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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, 1997 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)
6464 CANOGA AVENUE, WOODLAND HILLS, CALIFORNIA 91367
(Address of principal executive offices) (Zip Code)
(818) 737-4000
(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,
1997, 10,067,623 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, 1997 and December 31, 1996 . . . . . . . . . . 2
Statements of Income for three months
ended September 30, 1997 and 1996 . . . . . . . . . . . . . . 3
Statements of Income for nine months
ended September 30, 1997 and 1996 . . . . . . . . . . . . . . 4
Statements of Cash Flows for nine months
ended September 30, 1997 and 1996 . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition . . 8
Part II. Other Information . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
September 30, December 31,
1997 1996
______ ______
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents 27,821 25,214
Short-term investments 2,604 1,258
Accounts receivable, net 56,728 51,964
Inventory 6,220 7,827
Net assets of discontinued operations - 1,198
Prepaids and other current assets 4,313 5,519
___________________________
Total current assets 97,687 92,980
Marketable investment securities 1,233 1,239
Property and equipment, net 23,687 21,532
Excess of purchase price over net assets
acquired, net 14,466 14,207
Other assets 26,557 15,605
---------------------------
$163,630 $145,563
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,467 $ 38,851
Accrued liabilities 5,315 3,249
Accrued wages and related costs 12,821 10,757
Federal and state taxes payable 1,324 2,284
Current maturities of long-term debt 3,020 2,324
____________________________
Total current liabilities 60,948 57,465
Long-term debt, net of current maturities 15,791 7,595
Deferred compensation 1,971 1,971
Stockholders' equity:
Common stock, $.05 par value 570 567
Additional paid-in capital 54,707 53,072
Unrealized loss on investments (35) (27)
Employee stock ownership loan guarantee (7,162) (4,544)
Foreign currency translation adjustment (270) (157)
Retained earnings 49,634 40,234
Treasury stock, at cost; 1,356 shares at
September 30, 1997 and 1,126 shares
at December 31, 1996 (12,524) (10,613)
____________________________
Net stockholders' equity 84,920 78,532
____________________________
$163,630 $145,563
============================
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,
________________________________
1997 1996
______ ______
(UNAUDITED)
Net sales $94,493 $90,254
Cost of sales 72,233 71,601
_________________________
Gross profit 22,260 18,653
Operating, selling and administrative expenses 19,708 17,816
_________________________
Operating income 2,552 837
Other income, net 371 1,332
_________________________
Income before taxes 2,923 2,169
Provision for income taxes 1,169 779
_________________________
Income from continuing operations 1,754 1,390
Discontinued operations, net of taxes - (918)
_________________________
Net income $ 1,754 $ 472
=========================
Net income per share - Primary $.17 $ .05
=========================
Weighted average shares outstanding - Primary 10,323 10,943
=========================
Net income per share - Fully Diluted $ .17 $ .05
=========================
Weighted average shares outstanding - Fully Diluted 10,370 10,945
=========================
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,
_______________________________
1997 1996
______ ______
(UNAUDITED)
Net sales $285,764 $275,571
Cost of sales 219,534 214,949
________________________
Gross profit 66,230 60,622
Operating, selling and administrative expenses 55,847 53,378
________________________
Operating income 10,383 7,244
Other income, net 3,511 2,395
________________________
Income before taxes 13,894 9,639
Provision for income taxes 5,557 3,761
________________________
Income from continuing operations 8,337 5,878
Discontinued operations, net of taxes 1,063 (1,381)
________________________
Net income $ 9,400 $ 4,497
========================
Net income per share - Primary $ .92 $ .42
========================
Weighted average shares outstanding - Primary 10,178 10,662
========================
Net income per share - Fully Diluted $ .90 $ .42
========================
Weighted average shares outstanding - Fully Diluted 10,357 10,784
========================
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,
_______________________________
1997 1996
______ ______
(UNAUDITED)
Cash flows from operating activities:
Net income $ 9,400 $4,497
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,184 8,184
Amortization of ESSOP loan guarantee 945 973
Decrease (increase) in:
Accounts receivables, net (4,764) (2,003)
Inventory 1,607 (247)
Net assets of discontinued operations 1,198 -
Other current assets 1,206 (5,498)
Increase (decrease) in:
Accounts payable (384) 2,942
Accrued liabilities 2,066 312
Accrued wages and related costs 2,064 1,512
Federal and state taxes payable (960) (56)
Foreign currency translation adjustment (113) 21
_____________________
Net cash provided by operating activities 19,449 10,637
_____________________
Cash flows from investing and financing activities:
Purchase of property and equipment, net (7,881) (7,533)
(Increase) decrease in short-term investments (1,346) (473)
Decrease in long-term investments 6 -
(Increase) in other non-current assets (12,668) (4,085)
Net proceeds from (repayment of) short-term debt 696 172
Net proceeds from (repayment of) long-term debt 8,196 5,052
Issuance of common stock 1,638 4,098
Issuance of treasury stock 2,599 2,853
Reacquisition of common stock for treasury (4,510) (3,950)
Increase in ESSOP guarantee (3,563) (2,781)
Unrealized (loss) on investments (8) (6)
_____________________
Net cash used in investing and financing
activities (16,868) (6,653)
______________________
Net increase (decrease) in cash and cash equivalents 2,607 3,984
Cash and cash equivalents at beginning of period 25,214 23,022
______________________
Cash and cash equivalents at end of period $27,821 $27,006
=======================
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,
1997, 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, 1996.
2. ADOPTION OF FINANCIAL ACCOUNTING STANDARDS No. 123 "ACCOUNTING
FOR STOCK-BASED COMPENSATION." Prior to January 1, 1996, the
Company accounted for its stock option plan in accordance with
the provisions of Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. On January
1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock
based awards on the date of grant. Alternatively, SFAS No. 123
also allows entities to continue to apply the provisions of APB
Opinion 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied.
The Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provides the pro forma disclosure
provision of SFAS No. 123, accordingly, no compensation cost has
been recognized for its stock options in the financial
statements.
3. ADOPTION OF FINANCIAL ACCOUNTING STANDARDS No. 128 "EARNINGS PER
SHARE." The Financial Accounting Standards Board recently issued
Statement of Financial Accounting No. 128, "Earnings Per Share,"
which is required to be adopted for financial statements issued
for periods ending after December 15, 1997. This statement
establishes new, simplified standards for computing and
presenting earnings per share. It replaces the traditional
presentation of primary earnings per share and fully diluted
earning per share with presentations of basic earnings per share
and diluted earnings per share, respectively. When adopted by
the Company, basic earnings per share is expected to increase
slightly from primary earnings per share and diluted earnings
per share is expected to approximate fully diluted earnings per
share.
4. ADOPTION OF FINANCIAL ACCOUNTING STANDARD No. 130 "REPORTING
COMPREHENSIVE INCOME." The Financial Accounting Standards Board
recently issued Statement of Financial Accounting No. 130,
"Reporting Comprehensive Income," ("SFAS No. 130") which is
required to be adopted for interim and annual financial
statements issued for periods beginning after December 15, 1997.
SFAS No. 130 establishes standards for the reporting and display
of comprehensive income and it components. Comprehensive income
is defined as revenue, expenses, gains and losses that under
generally accepted accounting principles are excluded from net
income (such as extraordinary and non-recurring gains and
losses). SFAS No. 130 requires that items of comprehensive
income be classified separately in the financial statements.
The statement also requires that the accumulated balance of
comprehensive income items be reported separately from retained
earnings and paid-in-capital in the equity section of the
balance sheet. Management does not expect that the
implementation of SFAS No. 130 will have a material effect on
the Company's financial position or results of operations.
5. ADOPTION OF FINANCIAL ACCOUNTING STANDARD No. 131 DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. The
Company will be subject to Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise
and Related Information" ("SFAS No. 131") for annual financial
statements issues for periods beginning after December 15, 1997.
SFAS No. 131 is not required in interim financial statements in
the initial year of application. SFAS No. 131 requires that
financial and descriptive information about operating segments
of a company be provided. Generally, financial information will
need to be reported on the same basis that it is used internally
for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 131 will require additional
financial disclosure by the Company, but will not have any
effect on the Company's financial position or results of
operations.
6. TREASURY STOCK. During the third quarter of 1997, the Company
purchased 20,000 shares of its common stock in the open market
at an average price of $10.50 per share. For the nine months
ended September 30, 1997, the Company has purchased 479,600
shares of its common stock in the open market at an average
price of $9.40 per share. These shares were classified as
"treasury stock at cost," on the accompanying balance sheet.
<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 three months ended September 30, 1997
increased 4.7 percent or $4.2 million to $94.5 million versus $90.3
million for the third quarter of 1996. For the nine months ended
September 30, 1997, net sales increased 3.7 percent or $10.2 million
to $285.8 million compared to $275.6 million for the same period in
1996.
There were four factors which affected sales results during the three
months ended September 30, 1997. First, the market for cardiology
products continues to grow. Sales of Cardiolite(r) a proprietary
heart imaging agent to which the Company has preferential distribution
rights, increased approximately 30 percent for the third quarter of
1997 when compared to the same period in 1996. However, this growth
has come at the expense of thallium, a lower priced generic heart
imaging agent. Sales of thallium, the former cardiac agent of choice,
declined by 11 percent in the third quarter of 1997 when compared to
the comparable period in 1996. In addition, the cardiac stress agent,
IV Persantine(R), which was a proprietary product, is now generic.
While volumes have remained relatively high for I.V. Persantine(R),
the Company experienced a significant price decline for this product.
When taken together, the net change for these three major cardiology
products amounted to a net increase of 12 percent for the third
quarter of 1997. The outlook for sales performance for thallium and
IV Persantine(R) are not expected to change significantly.
The second factor affecting net sales during the third quarter was new
products. Technetium Tc99m Sestamibi, which has been indicated for
heart imaging under the trade name Cardiolite(R), has also been
approved by the Food and Drug Administration to indicate for breast
imaging under the trade name Miraluma(TM). Traditionally, new product
sales within the nuclear medicine market have a long ramp up period.
Due to the newness of the approval, the Company is not providing
guidance as to the sales performance for Miraluma(TM), other than to
indicate its net sales in the third quarter of 1997 did include this
new product and sales for the fourth quarter of 1997 are expected to
be positively impacted as a result of this product. Also, the
introduction of two new oncology products in the third quarter of
1997, Verluma and Quadramet, positively impacted sales.
Thirdly, the Company made a number of pharmacy acquisitions during
1995 which added to the sales gains in 1996. There were however, no
significant acquisitions in 1996. Therefore, the year-to-year growth
in net sales normally attributed to pharmacy store expansion does not
exist in 1997. The Company expects to either start-up or acquire
radiopharmacies during 1998.
The fourth factor which impacted net sales results is the continuing
push to convert the Company's "bulk" radiopharmaceutical business into
"unit dose" business, which generate higher profit margins for the
Company. In the third quarter of 1997, the Company experienced a
decline in bulk radiopharmaceutical sales of $2.3 million or 18
percent when compared to the same period in 1996.
For the nine months ended September 30, 1997, net sales were
negatively affected as a result of two factors: a temporary
interruption in the supply of molybdenum, the parent isotope of
technetium, and the loss of a supply contract to a large hospital
buying group. In June 1997, the entire nuclear medicine community
experienced an interruption in the supply of molybdenum due to a labor
dispute experienced by one of North America's major supplier of
molybdenum. This interruption in the supply of molybdenum impacted
the Company's net sales for the second quarter of 1997 by an estimated
$1.4 million and $.5 million in pharmacy profit. The estimated impact
on net income was in the range of $.2 million to $.3 million or
earnings per share of approximately $.03 per share.
In the first quarter of 1997, the Company announced it had lost a
competitive bid to supply products to a large hospital buying group
to a competitor. The annual value of the contract with members of
this buying group is estimated to be in the range of $60 million to
$65 million. The Company believes that it will continue to service
many of the existing members. It is difficult to quantify the
financial impact that the loss of this contract will have on Syncor.
The Company estimated that the potential negative impact in 1997 could
be in the range of $5 million to $10 million for net sales and $1
million to $2 million for pre-tax profits. The Company has initiated
actions to minimize any potential negative impact on its near-term
financial results by continuing to provide service to those members
who value the broad scope of services that Syncor provides.
GROSS PROFIT
Gross profit for the three months ended September 30, 1997 increased
$3.6 million to $22.3 million, and as a percentage of net sales to
23.6 percent, compared to 20.7 percent of net sales or $18.7 million
for the comparable quarter in 1996. For the nine months ended
September 30, 1997, gross profit increased $4.6 million to $66.2
million and as a percentage of net sales to 23.2 percent, compared to
22 percent of net sales or $60.6 million for the comparable period in
1996.
The gross margin percentage for the three months and nine months ended
September 30, 1997 was positively affected in part by a re-negotiated
supply agreement. The Company announced in July 1997, that it had re-
negotiated its long-term material supply agreement with one of its
major suppliers. The improved gross margin is due in part to this
transaction and due in part to a product mix shift within the
cardiology business. The decline in bulk radiopharmaceutical sales,
which have a lower margins, and switching customers to the Company's
full service unit dose business also plays an important part in
increased margins.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses increased by 10.6
percent for the three months ended September 30, 1997 or $1.9 million
to $19.7 million, and as a percentage of sales increased to 20.9
percent from 19.7 percent for the same period in 1996. For the nine
months ended September 30, 1997, operating, selling and administrative
expenses increased by 4.6 percent or $2.5 million to $55.8 million,
or 19.5 percent of sales, compared to $53.4 million or 19.4 percent
of sales for the same period in 1996.
The increase in operating, selling and administrative expenses for the
three months ended September 30, 1997 is the result of increased labor
costs associated with annual merit increases. For both the three
months and nine months ended September 30, 1997, increased operating,
selling and administrative expenses resulted from investments
associated with the Company's Core Improvement Program, the opening
of new subsidiaries and certain other costs associated with improving
operations of the core business.
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, backward integration
into the manufacturing of certain radiopharmaceuticals and the
investment in a new imaging business. The Company expects to continue
the increased level of expenditures in the operating, selling and
administrative expense categories for the next two years in the areas
of re-engineering opportunities, backward integration in manufacturing
and expansion.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and short-term investments of
$31.7 million at September 30, 1997, compared with $27.7 million at
December 31, 1996. The Company's total debt position of $18.8 million
at September 30, 1997, reflects an increase of $8.9 million when
compared to the debt position at December 31, 1996 of $9.9 million.
The primary increase in debt is the result of two bank loans. In
April 1997, a bank loan was obtained by the Company to finance an
acquisition and in August 1997, a loan was obtained to finance the
contribution of common stock to the Company's Employees Savings and
Stock Ownership Plan. Working capital decreased by $1.8 million to
$33.7 million at September 30, 1997, compared to $35.5 million at
December 31, 1996. Days sales outstanding on receivables increased
to 53 days at September 30, 1997, compared to 50 days at December 31,
1996.
The Company believes sufficient internal and external sources exist
to fund operations and future expansion programs. At September 30,
1997, the Company had unused lines of credit of $18.5 million to fund
short-term needs.
SAFE HARBOR STATEMENT
Statements which are not historical facts, including statements about
our confidence, strategies and expectations, opportunities, industry
and market growth, demand and acceptance of new and existing products
and return on investments are forward looking statements that involve
risks and uncertainties, including without limitation, the effect of
general economic and market conditions, supply and demand for the
Company's products, competitor pricing, maintenance of the Company's
current market position and other factors. Given these uncertainties,
undue reliance should not be place on such forward looking statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
STOCK REPURCHASE PROGRAM
________________________
During the third quarter of 1997, the Company purchased 20,000 shares
of its common stock in the open market at an average price of $10.50
per share. The shares are classified as "Treasury Stock" on the
Company's balance sheet. On August 8, 1997, the Company contributed
250,000 shares from Treasury Stock to the Company's Employees' Savings
and Stock Ownership Plan ("ESSOP") at the fair market value on that
date of $14.25 per share, for a total of $3.6 million.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10. Material Contracts
10.1 Senior Management Stock Purchase Plan effective as of July 9,
1997, together with the First Amendment and the Second Amendment, each
effective as of September 8, 1997.
10.2 Credit Agreement dated August 8, 1997 between Syncor
International Corporation and Mellon Bank, N.A.
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 (filed electronically)
<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, 1997 By: /s/ Michael E. Mikity
________________________________
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
<PAGE>
SYNCOR INTERNATIONAL CORPORATION
SENIOR MANAGEMENT STOCK PURCHASE PLAN
This SENIOR MANAGEMENT STOCK PURCHASE PLAN (this "Plan") is adopted by
the Board of Directors (the "Board of Directors") of Syncor International
Corporation, a Delaware corporation (the "Company"), effective as of the 9th
day of July 1997 (the "Adoption Date").
1. PURPOSE. The purpose of this Plan is to advance the interests of the
Company and its subsidiaries by providing stock ownership opportunities to
members of the senior management, directors and key personnel of the Company,
or any parent or subsidiary of the Company, who contribute significantly to
the management, growth and financial success of the Company and its
subsidiaries. The Company recognizes that aligning executive officers',
directors', and key employees' personal interests more closely with those of
the shareholders and with the Company's financial performance will benefit the
long-term growth of the Company while aiding it in attracting and retaining
employees of exceptional ability.
2. ADMINISTRATION. The Board of Directors shall, in its discretion,
establish such rules and regulations as it may deem appropriate for the proper
administration of the Plan and shall have full authority and power to
interpret and construe any provision of the Plan, subject, however, to the
provisions of Section 11(c) below. Decisions of the Board of Directors shall
be final, binding and conclusive on all persons who have an interest in the
Plan. The Board of Directors may, in its discretion, appoint a committee
consisting of two or more persons, each of whom shall be non-employee
directors, to administer this Plan.
3. AMOUNT OF STOCK. The total number of shares of common stock, $.05 par
value ("Common Stock"), of the Company to be available for purchase pursuant
to this Plan ("Shares") shall not exceed 1,000,000 shares. If any Shares
available for purchase hereunder are not subscribed for in accordance with the
terms of this Plan, such Shares will be available for future rights to
purchase granted to eligible recipients hereunder.
4. ELIGIBILITY AND PARTICIPATION. Only executive officers or persons
deemed to be key employees of the Company or any parent or a subsidiary of the
Company who have worked for the Company for at least twelve months, and
directors of the Company or a parent or a subsidiary of the Company (the
"Purchasers"), may purchase Shares pursuant to the Plan. The names of the
Purchasers currently eligible to participate in the Plan, and the number of
Shares each is eligible to purchase, are listed on Exhibit A hereto. Each
Purchaser must purchase the Shares that he or she is eligible to purchase no
later than sixty (60) days after the Adoption Date, or if such Purchaser is
not currently listed on Exhibit A hereto, within forty five (45) days after
the Board of Directors approves the number of Shares that such Purchaser would
be eligible to purchase; after such sixty- or forty five-day period, as the
case may be, the Purchasers will no longer be eligible to purchase those
Shares not purchased by him or her by such date.
5. VOLUNTARY AND DISCRETIONARY NATURE OF PLAN. The granting of the right
to purchase Shares under this Plan shall be entirely discretionary with the
Board of Directors, and nothing in this Plan shall be deemed to give any
employee of the Company or of any parent or subsidiary of the Company any
right to participate in this Plan or to purchase Shares. Nothing herein may
be construed to limit or restrict the right of the Company or any parent or
subsidiary of the Company to terminate the employment of any Purchaser at any
time, with or without cause, or to increase or decrease the compensation of
such Purchaser from the rate of compensation in existence at the time the
Purchaser received the right to purchase Shares under the Plan. Purchasers are
under no obligation to purchase any or all of the Shares made available for
purchase by them.
6. PRICE. The purchase price per share of Common Stock under this Plan
for a Purchaser shall be the lower of (a) the closing price or (b) the average
of the bid and asked prices for one share of Common Stock, as traded in NASDAQ
(the "Closing Price"), at the close of trading on the effective date of the
Subscription Agreement executed by such Purchaser in the form attached hereto
as Exhibit B (the "Subscription Agreement"). Payment for the Shares shall be
made by means of a full recourse promissory note in the form attached hereto
as Exhibit C (the "Promissory Note"), the payment of which shall be secured by
a pledge of the Shares, provided that the purchase of Shares and the
Promissory Note shall be void and cancelled if shareholder approval of this
Plan is not obtained in accordance with Section 14 below. The Board of
Directors may, in its own discretion, extend the maturity date of any
Promissory Note.
7. RIGHTS OF THE SHAREHOLDER. Upon execution of the Promissory Note in
payment for the Shares, the Company shall cause to be issued to the Purchaser
a certificate representing the number of Shares purchased, and the Purchaser
will be the record holder of such Shares with all rights of a shareholder with
respect thereto, including the right to vote such Shares and the right to
receive all dividends and distributions declared and paid with respect to such
Shares, subject to the pledge of such dividends and distributions to the
Company under the Promissory Note. Each certificate representing Shares will
be deposited by the Purchaser receiving such certificate with the Company,
together with a stock power endorsed in blank in fulfillment of the pledge of
the Shares. If Purchaser's employment is terminated for any reason or if
the Purchaser leaves the employ of the Company before the Company's
shareholders approve this Plan in accordance with Section 14 below or if such
approval is not obtained, the purchase of the Shares hereunder shall be
rescinded and the Promissory Note shall be void and cancelled. Until the
payment in full of the related Promissory Notes, the certificates will bear a
legend stating that such Shares were acquired under this Plan and are governed
by the terms and provisions hereof and the related Subscription Agreement and
Promissory Note.
8. RIGHTS UPON TERMINATION AND/OR CHANGE IN CONTROL. From and after
approval of this Plan by the Company's shareholders in accordance with Section
14 below:
(a) Except as set forth in Section 7 above and Subsections 8(b) and
(c) below, if the employment of the Purchaser with the Company is terminated
for any reason, with or without cause or voluntarily by the Purchaser, at any
time prior to the payment in full of the Promissory Note given in payment for
his or her Shares, the Company shall have an option (the "Option") to purchase
all or any portion of the Shares owned by the Purchaser at a price equal to
the closing sale price per share of the Common Stock as traded in NASDAQ on
the effective date of termination. The Company shall have thirty (30) days to
exercise its Option (the "Option Period") with respect to the Purchaser's
Shares. In the event that the Company does not exercise the Option, or
exercises the Option only with respect to a portion of the Purchaser's Shares,
the maturity date of the Promissory Note of that Purchaser shall be
immediately accelerated to the date that is sixty (60) days after the
expiration of the Option Period, but in no event later than the stated
maturity date (or other maturity date if extended in accordance with Section 6
above) under the Promissory Note.
(b) Notwithstanding Subsection 8(a) above, following a Change in
Control (as defined below) of the Company, the maturity date of the Promissory
Note shall be as set forth therein, provided, however, that if the Purchaser's
employment with the Company is thereafter terminated, with or without cause or
voluntarily by the Purchaser, then the maturity date of the Promissory Note of
that Purchaser shall be immediately accelerated to the date that is six months
after the effective date of termination established by the Company, but in no
event later than the stated maturity date (or other maturity date if extended
in accordance with Section 6 above) under the Promissory Note.
For purposes of this Plan, "Change in Control" shall occur upon the
occurrence of either of the following: (i) the acquisition, directly or
indirectly, of twenty percent (20%) or more of the outstanding common stock of
the Company by a person (as defined by Rule 13a-9 and Rule 13d-3 of the
Securities Exchange Act of 1934), or group of related persons, excluding the
Company, any subsidiary of the Company, or any employee benefit plan of the
Company, or (ii) during any period of two consecutive years while the
Promissory Notes are outstanding, individuals who at the Adoption Date
constitute the Board cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors
representing at least two-thirds of the directors then in office who were
directors at the beginning of the period.
(c) Notwithstanding Subsections 8(a) and (b) above, in the event of
a Change in Control of the Company that is not approved by the Board of
Directors of the Company, the Promissory Note shall be deemed to have been
fully paid by the Purchaser as of the date of the Change in Control, and all
payment and other obligations of the Purchaser thereunder shall be fully
extinguished and forgiven. If the forgiveness of the loan results in an
excess parachute payment pursuant to Internal Revenue Code Section 280G, the
amount deemed paid upon a Change in Control not approved by the Board of
Directors shall be the maximum amount that may be deemed paid by the Purchaser
without triggering an excess parachute payment pursuant to Internal Revenue
Code Section 280G; the balance of the Promissory Note would be treated in
accordance with Subsection 8(b) above.
9. FORFEITURE OF GAIN. If the Purchaser sells any Shares prior to the
expiration of two years from the effective date of the sale of the Shares to
him or her for any reason other than pursuant to a Change in Control of the
Company, or a merger, acquisition or other corporate transaction pursuant to
which the Shares are effectively sold, converted or transferred by operation
of law, and such sold Shares, at the time of sale, were pledged to Syncor to
secure the Purchaser's obligations under his or her Promissory Note, then
twenty five percent (25%) of any gain realized by the Purchaser upon such sale
shall be forfeited and paid over to the Company immediately upon such sale,
less any interest payment the Purchaser may have paid to the Company under the
Promissory Note with respect to those sold Shares. To the extent, however,
that the sum of (i) all interest payments made by the Purchaser to the Company
under the Promissory Note and (ii) the amount forfeited by the Purchaser and
paid over to the Company exceeds the maximum interest amount permitted under
the usury laws of California, the Purchaser shall be entitled to retain any
such excess amount in order that the Company remains in compliance with
applicable California laws. The purpose of this forfeiture is to further and
promote the purpose of this Plan as stated in Section 1 hereof, and therefore
shall not be applicable to the sale of Shares by the heirs or legal
representatives of a Purchaser in the event of his or her death.
10. PURCHASER OPTION TO SELL SHARES TO COMPANY. Following approval of
the Plan by the Company's shareholders in accordance with Section 14 below,
(a) in the event that the closing price for a share of Common Stock falls
below ninety five percent (95%) of the Purchaser's purchase price for a Share
while the Promissory Note remains outstanding (such event being hereinafter
referred to as the "Threshold Event") and so long as such Threshold Event is
continuing, or (b) if the Shares have not been registered by the Company under
the Securities Act, the Purchaser shall have the option (the "Purchaser
Option") to sell all or any portion of his or her Shares to the Company, and
the Company shall be obligated to purchase all such Shares from the Purchaser.
In order for the Purchaser to exercise the Purchaser Option, he or she must
provide written notice (the "Purchaser Option Notice") to the Company, by
facsimile, hand delivery, or certified or overnight mail, while such Threshold
Event is continuing, that he or she will exercise his or her Purchaser
Option. The Company shall thereafter be obligated to purchase from the
Purchaser, within thirty (30) days from receipt of the Purchaser Option
Notice, the Shares tendered by the Purchaser for an amount per Share equal to
the Closing Price for a share of Common Stock on the date that the Purchaser
Option Notice is received by the Company. The proceeds from such sale shall
be used by the Purchaser to pay, in part, its obligations under the Promissory
Note. If the Purchaser exercises the Purchaser Option with respect to all of
his or her Shares, the Purchaser shall pay to the Company the remaining
balance under the Promissory Note within thirty (30) days after the Company
purchases the Purchaser's Shares. If the Purchaser exercises the Purchaser
Option with respect to only a portion of his or her Shares, the Purchaser
shall pay down the Promissory Note, within thirty (30) days after the Company
purchases the Shares tendered by the Purchaser, such that the Purchaser's
remaining obligations under the Promissory Note after taking into account such
payment will not exceed the fair market value of the Purchaser's remaining
Shares pledged to the Company, based on the Closing Price per share of Common
Stock on the date the Purchaser Option Notice was received by the Company.
11. PURCHASE BY NON-EMPLOYEE DIRECTORS. Notwithstanding any provision in
any other section of this Plan, the purchase of Shares by the Company's
non-employee directors shall be governed by this Section 11:
(a) On the Adoption Date, each non-employee director shall be
eligible to purchase up to 10,000 Shares under this Plan.
(b) If, after the Adoption Date, additional Shares are made
available to the Purchasers under this Plan, each non-employee director shall
be eligible to purchase additional Shares, provided however that (i) the
number of additional Shares available for purchase by each non-employee
director must be approved by the employee directors of the Board and (ii) the
aggregate number of additional Shares available for purchase by all the
non-employee directors shall not exceed five percent (5%) of all of the
additional Shares.
(c) If any decision or amendment to this Plan is made by the Board
of Directors or the committee designated by the Board to administer this Plan,
and such decision or amendment has the effect of benefitting the Board's
non-employee directors, such decision or amendment must also be approved by a
majority of directors of the Board who have no self-interest in such decision
or amendment. If there are no disinterested directors with respect to such
decision or amendment, then any such decision or amendment must be approved by
the shareholders of the Company.
(d) A non-employee director who becomes an employee of the Company
shall not thereafter be subject to the provisions of this Section 11, but
shall be thereafter be subject to the provisions of the other Sections of this
Plan.
(e) Except as set forth in this Section 11, the purchase of Shares
by non-employee directors of the Company shall otherwise conform to the other
terms and conditions of this Plan.
12. REGISTRATION OF SHARES. All Purchasers of the Shares will be required
to agree that, unless such Shares have been registered or may otherwise be
sold pursuant to an available exemption from such registration under the
Securities Act, the Shares shall not be sold without the prior approval of the
Company, which approval shall not be unreasonably withheld by the Company.
The Shares will be purchased by the Purchaser pursuant to the terms of his or
her Subscription Agreement. The Purchasers may also be considered to be
affiliates, as that term is defined in Rule 144, and be subject to further
restrictions on the sale of the Shares. The Company may require that a legend
be placed on all certificates representing any Shares with respect to the
foregoing restrictions.
13. AMENDMENT OF THE PLAN. The Board of Directors may from time to time
alter, amend, suspend or discontinue this Plan and make rules for its
administration, subject, however, to the provisions of Section 11(c) above.
14. APPROVAL OF SHAREHOLDERS. This Plan is effective on the Adoption
Date, subject to the approval of the Company's shareholders in accordance with
Delaware law no later than twelve months after the Adoption Date. In the
event that the Company's shareholders do not approve this Plan within such
twelve-month period, then this Plan and all executed Subscription Agreements,
Promissory Notes, and related agreements shall be void ab initio and the
Company and the Purchasers shall not be bound thereby; furthermore, the
Company or the Purchasers, as the case may be, shall be obligated to make the
other party whole.
15. RESOLUTION OF DISPUTES. IF A DISPUTE OR CLAIM ARISES OUT OF THIS PLAN,
THE COMPANY AND THE PURCHASER AGREE TO WAIVE ANY RIGHTS EACH MAY HAVE TO A
JURY OR COURT TRIAL AND TO USE BINDING ARBITRATION TO RESOLVE ALL SUCH
DISPUTES BETWEEN THEM. To initiate this arbitration remedy, the party raising
the dispute must make a written demand for arbitration within thirty (30) days
of the conduct giving rise to the claim. Absent such timely written demand,
the party raising the dispute waives any entitlement or right to arbitration
and any other legal or equitable remedy. Within thirty (30) days after the
giving of notice by one party to the other party of its desire to refer the
matter in dispute to arbitration, the parties shall agree on an arbitrator to
be selected from a list of potential arbitrators obtained for this purpose
from the American Arbitration Association. If the parties fail to agree on an
arbitrator within said 30-day period, either party may petition any court of
competent jurisdiction for the appointment of an arbitrator, and the parties
shall be bound by the selection of the court. The Company and the Purchaser
shall stipulate that the arbitrator must use its best efforts to complete the
arbitration proceedings within forty five (45) days after selection of the
arbitrator. The arbitration shall be conducted in the County of Los Angeles
and shall be conducted by an arbitrator selected in accordance with the
then-existing rules of practice and procedure of the American Arbitration
Association or its successor. Each party will pay its own costs in connection
with the arbitration.
The arbitrator shall not have the right to add to, subtract from, or modify
any of the terms of this Plan, nor shall the arbitrator have the power to
decide the justice or propriety of any specific provisions of this Plan or any
matter reserved solely to the Company's discretion, it being understood that
only the Board of Directors of the Company has the ultimate power to
administer or modify the Plan. The arbitrator is fully bound to apply
relevant public law, both as to substance and remedy, in accordance with
statutory requirements and prevailing judicial decisions. The arbitrator
shall not have the power to commit errors of law or legal reasoning.
Notwithstanding the above, if the Purchaser breaches or threatens to breach
any provisions of this Plan, the Company will have the right and remedy, in
addition to any other rights and remedies the Company may have under law or in
equity, to have its rights under the Plan specifically enforced by any court
having equity jurisdiction, all without the need to post a bond or any other
security or to prove any amount of actual damage or that money damages would
not provide an adequate remedy, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Company and
that monetary damages will not provide an adequate remedy to the Company.
16. ASSIGNABILITY. The rights to purchase the Shares under this Plan
shall not be transferable or assignable by the Purchaser, and the Shares may
be purchased only by the Purchaser during his lifetime. The foregoing
restriction shall not be deemed to prohibit transfers by a Purchaser of
purchased Shares without consideration for estate or financial planning
purposes, to the extent permitted by the Board of Directors or the committee
designated by the Board to administer this Plan. Except as otherwise provided
herein, the provisions of this Plan shall be binding on the heirs, successors
and legal representatives of the Company and the Purchasers.
17. EXHIBITS. The list of Purchasers and number of Shares available for
purchase by each attached as Exhibit A, the Subscription Agreement attached as
Exhibit B, and the Promissory Note attached as Exhibit C, are hereby
incorporated into this Plan by reference.
EXHIBIT A
PURCHASER MAXIMUM NO. OF SHARES
FU, MONTY 155,000
FUNARI, ROBERT G. 155,000
BAGERDJIAN, HAIG S. 100,000
MIKITY, MICHAEL E. 100,000
COOP, SHEILA H. 70,000
SMITH, CHARLES A. 70,000
COFFEY, JACK L. 70,000
FENERIN, MICHAEL N. 35,000
MARTARELLA, ROY B. 35,000
ZIPP, CHARLES JOSEPH 35,000
BENDER, BRIAN 35,000
STONE, JAMES E. 35,000
MULLEN, MARC 35,000
GERBER, STEVEN B. 10,000
OKI, GEORGE S. 10,000
SPANGLER, ARNOLD E. 10,000
WAGNER, HENRY N. 10,000
WILENSKY, GAIL R. 10,000
EXHIBIT B
SUBSCRIPTION AGREEMENT
This Subscription Agreement, effective as of ____________, 1997, is entered
into by and between Syncor International Corporation, a Delaware Corporation
(the "Company"), and the undersigned employee of the Company (the
"Shareholder")
WITNESSETH
WHEREAS, the Board of Directors of the Company has adopted a Senior Management
Stock Purchase Plan (the "Plan") pursuant to which the Shareholder has been
given the opportunity to purchase up to _______ shares of the common stock,
$.05 par value, of the Company (the "Shares"), under the terms and conditions
contained in that Plan; and
WHEREAS, the Shareholder desires to purchase certain of the Shares upon the
terms and for the consideration set forth in the Plan;
NOW, THEREFORE the parties hereto agree as follows:
1. SUBSCRIPTION AND PAYMENT. Shareholder hereby subscribes to purchase
the number of Shares set forth on the signature page of this Subscription
Agreement at a purchase price equal to $____ per Share,which is the lower of
(a) the closing price or (b) the average of the bid and asked prices for one
share of common stock of the Company, as traded in NASDAQ, at the close of
trading on the effective date of this Subscription Agreement. As
consideration for the purchase of the Shares, Shareholder is delivering to the
Company, and the Company hereby acknowledges receipt of, his or her Promissory
Note payable to the Company in the aggregate principal amount of the purchase
price of the Shares indicated on the signature page hereof, and the stock
certificates evidencing the Shares pledged to the Company to secure payment of
the Note.
2. REPRESENTATIONS AND WARRANTIES. The Shareholder hereby represents and
warrants to the Company, its officers, directors, stockholders, affiliates,
agents, employees and representatives as follows:
(a) INVESTMENT INTENT. (i) The Shares are being acquired solely for
the account of the Shareholder, for investment, and not with a view to or for
the resale, distribution, subdivision or fractionalization thereof, (ii) the
Shareholder has no contract, understanding, undertaking agreement or
arrangement with any person except for the Company to sell, transfer or pledge
to any person the Shares or any part thereof, (iii) the Shareholder has no
present plans to enter into any such contract, undertaking, agreement or
arrangement, (iv) the Shareholder understands the legal consequences of the
foregoing representations and warranties to mean that the Shareholder must
bear the economic risk of the investment in the Shares for an indefinite
period of time, (v) the Shareholder has such knowledge and experience in
financial and business matters that the Shareholder is capable of evaluating
the merits and risks of acquiring the Shares, and (vi) the Shareholder
acknowledges that the acquisition of the Shares involves a high degree of risk
which may result in the loss of the total amount of Shareholder's investment
in the Shares.
(b) SECURITIES COMPLIANCE. The Shareholder understands that no
sale, distribution, transfer or other disposition of the Shares can be made by
the Shareholder unless the Shares have been registered under the Securities
Act of 1933, as amended (the "Act"), and applicable securities laws of any
other relevant jurisdiction, or exemptions from such registrations are
available, as evidenced by an opinion of counsel satisfactory to the Company,
with respect to the proposed sale, distribution, transfer or other
disposition. Any purchaser on resale or transferee of the Shares will also be
required to meet the suitability requirements applicable to the Shareholder,
and such purchaser or the Shareholder will be required to bear all expenses of
such transfer (including the costs of any legal advice or opinions required.)
(c) EXPERIENCE. Shareholder is an executive officer, director or
key employee of the Company and is knowledgeable and experienced in
investments involving medical products and services generally, and the
business and prospects of the Company specifically. Shareholder has such
knowledge and experience in financial and business matters that he is capable
of evaluating the risks of any investment in the Shares and making an informed
investment decision.
(d) NO GENERAL SOLICITATION. The Shares have been offered to the
Shareholder without any form of general solicitation or advertising of any
type by or on behalf of the Company or any of its officers, directors,
shareholders, employees, agents or representatives.
(e) ACCESS TO INFORMATION. The Shareholder has (i) read the
Company's Annual Report on Form 10-K for the fiscal year 1996, the Company's
proxy statement and annual report furnished to shareholders for their annual
meeting on June 18, 1997, the Company's Form 10-Q for the quarter ended
____________, 1997 and any other reports or documents required to be filed
under the Securities Exchange Act of 1934, as amended, by the Company since
the last fiscal year end, (ii) had an opportunity to ask questions and receive
answers concerning the actual and proposed business and affairs of the
Company, and is satisfied with the results thereof, and (iii) been given
access, if requested, to all documents with respect to the Company or the
Plan, as well as to such other information that the Shareholder has requested,
in order to evaluate fully the merits and risks of an investment in the
Shares.
(f) EXEMPT STATUS. The Shareholder understands that the Shares to
be sold hereunder are being offered and sold in reliance upon exemptions from
registration under the Act and state securities laws. The Shareholder
understands that the Company and its officers, directors, shareholders,
agents, employees and representatives are relying on, among other things, the
representations and warranties of the Shareholder set forth herein in offering
and selling the Shares to the Shareholder in reliance upon exemptions
available under the Act and state securities laws.
(g) DOMICILE. The Shareholder is a bona fide resident of the State
of ____________.
3. RESTRICTIONS ON TRANSFER. In addition to the restrictions set forth
above, the Shareholder understands and agrees that (i) the Company is under no
obligation to register the Shares or to perfect any exemption for resale of
the Shares under applicable securities laws, (ii) if they are not registered
the Shares will be restricted securities, and must be fully paid for, and the
Promissory Note given in consideration therefor fully paid and canceled, for a
full year under Rule 144, before a public resale of the Shares can be made and
(iii) a legend may be placed on each certificate evidencing any of the Shares
and stop transfer instructions may be issued by the Company to restrict the
resale, pledge, hypothecation or other transfer of the Shares in contravention
of this Agreement.
4. NOTICE. All communications hereunder will be in writing and, if sent
to the Shareholder, will be mailed, delivered or faxed to Shareholder at the
address set forth in the records of the Company, or if sent to the Company,
will be mailed, delivered or faxed to its principal executive offices,
Attention: Chief Executive Officer.
5. SPOUSAL CONSENT. If shareholder is married, Shareholder's spouse must
execute and deliver to the Company a spousal consent in the form set forth on
Annex 1 attached hereto with all of the blanks appropriately completed. If
such consent is not executed on the date this Agreement is delivered to the
Company, Shareholder shall be deemed to have represented and warranted to the
Company that Shareholder is not married and that no person has any community
property interest in the Shares.
6. AMENDMENT. This Agreement may not be modified or amended except by
written instrument executed by or on behalf of each of the parties hereto.
7. WAIVERS. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if in a writing signed by the party or parties against
which such waiver is to be asserted. Unless otherwise expressly provided
herein, no delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a wavier thereof, nor shall any
waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder
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.
8. ENTIRE AGREEMENT. This Agreement and the Plan, including the exhibits,
documents and agreements expressly referred to herein and therein, constitute
the entire agreement between the parties hereto with respect to the matters
covered hereby, and any other prior or contemporaneous oral or written
understandings or agreements with respect to the matters covered hereby are
expressly superseded by this Agreement and the Plan. There are no oral or
unwritten agreements between the parties.
9. RESOLUTION OF DISPUTES. IF A DISPUTE OR CLAIM ARISES OUT OF THIS PLAN,
THE COMPANY AND THE SHAREHOLDER AGREE TO WAIVE ANY RIGHTS EACH MAY HAVE TO A
JURY OR COURT TRIAL AND TO USE BINDING ARBITRATION TO RESOLVE ALL SUCH
DISPUTES BETWEEN THEM. The arbitration shall be conducted in accordance with
the procedures and provisions set forth in Section 15 of the Plan.
10. SEVERABILITY. If any provision of this Agreement, or the application
of such provision to any person or circumstances, shall be declared judicially
to be invalid, unenforceable or void, such decision will not have the effect
of invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, and the
parties hereto agree that the part or parts of this Agreement so held to be
invalid, unenforceable or void will be deemed to have been stricken herefrom
and the remainder of this Agreement will have the same force and effect as if
such part or parts had never been included herein. Any such finding of
invalidity or unenforceability shall not prevent the enforcement of such
provision in any other jurisdiction to the maximum extent permitted by
applicable law.
11. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, except to the extent
that the Delaware General Corporation Law is applicable.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto effective as of the date first above written.
Syncor International Corporation: The Shareholder:
______________________________ _________________________________
Robert G. Funari, President and Name:____________________________
Chief Executive Officer Social Security
No. Of Shares Subscribed For: ___________________
Principal Amount of Note: $_______________
ANNEX 1
SPOUSAL CONSENT AND AGREEMENT
The undersigned spouse of ____________________________ joins in the
Subscription Agreement set forth above (the "Agreement") with respect to any
interest, community property interest or otherwise, in the Shares that may be
issued under the Agreement and the Promissory Note and related pledge of
shares to the Company in exchange for such Shares. The undersigned has read
the Agreement, is not acting under any coercion, and has had the opportunity
to retain independent counsel for personal representation purposes and to
explain the legal consequences of this Spousal Consent and Agreement. The
undersigned agrees that any termination of the undersigned's marriage to the
Shareholder named above for any reason shall not have the effect of removing
any Shares otherwise subject to the Agreement from the coverage thereof.
Date: ________________, 1997.
Name____________________________
EXHIBIT C
THIS NOTE IS ISSUED TO SECURE PAYMENT FOR SHARES OF SYNCOR INTERNATIONAL
CORPORATION STOCK SOLD TO THE MAKER UNDER THE SENIOR MANAGEMENT STOCK
PURCHASE PLAN OF THE COMPANY (THE "PLAN") AND IS GOVERNED BY THE TERMS AND
CONDITIONS OF THE PLAN AND THE RELATED SUBSCRIPTION AGREEMENT, COPIES OF
WHICH MAY BE OBTAINED UPON REQUEST BY THE MAKER AT THE EXECUTIVE OFFICES OF
THE COMPANY. THIS NOTE SHALL BE VOID AND CANCELLED IF SHAREHOLDER APPROVAL
OF THE PLAN HAS NOT BEEN OBTAINED BY JULY 9, 1998 IN ACCORDANCE WITH SECTION
14 OF THE PLAN.
PROMISSORY NOTE
$_______________ _________, 1997
Woodland Hills, CA
FOR VALUE RECEIVED, the undersigned promises to pay to the order of SYNCOR
INTERNATIONAL CORPORATION (the "Company"), at its principal executive offices,
the principal sum of _____________________________ DOLLARS ($____________), in
lawful money of the United States of America, which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment.
This Note shall bear interest at the rate set forth below. The principal sum
above is the purchase price for the shares purchased by the undersigned Maker
pursuant to the Plan, at a price equal to $____ per share, which is the lower
of (a) the closing price or (b) the average of the bid and asked prices for
one share of common stock of the Company, as traded in NASDAQ, at the close of
trading on the effective date of the undersigned Maker's Subscription
Agreement with respect to those shares.
This Note shall be due and payable in full five years from the date set forth
hereinabove, subject to acceleration upon termination of the Maker's
employment with the Company, or cancellation of indebtedness, under the
conditions and to the dates as described in the Plan. The undersigned Maker
shall have the right and privilege of prepaying this Note at any time or
times, in whole or in part, without notice or penalty, in principal amounts of
no less than $5,000. This Note shall bear interest on the unpaid principal
balance hereof from time to time at the rate of _________ percent (___%) per
annum. [THE IMPUTED RATE AS OF THE EFFECTIVE DATE OF THE SUBSCRIPTION
AGREEMENT] Accrued interest shall be payable annually on each anniversary date
hereof.
The Maker, as well as any persons or entities to become liable for the payment
of this Note, hereby expressly waive demand or presentment for payment of this
Note, notice of nonpayment, protest, suit, acceleration, intention to
accelerate, diligence and/or any notice of, or defense on account of, the
extension of time of payment or change in the method of payments, and/or any
modification of the terms hereof or of the Plan or any instrument securing or
guaranteeing the payment hereof, and consent to any and all renewals and
extensions in the time of payment hereof, and/or any modification of the terms
hereof or of the Plan or any instrument securing or guaranteeing the payment
hereof, and to any substitutions, exchange or release of any security herefor
or the release of any party primarily or secondarily liable herefor, and
further agree that the acceptance of late payment hereunder by the Company,
waiver or other forgiveness of any other defaults by Maker, shall not
constitute a waiver by the Company of any subsequent defaults, late payments
or other violations of the Maker's obligations hereunder and/or in the terms
of any instrument securing or guaranteeing the payment hereof.
If this Note is not paid when due (whether the same becomes due by
acceleration or otherwise) and is placed in the hands of an attorney for
collection, or if suit is filed hereon, or if this Note shall be collected by
legal proceedings or through a probate or bankruptcy court, the undersigned
Maker agrees to pay all costs of collection, including reasonable
attorneys fees. Without limiting the Company's other rights and remedies, all
past due installments of principal and/or interest shall bear interest at the
rate of eighteen percent (18%) per annum. If the rate of interest required
to be paid under this Note exceeds the maximum rate permitted by applicable
law, then the interest rate shall be automatically reduced to the maximum
legal rate.
This Note shall be construed in accordance with the laws of the State of
California and the laws of the United States applicable to transactions in
California.
The payment of this Note is secured by the pledge of _________ shares of
Common stock of Syncor International Corporation, $.05 par value, sold to
Maker pursuant to the Plan, together with all proceeds, monies, income and
benefits attributable or accruing to said property which Maker is or may
hereafter become entitled to receive on account of said property, including,
but not by way of limitation, all dividends and other distributions on or with
respect thereto whether payable in cash, stock or other property and all
subscription and other rights (collectively, the "Collateral"). Maker hereby
pledges, assigns, transfers, delivers and grants to the Company a security
interest in the Collateral to secure performance and payment of all
obligations and indebtedness of Maker hereunder, and delivers the certificate
representing the Collateral to the Company, together with a stock power
endorsed in blank, to secure such pledge. This pledge of and grant of a
security interest in the Collateral shall not be construed as relieving Maker
from full personal liability on this Note and for any deficiency thereon, or
impair or affect any other security for the payment of this Note.
A portion of the Collateral may be released from this pledge upon partial
payment of the Note without altering, varying or diminishing in any way the
force, effect, lien, security interest or charge of this pledge as to the
Collateral not expressly released, and this pledge shall continue as a first
and prior lien and charge on all of the Collateral not expressly released
until this Note has been paid in full. Partial release of the Collateral upon
prepayment of a portion of the principal amount of the Note may be made in the
sole discretion of the Company in the amounts deemed appropriate by it, and
subject to the further provisions of the Plan.
All notices hereunder shall be in writing and shall be deemed to have been
delivered on the date personally delivered or on the date mailed, first class,
registered or certified mail, postage prepaid, if addressed to the respective
parties hereto at their address as shown in the corporate records of the
Company.
IF A DISPUTE OR CLAIM ARISES OUT OF THIS PLAN, THE MAKER AND THE COMPANY AGREE
TO WAIVE ANY RIGHTS EACH MAY HAVE TO A JURY OR COURT TRIAL AND TO USE BINDING
ARBITRATION TO RESOLVE ALL SUCH DISPUTES BETWEEN THEM. The arbitration shall
be conducted in accordance with the procedures and provisions set forth in
Section 15 of the Plan.
IN WITNESS WHEREOF, the Maker has executed this Note as of the date first
above written.
MAKER:
_________________________________
Name:
The Company as secured party:
SYNCOR INTERNATIONAL CORPORATION
By: ___________________________________
FIRST AMENDMENT TO THE
SENIOR MANAGEMENT STOCK PURCHASE PLAN
This FIRST AMENDMENT TO THE SENIOR MANAGEMENT STOCK PURCHASE PLAN (the
"First Amendment") is adopted by the Board of Directors of Syncor
International Corporation, a Delaware corporation (the "Company"), effective
as of the 8th day of September 1997, and amends that certain Senior Management
Stock Purchase Plan (the "Plan") approved by the Board of Directors on July 9,
1997.
Section 4 of the Plan is hereby deleted in its entirety, and in
substitution thereof shall be the following:
4. ELIGIBILITY AND PARTICIPATION. Only executive officers or
persons deemed to be key employees of the Company or any parent or a
subsidiary of the Company who have worked for the Company for at least twelve
months, and directors of the Company or a parent or a subsidiary of the
Company (the "Purchasers"), may purchase Shares pursuant to the Plan. The
foregoing notwithstanding, however, an executive officer or key employee who
has not worked for the Company or its parent or subsidiary for at least twelve
months may participate in the Plan upon the recommendation of the Chief
Executive Officer of the Company and the approval of the Board of Directors;
the terms and conditions for such officer's or key employee's eligibility to
participate in the Plan shall be determined by the Chief Executive Officer an
approved by the Board of Directors. The names of the Purchasers currently
eligible to participate in the Plan, and the number of Shares each is eligible
to purchase, are listed on Exhibit A hereto. Each Purchaser must purchase the
Shares that he or she is eligible to purchase no later than sixty (60) days
after the Adoption Date, or if such Purchaser is not currently listed on
Exhibit A hereto, within forty five (45) days after the Board of Directors
approves the number of Shares that such Purchaser would be eligible to
purchase; after such sixty- or forty five-day period, as the case may be, the
Purchasers will no longer be eligible to purchase those Shares not purchased
by him or her by such date.
SECOND AMENDMENT TO THE
SENIOR MANAGEMENT STOCK PURCHASE PLAN
This SECOND AMENDMENT TO THE SENIOR MANAGEMENT STOCK PURCHASE PLAN is
adopted by the Board of Directors of Syncor International Corporation, a
Delaware corporation (the "Company"), effective as of the 8th day of September
1997, and amends that certain Senior Management Stock Purchase Plan, approved
by the Board of Directors on July 9, 1997 and amended by that certain First
Amendment to the Senior Management Stock Purchase Plan effective as of the
date hereof (as amended, the "Plan").
Section 6 of the Plan is hereby deleted in its entirety, and in
substitution thereof shall be the following:
6. PRICE. The purchase price per share of Common Stock under this
Plan shall be the lower of (a) the closing price or (b) the average of the bid
and asked prices for one share of Common Stock as traded in NASDAQ (the
"Closing Price") at the close of trading on the effective date of the
Subscription Agreement executed by such Purchaser in the form attached hereto
as Exhibit B (the "Subscription Agreement"). Notwithstanding the foregoing,
the Board of Directors may, in its own discretion, permit a Purchaser to
purchase a Share for a different price, subject to terms and conditions set by
the Board of Directors. Payment for the Shares shall be made by means of a
full recourse promissory note in the form attached hereto as Exhibit C (the
"Promissory Note"), the payment of which shall be secured by a pledge of the
Shares, provided that the purchase of Shares and the Promissory Note shall be
void and cancelled if shareholder approval of this Plan is not obtained in
accordance with Section 14 below. The Board of Directors may, in its own
discretion, extend the maturity date of any Promissory Note.
AUGUST 8, 1997
CREDIT AGREEMENT
________________
This Credit Agreement dated as of August 8, 1997 is entered into
between SYNCOR INTERNATIONAL CORPORATION, a Delaware corporation ("Borrower"),
and MELLON BANK, N.A. ("Lender"), pursuant to the terms and conditions
described herein for the purpose of loan consolidation and financing the
purchase of stock by Borrower's employee stock ownership plan.
1. DEFINED TERMS.
(a) The following terms used in this Agreement shall have the
following meanings:
"Affected Loans" has the meaning set forth in subsection 3(j).
"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.
"Agreement" means this Credit Agreement, as amended, supplemented,
or modified from time to time.
"Business Day" means, unless otherwise provided for in this
Agreement, any day excluding Saturday or Sunday on which Lender is open for
business at the location where the Note is payable unless otherwise stated.
"Closing Date" means the date on or before August 31, 1997 on which
the initial borrowing of the Loan is made.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Consolidated Capital Expenditures" means, for any period, 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.
"Disbursement Request Form" means the form providing the wiring
instructions and account information for Borrower's account, into which Lender
shall wire funds.
"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.
"ESSOP" means the Employee Savings and Stock Ownership Plan
maintained by Borrower.
"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.
"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 and
amortization 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.
"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 determination.
"Indebtedness" means, 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.
"Indemnitees" has the meaning set forth in subsection 11(d).
"Initial Borrowing Amount" means the original principal amount of
the Loan borrowed on the Closing Date.
"Interest Rate Determination Date" means, with respect to any Rate
Period, the second Business Day prior to the first day of such Rate Period.
"Interest Rate Option" has the meaning set forth in subsection 3(b).
"Libor Rate" shall mean, for any day for any proposed or existing
Rate Segment corresponding to a Rate Period, the rate per annum determined by
Lender to be the rate per annum obtained by dividing (the resulting quotient
to be rounded upward to the nearest 1/16 of 1%) (A) the rate of interest
(which shall be the same for each day in such Rate Period) estimated in good
faith by Lender in accordance with its usual procedures (which determination
shall be conclusive) to be the average of the rates per annum for deposits in
United States dollars offered to major money center banks in the London
interbank market at approximately 11:00 a.m., London time, two (2) London
Business Days prior to the first day of such Rate Period for delivery on the
first day of such Rate Period in amounts comparable to such Rate Segment (or,
if there are no such comparable amounts actively traded, the smallest amounts
actively traded) and have maturities comparable to such Rate Period by (B) a
number equal to 1.00 minus the Libor Rate Reserve Percentage for such day.
The "Libor Rate" may also be expressed by the following formula:
[average of rates offered to major
money banks in the London inter-
Libor Rate = bank market estimated by Lender]
[1.00 - Libor Rate Reserve Percentage]
"Libor Rate Loan" means at any time, that portion of the
unpaid principal amount of the Note bearing interest at such time under the
Libor Rate Option subject to subsections 3(h) and 3(j) hereof.
"Libor Rate Option" has the meaning set forth in subsection 3(b).
"Libor Rate Reserve Percentage" For any day shall mean the
percentage (rounded upward to the nearest 1/16 of 1%), as determined in good
faith by Lender (which determination shall be conclusive) as representing for
such day the maximum effective reserve requirement (including, without
limitation, supplemental, marginal and emergency requirements) for member
banks of the Federal Reserve System with respect to eurocurrency funding
(currently referred to as "Eurocurrency Liabilities") of any maturity. Each
Libor Rate Loan shall be adjusted automatically as of the effective date of
any change in the Libor Rate Reserve Percentage.
"Loan" means, collectively, the Prime Rate Loan and the Libor Rate
Loan comprising the total outstanding borrowings made pursuant to subsection
2(a) hereof.
"Loan Documents" means this Agreement, the Note and all other
documents required by Lender in connection with this Agreement and/or credit
extended hereunder, all as amended, supplemented, extended or modified, from
time to time.
"London Business Day" means any day, for dealing in deposits in
Dollars by and among banks in the London interbank market, excluding Saturday
or Sunday and on which Lender is open for business in Pittsburgh and London
and dealing in offshore dollars.
"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.
"Material Subsidiary" means any Subsidiary of Borrower (i) which has
an individual net worth which equals or exceeds, at the relevant time period,
five percent (5%) of the net worth of Borrower and all of its Subsidiaries on
a consolidated basis (including such Subsidiary), (ii) which has a net income
which equals or exceeds, as of the relevant time period, five percent (5%) of
the net income of Borrower and all of its Subsidiaries on a consolidated basis
(including such Subsidiary) or (iii) the divestiture of which by Borrower
otherwise could reasonably be expected to have a material adverse effect on
the business, operations, assets or financial condition of the Borrower or of
the Borrower and its Subsidiaries taken as a whole (regardless of its relative
net worth).
"Maturity Date" means December 31, 2001.
"Note" means that certain Promissory Note dated August __, 1997,
executed by Borrower to the order of Lender.
"Notice of Conversion/Continuation" has the meaning set forth in
subsection 3(f).
"Obligations" means with respect to Person, any obligation of
Person of any kind, including, without limitation, any liability of such
Person on any claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any insolvency proceeding under the U.S. Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law. Without limiting
the generality of the foregoing, the Obligations of Borrower under the Loan
Documents include (a) the obligation to pay principal, interest, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other
amounts payable by Borrower under any Loan Document and (b) the obligation to
reimburse any amount in respect of any of the foregoing that Lender, in its
sole discretion, may elect to pay or advance on behalf of Borrower.
"Payment Office" means (i) the office of Lender located at Mellon
Bank, 3 Mellon Bank Center, 23rd Floor/Loan Administration, Pittsburgh, PA
15259, Telephone No. (412) 234-6726, Telecopier No. (412) 234-5049 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 multi-employer 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.
"Prime Rate" means the interest rate per annum announced from time
to time by Lender as its Prime Rate. The Prime Rate may be greater or lesser
than other interest rates charged by Lender to other borrowers and is not
solely based or dependent upon the interest rate which Lender may charge any
particular borrower or class of borrowers. Information concerning the Prime
Rate may be obtained from Lender.
"Prime Rate Loan" means at any time, that portion of the unpaid
principal amount of the Note bearing interest at such time under the Prime
Rate Option, subject to subsection 3(h) hereof.
"Prime Rate Option" has the meaning set forth in subsection 3(b).
"Rate Period" has the meaning set forth in subsection 3(c).
"Rate Segment" means, of the Libor Rate Loan at any time, any
portion of the principal amount of the Libor Rate Loan to which, at such time,
there is applicable a particular Rate Period beginning on a particular day and
ending on another particular day. By definition, the Libor Rate Loan is at
all times composed of an integral number of discrete Rate Segments, each
corresponding to a particular Rate Period. The sum of the principal amounts
of all Rate Segments at any time equals the Libor Rate Loan.
"Regulation G, T, U and X" means Regulations G, T, U and X,
respectively, promulgated by the Board of Governors of the Federal Reserve
System, as amended from time to time, and any successors thereto.
"Requirement" has the meaning set forth in subsection 3(m).
"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 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 was used by Borrower or any Subsidiary prior to the
sale or transfer.
"Subsidiary" means, with respect to any 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 discounts and expenses,
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.
(b) Other Definitional Provisions.
(i) All terms defined in this Agreement shall have the
defined meanings when used in the Note, the Loan Documents or any certificate
or other document made or delivered pursuant hereto.
(ii) As used herein, in the Note and in the Loan Documents,
and any certificate or other document made or delivered pursuant hereto,
accounting terms not defined in Section 1., and accounting terms partly
defined in Section 1 to the extent not defined, shall have the respective
meanings given to them under GAAP.
(iii) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
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 amount requested by Borrower, not exceeding Eight Million Dollars
($8,000,000), to be used for the purposes identified in Section 5. The Loan
and all other amounts or Obligations owed hereunder with respect to the Loan
or otherwise shall be paid in full no later than the Maturity Date. Amounts
borrowed under this subsection 2(a) and subsequently repaid or prepaid may not
be reborrowed. Borrower may make only one borrowing hereunder. On the
Closing Date, the Loan shall accrue interest at the Prime Rate or Libor Rate,
as the case may be, and shall be subject to the provisions in subsection 3(f).
The Loan shall be made by crediting the account of Borrower pursuant to the
Disbursement Request Form 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 (1)
Business Day prior to the Closing Date. After the funding on the Closing
Date, 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 A annexed hereto to
evidence the Loan, in the principal amount of the aggregate amount borrowed
under subsection 2(a) and with other appropriate insertions.
3. INTEREST ON THE LOAN.
(a) Payment. The principal balance of the Note shall be paid in
accordance with the terms set forth in the Note. Interest shall be payable in
arrears. Accrued interest on the Prime Rate Loan shall be due and payable on
the last Business Day of each calendar quarter commencing on September 30,
1997. Interest on each Rate Segment of the Libor Rate Loan shall be due and
payable on the last day of the corresponding Rate Period. Interest on each
Rate Segment of the Libor Rate Loan which has a Rate Period equal to or less
than three (3) months shall be due and payable on the last day of the
corresponding Rate Period. Interest on each Rate Segment of the Libor Rate
Loan which has a Rate Period equal to six (6) months shall be due and payable
on the (i) third month anniversary date of the first day of the corresponding
Rate Period, and (ii) on the last day of the corresponding Rate Period. The
Loan and all other amounts owed hereunder with respect to the Loan shall be
paid in full no later than the Maturity Date, and the final installment
payable by Borrower in respect of the Loan on such date shall be in an amount,
if such amount is different from the amount specified in the Note, sufficient
to repay all amounts owing by Borrower under this Agreement with respect to
the Loan. After maturity of any part of the Note (by acceleration or
otherwise), interest on such part of the Note shall be due and payable ON
DEMAND.
(b) Rate of Interest. The unpaid principal amount of the Note
shall bear interest for each day until repaid in full on one or more bases
selected by Borrower from among the interest rate options (the "Interest Rate
Option") set forth below. Borrower understands and agrees that subject to the
provisions of subsections 3(e), 3(g), 3(c)(vi) and 3(j) below, Borrower may
select any number of Interest Rate Options to apply simultaneously to
different parts of the unpaid principal amount of the Note and may select any
number of Rate Segments to apply simultaneously to different parts of the
Libor Rate Loan. The 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 the Prime Rate Loan, then at the Prime Rate
("Prime Rate Option"); or (ii) if the Libor Rate Loan, then at the sum of the
Libor Rate plus .75% per annum ("Libor Rate Option").
(c) Rate Periods for the Libor Rate Loan. At any time Borrower
selects, converts to or renews the Libor Rate Option pursuant to the
applicable Notice of Conversion/Continuation set forth in subsection 3(f)
below, Borrower shall fix a period (the "Rate Period") which shall be one (1),
two (2), three (3) or six (6) months, which shall be acceptable to Lender, in
Lender's sole discretion, during which the Libor Rate Option shall apply to
the corresponding Rate Segment. Lender's right to payment of principal and
interest under the Note shall in no way be affected by the fact that one or
more Rate Periods may be in effect; provided that:
(i) in the case of immediately successive Rate Periods
applicable to a Rate Segment continued as such pursuant to the Notice of
Conversion/Continuation, each successive Rate Period shall commence on the day
on which the immediately preceding Rate Period expires;
(ii) no Rate Period with respect to any Rate Segment shall
extend beyond the Maturity Date;
(iii) no Rate Period with respect to any Rate Segment shall
extend beyond a date on which Borrower is required to make a scheduled payment
of principal of the Loan unless the sum of (a) the aggregate principal amount
of the Prime Rate Loan plus (b) the aggregate principal amount of Rate
Segments with Rate Periods expiring on or before such date equals or exceeds
the principal amount required to be paid on the Loan on such date;
(iv) if a Rate Period would otherwise expire on a day that is
not a Business Day, such Rate Period shall expire on the immediately
succeeding Business Day; provided that, if any Rate Period would otherwise
expire on a day that is not a Business Day but is a day of a calendar month
after which no further Business Day occurs in such month, such Rate Period
shall expire on the immediately preceding Business Day;
(v) any Rate 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 Rate Period) shall end on the
last Business Day of a calendar month;
(vi) there shall be no more than three (3) Rate Segments out-
standing at any time; and
(vii) in the event Borrower fails to specify a Rate Period for
any Rate Segment in the applicable Notice of Conversion/Continuation,
Borrower shall be deemed to have selected a Rate Period of one (1) month.
(d) Determination of Applicable Interest Rate. As soon as
practicable after 11:00 A.M. (Los Angeles time) on each Interest Rate
Determination Date, Lender shall determine the interest rate that shall apply
to the Rate Segment for which an interest rate is then being determined for
the applicable Rate Period and shall promptly give notice thereof (in writing
by facsimile or by telephone confirmed in writing by facsimile) to Borrower.
Each determination of an interest rate or fee by Lender pursuant to any
provision of this Agreement shall be conclusive and binding on Borrower in the
absence of manifest error.
(e) Libor Rate Loan After Default. After the occurrence of and
during the continuation of an Event of Default, (i) Borrower may not elect to
have a Rate Segment be maintained as, or converted to, another Rate Segment
after the expiration of any Rate Period then in effect for such Rate Segment
and (ii) subject to the provisions of subsection 3(k), 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.
(f) Conversion or Continuation. Subject to the provisions of
subsections 3(e) and (j), Borrower shall have the option (i) to convert at any
time all or any part of the Prime Rate Loan to one or more Rate Segments and
any Rate Segment to the Prime Rate Loan or (ii) upon the expiration of any
Rate Period applicable to a Rate Segment, to continue all or any portion of
such Rate Segment as a new Rate Segment; provided, however, that a Rate
Segment may only be converted into the Prime Rate Loan on the expiration date
of the Rate Period applicable thereto; provided, further, however, that any
conversion or continuation shall be in the minimum amount of One Million
Dollars ($1,000,000) or integral multiples of One Hundred Thousand Dollars
($100,000) in excess of that amount. Whenever Borrower desires to make a
conversion or continuation pursuant to the above, Borrower shall deliver an
irrevocable notice to the Payment Office regarding such conversion or
continuation ("Notice of Conversion/Continuation") to Lender no later than
11:00 A.M. (Los Angeles time) at least one (1) Business Day in advance of the
proposed conversion/continuation date, in the case of a conversion to the
Prime Rate Loan, and at least three (3) London Business Days in advance of the
proposed conversion/continuation date, in the case of a conversion to, or a
continuation of, a Rate Segment, 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 Prime Rate Loan or Rate Segment
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 Rate Segment, the requested Rate Period, and (v) in the case of a conversion
to, or a continuation of, a Rate Segment, that no Event of Default has
occurred and is continuing.
(g) Prime Rate Fallback. If any Rate Period expires and, one (1)
or more Rate Segments corresponding to such Rate Period have not been
converted or renewed in accordance with Section 3(f) hereof, then each such
Rate Segment automatically shall be converted to the Prime Rate Option. If
Borrower fails to select, or if Lender fails to approve an Interest Rate
Option to apply to the borrowings evidenced by the Note, such borrowings shall
be deemed to be at the Prime Rate Option.
(h) Default Rate. The Loan hereunder with accrued interest thereon,
regardless of the Interest Rate Option, and all other amounts owing under the
Loan Documents shall bear interest at a rate equal to 2% above the applicable
Interest Rate Option from and after the occurrence and during the continuance
of an Event of Default.
(i) Computation of Interest. Interest in respect of the Prime Rate
Loan and the Libor Rate Loan (including any fees payable pursuant thereto),
shall be calculated on the basis of a 360 day year for the actual days
elapsed. Any change in the interest rate on a Prime Rate Loan resulting from
a change in the Prime Rate shall become effective as of the opening of
business on the day on which such change in the Prime Rate shall become
effective.
(j) Illegality or Impracticability of the Libor Rate Loan. In the
event that on any date Lender shall have determined that the making,
maintaining or continuation of the Libor Rate Loan (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, unascertainable 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, which shall be
conclusive. Thereafter (a) the obligation of Lender to convert the Prime Rate
Loan to the Libor Rate Loan or to a discrete Rate Segment shall be suspended
until such notice shall be withdrawn by Lender, (b) to the extent such
determination by Lender relates to a Rate Segment then being requested by
Borrower pursuant to a Notice of Conversion/Continuation, Lender shall convert
or continue such Rate Segment as the Prime Rate Loan, (c) Lender's obligation
to maintain its outstanding Rate Segments (the "Affected Loans") shall be
terminated at the earlier to occur of the expiration of the Rate Period then
in effect with respect to the Affected Loans or when required by law, and (d)
the Affected Loans shall automatically convert into the Prime Rate Loan on the
date of such termination, and Borrower shall not have the right to select the
Libor Rate Option.
(k) Compensation For Breakage or Non-Commencement of Rate 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 the Libor Rate Loan
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 Rate Segment 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(a)) or other principal payment or any
conversion of any of its Rate Segments occurs on a date prior to the last day
of a Rate Period applicable to such Rate Segment, (iii) if any prepayment of
any of its Rate Segments 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 the Libor Rate Loan when required by the terms of
this Agreement.
(m) Reduced Return. If Lender shall have determined that any
applicable law, regulation, rule or regulatory requirement generally
applicable to banks located in California and Pennsylvania (collectively in
this subsection 3(m), a "Requirement") regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof
by any United States federal or state 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, has or would have the effect of reducing
the rate of return on Lender's capital as a consequence of its obligations
hereunder to a level below that which would have been achieved but for such
Requirement, change or compliance (taking into consideration Lender's policies
with respect to capital adequacy) by an amount deemed by Lender to be material
(which amount shall be determined by Lender's reasonable allocation of the
aggregate of such reductions resulting from such events), then from time to
time, within five (5) Business Days after demand by Lender, Borrower shall pay
to Lender such additional amount or amounts as will compensate Lender for such
reduction. Lender does not presently have knowledge of any new Requirement or
any pending change in any existing Requirement which would result in such
additional amounts being owed.
4. PAYMENTS; PREPAYMENTS.
(a) Voluntary Prepayments. Borrower may, upon not less than one
(1) Business Day's prior written or telephonic notice, in the case of the
Prime Rate Loan, and three (3) Business Days' prior written or telephonic
notice, in the case of the Libor Rate Loan, in each case given to Lender by
11:00 A.M. (Los Angeles 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 the Loan 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 Rate Segment may only be prepaid on the
expiration of the Rate Period applicable thereto. Notice of prepayment having
been given as aforesaid, the principal amount of the Loan 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(c).
(b) Manner and Place of Payment. All payments by Borrower under
this Agreement, the Note or any other Loan Documents 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 11:00 A.M.
(Los Angeles 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, subject to subsection
3(c)(iv), 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.
(c) Application of Voluntary Prepayments. Any voluntary
prepayments of the Loan pursuant to subsection 4(a) shall be applied to reduce
the scheduled installments of principal of the Loan set forth in the Note in
inverse order of maturity.
5. USE OF PROCEEDS. The proceeds of the Loan being made to Borrower,
shall be applied by Borrower (i) to consolidate Borrower's existing ESSOP
loans with Bank of America, NT&SA, and The First National Bank of Chicago, the
proceeds of which loans were loaned by Borrower to its ESSOP to finance the
purchase of Borrower's stock by the ESSOP, and (ii) to loan additional amounts
to the ESSOP to enable the ESSOP to purchase additional stock in Borrower. No
portion of the Loan proceeds 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 Loan
proceeds, 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 obligation of Lender to make the Loan
hereunder is 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 the Loan Documents,
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;
(ii) Signature and incumbency certificates of the officers of
Borrower executing the Loan Documents;
(iii) Executed originals of this Agreement, the Note and any
other Loan Documents; and
(iv) Such other documents as Lender may reasonably request.
(b) Loan Fee. Borrower shall have paid to Lender a non-refundable
loan fee of Ten Thousand Dollars ($10,000).
(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).
(f) Due Diligence. Lender shall have completed its due diligence
with respect to Borrower, its Subsidiaries and their business to Lender's
satisfaction.
7. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement and to maintain and make the Loan, Borrower makes the
following representations, warranties and agreements, which shall survive the
execution and delivery of the Loan Documents and the making of the Loan:
(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 the Loan Documents and to carry out the transactions
contemplated hereby and thereby.
(b) Due Authorization. The execution, delivery and performance of
this Agreement, the Note and the Loan Documents have been duly authorized by
all necessary corporate action on the part of Borrower.
(c) Binding Obligation. Each of the Loan Documents 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, the Note and the Loan Documents
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 Subsidiaries.
(e) Government Consents. To Borrower's knowledge, the execution,
delivery and performance by Borrower of the Loan Documents and the consum-
mation of the transactions contemplated thereby, 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, 1996 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 March 31, 1997
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) Solvency. As of and from and after the date of this Agreement,
Borrower: (a) owns and will own assets the fair saleable value of which are
(i) greater than the total amount of liabilities (including contingent
liabilities) of Borrower and (ii) greater than the amount that will be
required to pay the probable liabilities of Borrower as they mature; (b) has
capital that is not unreasonably small in relation to its business as
presently conducted or any contemplated or undertaken transaction; and (c)
does not intend to incur and does not believe that it will incur debts beyond
its ability to pay such debts as they become due.
(h) No Material Adverse Change. Since March 31, 1997, 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.
(i) 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, or any of its Subsidiaries, 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.
(j) Payment of Taxes. All material tax returns and reports of
Borrower and its 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 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.
(k) Subsidiaries. Each of the 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.
(l) 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 shall not terminate contributions to any other employee benefit plans
maintained by it if such termination shall incur 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.
(m) Compliance with Laws; Environmental Matters.
(i) To Borrower's knowledge, Borrower and each of its
Subsidiaries are 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.
(ii) Except as set forth in Schedule 7(m) hereto, neither
Borrower nor any Subsidiary, nor any of their respective officers, employees,
representatives or agents, nor, to the best of their knowledge, any other
person, has treated, stored, processed, discharged, spilled, or otherwise
disposed of any substance defined as hazardous or toxic by any applicable
federal, state or local law, rule, regulation, order or directive, or any
waste or by-product thereof, at any real property or any other facility owned,
leased or used by Borrower or any Subsidiary, in violation of any applicable
statutes, regulations, ordinances or directives of any governmental authority
or court, which violations may result in liability to Borrower or any
Subsidiary or any of their respective officers, employees, representatives,
agents or shareholders in an amount exceeding $100,000 for all such
violations; and the unresolved violations set forth in said Schedule 7(m) will
not result in liability to Borrower or any Subsidiary or any of their
respective officers, employees, representatives, agents or shareholders in an
amount exceeding $100,000 for all such unresolved violations. Except as set
forth in said Schedule, no employee or other person has made a claim or demand
against Borrower or any Subsidiary based on alleged damage to health caused by
any such hazardous or toxic substance or by any waste or by-product thereof;
and the unsatisfied claims or demands against Borrower or any Subsidiary set
forth in said Schedule 7(m) will not result in uninsured liability to Borrower
or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 in
excess of reserves on the books of Borrower for all such unsatisfied claims or
demands. Except as set forth in said Schedule 7(m), neither Borrower nor any
Subsidiary has been charged by any governmental authority with improperly
using, handling, storing, discharging or disposing of any such hazardous or
toxic substance or waste or by-product thereof or with causing or permitting
any pollution of any body of water; and the outstanding related charges set
forth in said Schedule 7(m) will not result in liability to Borrower or any
Subsidiary or any of their respective officers, employees, representatives,
agents or shareholders in an amount exceeding $100,000 for all such
outstanding charges.
(n) Title to Properties. Borrower and its 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 liens, security interests and encumbrances.
(o) True and Complete Disclosure. To Borrower's knowledge, all
factual information heretofore furnished by or on behalf of Borrower or its
Subsidiaries 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 Borrower in writing
to Lender (or any successor or assignee thereof) will be, true and accurate in
all material respects.
(p) Other Obligations. To Borrower's knowledge, Borrower or its
Subsidiaries 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.
(q) 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.
(r) Consolidated Business Operations of Borrower. With respect to
the business operations of Borrower and its Subsidiaries, on a consolidated
basis, Borrower is the main operating entity, is directly responsible for at
least ninety percent (90%) of all revenues and owns at least ninety percent
(90%) of all assets.
8. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that until the
Loan (together with all interest, fees and all other Obligations incurred
thereunder), is paid in full:
(a) Information Covenants. Borrower will furnish to Lender:
(i) Quarterly Financials. Within sixty (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 one hundred twenty
(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 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)(i) and (ii), 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 Borrower was in
compliance with the provisions of Section 9(g) 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 (7) Business Days, in the case of clause (A)
below, twenty (20) calendar days, in the case of clause (B) below, and ten
(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 the Loan
Documents, 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. In this connection each of Borrower's pharmacies shall
maintain all required licenses and permits and shall comply with the
regulations of the United States Nuclear Regulatory Commission, as well as
corresponding state agencies.
(c) Maintenance of Property, Insurance. 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 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
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
Material 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.
(g) Consolidated Business Operations of Borrower. With respect to
the business operations of Borrower and its Subsidiaries, on a consolidated
basis, Borrower shall be the main operating entity, shall be directly
responsible for at least ninety percent (90%) of all revenues and shall own at
least ninety percent (90%) of all assets.
9. NEGATIVE COVENANTS. Borrower covenants and agrees that until the
Loan (together with all interest, fees and all other Obligations incurred
thereunder) is paid in full:
(a) Liens. Borrower will not, and will not allow any 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) purchase money security interests in personal or real
property acquired after the date of this Agreement if the total aggregate
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, authorize, declare or pay any
dividends, except that for so long as no Event of Default or Potential Event
of Default has occurred and is continuing, Borrower may declare and pay
dividends on its equity securities.
(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
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 so long as no Event of Default or Potential Default has occurred,
Borrower may make loans or advances to (i) its Employee's Savings and Stock
Ownership Plan to permit it to purchase stock, or (ii) any Person to permit
such Person to purchase stock pursuant to the Senior Management Stock Purchase
Plan.
(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 of Borrower 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 five (5)
days in any thirty (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 prior
written consent, such consent not to be unreasonably withheld; provided, that
Borrower or such Subsidiary may:
(i) incur Indebtedness owed to Lender;
(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 March 31, 1997;
(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
not exceeding, at any time, $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 and after June 30, 1997.
(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
outstandings under Borrower's line of credit) 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. 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 three (3) immediately preceding
fiscal quarters.
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 portion of the Loan or the Note or (ii) default, and such
default shall continue unremedied for one (1) Business Day, in the payment
when due of interest on the 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 other Loan Document or any
certificate delivered pursuant hereto or thereto 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(g) 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
fifteen (15) Business Days after written notice to Borrower by Lender; or
(d) Cross-Default. Any default occurs under any agreement in
connection with which Borrower or any Subsidiary has obtained credit from
another Person or which Borrower or any Subsidiary has issued a guaranty 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 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 sixty
(60) days after the filing thereof; 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 (2) 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 specified in Section 10(d) shall occur with
respect to Borrower, no notice shall be required) declare the principal of and
any accrued interest in the Loan 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 obligations of Lender shall thereupon
terminate.
11. MISCELLANEOUS.
(a) Costs and Expenses. Borrower shall pay to Lender immediately
upon demand, the full amount of all costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of
Lender's in-house counsel, if any), incurred by Lender in connection with (a)
the negotiation and preparation of this Agreement and each other of the Loan
Documents (which such amount shall not exceed $5,000), and the preparation of
any amendments and waivers hereto and thereto, (b) the enforcement of Lender's
rights and/or the collection of any amounts which become due to Lender under
any of the Loan Documents (including, without limitation, in appellate,
bankruptcy, insolvency, liquidation, reorganization, moratorium or other
similar proceedings) or the restructuring of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including, without limitation, any action for declaratory relief.
(b) Participations and Assignments. Lender may sell, assign,
transfer, negotiate or grant participations to other financial institutions in
all or part of the obligations of Borrower outstanding under the Loan
Documents, provided that any such sale, assignment, transfer, negotiation or
participation shall be in compliance with the applicable federal and state
securities laws; and provided further that any assignee or transferee agrees
to be bound by the terms and conditions of this Agreement. Lender may, in
connection with any actual or proposed assignment or participation, disclose
to the actual or proposed assignee or participant, any information relating to
Borrower or any of its Subsidiaries.
(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, the Loan
Documents or any transaction contemplated herein or therein; provided, that
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 the Loan 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 fifteen
(15) calendar 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 set forth in this Agreement, all
notices and other communications provided for hereunder shall be in writing
(including facsimile communication) and mailed or sent by facsimile or
delivered, if to Borrower, at its address set forth on the signature page
hereof; and if to Lender, at its address set forth on the signature page
hereof; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall be effective when sent by facsimile, or three (3) days
after such notice or communication is deposited in the mails, except that
notices and communications to Lender pursuant to Section 3 or Section 10 shall
not be effective until received by Lender.
(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 the 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. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
(g) Governing Law; Waiver of Jury Trial.
(i) The validity, interpretation and enforcement of this
Agreement and the other Loan Documents and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(ii) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of Los Angeles
and the United States District Court for the Central District of California
and waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Agreement or any of the other
Loan Documents or in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
other Loan Documents or the transactions related hereto or thereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above.
(iii) To the extent permitted by California law, Borrower
hereby waives personal service of any and all process upon it and consents
that all such service of process may be made by certified mail (return receipt
requested) directed to its address set forth on the signature pages hereof and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Lender's option, by
service upon Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
(iv) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER
OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(v) Lender shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit
of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
(h) Amendment. No amendment or waiver of any provision of the Loan
Documents nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by Lender
and Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(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, the Note or the Loan Documents 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 obligation
in any other jurisdiction, shall not in any way be affected or impaired
thereby.
(l) Effectiveness: Binding Effect. This Agreement shall become
effective when it shall have been executed by Borrower and Lender and
thereafter shall be binding upon and inure to the benefit of Borrower, Lender
and their respective successors and assigns, except that Borrower shall not
have the right to assign its rights hereunder or any interest herein without
the prior written consent of Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
MELLON BANK, N.A.
By: /s/ Richard M. McNiven
__________________________
Richard M. McNiven,
Assistant Vice President
Notice Address:
Mellon Bank
Mellon Bank Center
400 South Hope Street
5th Floor
Los Angeles, CA 90071
Attention: Richard M. McNiven
Telecopier: (213) 629-0484
SYNCOR INTERNATIONAL CORPORATION
By: /s/ Haig S. Bagerdjian
____________________________
Haig S. Bagerdjian
Senior Vice President,
Business Development,
and Secretary
Notice Address:
6464 Canoga Avenue
Woodland Hills, CA 91367
Attention: Haig S. Bagerdjian
Senior Vice President
Business Development,
and Secretary
Telecopier: (818) 737-4606
SCHEDULE 7(m)
ENVIRONMENTAL MATTERS
The Environmental Protection Agency has identified Borrower as one
of approximately 800 companies that have allegedly made improper disposals of
hazardous waste at RAMP Industries in Denver, Colorado. Borrower has been
informed by the EPA that it will assess and apportion liability costs for
clean up in late 1997. Borrower estimates its exposure, if any, to be less
than $50,000.
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, 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.
SCHEDULE 9(f)
EXISTING INDEBTEDNESS
1. The Guarantee of Parent Corporation, dated June 28, 1993, made by
Borrower in favor of Boston Capital Corporate Tax Credit Fund II (the "Fund"),
pursuant to which Borrower guarantees the payment and performance of
Management's obligations under the $1,980,000 investor Promissory Note in
favor of the Fund.
2. The Guarantee of Parent Corporation, dated July 1996, made by Borrower in
favor of John Hancock, pursuant to which Borrower guarantees the payment and
performance of Management's obligations under the $2,637,833 Promissory Note
in favor of John Hancock in connection with its investment in the American Tax
Credit Corporate Fund III, L.P.
3. Guarantees made and to be made by Borrower in favor of landlords of
office space used by subsidiaries of Syncor Diagnostics, LLC., pursuant to
which Borrower guarantees the payment and performance of the subsidiaries'
rental obligations.
4. Loan Agreement, dated March 31, 1997, between Syncor Pharmaceuticals,
Inc. and The First National Bank of Chicago, in the amount of $6,500,000,
payment of which is guaranteed by Borrower.
EXHIBIT A
[FORM OF NOTE]
SYNCOR INTERNATIONAL CORPORATION
PROMISSORY NOTE DUE DECEMBER 31, 2001
$_____________ August __, 1997
FOR VALUE RECEIVED, SYNCOR INTERNATIONAL CORPORATION, a Delaware
corporation ("Company"), promises to pay to the order of MELLON BANK, N.A.
("Payee"), or its registered assigns the principal amount of ______________
DOLLARS ($_________) (the "Original Principal Balance") 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
Credit Agreement dated as of August ___, 1997 by and among Company and Payee,
as lender (said Credit 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 eighteen (18)
consecutive quarterly installments, commencing on September 30, 1997,
continuing on the last day of each calendar quarter thereafter and ending on
December 31, 2001. Each such installment shall be in an amount equal to
one-eighteenth (1/18) of the Original Principal Balance; 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.
Subject to Section 3 (c)(iv) 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(a) 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: __________________________
Haig S. Bagerdjian
Senior Vice President,
Business Development,
and Secretary
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
1,000
<S> <C>
Period-type 9-mos
Fiscal-year-end 12/31/97
Period-start 01/01/97
Period-end 09/30/97
Cash 27,821
Securities 2,604
Receivables 57,749
Allowances (1,021)
Inventory 6,220
Current-assets 97,687
PP&E 60,923
Depreciation (37,236)
Total-assets 163,630
Current-liabilities 60,948
Bonds 0
Preferred-mandatory 0
Preferred 0
Common 570
Other-SE 84,350
Total-Liability-and-Equity 163,630
Sales 285,764
Total-Revenue 285,764
CGS 219,534
Total-costs 219,534
Other-expenses 55,847
Loss-provision 0
Interest-expense (560)
Income-pre-tax 13,894
Income-tax 5,557
Income-continuing 8,337
Discontinued 1,063
Extraordinary 0
Changes 0
Net-income 9,400
EPS-primary .92
EPS-diluted .90
</TABLE>
