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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER 0-8640
SYNCOR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0229124
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20001 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311
(Address of principal executive offices) (Zip Code)
(818) 886-7400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
___ ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of September 30,
1996, 10,970,334 shares of $.05 par value common stock were outstanding.
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<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
_____
PAGE
____
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
September 30, 1996 and December 31, 1995 . . . . . . . . . . . 2
Statements of Income for three months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . 3
Statements of Income for nine months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . 4
Statements of Cash Flows for nine months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition . . . 7
Part II. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
September 30, December 31,
1996 1995
_____________ ____________
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents 27,006 23,022
Short-term investments 2,769 2,296
Accounts receivable, net 52,860 50,857
Inventory 5,406 5,159
Prepaids and other current assets 7,809 2,306
_______ _______
Total current assets 95,850 83,640
Marketable investment securities 1,239 1,241
Property and equipment, net 25,358 23,006
Excess of purchase price over net assets
acquired, net 14,075 14,414
Other assets 12,802 11,379
_______ _______
$149,324 $133,680
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,228 $ 33,286
Accrued liabilities 2,396 2,395
Accrued wages and related costs 11,572 10,060
Federal and state taxes payable 699 755
Current maturities of long-term debt 2,366 2,224
_______ _______
Total current liabilities 53,261 48,720
Long-term debt, net of current maturities 10,252 5,200
Deferred compensation 864 864
Minority interest 975 634
Stockholders' equity:
Common stock, $.05 par value 566 533
Additional paid-in capital 51,234 47,169
Unrealized loss on investments (30) (24)
Employee stock ownership loan guarantee (4,806) (2,998)
Foreign currency translation adjustment (84) (105)
Retained earnings 40,100 35,598
Treasury stock, at cost; 341 shares at Sept. 30,
1996 and 250 shares at December 31, 1995 (3,008) (1,911)
_______ _______
Net stockholders' equity 83,972 78,262
_______ _______
$149,324 $133,680
======== ========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
THREE MONTHS ENDED SEPTEMBER 30,
________________________________
1996 1995
______ ______
(UNAUDITED)
Net sales $90,876 $81,014
Cost of sales 72,189 62,927
_______ _______
Gross profit 18,687 18,087
Operating, selling and administrative expenses 19,175 16,199
_______ _______
Operating income (488) 1,888
Other income, net 1,184 184
_______ _______
Income before taxes 696 2,072
Provision for income taxes 204 829
_______ _______
Net income $ 492 $ 1,243
======= =======
Net income per share - Primary $ .05 $ .12
======= =======
Weighted average shares outstanding - Primary 10,943 10,607
======= =======
Net income per share - Fully Diluted $ .05 $ .12
======= =======
Weighted average shares outstanding - Fully Diluted 10,945 10,607
======= =======
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
NINE MONTHS ENDED SEPTEMBER 30,
_______________________________
1996 1995
______ ______
(UNAUDITED)
Net sales $276,860 $247,314
Cost of sales 216,207 192,779
________ ________
Gross profit 60,653 54,535
Operating, selling and administrative expenses 55,478 49,036
________ ________
Operating income 5,175 5,499
Other income, net 2,204 401
________ ________
Income before taxes 7,379 5,900
Provision for income taxes 2,877 2,360
________ ________
Net income $ 4,502 $ 3,540
======= =======
Net income per share - Primary $ .42 $ .34
======= =======
Weighted average shares outstanding - Primary 10,662 10,496
======= =======
Net income per share - Fully Diluted $ .42 $ .34
======= =======
Weighted average shares outstanding - Fully Diluted 10,784 10,548
======= =======
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
NINE MONTHS ENDED SEPTEMBER 30,
_______________________________
1996 1995
______ ______
(UNAUDITED)
Cash flows from operating activities:
Net income $ 4,502 $3,540
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,184 8,021
Amortization of ESSOP loan guarantee 973 832
Decrease (increase) in:
Accounts receivables, net (2,003) 446
Inventory (247) 1,083
Other current assets (5,503) 592
Increase (decrease) in:
Accounts payable 2,942 (6,901)
Accrued liabilities (29) (113)
Accrued wages and related costs 1,512 2,982
Federal and state taxes payable (56) 647
Foreign currency translation adjustment 21 (113)
Minority interest 341 189
________ ________
Net cash provided by operating activities 10,637 11,205
________ ________
Cash flows from investing and financing activities:
Purchase of property and equipment, net (7,533) (1,600)
(Decrease) in short-term investments (473) (2,226)
(Increase) in other non-current assets (4,085) (2,571)
Net proceeds from (repayment of) short-term debt 172 (271)
Net proceeds from long-term debt 5,052 1,152
Issuance of common stock 4,098 585
Issuance of treasury stock to ESSOP 2,853 2,262
Increase in ESSOP loan guarantee (2,781) (2,299)
Reacquisition of common stock for treasury (3,950) (1,911)
Unrealized (loss) gain on investments (6) 20
________ ________
Net cash used in investing and financing
activities (6,653) (6,859)
________ ________
Net increase in cash and cash equivalents 3,984 4,346
Cash and cash equivalents at beginning of period 23,022 17,761
________ ________
Cash and cash equivalents at end of period $27,006 $22,107
======== ========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL. The accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been
included. The results of the nine months ended September 30,
1996, are not necessarily indicative of the results to be
expected for the full year. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's Annual Report and Form 10-K for the
period ended December 31, 1995.
2. ADOPTION OF FINANCIAL ACCOUNTING STANDARDS No. 123 "ACCOUNTING
FOR STOCK-BASED COMPENSATION." In October 1995, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (Statement 123). Statement 123 established a fair
value based method of accounting for stock-based compensation as
compared to the intrinsic value based method prescribed under
APB Opinion No. 25. Companies have the option of either
adopting the fair value method of Statement 123 or continuing to
use the intrinsic value based method of APB No. 25 and including
pro forma net income and earnings per share amounts in the
footnotes as if the fair value method had been adopted. The
disclosure provisions of Statement 123, including the pro forma
information, are effective for fiscal years beginning after
December 15, 1995. The Company will continue to use the
intrinsic value of APB Opinion No. 25 and implement the
disclosure provisions of Statement 123 in fiscal 1996.
3. TREASURY STOCK: During the second and third quarters of 1996,
the Company purchased 340,600 shares of its common stock in the
open market at an average price of $11.60 per share. These
shares were classified as "treasury stock at cost," on the
accompanying balance sheet. On September 30, 1996, 250,000
shares of treasury stock were contributed to the Company's
Employees' Saving and Stock Ownership Plan (ESSOP) at a fair
market value of $2.9 million.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET SALES
Consolidated net sales for the third quarter of 1996 increased 12.2
percent or $9.9 million to $90.9 million versus $81.0 million for the
third quarter of 1995. For the nine months ended September 30, 1996,
net sales increased 11.9 percent or $29.5 million to $276.9 million
compared to $247.3 million for the same period in 1995.
The Company continues to experience growth in the sale of cardiology
products when compared to the prior year. Sales from cardiology
products accounted for approximately 60 percent of the Company's net
sales during the third quarter of 1996. Price stability in the
marketplace also continues to positively impact sales. Sales growth
during the quarter ended September 30, 1996, was negatively
influenced by the traditional Summer slow down and the Company's
strategic decision to maintain pricing on its Cardiology products.
This decision has resulted in the increased market gain associated
with a competing cardiology product.
GROSS PROFIT
Gross profit for the third quarter of 1996 increased $.6 million to
$18.7 million, however, declined as a percentage of net sales to 20.6
percent, compared to 22.3 percent of net sales or $18.1 million for
the comparable quarter in 1995. For the nine months ended September
30, 1996, gross profit increased $6.1 million to $60.7 million,
however, declined as a percentage of net sales to 21.9 percent,
compared to 22.1 percent of net sales or $54.5 million for the same
period in 1995.
The gross margin percentage in the third quarter 1996 declined as a
result of the seasonal decrease in sales, thus impacting both material
and labor utilization. This decrease is the result of less than
optimal utilization of the Company's material over the Summer months.
The Summer slow down impacts the cost of material primarily in the
area of efficiency. The effective utilization of certain radioactive
products diminishes with a slight decline in sales. Labor
inefficiencies also occur with a decline in sales. The Summer slow
down of 1996 is partially offset by the on-going conversion of
customers to full service unit dose compounding services, rather than
supplying those same customers with the raw materials which allow them
to perform their own compounding services. An additional factor which
also negatively impacted the gross profit for the third quarter ended
September 30, 1996 was the continued investment associated with
positron emission tomography (PET).
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses rose 18.4 percent for
the third quarter of 1996 or $3.0 million to $19.2 million, and as a
percentage of sales increased to 21.1 percent from 20.0 percent for
the same period in 1995. For the nine month period ended September
30, 1996, these expenses increased 13.1 percent or $6.4 million to
$55.5 million, and as a percentage of sales increased to 20.0 percent
from 19.8 percent.
There are a number of expenses included in the third quarter 1996 that
are not in the corresponding period for 1995. The third quarter 1996
includes the increased investment in positron emission tomography
(PET), separation costs associated with the Company's former Vice
Chairman and Chief Executive Officer who resigned in July 1996,
relocation costs for the corporate headquarters, acquisition and new
radiopharmacies start-up costs and expenses associated with the
Company's core business improvement program.
The Company is making significant investments in new business
opportunities which are aimed at increasing its long-term
competitiveness. These opportunities include, continued domestic and
international expansion, the re-engineering of critical business
practices and associated information systems and the entry into the
positron emission tomography (PET) business. The increased operating,
selling and administrative expenses for the third quarter and first
nine months of 1996 reflects the investments required for these
opportunities. The Company expects to continue the increased level
of expenditures in the operating, selling and administrative category
for the next two years, as it accelerates its spending in PET, re-
engineering opportunities and expansion. As a consequence, overall
Company earnings may be reduced over the same period.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and short-term investments of
$31.0 million at September 30, 1996, compared with $26.6 million at
December 31, 1995. The Company's total debt position of $12.6 million
at September 30, 1996, was $5.2 million higher than the debt position
at December 31, 1995. The increase in debt is the direct result of
the positron emission tomography (PET) joint venture formed on June
1, 1996 and a new $2.8 million ESSOP loan. Working capital increased
by $7.7 million to $42.6 million at September 30, 1996, compared to
$34.9 million at December 31, 1995. Days sales outstanding on
receivable decreased to 52 days at September 30, 1996, compared to 55
days at December 31, 1995.
The Company believes sufficient internal and external sources exist
to fund operations and future expansion programs. At September 30,
1996, the Company had unused lines of credit of $17.9 million to fund
short-term needs.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Part II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
STOCK REPURCHASE PROGRAM
Between May 13, 1996 and October 3, 1996, the Company purchased
350,600 shares of its common stock in the open market at an average
price of $11.60 per share. The shares are classified as "Treasury
Stock at Cost" on the Company's balance sheet.
ESSOP LOAN
On September 30, 1996, the Company contributed 250,000 shares of its
common stock to the Employees' Savings and Stock Ownership Plan
(ESSOP). The shares contributed were from the Company's "Treasury
Stock" and are leveraged against a bank loan in the amount of $2.9
million which matures in the year 2000.
STOCK GRANT TO OUTSIDE BOARD MEMBERS
On August 27, 1996, 500 shares of the Company's common stock were
issued to each of the Company's non-employee members of the Board of
Directors pursuant to Section 16(b) of the Securities Act of 1934.
The market value for of the Company's common stock was $10.625 per
share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10. Material Contracts
10.1 Loan Agreement, Dated September 30, 1996, between the
Company and The First National Bank of Chicago.
10.2 Guarantee of Parent Corporation, dated July 1996,
made by the Company in favor of John Hancock Mutual Life
Insurance Company, as assignee of Corporate Credit, Inc.
10.3 1996 Management Incentive Plan
11. Statement Re: Computation of Per Share Earnings
Computation can be clearly determined from the material
contained in Part I of this Form 10-Q.
27. Financial Data Schedule.
(B) REPORTS ON FORM 8-K
Form 8-K dated July 3, 1996 was filed by the Company as a result
of the resignation of Gene R. McGrevin as Vice Chairman and
Chief Executive Officer of the Company.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SYNCOR INTERNATIONAL CORPORATION
(Registrant)
November 13, 1996 By: /S/ MICHAEL E. MIKITY
_________________________
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
INDEX TO EXHIBITS
EXHIBIT NO.
___________
10. Material Contracts
10.1 Loan Agreement, Dated September 30, 1996, between the
Company and The First National Bank of Chicago.
10.2 Guarantee of Parent Corporation, dated July 1996, made by
the Company in favor of John Hancock Mutual Life Insurance
Company, as assignee of Corporate Credit, Inc.
10.3 1996 Management Incentive Plan
11. Statement Re: Computation of Per Share Earnings
Computation can be clearly determined from the material
contained in Part I of this Form 10-Q.
27. Financial Data Schedule.
<PAGE>
EXHIBIT 10.1
September 30, 1996
Syncor International Corporation
20001 Prairie Street
Chatsworth, California 91311
Re: $3,500,000 Loan Facility
________________________
Ladies and Gentlemen:
This letter agreement (this "Agreement") shall constitute the
agreement of The First National Bank of Chicago, a national banking
association ("Lender"), to make a term loan of up to $3,500,000 to
Syncor International Corporation, a Delaware corporation ("Borrower")
pursuant to the terms and conditions described herein for the purpose
of financing the purchase of stock by Borrower's employee stock
ownership plan.
1. Definitions. The following terms used in this Agreement
___________
shall have the following meanings:
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar
Rate Loan, the rate per annum obtained by dividing (i) the rate at
________
which Lender offers to place deposits in U.S. dollars with first-class
banks in the London interbank market at 11:00 a.m. (London time) two
Business Days prior to the first day of the related Interest Period
in the approximate amount of the related Eurodollar Loan, and for a
maturity corresponding to the related Interest Period by (ii) a
__
percentage equal to 100% minus the stated maximum
_____
rate of all reserve requirements (including any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest
Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" as defined in
Regulation D (or any successor category of liabilities under
Regulation D).
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting
securities or by contract or otherwise.
"ALTERNATE BASE RATE" means, at any time, the higher of (i) the
rate which is 1/2 of 1% per annum in excess of the Federal Funds
Effective Rate or (ii) the rate that Lender announces from time to
time as its corporate base lending rate, as in effect from time to
time.
"ALTERNATE BASE RATE LOAN" means Loans bearing interest at rates
determined by reference to the Alternate Base Rate as provided in
subsection 3(a).
"BUSINESS DAY" means, unless otherwise provided for in this
Agreement, any day excluding Saturday or Sunday on which Lender is
open for business in Illinois. For the Eurodollar Rate Loans,
"Business Day" means any day excluding Saturday or Sunday on which
Lender is open for business in Illinois and London and dealing in
offshore dollars.
"CLOSING DATE" means the date on or before October 4, 1996 on
which the initial borrowing of the Loans is made.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
sum of (i) the aggregate of all expenditures (whether paid in cash or
other consideration or accrued as a liability and including that
portion of any lease which is capitalized in accordance with GAAP on
the consolidated balance sheet of Borrower and its Subsidiaries) by
Borrower and its Subsidiaries during that period that, in conformity
with GAAP, are included in "additions to property, plant or equipment"
or comparable items reflected in the consolidated statement of cash
flows of Borrower and its Subsidiaries
"CONTINGENT OBLIGATION" means, as to any Person, (i) any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent, (A) to
purchase any such primary obligation or any property constituting
direct or indirect security therefor, (B) to advance or supply funds
(x) for the purchase or payment of any such primary obligation or (y)
to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary
obligor, (C) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation or (D) otherwise to assure or hold harmless the holder of
such primary obligation against loss in respect thereof; provided,
________
however, that the term "Contingent Obligation"
_______
shall not include endorsements of instruments for deposit or
collection in the ordinary course of business; and (ii) any
obligations of such Person under any interest rate agreement or any
future, swap, currency contract, forward contract or financial
derivative. The amount of any Contingent Obligation shall be deemed
to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is
made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good
faith.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary of Borrower that is
organized under the laws of any jurisdiction forming a part of the
United States.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are
to ERISA, as in effect at the date of this Agreement, and to any
subsequent provisions of ERISA, amendatory thereof, supplemental
thereto or substituted therefor.
"ERISA AFFILIATE" means any person (as defined in Section 3(9)
of ERISA) which together with Borrower would be a member of the same
"controlled group" within the meaning of Section 414(b), (m), (c) and
(o) of the Code.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided
in subsection 3(a).
"EVENT OF DEFAULT" means each of the events set forth in
Section 10.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Lender from three Federal funds brokers of
recognized standing selected by Lender.
"FIXED CHARGE COVERAGE RATIO" means, with respect to Borrower and
determined on a consolidated basis in accordance with GAAP, the ratio
of (i) the sum of net income before taxes plus interest expense plus
____ ____
depreciation expense plus rental expense minus Consolidated Capital
____ _____
Expenditures to (ii) the sum of interest expense plus rental expense
____
plus the current portion of long-term debt (as of the end of the most
____
recent fiscal quarter). The Fixed Charge Coverage Ratio shall be
calculated at the end of each fiscal quarter based on the results of
that quarter and each of the 3 immediately preceding fiscal quarters.
"GAAP" means generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a
significant segment of the accounting profession, in each case as the
same are applicable to the circumstances as of the date of deter-
mination.
"INDEBTEDNESS" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, fees and charges) of such
Person for borrowed money or for the deferred purchase price of
property or services, (ii) the undrawn amount of or unreimbursed
amount under all letters of credit issued for the account of such
Person and all drafts drawn thereunder, (iii) all liabilities secured
by any lien on any property owned by such Person, whether or not such
liabilities have been assumed by such Person, (iv) the aggregate
amount required to be capitalized in conformity with GAAP under leases
under which such Person is the lessee and (v) all Contingent
Obligations of such Person.
"INITIAL BORROWING AMOUNT" means the original principal amount
of the Loans borrowed on the Closing Date.
"INTEREST PAYMENT DATE" means (i) with respect to any Alternate
Base Rate Loan, the last day of each month, commencing on the first
such date to occur after the Closing Date, and (ii) with respect to
any Eurodollar Rate Loan, the last day of each Interest Period
applicable to such Loan; provided that in the case of each Interest
________
Period of longer than three months "Interest Payment Date" shall also
include each date that is three months after the commencement of such
Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 3(b).
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of
such Interest Period.
"LOANS" means the Alternate Base Loans and the Eurodollar Rate
Loans comprising the then outstanding borrowing made pursuant to
subsection 2(a).
"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System
as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Borrower or any of its
Subsidiaries or (ii) the impairment of the ability of Lender to
enforce, the Obligations.
"NOTICE OF CONVERSION/CONTINUATION" has the meaning assigned to
that term in subsection 3(f).
"OBLIGATIONS" means all obligations of every nature of Borrower
from time to time owed to Lender under this Agreement or the Note,
whether for principal, interest, fees, expenses, indemnification or
otherwise.
"PAYMENT OFFICE" means (i) the office of Lender located at One
First National Plaza, 11th Floor, Chicago, Illinois 60670 or (ii) such
other office of Lender as may from time to time hereafter be
designated as such in a written notice delivered by Lender to
Borrower.
"PERSON" means any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government
or political subdivision or any agency, department or instrumentality
thereof.
"PLAN" means any multiemployer plan or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed
to, or at any time during the five calendar years preceding the date
of this Agreement was maintained or contributed to, by Borrower or by
an ERISA Affiliate.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of
Default.
"QUICK ASSETS" means cash, short-term cash investments, net trade
receivables and marketable securities not classified as long-term
investments.
"SALE AND LEASEBACK TRANSACTION" means a transaction or series
of transactions pursuant to which Borrower or any of its Subsidiaries
sells or transfers to any Person (other than the Borrower or a
Subsidiary) any property, whether now owned or hereafter acquired,
and, as part of the same transaction or series of transactions,
Borrower or any Subsidiary rents or leases as lessee, or similarly
acquires the right to possession or use of, such property or one or
more properties which it intends to use for the same purpose or
purposes as such property.
"SUBSIDIARY" means, with respect to Person, any corporation,
partnership, limited liability company, association, joint venture or
other business entity of which more than 50% of the total voting power
of shares of stock or other ownership interests entitled to vote in
the election of the Persons having the power to direct or cause the
direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by Borrower or one or more of
the other Subsidiaries of that Person or a combination thereof.
"TANGIBLE NET WORTH" means, with respect to Borrower and
determined on a consolidated basis in accordance with GAAP, the gross
book value of Borrower's assets (excluding goodwill, patents,
trademarks, trade names, organization expense, treasury stock,
unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like
intangibles, and monies due from affiliates, officers, directors, or
shareholders of Borrower) minus Total Liabilities, including,
_____
but not limited to accrued and deferred income taxes, and any reserves
against assets.
"TOTAL LIABILITIES" means, with respect to Borrower and
determined on a consolidated basis in accordance with GAAP, the sum
of current liabilities plus long term liabilities.
____
"UNFUNDED CURRENT LIABILITY" means, as to any Plan, the amount,
if any, by which the present value of the accrued benefits under such
Plan as of the close of its most recent plan year determined in
accordance with Section 412 of the Code exceeds the fair market value
of the assets allocable thereto.
2. THE LOAN FACILITY.
_________________
(a) Commitment; Expiration. Subject to the terms and conditions
______________________
of this Agreement and in reliance upon the representations and
warranties of Borrower set forth herein, Lender agrees to lend to
Borrower on the Closing Date an aggregate amount not exceeding
$3,500,000 to be used for the purposes identified in Section 5. The
Loans and all other amounts or Obligations owed hereunder with respect
to the Loans or otherwise shall be paid in full no later than June 30,
2000. Amounts borrowed under this subsection 2(a) and subsequently
repaid or prepaid may not be reborrowed. Borrower may make only one
borrowing hereunder. Loans made on the Closing Date shall be
Alternate Base Rate Loans and may thereafter be converted into or
continued as Eurodollar Rate Loans as provided in subsection 3(f).
The Loans shall be made by crediting the account of Borrower at Lender
in same day funds in the amount of the borrowing.
Borrower shall notify Lender of the designation of the Closing
Date and the amount of the borrowing to be made on such date at least
one Business Day prior to the Closing Date. After funding the one
borrowing, Lender shall have no further commitment to lend additional
amounts.
(b) Note. Borrower shall execute and deliver to Lender on the
____
Closing Date a Note substantially in the form of Exhibit I annexed
_________
hereto to evidence the Loans, in the principal amount of the aggregate
amount borrowed under subsection 2(a) and with other appropriate
insertions.
3. INTEREST ON THE LOANS.
_____________________
(a) Rate of Interest. Subject to the provisions of subsections
________________
3(g) and (i) below, each Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether
by acceleration or otherwise) as follows: (i) if a Alternate Base
Rate Loan, then at the Alternate Base Rate; or (ii) if a Eurodollar
Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus 1.00%
____
per annum.
(b) Interest Periods for Eurodollar Rate Loans. In connection
__________________________________________
with each Eurodollar Rate Loan, Borrower may, pursuant to the
applicable Notice of Conversion/Continuation select an interest period
(each an "INTEREST PERIOD") to be applicable to such Loan, which
Interest Period shall be, at Borrower's option, either a one, two,
three or six month period; provided that:
________
(i) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period
shall commence on the day on which the next preceding Interest Period
expires;
(ii) no Interest Period with respect to any portion of the
Loans shall extend beyond June 30, 2000;
(iii) no Interest Period with respect to any portion of the
Loans shall extend beyond a date on which Borrower is required to make
a scheduled payment of principal of the Loans unless the sum of (a)
the aggregate principal amount of Loans that are Alternate Base Rate
Loans plus (b) the aggregate principal amount of Loans that are
____
Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the
Loans on such date;
(iv) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
________
would otherwise expire on a day that is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;
(v) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(vi) there shall be no more than three Interest Periods out-
standing at any time; and
(vii) in the event Borrower fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of
Conversion/Continuation, Borrower shall be deemed to have selected an
Interest Period of one month.
(c) Determination of Applicable Interest Rate. As soon as
_________________________________________
practicable after 10:00 A.M. (Chicago time) on each Interest Rate
Determination Date, Lender shall determine the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate
is then being determined for the applicable Interest Period and shall
promptly give notice thereof (in writing by facsimile or by telephone
confirmed in writing by facsimile) to Borrower.
(d) Eurodollar Rate Loans After Default. After the occurrence
___________________________________
of and during the continuation of an Event of Default, (i) Borrower
may not elect to have a Loan be maintained as, or converted to, a
Eurodollar Rate Loan after the expiration of any Interest Period then
in effect for such Loan and (ii) subject to the provisions of
subsection 3(j) any Notice of Conversion/Continuation given by
Borrower with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to
be rescinded by Borrower.
(e) Interest Payments. Subject to the provisions of subsection
_________________
3(g) interest on each Loan shall be payable in arrears on and to each
Interest Payment Date applicable to such Loan, upon any prepayment of
such Loan (whether due to acceleration or otherwise) and at maturity
(including final maturity).
(f) Conversion or Continuation. Subject to the provisions of
__________________________
subsections 3(d) and (i), Borrower shall have the option (i) to
convert at any time all or any part of its outstanding Loans equal to
$1,000,000 and integral multiples of $100,000 in excess of that amount
from Loans bearing interest at a rate determined by reference to one
basis to Loans bearing interest at a rate determined by reference to
the alternative basis or (ii) upon the expiration of any Interest
Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of
$100,000 in excess of that amount as a Eurodollar Rate Loan; provided,
_________
however, that a Eurodollar Rate Loan may only be converted into a
_______
Alternate Base Rate Loan on the expiration date of an Interest Period
applicable thereto. Borrower shall deliver a notice regarding such
conversion or continuation ("NOTICE OF CONVERSION/CONTINUATION") to
Lender no later than 10:00 A.M. (Chicago time) at least one Business
Day in advance of the proposed conversion date (in the case of a
conversion to a Alternate Base Rate Loan) and at least three Business
Days in advance of the proposed conversion/continuation date (in the
case of a conversion to, or a continuation of, a Eurodollar Rate Loan)
(in writing by facsimile or by telephone confirmed in writing by
facsimile). A Notice of Conversion/Continuation shall specify (i) the
proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the
case of a conversion to, or a continuation of, a Eurodollar Rate Loan,
the requested Interest Period, and (v) in the case of a conversion to,
or a continuation of, a Eurodollar Rate Loan, that no Event of Default
has occurred and is continuing.
(g) Default Rate. Upon the occurrence and during the
____________
continuation of any Event of Default, the outstanding principal amount
of all Loans and, to the extent permitted by applicable law, any
interest payments thereon not paid when due and any fees and other
amounts then due and payable hereunder, shall thereafter bear interest
(including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at the Alternate Base Rate plus 2% per annum; provided
________
that, in the case of Eurodollar Rate Loans, upon the expiration of the
Interest Period in effect at the time any such increase in interest
rate is effective such Eurodollar Rate Loans shall thereupon become
Alternate Base Rate Loans and shall thereafter bear interest payable
upon demand at the Alternate Base Rate plus 2% per annum. Payment or
acceptance of the increased rates of interest provided for in this
subsection 3(g) is not a permitted alternative to timely payment and
shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Lender.
(h) Computation of Interest. Interest on the Loans shall be
_______________________
computed (i) in the case of Alternate Base Rate Loans, on the basis
of a 365-day or 366-day year, as the case may be, and (ii) in the case
of Eurodollar Rate Loans, on the basis of a 360-day year, in each case
for the actual number of days elapsed in the period during which it
accrues. In computing interest on any Loan, the date of the making
of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Alternate Base Rate Loan being converted
from a Eurodollar Rate Loan, the date of conversion of such Eurodollar
Rate Loan to such Alternate Base Rate Loan, as the case may be, shall
be included, and the date of payment of such Loan or the expiration
date of an Interest Period applicable to such Loan or, with respect
to a Alternate Base Rate Loan being converted to a Eurodollar Rate
Loan, the date of conversion of such Alternate Base Rate Loan to such
Eurodollar Rate Loan, as the case may be, shall be excluded.
(i) Illegality or Impracticability of Eurodollar Rate Loans. In
_______________________________________________________
the event that on any date Lender shall have determined that the
making, maintaining or continuation of its Eurodollar Rate Loans
(i) has become unlawful as a result of compliance by Lender in good
faith with any law, treaty, governmental rule, regulation, guideline
or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though
the failure to comply therewith would not be unlawful) or (ii) has
become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank
market or the position of such Lender in that market, then, and in any
such event, Lender shall give notice (by telefacsimile or by telephone
confirmed in writing) to Borrower of such determination. Thereafter
(a) the obligation of Lender to convert Loans to, Eurodollar Rate
Loans shall be suspended until such notice shall be withdrawn by
Lender, (b) to the extent such determination by Lender relates to a
Eurodollar Rate Loan then being requested by Borrower pursuant to a
Notice of Conversion/Continuation, Lender shall convert or continue
such Loan as an Alternate Base Rate Loan, (c) Lender's obligation to
maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS")
shall be terminated at the earlier to occur of the expiration of the
Interest Period then in effect with respect to the Affected Loans or
when required by law, and (d) the Affected Loans shall automatically
convert into Alternate Base Rate Loans on the date of such
termination.
(j) Compensation For Breakage or Non-Commencement of Interest
_________________________________________________________
Periods. Borrower shall compensate Lender, upon written request by
_______
Lender (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities
(including any interest paid by Lender to lenders of funds borrowed
by it to make or carry its Eurodollar Rate Loans and any loss, expense
or liability sustained by Lender in connection with the liquidation
or re-employment of such funds) which that Lender may sustain: (i) if
for any reason (other than a default by Lender) a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Conversion/Continuation, (ii) if any
prepayment (including any prepayment pursuant to subsection 4(b)) or
other principal payment or any conversion of any of its Eurodollar
Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to such Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice
of prepayment given by Borrower, or (iv) as a consequence of any other
default by Borrower in the repayment of its Eurodollar Rate Loans when
required by the terms of this Agreement.
4. PAYMENTS; PREPAYMENTS.
_____________________
(a) Scheduled Payments of Loans. Borrower shall make principal
___________________________
payments on the Loans in installments on the following dates and in
the following amounts: (i) on September 30, 1998, $100,000; (ii) on
each December 31, March 31, June 30 and September 30 thereafter
through and including June 30, 2000, an amount equal to (x) (A) the
Initial Borrowing Amount minus (B) $100,000 divided by (y) 7.00;
_____ __________
provided that the scheduled installments of
________
principal of the Loans set forth above shall be reduced in connection
with any voluntary prepayments of the Loans in accordance with
subsection 4(d); and provided, further that the Loans and all other
________ _______
amounts owed hereunder with respect to the Loans shall be paid in full
no later than June 30, 2000, and the final installment payable by
Borrower in respect of the Loans on such date shall be in an amount,
if such amount is different from that specified above, sufficient to
repay all amounts owing by Borrower under this Agreement with respect
to the Loans.
(b) Voluntary Prepayments. Borrower may, upon not less than one
_____________________
Business Day's prior written or telephonic notice, in the case of
Alternate Base Rate Loans, and three Business Days' prior written or
telephonic notice, in the case of Eurodollar Rate Loans, in each case
given to Lender by 12:00 Noon (Chicago time) on the date required and,
if given by telephone, promptly confirmed in writing to Lender, at any
time and from time to time prepay any Loans on any Business Day in
whole or in part in an aggregate minimum amount of $100,000 and
integral multiples of $10,000 in excess of that amount; provided,
________
however, that a Eurodollar Rate Loan may only be prepaid on the
_______
expiration of the Interest Period applicable thereto. Notice of
prepayment having been given as aforesaid, the principal amount of the
Loans specified in such notice shall become due and payable on the
prepayment date specified therein. Any such voluntary prepayment
shall be applied as specified in subsection 4(d).
(c) Manner and Place of Payment. All payments by Borrower under
___________________________
this Agreement or the Notes shall be made in Dollars in same day
funds, without defense, setoff or counterclaim, free of any
restriction or condition, and delivered to Lender not later than 12:00
Noon (Chicago time) on the date due at the Payment Office for the
account of Lender. Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension
of time shall be included in the computation of the payment of
interest hereunder or under any Note.
(d) Application of Voluntary Prepayments. Any voluntary
____________________________________
prepayments of the Loans pursuant to subsection 4(b) shall be applied
to reduce the scheduled installments of principal of the Loans set
forth in subsection 4(a) in inverse order of maturity.
5. USE OF PROCEEDS. The proceeds of any borrowing under this
_______________
Agreement shall be applied by Borrower to finance the purchase of
stock for Borrower's Employee's Savings and Stock Ownership Plan. No
portion of the proceeds of any borrowing under this Agreement shall
be used by Borrower or any of its Subsidiaries in any manner that
might cause the borrowing or the application of such proceeds to
violate Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to
violate the Exchange Act, in each case as in effect on the date of
such borrowing and such use of proceeds. Following the application
of the proceeds of any borrowing under this Agreement, not more than
25% of the value of the assets (either of Borrower only or of Borrower
and its Subsidiaries on a consolidated basis) subject to the
provisions of subsection 9(a) or 9(d) or subject to any restriction
contained in any agreement or instrument, between Borrower and Lender
or any Affiliate of Lender, relating to Indebtedness will be Margin
Stock.
6. CONDITIONS PRECEDENT. The obligations of Lender to make
____________________
Loans hereunder are subject to the satisfaction of the following
conditions:
(a) Delivery of Documents. On or before the Closing Date
_____________________
(except as otherwise provided), Borrower shall deliver to Lender the
following, each dated the Closing Date and in form and substance
satisfactory to Lender:
(i) Resolutions of the board of directors of Borrower
approving and authorizing the execution, delivery and performance
of this Agreement and the Note, certified as of the Closing Date by
the corporate secretary or an assistant secretary of Borrower as
being in full force and effect without modification or amendment;
provided, that Borrower shall deliver the foregoing certified
________
resolution no later than October 30, 1996 in the event it is
unable, after reasonable effort, to obtain such a resolution by the
Closing Date;
(ii) Signature and incumbency certificates of the officers
of Borrower executing this Agreement and the Note;
(iii) Executed originals of this Agreement and the Note;
(iv) A favorable legal opinion of Borrower's counsel as to
the matters set forth in subsections 7(a), (b), (c), (d), (e) and
(h); provided, that Borrower shall deliver the foregoing opinion no
________
later than October 30, 1996 in the event it is unable, after
reasonable effort, to obtain such an opinion by the Closing Date;
and
(v) Such other documents as Lender may reasonably request.
(b) Arrangement Fee. Borrower shall have paid to First Chicago
_______________
Capital Markets, Inc. a fee of $10,000 for its services in arranging
the Loans.
(c) Representations and Warranties True. The representations
___________________________________
and warranties set forth in Section 7 shall be true, correct and
complete in all material respects on and as of the Closing Date to the
same extent as though made on and as of such date.
(d) No Default. No event shall have occurred and be continuing
__________
or would result from the consummation of the borrowing on the Closing
Date that would constitute an Event of Default or Potential Event of
Default.
(e) Officer's Certificate. Borrower shall have delivered an
_____________________
officer's certificate confirming the matters set forth in subsections
6(c) and (d).
7. REPRESENTATIONS AND WARRANTIES. In order to induce Lender
______________________________
to enter into this Agreement and to maintain and make the Loans,
Borrower makes the following representations, warranties and
agreements, which shall survive the execution and delivery of this
Agreement and the Note and the making of Loans:
(a) Organization and Powers. Borrower is a corporation duly
_______________________
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Borrower has all requisite corporate
power and authority to own and operate its properties, to carry on its
business as now conducted, to enter into this Agreement and the Note
and to carry out the transactions contemplated thereby.
(b) Due Authorization. The execution, delivery and performance
_________________
of this Agreement and the Note have been duly authorized by all
necessary corporate action on the part of Borrower.
(c) Binding Obligation. Each of this Agreement and the Note has
__________________
been duly executed and delivered by Borrower and is the legally valid
and binding obligation of Borrower, enforceable against it in
accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
(d) No Violation. To Borrower's knowledge, the execution,
____________
delivery or performance by Borrower of this Agreement and the Note
will not (i) contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) conflict or be inconsistent with
or result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any
lien upon any of the property or assets of Borrower pursuant to the
terms of any indenture, mortgage, deed of trust, credit agreement,
loan agreement or any other material agreement, contract or instrument
to which Borrower is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) violate any
provision of the articles or certificate of incorporation or by-laws
of Borrower or any of its Domestic Subsidiaries.
(e) Government Consents. To Borrower's knowledge, the
___________________
execution, delivery and performance by Borrower of this Agreement and
the Note and the consummation of the transactions contemplated by this
Agreement and the Note do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with
or by, any federal, state or other governmental authority or
regulatory body.
(f) Financial Statements. The (i) audited consolidated balance
____________________
sheet of Borrower and its Subsidiaries at December 31, 1995 and the
related audited consolidated statement of operations and cash flows
of Borrower and its Subsidiaries for the fiscal year ended on such
date, and (ii) unaudited consolidated balance sheet of Borrower and
its Subsidiaries at June 30, 1996 and the related audited consolidated
statement of operations and cash flows of Borrower and its
Subsidiaries for the fiscal quarter ended on such date, each
heretofore furnished to Lender, subject to year-end audit adjustments,
present fairly the consolidated financial condition of Borrower and
its Subsidiaries at the date of such balance sheets and statements of
income. All such consolidated financial statements have been prepared
in accordance with GAAP consistently applied.
(g) No Material Adverse Change. Since June 30, 1996, to
__________________________
Borrower's knowledge, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material
Adverse Effect.
(h) Absence of Litigation; Adverse Facts. To Borrower's
____________________________________
knowledge, there is no action, suit, arbitration, tax claim or other
dispute pending or threatened against Borrower, which, if adversely
determined, could reasonably be expected to result in a Material
Adverse Effect. To Borrower's knowledge, neither Borrower nor any of
its Subsidiaries (i) is in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, or (ii) is subject to or in
default with respect to any final material judgments, writs,
injunctions, decrees, rules or regulations of any court or any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(i) Payment of Taxes. All material tax returns and reports of
________________
Borrower and its Domestic Subsidiaries required to be filed have been
timely filed, and all taxes shown on such tax returns to be due and
payable and all assessments, fees and other governmental charges upon
Borrower and its Domestic Subsidiaries which are due and payable have
been paid when due and payable. Borrower knows of no proposed tax
assessment against it or any of its Subsidiaries which is not being
actively contested by Borrower or such Subsidiary.
(j) Subsidiaries. Each of the Domestic Subsidiaries of Borrower
____________
is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation, has
all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted, and is
qualified to do business and in good standing in every jurisdiction
where such qualification is required, in each case except where
failure to be so qualified or in good standing or a lack of such
corporate power and authority has not had and will not have a Material
Adverse Effect.
(k) Compliance with ERISA. Each Plan is in substantial
_____________________
compliance with ERISA; no Plan is insolvent or in reorganization; no
Plan has an Unfunded Current Liability, no Plan has an accumulated or
waived funding deficiency or permitted decreases in its funding
standard account within the meaning of Section 412 of the Code.
Neither Borrower nor any ERISA Affiliate has incurred any material
liability to or on account of a Plan pursuant to Sections 502(c), (i)
or (l), 515, 4062, 4063, 4064, 4071, 4201 or 4204 of ERISA or Chapter
43 of the Code or expects to incur any liability under any of the
foregoing sections. No proceedings have been instituted to terminate
any Plan. No condition exists which presents a material risk to
Borrower of incurring a liability to or on account of a Plan pursuant
to the foregoing provisions of ERISA and the Code. No lien imposed
under the Code or ERISA on the assets of Borrower exists or is likely
to arise on account of any Plan. Borrower may terminate contributions
to any other employee benefit plans maintained by them without
incurring any material liability to any Person interested therein.
No Plan has received notice from the Internal Revenue Service of the
failure of such Plan to qualify under Section 401(a) of the Code.
(l) Compliance with Laws. To Borrower's knowledge, each of
____________________
Borrower and its Domestic Subsidiaries is in compliance with all
applicable material statutes, regulations and orders of, and all
applicable material restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards and
controls), except such noncompliances as would not, in the aggregate,
have a material adverse effect on the business, operations, property,
assets, condition (financial or otherwise) or prospects of Borrower
or any of its Subsidiaries.
(m) Title to Properties. Borrower and its Domestic Subsidiaries
___________________
have (i) good, sufficient and legal title to (in the case of fee
interests in real property), (ii) valid leasehold interests in (in the
case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of
their respective properties and assets. Except as permitted by this
Agreement, all such properties and assets are free and clear of lien.
(n) True and Complete Disclosure. To Borrower's knowledge, all
____________________________
factual information heretofore furnished by or on behalf of Borrower
in writing to Lender for purposes of or in connection with this
Agreement or any transaction contemplated herein is, and all other
such factual information hereafter furnished by or on behalf of the
Borrower in writing to Lender (or any successor or assignee thereof)
will be, true and accurate in all material respects.
(o) Other Obligations. To Borrower's knowledge, Borrower is not
_________________
in default on any obligation for borrowed money, any purchase money
obligation or, to the best of its knowledge, any other material lease,
commitment, contract, instrument or obligation.
(p) No Event of Default. To Borrower's knowledge, there is no
___________________
event which is, or with notice or lapse of time would be, an Event of
Default under this Agreement.
8. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that
_____________________
until the Loans and the Notes, together with interest, fees and all
other Obligations incurred hereunder and thereunder, are paid in full:
(a) Information Covenants. Borrower will furnish to Lender:
_____________________
(i) Quarterly Financials. Within 60 days after the end of
____________________
each fiscal quarter of Borrower, copies of the consolidated balance
sheet of Borrower and its Subsidiaries as of the end of such fiscal
quarter and consolidated statements of income and retained earnings
and statements of cash flows of Borrower and its Subsidiaries for
such fiscal quarter and for the portion of the fiscal year of
Borrower and its Subsidiaries ending with such fiscal quarter, all
in reasonable detail, prepared in accordance with GAAP, containing
the certification of and signed on behalf of Borrower by the chief
operating officer, president or chief financial officer of
Borrower. All such balance sheets shall set forth in comparative
form figures from the preceding year end. All such income
statements shall reflect current period and year-to-date figures,
and all such statements of cash flow shall reflect year-to-date
figures.
(ii) Annual Financial Statements. Within 120 days after
___________________________
the end of each fiscal year of Borrower, copies of the consolidated
balance sheets of Borrower and its Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained
earnings and statements of cash flow of Borrower and its
Subsidiaries for such fiscal year, in each case setting forth in
comparative form the figures for the preceding fiscal year of
Borrower and its Subsidiaries, all in reasonable detail and
prepared in accordance with GAAP, accompanied by an unqualified
opinion rendered by Borrower's regularly retained nationally
recognized independent certified public accountants satisfactory to
Lender and containing the certification of and signed by on behalf
of Borrower by the chief operating officer, president or chief
financial officer.
(iii) Officer's Certificates. At the time of the delivery
______________________
of the financial statements provided for in subsections 8(a) and
8(b), a certificate of the chief executive officer or the chief
financial officer of Borrower to the effect that, to the best of
his/her knowledge, no Potential Event of Default or Event of
Default has occurred and is continuing or, if any Potential Event
of Default or Event of Default has occurred and is continuing,
specifying the nature and extent thereof, which certificate shall
also set forth the calculations required to establish whether the
Borrower was in compliance with the provisions of Section 9(h) at
the end of such fiscal quarter or year, as the case may be.
(iv) Notice of Default or Litigation. As soon as possible,
_______________________________
but in no event later than seven Business Days, in the case of
clause (A) below, 20 calendar days, in the case of clause (B)
below, and 10 calendar days, in the case of clause (C) below, after
any officer of Borrower obtains actual knowledge thereof, notice of
(A) the occurrence of any event which constitutes a Potential Event
of Default or an Event of Default, (B) any litigation or
governmental or arbitration proceeding pending (x) against Borrower
or any of its Subsidiaries which could reasonably be expected to
result in a Material Adverse Effect or (y) with respect to this
Agreement or the Note, and (C) any other event which could
reasonably be expected to result in a Material Adverse Effect.
(v) Other Information. From time to time, such other
_________________
information or documents (financial or otherwise) as Lender may
reasonably request.
(b) Compliance with Laws. Borrower will comply with all
____________________
applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies in respect of the
conduct of its business and the ownership of its property (including
applicable statutes, regulations, orders and restrictions relating to
(i) environmental standards and controls and (ii) compliance with
ERISA in respect of any Plan), except such noncompliances as could
not, in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(c) Maintenance of Property, Insurance. The Borrower will (i)
__________________________________
keep all property necessary in its business in good working order and
condition, subject to ordinary course replacements and obsolescence,
and (ii) maintain with financially sound and reputable insurance
companies insurance on all its property and its directors and officers
in such amounts and against such risks as are reasonable and prudent
for the type of businesses engaged in by Borrower and its
Subsidiaries, consistent with standard industry practices for
companies in the same or similar businesses.
(d) Books, Records and Inspections. Borrower will, and will
______________________________
cause its Domestic Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with
GAAP and all material requirements of law shall be made of all
dealings and transactions in relation to its business and activities.
Borrower will permit officers and designated representatives of Lender
to visit and inspect, under guidance of officers of Borrower, any of
the properties of Borrower, and to examine the books of records and
accounts of Borrower and discuss the affairs, finances and accounts
of Borrower with, and be advised as to the same by, its and their
officers and independent accountants, all at such reasonable times
(during normal business hours) and intervals and to such reasonable
extent as Lender may request.
(e) Payment of Taxes. Borrower will, and will cause each of its
________________
Domestic Subsidiaries to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or
assets or in respect of any of its income, businesses or franchises
before any penalty accrues thereon, and all claims (including claims
for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or may become a lien upon any of
its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no
________
such charge or claim need be paid if it is being contested in good
faith by appropriate proceedings timely instituted and diligently
conducted, so long as such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made
therefor.
(f) Corporate Existence. Borrower will, and will cause each of
___________________
its Domestic Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises
material to its business.
9. NEGATIVE COVENANTS. Borrower covenants and agrees that
__________________
until the Loans and Note, together with interest, fees and all other
Obligations incurred hereunder, are paid in full:
(a) Liens. Borrower will not, and will not allow any Domestic
_____
Subsidiary to, create, incur, assume or permit to exist any lien upon
or with respect to any property or assets (real or personal, tangible
or intangible) of Borrower or such Subsidiary, whether now owned or
hereafter acquired, except:
(i) liens for taxes not yet due;
(ii) liens in respect of property or assets of Borrower or
any of its Domestic Subsidiaries imposed by law, which were incurred in the
ordinary course of business;
(iii) easements, rights-of-way, restrictions, minor defects
or irregularities of title;
(iv) additional purchase money security interests in
personal or real property acquired after the date of this Agreement if the
total principal amount of debts secured by such liens does not exceed
$1,000,000 at any one time;
(v) liens in favor of Lender; and
(vi) existing liens described on Schedule 9(a) attached
_____________
hereto.
(b) Dividends. Borrower will not declare or pay dividends on
_________
any of its capital stock except dividends payable in capital stock of
Borrower.
(c) Advances, Investments and Loans. Except in the ordinary
_______________________________
course of business and as otherwise provided herein, including the
transactions permitted by subsection 9(d) below, Borrower will not,
and will not allow any Domestic Subsidiary to, lend money or credit
or make advances to any Person (other than a Subsidiary of Borrower
or an Affiliate of Borrower or such Subsidiary), or purchase or
acquire any stock, obligations or securities of, or any other interest
in, or make any capital contribution to, any other Person; provided,
________
that Borrower may make loans or advances to its Employee's
Savings and Stock Ownership Plan to permit it to purchase stock.
(d) Fundamental Changes, Consolidation, Merger, Sale of Assets,
___________________________________________________________
etc. Borrower will not, and will not allow any Subsidiary to, without
____
Lender's written consent, do any of the following:
(i) engage in any business activity substantially different
from Borrower's or such Subsidiary's present line of business;
(ii) except as set forth in clause (iii) below, liquidate
or dissolve;
(iii) enter into any consolidation, merger, pool, joint
venture, syndicate, or other combination where Borrower's or such
Subsidiary's contribution is in excess of $5,000,000 in any fiscal
year; provided, that after entering into any such permitted
________
consolidation or merger, Borrower shall be the surviving entity;
(iv) lease, or dispose of all or a substantial part of
Borrower's or such Subsidiary's business or assets;
(v) acquire or purchase any other business or its assets;
provided, that Borrower or any such Subsidiary may acquire or purchase
________
another business or its assets if (A) the consideration paid for such
acquisition or purchase (including assumption of debt), when added to
the consideration paid for any other such acquisitions or purchases
in Borrower's fiscal year does not exceed a total of $12,000,000, with
no single acquisition in excess of $8,000,000; and (B) the acquisition
has been approved in writing by the board of directors or other
Persons having the right to control and direct the policies of the
business or assets to be acquired; provided, that acquisitions
________
involving total consideration of less than $500,000 shall not require
such written approval;
(vi) sell or otherwise dispose of any assets for less than
fair market value, or enter into any Sale and Leaseback Transaction
covering any of its fixed or capital assets in an aggregate amount
exceeding $500,000; and
(vii) voluntarily suspend its business for more than 5 days
in any 30 day period.
(e) Transactions with Affiliates. Borrower will not, and will
____________________________
not allow any Subsidiary to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of
business, with any Affiliate of Borrower, other than on terms and
conditions substantially as favorable to Borrower as would be
obtainable by Borrower at the time in a comparable arm's-length
transaction with a Person other than an Affiliate.
(f) Indebtedness. Borrower will not, and will not allow any
____________
Subsidiary to, contract, create, incur, assume or suffer to exist any
Indebtedness or obligation with respect to any lease, without Lender's
written consent, such consent not to be unreasonably withheld;
provided, that Borrower such Subsidiary may:
________
(i) incur Indebtedness owed to Lender under this Agreement
and the Note;
(ii) acquire goods, supplies or merchandise on trade credit
in the ordinary course of business;
(iii) endorse negotiable instruments received in the
ordinary course of business;
(iv) obtain surety bonds in the ordinary course of business;
(v) maintain debts and lines of credit in existence on the
date of this Agreement and disclosed in writing to Lender in
Borrower's financial statements dated June 30, 1996;
(vi) incur Indebtedness for the acquisition or purchase of
a business or its assets subject to the limitations under subsection
9(d) above;
(vii) incur other Indebtedness in an aggregate outstanding
amount at no time exceeding $8,000,000; and
(viii) remain liable with respect to Indebtedness described
in Schedule 9(f) annexed hereto.
_____________
(g) Financial Covenants.
___________________
(i) Tangible Net Worth. Borrower shall not permit
__________________
Tangible Net Worth to be less than the sum of $50,000,000 plus 50% of
____
net income after income taxes (without subtracting losses) earned in
each fiscal quarter ending on or after March 31, 1996.
(ii) Total Liabilities to Tangible Net Worth. Borrower
_______________________________________
shall not permit the ratio of Total Liabilities to Tangible Net Worth
to exceed 1.25:1.00.
(iii) Quick Ratio. Borrower shall maintain on a
___________
consolidated basis a ratio of Quick Assets to current liabilities
(including the current portion of long-term debt) of not less than
1.10:1.00.
(iv) Fixed Charge Coverage Ratio. Borrower shall not
___________________________
permit the Fixed Charge Coverage Ratio to be less than 1.25:1.00.
10. EVENTS OF DEFAULT. Upon the occurrence of any of the
_________________
following specified events (each an "Event of Default");
(a) Payments. Borrower shall (i) default in the payment when
________
due of any principal of any Loan or the Note or (ii) default, and such
default shall continue unremedied for one Business Day, in the payment
when due of interest on any Loan, any fees or any other amounts owing
hereunder or under the Note; or
(b) Representations, etc. Any material representation, warranty
_____________________
or statement made by Borrower herein or in any certificate delivered
pursuant hereto shall prove to be untrue in any material respect on
the date as of which made or deemed made; or
(c) Covenants. Borrower shall (i) default in the due
_________
performance or observance by it of any term, covenant or agreement
contained in subsection 8(f) or Section 9 or (ii) default in the due
performance or observance by it of any term, covenant or agreement
(other than those referred to in subsections 10(a) or 10(b) or clause
(i) of this subsection 10(c)) contained in this Agreement and such
default shall continue unremedied for a period of 15 Business Days
after written notice to Borrower by Lender; or
(d) Cross-Default. Any default occurs under any agreement in
_____________
connection with any credit Borrower or any Domestic Subsidiary has
obtained from another Person or which Borrower or any Domestic
Subsidiary has guaranteed in the amount of $100,000 or more in the
aggregate if the default consists of failing to make a payment when
due or gives the other party the right to accelerate the obligation
(whether or not resulting in acceleration); or
(e) Other Bank Agreements. Borrower or any Domestic Subsidiary
_____________________
fails to meet the conditions of, or fails to perform any material
obligation under any other agreement that Borrower or any material
Subsidiary has with any other bank or any affiliate of any other bank.
(f) Bankruptcy, etc. Borrower files a bankruptcy petition, a
________________
bankruptcy petition is filed against Borrower or any material
Subsidiary, or Borrower or any material Subsidiary makes a general
assignment for the benefit of creditors; notwithstanding the
foregoing, any bankruptcy petition filed against Borrower or any
material Subsidiary will not be an Event of Default hereunder if the
bankruptcy petition is dismissed within a period of 60 days after the
filing; or
(g) Receivers. A receiver or similar official is appointed for
_________
Borrower's (or any material Subsidiary's) business, or the business
is terminated; or
(h) Judgments. One or more judgments, decrees or arbitration
_________
awards shall be entered against Borrower or any of its Subsidiaries
involving in the aggregate a liability (not paid or fully covered by
insurance) of $1,000,000 or more, and all such judgments, decrees or
awards shall not have been vacated, discharged or stayed or appealed
pending appeal within the permitted time period after the entry
thereof; or
(i) Changes of Control. Any Person or any two or more Persons
__________________
acting in concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission,
directly or indirectly, of securities of Borrower (or other securities
convertible into such securities) representing 30% or more of the
combined voting power of all securities of Borrower entitled to vote
in the election of directors, other than securities having such power
only by reason of the happening of a contingency; or
(j) Material Adverse Effect. Any Material Adverse Effect
_______________________
occurs;
then, and in any such event, and at any time thereafter, if any Event
of Default shall then be continuing, Lender may by written notice to
Borrower, provided, that, if an Event of Default specified in Section
________
10(d) shall occur with respect to Borrower, the result which would
occur upon the giving of written notice by Lender to Borrower as
hereafter shall occur automatically without the giving of any such
notice) declare the principal of and any accrued interest in respect
of all Loans and the Note and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower, and the obligation
of Lender to make any Loan shall thereupon terminate.
11. MISCELLANEOUS.
_____________
(a) Expenses. Borrower shall pay all reasonable out-of-pocket
________
costs and expenses of Lender (including, without limitation, the
reasonable fees and disbursements of counsel for Lender in a total
amount not exceeding $5,000.00 in the case of clause (i) below) in
connection with (i) the preparation, execution and delivery of this
Agreement and the Note, the documents and instruments referred to
herein and therein and any amendment, waiver or consent relating
hereto or thereto and (ii) the enforcement of this Agreement and the
Note and the documents and instruments referred to herein and therein.
All costs, fees and expenses incurred by First Chicago Capital
Markets, Inc. in connection with this Agreement shall also be paid by
Borrower.
(b) Participation and Assignments. Lender may, in its sole
_____________________________
discretion, sell participations in any amount in the Loans. Lender
shall also have the right to sell assignments of any amounts of the
Loans with the giving of notice to and the prior written consent of
Borrower (which consent shall not be unreasonably withheld); provided,
________
that if an Event of Default has occurred and is continuing, the
consent of Borrower shall not be required. Borrower shall release
Lender for any the amounts so assigned. Lender may release any
information regarding Borrower and its Subsidiaries to prospective
participants and assigns.
(c) Indemnification. Borrower hereby indemnifies and holds
_______________
Lender and the officers, directors, employees, agents and Affiliates
of Lender (the "INDEMNITEES") harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses (including
reasonable attorneys' fees and expenses) which the Indemnitees may
incur or which may be claimed against the Indemnitees by any Person
by reason of or in connection with the execution, delivery or
performance by Borrower of this Agreement, the Note, or any
transaction contemplated therein, and in any case, Borrower shall not
be liable under this Section 11(c) to indemnify the Indemnitees for
any claims, damages, losses, liabilities, costs or expenses resulting
solely from Lender's gross negligence or willful misconduct.
(d) Increased Costs. If Lender shall determine that the
_______________
adoption of any applicable law, rule or regulation concerning capital
adequacy or any applicable change therein, or any change in
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender with
any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or
comparable agency, in each case occurring after the date hereof, has
or will have the effect of reducing the rate of return on Lender's
capital as a consequence of its obligation to make any Loans hereunder
to a level below that which Lender could have achieved but for such
adoption, change or compliance (taking into consideration Lender's
policies with respect to capital adequacy) by any amount deemed by
Lender to be material, then from time to time, within 15 days after
demand by Lender, Borrower shall pay to Lender such additional amounts
as shall compensate Lender for such reduction. Lender shall promptly
notify Borrower of any of the matters set forth in the preceding
sentence. A certificate as to additional amounts owed Lender, showing
in reasonable detail the basis for the calculation thereof, submitted
in good faith to Borrower by Lender shall, absent manifest error, be
final and conclusive and binding upon all of the parties hereto.
(e) Notices. Except as otherwise expressly provided herein, all
_______
notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopier or cable
communication) and mailed, telegraphed, telexed, telecopied, cabled
or delivered at the addresses shown on the signature pages hereof.
(f) No Waiver. No failure or delay on the part of Lender or the
_________
holder of any Note in exercising any right, power or privilege
hereunder and no course of dealing between Borrower and Lender or the
holder of any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder.
(g) Governing Law; Waiver of Jury Trial. THIS AGREEMENT AND THE
___________________________________
NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF CALIFORNIA. ALL PARTIES HERETO HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
(h) Amendment or Waiver. No approval, consent, amendment or
___________________
waiver of this Agreement or the Note shall be effective unless it is
in writing signed by Borrower and the Lender.
(i) Counterparts. This Agreement may be executed in any number
____________
of counterparts and by the different parties hereto on separate
counterparts by facsimile or otherwise, each of which when so executed
and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
(j) Headings Descriptive. The headings of the several sections
____________________
and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any
provision of this Agreement.
(k) Severability. In case any provision in or obligation under
____________
this Agreement or the Note shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or obliga-
tion in any other jurisdiction, shall not in any way be affected or
impaired thereby.
(l) Arbitration. At the request of either Lender or Borrower,
___________
any controversies or claims between Lender and Borrower will be
settled by arbitration in accordance with the rules of the American
Arbitration Association. The venue of such arbitration shall be Los
Angeles, California. The arbitrators shall have the authority to
award costs (including reasonable attorney's fees) to the respective
parties in connection with the arbitration proceedings based on the
success of each party's position with respect to the issues decided
in such arbitration proceedings.
[remainder of page intentionally blank]
<PAGE>
Kindly indicate your acceptance of this Agreement by executing
and delivering a counterpart of this Agreement on or before September
30, 1996.
THE FIRST NATIONAL BANK OF CHICAGO
By: /S/ L. GENE BEUBE
______________________________
Its: SENIOR VICE PRESIDENT
______________________________
Notice Address:
First Chicago NBD
1 First National Plaza, Suite 0364/1/14
Chicago, Illinois 60670
Attention: Sharon Bosch, CFA
Tel: (312) 732-7112
Fax: (312) 732-4840
THE FOREGOING AGREEMENT IS
ACCEPTED ON SEPTEMBER 30, 1996:
SYNCOR INTERNATIONAL CORPORATION
By: /S/ MICHAEL E. MIKITY
____________________________
Its: SENIOR VICE PRESIDENT AND CFO
______________________________
Notice Address:
20001 Prairie Street
Chatsworth, California 91311
Attention: Michael E. Mikity
Vice President and CFO
Attention: Company General Counsel
<PAGE>
EXHIBIT I
[FORM OF NOTE]
SYNCOR INTERNATIONAL CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2000
$____________ ____________, 1996
FOR VALUE RECEIVED, SYNCOR INTERNATIONAL CORPORATION, a Delaware
corporation ("COMPANY"), promises to pay to THE FIRST NATIONAL BANK
OF CHICAGO ("PAYEE") or its registered assigns the principal amount
of _____________________ DOLLARS ($_____________) in the installments
referred to below.
Company also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates
and at the times which shall be determined in accordance with the
provisions of that certain Agreement dated as of September 30, 1996
by and among Company and Payee, as Lender (said Agreement, as it may
be amended, supplemented or otherwise modified from time to time,
being the "AGREEMENT", the terms defined therein and not otherwise
defined herein being used herein as therein defined).
Company shall make principal payments on this Note in consecutive
quarterly installments, commencing on September 30, 1998 and ending
on June 30, 2000. Each such installment shall be due on the date
specified in the Agreement and in an amount determined in accordance
with the provisions thereof; provided that the last such installment
________
shall be in an amount sufficient to repay the entire unpaid principal
balance of this Note, together with all accrued and unpaid interest
thereon.
This Note is issued pursuant to and entitled to the benefits of
the Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Loan evidenced
hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same
day funds at the Payment Office or at such other place as shall be
designated in writing for such purpose in accordance with the terms
of the Agreement.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be
included in the computation of the payment of interest on this Note.
This Note is subject to prepayment at the option of Company as
provided in subsection 4(b) of the Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
(INCLUDING SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF
CALIFORNIA), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued and
unpaid interest thereon, may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect
provided in the Agreement.
The terms of this Note are subject to amendment only in the
manner provided in the Agreement.
This Note is subject to restrictions on transfer or assignment
as provided in subsection 11(b) of the Agreement.
No reference herein to the Agreement and no provision of this
Note or the Agreement shall alter or impair the obligations of
Company, which are absolute and unconditional, to pay the principal
of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
Company promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 11(a) of the
Agreement, incurred in the collection and enforcement of this Note.
Company and any endorsers of this Note hereby consent to renewals and
extensions of time at or after the maturity hereof, without notice,
and hereby waive diligence, presentment, protest, demand and notice
of every kind and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of
the date and at the place first written above.
SYNCOR INTERNATIONAL CORPORATION
By: __________________________
Title: ________________________
<PAGE>
SCHEDULE 9(a)
EXISTING LIENS
______________
1. Security Agreement, dated July 15, 1996, between Syncor
Management Corporation, as debtor ("Management"), and John
Hancock Mutual Life Insurance Company, as lender and as
assignee of Corporate Credit, Inc. ("John Hancock"), pursuant
to which Management granted a security interest to John
Hancock of all of its right, title and interest as a limited
partner in the American Tax Credit Corporate Fund III, L.P.
2. Pledge and Security Agreement, dated June 28, 1993, between
Management and Boston Capital Corporate Tax Credit Fund II, as
lender (the "Fund"), pursuant to which Management granted a
security interest to the Fund of all of its right, title and
interest as a limited partner in the Fund.
<PAGE>
SCHEDULE 9(f)
EXISTING INDEBTEDNESS
_____________________
1. The Guarantee of Parent Corporation, dated July 1996, made by
Syncor International Corporation (the "Company") in favor of
John Hancock, pursuant to which the Company guarantees the
payment and performance of Management's obligations under the
$2,637,833 Promissory Note in favor John Hancock in connection
with its investment in the American Tax Credit Corporate Fund
III, L.P.
<PAGE>
EXHIBIT 10.2
GUARANTEE OF PARENT CORPORATION
_______________________________
For valuable consideration, receipt of which is hereby acknowledged, the
undersigned (the "Guarantor") hereby unconditionally guarantees to Corporate
Credit, Inc., a New York Corporation (together with its successors and assigns,
the "Lender"), the payment and performance of all the obligations of Syncor
Management Corporation (name of subsidiary corporation) (the "Borrower") under
the Promissory Note in the amount of $2,637,833.00, dated July , 1996,
executed by the Borrower and payable to the Lender (the "Note").
This is an absolute, unconditional, present and continuing guarantee of
payment and not of collection, and the Guarantor hereby waives acceptance of
this guarantee and, to the extent permissible under applicable law, all notices
which may be required to be given to the Guarantor and all defenses which may be
available to the Guarantor under the Note or hereunder, as guarantor or surety
as the case may be, under any statute or rule of law. The obligation of the
Guarantor hereunder is the liability of a surely and is in no way conditioned or
contingent upon any attempt to collect from Borrower hereunder, or upon any
other condition or contingency and shall arise immediately upon nonpayment of
the Note without taking any prior action or proceeding of any kind to enforce
any such Note or for the liquidation or foreclosure of any security given for
such Note.
This Guarantee shall continue in full force and effect until all
obligations due under the Note and hereunder shall have been paid in full.
It shall be enforceable despite (i) any discharge of the Borrower in
bankruptcy, or (ii) any adjustment of the debts, liabilities or obligations
of the Borrower in insolvency proceedings or pursuant to some other
compromise with creditors. If any payment made by the Borrower to the
Lender is avoided or reduced on account of any law relating to the
insolvency, liquidation or reorganization of debtors, or for any other
reason, the Lender or any successor or assignee thereof shall be entitled
to recover in full from the Guarantor the amount of any such repayment so
avoided or reduced.
The Guarantee contains our sole and entire understanding and agreement with
respect to its entire subject matter, and all prior negotiations, discussions,
commitments, representations, agreements and understandings heretofore are
merged herein. This Guarantee cannot be changed or terminated orally.
The obligations of the Guarantor hereunder shall not be affected, impaired,
released or lessened by any defense, set-off or counterclaim which Borrower or
Guarantor may have against Lender or any other entity, or by the invalidity,
irregularity or unenforceability of all or any part of the Borrower obligations
or of any of the documents executed by the Borrower or the Guarantor, or by the
delay or failure of the Lender to exercise any of its rights and remedies
against the Borrower or against any collateral or security for the Borrower
Obligations. No amendment or modification of this Guarantee shall be
effective unless the same shall be in writing, duly signed on behalf of the
entity against whom such waiver, modification or amendment is asserted.
No amendment of the Promissory Note permitted by the terms thereof or any
renewal, extension or modification thereof shall affect, impair or release this
Guarantee. This Guarantee shall be freely assignable by the Lender and shall
bind the Guarantor and the personal representatives and successors of the
Guarantor and shall inure to the benefit of the Lender and its successors and
assigns and to the benefit of each beneficiary of this Agreement and the heirs,
personal representatives, successors and assigns of each beneficiary. If the
Guarantor consists of more than one party, the obligations of such parties
hereunder shall be joint and several.
This Guaranty shall be governed and construed in accordance with the
laws of California without giving effect to any conflicts of laws principles
or cases.
WITNESS the execution of this Guarantee as a sealed instrument.
Date: July 15, 1996
_____________
Syncor International Corporation /S/ Edwin Burgos
________________________________ _____________________
Name of Parent Corporation Witness
(Print)
By: /S/ Michael E. Mikity
_______________________
Signature of Authorized
Officer of Parent Corporation
Vice President
Michael Mikity, and Chief Financial Officer
___________________________________________
Name and Title (Print)<PAGE>
EXHIBIT 10.3
SYNCOR INTERNATIONAL CORPORATION
1996 MANAGEMENT INCENTIVE PLAN
SUMMARY PLAN DESCRIPTION
Revised 7/96<PAGE>
1996 MANAGEMENT INCENTIVE PLAN
PURPOSE
_______
The 1996 Management Incentive Plan is designed to support the
achievement of the Company's profit objectives by incentivizing
managers, directors and above who have direct influence in
accomplishing Syncor's business objectives for 1996. Direct influence
is defined as budgetary responsibility, major program responsibility
and sales responsibility.
OVERVIEW
________
The framework for the 1996 Management Incentive Plan was developed by
the Sales and Service Task Force (SSTF) in 1995 and is also based on
management criteria. The objectives identified for the Plan are:
- Profit driven
- Shared or common goals
- Simplicity
- Realistic, equitable goals
- Linear relationship with goal achievement
- Measurable
In addition, the 1996 Plan was developed to ensure: consistency with
overall Company performance (EARNINGS PER SHARE - EPS); the providing
of equity in total incentive opportunity; and affordability. The 1996
Management Incentive Plan consists of three incentive components;
based on your position, you may be eligible for one or more of the
following components of the Management Incentive Plan:
1) Local Achievement Incentive
___________________________
2) Earnings Per Share (EPS) Incentive*
___________________________________
- EPS Level 1
- EPS Level 2
3) Long-Term Incentive*
____________________
*The EPS Incentive and Long-Term Incentive are subject to INDIVIDUAL
PERFORMANCE ACHIEVEMENT. Please refer to the Individual Performance
section on pages 6 through 8 for more details.
The following two pages summarize how payment under each of the
Incentive Plan components (1 and 2) is determined and what positions
are eligible to participate in these component(s).<PAGE>
1996 Management Incentive Plan
Page 2
<TABLE>
<CAPTION>
Position Local Achievement Payment Earnings Per Share Payment
Incentive Based On (EPS) Incentive* Based On
==============================================================================
<S> <C> <C> <C> <C>
Pharmacy Paid at 100% targeted Local Paid at achievement of: Syncor's
Manager profit contribution Pharmacy EPS Level 1=$.50/share Combined
achievement or Team EPS Level 2=$.55/share CY96
CY96 Annual
Annual Results
Results
_________________________________________________________________________________
Local Syncor's
Sr Pharmacy Paid at 100% targeted Pharmacy Paid at achievement of: Combined
Manager profit contribution or Team EPS Level 1=$.50/share CY96
achievement CY96 EPS Level 2=$.55/share Annual
Annual Results
Results
_________________________________________________________________________________
Syncor's
Sales Paid at achievement of: Combined
Manager N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
General Paid at achievement of: Combined
Manager N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
Nat'l Acct Paid at achievement of: Combined
Manager N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
Corporate Paid at achievement of: Combined
Manager N/A N/A EPS Level 1=$.50/share CY96
(Grade 314+) EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
Program Paid at achievement of: Combined
Director N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
==============================================================================
</TABLE>
*Payment of Incentive is subject to Consolidated EPS target, INDIVIDUAL
PERFORMANCE ACHIEVEMENT and, for some positions, Company cash target. Please
refer to the following applicable sections for more details.<PAGE>
1996 Management Incentive Plan
Page 3
<TABLE>
<CAPTION>
Position Local Achievement Payment Earnings Per Share Payment
Incentive Based On (EPS) Incentive* Based On
==============================================================================
<S> <C> <C> <C> <C>
Syncor's
Director Paid at achievement of: Combined
N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
Executive Paid at achievement of: Combined
Director N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
VP, Sales Paid at achievement of: Combined
and N/A N/A EPS Level 1=$.50/share CY96
Operations EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
VP, Paid at achievement of: Combined
Department N/A N/A EPS Level 1=$.50/share CY96
Function EPS Level 2=$.55/share Annual
Results
_________________________________________________________________________________
Syncor's
Paid at achievement of: Combined
Officer N/A N/A EPS Level 1=$.50/share CY96
EPS Level 2=$.55/share Annual
Results
==============================================================================
</TABLE>
*Payment of Incentive is subject to Consolidated EPS target, INDIVIDUAL
PERFORMANCE ACHIEVEMENT and, for some positions, Company cash target. Please
refer to the following applicable sections for more details.
<PAGE>
1996 Management Incentive Plan
Page 4
PAY COMPONENTS
______________
I. LOCAL ACHIEVEMENT INCENTIVE
___________________________
A LOCAL ACHIEVEMENT INCENTIVE is assigned for each Pharmacy Manager and Senior
Pharmacy Manager. An Incentive is earned when targeted PROFIT CONTRIBUTION
for the pharmacy(ies), metro area or Business Unit (as applicable) is
attained. (Note: No incentive will be paid out for achievement below 100%
of targeted PROFIT CONTRIBUTION).
New for 1996 - Team Incentive:
______________
Pharmacy Managers and Senior Pharmacy Managers may have the
opportunity to participate in the LOCAL ACHIEVEMENT INCENTIVE
based on team performance. The team can either be a metro area
or the entire Business Unit. All General Managers will be
provided with information so an informed decision can be made to
either participate on an individual basis or as part of a team.
The decision to participate as a team must be made by a majority
__
vote of all Pharmacy Managers and Senior
____
Pharmacy Managers within a metro area or Business Unit. If a
team incentive is selected by majority vote within a metro area
or Business Unit, all affected managers will be required to sign
a document indicating their agreement to participate in the
LOCAL ACHIEVEMENT INCENTIVE as a team. If team participation is
elected, the LOCAL ACHIEVEMENT INCENTIVE will be calculated as
stated above, using combined PROFIT CONTRIBUTION results for the
participating pharmacies. (The applicable General Manager's
budget will not be included in the calculation.) The decision
to participate as a team is binding for the entire 1996 Plan
Year.
The LOCAL ACHIEVEMENT INCENTIVE is paid out on an annual basis. NOTE:
DAYS SALES OUTSTANDING (DSO) WILL IMPACT THE PROFIT CONTRIBUTION ACHIEVEMENT.
COST OF MONEY REMAINS AS A LINE ITEM ABOVE THE GROSS PROFIT LINE ON THE P&L.
II. EPS INCENTIVE
_____________
Company Performance
___________________
Overall Company performance must be achieved prior to payment of EPS
INCENTIVES. Company performance consists of two requirements:
REQUIREMENT EARNINGS PER SHARE (EPS) TARGET
_____________________________________________________________
I Consolidated $.33/share
II CORE - Level 1 $.50/share
CORE - Level 2 $.55/share
Please refer to Appendix I for the definitions of all italicized terms.<PAGE>
1996 Management Incentive Plan
Page 5
REQUIREMENT I - CONSOLIDATED EPS must be achieved first. The Consolidated EPS
target is a combination of the following:
CORE (including International) $ .50/share
PET ($.30/share)
Other Earnings $ .13/share
__________________________ ___________
CONSOLIDATED $ .33/SHARE
Note: As of this date, the PET budget has not been finalized;
upon finalization a change may occur in the above
calculation for the Consolidated EPS number.
_______________________
Notification will occur if a change results upon
finalization of the PET budget.
REQUIREMENT II - CORE EPS Level 1 must be achieved for the EPS Level
1 payment to occur and EPS Level 2 must be achieved for the EPS Level
2 payment to occur. Further explanation is provided below:
The EPS INCENTIVE includes two possible incentive payments:
Level 1) If the Company meets its targeted EPS of $.50/share, and
Level 2) if the Company exceeds its targeted EPS and attains $.55/share.
A percent of salary is designated for each eligible employee for both
levels of EPS achievement: $.50/share and $.55/share. To calculate
the EPS INCENTIVE at $.50/share, the designated percentage is
multiplied by the eligible employee's salary. To calculate the EPS
INCENTIVE at $.55/share, the designated percentage is multiplied by
the eligible employee's salary; add the result to the incentive
calculated at $.50/share to calculate the total EPS INCENTIVE. The
salary used to determine the incentive payment will be the salary in
effect at 01/01/96. However, if an employee receives a salary change
during 1996, the payment will be determined based on an average salary
for 1996.
(PLEASE REFER TO THE ELIGIBILITY CHART ON PAGE 10 FOR YOUR LOCAL
ACHIEVEMENT INCENTIVE, IF APPLICABLE, AND PERCENTAGE OF SALARY PAYABLE
FOR EPS ACHIEVEMENT.)
III. LONG-TERM INCENTIVE
___________________
A LONG-TERM INCENTIVE has been designed to reward LONG-TERM results.
Program Directors, Directors, General Mangers, Executive Directors,
Vice Presidents and Officers will have an additional percentage of
salary designated for each achievement level (i.e. $.50/share and
$.55/share) set aside in a long-term plan. This LONG-TERM INCENTIVE
is deferred for three years. Please refer to pages 12-15 for more
details if you are eligible for this incentive.
Please refer to Appendix I for the definitions of all italicized
terms.
<PAGE>
1996 Management Incentive Plan
Page 6
CASH TARGET ASSESSMENT
______________________
Syncor's business objectives for 1996 include the investment of
expansion in PET and International sites. The funding of these
investments requires that we have a new focus and accountability on
cash and expense management. Therefore, the cash target assessment
feature has been added to this Incentive Plan. This feature is only
____
applicable to the following incentive plan participants:
PROGRAM DIRECTOR
DIRECTOR
GENERAL MANAGER
EXECUTIVE DIRECTOR
VICE PRESIDENT
OFFICER
The CASH TARGET ASSESSMENT only applies if we DO NOT meet our cash
goal for 1996. In the event that this occurs, there will be a 25%
PENALTY ASSESSED AGAINST THE TOTAL INCENTIVE AMOUNTS calculated for each of
the above participants. (This assessment would apply to short and
long-term incentive amounts.) If the cash target is met, no penalty
__
will be applied.
INDIVIDUAL PERFORMANCE
______________________
There are two eligibility components used to determine Individual performance
results achieved for payment of the EPS Incentive and the Long-Term Incentive:
_____________ ___________________
1) FINANCIAL OBJECTIVES and 2) MANAGEMENT BY OBJECTIVES (MBO'S). Your
individual performance on these two components will be used to derive an
INDIVIDUAL PERFORMANCE ACHIEVEMENT factor which will be multiplied by your
EPS Incentive amount (and Long-Term Incentive amount for eligible positions)
to determine your final pay-out. As you can see below, financial objectives
that are not met at 100% are severely discounted for the pay-out level. The
weighing of each of the components of the INDIVIDUAL PERFORMANCE ACHIEVEMENT
factor are as follows:
FIELD MANAGERS (EXCLUDING SALES MANAGERS):
_________________________________________
1) FINANCIAL OBJECTIVES (70% WEIGHING) - Field managers' financial objectives
are measured by attainment of targeted profit contribution for core business
only (bulk not included).
PROFIT CONTRIBUTION (PC)
PC ACHIEVEMENT* PAYOUT LEVEL
___________________________________________________
90% - 94.9% 1/3
95% - 99.9% 2/3
100% or greater 3/3
*Less than 90% will result in no credit for the Financial objective.
Please refer to Appendix I for the definitions of all italicized terms.<PAGE>
1996 Management Incentive Plan
Page 7
2) MBO'S (30% WEIGHING) - Field managers determine these objectives in
conjunction with their direct supervisor based on their local market/location
needs, threats, opportunities, etc. After the end of the Plan Year, the
supervisor will assess each manager's performance on established MBO's.
(Refer to the Guidelines for Developing MBO's and the MBO Worksheet for
additional information.)
SALES MANAGERS:
______________
1) FINANCIAL OBJECTIVES (70% WEIGHING) - Sales Managers' financial objectives
are measured by attainment of targeted gross profit for core business only
(bulk not included).
GROSS PROFIT (GP)
GP ACHIEVEMENT* PAYOUT LEVEL
____________________________________________________
90% - 94.9% 1/3
95% - 99.9% 2/3
100% or greater 3/3
*Less than 90% will result in no credit for the Financial objective.
2) MBO'S (30% WEIGHING) - Sales Managers determine these objectives in
conjunction with their direct supervisor based on their local market/location
needs, threats, opportunities, etc. After the end of the Plan Year, the
supervisor will assess each Sales Manager's performance on established MBO's.
(Refer to the Guidelines for Developing MBO's and the MBO Worksheet for
additional information.)
CORPORATE MANAGERS (COST CENTER RESPONSIBILITY ONLY):
____________________________________________________
1) FINANCIAL OBJECTIVES (40%) - Corporate managers' financial objectives are
measured by budget attainment.
BUDGET ATTAINMENT
BUDGET ATTAINMENT* PAYOUT LEVEL
____________________________________________________
105% - 110% 1/3
100.1% - 104.9% 2/3
100% or less 3/3
*Greater than 110% will result in no credit for the Financial objective.
2) MBO'S (60%) - Corporate managers determine these objectives in conjunction
with their direct supervisor based on their department needs, threats,
opportunities, etc. Each department should reflect their support of PET and
International expansion for 1996. After the end of the Plan Year, the
supervisor will assess each manager's performance on established MBO's.
(Refer to the Guidelines for Developing MBO's and the MBO Worksheet for
additional information.)
Please refer to Appendix I for the definitions of all italicized terms.<PAGE>
1996 Management Incentive Plan
Page 8
CORPORATE MANAGERS (COST CENTER WITH FILED RESPONSIBILITY):
__________________________________________________________
1) FINANCIAL OBJECTIVES (70%) - Corporate managers' (with field responsibility)
financial objectives are measured by budget attainment for core business only
(bulk not included).
BUDGET ATTAINMENT
BUDGET ATTAINMENT* PAYOUT LEVEL
____________________________________________________
90% - 94.9% 1/3
95% - 99.9% 2/3
100% or greater 3/3
*Less than 90% will result in no credit for the Financial objective.
2) MBO'S (30%) - Corporate managers determine these objectives in conjunction
with their direct supervisor based on their unit/area needs, threats,
opportunities, etc. After the end of the Plan Year, the supervisor will
assess each manager's performance on established MBO's. (Refer to the
Guidelines for Developing MBO's and the MBO Worksheet for additional
information.)
It is the responsibility of the manager and his/her supervisor to track the
performance of the manager throughout the year. In order to simplify the
tracking process, an MBO Worksheet has been provided (see page 11). Required
signatures are the manager and immediate supervisor. COMPLETED MBO
WORKSHEETS MUST BE TURNED IN TO HUMAN RESOURCES NO LATER THAN APRIL 30, 1996.
AFTER THE END OF THE PLAN YEAR, MBO'S WILL BE EVALUATED BY EACH MANAGER'S
IMMEDIATE SUPERVISOR; EVALUATED MBO WORKSHEETS MUST BE TURNED IN TO HUMAN
RESOURCES NO LATER THAN FEBRUARY 28, 1997. If final budget numbers are not
available in time to meet the deadline of 2/28/97, supervisors will be
required to use their best estimate of budget results.
_____________
ELIGIBILITY AND OTHER RULES GOVERNING THE INCENTIVE PLAN
________________________________________________________
1. Eligible employees must be actively employed at Syncor on the
last day of the year to receive an annual payout.
2. Eligible employees must have a current performance appraisal
rating of Low Successful or above and not be in the progressive
discipline process at time of payout. If an employee has a
current performance rating of less than Low Successful or is in
the progressive discipline process, he/she must develop a
performance improvement plan agreed upon with employee's
supervisor. When improvement plans have been carried out (no
later than 60 days after the original incentive payment date),
the employee's supervisor must reevaluate the employee's
performance. If the employee is rated Low Successful or above
at that time, he/she is eligible to participate in the Incentive
Plan. An incentive payment may or may not be prorated for the
year, based on performance issues, at the discretion of the
supervisor with approval by Human Resources.
Please refer to Appendix I for the definitions of all italicized terms.<PAGE>
1996 Management Incentive Plan
Page 9
3. Eligible part-time employees will be paid a partial amount,
based on the total number of hours worked during 1996. If the
employee works at least 500 hours during the year, but less than
an average of 35 hours a week, the employee will receive two-
thirds payment, subject to the rules of the Plan. Employees who
work on a casual basis, that is, less than 500 hours per year,
are not eligible.
4. Employees must begin employment with Syncor International
Corporation before October 1, 1996, to participate in this
Incentive Plan. Eligible employees whose first date of
employment falls between January 1, 1996, and October 1, 1996,
will participate on a prorated basis. If an employee's hire
date occurs by the 15th of the month, the month will be credited
for proration. If the employee's hire date occurs after the
15th of the month, the month will not be credited for proration
and proration will start with the month following the employee's
hire date.
5. Eligible employees who change positions or locations during the
year will participate in the Incentive Plan prorated to the
positions or locations held. An employee may only be
incentivized for one position at a time. In the event that an
employee assumes a new position and for a time fulfills the
duties of the previous position until it is filled, the
incentive payment will be calculated based on the new position.
(In the event the new position is not incentivized, the
incentive will be
calculated based on the previous position according to the rules
of the plan. At no time will anyone be eligible to participate
in the Management Incentive Plan based on more than one job
classification at a time.) The prorating rule as described
above in number four (4) will apply, depending on the change in
status date.
6. Payment of an incentive to eligible employees who take a leave
of absence for any reason during the year will be considered on
a case by case basis, which may or may not result in payment of
an incentive.
7. In the circumstances of a windfall (e.g. a sales result that was
realized outside the normal influencing role of the sales
representative), management has the right to exclude the
windfall from the normal incentive calculation.
8. Payment of an incentive will occur within two months after
audited Calendar Year 1996 operating results are announced. It
is expected that incentive payments will be distributed during
March of 1997.
THE INCENTIVE PLAN, AS DESCRIBED, SHALL BE THE MECHANISM AND THE WAY TO
IMPLEMENT THE INTENTION OF MANAGEMENT. THIS INCENTIVE PLAN SHALL NOT
OBLIGATE THE COMPANY OR MANAGEMENT TO GRANT THE BENEFITS CONTEMPLATED
HEREUNDER. CURRENTLY, IT IS MANAGEMENT'S INTENTION AND BEST JUDGMENT THAT
THE PLAN SHOULD BE CARRIED OUT AS DESCRIBED. HOWEVER, UPON HAPPENING OF
UNFORESEEN CIRCUMSTANCES, MANAGEMENT RESERVES THE RIGHT TO CHANGE THE PLAN
AT ANY TIME, RETROACTIVE TO THE BEGINNING OF 1996. NO BENEFITS ARE VESTED
OR COUPLED WITH INTEREST BEFORE PAYMENT IS COMMENCED.
Please refer to Appendix I for the definitions of all italicized terms.<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on page 4, payment of a LOCAL ACHIEVEMENT INCENTIVE is
based on 100% achievement of targeted profit contribution. Payment
of an EPS INCENTIVE is based on the Company meeting the Consolidated
EPS target of $.33/share and the CORE EPS Level 1 = $.50/share or EPS
Level 2 = $.55/share. (The EPS Incentive is also dependent upon
Individual Performance Achievement of financial objectives and MBO's).
The Local Achievement Incentive and percentages of salary for EPS
achievement are shown below for the listed eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
PHARMACY MANAGER* 1. Local Achievement Incentive
Incentive = $8,125
2. EPS Incentive
Level 1 - Percent of Salary @ $.50/Share = 7%
Level 2 - Percent of Salary @ $.55/Share = 1.5%
*Note: This position may also participate in the 1996 Sales Incentive Plan -
YTD Territory Incentive Target - if a sales territory is assigned.
Pharmacy Manager
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on page 4, payment of a LOCAL ACHIEVEMENT INCENTIVE is based on 100%
achievement of targeted profit contribution. Payment of an EPS INCENTIVE is
based on the Company meeting the Consolidated EPS target of $.33/share and
the CORE EPS Level 1 = $.50/share or EPS Level 2 = $.55/share. (The EPS
Incentive is also dependent upon Individual Performance Achievement of
financial objectives and MBO's). The Local Achievement Incentive and
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
___________________________________________________________________________
SENIOR PHARMACY 1. Local Achievement Incentive
MANAGER* Incentive = $10,000
2. EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 8%
Level 2 - Percent of Salary @ $.55/share = 2%
*Note: This position may also participate in the 1996 Sales Incentive Plan -
YTD Territory Incentive Target - if a sales territory is assigned.
Senior Pharmacy Manager
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's).
The percentages of salary for EPS achievement are shown below for the
listed eligible position:
Eligible Position Incentive Plan(s) Eligible For
_______________________________________________________________________________
SALES MANAGER* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 25%
Level 2 - Percent of Salary @ $.55/share = 5%
*Note: This position also participates in the 1996 Sales Incentive Plan -
YTD Unit Territory Incentive Target and for Sales Managers with a territory,
YTD Territory Incentive Target.
Sales Manager
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of MBO's). The percentages of salary
for EPS achievement are shown below for the listed eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
NATIONAL ACCOUNT MANAGER* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 18%
Level 2 - Percent of Salary @ $.55/share = 4%
*Note: This position also participates in the 1996 Sales Incentive Plan.
National Account Manager
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's).
The percentages of salary for EPS achievement are shown below for the
listed eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 314 Level 1 - Percent of Salary @ $.50/share = 6%
Level 2 - Percent of Salary @ $.55/share = 2%
Corporate Manager (314)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 315 Level 1 - Percent of Salary @ $.50/share = 7%
Level 2 - Percent of Salary @ $.55/share = 2.5%
Corporate Manager (315)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 316 Level 1 - Percent of Salary @ $.50/share = 8%
Level 2 - Percent of Salary @ $.55/share = 2.5%
Corporate Manager (316)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 317 Level 1 - Percent of Salary @ $.50/share = 10%
Level 2 - Percent of Salary @ $.55/share = 3%
Corporate Manager (317)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 318 Level 1 - Percent of Salary @ $.50/share = 11%
Level 2 - Percent of Salary @ $.55/share = 3%
Corporate Manager (318)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 319 Level 1 - Percent of Salary @ $.50/share = 13%
Level 2 - Percent of Salary @ $.55/share = 3.5%
Corporate Manager (319)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 320 Level 1 - Percent of Salary @ $.50/share = 14%
Level 2 - Percent of Salary @ $.55/share = 3.5%
Corporate Manager (320)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
CORPORATE MANAGER - EPS Incentive
GRADE 321 Level 1 - Percent of Salary @ $.50/share = 15%
Level 2 - Percent of Salary @ $.55/share = 4%
Corporate Manager (321)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
PROGRAM DIRECTOR* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 17%
Level 2 - Percent of Salary @ $.55/share = 4%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that
the Company's overall cash target is not met.
___
Program Director
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on page 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
DIRECTOR* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 27%
Level 2 - Percent of Salary @ $.55/share = 7%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that
the Company's overall cash target is not met.
___
Director
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
GENERAL MANAGER* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 34%
Level 2 - Percent of Salary @ $.55/share = 9%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that
the Company's overall cash target is not met.
___
General Manager
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
EXECUTIVE DIRECTOR - EPS Incentive
CORPORATE* Level 1 - Percent of Salary @ $.50/share = 29%
Level 2 - Percent of Salary @ $.55/share = 7%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that
the Company's overall cash target is not met.
___
Executive Director (Corporate)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
EXECUTIVE DIRECTOR - FIELD* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 32%
Level 2 - Percent of Salary @ $.55/share = 8%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Executive Director (Field)
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
______________________________________________________________________________
VP, SALES AND OPERATIONS* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 40%
Level 2 - Percent of Salary @ $.55/share = 12%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
VP, Sales and Operations
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
_____________________________________________________________________________
VP, DEPARTMENT FUNCTION EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 36%
Level 2 - Percent of Salary @ $.55/share = 10%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
VP, Department Function
<PAGE>
1996 Management Incentive Plan
Page 10
ELIGIBILITY CHART
As outlined on pages 4 - 5, payment of an EPS INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and the CORE EPS Level 1 =
$.50/share or EPS Level 2 = $.55/share. (The EPS Incentive is also dependent
upon Individual Performance Achievement of financial objectives and MBO's). The
percentages of salary for EPS achievement are shown below for the listed
eligible position:
Eligible Position Incentive Plan(s) Eligible For
__________________________________________________________________________
OFFICER* EPS Incentive
Level 1 - Percent of Salary @ $.50/share = 45%
Level 2 - Percent of Salary @ $.55/share = 16%
*Note: This position also participates in the 1996 Long-Term Incentive Plan
CASH TARGET ASSESSMENT
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Officer
Please refer to Appendix I for the definitions of all italicized terms.
<PAGE>
1996 Management Incentive Plan
Page 11
1996 MANAGEMENT INCENTIVE PLAN
MANAGEMENT BY OBJECTIVES (MBO) WORKSHEET
CORP. MANAGERS, PROGRAM DIRECTORS, DIRECTORS, EXEC DIRECTORS (CORP)
Instructions:
Complete this form to document your 2 to 5 agreed-upon MBO's.
This data will be used to determine your individual performance
achievement percentage for calculating pay-outs on the EPS Incen-
tive. As a reminder, MBO's are weighted as 60% of your individual
performance achievement total; achievement of financial objectives
is weighted at 40%. PLEASE RETURN THIS COMPLETED FORM WITH ALL
APPROVAL SIGNATURES TO THE COMPENSATION/HUMAN RESOURCES DEPARTMENT
BY APRIL 30, 1996.
Employee Name:_______________________________Department:______________________
1996 MBO's Assigned Achievement
Weight (1) Level (2)
1. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
2. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
3. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
4. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
5. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
100%
TOTAL __________ __________
(1) Assign a Weight for each MBO (Must total 100%)
(2) AT THE CONCLUSION OF THE PLAN YEAR, determine the Achievement Level for each
MBO; total possible for all objectives is 100%.
APPROVAL SIGNATURES:
Employee:_________________________________________Date:_______________________
Supervisor:_______________________________________Date:_______________________
Have you reviewed your MBO's against the "Final Checklist for Writing MBO's"?
<PAGE>
1996 Management Incentive Plan
Page 11
1996 MANAGEMENT INCENTIVE PLAN
MANAGEMENT BY OBJECTIVES (MBO) WORKSHEET
FIELD MANAGEMENT & CORP. MANAGERS W/FIELD RESPONSIBILITY
Instructions:
Complete this form to document your 2 to 5 agreed-upon
MBO's. This data will be used to determine your
individual performance achievement percentage for
calculating pay-outs on the EPS Incentive. As a
reminder, MBO's are weighted as 30% of your individual
performance achievement total; achievement of financial
objectives is weighted at 70%. PLEASE RETURN THIS
COMPLETED FORM WITH ALL APPROVAL SIGNATURES TO THE
COMPENSATION/HUMAN RESOURCES DEPARTMENT BY APRIL 30, 1996.
Employee Name:_____________________________ Location/Unit:_________
1996 MBO's Assigned Achievement
Weight (1) Level (2)
1. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
2. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
3. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
4. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
5. _____________________________________________ __________ __________
_____________________________________________
_____________________________________________
_________________
100%
TOTAL __________ __________
(1) Assign a Weight for each MBO (Must total 100%)
(2) AT THE CONCLUSION OF THE PLAN YEAR, determine the Achievement Level for each
MBO; total possible for ALL objectives is 100%.
APPROVAL SIGNATURES:
Employee:_________________________________________Date:_______________________
Supervisor:_______________________________________Date:_______________________
Have you reviewed your MBO's against the "Final Checklist for Writing MBO's"?
<PAGE>
1996 Management Incentive Plan
Page 12
LONG TERM INCENTIVE PLAN
________________________
ELIGIBILITY - The following employees are eligible to participate in the LONG-
TERM INCENTIVE PLAN:
- Program Director
- Director
- General Manager
- Executive Director
- Vice President
- Officer
OVERVIEW - The LONG-TERM INCENTIVE PLAN is subject to the same overall Company
performance as the Short-Term Incentive Plan.
REQUIREMENT EARNINGS PER SHARE (EPS) TARGET
_____________________________________________________________________
I Consolidated $.33/share
II CORE - Level 1 $.50/share
CORE - Level 2 $.55/share
LONG-TERM CALCULATION PART I:
Once the Consolidated EPS goal is reached, a designated percent of salary is
awarded for CORE - Level 1 and CORE - Level 2 performance as follows:
CORE LEVEL 1 - $.50/SHARE: A percentage of salary is designated based on your
eligible position when the CORE achieves $.50/share.
To determine your LONG-TERM INCENTIVE amount at
$.50/share, your designated percentage of salary is
multiplied by your salary as of January 1, 1996, (or,
if applicable, an average salary for 1996).
CORE LEVEL 2 - $.50/SHARE: A percentage of salary is designated based on your
eligible position when the CORE achieves $.55/share.
To determine your LONG-TERM INCENTIVE amount at
$.55/share, your designated percentage of salary is
multiplied by your salary as of January 1, 1996, (or,
if applicable, an average salary for 1996).
The sum of the results of CORE Level 1 and CORE Level 2 are added together and
multiplied by your INDIVIDUAL PERFORMANCE ACHIEVEMENT factor to determine
your total BASE LONG-TERM INCENTIVE amount. This portion of the LONG-TERM
INCENTIVE is considered earned but DEFERRED for payment until after December 31,
____________
1988, unless you terminate employment prior to 12/31/98.
____
Please refer to Appendix I for the definitions of all italicized terms.
<PAGE>
1996 Management Incentive Plan
Page 13
LONG-TERM CALCULATION PART II:
LONG-TERM OVER-ACHIEVEMENT COMPANY MATCH
________________________________________
An OVER-ACHIEVEMENT Company match component is also included in the LONG-TERM
INCENTIVE PLAN. For each CORE EPS Level achieved, a company match is assigned.
STEP 1:
CORE EPS LEVEL 1 - Upon achievement of this level a total of 1 TIMES
the base long-term incentive amount is designated.
CORE EPS LEVEL 2 - Upon achievement of this level a total of 2 TIMES
the base long-term incentive amount is designated.
STEP 2:
The total over-achievement company match dollars designated are multiplied by
1/3. This amount is then attributed to the current year's performance and
DEFERRED for payment until the three (3) year plan is completed.
STEP 3:
At the end of the three year plan period, the base long-term amount is added
to the over-achievement company match for each of the three years for the
final long-term incentive payment amount.
BASE LONG-TERM
INCENTIVE AMOUNT PART I = $ X,XXX
_____________________________________________________________________________
OVER-ACHIEVEMENT (1 or 2 times Base Long-Term Amount x 1/3)
COMPANY MATCH
YEAR 1 PART II (YEAR 1) = $ X,XXX
_____________________________________________________________________________
OVER-ACHIEVEMENT (1 or 2 times Base Long-Term Amount x 1/3)
COMPANY MATCH
YEAR 2 PART II (YEAR 2) = $ X,XXX
_____________________________________________________________________________
OVER-ACHIEVEMENT (1 or 2 times Base Long-Term Amount x 1/3)
COMPANY MATCH
YEAR 3 PART II (YEAR 3) = $ X,XXX
_____________________________________________________________________________
TOTAL LONG-TERM
INCENTIVE AMOUNT
PAID AFTER THREE
YEARS: PART I + PART II (YEARS 1, 2 & 3) = $ XX,XXX
Please refer to Appendix I for the definitions of all italicized terms.
<PAGE>
1996 Management Incentive Plan
Page 14
An eligible employee must be continuously employed with Syncor through
December 31, 1998, to be eligible to receive the OVER-ACHIEVEMENT COMPANY
MATCH. If an employee leaves Syncor before December 31, 1998, THE OVER-
ACHIEVEMENT COMPANY MATCH IS FORFEITED AND WILL NOT BE PAID. However, if
an employee leaves Syncor after December 31, 1996, but before December 31,
1998, he/she is eligible to receive an early pay-out consisting of the base
long-term incentive amount(s). The amount of early pay-out is determined
as follows:
TERMINATION DATE EARLY PAY-OUT AMOUNT
_______________________________________________________________________________
> 12/31/96 < 12/31/97 100% of base Long-Term Incentive,
Less 100% over-achievement
Company match
______________________________________________________________________________
> 12/31/97 < 12/31/98 100% of base Long-Term Incentive,
Less 100% over-achievement
Company match
CASH TARGET ASSESSMENT
______________________
Syncor's business objectives for 1996 include the investment of expansion in
PET and International sites. The funding of these investments requires that
we have a new focus and accountability on cash and expense management.
Therefore, the cash target assessment feature has been added to this
Incentive Plan and is applicable to all eligible participants.
The CASH TARGET ASSESSMENT only applies if we do not meet our cash goal for
______
1996. In the event that this occurs, there will be a 25% PENALTY ASSESSED
AGAINST THE TOTAL INCENTIVE AMOUNTS calculated for each Long-Term Incentive
Plan participant. (This assessment would apply to short and long-term
incentive amounts.) If the cash target is met, no penalty will be applied.
__
Please refer to page 15 for your designated percentage of salary payable for EPS
achievement under the LONG-TERM INCENTIVE PLAN. Refer to Appendix II for a
Long-Term Incentive and Over-achievement Company match sample calculation.
Note: The Long-Term Incentive Plan begins again each year that it is in
place. There may be more than one Long-Term, three-year plan in place
at a time with different pay-out time frames. (i.e. 1995 Plan extends
through 1997; 1996 Plan extends through 1998; etc.)
Please refer to Appendix I for the definitions of all italicized terms.
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
_______________________________________________________________________________
PROGRAM DIRECTOR Level 1 - Percent of Salary @ $.50/share = 2%
Level 2 - Percent of Salary @ $.55/share = 2%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Program Director
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
______________________________________________________________________________
DIRECTOR Level 1 - Percent of Salary @ $.50/share = 3%
Level 2 - Percent of Salary @ $.55/share = 3%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Director
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
______________________________________________________________________________
GENERAL MANAGER Level 1 - Percent of Salary @ $.50/share = 3.5%
Level 2 - Percent of Salary @ $.55/share = 3.5%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
General Manager
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
______________________________________________________________________________
EXECUTIVE DIRECTOR - Level 1 - Percent of Salary @ $.50/share = 4.5%
CORPORATE Level 2 - Percent of Salary @ $.55/share = 4.5%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Executive Director, Corporate
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
____________________________________________________________________________
EXECUTIVE DIRECTOR - FIELD Level 1 - Percent of Salary @ $.50/share = 5%
Level 2 - Percent of Salary @ $.55/share = 5%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Executive Director, Field
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
____________________________________________________________________________
VP, SALES AND OPERATIONS Level 1 - Percent of Salary @ $.50/share = 9%
Level 2 - Percent of Salary @ $.55/share = 9%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
VP, Sales and Operations
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
____________________________________________________________________________
VP, DEPARTMENT FUNCTION Level 1 - Percent of Salary @ $.50/share = 7%
Level 2 - Percent of Salary @ $.55/share = 7%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
VP, Department Function
<PAGE>
1996 Management Incentive Plan
Page 15
LONG-TERM INCENTIVE PLAN
ELIGIBILITY CHART
As outlined on page 12, payment of a LONG-TERM INCENTIVE is based on the Company
meeting the Consolidated EPS target of $.33/share and includes an initial
calculation based on CORE EPS Level 1 = $.50/share or CORE EPS Level 2 =
$.55/share. (The Long-Term Incentive is also dependent upon Individual
Performance Achievement of financial objectives and MBO's). The percentages
of salary for each level of EPS performance are shown below for the listed
eligible position:
Eligible Position Long Term Incentive Plan - % of Salary
_____________________________________________________________________________
OFFICER Level 1 - Percent of Salary @ $.50/share = 12%
Level 2 - Percent of Salary @ $.55/share = 12%
CASH TARGET ASSESSMENT
______________________
25% cash penalty assessment applies to this position in the event that the
Company's overall cash target is not met.
___
Officer
Please refer to Appendix I for the definitions of all italicized terms.<PAGE>
APPENDIX I
DEFINITIONS
<PAGE>
DEFINITIONS
___________
Budget Attainment: CORPORATE MANAGERS - COST CENTER RESPONSIBILITY
ONLY: A budget has been established for each Cost
Center for CY96. Budget attainment makes up 40%
of a manager's Individual Performance achievement
percentage. Budget attainment assesses how well
an employee manages his/her expenses and measures
actual results verses budget. At the end of CY96,
if results equal budget, budget attainment = 100%.
If results exceed budget, managers will receive
partial credit for up to 110% of budget.
CORPORATE MANAGERS - COST CENTER WITH FIELD
RESPONSIBILITY: A budget has been established for
each Cost Center for CY96. Budget attainment
makes up 70% of a manger's Individual Performance
achievement percentage. Budget attainment
determines whether or not a manager's individual
budget is met and budgeted profit contribution
levels for the assigned unit or area are met and
measures actual results versus budget. At the end
of CY96, if results equal budget, budget
attainment = 100%. If results fall short of
budget, managers will receive partial credit for
meeting 90% to 99.9% of budget.
Deferred: Applies to the Long-Term Incentive Plan and
indicates that payment is delayed until a
specified later date.
Earnings Per Share (EPS): The net income of the Company divided by
the number of shares of common stock
outstanding as shown on the Company's
Annual Report to shareholders. Syncor's
Consolidated targeted EPS for 1996 is
$.33/share. Syncor's CORE targeted EPS
for 1996 is $.50/share.
Gross Profit: Sales minus Cost of Sales. Cost of Sales include
costs of material, delivery, direct labor, and
cost of money (Days Sales Outstanding - DSO).
Ind. Performance Achievement: A factor based on budget
achievement and MBO results that
is multiplied by the EPS
Incentive and Long-Term
Incentive.
Management by Objectives: Also referred to as MBO's, it is a goal-
oriented method used to evaluate the
performance of managers against
established objectives. MBO's include
three steps: 1) establishing goals; 2)
setting performance standards for each
goal; and 3) comparing actual goal
attainment against the established goals.
<PAGE>
DEFINITIONS: (con't)
___________
Profit Contribution: Gross profit minus operating expenses, both
controllable and non-controllable. An example
of a controllable operating expense is indirect
labor. An example of a non-controllable
operating expense is depreciation.
<PAGE>
APPENDIX II
SAMPLE INCENTIVE CALCULATIONS
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> 12/31/96
<PERIOD-START> 06/01/96
<PERIOD-END> 09/30/96
<CASH> 27,006
<SECURITIES> 1,239
<RECEIVABLES> 53,921
<ALLOWANCES> (1,061)
<INVENTORY> 5,406
<CURRENT-ASSETS> 95,850
<PP&E> 66,453
<DEPRECIATION> (41,095)
<TOTAL-ASSETS> 149,324
<CURRENT-LIABILITIES> 53,261
<BONDS> 0
0
0
<COMMON> 566
<OTHER-SE> 83,406
<TOTAL-LIABILITY-AND-EQUITY> 149,324
<SALES> 276,860
<TOTAL-REVENUE> 276,860
<CGS> 216,207
<TOTAL-COSTS> 216,207
<OTHER-EXPENSES> 55,478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (749)
<INCOME-PER-TAX> 7,379
<INCOME-TAX> 2,877
<INCOME-CONTINUING> 4,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,502
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
