusetts 01930 Attention: Robert F. Burns, Vice President and Chief Financial Officer with a copy to: Eugene M. Schloss, Jr., Esq. 1700 Cary Road Huntingdon Valley, Pennsylvania 19006-5002 and Goodwin, Procter & Hoar, LLP Exchange Place 53 State Street Boston, Massachusetts 02109 Attention: Joseph L. Johnson III, Esq. 46 or to such other individual or address as a party hereto my designate for itself by notice given as herein provided. 9.3. General. (a) This Agreement (including the documents and ------- instruments referred to or incorporated herein) constitutes the entire agreement, and supersedes all of the prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. (b) This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder other than as contemplated in Article VI, Article VII and Section 9.3(d) and shall not be assigned by any party by operation of law or otherwise. (c) This Agreement may be executed in two or more counterparts which 47 together shall constitute a single agreement. (d) This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs and permitted assigns. This Agreement is not assignable except by consent of each of the parties hereto or operation of law; provided that the heirs or legatees of the Purchaser shall succeed to the rights and obligations of the Purchaser contained in Article VI hereof. Any purported assignment of this Agreement in violation of this Section 9.3 shall be null and void. 9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ------------- OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (b) Each party agrees that any proceeding relating to this Agreement shall be brought in a state court of Delaware. Each party hereby consents to personal jurisdiction in any such action brought in any such Delaware court, consents to service of process by mail made upon such party and such party's agent and waives any objection to venue in any such Delaware court or to any claim that any such Delaware court is an inconvenient forum. 9.5. Severability of Provisions. If any provision or any portion of -------------------------- any provision of this Agreement or the circumstance, shall be held invalid or unenforceable, to the extent permitted by 48 law, the remaining portion of such provision and the remaining provisions of this Agreement, or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby. 9.6. Captions. All section titles or captions contained in this -------- Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement. All references herein to Sections shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. 9.7. Expenses. Except as otherwise expressly provided in this -------- Agreement, the Company shall pay the expenses incidental to the preparation of this Agreement, the carrying out of the provisions hereof and the consummation of the transactions contemplated hereby. 9.8. Equitable Relief. Each party acknowledges that, in the event of ---------------- any breach of this Agreement by a party, the other party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that such other party, in addition to any other remedy to which it may be entitled, shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to compel specific performance of this Agreement. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto. 9.9. Definitions. The following terms shall have the respective ----------- meanings specified in the indicated Sections of this Agreement: 49 Term Agreement Section - ---- ----------------- Agreement Recitals Authority 1.3(b) Board 1.3(d)(ii) Cape Ann Recitals Cape Ann Purchase Recitals Cape Ann Purchase Agreement Recitals Closing 1.3(a) Commission 2.6 Common Stock Recitals Company Recitals Credit Facilities 1.3(b) Credit Facility Amendments 1.3(b) Encumbrances 1.1 Exchange Act 2.4 Financial Statements 2.7(a) FNBB 1.3(b) Governmental Entity 1.3(b) Hart-Scott-Rodino Act 1.3(b) Holder 6.8(a) Korman Purchase Recitals Korman Purchase Agreement Recitals Legal Requirements 1.3(b) Lenders Recitals Loan Agreement 1.3(b) Material Adverse Effect 1.3(b) NASD 2.3(a) Offering 6.3(c) Other Holders 6.3(b) 50 Term Agreement Section - ---- ----------------- Person 4.1 Purchase Agreements Recitals Purchaser Recitals Purchaser's Stock 6.1 SEC Reports 2.6 Securities Act 3.5(a) Shares Recitals Stockholders Meeting 5.5(b) Stop Order 6.7(a) Subsidiary 2.1 Suspension Event 6.7(b) Violation 6.8(a) 51 IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered this Agreement as of the date first above written. NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns ------------------------------- Name: Robert F. Burns Title: Vice President, Chief Financial Officer and Treasurer /s/ Donald E. Lepone -------------------- Name: Donald E. Lepone 52 EX-10.(GG) 6 AMEND. #3 REVOLV. CREDIT & TERM LOAN AGREEMENT Exhibit 10(gg) G&S DRAFT 01/07/98 -------- NUTRAMAX PRODUCTS, INC. 9 Blackburn Drive Gloucester, MA 01930 Dated as of: January 20, 1998 BankBoston, N.A. Individually and as Agent 100 Federal Street Boston, Massachusetts 02110 Fleet National Bank One Federal Street Boston, MA 02109 National Bank of Canada One Federal Street, 27th Floor Boston, MA 02110 The Sumitomo Bank, Limited One Post Office Square Suite 3820 Boston, MA 02109 Senior Debt Portfolio c/o Eaton Vance Management 24 Federal Street Boston, MA 02110 Re: Third Amendment to Revolving Credit and Term Loan Agreement ----------------------------------------------------------- -1- Ladies and Gentlemen: We refer to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996, as amended by a First Amendment to Revolving Credit and Term Loan Agreement dated as of September 11, 1997, and by a Second Amendment to Revolving Credit and Term Loan Agreement dated as of November 26, 1997, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking institutions referred to therein as Banks (the "Banks") and The First National Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon the terms and subject to the conditions contained in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit for the account of, the Borrower. Terms used in this letter of agreement (the "Third Amendment") which are not defined herein, but which are defined in the Loan Agreement, shall have the same respective meanings herein as therein. We have requested and you have agreed to make certain modifications of the Loan Documents (collectively, the "Modifications"), and you have advised us that you are prepared and would be pleased to make the Modifications so requested by us on the condition that we join with you in this Third Amendment. Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Third Amendment, and fully intending to be legally bound by this Third Amendment, we hereby agree with you as follows: ARTICLE I --------- AMENDMENTS TO LOAN AGREEMENT ---------------------------- Effective as of September 28, 1997 (the "Third Amendment Date"), the Loan Agreement is amended in each of the following respects: (a) The terms "Loan Documents" and "Security Documents" shall, wherever used in any of the Loan Documents or Security Documents, be deemed to also mean and include this Third Amendment. (b) The term "Subordinated Debt Documents" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any required consents in form and substance reasonably satisfactory to the Banks and the Agent, between the Borrower and ING, as referenced in Article III(f)(ii) below. -2- (c) Section 6.3 of the Agreement is amended: (i) by deleting the reference contained therein to "$650,000"; and (ii) by inserting in place thereof the following: "$1,750,000." (d) Section 6.10 is amended by deleting the table set forth therein in its entirety and by inserting the following table in place thereof:
Maximum Fiscal Year Capital Expenditures ----------- -------------------- 1997 $4,300,000 1998 $8,000,000 1999 $7,000,000 2000, and each $6,750,000 fiscal year thereafter
ARTICLE II ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- The Borrower hereby represents, warrants and covenants to you as follows: (a) Representations in Loan Agreement. Each of the representations and --------------------------------- warranties made by the Borrower to you in the Loan Agreement was true, correct and -3- complete when made and is true, correct and complete in all material respects on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrower on the date hereof and in this Third Amendment. (b) No Defaults or Events of Default. No Default or Event of Default -------------------------------- exists on the date of this Third Amendment (after giving effect to all of the arrangements and transactions contemplated by this Third Amendment). (c) Binding Effect of Documents. This Third Amendment has been duly --------------------------- executed and delivered to you by the Borrower and the Subsidiaries (as the case may be) and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrower and the Subsidiaries (as the case may be) contained herein constitute legal, valid and binding obligations of the Borrower and the Subsidiaries (as the case may be) enforceable against them in accordance with their terms. ARTICLE III ----------- PROVISIONS OF GENERAL APPLICATION --------------------------------- (a) No Other Changes. Except to the extent specifically amended and ---------------- supplemented hereby, all of the terms, conditions and the provisions of the Loan Agreement, the Notes and each of the other Loan Documents shall remain unmodified, and the Loan Agreement, the Notes and each of the other Loan Documents, as amended and supplemented by this Third Amendment, are confirmed as being in full force and effect. (b) Governing Law. This Third Amendment is intended to take effect as a ------------- sealed instrument and shall be deemed to be a contract under the laws of The Commonwealth of Massachusetts. This Third Amendment and the rights and obligations of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. (c) Binding Effect; Assignment. This Third Amendment shall be binding -------------------------- upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. (d) Counterparts. This Third Amendment may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this Third Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. -4- (e) Conflict with Loan Agreement. If any of the terms of this Third ---------------------------- Amendment shall conflict in any respect with any of the terms of the Loan Agreement or any other Loan Document, the terms of this Third Amendment shall be controlling. (f) Conditions Precedent. This Third Amendment shall become and be -------------------- effective as of the Third Amendment Date, but only if: (i) the form of acceptance at the end of this Third Amendment shall be signed by the Borrower, each Subsidiary, the Agent and the Banks; and (ii) the Banks and the Agent shall have received satisfactory evidence that Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any and all required consents to the Modifications and has entered into modifications to the Subordinated Debt Documents in form and substance satisfactory to the Banks and the Agent in connection therewith (it being understood and agreed by the Borrower that its failure to enter into with ING, on or before February 12, 1998, such modifications to the Subordinated Debt Documents in form and substance satisfactory to the Banks and the Agent shall constitute an Event of Default under (and as defined in) the Loan Agreement). -5- If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Third Amendment and return such counterpart to the undersigned, whereupon this Third Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, The Borrower: ------------- NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns -------------------------- Title: Vice President (remainder of page intentionally left blank) The foregoing Third Amendment is hereby accepted by the undersigned effective as of September 28, 1997. The Agent: - --------- BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually and as Agent By: /s/ Timothy G. Clifford ----------------------------- Title: Director FLEET NATIONAL BANK By: /s/ Ann M. Meade ----------------------------- Title: Vice President -6- NATIONAL BANK OF CANADA By: /s/ Edward T. Paslawski --------------------------------- Title: Vice President By: /s/ Leonard J. Pellecchia --------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ Daniel G. Eastman ---------------------------------- Title: Vice President & Manager By: /s/ Alfred DeGemmis ---------------------------------- Title: Vice President -7- SENIOR DEBT PORTFOLIO By: Boston Management and Research, as investment advisor By: /s/ Scott H. Page ---------------------------- Title: Vice President -8- CONSENT OF GUARANTORS --------------------- Each of the undersigned has guaranteed the Obligations under (and as defined in) the Agreement by executing separate Guaranties, each dated as of December 30, 1996 (or, in the case of the last three signatories listed below, as of September 11, 1997). By executing this letter, each of the Subsidiaries hereby absolutely and unconditionally reaffirms the Guaranty to which it is a party, and acknowledges and agrees to the terms and conditions of this letter agreement and the Loan Agreement and the other Loan Documents as amended hereby (including, without limitation, the making of the representations and warranties and the performance of the covenants applicable to it herein or therein). NUTRAMAX HOLDINGS, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President NUTRAMAX HOLDINGS II, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President OPTOPICS LABORATORIES, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FAIRTON REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -9- ORAL CARE, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FLORENCE REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President POWERS PHARMACEUTICAL CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President CERTIFIED CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ADHESIVE COATINGS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ELMWOOD PARK REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -10- FIRST AID PRODUCTS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -11- EX-10.(HH) 7 AMEND. #4 TO REVOLVING CREDIT & TERM LOAN AGRMT. Exhibit 10(hh) NUTRAMAX PRODUCTS, INC. 9 Blackburn Drive Gloucester, MA 01930 Dated as of: March 31, 1998 BankBoston, N.A. Individually and as Agent 100 Federal Street Boston, Massachusetts 02110 Fleet National Bank One Federal Street Boston, MA 02109 National Bank of Canada One Federal Street, 27th Floor Boston, MA 02110 The Sumitomo Bank, Limited 450 Lexington Avenue, Suite 1700 New York, NY 10017 Senior Debt Portfolio c/o Eaton Vance Management 24 Federal Street Boston, MA 02110 Re: Fourth Amendment to Revolving Credit and Term Loan Agreement ------------------------------------------------------------ Ladies and Gentlemen: We refer to the Revolving Credit and Term Loan Agreement dated as of -1- December 30, 1996, as amended by a First Amendment to Revolving Credit and Term Loan Agreement dated as of September 11, 1997, by a Second Amendment to Revolving Credit and Term Loan Agreement dated as of November 26, 1997, and by a Third Amendment to Revolving Credit and Term Loan Agreement dated as of January 20, 1998, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking institutions referred to therein as Banks (the "Banks") and The First National Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon the terms and subject to the conditions contained in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit for the account of, the Borrower. Terms used in this letter of agreement (the "Fourth Amendment") which are not defined herein, but which are defined in the Loan Agreement, shall have the same respective meanings herein as therein. We have requested and you have agreed to make certain modifications of the Loan Documents (collectively, the "Modifications"), and you have advised us that you are prepared and would be pleased to make the Modifications so requested by us on the condition that we join with you in this Fourth Amendment. Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Fourth Amendment, and fully intending to be legally bound by this Fourth Amendment, we hereby agree with you as follows: ARTICLE I --------- AMENDMENTS TO LOAN AGREEMENT ---------------------------- Effective as of March 31, 1998 (the "Fourth Amendment Date"), the Loan Agreement is amended in each of the following respects: (a) The terms "Loan Documents" and "Security Documents" shall, wherever used in any of the Loan Documents or Security Documents, be deemed to also mean and include this Fourth Amendment. (b) The term "Subordinated Debt Documents" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any required consents in form and substance reasonably satisfactory to the Banks and the Agent, between the Borrower and ING, as referenced in Article III(g)(iii) below. (c) The last line of Section 2.13(f)(iii) of the Loan Agreement is amended to read in its entirety as follows: -2- "statements required to be delivered pursuant to Section 5.1(a), provided -------- that for the fiscal year ending September 30, 1997, there shall only be due and payable 75% of the Excess Cash Flow of the Borrower for the immediately preceding three fiscal quarters (the "Stub Period"), and provided, further, -------- ------- that of the $930,750 of Excess Cash Flow owing for the Stub Period, (x) $100,000 thereof shall be deferred and become due on June 30, 1998, (y) $100,000 thereof shall be deferred and become due on October 5, 1998, and (z) the remaining balance thereof shall be deferred and become due 10 days after the date on which the financial statements are required to be delivered pursuant to Section 5.1(a) for the fiscal year ending September 30, 1998, it being understood and agreed, however, that the foregoing deferrals shall not in any way limit the Borrower's obligations to make Mandatory Prepayments under clause (ii) above. (d) Section 6.6 of the Loan Agreement is amended: (i) by deleting the reference to "4.25 to 1" specified opposite the test for the fiscal quarter ending March 31, 1998 (but not the fiscal quarter ending June 30, 1998), and (ii) by inserting in place thereof the following: "4.50 to 1." (e) Section 6.9 of the Loan Agreement is amended: (i) by deleting the reference to "2.75 to 1" specified opposite the test for the fiscal quarters ending March 31, 1998 and June 30, 1998 (but not the fiscal quarter ending December 31, 1997), and (ii) by inserting in place thereof the following: "2.50 to 1." ARTICLE II ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- The Borrower hereby represents, warrants and covenants to you as follows: (a) Representations in Loan Agreement. Each of the representations and --------------------------------- warranties made by the Borrower to you in the Loan Agreement was true, correct and complete when made and is true, correct and complete in all material respects on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrower on the date hereof and in this Fourth Amendment. -3- (b) No Defaults or Events of Default. No Default or Event of Default -------------------------------- exists on the date of this Fourth Amendment (after giving effect to all of the arrangements and transactions contemplated by this Fourth Amendment). (c) Binding Effect of Documents. This Fourth Amendment has been duly --------------------------- executed and delivered to you by the Borrower and the Subsidiaries (as the case may be) and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrower and the Subsidiaries (as the case may be) contained herein constitute legal, valid and binding obligations of the Borrower and the Subsidiaries (as the case may be) enforceable against them in accordance with their terms. ARTICLE III ----------- PROVISIONS OF GENERAL APPLICATION --------------------------------- (a) Waiver. The Borrower has informed the Banks and the Agent that it has ------ failed to comply with the provisions of Sections 2.13(f) and 6.6 of the Loan Agreement for the fiscal year ending September 30, 1997 and the fiscal quarter ending December 31, 1997, respectively, which such failure constitutes Events of Default thereunder. The Borrower has requested that the Banks waive such Events of Default, and by their countersignatures below, the Banks hereby waive such Events of Default under Sections 2.13(f) and 6.6 of the Loan Agreement insofar as (and only to the extent that) such Events of Default relate to the fiscal year ending September 30, 1997 and the fiscal quarter ending December 31, 1997, respectively. This waiver is a one-time waiver only, and does not constitute a waiver of (i) any other Default or Event of Default under the Loan Agreement, whether existing prior to, on or arising after December 31, 1997, including without limitation, any breach arising after such date of the same type or nature or (ii) any of the Banks' or Agent's rights or remedies with respect to any such other or subsequent Defaults or Events of Default. (b) No Other Changes. Except to the extent specifically amended and ---------------- supplemented hereby, all of the terms, conditions and the provisions of the Loan Agreement, the Notes and each of the other Loan Documents shall remain unmodified, and the Loan Agreement, the Notes and each of the other Loan Documents, as amended and supplemented by this Fourth Amendment, are confirmed as being in full force and effect. (c) Governing Law. This Fourth Amendment is intended to take effect as a ------------- sealed instrument and shall be deemed to be a contract under the laws of The Commonwealth of Massachusetts. This Fourth Amendment and the rights and obligations of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. -4- (d) Binding Effect; Assignment. This Fourth Amendment shall be binding -------------------------- upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. (e) Counterparts. This Fourth Amendment may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this Fourth Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. (f) Conflict with Loan Agreement. If any of the terms of this Fourth ---------------------------- Amendment shall conflict in any respect with any of the terms of the Loan Agreement or any other Loan Document, the terms of this Fourth Amendment shall be controlling. -5- (g) Conditions Precedent. This Fourth Amendment shall become and be -------------------- effective as of the Fourth Amendment Date, but only if: (i) the form of acceptance at the end of this Fourth Amendment shall be signed by the Borrower, each Subsidiary, the Agent and the Banks; (ii) the Agent shall have received, for the ratable benefit of those Banks who are signatories to this Fourth Amendment, an amendment fee from the Borrower in the amount of $90,000 (which represents approximately 10 basis points of the current Total Commitment); and (iii) the Banks and the Agent shall have received satisfactory evidence that Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any and all required consents to the Modifications and has entered into modifications to the Subordinated Debt Documents in form and substance satisfactory to the Banks and the Agent in connection therewith (including, without limitation, modifications to certain of the financial covenants contained therein so as to make them less restrictive than those which are contained in the Loan Agreement). If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Fourth Amendment and return such counterpart to the undersigned, whereupon this Fourth Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, The Borrower: ------------- NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns ------------------------------- Title: Vice President (remainder of page intentionally left blank) The foregoing Fourth Amendment is hereby accepted by the undersigned effective as of March 31, 1998. The Agent: - --------- BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually and as Agent By: /s/ Timothy G. Clifford --------------------------------- Title: Vice President FLEET NATIONAL BANK By: /s/ Ann M. Meade --------------------------------- Title: Vice President NATIONAL BANK OF CANADA By: /s/ Edward T. Paslawski --------------------------------- Title: Vice President By: /s/ Leonard J. Pellecchia --------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ Brian M. Smith --------------------------------- Title: Senior Vice President By: /s/ Jeffrey Frost --------------------------------- Title: Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research, as investment advisor By: /s/ Scott H. Page ---------------------------- Title: Vice President -8- CONSENT OF GUARANTORS --------------------- Each of the undersigned has guaranteed the Obligations under (and as defined in) the Agreement by executing separate Guaranties, each dated as of December 30, 1996 (or, in the case of the last three signatories listed below, as of September 11, 1997). By executing this letter, each of the Subsidiaries hereby absolutely and unconditionally reaffirms the Guaranty to which it is a party, and acknowledges and agrees to the terms and conditions of this letter agreement and the Loan Agreement and the other Loan Documents as amended hereby (including, without limitation, the making of the representations and warranties and the performance of the covenants applicable to it herein or therein). NUTRAMAX HOLDINGS, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President NUTRAMAX HOLDINGS II, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President OPTOPICS LABORATORIES, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FAIRTON REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ORAL CARE, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FLORENCE REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President POWERS PHARMACEUTICAL CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President CERTIFIED CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ADHESIVE COATINGS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ELMWOOD PARK REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FIRST AID PRODUCTS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President EX-10.(II) 8 AMEND. #5 TO REVOLVING CREDIT & TERM LOAN AGRMT. Exhibit 10(ii) NUTRAMAX PRODUCTS, INC. 9 Blackburn Drive Gloucester, MA 01930 Dated as of: May 7, 1998 BankBoston, N.A. Individually and as Agent 100 Federal Street Boston, Massachusetts 02110 Fleet National Bank One Federal Street Boston, MA 02109 National Bank of Canada One Federal Street, 27th Floor Boston, MA 02110 The Sumitomo Bank, Limited 450 Lexington Avenue, Suite 1700 New York, NY 10017 Senior Debt Portfolio c/o Eaton Vance Management 24 Federal Street Boston, MA 02110 Re: Fifth Amendment to Revolving Credit and Term Loan Agreement ----------------------------------------------------------- Ladies and Gentlemen: We refer to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996, as amended by a First Amendment to Revolving Credit and Term Loan Agreement dated as of September 11, 1997, by a Second Amendment to Revolving Credit and Term Loan Agreement dated as of November 26, 1997, by a Third Amendment to Revolving Credit and Term Loan Agreement dated as of January 20, 1997 -1- (and effective as of September 28, 1997), and by a Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of March 31, 1998, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking institutions referred to therein as Banks (the "Banks") and The First National Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon the terms and subject to the conditions contained in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit for the account of, the Borrower. Terms used in this letter of agreement (the "Fifth Amendment") which are not defined herein, but which are defined in the Loan Agreement, shall have the same respective meanings herein as therein. We have requested and you have agreed to make certain modifications of the Loan Documents (collectively, the "Modifications"), and you have advised us that you are prepared and would be pleased to make the Modifications so requested by us on the condition that we join with you in this Fifth Amendment. Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Fifth Amendment, and fully intending to be legally bound by this Fifth Amendment, we hereby agree with you as follows: ARTICLE I --------- AMENDMENTS TO LOAN AGREEMENT ---------------------------- Effective as of May 7, 1998 (the "Fifth Amendment Date"), the Loan Agreement is amended in each of the following respects: (a) The terms "Loan Documents" and "Security Documents" shall, wherever used in any of the Loan Documents or Security Documents, be deemed to also mean and include this Fifth Amendment. (b) The term "Subordinated Debt Documents" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any required consents in form and substance reasonably satisfactory to the Banks and the Agent, between the Borrower and ING, as referenced in Article III(f)(ii) below. (c) The term "Obligations" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any and all Overadvances. -2- (d) Section 2 of the Agreement is amended by inserting at the end thereof the following a new Section 2.20: "2.20 Notwithstanding the provisions of Sections 2.1(a), at the Borrower's request, the Banks will make Revolving Loans to the Borrower at a time when the debit balance in the Loan Account in respect of Revolving Loans and Letters of Credit exceeds the Borrowing Base or which cause the debit balance in the Loan Account in respect of Revolving Loans and Letters of Credit to exceed the Borrowing Base (any such Loan or Loans being herein referred to individually as an "Overadvance" and collectively as "Overadvances"), provided that: (i)_the aggregate amount of the Overadvances at any one time outstanding shall not exceed $2,000,000; (ii)_in no event shall the debit balance in the Loan Account in respect of Revolving Loans and Letters of Credit at any one time outstanding exceed the Revolving Credit Commitments of all of the Banks; and (iii)_no Default or Event of Default shall exist hereunder at the time any Overadvance is requested or outstanding. Failure of the Borrower to maintain any of the foregoing conditions (other than the condition under clause (iii) that no Default shall exist) shall constitute an immediate Event of Default hereunder, and shall be deemed to be a failure to perform an Obligation hereunder. The Agent shall enter such Overadvances, along with all interest, expenses and charges relating thereto, as debits in the Loan Account. Notwithstanding anything contained in this Section_2 or otherwise, unless sooner demanded as a result of the failure to meet any of the conditions set forth in clauses_(i) through (iii) above, the Borrower shall pay all outstanding Overadvances on or before August_31, 1998 (the "Overadvance Termination Date"). Prior to the occurrence of an Event of Default, outstanding Overadvances bearing interest with reference to the Base Rate shall bear interest at the rate per annum equal to (i)_one percent (1%) plus (ii) the rate then applicable to Base Rate Loans (e.g., the Base Rate plus the Applicable Base Rate Margin then in effect), and outstanding Overadvances bearing interest with reference to the Eurodollar Rate shall bear interest at the rate per annum equal to (i)_one percent (1%) plus (ii)_ the rate then applicable to Eurodollar Loans (e.g., the Adjusted Eurodollar Rate plus the Applicable Eurodollar Margin). After the occurrence of any Default or Event of Default, outstanding Overadvances shall bear interest at the default rate otherwise applicable to the Loans pursuant to Section 2.15(a) plus one percent (1%)." -3- (e) Notwithstanding the provisions of Section 5.1(c) of the Loan Agreement, it is agreed that during the period commencing on the Fifth Amendment Date and ending on the Overadvance Termination Date, a Borrowing Base Report shall be delivered to the Agent on the 15th and last day of each fiscal month during such period, setting forth the Borrowing Base as of each such date. (f) Section 5.5 of the Loan Agreement is amended by inserting the following new sentence at the end thereof: "Without limitation of the foregoing, it is agreed that the Borrower shall meet with the Agent on at least a monthly basis, upon the Agent's request, to discuss the financial condition of the Borrower and such other matters as the Agent may deem pertinent." ARTICLE II ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- The Borrower hereby represents, warrants and covenants to you as follows: (a) Representations in Loan Agreement. Each of the representations and --------------------------------- warranties made by the Borrower to you in the Loan Agreement was true, correct and complete when made and is true, correct and complete in all material respects on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrower on the date hereof and in this Fifth Amendment. (b) No Defaults or Events of Default. No Default or Event of Default -------------------------------- exists on the date of this Fourth Amendment (after giving effect to all of the arrangements and transactions contemplated by this Fifth Amendment). (c) Binding Effect of Documents. This Fifth Amendment has been duly --------------------------- executed and delivered to you by the Borrower and the Subsidiaries (as the case may be) and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrower and the Subsidiaries (as the case may be) contained herein constitute legal, valid and binding obligations of the Borrower and the Subsidiaries (as the case may be) enforceable against them in accordance with their terms. -4- ARTICLE III ----------- PROVISIONS OF GENERAL APPLICATION --------------------------------- (a) No Other Changes. Except to the extent specifically amended and ---------------- supplemented hereby, all of the terms, conditions and the provisions of the Loan Agreement, the Notes and each of the other Loan Documents shall remain unmodified, and the Loan Agreement, the Notes and each of the other Loan Documents, as amended and supplemented by this Fifth Amendment, are confirmed as being in full force and effect. (b) Governing Law. This Fifth Amendment is intended to take effect as a ------------- sealed instrument and shall be deemed to be a contract under the laws of The Commonwealth of Massachusetts. This Fifth Amendment and the rights and obligations of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. (c) Binding Effect; Assignment. This Fifth Amendment shall be binding -------------------------- upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. (d) Counterparts. This Fifth Amendment may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this Fifth Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. (e) Conflict with Loan Agreement. If any of the terms of this Fifth ---------------------------- Amendment shall conflict in any respect with any of the terms of the Loan Agreement or any other Loan Document, the terms of this Fifth Amendment shall be controlling. (f) Conditions Precedent. This Fifth Amendment shall become and be -------------------- effective as of the Fifth Amendment Date, but only if: (i) the form of acceptance at the end of this Fifth Amendment shall be signed by the Borrower, each Subsidiary, the Agent and the Majority Banks; and (ii) the Banks and the Agent shall have received satisfactory evidence that Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any and all required consents to the Modifications and, to the extent necessary, has entered into modifications to the Subordinated Debt -5- Documents in form and substance satisfactory to the Banks and the Agent in connection therewith. If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Fifth Amendment and return such counterpart to the undersigned, whereupon this Fifth Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, The Borrower: ------------- NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns --------------------------- Title: Vice President (reminder of page intentionally left blank) -6- The foregoing Fifth Amendment is hereby accepted by the undersigned effective as of May __, 1998. The Agent: - --------- BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually and as Agent By: /s/ Timothy G. Clifford --------------------------------- Title: Director FLEET NATIONAL BANK By: /s/ Ann M. Meade --------------------------------- Title: Vice President NATIONAL BANK OF CANADA By: /s/ Edward T. Paslawski --------------------------------- Title: Vice President By: /s/ Leonard J. Pellecchia --------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ Jeffrey Frost --------------------------------- Title: Vice President By: /s/ Brian M. Smith --------------------------------- Title: Senior Vice President -7- SENIOR DEBT PORTFOLIO By: Boston Management and Research, as investment advisor By: /s/ Scott H. Page ---------------------------- Title: Vice President -8- CONSENT OF GUARANTORS --------------------- Each of the undersigned has guaranteed the Obligations under (and as defined in) the Agreement by executing separate Guaranties, each dated as of December 30, 1996 (or, in the case of the last three signatories listed below, as of September 11, 1997). By executing this letter, each of the Subsidiaries hereby absolutely and unconditionally reaffirms the Guaranty to which it is a party, and acknowledges and agrees to the terms and conditions of this letter agreement and the Loan Agreement and the other Loan Documents as amended hereby (including, without limitation, the making of the representations and warranties and the performance of the covenants applicable to it herein or therein). NUTRAMAX HOLDINGS, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President NUTRAMAX HOLDINGS II, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President OPTOPICS LABORATORIES, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FAIRTON REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ORAL CARE, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -9- FLORENCE REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President POWERS PHARMACEUTICAL CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President CERTIFIED CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ADHESIVE COATINGS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ELMWOOD PARK REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -10- FIRST AID PRODUCTS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -11- EX-10.(MM) 9 AMEND. #2 REVOLVING CREDIT & TERM LOAN AGRMT. Exhibit 10(mm) NUTRAMAX PRODUCTS, INC. 9 Blackburn Drive Gloucester, MA 01930 Dated as of: November 26, 1997 BankBoston, N.A. Individually and as Agent 100 Federal Street Boston, Massachusetts 02110 Fleet National Bank One Federal Street Boston, MA 02109 National Bank of Canada One Federal Street, 27th Floor Boston, MA 02110 The Sumitomo Bank, Limited One Post Office Square Suite 3820 Boston, MA 02109 Senior Debt Portfolio c/o Eaton Vance Management 24 Federal Street Boston, MA 02110 Re: Second Amendment to Revolving Credit and Term Loan Agreement ------------------------------------------------------------ Ladies and Gentlemen: We refer to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996, as amended by a First Amendment to Revolving Credit and Term Loan Agreement dated as of September 11, 1997, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking institutions referred to therein as Banks (the "Banks") and The First National Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon the terms and subject to the conditions contained in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit for the account of, the Borrower. Terms used in this letter of agreement (the "Second Amendment") which are not defined herein, but which are defined in the Loan Agreement, shall have the same respective meanings herein as therein. We have requested and you have agreed to make certain modifications and waivers of the Loan Documents (collectively, the "Modifications"), and you have advised us that you are prepared and would be pleased to make the Modifications so requested by us on the condition that we join with you in this Second Amendment. Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Second Amendment, and fully intending to be legally bound by this Second Amendment, we hereby agree with you as follows: ARTICLE I --------- AMENDMENTS TO LOAN AGREEMENT ---------------------------- Effective as of September 26, 1997 (the "Second Amendment Date"), the Loan Agreement is amended in each of the following respects: (a) The terms "Loan Documents" and "Security Documents" shall, wherever used in any of the Loan Documents or Security Documents, be deemed to also mean and include this Second Amendment. (b) The term "Chilmark Documents" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include the documents, in form and substance reasonably satisfactory to the Banks and the Agent, entered into between the Borrower and Cape Ann Investors, L.L.C. in connection with the Repurchase Transaction (as defined in Article II below). (c) The term "Subordinated Debt Documents" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any required consents in form and substance reasonably satisfactory to the Banks and the Agent, between the Borrower and ING, as referenced in Section IV(f)(iv)(d) below. (d) Section 1.1, containing various definitions, is amended in each of the following respects: (i) the definition of "Base Net Worth" is amended to read in its entirety as follows: Base Net Worth. An amount equal to $7,500,000, increasing to $23,000,000 -------------- effective as of September 27, 1997. (ii) the definition of "EBITDA" is amended by adding at the end thereof the following: For purposes of calculating EBITDA for the Acquiring Subsidiaries (Adhesive Coatings, Inc. and First Aid Products, Inc.) with respect to the 1996-97 and 1997-98 fiscal years, EBITDA shall be calculated as follows: Fiscal year ending $6,837,000 September 30, 1997 First Quarter ending Actual EBITDA results for the December 31, 1997 first quarter plus $5,127,750 ($6,837,000 x 0.75) Second Quarter ending Actual EBITDA results for the March 31, 1998 first two quarters plus $3,418,500 ($6,837,000 x 0.50) Second Quarter ending Actual EBITDA results for the June 30, 1998 first three quarters plus $1,709,250 ($6,837,000 x 0.25) Fourth Quarter ending Actual EBITDA results for the previous September 30, 1998 four quarters (iii) the definition of "Term Loan A" is amended to read in its entirety as follows: Term Loan A. The term loan in the principal amount of up to $30,000,000 ----------- (as reduced from $32,000,000) made or to be made to the Borrower between the Closing Date and the Stock Purchase LC Expiry Date by the Banks having a Term Loan A Commitment pursuant to this Agreement (including Section 2.1(b) hereof), and subject to the limitations contained herein. (iv) the definition of "Total Commitment" is amended to read in its entirety as follows: Total Commitment. As of any date, the sum of the then-current Commitments ---------------- of the Banks, provided that the Total Commitment shall not at any time -------- exceed $89,222,693. (v) the following new definition is added to Section 1.1: Second Amendment. The Second Amendment to Revolving Credit and Term Loan ---------------- Agreement dated as of September 26, 1997, among the Borrower, the Banks and the Agent. (c) Section 2.13(b) is amended to read in its entirety as follows: (e) The entire principal of the Term Notes A shall be payable by the Borrower to the Banks in 20 consecutive quarter-annual installments of principal. Such quarter-annual installments of principal shall be payable on the installment payment dates, and shall be in the amounts, set forth below: Installment Aggregate Amount Payment Date of Payment - -------------- ---------------- 12/31/97 $ 725,000 03/31/98 $ 725,000 06/30/98 $ 725,000 09/30/98 $ 725,000 12/31/98 $1,475,000 03/31/99 $1,475,000 06/30/99 $1,475,000 09/30/99 $1,475,000 12/31/99 $1,787,500 03/31/00 $1,787,500 06/30/00 $1,787,500 09/30/00 $1,787,500 12/31/00 $1,975,000 03/31/01 $1,975,000 06/30/01 $1,975,000 09/30/01 $1,975,000 12/31/01 $2,037,500 03/31/02 $2,037,500 06/31/02 $2,037,500 09/30/02 $ 37,500 Notwithstanding the foregoing, the last 4_quarter-annual installments set forth in the table above shall be reduced in the inverse order of maturity by the difference between (i)_$30,000,000 and (ii)_the aggregate amount borrowed under Term Loan_A as of the Stock Purchase LC Expiry Date. All of the indebtedness evidenced by each Term Note_A shall, if not sooner paid, be in any event absolutely and unconditionally due and payable in full by the Borrower to the Banks on the Term Loan_A Maturity Date. (f) Section 5.1(b) is amended to read in its entirety as follows: (b)(1) as soon as available, but in any event within 45 days after the end of each fiscal quarter of the Borrower and its Subsidiaries, a Consolidated balance sheet as of the end of, and a related Consolidated statement of income, changes in stockholders' equity and cash flow for, the portion of the fiscal year then ended and for the fiscal quarter then ended, prepared in accordance with GAAP and certified by the chief financial officer of the Borrower, but subject, however, to normal, recurring year-end adjustments that shall not in the aggregate be material in amount; (b)(2) as soon as available, but in any event within 30 days after the end of each calendar month of the Borrower and its Subsidiaries (commencing with the month ending October 31, 1997), a Consolidated balance sheet as of the end of, and a related Consolidated statement of income, changes in stockholders' equity and cash flow for, the portion of the fiscal year then ended and for the calendar month then ended, prepared in accordance with GAAP and certified by the chief financial officer of the Borrower, but subject, however, to normal, recurring year-end adjustments that shall not in the aggregate be material in amount; (g) Section 5.7 is amended to read in its entirety as follows: 5.7. Minimum Net Worth. The Borrower shall maintain a minimum ----------------- Consolidated Net Worth at least equal to Base Net Worth plus, on a ---- cumulative basis, 75% of the positive Consolidated net income of the Borrower and its Subsidiaries earned in each of its fiscal quarters. Any quarterly or annual losses incurred by the Borrower or any Subsidiary shall not reduce the amount of Consolidated Net Worth required to be maintained from time to time pursuant to this Section 5.7. (h) Section 6.6 is amended to read in its entirety as follows: 6.6. Funded Debt Ratio. The Borrower shall not at any time permit the ----------------- Funded Debt Ratio of the Borrower and its Subsidiaries as at the last day of any fiscal quarter in any fiscal period identified below to be greater than the ratio specified below opposite such fiscal period: Maximum ------- Period Ratio - ------ ----- For any fiscal quarter ending on or after March 31, 4.25 to 1 1997 through June 30, 1997 For any fiscal quarter ending on or after September 30, 4.50 to 1 1997 through December 31, 1997 For any fiscal quarter ending on or after March 31, 1998 4.25 to 1 through June 30, 1998 For the fiscal quarter ending on September 30, 1998 3.75 to 1 For any fiscal quarter ending on or after December 31, 3.25 to 1 1998 through March 31, 1999 For the fiscal quarter ending on June 30, 1999 3.00 to 1 For the fiscal quarter ending on September 30, 1999 2.50 to 1 For any fiscal quarter ending on or after December 31, 2.00 to 1 1999 (i) Section 6.8 is amended to read in its entirety as follows: 6.8. Cash Flow Ratio. The Borrower shall not permit the Cash Flow --------------- Ratio of the Borrower and its Subsidiaries for any fiscal period identified below to be less than the ratio specified below opposite such fiscal period: Period Minimum Ratio ------ ------------- For the fiscal quarter ending March 31, 1997 1.05 to 1 For the two consecutive fiscal quarters ending June 1.10 to 1 30, 1997 For the three consecutive fiscal quarters ending 1.20 to 1 September 30, 1997 For any four consecutive fiscal quarters ending on or 1.20 to 1 after December 31, 1997 through September 30, 1999 (determined at the end of each fiscal quarter for the four quarters then ending) For any four consecutive fiscal quarters ending on or 1.30 to 1 after December 31, 1999 (determined at the end of each fiscal quarter for the four quarters then ending) (j) Section 6.9 is amended to read in its entirety as follows: 6.9. Minimum Interest Coverage. The Borrower shall not permit the ------------------------- Interest Coverage Ratio of the Borrower and its Subsidiaries for any fiscal period identified below to be less than the ratio specified below opposite such period: Period Minimum Ratio ------- ------------- For the fiscal quarter ending March 31, 1997 2.50 to 1 For the two consecutive fiscal quarters ending June 2.50 to 1 30, 1997 For the three consecutive fiscal quarters ending 2.75 to 1 September 30, 1997 For any four consecutive fiscal quarters ending on or 2.75 to 1 after December 31, 1997 through June 30, 1998 (determined at the end of each fiscal quarter for the four quarters then ending) For the four consecutive fiscal quarters ending on 3.00 to 1 September 30, 1998 (determined at the end of such fiscal quarter for the four quarters then ending) For the four consecutive fiscal quarters ending on 3.25 to 1 December 31, 1998 (determined at the end of such fiscal quarter for the four quarters then ending) For any four consecutive fiscal quarters ending on or 3.50 to 1 after March 31, 1999 through June 30, 1999 (determined at the end of each fiscal quarter for the four quarters then ending) For any four consecutive fiscal quarters ending on or 4.00 to 1 after September 30, 1999 (determined at the end of each fiscal quarter for the four quarters then ending) (k) Section 6.10 is amended by deleting the table set forth therein in its entirety and by inserting the following table in place thereof: Maximum Fiscal Year Capital Expenditures ----------- -------------------- 1997 $4,000,000 1998 $8,000,000 1999 $7,000,000 2000, and each fiscal year thereafter $6,750,000 (l) The portion of Schedule 1 to the Loan Agreement setting forth the Commitment and Commitment Percentages of the Banks with respect to Term Loan A is amended as set forth in Annex 1 attached hereto. ------- ARTICLE II ---------- WAIVER ------ At the Borrower's request, the Banks hereby waive Section 5.10 (Use of Proceeds), Section 6.11 (Restricted Payments), and Section 6.17 (No Amendments to Certain Documents) of the Loan Agreement to the extent necessary for the Borrower to proceed with the following transaction (the "Repurchase Transaction"): Cape Ann Investors, L.L.C. ("Chilmark"), Donald E. Lepone, Bernard J. Korman and Donald M. Gleklen will finance the Borrower's repurchase of a designated number of shares (not to exceed 400,000) of the Borrower's outstanding common stock (the "Designated Number of Shares"), in return for the receipt of the Borrower's warrants. Such repurchase will be conducted via a modified Dutch auction tender offer (the "Offer"), pursuant to which the Borrower will offer to repurchase the Designated Number of Shares at a price between a stated range (the "Range"). Those stockholders who desire to tender their shares in connection with the Offer will select a price within the Range at which they are willing to tender their shares. Upon expiration of the Offer, the Borrower will select a per share purchase price (the "Purchase Price") which will enable it to acquire the Designated Number of Shares. Subject to proration of shares accepted for tender in the event the number of shares tendered at or below the Purchase Price exceeds the Designated Number of Shares, the Borrower will pay the Purchase Price for all shares tendered at or below the Purchase Price. The Banks hereby waive the provisions of Sections 2.13(f), 5.10, 6.11, 6.14 and 6.17 of the Loan Agreement for the limited purpose of allowing the Borrower to consummate the Repurchase Transaction upon the terms and conditions described above, it being expressly agreed that no other waiver, modification or consent is hereby granted. ARTICLE III ----------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- The Borrower hereby represents, warrants and covenants to you as follows: (a) Representations in Loan Agreement. Each of the representations and --------------------------------- warranties made by the Borrower to you in the Loan Agreement was true, correct and complete when made and is true, correct and complete in all material respects on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrower on the date hereof and in this First Amendment. (b) No Defaults or Events of Default. No Default or Event of Default -------------------------------- exists on the date of this Second Amendment (after giving effect to all of the arrangements and transactions contemplated by this Second Amendment). (c) Binding Effect of Documents. This Second Amendment has been duly --------------------------- executed and delivered to you by the Borrower and the Subsidiaries (as the case may be) and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrower and the Subsidiaries (as the case may be) contained herein constitute legal, valid and binding obligations of the Borrower and the Subsidiaries (as the case may be) enforceable against them in accordance with their terms. ARTICLE IV ---------- PROVISIONS OF GENERAL APPLICATION --------------------------------- (a) No Other Changes. Except to the extent specifically amended and ---------------- supplemented hereby, all of the terms, conditions and the provisions of the Loan Agreement, the Notes and each of the other Loan Documents shall remain unmodified, and the Loan Agreement, the Notes and each of the other Loan Documents, as amended and supplemented by this Second Amendment, are confirmed as being in full force and effect. (b) Governing Law. This Second Amendment is intended to take effect as a ------------- sealed instrument and shall be deemed to be a contract under the laws of the Commonwealth of Massachusetts. This Second Amendment and the rights and obligations of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. (c) Binding Effect; Assignment. This Second Amendment shall be binding -------------------------- upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. (d) Counterparts. This Second Amendment may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this Second Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. (e) Conflict with Loan Agreement. If any of the terms of this Second ---------------------------- Amendment shall conflict in any respect with any of the terms of the Loan Agreement or any other Loan Document, the terms of this Second Amendment shall be controlling. (f) Conditions Precedent. This Second Amendment shall become and be -------------------- effective as of the Second Amendment Date, but only if: (i) the form of acceptance at the end of this Second Amendment shall be signed by the Borrower, each Subsidiary and the Banks; (ii) the Agent shall have received originals of the Second Amendment, together with any and all schedules, exhibits, annexes, agreements and instruments required to be delivered in connection therewith, each duly executed and delivered by the parties thereto, and each in form and substance satisfactory to the Agent; (iii) the Banks and the Agent shall have received satisfactory evidence of appropriate corporate and, if necessary, shareholder approval of the proposed transactions (including both the Repurchase Transaction and the Modifications); (iv) the Banks and the Agent shall have received satisfactory evidence that (a) the Borrower has successfully completed (or, upon funding by Chilmark of the entire purchase price, will successfully complete) the Repurchase Transaction, such transaction to be in form and substance reasonably satisfactory to the Banks and the Agent and (b) Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any and all required consents to the Repurchase Transaction and the Modifications and has entered into modifications to the Subordinated Debt Documents in form and substance satisfactory to the Banks and the Agent in connection therewith (it being understood and agreed by the Borrower that its failure to enter into with ING, on or before February 12, 1998, such modifications to the Subordinated Debt Documents in form and substance satisfactory to the Banks and the Agent shall constitute an Event of Default under (and as defined in) the Loan Agreement); and (v) the Agent shall have received, for the ratable benefit of those Banks who are signatories to this Second Amendment, the amendment fee from the Borrower in the amount of $111,528.36. If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Second Amendment and return such counterpart to the undersigned, whereupon this Second Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, The Borrower: ------------- NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns ------------------------------- Title: Vice President (remainder of page intentionally left blank) The foregoing Second Amendment is hereby accepted by the undersigned effective as of September 26, 1997. The Agent: - --------- BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually and as Agent By: /s/ Timothy G. Clifford --------------------------------- Title: Vice President FLEET NATIONAL BANK By: /s/ Ann M. Meade --------------------------------- Title: Vice President NATIONAL BANK OF CANADA By: /s/ Edward T. Paslawski --------------------------------- Title: Vice President By: /s/ Leonard J. Pellecchia --------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ Daniel G. Eastman --------------------------------- Title: Vice President & Manager By: /s/ Alfred DeGemmis --------------------------------- Title: Vice President SENIOR DEBT PORTFOLIO By: /s/ Scott H. Page -------------------------------- Title: Vice President CONSENT OF GUARANTORS --------------------- Each of the undersigned has guaranteed the Obligations under (and as defined in) the Agreement by executing separate Guaranties, each dated as of December 30, 1996 (or, in the case of the last three signatories listed below, as of September 11, 1997). By executing this letter, each of the Subsidiaries hereby absolutely and unconditionally reaffirms the Guaranty to which it is a party, and acknowledges and agrees to the terms and conditions of this letter agreement and the Loan Agreement and the other Loan Documents as amended hereby (including, without limitation, the making of the representations and warranties and the performance of the covenants applicable to it herein or therein). NUTRAMAX HOLDINGS, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President NUTRAMAX HOLDINGS II, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President OPTOPICS LABORATORIES, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FAIRTON REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ORAL CARE, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FLORENCE REALTY, INC., Guarantor -13- By: /s/ Robert F. Burns -------------------------- Title: Vice President POWERS PHARMACEUTICAL CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President CERTIFIED CORP., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ADHESIVE COATINGS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ELMWOOD PARK REALTY, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FIRST AID PRODUCTS, INC. By: /s/ Robert F. Burns -------------------------- Title: Vice President ANNEX 1 ------- Commitment and Commitment Percentages -------------------------------------
Term Loan A Bank Commitment Percentage - ---- ------------ ---------- BankBoston, N.A. $11,011,335.90 36.70445300% Fleet National Bank $ 7,684,683.09 25.61561030% National Bank of Canada $ 6,981,511.22 23.27170405% The Sumitomo Bank, Limited $ 4,322,469.89 14.40823295% TOTAL $30,000,000.00 100.0000030%
* Notwithstanding the foregoing Commitments of the Banks, the Total Commitment shall not at any time exceed $89,222,693. -15- EX-10.(NN) 10 WARRANT CERTIFICATE Exhibit 10(nn) WARRANT CERTIFICATE ------------------- October 14, 1997 ARTICLE I GRANT OF WARRANTS ----------------- NutraMax Products, Inc., a Delaware corporation (the "Company"), hereby grants to _________________________________________ (the "Holder") __________ warrants (the "Warrants") to purchase shares of the Company's common stock, par value $.001 per share (the "Common Stock"). Each Warrant entitles the Holder, during the Exercise Period (as defined in Section 2.2 hereof), to purchase one share of Common Stock at a price equal to the Exercise Price per share (as defined in Section 2.1 hereof). ARTICLE II EXERCISE OF WARRANTS; EXERCISE PRICE ------------------------------------ Section 2.1 Exercise Price. Upon exercise of any Warrants, the Holder shall -------------- pay an exercise price per Warrant (the "Exercise Price") equal to the difference obtained by subtracting (i) $2.25 from (ii) the Average Stock Price (as defined below) on the date of the first anniversary of this Certificate (the "Strike Price Date"). Notwithstanding the foregoing, in the event the Company shall enter into a Transaction (as defined in Section 3.5(a)) prior to the Strike Price Date, (a) the Exercise Price shall equal the difference obtained by subtracting (i) $2.25 from (ii) the Average Stock Price on the date of the first public announcement of the Transaction (the "Transaction Strike Price Date"), and (b) the Company shall notify the Holder of the Exercise Price at least ten (10) business days prior to the effective date of such Transaction. The "Average Stock Price" on any date shall mean the average of the mean of the high and low prices for a share of Common Stock reported on the principal market or exchange on which the Common Stock is traded for the twenty (20) consecutive trading days preceding such date. Section 2.2 Right to Exercise the Warrants. The Warrants may be exercised, ------------------------------ in whole or in part, at any time and from time to time during the period commencing on the Strike Price Date and expiring on the fifth anniversary of the Strike Price Date (the "Exercise Period"). Notwithstanding the foregoing, in the event the Company shall enter into a Transaction prior to the Strike Price Date, each Warrant shall become immediately exercisable on the Transaction Strike Price Date and each Warrant shall remain exercisable for a period of five years thereafter unless earlier terminated pursuant Section 3.5(a)(ii). Section 2.3 Procedure for Exercising the Warrants. The Holder may exercise ------------------------------------- the Warrants by executing the Form of Election attached hereto as Exhibit A and delivering it to the Company and tendering the requisite aggregate Exercise Price for the number of shares of Common Stock subject to such exercise to the Company on any business day during normal business hours (the date of receipt of such Form of Election and aggregate Exercise Price by the Company is hereinafter referred to as an "Exercise Date"). The Holder shall not be obligated to pay a stamp tax or similar issuance tax or charge. Section 2.4 Issuance of Shares of Common Stock. As soon as practicable ---------------------------------- after any Exercise Date the Company shall (provided that it has received the Form of Election duly executed, accompanied by payment of the Exercise Price pursuant to Section 2.1 hereof for each of the shares of Common Stock to be purchased) promptly cause certificates for the number of shares of Common Stock to be issued on such Exercise Date to be delivered to or upon the order of the Holder, registered in such name as may be designated by the Holder; provided that if the Common Stock is to be registered in the name of any entity or person other than the Holder, the Company may require evidence of compliance by the Holder with all applicable securities laws. Section 2.5 Partial Exercise. If the Holder shall exercise this Warrant ---------------- Certificate for less than all of the Warrants represented hereby, the Company shall issue to the Holder, within ten (10) business days of the Exercise Date, a new warrant certificate of like kind and tenor to this Warrant Certificate evidencing the right to exercise the remaining outstanding Warrants. Each Warrant exercised pursuant to Section 2.2 and Section 2.3 shall be canceled. ARTICLE III RESERVATION AND AVAILABILITY OF COMMON STOCK; ADJUSTMENTS --------------------------------------------------------- Section 3.1 Reservation of Common Stock. The Company covenants and agrees --------------------------- that it will cause to be kept available out of its authorized and unissued Common Stock, or its authorized and issued Common Stock held in its treasury, the number of shares of Common Stock that will be sufficient to permit the exercise in full of each of the Warrants outstanding under this Warrant Certificate. Section 3.2 Common Stock to be Duly Authorized and Issued, Fully Paid and ------------------------------------------------------------- Non-assessable. The Company covenants and agrees that it will take all such - -------------- action as may be necessary to ensure that all shares of Common Stock delivered upon exercise of any Warrants shall, at the time of delivery of the certificates for such shares, be duly and validly authorized and issued and fully paid and non-assessable shares and free from all taxes, liens, charges, encumbrances and restrictions, except as set forth herein or in that certain Stock Purchase Agreement, dated as of August 12, 1997, as amended (the "Stock Purchase Agreement"), between the Company and Cape Ann Investors, L.L.C. 2 Section 3.3 Common Stock Record Date. Each person or entity in whose name ------------------------ any certificate for shares of Common Stock is issued upon the exercise of any Warrants shall for all purposes be deemed to have become the holder of record of the shares of Common Stock represented thereby on, and such certificate shall be dated, the Exercise Date. Prior to the exercise of such Warrants, the Holder shall not be entitled to any rights of a stockholder of the Company with respect to the shares of Common Stock for which such Warrants shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 3.4 Adjustment for Common Stock Dividends, Subdivisions and ------------------------------------------------------- Combinations. In case the Company shall, at any time or from time to time, (i) - ------------ pay a dividend in Common Stock, or make a distribution in Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, or (iii) combine its outstanding Common Stock into a smaller number of shares (including a recapitalization in connection with a consolidation or merger in which the Company is the continuing corporation), then (a) the Exercise Price determined in accordance with Section 2.1 shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event and (b) the number of Warrants outstanding pursuant to this Warrant Certificate immediately before such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the Exercise Price immediately before such event and the denominator of which is the Exercise Price immediately after such event. Section 3.5 Consolidation or Merger; Rights and Other Distributions. ------------------------------------------------------- (a) If at any time after the date of this Certificate, the Company shall consolidate with, merge with or into, or sell substantially all of its assets or property to, another corporation (a "Transaction"), then the Company or the entity assuming the obligations of the Company, may, in its sole discretion, either (i) cause effective provision to be made so that each Warrant shall, effective as of the effective date of such event, be exercisable or exchangeable for the kind and number of shares of stock, other securities, cash or other property to which a holder of the number of shares of Common Stock deliverable upon exercise or exchange of such Warrant would have been entitled upon such event, or (ii) in the event that the only consideration to be received in the Transaction is cash, upon 20 days written notice by the Company to the Holder, provide that all unexercised Warrants will terminate immediately prior to the consummation of the Transaction unless exercised by the Holder prior to the effective date of the Transaction; (b) If at any time after the date of this Warrant Certificate, the Company shall effect any rights offering or pay any dividend (other than dividends paid in shares of Common Stock for which an adjustment is made pursuant to Section 3.4 hereof or regular cash dividends payable out of earnings or surplus and made in the ordinary course of business) to its 3 stockholders, then in each such case the Company shall cause effective provision to be made so that each Warrant shall, effective as of the effective date of such event, be exercisable for the kind and number of shares of stock, other securities, cash or other property to which a holder of the number of shares of Common Stock deliverable upon exercise of such Warrant would have been entitled upon such event and any such provision shall include adjustments in respect of such stock, securities, cash or other property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant Certificate with respect to such Warrant; and (c) Notwithstanding the foregoing, in the event that the Company shall distribute "poison pill" rights pursuant to a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of making any adjustment pursuant to clauses (a) or (b) of this Section 3.5, make proper provision so that the Holder upon exercise of a Warrant after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (i) if such exercise occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such exercise is entitled at the time of such exercise in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such exercise occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares of Common Stock into which the Warrant so exercised was exercisable immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights. Section 3.6 Notice; Calculations; Etc. Whenever any adjustments are made as ------------------------- provided in Sections 3.4 or Section 3.5, the Company shall provide to the Holder a statement, signed by an authorized officer, describing in detail the facts requiring such adjustment and setting forth a calculation of the Exercise Price and the number of shares of Common Stock or other stock, securities, cash or other property applicable to each Warrant after giving effect to such adjustment. All calculations under this Section 3.6 shall be made to the nearest one hundredth of a cent or to the nearest one-tenth of a share, as the case may be. ARTICLE IV HOLDER REPRESENTATIONS, WARRANTIES AND COVENANTS ------------------------------------------------ By its receipt and acceptance of this Warrant Certificate, the Holder represents and warrants to and covenants with, the Company, as follows: Section 4.1 Representations. The Holder, by reason of its business and --------------- financial experience, has such knowledge, sophistication and experience in business and financial 4 matters as to be capable of evaluating the merits and risks of its investment in the Warrants and the shares of Common Stock issuable upon the exercise thereof, and is purchasing the Warrants and the shares of Common stock issuable upon the exercise thereof to be purchased hereunder have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. The Holder is an "accredited investor" as that term is defined in Rule 501 promulgated under the Securities Act. The Holder has had the opportunity to ask questions and to receive answers concerning the financial condition, operation and prospects of the Company and the terms and conditions of the Holder's investment, as well as the opportunity to obtain any additional information necessary to certify the accuracy of information furnished in connection therewith that the Company possesses or can acquire without unreasonable effort or expense. Section 4.2 Restrictions on Transferability. The Warrants and the shares of ------------------------------- Common Stock received upon exercise thereof shall be subject to the restrictions contained in the Stock Purchase Agreement. The Warrants and the shares of Common Stock received upon exercise of the Warrants shall be entitled to the benefits of the registration rights contained in the Stock Purchase Agreement. Section 4.3 Restrictive Legend. Each certificate representing shares of the ------------------ Common Stock issuable upon exercise of the Warrants, or any other securities issued in respect of the Common Stock issued upon exercise of the Warrants, upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend in substantially the following form (in addition to any legend required under applicable state securities laws): "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT OR (2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SUCH SECURITIES. THE SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO THE PROVISIONS OF (I) AN AGREEMENT, DATED AS OF OCTOBER 14, 1997, BY AND BETWEEN NUTRAMAX PRODUCTS, INC. AND CAPE ANN INVESTORS, L.L.C., AND (II) A CERTAIN STOCK PURCHASE AGREEMENT, DATED AS OF 5 AUGUST 12, 1997, AS AMENDED, BY AND BETWEEN NUTRAMAX PRODUCTS, INC. AND CAPE ANN INVESTORS, L.L.C., INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. COPIES OF SUCH AGREEMENTS ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF NUTRAMAX PRODUCTS, INC. AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE." ARTICLE V MISCELLANEOUS ------------- Section 5.1 Company Covenant. The Company covenants not to purchase any ---------------- shares of its Common Stock during the twenty (20) trading days preceding the Strike Price Date or the Transaction Strike Price Date, as the case may be. Section 5.2 Notices. Notices or demands relating to this Warrant ------- Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed as follows, or telexed, telecopied, or delivered by nationally-recognized overnight or other courier: If to the Holder: ________________________ ________________________ ________________________ ________________________ ________________________ copy to: William A. Groll, Esq. Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 If to the Company: NutraMax Products, Inc. 9 Blackburn Drive Gloucester, Massachusetts 01930 Attention: Mr. Robert F. Burns copy to: Joseph L. Johnson III, Esq. Goodwin, Procter & Hoar LLP Exchange Place Boston, MA 02109 6 Section 5.3 Successors. All the covenants and provisions of this Warrant ---------- Certificate by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 5.4 DELAWARE CONTRACT. THIS CERTIFICATE AND THE WARRANTS, AND ALL ----------------- QUESTIONS RELATING TO THE INTERPRETATION, CONSTRUCTION AND ENFORCEABILITY OF THIS CERTIFICATE AND THE WARRANTS, SHALL BE GOVERNED IN ALL RESPECTS BY THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE. Section 5.5 Amendments and Waivers. Except as otherwise provided herein, ---------------------- the provisions of this Agreement may not be amended, modified or supplemented, other than by a written instrument executed by the Company and the Holder. Section 5.6 Severability. In the event that any one or more of the ------------ provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Holder shall be enforceable to the fullest extent permitted by law. Section 5.7 Fractional Shares. No fractional shares of Common Stock shall ----------------- be issued in connection with the exercise of any Warrants hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Average Stock Price as of the Exercise Date. Section 5.8 Replacement Certificate. On receipt of evidence reasonably ----------------------- satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, on delivery of an indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant Certificate, the Company, at its expense, will execute and deliver, in lieu of this Warrant Certificate, a new warrant certificate of like tenor. 7 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered, all as of the date and year first above written. NUTRAMAX PRODUCTS, INC. By: ___________________________________ Name: Robert F. Burns Title: Chief Financial Officer 8 EXHIBIT A FORM OF ELECTION TO PURCHASE (To be executed if Holder desires to exercise the Warrants) NUTRAMAX PRODUCTS, INC.: The undersigned hereby irrevocably elects to exercise _______ Warrants represented by the Warrant Certificate to purchase _______ shares of Common Stock issuable upon the exercise of such Warrants and requests that certificates for such shares be issued in the name of: _______________________________________ (Please print name and address) _______________________________________ Please insert federal tax identification number or other identifying number _______. Dated: ___________. ________________________________________________ By: ____________________________________________ Name: Title: 9 EX-10.(OO) 11 AMEND. #6 TO REVOLVING CREDIT & TERM LOAN AGRMNT. Exhibit 10(oo) NUTRAMAX PRODUCTS, INC. 9 Blackburn Drive Gloucester, MA 01930 Dated as of: August 31, 1998 BankBoston, N.A. Individually and as Agent 100 Federal Street Boston, Massachusetts 02110 Fleet National Bank One Federal Street Boston, MA 02109 National Bank of Canada One Federal Street, 27th Floor Boston, MA 02110 The Sumitomo Bank, Limited 450 Lexington Avenue, Suite 1700 New York, NY 10017 Senior Debt Portfolio c/o Eaton Vance Management 24 Federal Street Boston, MA 02110 Re: Sixth Amendment to Revolving Credit and Term Loan Agreement ----------------------------------------------------------- Ladies and Gentlemen: We refer to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996, as amended by a First Amendment to Revolving Credit and Term Loan Agreement dated as of September 11, 1997, by a Second Amendment to Revolving Credit and Term Loan Agreement dated as of November 26, 1997, by a Third Amendment to Revolving Credit and Term Loan Agreement dated as of January 20, 1997 (and effective as of September 28, 1997), by a Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of March 31, 1998, and by a Fifth Amendment to Revolving Credit and Term Loan Agreement dated as of May 7, 1998, (as so amended, the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking institutions referred to therein as Banks (the "Banks") and The First National Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon the terms and subject to the conditions contained in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit for the account of, the Borrower. -1- Terms used in this letter of agreement (the "Sixth Amendment") which are not defined herein, but which are defined in the Loan Agreement, shall have the same respective meanings herein as therein. We have requested and you have agreed to make certain modifications of the Loan Documents (collectively, the "Modifications"), and you have advised us that you are prepared and would be pleased to make the Modifications so requested by us on the condition that we join with you in this Sixth Amendment. Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Sixth Amendment, and fully intending to be legally bound by this Sixth Amendment, we hereby agree with you as follows: ARTICLE I --------- AMENDMENTS TO LOAN AGREEMENT ---------------------------- Effective as of August 31, 1998 (the "Sixth Amendment Date"), the Loan Agreement is amended in each of the following respects: (a) The terms "Loan Documents" and "Security Documents" shall, wherever used in any of the Loan Documents or Security Documents, be deemed to also mean and include this Sixth Amendment. (b) The term "Subordinated Debt Documents" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any required consents in form and substance reasonably satisfactory to the Banks and the Agent, between the Borrower and ING, as referenced in Article III(f)(iii) below. (c) The term "Obligations" shall, whenever used in any of the Loan Documents or Security Documents, be deemed to also mean and include any and all Overadvances. (d) The first paragraph of Section 2.20 of the Loan Agreement is amended to read in its entirety as follows: "2.20 Notwithstanding the provisions of Sections 2.1(a), at the Borrower's request, the Banks will make Revolving Loans to the Borrower at a time when the debit balance in the Loan Account in respect of Revolving Loans and Letters of Credit exceeds the Borrowing Base or which cause the debit balance in the Loan Account in respect of Revolving Loans and Letters of Credit to exceed the Borrowing Base (any such Loan or Loans being herein referred to individually as an "Overadvance" and collectively as "Overadvances"), provided that: (i)_the aggregate amount of the Overadvances -------- at any one time outstanding shall not exceed $1,500,000; (ii)_in no event shall the debit balance in the Loan Account in respect of Revolving Loans and Letters of Credit at any one -2- time outstanding exceed the Revolving Credit Commitments of all of the Banks; and (iii)_no Default or Event of Default shall exist hereunder at the time any Overadvance is requested or outstanding. Failure of the Borrower to maintain any of the foregoing conditions (other than the condition under clause (iii) that no Default shall exist) shall constitute an immediate Event of Default hereunder, and shall be deemed to be a failure to perform an Obligation hereunder. The Agent shall enter such Overadvances, along with all interest, expenses and charges relating thereto, as debits in the Loan Account. Notwithstanding anything contained in this Section_2 or otherwise, unless sooner demanded as a result of the failure to meet any of the conditions set forth in clauses_(i) through (iii) above, the Borrower shall pay all outstanding Overadvances on or before September_21, 1998 (the "Overadvance Termination Date")." ARTICLE II ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- The Borrower hereby represents, warrants and covenants to you as follows: (a) Representations in Loan Agreement. Each of the representations and --------------------------------- warranties made by the Borrower to you in the Loan Agreement was true, correct and complete when made and is true, correct and complete in all material respects on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrower on the date hereof and in this Sixth Amendment. (b) No Defaults or Events of Default. No Default or Event of Default -------------------------------- exists on the date of this Sixth Amendment (after giving effect to all of the arrangements and transactions contemplated by this Sixth Amendment). (c) Binding Effect of Documents. This Sixth Amendment has been duly --------------------------- executed and delivered to you by the Borrower and the Subsidiaries (as the case may be) and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrower and the Subsidiaries (as the case may be) contained herein constitute legal, valid and binding obligations of the Borrower and the Subsidiaries (as the case may be) enforceable against them in accordance with their terms. ARTICLE III ----------- PROVISIONS OF GENERAL APPLICATION --------------------------------- (a) No Other Changes. Except to the extent specifically amended and ---------------- supplemented hereby, all of the terms, conditions and the provisions of the Loan Agreement, the Notes and each of the other Loan Documents shall remain unmodified, and the Loan Agreement, the Notes and each of the other Loan Documents, as amended and supplemented by this Sixth Amendment, are confirmed as being in full force and effect. -3- (b) Governing Law. This Sixth Amendment is intended to take effect as a ------------- sealed instrument and shall be deemed to be a contract under the laws of The Commonwealth of Massachusetts. This Sixth Amendment and the rights and obligations of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of The Commonwealth of Massachusetts. (c) Binding Effect; Assignment. This Sixth Amendment shall be binding -------------------------- upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. (d) Counterparts. This Sixth Amendment may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this Sixth Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. (e) Conflict with Loan Agreement. If any of the terms of this Sixth ---------------------------- Amendment shall conflict in any respect with any of the terms of the Loan Agreement or any other Loan Document, the terms of this Sixth Amendment shall be controlling. (f) Conditions Precedent. This Sixth Amendment shall become and be -------------------- effective as of the Sixth Amendment Date, but only if: (i) the form of acceptance at the end of this Sixth Amendment shall be signed by the Borrower, each Subsidiary, the Agent and the Banks; (ii) each Bank which is a signatory to this Sixth Amendment shall have received an amendment fee from the Borrower in the amount of $10,000; and (iii) the Banks and the Agent shall have received satisfactory evidence that Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any and all required consents to the Modifications and, to the extent necessary, has entered into modifications to the Subordinated Debt Documents in form and substance satisfactory to the Banks and the Agent in connection therewith. If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this Sixth Amendment and return such counterpart to the undersigned, whereupon this Sixth Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, The Borrower: ------------- NUTRAMAX PRODUCTS, INC. By: /s/ Robert F. Burns ------------------------------- Title: Vice President (reminder of page intentionally left blank) -4- The foregoing Sixth Amendment is hereby accepted by the undersigned effective as of August 31, 1998. The Agent: - --------- BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually and as Agent By: /s/ Timothy G. Clifford --------------------------------- Title: Director FLEET NATIONAL BANK By: /s/ Ann M. Meade --------------------------------- Title: Vice President NATIONAL BANK OF CANADA By: /s/ Leonard J. Pellecchia --------------------------------- Title: Vice President By: /s/ A. Keith Broyles --------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ Brian M. Smith --------------------------------- Title: Senior Vice President By: /s/ Jeffrey Frost --------------------------------- Title: Vice President -5- SENIOR DEBT PORTFOLIO By: Boston Management and Research, as investment advisor By: /s/ Scott H. Page ---------------------------- Title: Vice President -6- CONSENT OF GUARANTORS --------------------- Each of the undersigned has guaranteed the Obligations under (and as defined in) the Agreement by executing separate Guaranties, each dated as of December 30, 1996 (or, in the case of the last three signatories listed below, as of September 11, 1997). By executing this letter, each of the Subsidiaries hereby absolutely and unconditionally reaffirms the Guaranty to which it is a party, and acknowledges and agrees to the terms and conditions of this letter agreement and the Loan Agreement and the other Loan Documents as amended hereby (including, without limitation, the making of the representations and warranties and the performance of the covenants applicable to it herein or therein). NUTRAMAX HOLDINGS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President NUTRAMAX HOLDINGS II, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President OPTOPICS LABORATORIES, CORPORATION, Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President FAIRTON REALTY HOLDINGS, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President ORAL CARE, INC., Guarantor By: /s/ Robert F. Burns -------------------------- Title: Vice President -7- FLORENCE REALTY, INC., Guarantor By: /s/ Robert F. Burns ------------------------- Title: Vice President POWERS PHARMACEUTICAL CORPORATION, Guarantor By: /s/ Robert F. Burns ------------------------- Title: Vice President CERTIFIED CORP., Guarantor By: /s/ Robert F. Burns ------------------------- Title: Vice President ADHESIVE COATINGS, INC., Guarantor By: /s/ Robert F. Burns ------------------------- Title: Vice President ELMWOOD PARK REALTY, INC., Guarantor By: /s/ Robert F. Burns ------------------------- Title: Vice President FIRST AID PRODUCTS, INC., Guarantor By: /s/ Robert F. Burns ------------------------- Title: Vice President -8- EX-21 12 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Set forth below is a list of NutraMax Products, Inc.'s subsidiaries, as of December 28, 1998, with their respective states of incorporation. All of such subsidiaries were wholly-owned by the Company as of such date. Name State of Incorporation Optopics Laboratories Corporation DE Fairton Realty Holdings, Inc. DE Powers Pharmaceutical Corporation (1) DE Certified Corp. DE Oral Care, Inc. DE Florence Realty, Inc. MA First Aid Products, Inc. DE Adhesive Coatings, Inc. NJ Elmwood Park Realty, Inc. NJ NutraMax Holdings Inc. DE NutraMax Holdings II Inc. DE F. A. Products, L.P. DE (1) Subsidiary or Certified Corp. EX-23 13 CONSENT OF DELOITTE & TOUCHE EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-46553 and 33-61724 of Nutramax Products, Inc. on Form S-3 and 33-47175 of Nutramax Products, Inc. on Form S-8 of our report dated November 24, 1998 (December 29, 1998 as to Note P and the second to last paragraph of Note F), appearing in this Annual Report on Form 10-K of Nutramax Products Inc., for the year ended October 3, 1998. DELOITTE & TOUCHE LLP Boston, Massachusetts December 30, 1998 EX-27.1 14 FINANCIAL DATA SCHEDULE 10/3/98
5 This Schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of Form 10-K and is qualified in its entirety by reference to such Form 10-K 1,000 YEAR OCT-3-1998 SEP-28-1997 OCT-3-1998 761 0 17,286 758 36,879 62,179 68,143 22,240 138,751 29,480 84,425 0 0 6 21,188 138,751 128,434 128,434 102,112 102,112 22,183 0 8,449 (4,346) (1,475) (2,871) 0 0 0 (2,871) (.51) (.51)
EX-27.2 15 FINANCIAL DATA SCHEDULE 9/27/97
5 This Schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of Form 10-K and is qualified in its entirety by reference to such Form 10-K 1,000 YEAR SEP-27-1997 SEP-29-1996 SEP-27-1997 243 0 19,618 605 36,135 60,350 61,688 17,232 132,759 21,748 85,542 0 0 6 23,473 132,759 94,331 94,331 71,728 71,728 13,947 0 6,042 3,798 1,536 2,262 0 0 0 2,262 .39 .38
EX-27.3 16 FINANCIAL DATA SCHEDULE 3/29/97
5 This Schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of Form 10-K and is qualified in its entirety by reference to such Form 10-K 1,000 6-MOS SEP-27-1997 SEP-29-1996 MAR-29-1997 464 0 12,422 535 21,009 35,015 47,990 15,292 87,313 11,044 61,493 0 0 9 12,452 87,313 47,213 47,213 34,625 34,625 6,595 0 1,802 4,260 1,717 2,543 0 0 0 2,543 .38 .37
EX-27.4 17 FINANCIAL DATA SCHEDULE 9/28/96
5 This Schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of Form 10-K and is qualified in its entirety by reference to such Form 10-K 1,000 YEAR SEP-28-1996 OCT-01-1995 SEP-26-1996 294 0 12,848 709 18,321 32,882 42,726 13,519 82,878 23,391 11,780 0 0 9 45,808 82,878 80,479 80,479 57,686 57,686 11,662 0 1,479 9,363 3,680 5,683 0 0 0 5,683 .67 .66
EX-27.5 18 FINANCIAL DATA SCHEDULE 9/30/1995
5 This Schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of Form 10-K and is qualified in its entirety by reference to such Form 10-K 1,000 YEAR SEP-30-1995 OCT-02-1994 SEP-30-1995 503 0 9,050 601 12,497 23,552 34,101 10,387 63,074 9,400 12,550 0 0 9 39,224 63,074 63,111 63,111 45,916 45,916 8,694 0 1,427 7,390 2,915 4,474 0 0 0 4,474 .53 .52
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