[THIS AMENDMENT TO THE FORM 10-K WAS FILED TO ATTACH A NEW "Exhibit 13" (Annual
Report to Stockholders).]
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
______________________________________________________
For the Year Ended December 31, 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 (IRS Employer
Incorporation or organization) Identification No.)
6464 Canoga Avenue, Woodland Hills, California 91367-2407
(Address of principal executive offices) (Zip Code)
(818) 737-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.05 PAR VALUE
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the average bid and asked prices of such
stock on March 19, 1998 was $158,763,010. For purposes of the foregoing
calculation, each executive officer and director of Registrant was deemed an
"affiliate" of Registrant. The number of shares outstanding (excluding
treasury shares) of the Registrant's $0.05 par value common stock as of March
19, 1998 was 10,138,767 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for the year ended
December 31, 1997, are incorporated by reference into Parts I, II and IV of
this report.
Portions of Registrant's definitive Proxy Statement for Registrant's Annual
Meeting of Stockholders on June 16, 1998, are incorporated by reference into
Part III of this report.<PAGE>
SYNCOR INTERNATIONAL CORPORATION
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
December 31, 1997
PART I Page
Item 1. BUSINESS........................................................1
Item 2. PROPERTIES......................................................7
Item 3. LEGAL PROCEEDINGS..............................................10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................10
Item 6. SELECTED FINANCIAL DATA........................................10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..........................................10
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA........10
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE...........................................10
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............11
Item 11. EXECUTIVE COMPENSATION.........................................11
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.....................................................11
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................11
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.......................................................12
<PAGE>
PART I
Item 1. BUSINESS.
Unless otherwise indicated, the term "Syncor" or the "Company" as used in this
report refers to Syncor International Corporation, incorporated in 1985 under
the laws of the State of Delaware, and its consolidated subsidiaries.
GENERAL DEVELOPMENT OF BUSINESS
The general development of the Company's business for the year ended December
31, 1997, is covered in the letter from the Chairman of the Board and the
President and Chief Executive Officer to the Company's stockholders in the
Company's Annual Report to Stockholders for said year and is incorporated into
this Form 10K by reference. A copy of the Company's Annual Report to
Stockholders is attached as Exhibit 13.
PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED
Radiopharmacy Business
The Company is primarily a pharmacy services company engaged in compounding,
dispensing and distributing radiopharmaceutical products and services to
hospitals and clinics through its network of 119 nuclear pharmacy service
centers in the United States and thirteen nuclear pharmacy service centers
outside of the United States. The Company's pharmacies process
radiopharmaceutical prescriptions in convenient packaging for the customer,
called "unit dose". The unit dose is then applied to a specific patient for
diagnostic imaging of physiological functions and organ systems and for
monitoring and treatment of diseases.
In addition, the Company provides various services in connection with the sale
of radiopharmaceuticals, including radiopharmaceutical record keeping required
by federal and state government agencies, and radiopharmaceutical technical
consulting. The Company also markets and distributes imaging cold kits,
isotopes, medical reference sources, and nuclear and pharmacy equipment and
accessories. The Company estimates that its pharmacies serve approximately
7,000 hospitals and clinics in 40 states throughout the United States.
Manufacturing Business
As a result of an acquisition made in 1997, the Company, through its
subsidiary, Syncor Pharmaceuticals, Inc., now manufactures Iodine-123 capsules
in its manufacturing facility in Golden, Colorado. An Iodine-123 capsule is a
radiopharmaceutical diagnostic product used for thyroid disorders. As a
result of the acquisition, the Company has enhanced its ability to maintain a
reliable supply of Iodine-123 capsules for its customers and their patients,
and hopes to package and distribute other Iodine-123 pharmaceutical products
in the near future. The financial results from the operations of Syncor
Pharmaceuticals have had a positive impact on the Company's overall gross
profit margin.
Medical Imaging Business
In 1997, the Company began a series of transactions to expand its role in the
field of medical imaging. In February 1997, the Company, together with
National Diagnostic Services, Inc., formed Syncor Diagnostics, LLC for the
purpose of establishing and operating magnetic resonance imaging ("MRI")
centers using a new MRI design that features an open, permanent magnet.
Syncor Diagnostics currently has seven open MRI centers in operation or under
construction, and plans to open three more open MRI centers by the end of the
third quarter of 1998. In the first quarter of 1998, the Company announced or
completed the acquisition of three imaging businesses (through mergers or
asset acquisitions) from the following companies: National Diagnostic
Services, Inc., based in Thousand Oaks, California; TME, Inc., based in
<PAGE>
Houston, Texas; and International Magnetic Imaging, Inc., based in Boca Raton,
Florida. As a result of these acquisitions, the Company will own 26 medical
imaging centers (including the ten open MRI centers of Syncor Diagnostics) and
will manage (with no or less than 50% ownership interest) an additional 23
medical imaging centers located in eleven states and Puerto Rico by the end of
the third quarter of 1998. The centers are concentrated primarily in
California, Arizona, Texas and Florida. The Company intends to consolidate
its medical imaging business into one subsidiary, Comprehensive Medical
Imaging, Inc.
These medical imaging centers provide one or more outpatient diagnostic
imaging services, including MRI (42 centers), computerized tomography or CT
(14 centers), nuclear imaging (4 centers), X-ray (8 centers), ultrasound (11
centers), mammography (9 centers) and fluoroscopy (4 centers). The Company's
goal is to offer its customers comprehensive imaging services across multiple
geographic markets. The medical services provided in each imaging center are
performed by groups of radiologists affiliated with the Company. The
board-certified radiologists interpret diagnostic images and supervise
technicians performing medical imaging procedures, while the Company performs
marketing, legal, billing and other administrative and technical functions.
The description of the Company's various activities in the Company's Annual
Report to Stockholders for the year ended December 31, 1997 is incorporated
into this Form 10-K by reference.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company's pharmacies dispense approximately sixty different
radiopharmaceutical products, which are obtained primarily from six suppliers.
The Company's principal supplier of radiopharmaceutical products is the
Radiopharmaceutical Division of The DuPont Merck Pharmaceutical Company
("DuPont"), with whom the Company has had a long-standing relationship with
respect to the distribution of its products, including its bulk
radiopharmaceutical products since February 1, 1994.
If DuPont is not able to supply its proprietary products to the Company, the
Company's operations could be negatively impacted. Management believes,
however, that if any one of the suppliers of proprietary radiopharmaceuticals
to the Company failed to supply products, the Company's other current
suppliers would be able to supply additional products to make up most of the
shortfall. The failure of two or more suppliers to provide products at a
particular time, however, could have an adverse effect on the Company's
business.
The Company derives approximately 60 percent of its radiopharmacy net sales
per day from technetium-based products. The Company obtains its supply of
technetium, a radioactive isotope, from technetium generators provided
primarily by DuPont. Since radioactive isotopes decay naturally, the Company
cannot stockpile technetium generators for use during temporary shortages.
DuPont's supply of technetium generators was interrupted for six days in May
1997 as a result of a labor dispute experienced by its main supplier of
molybdenum, the parent isotope of technetium. The supply interruption had an
adverse impact on the Company's sales. In order to prevent a similar
interruption, DuPont is attempting to secure alternative molybdenum sources.
A similar interruption, depending on its duration, could have a material
adverse effect on the Company's business.
In March 1997, the Company entered into an agreement to act as the preferred
distributor for positron radiopharmaceuticals produced by P.E.T.Net
Pharmaceutical Services(TM), LLC. In April 1997, the Company signed an
agreement with PerImmune Inc. to market and distribute HumaSPECT(R)/CR, a
human monoclonal antibody for the diagnosis and staging of colorectal cancer,
and other invivo imaging and therapeutic radiopharmaceutical products. The
Company also maintains distribution agreements with other suppliers.
<PAGE>
The principal raw material used by the Company in its manufacturing facility
in Colorado is the radioactive isotope, Iodine-123. The Company obtains its
supply of Iodine-123 from MDS Nordion, which has supplied the material without
interruption during the last five years.
The Company is consistently in pursuit of improving its relationships with
current suppliers and developing new long-term relationships.
PATENTS, TRADEMARKS, AND LICENSES
The Company owns a number of trademarks and patents, including patent rights
to the SECURE Safety Insert System(TM), a safety insert container system used
for the safe delivery, handling and disposal of unit dose products. In June
1997, the Company introduced a new family of proprietary radiopharmaceutical
delivery systems referred to as the "Pigs" (Piglet(TM), Piglet2(TM) and
PETPig(TM)).
The Pigs are tungsten containers that weigh considerably less than current
lead containers and set new industry standards for the safe transport and
handling of radioactive substances. They also provide enhanced radiation
shielding resulting in a reduction in radiation exposure to our pharmacy
personnel and customers.
The Company also licenses its proprietary Unit Dose Manager(TM), NucLink(TM) and
Windows-based SYNtrac(TM) integrated software and hardware systems to its
customers to assist their nuclear medicine departments and to facilitate
electronic communication between the Company's local radiopharmacies and
customers. As of December 31, 1997, the Company had approximately 1,335
customers who were active licensees of the software systems. The foregoing
trademarks, patents and licenses are key components to the Company's ability
to operate its pharmacies efficiently, provide high quality customer service,
and build mutually beneficial long-term relationships with the Company's
customers.
DEPENDENCE ON CUSTOMERS
Radiopharmacy Customers
The Company has primarily two types of radiopharmacy customers. The first
type of customer is a national account customer, which may be a national
managed care provider or a group purchasing organization. The national
account customer owns, manages or negotiates contracts for a network of
hospitals and clinics that purchase most of their radiopharmaceutical
requirements from the Company. In 1997, the Company signed a five-year sole
source national contract with VHA, Inc. and a five-year sole source national
contract with AmeriNet, Inc., and in January 1998, a three-year sole source
national contract with Kaiser Permanente. Other national account customers
include Columbia/HCA, TENET and Health Service Corporation of America.
Sales to national account customers was valued at approximately $195 million
in 1997, representing nearly 51% of the Company's total sales. Sales to the
Company's three biggest national account customers (VHA, Inc., Columbia/HCA
and AmeriNet, Inc.) accounted for approximately 54% of the total national
account sales. The second type of customer is an individual hospital or
clinic that is not affiliated with a national managed care provider or group
purchasing organization. Sales to non-affiliated U.S. hospitals and clinics
was valued at approximately $170 million in 1997, representing nearly 45% of
the Company's total sales.
The Company's radiopharmacy operations are such that none of its business is
dependent upon a single customer. If two or more national account customers
were to merge and their affiliated or member hospitals and clinics cease to
use the Company's services, such a loss could have a short-term negative
impact on the Company's operations.
In February 1997, the Company announced the termination of its national
agreement to distribute radiopharmaceuticals to Premier members formerly
<PAGE>
affiliated with AmHS and SunHealth. The Company, however, continues to
provide radiopharmaceutical products and services to many of the Premier
members.
Manufacturing Customers
The Company's manufacturing facility in Colorado supplies almost 95% of its
Iodine-123 capsules to the Company's radiopharmacies. The Company aims to
expand the customer base for its Iodine-123 capsules.
Medical Imaging Customers
The Company's ability to attract medical imaging customers depends on its
ability to attract referrals from health care providers and from physicians
representing various medical specialties. Referrals may depend on the
existence of a contractual relationship between a center and a patient's
insurance carrier or between a center and a health care provider (such as a
managed care provider, hospital or clinic). The loss of one or a few large
customers would not have a material adverse effect on the Company's business;
however, such a loss could have a material adverse impact on the local imaging
centers operated by the Company with whom such customers do business.
COMPETITIVE CONDITIONS
Radiopharmacy Business
The nuclear medicine market is divided into two segments: the market for bulk
products and the market for unit dose products. In 1997, the U.S. nuclear
medicine market was valued at approximately $800 million, with unit dose sales
accounting for approximately 75 to 80 percent of the market, and bulk product
sales accounting for the remaining 20 to 25 percent.
With respect to the bulk sales market, the Company competes with
radiopharmaceutical manufacturers that sell their products directly to
hospitals and clinics or indirectly through radiopharmacies. The hospital or
clinic, in turn, compounds the bulk product into unit doses. Through its
distribution agreements with manufacturers, primarily with DuPont, the Company
is able to compete with manufacturers for bulk business.
The core of the Company's business, however, is in unit dose sales, which
generate higher profit margins than bulk sales. In 1997, the Company's unit
dose sales represented 90 percent of the Company's total radiopharmacy sales.
The Company's management believes that the advantages to customers of using a
centralized radiopharmacy to compound unit doses rather than preparing their
own radiopharmaceutical products include: (i) reduced risk of radiation
exposure to hospital personnel; (ii) cost savings due to the Company's volume
purchasing power; (iii) better utilization of time-sensitive products
purchased from radiopharmaceutical manufacturers; (iv) reduction in the time
needed to maintain extensive records required by regulatory agencies; and (v)
elimination or reduction of personnel, working space and equipment that would
otherwise have been necessary to compound unit doses.
The Company's radiopharmacies compete for unit dose sales primarily with two
radiopharmaceutical manufacturers that have also set up their own centralized
radiopharmacies to supply unit doses to customers. The Company's
radiopharmacies also compete with approximately 95 to 100 independent
radiopharmacies located in small- to medium-size cities throughout the U.S.
The advantages to operating an independent radiopharmacy include lower
start-up and overhead costs and greater management flexibility. In certain
markets, there is competition with universities which own and operate
centralized radiopharmacies. The advantages to operating a university
radiopharmacy include having a guaranteed customer base from the university's
nuclear medicine department and having access to subsidies from the
university. In 1997, the Company held approximately 50 to 55 percent of the
<PAGE>
market share for unit dose sales.
The Company differentiates itself from its competitors, and adds value to its
customers, by providing: (i) unit dose radiopharmaceuticals under rigorous
quality control standards; (ii) a comprehensive nuclear medicine product line;
(iii) professional consultation and delivery services; (iv) the SECURE Safety
Insert System and the Pigs system for the safe delivery, handling and
disposal of unit dose products; and (v) the Unit Dose Manager(TM) and
SYNtrac(TM) software and hardware systems to allow customers to better
manage their nuclear medicine departments. In addition, the Company
distinguishes itself from its competitors by providing radiopharmaceutical
products and services with a Service Difference(SM) Guarantee.
Medical Imaging Business
The Company's medical imaging centers compete primarily with local hospitals,
independent imaging centers owned by physician groups and multi-center imaging
companies. The principal competitive factors are the quality and timeliness
of results, price, center location, type of equipment available at the center,
reputation of interpreting radiologists and the center's ability to establish
and maintain relationships with health care providers and referring
physicians. The Company plans to enhance its patient referral network by
building on existing relationships with health care providers and physicians
developed through its radiopharmacy business. The Company also plans to
differentiate itself from the competition by becoming a leader in providing
multi-modality services in local markets, thereby making it a partner of
choice for health care providers that are increasingly preferring to work with
fewer service providers that offer comprehensive services.
GOVERNMENT REGULATION
Radiopharmacy and Manufacturing Business
Each of the Company's pharmacies is licensed by and must comply with the
regulations of the United States Nuclear Regulatory Commission ("NRC") or
corresponding state agencies. In addition, each pharmacy is licensed and
regulated by the Board of Pharmacy in the state where it is located. The
Company's manufacturing facility in Colorado is licensed by the state of
Colorado for radioactive materials and is licensed by the Food and Drug
Administration ("FDA") as a manufacturing facility. The FDA also inspects the
facility for compliance with its "good manufacturing practices" standards.
Periodic inspections of the Company's pharmacies are conducted by the NRC and
various other federal and state agencies. Unsatisfactory inspection results
could lead to escalated enforcement action, the imposition of fines or the
suspension, revocation or denial of renewal of the licenses for the location
inspected. The Company devotes substantial human and financial resources to
ensure continued regulatory compliance and believes that it is currently in
compliance with all material rules and regulations.
The Company is subject to the various federal and state regulations relating
to occupational safety and health and the use and disposal of bio-hazardous
materials. In addition, the Company's products are subject to federal and
state regulations relating to drugs and medical devices.
Compliance with the applicable environmental control laws and regulations,
such as those regulating the use and disposal of radioactive materials, is
inherent in the industry and the normal operations of the Company's pharmacies
and its manufacturing facility. Historically, compliance with such laws and
regulations has not had a material adverse effect on the capital expenditures,
earnings or competitive position of the Company.
Medical Imaging Business
The federal government and all states in which the Company operates or plans
<PAGE>
to operate medical imaging centers regulate various aspects of the medical
imaging business. Failure to comply with these laws and regulations could
have an adverse impact on the Company's ability to receive reimbursement for
its services from government agencies and could also result in civil and
criminal penalties against the Company and its management.
The establishment and operation of outpatient diagnostic imaging centers are
subject to various licensure requirements. Some states require a Certificate
of Need ("CON") in certain circumstances to establish, construct, acquire or
expand healthcare facilities and services. The Company may also have to
comply with federal certification requirements, such as the federal
certification requirement to provide mammography examinations. The Company's
imaging centers are also subject to federal and state regulations relating to
testing standards, personnel accreditation and compliance with government
reimbursement programs.
The Medicare Anti-Kickback Act and similar state statutes prohibit the
offering, payment, solicitation or receipt of any form of remuneration in
return for the referral of Medicare or Medicaid patients or patient care
opportunities, or in return for the purchase, lease or order or provision of
any item or service that is covered by Medicare or Medicaid. Violations of
the Anti-Kickback Act or similar state statutes could result in substantial
civil and/or criminal penalties. Violations could also result in the
Company's exclusion from Medicare or Medicaid programs. The Company believes
that its medical imaging centers, including the recently-acquired centers, are
in material compliance with the Anti-Kickback Act and similar state statutes.
The "Stark II" statute, enacted under the Omnibus Budget Reconciliation Act of
1993, prohibits a physician from making a referral to an entity for the
furnishing of designated health services (including diagnostic imaging
services) for which Medicare may otherwise pay, if the physician has a
financial relationship with that entity. The regulations governing Stark II
have yet to be finalized; the Company, however, believes that it is currently
in material compliance with the statute, and intends to comply fully with the
Stark II regulations once they are finalized. Based on a review of the
proposed Stark II regulations, the Company believes that, as currently
proposed, compliance with the Stark II regulations will not have a material
adverse impact on the operations of the Company's imaging centers.
FOREIGN OPERATIONS
As of December 31, 1997, the Company owned and operated nuclear pharmacy
service centers in ten foreign markets: Hong Kong; Taipei, Taichung and
Kaoshiung (Taiwan); Manila (Philippines); Mexico City (Mexico); Bangkok
(Thailand); San Juan (Puerto Rico); Sydney (Australia); and Johannesburg
(South Africa). The Company also has joint ventures to operate nuclear
pharmacies in Beijing and Shanghai (China). In March 1998, the Company opened
a radiopharmacy in Seoul, South Korea. Additional foreign sites are also
being considered for development.
In 1997, the Company began managing a hospital's nuclear medicine department
in Chia-Yi City (Taiwan), and entered into a long term agreement to produce
positron emission tomography (PET) radiopharmaceuticals in Taichung (Taiwan).
The Company's foreign operations are not immune to the inherent uncertainties
and risks of currency fluctuations, political and civil unrest, trade
restrictions, and inconsistent market and regulatory conditions.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 2,281 people in the
United States, of which approximately 1,402 were full-time employees. As a
result of its recent acquisitions of three medical imaging businesses, by the
beginning of the second quarter of 1998, the Company will employ an additional
<PAGE>
513 employees, of which approximately 410 will be full-time employees.
Item 2. PROPERTIES.
The Company's corporate headquarters is located in Woodland Hills, California.
The Company relocated to Woodland Hills pursuant to a lease that commenced on
March 1, 1997. The lease is for a term of ten years with one five-year
renewal option. Presently, the Company leases approximately 60,967 square
feet at such location, which is adequate for the Company's current needs. The
Company also leases an administrative office facility in Duluth, Georgia,
pursuant to a lease that commenced on October 18, 1996. The lease is for a
term of ten years. Presently, the Company leases approximately 19,666 square
feet at such location, which is adequate for the Company's current needs.
The Company and its consolidated subsidiaries lease (and in one location own)
and operate a number of pharmacies whose locations are set forth in the
following table*:
<TABLE>
<CAPTION>
STATE LOCATION STATE LOCATION
<S> <C> <C> <C>
ALABAMA Birmingham MISSOURI Kansas City
Mobile Overland (St. Louis)
ARIZONA Gilbert (Mesa) Springfield
Tucson NEBRASKA Omaha
ARKANSAS Jonesboro NEVADA Las Vegas
Little Rock Reno
CALIFORNIA Bakersfield NEW JERSEY Kenilworth (Newark)
Berkeley NEW MEXICO Albuquerque
Colton NEW YORK The Bronx
Fresno Cheektowaga (Buffalo)
Modesto Franklin Sq. (Long Island)
Placentia Newburgh
Redding Rochester
Sacramento Syracuse
San Diego Troy (Albany)
San Jose NORTH CAROLINA Charlotte
Torrance Greensboro
Van Nuys (Los Angeles)OHIO Cincinnati
COLORADO Colorado Springs Columbus
Denver Girard (Youngstown)
CONNECTICUT Glastonbury (Hartford) Holland (Toledo)
Stamford Miamisburg (Dayton)
DELAWARE Seaford Uniontown/Green (Akron)
FLORIDA Fort Myers Valley View (Cleveland)
Gainesville OKLAHOMA Oklahoma City
Jacksonville Tulsa
Jupiter OREGON Portland
(West Palm Beach) PENNSYLVANIA Allentown
Miami Lakes (Miami) Bloomsburg
Pensacola Bristol (N. Philadelphia)
Pompano Beach Duncansville (Altoona)
(Ft. Lauderdale) Hummelstown (Harrisburg)
Sarasota Pittsburgh
Tampa Sharon Hill (Philadelphia)
Winter Park (Orlando) RHODE ISLAND Providence
GEORGIA Augusta SOUTH CAROLINA Columbia
Columbus TENNESSEE Chattanooga
Doraville (Atlanta) Jackson
Rome Knoxville
ILLINOIS Des Plaines Memphis
Chicago Nashville
Springfield TEXAS Amarillo<PAGE>
INDIANA Ft. Wayne** Austin
Indianapolis Beaumont
IOWA Des Moines Corpus Christi
KANSAS Wichita Dallas
KENTUCKY Lexington El Paso
Louisville Fort Worth
LOUISIANA New Orleans Houston
MARYLAND Silver Springs Lubbock
Timonium (Baltimore) San Antonio
MASSACHUSETTS Woburn (Boston) VIRGINIA Richmond
MICHIGAN Grand Rapids Virginia Beach
Southfield (Detroit) WASHINGTON Seattle
Swartz Creek (Flint) Spokane
Moorhead (Fargo, ND) Tacoma
MINNESOTA St. Paul WEST VIRGINIA Huntington
MISSISSIPPI Flowood (Jackson) WISCONSIN Appleton (Green Bay)
Gulfport Wauwatosa (Milwaukee)
Tupelo
</TABLE>
* The Company also owns an interest in pharmacies in: Salt Lake City,
Utah; Midland, Texas; and Huntsville, Alabama.
** Managed by, and under the name of, Spectrum Pharmacy, Inc.
Pharmacy lease terms vary from less than one year to approximately ten years,
and average approximately five years. Leased areas average approximately
4,500 square feet.
As a result of the recent acquisitions of medical imaging businesses, by the
second quarter of 1998, the Company will own or manage medical imaging centers
in various locations throughout the U.S. The following table lists the
medical imaging centers and describes the Company's ownership interest in each
center and the types of imaging modalities offered in each center*:
<TABLE>
<CAPTION>
NAME OF CENTER LOCATION PROPERTY OWNERSHIP MODALITIES
<S> <C> <C> <C> <C>
Advanced Medical Imaging Stuart, FL N/A 0 MRI
of Stuart
Bakersfield Cath. Lab Bakersfield, CA N/A 0 Catheteriza-
tion Laboratory
Boston Avenue Imaging Altamonte Springs Leased 6.34 MRI/CT/
FL Fluoroscopy/
Mammography/
Ultrasound
Comprehensive Open MRI - Bakersfield, CA Leased 50 MRI
Bakersfield
Comprehensive Open MRI - Dallas, TX Leased 50 MRI
Dallas
Comprehensive Open MRI - Encino, CA Leased 50 MRI
Encino
Comprehensive Open MRI - Fullerton, CA Leased 50 MRI
Fullerton**
Comprehensive Open MRI - Laguna Hills, CA Leased 50 MRI
Laguna Hills
Comprehensive Open MRI - Plano, TX Leased 50 MRI
Plano**
Comprehensive Open MRI - Sacramento, CA Leased 50 MRI
Sacramento
Coppell Diagnostic Coppell, TX N/A 0 MRI/CT/Nuclear
Imaging Center Medicine/
Ultrasound/
<PAGE>
Mammography/
X-ray
Corona Inland MRI Corona, CA Leased 100 MRI
Crescent City MRI New Orleans, LA Leased 26.08 MRI
Desert CT/MRI Palm Springs, CA Leased 100 MRI/CT
Desert CT/MRI Rancho Mirage, CA Leased 100 MRI/CT
Fox Valley Imaging Naperville, IL Leased 6.37 MRI/CT/X-ray
Center
Greenville MRI Greenville, NC Leased 23.12 MRI
Huntington Plaza MRI Pasadena, CA N/A 0 MRI
IMI of Arlington*** Arlington, VA Leased 100 MRI
IMI of Boca Raton*** Boca Raton, FL Owned 100 MRI/CT/X-ray
IMO Diagnostic Center*** Plantation, FL Leased 100 CT/Mammography/
X-ray/Ultra-
sound/Nuclear
Medicine/
Tomography
IMI of Kansas City*** Overland Park, KS Owned 100 MRI
IMI of Miami*** Miami, FL Leased 100 MRI/CT/X-ray/
Fluorscopy/
Ultrasound/
Mammography
IMI of North Miami Miami, FL Leased 100 MRI/Ultrasound
IMI of Oakland Park*** Oakland Park, FL Leased 100 MRI
IMI of Pine Island*** Plantation, FL Owned 100 MRI
IMI of San Juan Santurce, Owned 100 MRI
Beach*** Puerto Rico
Inland Imaging Upland, CA Leased 6.34 MRI
Associates
Jefferson Imaging - Bala Bala Cynwyd, PA Leased 6.37 MRI
Jefferson Imaging - Langhorne, PA Leased 6.34 MRI
Langhorne
Los Gatos MRI Los Gatos, CA Leased 14.07 MRI
MRI or Orlando*** Orlando, FL Leased 50 MRI/CT/
Mammography/
Ultrasound
MRI of Woodbridge Woodbridge, AZ Leased 6.37 MRI
Medical Imaging Center W. Orange, NJ Leased 14.80 MRI/CT/
of the Oranges Ultrasound/
Mammography/
Fluoroscopy
Mesa MRI Mesa, AZ Leased 6.37 MRI
Mid States Diagnostic Wichita, KS N/A 0 Ultrasound/
Nuclear
Medicine
Mountain View MRI Paradise Valley, AZ Leased 6.34 MRI
Oak Valley CT Oakdale, CA N/A 0 CT
Plano Diagnostic Plano, TX N/A 0 MRI/CT/Nuclear
Medicine/
Ultrasound/
Mammography/
X-ray
Riverside MRI Riverside, CA Leased 6.35 MRI/Fluorscopy
Tampa Diagnostic Tampa, FL Leased 6.37 MRI
Institute
Texoma Diagnostic Sherman, TX N/A 0 MRI/CT/
Ultrasound/
Mammography/
X-ray
Thunderbird MRI Glendale, AZ Leased 100 MRI
Valley MRI Phoenix, AZ Leased 59.16 MRI
West Coast Radiology Santa Ana, CA N/A 0 MRI/CT/
Center Mammography/
Ultrasound/
<PAGE>
Nuclear
Medicine/X-ray/
Bone Density
Testing/Radia-
tion Therapy
Wichita Diagnostic Wichita, KS Leased 100 MRI
Services
</TABLE>
* In addition to the listed medical imaging centers, the Company receives a
fee for managing the equipment leases in 12 other medical imaging centers.
** Center is scheduled to begin operations during the second quarter of
1998.
*** Pending closing of the acquisition of International Magnetic Imaging,
Inc. scheduled to occur on March 31, 1998.
In connection with the recent medical imaging acquisitions, the Company will
also assume leases of corporate offices in three locations: Thousand Oaks,
California; Houston, Texas; and Boca Raton, Florida. The Company is reviewing
its options with respect to these corporate office leases, but as of March
1998, no decision had been made as to whether any of these offices will be
closed or reduced in size.
Item 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are involved in various litigation
proceedings. Many of the claims asserted against the Company in these
proceedings are covered by insurance. The results of litigation proceedings
cannot be predicted with certainty. In the opinion of the Company's General
Counsel, however, such proceedings either are without merit or do not have a
potential liability which would materially affect the financial condition of
the Company and its subsidiaries on a consolidated basis.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information relating to the Company's Common Stock which appears in the
Company's Annual Report to Stockholders for the year ended December 31, 1997,
under Note 13, "Selected Quarterly Results of Operations" and Stockholder
Information, included in this Form 10-K Annual Report as Exhibit 13, is
incorporated by reference.
Item 6. SELECTED FINANCIAL DATA.
The selected financial data which appears in the Company's Annual Report to
Stockholders for the year ended December 31, 1997, under the heading of
"Selected Financial Data", included in this Form 10-K Annual Report as Exhibit
13, is incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations which appears in the Company's Annual Report to Stockholders for
the year ended December 31, 1997, under the heading of "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
included in this Form 10-K Annual Report as Exhibit 13, is incorporated by
<PAGE>
reference.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The consolidated financial statements and the notes thereto which appear in
the Company's Annual Report to Stockholders for the year ended December 31,
1997, under the headings of "Consolidated Statements of Income" and
"Consolidated Balance Sheets", included in this Form 10-K Annual Report as
Exhibit 13, are incorporated by reference. Schedules containing certain
supporting information are also included. See Financial Statement Schedules
on page 12 hereof.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by Item 10 of Form 10-K is incorporated by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders, to be held on June 16, 1998, which will be filed with the
Commission pursuant to Regulation 14A of the Securities and Exchange
Commission ("Regulation 14A") within 120 days from December 31, 1997.
Based solely upon its review of Forms 3, 4 and 5 furnished to the Company, the
Company believes that all reports required to be filed during 1997 pursuant to
Section 16(b) of the Securities Exchange Act of 1934 were timely filed, except
that Brad Nutter, the Company's new Executive Vice President and Chief
Operating Officer since July 1997, was late in filing his Form 3.
Item 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 of Form 10-K is hereby incorporated by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on June 16, 1998, which will be filed with the
Commission pursuant to Regulation 14A within 120 days from December 31, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by Item 12 of Form 10-K is hereby incorporated by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on June 16, 1998, which will be filed with the
Commission pursuant to Regulation 14A within 120 days from December 31, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 of Form 10-K is hereby incorporated by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on June 16, 1998, which will be filed with the
Commission pursuant to Regulation #14A within 120 days from December 31, 1997.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Consolidated Financial Statements.
The consolidated financial statements listed below, together
with the report thereon of KPMG Peat Marwick LLP, dated February 25, 1998,
<PAGE>
which appear in the Company's Annual Report to Stockholders for the year ended
December 31, 1997, included in this Form 10-K Annual Report as Exhibit 13, are
hereby incorporated herein by reference.
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
The following schedule supporting the financial statements
of the Company is included herein:
Page
Schedule II Valuation and Qualifying Accounts..........14
All other schedules and financial statements of the Company
are omitted because they are not applicable, not required or because the
required information is included in the consolidated financial statements or
notes thereto.
3. Index to Exhibits.
The list of exhibits filed as part of this report on Form
10-K or incorporated by reference appears as Index to Exhibits on page 15.
(b) Reports on Form 8-K filed in the Quarter Ended December 31,
1997.
None.
(c) Exhibits.
The exhibits required by Item 601 of Regulation S-K are filed
with this Form 10-K Annual Report or are incorporated by reference and are
listed in the Index to Exhibits on page 15.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYNCOR INTERNATIONAL CORPORATION
/s/ Robert G. Funari
By ____________________________
Robert G. Funari
President and Chief Executive Officer
Date: 3/31/98
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Monty Fu
______________________________
Monty Fu, Chairman of the Board and Director
Date: 3/31/98
<PAGE>
/s/ Robert G. Funari
______________________________
Robert G. Funari, President, Chief Executive Officer
(Principal Executive Officer) and Director
Date: 3/31/98
/s/ Brad Nutter
______________________________
Brad Nutter, Executive Vice President and
Chief Operating Officer
3/31/98
/s/ Michael E. Mikity
______________________________
Michael E. Mikity, Senior Vice President, Chief Financial Officer
and Treasurer (Principal Financial and Accounting Officer)
Date: 3/31/98
/s/ Haig S. Bagerdjian
_______________________________
Haig S. Bagerdjian, Senior Vice President, Secretary and
General Counsel
Date: 3/31/98
/s/ George S. Oki
______________________________
George S. Oki, Director
Date: 3/31/98
/s/ Arnold E. Spangler
______________________________
Arnold E. Spangler, Director
Date: 3/31/98
/s/ Steven B. Gerber
______________________________
Steven B. Gerber, M.D., Director
Date: 3/31/98
/s/ Henry N. Wagner
______________________________
Henry N. Wagner, Jr., M.D., Director
Date: 3/31/98
/s/ Gail R. Wilensky
______________________________
Dr. Gail R. Wilensky, Director
Date: 3/31/98
<TABLE>
<CAPTION>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Schedule II. Valuation and Qualifying Accounts
(In thousands)
______________________________________________________________________________
Balance Balance
at Costs at End
Beginning and Deductions of
Description of Period Expenses (A) Period
_____________________________________________________________________________
<PAGE>
<S> <C> <C> <C> <C>
Year Ended
December 31, 1997
Allowance for doubtful
accounts $ 911 $ 0 $ 129 $ 1,040
Year Ended
December 31, 1996
Allowance for doubtful
accounts $1,097 $ 0 $ 186 $ 911
Year Ended
December 31, 1995
Allowance for doubtful
accounts $1,154 $609 $ 666 $ 1,097
</TABLE>
(A) Uncollectible accounts written-off, net of recoveries and reduction of
reserve.
INDEX TO EXHIBITS
Exhibit No.
3. Certificate of Incorporation and By-Laws
3.1 Restated Certificate of Incorporation of the Company filed as
Exhibit 3.1 to the Form 10-K for the year ended May 31, 1987, and incorporated
herein by reference.
3.2 Restated By-Laws of the Company, filed as Exhibit 3.2 to the Form
10-K for the year ended December 31, 1995, and incorporated herein by
reference.
4. Instruments Defining the Rights of Security Holders
4.1 Stock Certificate for Common Stock of the Company filed as Exhibit
4.1 to the Form 10-K for the year ended May 31, 1986, and incorporated herein
by reference.
4.2 Rights Agreement dated as of November 8, 1989 between the Company
and American Stock Transfer & Trust Company filed as Exhibit 2.1 to the
Registration Statement on Form 8-A dated November 3, 1989, and incorporated
herein by reference.
10. Material Contracts
10.1 Syncor International Corporation 1981 Master Stock Option Plan, as
amended, filed as part of the Company's Proxy Statement dated November 5,
1985, for its Annual Meeting of Stockholders held November 26, 1985, and
incorporated herein by reference.*
10.2 Form of Indemnity Agreement substantially as entered into between
the Company and each Director and Officer, filed as Exhibit 3.2 Appendix A to
the Form 10-K for the year ended December 31, 1995, and incorporated herein by
reference.*
10.3 Form of Benefits Agreement substantially as entered into between
the Company and each Director, filed as Exhibit 10.8 to the Form 10-K for the
year ended December 31, 1995, and incorporated herein by reference.*
<PAGE>
10.4 Form of Benefits Agreement substantially as entered into between
the Company and certain employees, filed as Exhibit 10.8 to the Form 10-K for
the year ended December 31, 1995, and incorporated herein by reference.*
10.5 Syncor International Corporation 1990 Master Stock Incentive Plan,
as amended and restated as of June 18, 1997, filed as Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1997, and incorporated
herein by reference.*
10.6 Form of Stock Option Agreement substantially as entered into
between the Company and certain employee Directors and employees filed as
Exhibit 10.15 to the Form 10-K for year ended December 31, 1993, and
incorporated herein by reference.*
10.7 Form of Stock Option Agreement substantially as entered into
between the Company and certain non-employee Directors filed as Exhibit 10.16
to the Form 10-K for the year ended December 31, 1993, and incorporated herein
by reference.*
10.8 Non-Employee Director 1995 Stock Incentive Award Agreement dated
January 24, 1995 entered into between the Company and Arnold E. Spangler,
filed as Exhibit 10.17 to the Form 10-K for the year ended December 31, 1995,
and incorporated herein by reference.*
10.9 Non-Employee Director 1995 Stock Incentive Award Agreement dated
January 24, 1995 entered into between the Company and George S. Oki, filed as
Exhibit 10.18 to the Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.*
10.10 Non-Employee Director 1995 Stock Incentive Award Agreement dated
January 24, 1995 entered into between the Company and Henry Wagner, Jr, filed
as Exhibit 10.19 to the Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.*
10.11 Non-Employee Director 1995 Stock Incentive Award Agreement dated
April 29, 1996, entered into between the Company and Gail Wilensky, filed as
Exhibit 4.3(b) to the Registration Statement on Form S-8 filed on December 20,
1996 to register the shares underlying said Award Agreement, and incorporated
herein by reference.*
10.12 Non-Employee Director 1995 Stock Incentive Award Agreement dated
April 29, 1996, entered into between the Company and Steven Gerber, filed as
Exhibit 4.3(a) to the Registration Statement on Form S-8 filed on December 20,
1996 to register the shares underlying said Award Agreement, and incorporated
herein by reference.*
10.13 Subscription Agreement, dated July 15, 1996, executed by Syncor
Management Corporation in favor of American Tax Credit Corporate Fund III,
L.P., together with a Promissory Note, dated July 15, 1996, executed by
Syncor Management Corporation in favor of John Hancock Mutual Life Insurance
Company, as assignee of Corporate Credit, Inc., and the Guarantee of Parent
Corporation, dated July 15, 1996, executed by the Company in favor of John
Hancock Mutual Life Insurance Company, as assignee of Corporate Credit, Inc.
These agreements were filed as Exhibit 10.15 to the Form 10-K for the year
ended December 31, 1996, and are incorporated herein by reference.
10.14 The 1995 Management Incentive Plan of the Company, filed as
Exhibit 10.20 to the Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.*
10.15 The 1996 Management Incentive Plan of the Company, filed as
Exhibit 10.3 to the Form 10-Q for the quarter ended September 30, 1996, and
incorporated herein by reference.*
10.16 The 1997 Management Incentive Plan of the Company, filed as
Exhibit 10.18 to the Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.*
10.17 The Office Lease, dated as of September 30, 1996, between
Massachusetts Life Insurance Company and the Company, relating to the office
lease for the Company's corporate headquarters in Woodland Hills, California,
filed as Exhibit 10.19 to the Form 10-K for the year ended December 31, 1996,
and incorporated herein by reference.
10.18 Lease, dated May 30, 1996, between the Company and Technology
Park/Atlanta, Inc., relating to the office lease for the Company's
administrative office in Duluth, Georgia, filed as Exhibit 10.20 to the Form
10-K for the year ended December 31, 1996, and incorporated herein by
reference.
10.19 Non-employee Director Stock Compensation Plan, dated August 27,
1996, filed as Exhibit 4.3 to the Form S-8 Registration Statement filed by the
Company with the SEC on December 20, 1996.*
10.20 Loan Agreement, dated March 31, 1997, among Syncor
Pharmaceuticals, Inc., as borrower, the Company, as guarantor, and The First
National Bank of Chicago, as lender, filed as Exhibit 10.1 to the Form 10-Q
for the quarter ended March 31, 1997, and incorporated herein by reference.
10.21 Employment Agreement, dated January 1, 1997, between Monty Fu, the
Company's Chairman of the Board, and the Company, filed as Exhibit 10.2 to the
Form 10-Q for the quarter ended March 31, 1997, and incorporated herein by
reference.*
10.22 Employment Agreement, dated January 1, 1997, between Robert
Funari, the Company's President and Chief Executive Officer, and the Company,
filed as Exhibit 10.3 to the Form 10-Q for the quarter ended March 31, 1997,
and incorporated herein by reference.*
10.23 Credit Agreement, dated August 8, 1997, between Syncor
International Corporation and Mellon Bank, N.A., filed as Exhibit 10.2 to the
Form 10-Q for the quarter ended September 30, 1997, and incorporated herein
by reference.
10.24 Syncor International Corporation Deferred Compensation Plan
effective January 1, 1998.*
10.25 Consulting Agreement, dated January 31, 1998, between James F.
Mitchell and the Company.*
10.26 Credit Agreement, dated as of January 5, 1998, among the Company,
as borrower, The First National Bank of Chicago, as lender and administrative
agent, and Mellon Bank, N.A., as lender.
11. Statement Re: Computation of Per Share Earnings
Computation can be clearly determined from the material contained in the
Company's Annual Report to Stockholders for year ended December 31, 1997.
13. Annual Report to Security Holders
Syncor International Corporation Annual Report to Stockholders for the
year ended December 31, 1997, except for specific information in such Annual
Report expressly incorporated herein by reference, is furnished for the
information of the Commission and is not to be deemed "filed" as part hereof.
21. Subsidiaries of the Registrant<PAGE>
27. Financial Data Schedule
State or Country
Name of Subsidiary of Organization
Syncor Diagnostics, LLC*** California
Syncor Management Corporation Delaware
Syncor Midland, Inc. Texas
Syncor Pharmaceuticals, Inc. Delaware
TME, Inc. Delaware
Comprehensive Medical Imaging, Inc. Delaware
National Diagnostic Imaging, Inc. Delaware
Beijing Syncor Medicine Corporation, Ltd. People's Republic of China
Pharmatopes (Proprietary) Limited** South Africa
Shanghai Syncor Medicine Corporation, Ltd. People's Republic of China
Specialised Medical Trading Pty. Ltd.** Australia
Syncor de Mexico, S.A. de C.V.** Mexico
Syncor de Puerto Rico, Inc.** Puerto Rico
Syncor Hong Kong Limited** Hong Kong
Syncor International (Thailand) Co., Ltd. Thailand
Syncor Korea, Inc.** South Korea
Syncor New Zealand Limited** New Zealand
Syncor Pharmacies Australia Pty. Ltd.** Australia
Syncor Overseas Ltd. British Virgin Islands
Syncor Philippines, Inc.** Philippines
Syncor Taiwan, Inc.** Taiwan
23. Consent of KPMG Peat Marwick LLP
________________________________
* Management contracts or compensatory plan
** Subsidiaries of Syncor Overseas Ltd.
*** 50% owned by Syncor
EXHIBIT 10.24
SYNCOR INTERNATIONAL CORPORATION
DEFERRED COMPENSATION PLAN
WHEREAS, Syncor International Corporation ("Corporation") desires to retain
the services of a select group of management or highly compensated employees
and members of the Board of Directors of the Corporation and recognizes that
the loss of the services of any member of such group would result in
substantial loss to the Corporation; and
WHEREAS, Syncor International Corporation desires to recognize the services
rendered in the past and to be rendered in the future by the members of such
group;
NOW THEREFORE, Syncor International Corporation hereby adopts this Deferred
Compensation Plan for a select group of management or highly compensated
employees and members of the Board of Directors as hereinafter set forth:
ARTICLE 1 -- DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the context, where
the following terms appear as proper nouns, they shall have the meanings
indicated below.
1.1 Account Balance: With respect to each Participant, Deferred Amounts,
Corporate Contributions under this Plan, and any amount transferred from the
Prior Plan, as further adjusted for Additions on such amounts.
1.2 Additions: A dollar amount equivalent to the underlying performance of
<PAGE>
the hypothetical investment funds specified by the Committee and designated by
the Participant in accordance with Section 2.3.
1.3 Beneficiary: Any person or persons (including, without limitation,
the trustees of any testamentary or inter vivos trust), as designated from
time to time in writing pursuant to Article 4, to whom any benefits may be
payable upon the death of a Participant under to Article 3.
1.4 Board of Directors: The Board of Directors of Syncor International
Corporation, as constituted from time to time.
1.5 Committee: The Deferred Compensation Plan Committee consisting of any
person or persons appointed by the Chief Executive Officer of the Corporation
to administer the Plan. The Committee may assign some of the routine
administrative functions to any department of the Corporation or another
organization at its discretion.
1.6 Compensation: Total salary, bonuses (including, but not limited to
Compensation paid under the Corporation's management incentive plans) and fees
paid or accrued by the Corporation for services rendered by a Participant and
reportable on Form W-2 or Form 1099, as the case may be, as taxable income for
federal income tax purposes. Compensation, as defined herein, does not
include car allowances or other forms of taxable welfare benefits.
1.7 Corporate Contribution: A monthly contribution amount by the
Corporation on behalf of to either an Employee Participant or Director
Participant as follows:
(1) To an Employee Participant in the Plan for so long as he or
she remains an Employee Participant and remains an employee of the
Corporation. Such amounts shall be contributed on behalf of the Employee
Participant at a rate of twenty-five percent (25%) on up to fifteen percent
(15%) of the Compensation deferred by the individual Employee Participant as
limited by Section 2.1(d). The Corporation will not match deferrals in excess
of fifteen percent (15%); and
(2) To a Director Participant in the Plan for so long as he or she
remains a Director Participant and remains a member of the Board of Directors
of the Corporation. Such amounts shall be contributed on behalf of the
Director Participant at a rate of twenty-five percent (25%) on all
Compensation deferred by the Director Participant.
1.8 Corporation: Syncor International Corporation, a Delaware corporation,
and any successor thereof, including any affiliated corporation that adopts
this Plan with the consent of the Board of Directors of the Corporation
1.9 Deferred Amount: An amount credited to this Plan by the Corporation
in lieu of payment to a Participant as Compensation.
1.10 Director Participant: Any member of the Board of Directors of the
Corporation, who has executed an application for participation pursuant to
Section 2.1, and who is participating in this Plan from time to time.
However, notwithstanding any designation to the contrary, any member of the
Board of Directors of the Corporation who was a participant in the Prior Plan
and elected to receive a distribution from the Prior Plan shall not be
eligible now or at any time in the future to participate in this Plan.
1.11 Effective Date of Plan: January 1, 1998.
1.12 Employee Participant: Any manager or highly compensated employee of
the Corporation designated by the Committee to be eligible for participation
in the Plan, who has executed an application for participation pursuant to
Section 2.1, and who is participating in this Plan from time to time.
However, notwithstanding any designation to the contrary, any manager or
<PAGE>
highly compensated employee of the Corporation who was a participant in the
Prior Plan and elected to receive a distribution from the Prior Plan shall not
be eligible now or at any time in the future to participate in this Plan.
1.13 Participant: A Director Participant or an Employee Participant.
1.14 Plan: The Syncor International Corporation Deferred Compensation Plan
effective January 1, 1998 and as from time to time amended and in effect.
1.15 Plan Year: January 1 through December 31.
1.16 Prior Plan: The Syncor International Corporation Deferred
Compensation Plan made effective as of July 1, 1991.
1.17 Termination of Service: The termination (by death, retirement, or
otherwise) of a Participant's service as a member of the Board of Directors or
as an employee of the Corporation, as the case may be.
ARTICLE 2 -- DEFERRED COMPENSATION
2.1 Eligibility and Participation: Eligibility to commence participation
in this Plan shall be restricted to the members of the Board of Directors and
those managers or highly paid employees who: are deemed by the Committee in
its sole discretion to qualify for inclusion in a "select group of management
or highly compensated employees" as defined in Sections 201(2), 301(a)(3),
401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security Act of
1974 and amendments thereto or are members of the Board of Directors,
provided, however, that any such person shall timely complete all forms
necessary for participation in the Plan under this Section.
(a) Application: Any individual so selected shall first become a
Participant in the Plan by filing with the Corporation a written application
for participation in a form satisfactory to the Corporation, within thirty
(30) days of the date when he or she is first notified, in writing, that he or
she is eligible to participate in the Plan. If such application is not filed
within such thirty (30) day period, such individual shall not thereafter be
permitted to participate in the Plan until the next opportunity generally
available to all Participants to make or change their deferral elections.
(b) Deferral Election: A Participant shall indicate, in a written
form satisfactory to the Corporation, the percentage or amount of Compensation
otherwise payable to him or her to be deferred commencing on the first day
that he or she is eligible to defer amounts under the Plan with respect to a
specific Plan Year. Such Deferral Election shall be irrevocable and shall
remain in effect until the earliest of (i) the occurrence of a Termination
Event as defined in Section 2.4, or (ii) the timely completion of a change in
Deferral Election form during a subsequent open enrollment period under this
Plan. Should a Participant fail to provide a Deferral Election or fail to
timely provide a Deferral Election for any given Plan Year subsequent to the
first Plan Year in which such Participant participated, the Deferral Election
of the Prior Plan Year shall apply.
(c) Deferral Percentage: The Committee may, in its sole
discretion, permit a separate deferral election to be made with respect to the
subcategories of Compensation of a Participant (if applicable).
(d) Deferral Maximum: An Employee Participant shall be entitled
to defer up to twenty-five percent (25%) of his/her Compensation. Should an
Employee Participant elect differing percentages with respect to the
subcategories of his/her Compensation, as permitted by the Committee, the
maximum he/she may defer of any such subcategory is twenty-five percent (25%).
A Director Participant shall have no such restriction on the maximum amount of
Compensation he/she may defer. Instead, he/she may defer up to 100% of
his/her Compensation received as a member of the Board of Directors of the
Corporation. The Corporation shall in its sole discretion establish further
<PAGE>
Deferral Maximums as it deems fit. The Corporation shall notify Participants
in writing of any such additional maximums prior to the beginning of each Plan
Year. If no such notification is given, the maximum in effect for the
immediately preceding Plan Year shall apply for the new Plan Year.
(e) Deferral Minimum: The minimum deferral percentage under this
Plan shall be five percent (5%) of salary/fees unless otherwise amended by the
Corporation. The Corporation shall notify Participants in writing of any such
amendments prior to the beginning of each Plan Year. If no such notification
is given, the minimum in effect for the immediately preceding Plan Year shall
apply for the new Plan Year.
2.2 No less than twenty (20) days prior to the start of each Plan Year,
the Committee shall provide (i) notice to each Participant of the terms and
conditions upon which deferrals may be made with respect to such Plan Year and
(ii) a deferral form with which to make deferral elections for such Plan Year.
Such election form(s) must be filed at least ten (10) days prior to the
beginning of the Plan Year to which it pertains and shall be effective on the
first day of the Plan Year following the filing thereof. If no notice of
terms and conditions is provided by the Committee, the terms and conditions of
the Prior Plan Year shall remain in effect.
2.3 Upon commencement of participation in the Plan, a Participant may
designate, from a list of hypothetical investments or investment funds
selected by the Committee, the investments or investment funds into which he
or she would prefer to have any Deferred Amounts, Corporate Contributions, and
Additions thereon deemed to be invested. A Participant may from time to time
request, in accordance with such rules and procedures as adopted by the
Committee, that his or her Account Balance and/or all future Deferred Amounts
be changed from one deemed investment to whatever other deemed investment may
be listed by the Committee at the time of such request. The Committee, in its
sole discretion, may determine whether such amounts will, in fact, be so
invested or will be invested otherwise. The Corporation agrees that it will
credit the Account Balance with Additions thereon, from and after the dates
the Deferred Amounts are credited to the Account.
2.4 Termination Event: A Participant shall continue to be eligible to
defer amounts of Compensation under the Plan until the earliest date on which
any of the following events ("a Termination Event") occurs:
(a) the Plan is terminated;
(b) there occurs a Termination of Service as defined in Section
1.17;
(c) the Committee makes a determination that the Participant is no
longer eligible to continue to defer amounts under the Plan;
(d) the Participant provides notice to the Corporation, as
provided in Section 2.8, that he or she does not want to continue
participation in the Plan for one or more years;
2.5 The Plan Committee is empowered to accelerate the payment of amounts
from the Participant's Account Balance to such Participant in the event the
Plan Committee Determines that such Participant (i) has become totally
disabled in that he/she is prevented from engaging in any suitable gainful
employment or occupation based on medical evidence satisfactory to the
Committee, and that such disability will be permanent and continuous for the
remainder of his/her life; or (ii) has a demonstrated financial hardship,
based on circumstances beyond his/her control, severely affecting his/her
financial affairs or clearly endangering his family with present or impending
want or deprivation. The amount of payment made based on a financial hardship
is to be limited to the amount necessary to meet the emergency.
<PAGE>
2.6 Should a Participant's eligibility to defer amounts under the Plan be
discontinued under Section 2.4, he or she may not be eligible to re-commence
deferrals under the Plan except upon prior approval by the Committee.
2.7 In the event a Participant is granted a leave of absence by the
Corporation, no further Deferred Amounts or Corporate Contributions shall be
credited to such Participant's Account Balance for the duration of the period
of such leave. However, Additions shall continue to be credited during such
period. Such a leave of absence shall not entitle the Participant to
distribution of his or her Termination Benefit. Upon the termination of such
leave of absence, should the such Participant return to his/her duties as a
member of the Board of Directors of the Corporation or a manager or highly
compensated employee, as the case may be, he/she will be eligible to continue
to defer under this Plan based upon the enrollment forms filed with the
Corporation under Section 2.1 if the Plan remains in effect and for so long as
no other Termination Event occurs.
2.8 A Participant may notify the Corporation, in advance and in writing,
that he or she no longer wishes to defer Compensation pursuant to Section 2.1
for a period of one or more years. Under such circumstances no further
Deferred Amounts shall be credited to such Participant's Account Balance for
the duration of such period. Such notice shall not, however, entitle such
Participant to a distribution of his/her Termination Benefit.
ARTICLE 3 -- BENEFITS
3.1 Termination Benefit: Upon the occurrence of a Termination Event as
provided in Sections 2.4-2.5 and limited by Sections 2.7-2.8, a Participant
shall be entitled to receive a distribution of his or her Account Balance (the
"Termination Benefit") as defined herein:
(a) Standard Distribution Options: As provided in Section 3.1(c),
pursuant to such Participant's Termination Benefit Election (as defined
below), the Termination Benefit attributable to such Participant's Account
Balance shall be paid either (i) in a lump sum within thirty (30) days
following the Termination Date, (ii) in five annual installments or (iii) in
ten annual installments (each, a "Standard Distribution Option"). Should
annual installments be selected, the first such payment shall be made within
thirty (30) days following the termination date except as otherwise limited by
the Plan.
Notwithstanding any election to the contrary, there will be no
installment payout for a Participant whose Account Balance is less than
$10,000 at the time that he or she has a Termination Date.
Should a lump sum distribution apply, the Termination Benefit
shall be made within thirty (30) days following the termination date except as
otherwise limited by the Plan.
(b) Termination Benefit Election: As of the date a Participant
commences participation in the Plan, such Participant shall elect a Standard
Distribution Option (a "Termination Benefit Election"). The Termination
Benefit Election may thereafter be changed only once a year, effective as of
the first day of the next Plan Year beginning after the date of such election.
The Termination Benefit Election shall not be binding unless made at least one
(1) full year prior to the Termination Date. If the Termination Date should
occur within one (1) year of the Termination Benefit Election, the last valid
Termination Benefit Election made one (1) year or more before the Termination
Date will be effective, or if no Termination Benefit Election is otherwise in
effect, the Termination Benefit attributable to the Deferred Amounts and
Additions thereto shall be payable in a lump sum within thirty (30) days
following the Termination Date.
<PAGE>
The Corporation shall make available to a Participant the
appropriate form for making the Termination Benefit Election. This form shall
be made available at the time such Participant commences participation in the
Plan, and at least twenty (20) days before the start of each subsequent Plan
Year.
(c) Installment Method: In the event such Participant chooses to
receive the Termination Benefit attributable to his/her Account Balance in
installments over a period of five (5) years, except as otherwise limited by
the Plan, the first payment would be equal to one-fifth of the full value of
the Account Balance as of the date of such payment. The installment payment
to be made the following year would be equal to one-fourth of the value of the
Account Balance as of the date of such payment (including any Additions
credited to the remaining balance since the date of the first payment), and so
forth. A similar payment schedule would apply to a Termination Benefit
payable in installments over a ten (10) year period. Such method of payment
is referred to herein as the "Installment Method."
(d) In Service Distribution: Notwithstanding Section 3.1(a) and
subject to all other provisions of this Plan, each Participant may make an
irrevocable election, at the time specified in Section 2.1 or Section 2.2 for
elections or changes, to receive all or any part of their Deferred Amount and
Corporate Contributions for any Plan Year, together with Additions with
respect thereto, in the form of an "In Service Distribution." This election
will allow such Participant to set in advance the year in which the In Service
Distribution will be made, whether or not such Participant's Termination date
is within or subsequent to such year. In no event, however, can this
distribution be less than five (5) years from the date the election is made.
The Committee, in its discretion, shall select the date in the year elected by
such Participant on which the In Service Distribution will be made. If an In
Service Distribution election is made and a Termination Event occurs prior to
the date the In Service Distribution is made, such distribution shall be made
in a lump sum or in installments in accordance with the Participant's
election, subject to all other terms and conditions of this Plan.
3.2 Death Benefit: Notwithstanding the provisions set forth in Section
3.1, infra, in the event of the death of a Participant, the entire remaining
value of his/her Account Balance will be distributed as a lump sum survivor
benefit as provided in Section 4.3. In addition, certain individuals who
participated in the Prior Plan will receive an additional death benefit (i)
should they continue to defer more than 15% of their Compensation from the
inception until the occurrence of a Termination Event and (ii) should they die
prior to a Termination Event described in Section 2.4 and subject to all other
terms and conditions of this Plan. The applicable individuals and the benefit
they may receive are described in Schedule A hereto.
ARTICLE 4 -- BENEFICIARY
4.1 At the time participation in the Plan commences, each Participant
shall designate on a form satisfactory to the Corporation one (1) or more
Beneficiaries to receive any benefits which may become payable hereunder in
the event of his or her death (Beneficiary Designation). Any such Beneficiary
can be changed by a Participant at any time prior to his/her death upon
written notice to the Corporation.
4.2 If the Participant shall have made more than one (1) Beneficiary
Designation, the Beneficiary Designation most recently filed with the
Corporation prior to the time of the Participant's death shall govern.
4.3 If any amounts under the Plan become payable following a Participant's
death at a time when no Beneficiary Designation is applicable or when no
Beneficiary is in existence, such payments shall be made in a lump sum to such
Participant's surviving spouse, or if none, such amounts shall be paid to such
<PAGE>
Participant's estate.
ARTICLE 5 -- MISCELLANEOUS
5.1 Amendment and Termination: The Board of Directors of the Corporation
reserves the right to amend, in whole or in part, in writing, or to terminate
this Plan at any time, with or without notice; provided, however, that no such
action shall reduce the value of a Participant's Account Balance accrued prior
to the date of any such amendment or termination.
5.2 Insurance: The Corporation may purchase one (1) or more insurance
policies on the life of a Participant, as a means of providing, in whole or in
part, for the payment of benefits hereunder. However, in such event neither
such Participant, his or her designated Beneficiary, nor any other beneficiary
shall have any rights whatsoever therein or in the proceeds therefrom. The
Corporation (or any "Rabbi Trust" (as described in Section 5.6) formed in
connection with the Plan) shall be the sole owner and beneficiary of any such
insurance policy and shall possess and may exercise all incidents of ownership
therein. No such policy, policies or other property shall be held in any
trust for a Participant or any other person or as collateral security for any
obligation of the Corporation hereunder. This Plan shall under no
circumstances be deemed to constitute a contract of insurance.
5.3 No Contract of Employment: The Plan shall under no circumstance be
deemed to have any effect upon the terms or conditions of employment of any
employee of the Corporation whether or not he or she is a Participant
hereunder. Neither the offering of the Plan, the payment of any expenses,
costs or benefit amounts associated with the Plan, nor any documents published
in connection with the Plan shall be construed as having created a contract of
employment between the Participant and the Corporation.
5.4 Benefits not Transferable: Benefits under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge or encumbrance by any Participant or Beneficiary and any attempt to do
so shall be null and void. Benefits under this Plan shall not be subject to
or liable for the debts, contracts, liabilities, engagements or torts of any
Participant or any Beneficiary, nor may the same be subject to attachment or
seizure by any creditor of any Participant or any Beneficiary under any
circumstances.
5.5 Determination of Benefits: In the event of a Participant's
Termination (or death following Termination if, at the time of death, a
portion of such Participant's Account Balance remains unpaid), such
Participant or applicable Beneficiary, as the case may be, shall notify the
Corporation promptly of such event, and the Corporation will then provide a
claimant's statement form for completion which should be returned to the
Corporation, together with an official death certificate, as applicable,
before Plan benefits may be paid. Within ninety (90) days after receipt of an
application for benefits, the Corporation shall notify the applicant of its
decision with respect to the payment of benefits under the Plan. If special
circumstances require an extension of time, the Corporation shall notify the
applicant of such circumstances within ninety (90) days after receipt of the
application, and the Corporation shall thereafter notify the applicant of its
decision within 180 days after receipt of the application. If the application
is denied in whole or in part, the Corporation's notice of denial shall be in
writing and shall state:
(a) the specific reasons for denial with specific reference to
pertinent Plan provisions upon which the denial was based;
(b) a description of any additional materials or information
necessary for the applicant to perfect his or her claim and an explanation of
why the materials or information are necessary; and
<PAGE>
(c) an explanation of the Plan's claim review procedure.
During the sixty (60) day period following an applicant's receipt of a
notice of denial of his or her application for benefits, the applicant or his
or her duly authorized representative may review pertinent documents and
within sixty (60) days submit a written request to the Corporation for review
of the denial.
An applicant submitting a request for review shall be allowed to
submit questions and comments in writing to the Corporation. The Corporation
shall afford an applicant who requests a hearing a full and fair review of the
decision denying the application and may, in its sole discretion, hold a
hearing to review any or all issues raised by the applicant, which hearing
shall take place within thirty (30) days of the date of the applicant's
request. Within sixty (60) days after receipt of the request for review, the
Corporation shall issue a written decision to the applicant. If special
circumstances, such as the need to hold a hearing, require an extension of
time, the Corporation shall issue a written decision no later than 120 days
after receipt of the request for review. The Corporation's decision shall
include specific reasons for the decision, written in a manner calculated to
be understood by the applicant, and contain specific references to pertinent
Plan provisions upon which the decision is based.
5.6 No Trust: For tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), this
Plan is intended to qualify as an unfunded plan maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees and members of the Board of Directors, and shall
be interpreted accordingly.
No action by the Corporation or its Board of Directors under this Plan
shall be construed as creating a trust, escrow or other secured or segregated
fund or other fiduciary relationship of any kind in favor of any Participant
or Beneficiary or any other persons otherwise entitled to benefits under the
Plan. The status of the Participant and any Beneficiary with respect to any
liabilities assumed by the Corporation hereunder shall be solely that of
unsecured creditors of the Corporation. The Plan constitutes a mere promise
by the Corporation to make benefit payments in the future. Any insurance
policy or any other asset acquired or held by the Corporation in connection
with liabilities assumed by it hereunder, shall not be deemed to be held under
any trust, escrow or other secured or segregated fund or other fiduciary
relationship of any kind for the benefit of a Participant or Beneficiary or to
be security for the performance of the obligations of the Corporation, but
shall be, and remain a general, unpledged, unrestricted asset of the
Corporation at all times subject to the claims of general creditors of the
Corporation. Notwithstanding the foregoing, the Corporation may transfer
assets, including any insurance policies to a grantor trust of the type known
as a "Rabbi Trust" with the Corporation as grantor and owner of such trust.
5.7 Plan Administration: The Plan shall be administered by the Committee.
The Committee shall have the exclusive authority, sole discretion and
responsibility for all matters in connection with the operation and
administration of the Plan. The Committee's powers and duties shall include,
but not be limited to, the following: (a) responsibility for the compilation
and maintenance of all records necessary in connection with the Plan; (b)
authorizing the payment of all benefits under and expenses of the Plan; (c)
authority to engage such legal, accounting and other professional services as
it may deem proper; (d) discretionary authority to interpret the Plan; and (e)
discretionary authority to determine eligibility for benefits under the Plan
and to resolve all issues of fact and law in connection with such
determination. Decisions by the Committee shall be final and binding upon all
parties.
The Committee, from time to time, may allocate to other persons or
<PAGE>
organizations any of its rights, powers, and duties with respect to the
operation and administration of the Plan. Any such allocation shall be
reviewed from time to time by the Committee; shall, unless the Committee
specifies otherwise, carry such discretionary authority as the Committee
possesses regarding the matter; and shall be terminable upon such notice as
the Committee in its sole discretion, deems reasonable and prudent under the
circumstances.
5.8 Satisfaction of Claims: Any payment to a Participant or Beneficiary
or the legal representative of either, in accordance with the terms of this
Plan shall to the extent thereof be in full satisfaction of all claims such
person may have against the Corporation. The Corporation may require such
payee, as a condition to such payment, to execute a receipt and release
therefore in such form as shall be determined by the Corporation.
5.9 Governing Law: The Plan shall be construed, administered, and
governed in all respects in accordance with the laws of the State of
California to the extent not preempted by ERISA.
5.10 Gender and Number: Words used herein in the masculine, feminine or
neuter gender shall be construed as though they were also used in another
gender in all cases where they would so apply. Words used herein in the
singular or plural form shall be construed as though they were also used in
the other form in all cases where they would so apply.
5.11 Severability: In the event that a court of competent jurisdiction
determines that any provision of the Plan is in violation of any statute or
public policy, only those provisions of the Plan that violate such statute or
public policy shall be stricken. All provisions of the Plan that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any provision of the Plan shall modify the
stricken terms as narrowly as possible to give as much effect as possible to
the intentions of the Corporation in establishing the Plan.
5.12 Taxation: If the Internal Revenue Service finds that the Compensation
intended to be deferred for Federal income tax purposes pursuant to the Plan
is immediately taxable to a Participant for Federal income tax purposes, the
Corporation may, but shall not be required to, amend the Plan to comply with
the Internal Revenue Service requirements necessary to achieve the desired
Federal income tax benefits relating to the Plan. Notwithstanding the
foregoing, each Participant agrees to be liable for any tax that may be
imposed by the Internal Revenue Service or any other taxing entity with
respect to any benefits provided to or on behalf of such Participant or
Beneficiary pursuant to the Plan (including, without limitation, any and all
withholding taxes), irrespective of whether such tax consequences were
intended pursuant to the Plan. In the event amounts of Compensation otherwise
intended to be deferred under the Plan result in immediate taxation to a
Participant for Federal income tax purposes, and the Plan is not amended to
achieve the intended deferral, then such Participant may receive an immediate
distribution of that portion of the value of his or her Account Balance
subject to such taxation at the sole discretion of the Committee.
5.13 Indemnification: The Corporation agrees to and shall indemnify and
hold harmless each Indemnified Person (as hereinafter defined) from and
against all claims, losses, damages, causes of action, suits, and liability of
every kind, including all expenses of litigation, court costs and reasonable
attorney's fees, incurred in connection with the Plan. "Indemnified Person"
shall mean each director, officer, Committee member; or employee of the
Corporation acting as a fiduciary of the Plan. Such indemnity shall apply
regardless of whether the claims, losses, damages, causes of action, suits or
liabilities arise in whole or in part from the negligence or fault on the part
of the Indemnified Person, except to the extent there has been a final
adjudication by a court or other tribunal of competent jurisdiction that the
claim or liability is the result of gross negligence or willful misconduct of
<PAGE>
the Indemnified Person.
5.14 Other Benefits: Deferrals by a Participant shall be given effect
under the Corporation's other benefits plans and/or whenever the Corporation
is required to verify the status of a Participant, as follows:
(a) deferrals shall be considered for purposes of determining such
Participant's total income when verifying such Participant's status for credit
grantors, credit reporting agencies, in response to legal process and/or to
other authorized persons or entities;
(b) where permitted by the terms of the applicable plan, and
subject to applicable law, amounts deferred under the Plan shall be taken into
account for purposes of determining amounts to be paid to such Participant
under any insurance or salary/fees continuation or replacement plan maintained
by the Corporation;
(c) except where specifically excluded by the terms of such plans
or agreements, deferrals of Compensation under the Plan shall be taken into
account by the Corporation when determining a Participant's compensation in
connection with determining eligibility for bonus, incentive or severance pay
plans maintained by the Corporation;
(d) amounts deferred under the Plan shall not be treated as
compensation for purposes of determining the amount of a Participant's
deferrals under any qualified pension plan of the Corporation.
5.15 Expenses: The expenses of administering the Plan and any grantor
trust described in Section 5.6 shall be borne by the Corporation.
5.16 Successors and Assigns: This Plan shall be binding on and inure to
the benefit of the Corporation and the Participants and their Beneficiaries,
and their respective heirs and assigns.
5.17 Arbitration: Arbitration shall be the exclusive remedy for resolving
any dispute or controversy between the Corporation and any Participant or
Beneficiary with regard to any issue relating to the Plan which cannot be
resolved under the claims procedure set forth in Section 5.5. Such
arbitration shall be conducted in accordance with the then most applicable
rules of the American Arbitration Association. The arbitrator shall be
empowered to grant only such relief as would be available in a court of law.
In the event of any conflict between this Agreement and the rules of the
American Arbitration Association, the provisions of the Agreement shall be
determinative. If the parties are unable to agree upon an arbitrator, they
shall select a single arbitrator from a list designated by the office of the
American Arbitration Association having responsibility for the city in which
the Participant or Beneficiary last resided while employed by the Corporation
of seven arbitrators, all of whom shall be retired judges who are actively
involved in hearing private cases or members of the National Academy of
Arbitrators. If the parties are unable to agree upon an arbitrator from such
list, they shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used three strikes,
the remaining name on the list shall be the arbitrator. The fees and expenses
of the arbitrator shall initially be borne equally by the parties; provided,
however, that each party shall initially be responsible for the fees and
expenses of its own representatives and witnesses. If the parties cannot
agree upon a location for the arbitration, the arbitrator shall determine the
location. Judgment may be entered on the award of the arbitrator in any court
having jurisdiction. The prevailing party in the arbitration proceeding as
determined by the arbitrator, and in any enforcement or other court
proceedings, shall be entitled, to the extent provided by law, to
reimbursement from the other party for all of the prevailing party's costs
(including but not limited to the arbitrator's compensation), expenses and
reasonable attorney's fees.<PAGE>
ACKNOWLEDGED:
/s/ Robert G. Funari 1/1/98
________________________________________________ ____________
Syncor International Corporation Date
SCHEDULE A
The following individuals are entitled to receive the additional death benefit
referenced in Section 3.2 of this Plan and described herein:
Name Amount of Additional Death Benefit
1. Monty Fu $725,000
2. Kumar Chatani $350,000
EXHIBIT 10.25
CONSULTING AGREEMENT
This Consulting Agreement (this "AGREEMENT") is made and entered
into as of this 31st day of January 1998, by and between Syncor International
Corporation, a Delaware corporation ("SYNCOR"), and James Francis Mitchell, an
individual ("CONSULTANT"), with reference to the following facts:
A. Syncor, Syncor Acquisition (NDS) Corp., National Diagnostic
Services, Inc. ("NDS"), James Francis Mitchell & Co., Inc. ("JFM") and
Consultant are parties to that certain Asset Purchase Agreement ("ASSET
PURCHASE AGREEMENT") and that certain Agreement and Plan of Merger (the
"MERGER AGREEMENT"), each dated January 21, 1998, pursuant to which NDS and
JFM (collectively, "SELLERS") transferred to Syncor certain assets or
interests relating to the field of medical imaging and described more
specifically in those agreements.
B. Consultant possesses special skills, knowledge and
qualifications beneficial to the business of Syncor, particularly in the area
of medical imaging.
C. The parties desire to enter into an agreement under which
Consultant will provide services to Syncor relating to the field of medical
imaging.
D. The parties intend that Consultant shall be an independent
contractor with and to Syncor under this Agreement and not an employee of
Syncor.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Syncor and Consultant
hereby agree as follows:
1. Engagement and Term. Syncor engages the services of
Consultant and Consultant accepts such engagement upon the terms and
conditions set forth in this Agreement for a term commencing on the date
hereof and terminating on the second anniversary date hereof unless such
engagement is sooner terminated as provided in this Agreement.
2. Duties. Consultant shall be engaged to provide consulting
services for Syncor with respect to Syncor's plans to expand its medical
imaging business and with respect to Syncor's operations and management of the
<PAGE>
medical imaging facilities owned by, affiliated with, and/or operated by it.
Consultant shall also perform such other duties pertaining to Syncor's
business as Syncor and Consultant may from time to time mutually agree. The
services to be performed by Consultant are more particularly described on
Exhibit A attached hereto.
3. Nature of Services. Consultant shall perform diligently
and to the best of his talents, skills and expertise, all of the services
which he is required to perform under this Agreement. He shall devote full
time to the performance of these duties except that he may continue to engage
in other business activities in which he or NDS currently engages, including
his activities for Tamarack Investment Partners, LP, and his performance of
his investor relations and general partner duties under the NDS' imaging
center management contracts. Syncor and Consultant estimate that these other
activities will require approximately one business day a week of Consultant's
time and attention. Syncor also understands that Consultant takes
approximately four weeks of vacation each calendar year. Subject to Syncor's
prior written approval, Consultant may assign his rights, duties and
obligations under this Agreement to an entity owned or controlled by him,
provided that Consultant shall continue to perform the consulting and advisory
services on behalf of such assignee. In the event that Consultant ceases to
perform the services on behalf of such assignee, this Agreement shall
terminate. Consultant shall have the right to engage in any other gainful
activities and businesses, provided that Consultant shall not engage in any
activities or businesses which conflict or compete with the activities and
businesses of Syncor; Consultant may, however, engage in the activities
expressly permitted above and under Article VI of the Asset Purchase
Agreement.
4. Compensation. Syncor shall pay to Consultant and
Consultant shall accept as payment in full for all services rendered by him to
Syncor a consulting fee equal to $150,000 per year. Consultant's compensation
shall be paid to Consultant in equal installments on a monthly basis.
5. Reimbursement of Expenses; Travel Expenses. Syncor shall
reimburse Consultant for reasonable out-of-pocket expenses authorized by the
Chief Executive Officer of Syncor to be incurred by Consultant in the
performance of his duties hereunder and accounted for to Syncor in accordance
with Syncor's reporting and reimbursement policies. Consultant shall send an
invoice for expenses to be reimbursed by Company, which invoice shall be
accompanied with the following certification signed by Consultant:
"I certify that the above invoice is true and correct and
that payment therefor has not been received.
/S/ Consultant
___________________________________
"Consultant"
Syncor agrees to reimburse Consultant for the cost of business class airfare
for air travel in excess of four hours and for international air travel.
6. Confidential Relationship Created by this Agreement.
Consultant acknowledges that this Agreement creates a relationship of
confidence and trust on the part of Consultant for the benefit of Syncor.
During the term of this Agreement, Consultant may be responsible in whole or
in part for the creation of, or may acquire, certain Confidential Information
(as defined in Section 6.10) of Syncor and acknowledges that Syncor would not
have entered into this Agreement unless it were assured that all such
Confidential Information would be held in confidence by Consultant for the
sole benefit of Syncor, and pursuant to the terms set forth in this Section 6:
<PAGE>
6.1 Use of Confidential Information. During the term
of this Agreement and at all times thereafter, Consultant shall keep all of
the Confidential Information in confidence and shall not disclose any of the
same to any other person, except Syncor's personnel entitled thereto and other
persons designated in writing by Syncor. Consultant shall not cause, suffer
or permit the Confidential Information to be used for the gain or benefit of
any party outside of Syncor or for Consultant's personal gain or benefit
outside the scope of Consultant's engagement by Syncor. Consultant
acknowledges that the unauthorized taking of any of Syncor's trade secrets is
a crime under California Penal Code Section 499(c) and is punishable by
imprisonment in a state prison or in a county jail for a time not exceeding
one year, or by a fine, or by both such fine and such imprisonment.
Consultant further acknowledges that such unauthorized taking of Syncor's
trade secrets could also result in civil liability under California Civil Code
Section 3426 and that willful misappropriation may result in an award against
Consultant for triple the amount of Syncor's damages and Syncor's attorneys'
fees in collecting such damages.
6.2 Solicitation of Business. Consultant shall not,
during the longer duration of (i) the three-year period immediately following
the Closing Date (as defined in the Merger Agreement, (ii) the period
commencing on the Closing Date and continuing until one year after the
termination of this Agreement, or (iii) the period commencing on the Closing
Date and terminating one year after the date in which Consultant ceases to own
beneficially Syncor shares constituting one percent or more of all Syncor
shares outstanding (such longer period being the "RESTRICTED PERIOD"), solicit
or assist any other person to solicit any business (other than for Syncor)
from any present or past customer of Syncor; or request or advise any present
or future customer of Syncor to withdraw, curtail or cancel its business
dealings with Syncor; or commit any other act or assist others to commit any
other act which might injure the business of Syncor.
6.3 Solicitation of Employees. Consultant shall not
during the Restricted Period, directly or indirectly, (a) solicit or encourage
any employee of Syncor to leave the employ of Syncor, or (b) hire any employee
or former employee of Syncor if that employee has left the employ of Syncor
within one year prior thereto.
6.4 Solicitation of Consultants. Consultant shall not
during the Restricted Period, directly or indirectly, (a) solicit or encourage
to cease work with Syncor any consultant then under contract with Syncor or
(b) hire any consultant or former consultant of Syncor if that consultant has
ceased to be engaged by Syncor within one year prior thereto.
6.5 Use of Syncor Name. Consultant shall not make any
written use of or reference to Syncor's name for any marketing, public
relations, advertising, display or other business purpose or make any use of
Syncor's facilities for any activity unrelated to the express business
purposes and interests of Syncor under this Agreement without the prior
written consent of Syncor, which consent may be granted or withheld in
Syncor's sole and absolute discretion.
6.6 Survival. Consultant agrees that the obligations,
covenants and agreements of Consultant and the rights of Syncor set forth in
this Section 6 shall survive any termination or expiration of this Agreement.
6.7 Rights and Remedies Upon Breach. If Consultant
breaches or threatens to commit a breach of any of the provisions of this
Section 6 (the "RESTRICTIVE COVENANTS"), Syncor shall have the following
rights and remedies, each of which rights and remedies shall be independent of
the other and severally enforceable, and all of which rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to Syncor under law or in equity:
<PAGE>
(a) Specific Performance. The right and remedy
to have the Restrictive Covenants 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 Syncor and that
money damages will not provide adequate remedy to Syncor; and
(b) Accounting and Indemnification. The right
and remedy to require Consultant (i) to account for and pay over to Syncor all
compensation, profits, monies, accruals, increments or other benefits derived
or received by Consultant or any associated party deriving such benefits as a
result of any such breach of the Restrictive Covenants; and (ii) to indemnify
Syncor against any other losses, damages (including special and consequential
damages), costs and expenses, including actual attorneys' fees and court
costs, which may be incurred by them and which result from or arise out of any
such breach or threatened breach of the Restrictive Covenants.
6.8 Severability of Covenants/Blue Pencilling. If any
court determines that any of the Restrictive Covenants, or any part thereof,
is invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions.
6.9 Enforceability in Jurisdictions. Syncor and
Consultant intend to and do hereby confer jurisdiction to enforce the
Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such covenants. If the courts of any one or more of
such jurisdictions hold the Restrictive Covenants wholly unenforceable by
reason of the breadth of such scope or otherwise, it is the intention of
Syncor and Consultant that such determination not bar or in any way affect the
right of Syncor to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such covenants, as to breaches
of such covenants in such other respective jurisdictions, such covenants as
they relate to each jurisdiction being, for this purpose, severable into
diverse and independent covenants.
6.10 Definitions.
(a) The term "SYNCOR", as used in Sections 6.1 -
6.10, means not only Syncor International Corporation, but also any company,
partnership or entity which, directly or indirectly, controls, is controlled
by or is under common control with Syncor International Corporation.
(b) The term "CONFIDENTIAL INFORMATION," as used
herein, means all information or material not generally known by non-Syncor
personnel which (i) gives Syncor some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of Syncor; (ii) which is owned by Syncor or in
which Syncor has an interest and (iii) which is either (A) marked
"Confidential Information," "Proprietary Information" or other similar
marking, (B) known by Consultant to be considered confidential and proprietary
by Syncor or (C) from all the relevant circumstances should reasonably be
assumed by Consultant to be confidential and proprietary to Syncor.
Confidential Information includes, but is not limited to, the following types
of information and other information of a similar nature (whether or not
reduced to writing): trade secrets, marketing techniques and materials,
marketing and development plans, price lists, pricing policies, business
plans, information relating to customers and/or suppliers' identities,
characteristics and agreements, financial information and projections,
inventions, drawings, file data, documentation, diagrams, specifications, know
how, processes, formulas, models, flow charts, software in various stages of
development, source codes, object codes, research and development procedures,
research or development and test results, and employee files. Confidential
<PAGE>
Information also includes any information described above which Syncor obtains
from another party and which Syncor treats as proprietary or designates as
Confidential Information, whether or not owned or developed by Syncor.
NOTWITHSTANDING THE ABOVE, HOWEVER, NO INFORMATION CONSTITUTES CONFIDENTIAL
INFORMATION IF IT IS GENERIC INFORMATION OR GENERAL KNOWLEDGE OR IF IT IS
OTHERWISE PUBLICLY KNOWN AND IN THE PUBLIC DOMAIN.
7. Termination. In addition to any other termination
provisions contained herein, this Agreement shall be terminated:
(a) If by reason of any act of God, governmental
interference, calamities or other matters over which the parties have no
control, the terms of this Agreement cannot be fulfilled. Such notice shall
specify the reason for the election to terminate and the effective date of
such termination, which may be effective immediately in the discretion of the
party electing to terminate;
(b) Upon the death or permanent disability of
Consultant;
(c) At such time, if any, as Syncor ceases to
conduct business for any reason whatsoever or discontinues its medical imaging
business. Termination for this reason shall be effective automatically upon
such event without notice to either party; and
(d) At the election of Syncor, by giving fifteen
(15) days' written notice thereof to Consultant, upon the breach by Consultant
of any term or condition of this Agreement, or upon the occurrence of an event
of termination for cause. Such notice shall specify the reason for the
election to terminate and the effective date of such termination. For
purposes of this Agreement, "CAUSE" is defined as follows: (i) the failure,
neglect or refusal by Consultant to perform any consulting services assigned
to him hereunder (including, without limitation, Consultant's inability to
perform his obligations hereunder as a result of chronic alcoholism or drug
addiction and/or as a result of any failure to comply with any laws, rules or
regulations of any governmental entity with respect to the performance of the
consulting services described herein); (ii) any willful, intentional or
grossly negligent act by Consultant having the effect of materially injuring
the reputation or business of Syncor; or (iii) Consultant's conviction of a
crime (including conviction of a nolo contendere plea) involving, in Syncor's
good faith judgment, fraud, dishonesty or moral turpitude.
Upon termination of this Agreement, Consultant shall not be
obligated to render any additional services to Syncor and Syncor shall not be
obligated to make any additional payments to Consultant; provided, however,
Syncor shall pay Consultant for any uncompensated services theretofore
rendered by Consultant.
8. Return of Syncor's Property. If this Agreement is
terminated for any of the foregoing reasons, Syncor shall have the right, at
its option, to require Consultant to vacate his offices, if any, on Syncor's
premises prior to the effective date of termination and to cease all
activities on Syncor's behalf. Upon the termination of his engagement in any
manner, Consultant shall immediately surrender to Syncor all lists, books and
records of, or in connection with, Syncor's business, and all other property
belonging to Syncor, it being distinctly understood that all such lists, books
and records, and other documents, are the property of Syncor.
9. No Conflicting Agreements. Consultant represents and
warrants to Syncor that there are no agreements to which he is a party which
would prevent his timely and complete performance of the terms and conditions
of this Agreement, and Consultant shall not enter into any such agreement
during the term of this Agreement.
<PAGE>
10. Indemnification. Consultant shall indemnify, defend and
hold harmless Syncor, its officers, directors, shareholders, employees and
agents and their respective successors and assigns, from and against any and
all claims, demands, liabilities, losses, expenses, costs, obligations,
recoveries or damages of any nature whatsoever, whether accrued, absolute,
contingent or otherwise, including without limitation court costs and
attorneys' fees (whether or not suit is brought), arising out of or resulting
from or relating to any breach by Consultant of any of his covenants contained
in this Agreement, or by any acts or omissions of Consultant. This
indemnification obligation shall survive any termination of this Agreement.
11. Specific Performance. If Consultant breaches or
threatens to breach any provisions of Section 6, Syncor will have the right
and remedy, in addition to any other rights and remedies Syncor may have under
law or in equity, to have its rights under this Agreement 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 Syncor and that monetary damages will not provide an adequate remedy to
Syncor.
12. Notices. All notices, requests and other communications
of any kind which either party hereto may be required or desires to serve upon
the other party under the terms of this Agreement shall be in writing and
shall be delivered by courier or other means of personal service (including by
means of a nationally recognized courier service or a professional messenger
service), or sent by telex or telecopy or mailed first class, postage prepaid
by certified mail, return receipt requested, in all cases addressed to:
If to Consultant: James F. Mitchell
3396 Willow Lane #201
Westlake Village, CA 91361
If to Syncor: Syncor International Corporation
6464 Canoga Avenue
Woodland Hills, CA 91367
Attn: General Counsel
All notices, requests and other communications shall be deemed given on the
date of actual receipt or delivery to the address set forth above. In case of
service by telecopy, a copy of such notice shall be personally delivered or
sent by registered or certified mail, in the manner set forth above, within
three (3) business days thereafter. Either party hereto may from time to time
by notice in writing served as set forth above designate a different address
or a different or additional person to which all such notices or
communications thereafter are to be given.
13. Attorneys' Fees. In the event of any action, proceeding
or arbitration between the parties hereto to enforce any provision or right
hereunder, the unsuccessful party to such action or proceeding shall pay the
successful party all costs and expenses, including but not limited to,
reasonable attorneys' fees incurred therein by such successful party, which
cost, expenses and attorneys' fees shall be included in and as a part of any
judgment or award rendered in such action or proceeding.
14. Relationship and Authority. The relationship between
Syncor and Consultant intended to be created by this Agreement is that of
client and independent contractor, and nothing herein contained shall be
construed as creating a relationship of employer and employee or principal and
agent between them. Consultant shall neither act nor make any representation
that he is authorized to act as an employee, agent or officer of Syncor.
<PAGE>
15. Assignment. The services to be rendered and the duties to
be performed by Consultant hereunder are of a unique and personal nature.
Subject to Section 3 above, nothing contained in this Agreement shall be
construed to permit the assignment by Consultant of any right or obligation
under this Agreement and any such assignment is expressly prohibited without
the prior written consent of Syncor, which may be granted or withheld in
Syncor's sole and absolute discretion.
16. Section Headings. The headings of the several paragraphs
of this Agreement are inserted solely for convenience of reference and are not
a part hereof and are not intended to govern, limit or aid in the construction
of any term or provision hereof.
17. Entire Agreement. This Agreement (including the exhibits
hereto) and the agreements, documents and instruments to be executed and
delivered pursuant hereto or thereto are intended to embody the final,
complete and exclusive agreement among the parties with respect to the subject
matter hereof; are intended to supersede all prior agreements, understandings
and representations written or oral, with respect thereto; and may not be
contradicted by evidence of any such prior to contemporaneous agreement,
understanding or representation, whether written or oral.
18. Engagement at Will. Any continuance of Consultant's
engagement by Syncor and Consultant after the expiration of the term of this
Agreement shall be deemed an engagement at will and shall be subject to
termination with or without cause by either Syncor or Consultant upon delivery
of notice thereof to the other party. Any such continuance of engagement
shall be upon the terms and conditions as set forth herein or as otherwise
mutually agreed upon by the parties hereto.
19. Waiver; Modification. No provision of this Agreement may
be amended or modified, or the termination or discharge thereof agreed to or
acknowledged orally, but such may be accomplished only by an agreement in
writing signed by the party against whom the enforcement of any such waiver,
amendment, modification, termination or discharge is sought.
20. Severability. The provisions of this Agreement are
severable, and in the event that any provision is declared invalid, this
Agreement shall be interpreted as if such invalid provision were not contained
herein.
21. Governing Law. This Agreement shall constitute a contract
under the laws of the State of California and shall be governed and construed
in accordance with the laws of said State and without regard to the conflicts
of laws principles thereof.
22. Further Assurances. Syncor and Consultant shall, whenever
and as often as reasonably requested to do so by the other party, execute,
acknowledge and deliver or cause to be executed, acknowledged or delivered,
any and all agreements and instruments as may be necessary, expedient or
proper in the opinion of the requesting party to carry out the intent and
purposes of this Agreement, provided that the requesting party shall bear the
cost and expense of such further agreements and instruments (except that each
party shall bear his or its own attorneys' fees).
23. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
<PAGE>
"Consultant"
/s/ James Francis Mitchell
___________________________
JAMES FRANCIS MITCHELL
"Syncor"
SYNCOR INTERNATIONAL CORPORATION
By:/s/ Robert G. Funari
____________________________
Robert G. Funari
President
Exhibit A
Consultant's Duties
Consultant's duties shall include, without limitation, the
following:
1. Assisting Syncor in all matters relating to Comprehensive Medical
Imaging, Inc. ("CMI") and its medical imaging operations;
2. Assisting Syncor and CMI in acquisition and corporate development
activities in the field of medical imaging;
3. Assisting Syncor in developing international opportunities,particularly
in Asia and South America; and
4. Participating, as requested, in other business matters pertaining to
Syncor's core and other businesses.
EXHIBIT 10.26
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), dated as of January 5, 1998, is
among SYNCOR INTERNATIONAL CORPORATION, a Delaware corporation (the
"Borrower"), THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association ("First Chicago"), those other lenders from time to time party
hereto (First Chicago and such other lenders being referred to herein
individually as a "Lender" and collectively as the "Lenders"), and First
Chicago, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"). The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
<PAGE>
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as
the most recent transaction in a series of transactions) at least a majority
(in number of votes) of the securities of a corporation which have ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) or a majority (by
percentage or voting power) of the outstanding ownership interests of a
partnership or limited liability company.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans made on the
same Borrowing Date (or date of conversion or continuation) by the Lenders to
the Borrower of the same Type and, in the case of Fixed Rate Advances, for the
same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10%
or more of any class of voting securities (or other ownership interests) of
the controlled Person or possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of stock, by contract or otherwise.
"Administrative Agent" means First Chicago in its capacity as agent for
the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Administrative Agent appointed pursuant to Article
X.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or modified
and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the
Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Margin" in connection with the Eurodollar Rate, the Floating
Rate or the commitment fee, as applicable, means at any date the percentage
listed below in the applicable category column and corresponding to the range
of Total Indebtedness / EBITDA Ratio under which the Borrower's Total
Indebtedness / EBITDA Ratio (as determined quarterly based on the Borrower's
financial statements) falls for the fiscal quarter ended immediately prior to
such date:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Total Indebtedness in connection with in connection with
/ EBITDA Ratio the Eurodollar The Floating Rate Commitment Fee
Rate
<S> <C> <C> <C>
Less than or
equal to 0.75 0.750% 0% 0.125%
Greater than 0.75
But less than or<PAGE>
equal to 1.5 1.000% 0% 0.200%
Greater than 1.5
But less than or
equal to 3.0 1.250% 0% 0.250%
Greater than 3.0 1.500% 0% 0.300%
"Arranger" means First Chicago Capital Markets, Inc.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the President, Chief Financial Officer
or Treasurer of the Borrower, acting singly.
"Borrower" means Syncor International Corporation, a Delaware
corporation, and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and
(ii) for all other purposes, a day (other than a Saturday or Sunday) on which
banks generally are open in Chicago for the conduct of substantially all of
their commercial lending activities.
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Change in Control" with respect to the Borrower is deemed to have
occurred at such time as any of the following events shall occur:
(i) There shall be consummated any consolidation and merger of
the Borrower in which the Borrower is not the continuing or surviving
corporation or pursuant to which the voting stock of the Borrower would be
converted into cash, securities or other property; or
(ii) There is a report filed by any person, including such
person's Affiliates, on Schedule 13D or 14D-1 (or any successor schedule, form
or report) pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"), disclosing that such person (for the purposes of this definition only,
the term "person" is used as defined in Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act or any successor provision to either of the foregoing) has
become the beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the voting power of the Borrower's voting stock
outstanding; provided, however, that a Change in Control shall not be deemed
<PAGE>
to have occurred if at any time the Borrower, any Subsidiary of the Borrower,
any employee stock ownership plan or any other employee benefit plan,
including any pension plan of the Borrower or any Subsidiary of the Borrower,
or any person holding voting stock for or pursuant to the terms of such
employee benefit plan, files or becomes obligated to file a report under or in
response to Schedule 13D or Schedule 14D-1 (or any successor schedule, form or
report) under the Exchange Act disclosing beneficial ownership by it of shares
of voting stock in the Borrower, whether in excess of 50% or otherwise.
"Change in Control Notice" is defined in Section 2.18.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount for such Lender set forth in the most
current commitment schedule provided to the Borrower and the Lenders by the
Administrative Agent (as such schedule may be modified from time to time
pursuant to the terms hereof, with the initial commitment schedule being
attached hereto as Schedule 4).
"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes
or is contingently liable upon, the obligation or liability of any other
Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or obligations in connection
with letters of credit.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries,
are treated as a single employer under Section 414 of the Code.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by the Administrative Agent from time to time,
changing when and as said corporate base rate changes.
"Default" means an event described in Article VII.
"EBITDA" means, for any period and with respect to any Person and all
such Person's Subsidiaries on a consolidated basis, (i) the net earnings (or
loss) after taxes for such period taken as a single accounting period, plus
(ii) depreciation, depletion and amortization expense for such period, plus
(iii) federal, state and local income (or equivalent) taxes paid or accrued
for such period, plus (iv) total interest expense for such period (including
amortization of capitalized Indebtedness issuance costs), whether paid or
accrued (including the interest component of Capitalized Leases), including
all commissions, discounts and other fees and charges owed with respect to
letters of credit, plus (v) extraordinary, unusual or non-recurring losses and
non-cash charges for any disposition of businesses or early extinguishment of
Indebtedness for such period, minus (vi) any cash payments with respect to any
non-cash charges and expenses related to the disposition of businesses or
early extinguishment of Indebtedness previously taken into account for such
period, in each case determined in accordance with Agreement Accounting
Principles and, in the case of clauses (ii) through (vi), to the extent
included in the determination of net earnings (or loss) for such period.
<PAGE>
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) the effect of the environment on human
health, (iii) emissions, discharges or releases of pollutants, contaminants,
hazardous substances or wastes into surface water, ground water or land, or
(iv) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, the rate determined by the
Administrative Agent to be the rate at which the Administrative Agent offers
to place deposits in U.S. dollars with first-class banks in the London
interbank market at approximately 11 a.m. (London time) two Business Days
prior to the first day of such Eurodollar Interest Period, in the approximate
amount of First Chicago's (in its capacity as a Lender) relevant Eurodollar
Loan and having a maturity approximately equal to such Eurodollar Interest
Period.
"Eurodollar Interest Period" means, with respect to a Eurodollar Advance,
a period of one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on the day which corresponds numerically to such date one,
two, three or six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Eurodollar Interest Period shall end on the last
Business Day of such next, second, third or sixth succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a
Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day, provided, however, that if said next succeeding Business Day
falls in a new calendar month, such Eurodollar Interest Period shall end on
the immediately preceding Business Day.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The
Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if
the rate is not such a multiple.
"Facility Termination Date" means January 2, 2001 or any later date as
may be specified by the Administrative Agent as the Facility Termination Date
in accordance with Section 2.19 or any earlier date on which the Aggregate
Commitment is reduced to zero or otherwise terminated pursuant to the terms
hereof.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10
<PAGE>
a.m. (Chicago time) on such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent in its sole discretion.
"First Chicago" means The First National Bank of Chicago, a national
banking association, in its individual capacity, and its successors.
"Fixed Charge Coverage Ratio" means, for any period and with respect to
the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a)
(i) EBITDA for such period, plus (ii) Rental Expense for such period, minus
(iii) all cash expenditures for Capital Expenditures for such period, to (b)
the sum of (i) all current portions of Indebtedness which shall be due and
payable within the twelve-month period immediately following such period
(including the principal component of Capitalized Leases), plus (ii) total
interest expense for such period, whether paid or accrued (including the
interest component of Capitalized Leases), including all commissions,
discounts and other fees and charges owed with respect to letters of credit,
plus (iii) Rental Expense for such period, in each case determined in
accordance with Agreement Accounting Principles.
"Fixed Rate" means the Eurodollar Rate.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Margin, changing
when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Guarantor" means International Magnetic Imaging, Inc. (if and when it
has been acquired by the Borrower), and any other now existing or hereafter
established or acquired Subsidiary of the Borrower required to provide a
Guaranty pursuant to Section 2.26 below, and its respective successors and
assigns.
"Guaranty" means a guaranty executed by a Guarantor in favor of the
Administrative Agent, for the ratable benefit of the Lenders, in the form of
Exhibit F hereto, as it may be amended or modified and in effect from time to
time.
"Indebtedness" of a Person means, without duplication, such Person's (i)
obligations for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in
the trade), (iii) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease Obligations, and (vi)
Contingent Obligations.
"Interest Period" means a Eurodollar Interest Period.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable
arising in the ordinary course of business on terms customary in the trade) or
<PAGE>
contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
"L/C Documents" has the meaning given such term in Section 2.19 below.
"L/C Drawing" has the meaning given such term in Section 2.22 below.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the
Administrative Agent, any office, branch, subsidiary or affiliate of such
Lender or the Administrative Agent.
"Letter of Credit" has the meaning given such term in Section 2.19 below.
"Letter of Credit Application" means an application for the issuance of a
Letter of Credit in form satisfactory to First Chicago.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind
or nature whatsoever (including, without limitation, the interest of a vendor
or lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
"Loan" means, with respect to a Lender, such Lender's loan made pursuant
to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Subordination Agreements and the other documents and agreements contemplated
hereby and executed by the Borrower or any Guarantor in favor of the
Administrative Agent or any Lender.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower or any Guarantor to perform its obligations under the
Loan Documents (provided that any such effect with respect to the Borrower or
any Guarantor shall not constitute a Material Adverse Effect if not more than
ten percent (10%) of the total asset of the Borrower and its Subsidiaries on a
consolidated basis is affected adversely by such effect), or (iii) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Administrative Agent or the Lenders thereunder.
"Net Worth" means as to any Person the net worth of such Person and its
consolidated Subsidiaries, determined in accordance with Agreement Accounting
Principles.
"Note" means a promissory note, in substantially the form of Exhibit "A"
hereto, duly executed by the Borrower and payable to the order of a Lender in
the amount of its Commitment, including any amendment, modification, renewal
or replacement of such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, the Outstanding Letters of Credit, and unrepaid L/C
Drawings, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Administrative Agent or any indemnified party hereunder arising<PAGE>
under the Loan Documents.
"Outstanding" shall mean with respect to Letters of Credit, any Letter of
Credit which has not been canceled, expired unutilized or fully drawn upon and
reference to the "amount" of any Outstanding Letter of Credit shall be deemed
to mean an amount available for drawing thereunder.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each calendar quarter.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization,
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of
the Code as to which the Borrower or any member of the Controlled Group may
have any liability.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions
and modifications thereof and substitutions therefor), under (i) any and all
Rate Hedging Agreements, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Hedging Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing or
carrying margin stocks applicable to member banks of the Federal Reserve
System.
"Rental Expense" means for any period all fixed payments (including as
such all payments which the lessee is obligated to make to the lessor on
termination of the lease and/or surrender of the property, payable by the
Borrower or any Subsidiary of the Borrower, as lessee or sublessee under a
lease of real and/or personal property) but excluding any amounts required to
be paid by the Borrower or any Subsidiary of the Borrower (whether designated
as rents or additional rents) on account of maintenance, repairs, insurance,
<PAGE>
taxes, and similar charges. Fixed rents under any so-called "percentage
leases" shall be computed solely on the basis of the minimum rents, if any,
required to be paid by the lessee regardless of sales volume and/or gross
revenues.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such
waiver of the notice requirement in accordance with either Section 4043(a) of
ERISA or Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 51% of
the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the aggregate unpaid
principal amount of the outstanding Advances; provided, however, that if there
are only two Lenders hereunder, Required Lenders shall include both Lenders.
"Reserve Requirement" means, with respect to a Eurodollar Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
on Eurocurrency liabilities.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subordination Agreement" means a subordination agreement executed by a
Guarantor in favor of the Administrative Agent, for the ratable benefit of the
Lenders, in the form of Exhibit G hereto, as it may be amended or modified and
in effect from time to time.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, limited liability company, association,
joint venture or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned
or controlled. Unless otherwise expressly provided, all references herein to
a "Subsidiary" shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as
at the beginning of the twelve-month period ending with the month in which
such determination is made.
"Total Indebtedness" means, as of any date of determination, the amount
(determined in conformity with Agreement Accounting Principles) of (i) the
Obligations, plus (ii) all other outstanding Indebtedness of the Borrower and
all its Subsidiaries, determined on a consolidated basis, created or assumed
by any of such Persons, plus (iii) all other outstanding Indebtedness of the
Borrower and all its Subsidiaries which arises under a revolving credit or
similar agreement which obligates the lender or lenders to extend credit.
<PAGE>
"Total Indebtedness / EBITDA Ratio" means, as of any date of
determination, the quotient of the Total Indebtedness of the Borrower and its
Subsidiaries (determined on a consolidated basis) as of such date divided by
the EBITDA of the Borrower and its Subsidiaries (determined on a consolidated
basis) as of such date.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability
company, association, joint venture or similar business organization 100% of
the ownership interests having ordinary voting power of which shall at the
time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the
Borrower from time to time in amounts not to exceed in the aggregate at any
one time outstanding the amount of its Commitment; provided, however, that the
aggregate amount of Loans made by all Lenders at any one time outstanding
shall not exceed the Aggregate Commitment minus the aggregate dollar amount of
Outstanding Letters of Credit and unrepaid L/C Drawings on such date. Subject
to the terms of this Agreement, the Borrower may borrow, repay and reborrow at
any time prior to the Facility Termination Date. The Commitments to lend
hereunder shall expire on the Facility Termination Date.
2.2. Required Payments; Termination. Any outstanding Advances and
all other unpaid Obligations shall be paid in full by the Borrower on the
Facility Termination Date.
2.3. Ratable Loans. Each Advance hereunder shall consist of Loans
made from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.4 Types of Advances. The Advances may be Floating Rate Advances
or Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.
2.5. Commitment Fee; Reductions in Aggregate Commitment. The
Borrower agrees to pay to the Administrative Agent for the account of each
Lender a commitment fee equal to the applicable percentage per annum set forth
under the definition of "Applicable Margin" on the amount, calculated daily,
<PAGE>
equal to such Lender's Commitment minus such Lender's pro rata share of all
outstanding Loans and Advances, Outstanding Letters of Credit and unrepaid L/C
Drawings, from the date hereof to and including the Facility Termination Date,
payable in arrears on each Payment Date hereafter and on the Facility
Termination Date. The Borrower may permanently reduce the Aggregate
Commitment in whole, or in part ratably among the Lenders in integral
multiples of $5,000,000, upon at least five Business Days' written notice to
the Administrative Agent, which notice shall specify the amount of any such
reduction, provided, however, that the amount of the Aggregate Commitment may
not be reduced below the aggregate principal amount of the outstanding
Advances. All accrued commitment fees shall be payable on the effective date
of any termination of the obligations of the Lenders to make Loans hereunder.
2.6. Minimum Amount of Each Advance. Each Fixed Rate Advance
shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if
in excess thereof), and each Floating Rate Advance shall be in the minimum
amount of $100,000 (and in multiples of $100,000 if in excess thereof),
provided, however, that any Floating Rate Advance may be in the amount of the
unused Aggregate Commitment.
2.7 Optional Principal Payments. The Borrower may from time to
time pay, without penalty or premium, all outstanding Floating Rate Advances,
or, in a minimum aggregate amount of $100,000 or any integral multiple of
$100,000 in excess thereof, any portion of the outstanding Floating Rate
Advances upon two Business Days' prior notice to the Administrative Agent. A
Fixed Rate Advance may not be paid prior to the last day of the applicable
Interest Period.
2.8. Method of Selecting Types and Interest Periods for New
Advances. The Borrower shall select the Type of Advance and, in the case of
each Fixed Rate Advance, the Interest Period applicable to each Advance from
time to time. The Borrower shall give the Administrative Agent irrevocable
notice (a "Borrowing Notice") not later than 10:00 a.m. (Chicago time) at
least one Business Day before the Borrowing Date of each Floating Rate
Advance, and three Business Days before the Borrowing Date for each Eurodollar
Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of
such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Fixed Rate Advance, the Interest
Period applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans, in funds immediately available in Chicago to
the Administrative Agent at its address specified pursuant to Article XIII.
The Administrative Agent will make the funds so received from the Lenders
available to the Borrower at the Administrative Agent's aforesaid address.
2.9. Conversion and Continuation of Outstanding Advances.
Floating Rate Advances shall continue as Floating Rate Advances unless and
until such Floating Rate Advances are converted into Fixed Rate Advances.
Each Fixed Rate Advance shall continue as a Fixed Rate Advance until the end
of the then applicable Interest Period therefor, at which time such Fixed Rate
Advance shall be automatically converted into a Floating Rate Advance unless
the Borrower shall have given the Administrative Agent a
Conversion/Continuation Notice requesting that, at the end of such Interest
Period, such Fixed Rate Advance either continue as a Fixed Rate Advance for
the same or another Interest Period or be converted into an Advance of another
Type. Subject to the terms of Section 2.6, the Borrower may elect from time
<PAGE>
to time to convert all or any part of an Advance of any Type into any other
Type of Advances; provided that any conversion of any Fixed Rate Advance shall
be made on, and only on, the last day of the Interest Period applicable
thereto. The Borrower shall give the Administrative Agent irrevocable notice
(a "Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a Fixed Rate Advance not later than 10:00 a.m. (Chicago time)
at least one Business Day, in the case of a conversion into a Floating Rate
Advance, or three Business Days, in the case of a conversion into or
continuation of a Fixed Rate Advance, prior to the date of the requested
conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to
be converted or continued, and
(iii)the amount and Type(s) of Advance(s) into which such
Advance is to be converted or continued and, in the case of a conversion into
or continuation of a Fixed Rate Advance, the duration of the Interest Period
applicable thereto.
2.10. Changes in Interest Rate, etc. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is converted from a Fixed
Rate Advance into a Floating Rate Advance pursuant to Section 2.9 to but
excluding the date it becomes due or is converted into a Fixed Rate Advance
pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate
for such day. Changes in the rate of interest on that portion of any Advance
maintained as a Floating Rate Advance will take effect simultaneously with
each change in the Alternate Base Rate. Each Fixed Rate Advance shall bear
interest on the outstanding principal amount thereof from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined as applicable
to such Fixed Rate Advance. No Interest Period may end after the Facility
Termination Date.
2.11. Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.8 or 2.9, during the continuance of a
Default the Required Lenders may, at their option, by notice to the Borrower
(which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of
the Lenders to changes in interest rates), declare that no Advance may be made
as, converted into or continued as a Fixed Rate Advance. If any Advance is
not paid at maturity, whether by acceleration or otherwise, or any L/C Drawing
is not paid when due, the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the Required
Lenders notwithstanding any provision of Section 8.2 requiring unanimous
consent of the Lenders to changes in interest rates), declare that all
outstanding Obligations (including any Advance and any unrepaid L/C Drawing)
shall bear interest at a rate per annum equal to the Floating Rate plus 2% per
annum.
2.12. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Administrative Agent at the Administrative Agent's
address specified pursuant to Article XIII, or at any other Lending
Installation of the Administrative Agent specified in writing by the
Administrative Agent to the Borrower, by noon (local time) on the date when
due and shall be applied ratably by the Administrative Agent among the
Lenders. Each payment delivered to the Administrative Agent for the account
of any Lender shall be delivered promptly by the Administrative Agent to such
Lender in the same type of funds that the Administrative Agent received at its
address specified pursuant to Article XIII or at any Lending Installation
<PAGE>
specified in a notice received by the Administrative Agent from such Lender.
The Administrative Agent is hereby authorized to charge the account of the
Borrower maintained with First Chicago for each payment of principal, interest
and fees as it becomes due hereunder.
2.13. Notes; Telephonic Notices. Each Lender is hereby authorized
to record the principal amount of each of its Loans and each repayment on the
schedule attached to its Note, provided, however, that neither the failure to
so record nor any error in such recordation shall affect the Borrower's
obligations under such Note. The Borrower hereby authorizes the Lenders and
the Administrative Agent to extend, convert or continue Advances, effect
selections of Types of Advances and to transfer funds based on telephonic
notices made by any person or persons the Administrative Agent or any Lender
in good faith believes to be acting on behalf of the Borrower. The Borrower
agrees to deliver promptly to the Administrative Agent a written confirmation,
if such confirmation is requested by the Administrative Agent or any Lender,
of each telephonic notice signed by an Authorized Officer. The Administrative
Agent and the Lenders shall be entitled to rely on any such telephonic notice
and take actions pursuant thereto without any written confirmation (if none
has been requested) or prior to the receipt of any written confirmation (if
one has been requested). If the related written confirmation has been
delivered to the Administrative Agent by the Borrower prior to any action
having been taken by the Administrative Agent and the Lenders pursuant to the
Borrower's telephonic notice, and such written confirmation differs from the
Borrower's telephonic notice, the Administrative Agent and the Lenders shall
use their best efforts to take such actions as are specified in such written
confirmation instead of pursuant to the telephonic notice. If such written
confirmation is delivered to the Administrative Agent by the Borrower after
the Administrative Agent and the Lenders have already taken action pursuant to
the Borrower's telephonic notice, the Administrative Agent and the Lenders
shall have no obligation whatsoever in following such written confirmation
even if it differs in material respects from the Borrower's prior telephonic
notice.
2.14. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any
date on which the Floating Rate Advance is prepaid, whether due to
acceleration or otherwise, and at maturity. Interest accrued on that portion
of the outstanding principal amount of any Floating Rate Advance converted
into a Fixed Rate Advance on a day other than a Payment Date shall be payable
on the date of conversion. Interest accrued on each Fixed Rate Advance shall
be payable on the last day of its applicable Interest Period, on any date on
which the Fixed Rate Advance is prepaid, whether by acceleration or otherwise,
and at maturity. Interest accrued on each Fixed Rate Advance having an
Interest Period longer than three months shall also be payable on the last day
of each three-month interval during such Interest Period. Interest on Fixed
Rate Loans, commitment fees and letter of credit fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest on Floating Rate
Loans shall be calculated for actual days elapsed on the basis of a 365-, or
when appropriate 366-, day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon(local time) at the place of payment. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.15. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Administrative
Agent will notify each Lender of the contents of each Aggregate Commitment
reduction notice, Borrowing Notice, Conversion/Continuation Notice, and
repayment notice received by it hereunder. The Administrative Agent will
notify each Lender of the interest rate applicable to each Fixed Rate Advance
<PAGE>
promptly upon determination of such interest rate and will give each Lender
prompt notice of each change in the Alternate Base Rate.
2.16. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to
any such Lending Installation and the Notes shall be deemed held by each
Lender for the benefit of such Lending Installation. Each Lender may, by
written or telex notice to the Administrative Agent and the Borrower,
designate a Lending Installation through which Loans will be made by it and
for whose account Loan payments are to be made.
2.17. Non-Receipt of Funds by the Administrative Agent. Unless the
Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the
Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or
(ii) in the case of the Borrower, a payment of principal, interest or fees to
the Administrative Agent for the account of the Lenders, that it does not
intend to make such payment, the Administrative Agent may assume that such
payment has been made. The Administrative Agent may, but shall not be
obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Lender or the Borrower,
as the case may be, has not in fact made such payment to the Administrative
Agent, the recipient of such payment shall, on demand by the Administrative
Agent, repay to the Administrative Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on
the date such amount was so made available by the Administrative Agent until
the date the Administrative Agent recovers such amount at a rate per annum
equal to (i) in the case of payment by a Lender, the Federal Funds Effective
Rate for such day or (ii) in the case of payment by the Borrower, the interest
rate applicable to the relevant Loan.
2.18. Mandatory Prepayment in the Event of a Change in Control. No
later than ten (10) Business Days prior to the consummation of any transaction
which would cause a Change in Control, the Borrower shall notify (a "Change in
Control Notice") the Administrative Agent (and the Administrative Agent shall
promptly forward a copy of such Change in Control Notice to each Lender) of
such expected transaction, including within such Change in Control Notice the
expected closing date of such transaction. Within five (5) Business Days of
receipt of such Change in Control Notice by any Lender, such Lender may, at
its option, give notice to the Administrative Agent and the Borrower that such
Lender elects to terminate its Commitment hereunder. Unless an earlier date
is otherwise agreed upon between the Borrower, the Administrative Agent and
the terminating Lender, such Lender's Commitment shall terminate
simultaneously with the closing of such transaction and the Borrower shall
repay at such time all of such Lender's outstanding Loans, together with
accrued interest thereon, any accrued fees with respect to such Lender's
Commitment, any costs, losses or expenses incurred by such Lender in
connection with such prepayment payable by the Borrower pursuant to Section
3.4 and any other obligations of the Borrower to such Lender hereunder. Any
failure of the Borrower to deliver a Change in Control Notice pursuant to this
Section shall not affect the right of any Lender to terminate its Commitment
hereunder simultaneously with the closing of the transaction causing the
Change in Control nor the obligation of the Borrower to repay at the time of
such closing the amounts required in connection with such termination.
2.19. Issuance of Letters of Credit. On the terms and subject to
the conditions set forth herein, First Chicago shall, from time to time from
and including the date of this Agreement and prior to the Facility Termination
Date, issue its letters of credit (each a "Letter of Credit" and,
collectively, the "Letters of Credit") for the account of the Borrower, in an
amount (a) which when added to the aggregate amount of other Outstanding
Letters of Credit and unpaid L/C Drawings will not exceed $10,000,000, and (b)
which when added to the aggregate amount of Loans outstanding hereunder and
<PAGE>
the aggregate amount of other Outstanding Letters of Credit and unpaid L/C
Drawings will not exceed the Aggregate Commitment. Each Letter of Credit
shall be requested by the Borrower at least one Business Day prior to the
proposed issuance date by delivery to First Chicago of a duly executed Letter
of Credit Application, accompanied by all other documents, instruments and
agreements as First Chicago may require (the "L/C Documents"). No Letter of
Credit shall have a stated expiration date (or provide for the extension of
such stated expiration date or the issuance of any replacement therefor) later
than the Facility Termination Date.
2.20. Purchase of Participation Interests. Upon the issuance of
each Letter of Credit, the Lenders shall be automatically deemed to have
purchased an undivided participation interest therein and in all rights and
obligations relating thereto ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.21. Repayment of L/C Drawings. Any drawing under any Letter of
Credit (a "L/C Drawing") shall be payable in full by the Borrower: (1) prior
to the occurrence of a Default and acceleration of the Obligations, on the
date the Administrative Agent notifies the Borrower (which notice may be
telephonic) of such L/C Drawing if such notice is given prior to 12:00 noon
(Los Angeles time), or on the next succeeding Business Day if given after
12:00 noon (Los Angeles time), or (2) following the occurrence of a Default
and acceleration of the Obligations, without demand upon or notice to the
Borrower, on the date of such L/C Drawing. Any L/C Drawing not paid on the
date when due shall accrue interest as provided in Section 2.11 above, from
and including such date to but not including the date paid in full. The
Lenders hereby absolutely and unconditionally (including, without limitation,
following the occurrence of a Default) agree to purchase and sell among
themselves the dollar amount of any L/C Drawing which is not paid on the date
when due by the Borrower, so that each unrepaid L/C Drawing shall be held and
participated in by the Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.22. Absolute Obligation to Repay. The Borrower's obligation to
repay L/C Drawings shall be absolute, irrevocable and unconditional under any
and all circumstances whatsoever and irrespective of any set-off, counterclaim
or defense to payment which the Borrower may have or have had, against any
Lender or any other Person, including, without limitation, any set-off,
counterclaim or defense based upon or arising out of: (1) any lack of
validity or enforceability of this Agreement or any of the other Loan
Documents; (2) any amendment or waiver of or any consent to departure from the
terms of any Letter of Credit; (3) the existence of any claim, setoff, defense
or other right which the Borrower or any other Person may have at any time
against any beneficiary or any transferee of any Letter of Credit (or any
Person for whom any such beneficiary or any such transferee may be acting);
(4) any allegation that any demand, statement or any other document presented
under any Letter of Credit is forged, fraudulent, invalid or insufficient in
any respect, or that any statement therein is untrue or inaccurate in any
respect whatsoever or that variations in punctuation, capitalization, spelling
or format were contained in the drafts or any statements presented in
connection with any L/C Drawing; (5) any payment made by First Chicago under
any Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with
any insolvency proceeding; or (6) any other circumstance of happening
whatsoever, whether or not similar to any of the foregoing, including any
other circumstance that might otherwise constitute a defense available to, or
a discharge of the Borrower. Nothing contained herein shall constitute a
waiver of any rights of the Borrower against First Chicago arising out of the
gross negligence or willful misconduct of First Chicago in connection with any
Letter of Credit issued hereunder, it being expressly acknowledged and agreed
by First Chicago that payment by First Chicago under any Letter of Credit in
<PAGE>
an amount in excess of that available for drawing thereunder or in excess of
that requested by the beneficiary in making a drawing thereunder shall
constitute "gross negligence" on the part of First Chicago.
2.23. Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in such Letter of Credit) apply to such
Letter of Credit.
2.24. Relationship to Letter of Credit Application. In the event
of any inconsistency between the terms and provisions of this Agreement and
the terms and provisions of the Letter of Credit Application, the terms and
provisions of this Agreement shall supersede and govern.
2.25. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent for the account of the Lenders, ratably in proportion to
the ratio that their respective Commitments bear to the Aggregate Commitment,
a letter of credit fee equal to the Applicable Margin in connection with the
Eurodollar Rate on the stated amount of all Outstanding Letters of Credit,
payable in arrears on each Payment Date hereafter and on the Facility
Termination Date. In addition, the Borrower agrees to pay to First Chicago at
the time of issuance of each Letter of Credit a fronting fee pursuant to that
certain fee letter dated of even date herewith among First Chicago, the
Arranger and the Borrower.
2.26. Guaranties and Subordination Agreements. As additional
credit support for the Obligations, the Borrower shall cause to be executed
and delivered to the Administrative Agent from each of the Guarantors a
Guaranty and a Subordination Agreement. The Borrower shall also cause to be
executed and delivered to the Administrative Agent a Guaranty and a
Subordination Agreement from any other direct or indirect Wholly-Owned
Subsidiary (whether now existing or hereafter established or acquired) from
time to time if such Subsidiary shall have (i) gross revenues equal to or in
excess of five percent (5%) of the consolidated gross revenues of the Borrower
and its Subsidiaries for the immediately preceding twelve-month period or (ii)
total assets equal to or in excess of five percent (5%) of the consolidated
total assets of the Borrower and its Subsidiaries as of the last day of the
most recent fiscal quarter.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether
or not having the force of law), or any interpretation thereof, or the
compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation
to any tax, duty, charge or withholding on or from payments due from the
Borrower (excluding federal taxation of the overall net income of any Lender
or applicable Lending Installation), or changes the basis of taxation of
payments to any Lender in respect of its Loans or other amounts due it
hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender or any applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest rate applicable to
Fixed Rate Advances), or
<PAGE>
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation of
making, funding or maintaining loans or reduces any amount receivable by any
Lender or any applicable Lending Installation in connection with loans, or
requires any Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of loans held or interest received by
it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making,
funding and maintaining its Loans and its Commitment. Notwithstanding
anything to the contrary set forth above in this Section, this Section shall
not apply to Floating Rate Loans.
3.2. Changes in Capital Adequacy Regulations. If a Lender
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within 15 days of
demand by such Lender, the Borrower shall pay such Lender the amount necessary
to compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, its Loans or its obligation to make Loans hereunder (after taking
into account such Lender's policies as to capital adequacy). "Change" means
(i) any change after the date of this Agreement in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender (other than any change taken into account in
determining the interest rate applicable to Fixed Rate Advances). "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in
the United States on the date of this Agreement, including transition rules,
and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted
prior to the date of this Agreement. Notwithstanding anything to the contrary
set forth above in this Section, this Section shall not apply to Floating Rate
Loans.
3.3. Availability of Types of Advances. If any Lender determines
that maintenance of any of its Fixed Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders determine
that (i) deposits of a type and maturity appropriate to match fund Fixed Rate
Advances are not available or (ii) the interest rate applicable to a Type of
Advance does not accurately reflect the cost of making or maintaining such
Advance, then the Administrative Agent shall suspend the availability of the
affected Type of Advance and require any Fixed Rate Advances of the affected
Type to be repaid.
3.4. Funding Indemnification. If any payment of a Fixed Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify each Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Fixed Rate Advance.
<PAGE>
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of
the Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver
a written statement of such Lender to the Borrower (with a copy to the
Administrative Agent) as to the amount due, if any, under Section 3.1, 3.2 or
3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Fixed Rate Loan shall be calculated as though each Lender funded its Fixed
Rate Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Fixed Rate
applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written statement of
any Lender shall be payable on demand after receipt by the Borrower of such
written statement. The obligations of the Borrower under Sections 3.1, 3.2
and 3.4 shall survive payment of the Obligations and termination of this
Agreement.
ARTICLE IV
CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION
4.1. Initial Advance. The Lenders shall not be required to make
the initial Advance hereunder at any time prior to the date of this Agreement
and unless and until the Borrower has furnished to the Administrative Agent
with sufficient copies for the Lenders:
(i) Duly executed originals of this Agreement.
(ii) Duly executed originals of each of the Guaranties.
(iii) Duly executed originals of each of the Subordination
Agreements.
(iv) Copies of the articles of incorporation of the Borrower,
together with all amendments, and a certificate of good standing, both
certified by the Secretary of State of the State of Delaware.
(v) Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are deemed necessary by
counsel for any Lender) authorizing the execution of the Loan Documents.
(vi) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by name and title
and bear the signature of the officers of the Borrower authorized to sign the
Loan Documents and to make borrowings hereunder, upon which certificate the
Administrative Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.
(vii) With respect to each of the Guarantors, copies of its
articles of incorporation, together with all amendments, and a certificate of
good standing, both certified by the appropriate governmental officer in its
jurisdiction of incorporation.
(viii)With respect to each of the Guarantors, copies,
certified by the Secretary or Assistant Secretary of such Guarantor, of its
by-laws and of its Board of Directors' resolutions (and resolutions of other
bodies, if any are deemed necessary by counsel for any Lender) authorizing the
execution of the Guaranty to which it is party.<PAGE>
(ix) With respect to each of the Guarantors, an incumbency
certificate, executed by the Secretary or Assistant Secretary of such
Guarantor, which shall identify by name and title and bear the signature of
the officers of such Guarantor authorized to sign the Guaranty to which it is
party.
(x) A certificate, signed by the chief financial officer of
the Borrower, stating that on the initial Borrowing Date no Default or
Unmatured Default has occurred and is continuing.
(xi) A written opinion of counsel to the Borrower and the
Guarantors, addressed to the Lenders in substantially the form of Exhibit "B"
hereto.
(xii) Notes payable to the order of each of the Lenders.
(xiii) Written money transfer instructions, in substantially
the form of Exhibit "E" hereto, addressed to the Administrative Agent and
signed by an Authorized Officer, together with such other related money
transfer authorizations as the Administrative Agent may have reasonably
requested.
(xiv) Evidence satisfactory to the Administrative Agent that
upon funding of the initial Advance hereunder, all Indebtedness (other than
with respect to the letters of credit set forth in Schedule "5" hereto) to
First Chicago under the existing line of credit extended by First Chicago to
the Borrower shall have been paid in full.
(xv) Such other documents as any Lender or its counsel may
have reasonably requested.
(xvi) Payment of a one-time loan fee in the amount of $27,500
to the Administrative Agent for distribution to the Lenders.
4.2. Each Advance. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and to the
application of the proceeds thereof, does not increase the aggregate amount of
outstanding Advances), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V
are true and correct in all material respects as of such Borrowing Date except
to the extent any such representation or warranty is stated to relate solely
to an earlier date, in which case such representation or warranty shall be
true and correct on and as of such earlier date.
(iii) All legal matters incident to the making of such Advance
shall be reasonably satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall constitute
a representation and warranty by the Borrower that the conditions contained in
Sections 4.2(i) and (ii) have been satisfied. Any Lender may, through the
Administrative Agent, require a duly completed compliance certificate in
substantially the form of Exhibit "C" hereto as a condition to making an
Advance.
4.3. Withholding Tax Exemption. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver
to each of the Borrower and the Administrative Agent two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Lender is entitled to receive payments under this
<PAGE>
Agreement and the Notes without deduction or withholding of any United States
federal income taxes. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Administrative
Agent two additional copies of such form (or a successor form) on or before
the date that such form expires (currently, three successive calendar years
for Form 1001 and one calendar year for Form 4224) or becomes obsolete or
after the occurrence of any event requiring a change in the most recent forms
so delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Administrative
Agent, in each case certifying that such Lender is entitled to receive
payments under this Agreement and the Notes without deduction or withholding
of any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender
advises the Borrower and the Administrative Agent that it is not capable of
receiving payments without any deduction or withholding of United States
federal income tax.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Corporate Existence and Standing. Each of the Borrower and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction where its
ownership of property or conduct of business requires such authority and where
failure to have such authority could have a Material Adverse Effect.
5.2. Authorization and Validity. Each of the Borrower and the
Guarantors has the corporate power and authority and legal right to execute
and deliver the Loan Documents to which it is party and to perform its
obligations thereunder. The execution and delivery by the Borrower and the
Guarantors of the Loan Documents and the performance of their respective
obligations thereunder have been duly authorized by proper corporate
proceedings, the Loan Documents to which the Borrower is party constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, and the Loan Documents to which each
Guarantor is party constitute legal, valid and binding obligations of such
Guarantor enforceable against such Guarantor in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower or any Guarantor of the Loan Documents, nor the
consummation of the transactions therein contemplated, nor compliance with the
provisions thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or any of the
Guarantors or the Borrower's or any Guarantor's articles of incorporation or
by-laws or the provisions of any material indenture, instrument or agreement
to which the Borrower or any of the Guarantors is a party or is subject, or by
which it, or its Property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on
the Property of the Borrower or any Guarantor pursuant to the terms of any
such indenture, instrument or agreement. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, or other action in respect of any governmental or
public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with the execution, delivery and
<PAGE>
performance of, or the legality, validity, binding effect or enforceability
of, any of the Loan Documents.
5.4. Financial Statements. The consolidated financial statements dated
December 31, 1996 of the Borrower and its Subsidiaries heretofore delivered to
the Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of the Borrower
and its Subsidiaries at such date and the consolidated results of their
operations for the period then ended.
5.5. Material Adverse Change. Since December 31, 1996, there has been
no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries which
is likely to have a Material Adverse Effect.
5.6. Taxes. The Borrower and its Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided in accordance with Agreement Accounting Principles
and as to which no Lien exists. The United States income tax returns of the
Borrower and its Subsidiaries have been audited by the Internal Revenue
Service through the fiscal year ended December 31, 1993. No tax liens have
been filed and no claims are being asserted with respect to any such taxes.
The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of any taxes or other governmental charges are
adequate.
5.7. Litigation and Contingent Obligations. Except as set forth on
Schedule "3" hereto, there is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or, to the knowledge of any of
their officers, threatened against or affecting the Borrower or any of its
Subsidiaries which could have a Material Adverse Effect or which seeks to
prevent, enjoin or delay the making of the Loans or Advances. Other than any
liability incident to such litigation, arbitration or proceedings, the
Borrower has no material contingent obligations not provided for or disclosed
in the financial statements referred to in Section 5.4.
5.8. Subsidiaries. Schedule "1" hereto contains an accurate list of all
Subsidiaries of the Borrower as of the date of this Agreement, setting forth
their respective jurisdictions of incorporation and the percentage of their
respective capital stock owned by the Borrower or other Subsidiaries. All of
the issued and outstanding shares of capital stock of such Subsidiaries have
been duly authorized and issued and are fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do
not in the aggregate exceed $1,000,000. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no
Reportable Event has occurred with respect to any Plan, neither the Borrower
nor any other members of the Controlled Group has withdrawn from any Plan or
initiated steps to do so, and no steps have been taken to reorganize or
terminate any Plan.
5.l0. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Administrative
Agent or to any Lender in connection with the negotiation of, or compliance
with, the Loan Documents contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statements
contained therein not misleading.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
<PAGE>
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which is likely to have a Material Adverse Effect.
Neither the Borrower nor any Subsidiary is in default in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions contained in (i) any agreement to which it is a party, which
default is likely to have a Material Adverse Effect or (ii) any agreement or
instrument evidencing or governing Indebtedness with a current outstanding
principal amount in excess of $100,000.
5.13. Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property if failure to comply
could reasonably be expected to have a Material Adverse Effect.
5.14. Ownership of Properties. Except as set forth on Schedule "2"
hereto, on the date of this Agreement, the Borrower and its Subsidiaries will
have good title, free of all Liens other than those permitted by Section 6.15,
to all of the Property and assets reflected in the financial statements as
owned by it.
5.15. Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of
Section 4975 of the Code); and neither the execution of this Agreement and the
making of Loans hereunder do not give rise to a prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Code.
5.16. Environmental Matters. In the ordinary course of its business,
the officers of the Borrower consider the effect of Environmental Laws on the
business of the Borrower and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the Borrower
due to Environmental Laws. On the basis of this consideration, the Borrower
has reasonably concluded that it is in material compliance with all applicable
Environmental Laws in effect on the date of this representation and warranty.
Except as set forth on Schedule "6" hereto, neither the Borrower nor any
Subsidiary has received any notice to the effect that its operations are not
in material compliance with any of the requirements of applicable
Environmental Laws or are the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of
any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could have a Material Adverse Effect.
5.17. Investment Company Act. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
5.18. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
<PAGE>
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lenders:
(i) Within 120 days after the close of each of its fiscal years,
(A) an unqualified (except for qualifications relating to changes in
accounting principles or practices reflecting changes in generally accepted
principles of accounting and required or approved by the Borrower's
independent certified public accountants) audit report certified by
independent certified public accountants, acceptable to the Required Lenders,
prepared in accordance with Agreement Accounting Principles on a consolidated
and consolidating basis (consolidating statements need not be certified by
such accountants) for itself and the Subsidiaries, including balance sheets as
of the end of such period, related profit and loss and reconciliation of
surplus statements, and a statement of cash flows, accompanied by any
management letter prepared by said accountants, and (B) consolidating
unaudited balance sheets as at the close of each such period and consolidating
profit and loss and reconciliation of surplus statements and a statement of
cash flows for such fiscal year, all certified by its chief financial officer.
(ii) Within 60 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and the Subsidiaries,
consolidated and consolidating unaudited balance sheets as at the close of
each such period and consolidated and consolidating profit and loss and
reconciliation of surplus statements and a statement of cash flows for the
period from the beginning of such fiscal year to the end of such quarter, all
certified by its chief financial officer.
(iii) [Intentionally Omitted.]
(iv) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit
"C" hereto signed by an Authorized Officer showing the calculations necessary
to determine compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof.
(v) Within 270 days after the close of each fiscal year, a
statement of the Unfunded Liabilities of each Single Employer Plan, certified
as correct by an actuary enrolled under ERISA.
(vi) As soon as possible and in any event within l0 days after the
Borrower knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by the chief financial officer of the Borrower,
describing said Reportable Event and the action which the Borrower proposes to
take with respect thereto.
(vii) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim to the effect that
the Borrower or any of its Subsidiaries is or may be liable to any Person as a
result of the release by the Borrower, any of its Subsidiaries, or any other
Person of any toxic or hazardous waste or substance into the environment, and
(b) any notice alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the Borrower or any of
its Subsidiaries, which, in either case, could reasonably be expected to have
a Material Adverse Effect.<PAGE>
(viii) Promptly upon the furnishing thereof to the shareholders of
the Borrower, copies of all financial statements, reports and proxy statements
so furnished.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which the
Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission.
(x) Such other information (including non-financial information)
as the Administrative Agent or any Lender may from time to time reasonably
request.
6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
to, use the proceeds of the Advances to support working capital requirements,
general corporate purposes and friendly Acquisitions, and to repay outstanding
Advances. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances to purchase or carry any "margin stock"
(as defined in Regulation U).
6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence
of any Default or Unmatured Default and of any other development, financial or
otherwise, which could have a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted or in related business lines and to do all things necessary to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business
is conducted.
6.5. Taxes. The Borrower will, and will cause each Subsidiary to,
timely file complete and correct United States federal and applicable foreign,
state and local tax returns required by law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside in accordance with Agreement Accounting Principles.
6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent
with sound business practice, and the Borrower will furnish to any Lender upon
request full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, except
to the extent that such noncompliance could not reasonably be expected to have
a Material Adverse Effect.
6.8. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
permit the Administrative Agent and the Lenders, by their respective
representatives and agents, to inspect any of the Property, corporate books
and financial records of the Borrower and each Subsidiary, to examine and make
<PAGE>
copies of the books of accounts and other financial records of the Borrower
and each Subsidiary, and to discuss the affairs, finances and accounts of the
Borrower and each Subsidiary with, and to be advised as to the same by, their
respective officers at such reasonable times and intervals as the Lenders may
designate.
6.10. Dividends. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own capital stock and
dividends on preferred stock of the Borrower outstanding on the date of this
Agreement), except that any Subsidiary may declare and pay dividends to, or
make distributions to, or make redemptions from, the Borrower or a
Wholly-Owned Subsidiary.
6.11. Indebtedness. The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness existing on the date hereof and described in
Schedule "2" hereto.
(iii) Indebtedness arising under Rate Hedging Agreements related
to the Loans.
(iv) Capitalized Leases and Indebtedness assumed in connection
with the Acquisition of International Magnetic Imaging, Inc., as described in
Schedule "2" hereto.
(v) Capitalized Leases, Indebtedness assumed in connection with
any Acquisition after the date of this Agreement, and other incidental
Indebtedness, collectively in an aggregate amount not to exceed $15,000,000.
(vi) With prior notice to the Administrative Agent for
distribution to the Lenders and with subsequent delivery to each Lender of
copies of all agreements executed in connection therewith, a one-time issuance
of term debt in an aggregate amount not to exceed $100,000,000, the proceeds
of which to be used to repay outstanding Obligations.
In the event the Borrower or any Subsidiary wishes to assume any Indebtedness
in connection with any Acquisition after the date of this Agreement in
addition to that permitted above in this Section 6.11, the Borrower shall
provide all relevant documents in connection with such Indebtedness to the
Administrative Agent and the Lenders for their review and prior approval. The
Administrative Agent and the Lenders shall use their reasonable judgment in
reviewing such documents and in deciding whether to grant such approval.
6.12. Merger. The Borrower will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except: (1) any merger
of a Subsidiary into the Borrower or a Wholly-Owned Subsidiary, and (2) any
consolidation or merger in which the Borrower is the surviving entity and the
shareholders of the Borrower prior to such consolidation or merger will
control a majority of the Borrower's voting stock upon the closing of such
consolidation or merger.
6.13. Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property, to any other
Person, except:
(i) Sales of inventory in the ordinary course of business.
(ii) Leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its Subsidiaries
previously leased, sold or disposed of (other than inventory in the ordinary
<PAGE>
course of business) as permitted by this Section during the twelve-month
period ending with the month in which any such lease, sale or other
disposition occurs, do not constitute a Substantial Portion of the Property of
the Borrower and its Subsidiaries.
6.14. Investments and Acquisitions. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including,
without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or to create any Subsidiary or to
become or remain a partner in any partnership or joint venture, or to make any
Acquisition of any Person, except:
(i) Short-term obligations of, or fully guaranteed by, the United
States of America.
(ii) Commercial paper rated A-l or better by Standard and Poor's
Ratings Group, a division of McGraw Hill, Inc., or P-l or better by Moody's
Investors Service, Inc.
(iii) Municipal bonds rated AA or better, and preferred stock
rated A or better, by Standard and Poor's Ratings Group.
(iv) Demand deposit accounts maintained in the ordinary course of
business.
(v) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and surplus in
excess of $100,000,000.
(vi) Existing Investments in Subsidiaries and other Investments
in existence on the date hereof and described in Schedule "1" hereto.
(vii) Friendly Acquisitions involving (A) total expenditures not
to exceed (i) $20,000,000 in any one transaction or series of transactions
related to the same entity; or (ii) in the aggregate determined as of the last
day of each fiscal quarter for the 12-month period ending on such date,
$40,000,000, (B) targets in a similar line of business (radioactive
pharmaceuticals and diagnostic imaging) as the Borrower, and (C) targets with
a positive EBITDA; provided that on a proforma basis, the Borrower shall
remain in compliance with all the covenants under this Agreement immediately
upon consummation of such Acquisition; and provided further, that the
Acquisition of International Magnetic Imaging, Inc. involving total
expenditures not to exceed $42,000,000 shall be permitted and not subject to
the restrictions of this subsection 6.14(vi).
6.15. Liens. The Borrower will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the Property of
the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or
levies on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith
and by appropriate proceedings and for which adequate reserves in accordance
with generally accepted principles of accounting shall have been set aside on
its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
<PAGE>
security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the
use thereof in the business of the Borrower or the Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule
"2" hereto.
(vi) Liens and purchase money security interests assumed in
connection with the Acquisition of International Magnetic Imaging, Inc. as
described in Schedule "2" hereto.
(v) Liens incurred in connection with any Acquisition after the
date of this Agreement and purchase money security interests, in an aggregate
amount not to exceed $10,000,000 at any one time outstanding.
6.16. Capital Expenditures. The Borrower will not, nor will it permit
any Subsidiary to, expend, or be committed to expend for Capital Expenditures
in the aggregate in excess of the sum of (a) one hundred percent (100%) of all
depreciation, depletion and amortization expenses of the Borrower and its
Subsidiaries on a consolidated basis, and (b) fifty percent (50%) of the net
income of the Borrower and its Subsidiaries on a consolidated basis, all
determined as of the last day of each fiscal quarter for the 12-month period
ending on such date.
6.17. Affiliates. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.
6.18. Net Worth The Borrower will not permit the Net Worth of the
Borrower and its consolidated Subsidiaries to be less than the sum of: (i)
$65,000,000, plus (ii) fifty percent (50%) of net income of the Borrower and
its consolidated Subsidiaries (if positive) earned at any time after December
31, 1996, determined in accordance with Agreement Accounting Principles, plus
(iii) seventy-five percent (75%) of proceeds of any new equity issuance of the
Borrower and its consolidated Subsidiaries occurring at any time after the
date of this Agreement.
6.19. Total Indebtedness / EBITDA Ratio The Borrower will not permit
the Total Indebtedness / EBITDA Ratio of the Borrower and its consolidated
Subsidiaries, determined as of the last day of each fiscal quarter for the
12-month period ending on such date, to exceed: (i) at any time on or prior to
March 31, 1999, 3.25:1; and (ii) at any time thereafter, 2.5:1.
6.20. Fixed Charge Coverage Ratio The Borrower will not permit the
Fixed Charge Coverage Ratio of the Borrower and its consolidated Subsidiaries,
determined as of the last day of each fiscal quarter for the 12-month period
ending on such date, to be less than 1.25:1.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:<PAGE>
7.1. Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Lenders or the
Administrative Agent under or in connection with this Agreement, any Loan, or
any certificate or information delivered in connection with this Agreement or
any other Loan Document shall be materially false on the date as of which
made.
7.2. Nonpayment of principal of any Note when due, or nonpayment of
interest upon any Note or of any commitment fee or other obligations under any
of the Loan Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
Article VI.
7.4. The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied within thirty days after written notice
from the Administrative Agent or any Lender.
7.5. Failure of the Borrower or any Guarantor to pay when due any
Indebtedness aggregating in excess of $1,000,000 ("Material Indebtedness"); or
the default by the Borrower or any Guarantor in the performance of any term,
provision or condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other event shall
occur or condition exist, the effect of which is to cause, or to permit the
holder or holders of such Material Indebtedness to cause, such Material
Indebtedness to become due prior to its stated maturity; or any Material
Indebtedness of the Borrower or any Guarantor shall be declared to be due and
payable or required to be prepaid or repurchased (other than by a regularly
scheduled payment) prior to the stated maturity thereof; or the Borrower or
any Guarantor shall not pay, or admit in writing its inability to pay, its
debts generally as they become due.
7.6. The Borrower or any Guarantor shall (i) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it
or any Substantial Portion of its Property, (iv) institute any proceeding
seeking an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate action to authorize or
effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail
to contest in good faith any appointment or proceeding described in Section
7.7.
7.7. Without the application, approval or consent of the Borrower or any
Guarantor, a receiver, trustee, examiner, liquidator or similar official shall
be appointed for the Borrower or any Guarantor or any Substantial Portion of
its Property, or a proceeding described in Section 7.6(iv) shall be instituted
against the Borrower or any Guarantor and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of the Borrower or any
Guarantor which, when taken together with all other Property of the Borrower
or any Guarantor so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
<PAGE>
such Condemnation occurs, constitutes a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge any judgment or order for the payment of
money (to the extent not covered by insurance) in excess of $1,000,000, which
is not stayed on appeal or otherwise being appropriately contested in good
faith.
7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed
in the aggregate $1,000,000 or any Reportable Event shall occur in connection
with any Plan.
7.11. The Borrower or any of its Subsidiaries shall be the subject of any
proceeding or investigation pertaining to the release by the Borrower or any
of its Subsidiaries, or any other Person of any toxic or hazardous waste or
substance into the environment, or any violation of any federal, state or
local environmental, health or safety law or regulation, which, in either
case, could be reasonably expected to have a Material Adverse Effect.
7.12. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement or the Notes) or the breach of any of the terms or
provisions of any Loan Document (other than this Agreement or the Notes),
which default or breach continues beyond any period of grace therein provided.
7.13. Nonpayment by the Borrower of any Rate Hedging Obligation when due
or the breach by the Borrower of any term, provision or condition contained in
any Rate Hedging Agreement.
7.14. Any Guaranty shall fail to remain in full force or effect (and such
failure could reasonably be expected to have a Material Adverse Effect) or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply with
any of the terms or provisions of any Guaranty to which it is a party (and
such failure could reasonably be expected to have a Material Adverse Effect),
or any Guarantor denies that it has any further liability under any Guaranty
to which it is a party, or gives notice to such effect.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder and First Chicago's obligation to issue Letters of Credit
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the
Administrative Agent or any Lender. If any other Default occurs, the Required
Lenders (or the Administrative Agent with the consent of the Required Lenders)
may terminate or suspend the obligations of the Lenders to make Loans
hereunder (and First Chicago may in its sole discretion terminate or suspend
its obligation to issue Letters of Credit hereunder), or declare the
Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrower hereby expressly waives. Any
amounts paid by the Borrower to the Administrative Agent on account of
Outstanding Letters of Credit shall be held by the Administrative Agent as
cash collateral for the obligations of the Borrower with respect to unpaid L/C
Drawings relating thereto, and the Borrower hereby grants to the
Administrative Agent a first perfected security interest in said cash and
authorizes the Administrative Agent to apply such cash on account of future
L/C Drawings as such become payable by the Borrower.
<PAGE>
If, within five (5) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Administrative Agent shall, by notice to the Borrower, rescind and annul such
acceleration and/or termination.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Administrative Agent with the consent in writing of
the Required Lenders) and the Borrower may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the Borrower
hereunder or waiving any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of each Lender affected
thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate or extend the time
of payment of interest or fees thereon.
(ii) Modify the definition of Required Lenders.
(iii) Reduce the amount or extend the payment date for, the
mandatory payments required under Section 2.2, or increase or decrease the
amount of the Commitment of any Lender hereunder (except for a ratable
decrease in the Commitments of all Lenders), or permit the Borrower to assign
its rights under this Agreement.
(iv) Amend this Section 8.2.
(v) Release any guarantor of any Advance.
No amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent. The Administrative Agent may waive payment of the fee required under
Section 12.3.2 without obtaining the consent of any other party to this
Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
Administrative Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence
of a Default or the inability of the Borrower to satisfy the conditions
precedent to such Loan shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the
Loan Documents whatsoever shall be valid unless in writing signed by the
Lenders required pursuant to Section 8.2, and then only to the extent in such
writing specifically set forth. All remedies contained in the Loan Documents
or by law afforded shall be cumulative and all shall be available to the
Administrative Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes
and the making of the Loans herein contemplated.<PAGE>
9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any taxes (excluding federal income taxes on the overall
net income of any Lender) or other similar assessments or charges made by any
governmental or revenue authority in respect of the Loan Documents shall be
paid by the Borrower, together with interest and penalties, if any.
9.4. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
9.5. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrower, the Administrative Agent and the Lenders
and supersede all prior agreements and understandings among the Borrower, the
Administrative Agent and the Lenders relating to the subject matter thereof
other than the fee letter described in Section 10.13.
9.6. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Administrative Agent is authorized to act as such). The failure of any Lender
to perform any of its obligations hereunder shall not relieve any other Lender
from any of its obligations hereunder. This Agreement shall not be construed
so as to confer any right or benefit upon any Person other than the parties to
this Agreement and their respective successors and assigns.
9.7. Expenses; Indemnification. The Borrower shall reimburse the
Administrative Agent for any costs, internal charges and reasonable
out-of-pocket expenses (including attorneys' fees and time charges of
attorneys for the Administrative Agent, which attorneys may be employees of
the Administrative Agent) paid or incurred by the Administrative Agent in
connection with the preparation, negotiation, execution, delivery, review,
amendment, modification, and administration of the Loan Documents. The
Borrower also agrees to reimburse the Administrative Agent and the Lenders for
any costs, internal charges and reasonable out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Administrative Agent and
the Lenders, which attorneys may be employees of the Administrative Agent or
the Lenders) paid or incurred by the Administrative Agent or any Lender in
connection with the collection and enforcement of the Loan Documents. The
Borrower further agrees to indemnify the Administrative Agent and each Lender,
its directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not the
Administrative Agent or any Lender is a party thereto) which any of them may
pay or incur arising out of or relating to this Agreement, the other Loan
Documents, the transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loan hereunder
except to the extent that they are determined by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of the party seeking indemnification. The obligations of the Borrower under
this Section shall survive the termination of this Agreement.
9.8. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to
each of the Lenders.
9.9. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles, except that any calculation or determination which is to be made
<PAGE>
on a consolidated basis shall be made for the Borrower and all its
Subsidiaries, including those Subsidiaries, if any, which are unconsolidated
on the Borrower's audited financial statements.
9.10. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are
declared to be severable.
9.11. Nonliability of Lenders. The relationship between the Borrower
and the Lenders and the Administrative Agent shall be solely that of borrower
and lender. Neither the Administrative Agent nor any Lender shall have any
fiduciary responsibilities to the Borrower. Neither the Administrative Agent
nor any Lender undertakes any responsibility to the Borrower to review or
inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the
Administrative Agent nor any Lender shall have liability to the Borrower
(whether sounding in tort, contract or otherwise) for losses suffered by the
Borrower in connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from
which recovery is sought. Neither the Administrative Agent nor any Lender
shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect or consequential
damages suffered by the Borrower in connection with, arising out of, or in any
way related to the Loan Documents or the transactions contemplated thereby.
9.12. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement
in confidence, except for disclosure (i) to its Affiliates and to other
Lenders and their respective Affiliates which need to receive such
information, (ii) to legal counsel, accountants, and other professional
advisors to that Lender or to a Transferee which need or needs to receive such
information, (iii) to regulatory officials, (iv) to any Person as requested
pursuant to or as required by law, regulation, or legal process, (v) to any
Person in connection with any legal proceeding to which that Lender is a
party, provided that Lender shall use its best efforts to notify the Borrower
prior to such disclosure, and (vi) permitted by Section 12.4.
9.13. Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans
provided for herein.
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment; Nature of Relationship. The First National Bank of
Chicago is hereby appointed by the Lenders as the Administrative Agent
hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Administrative Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Administrative Agent agrees to
act as such contractual representative upon the express conditions contained
in this Article X. Notwithstanding the use of the defined term
"Administrative Agent," it is expressly understood and agreed that the
Administrative Agent shall not have any fiduciary responsibilities to any
<PAGE>
Lender by reason of this Agreement or any other Loan Document and that the
Administrative Agent is merely acting as the representative of the Lenders
with only those duties as are expressly set forth in this Agreement and the
other Loan Documents. In its capacity as the Lenders' contractual
representative, the Administrative Agent (i) does not hereby assume any
fiduciary duties to any of the Lenders, (ii) is a "representative" of the
Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and
(iii) is acting as an independent contractor, the rights and duties of which
are limited to those expressly set forth in this Agreement and the other Loan
Documents. Each of the Lenders hereby agrees to assert no claim against the
Administrative Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby waives.
10.2. Powers. The Administrative Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the
Administrative Agent by the terms of each thereof, together with such powers
as are reasonably incidental thereto. The Administrative Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan
Documents to be taken by the Administrative Agent.
10.3. General Immunity. Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Lenders or any Lender for (i) any action taken or omitted to be taken by it or
them hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct;
or (ii) any determination by the Administrative Agent that compliance with any
law or any governmental or quasi-governmental rule, regulation, order, policy,
guideline or directive (whether or not having the force of law) requires the
Advances and Commitments hereunder to be classified as being part of a "highly
leveraged transaction".
10.4. No Responsibility for Loans, Recitals, etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or
verify (i) any statement, warranty or representation made in connection with
any Loan Document or any borrowing hereunder; (ii) the performance or
observance of any of the covenants or agreements of any obligor under any Loan
Document, including, without limitation, any agreement by an obligor to
furnish information directly to each Lender; (iii) the satisfaction of any
condition specified in Article IV, except receipt of items required to be
delivered to the Administrative Agent; (iv) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; or (v) the value,
sufficiency, creation, perfection or priority of any interest in any
collateral security. The Administrative Agent shall have no duty to disclose
to the Lenders information that is not required to be furnished by the
Borrower to the Administrative Agent at such time, but is voluntarily
furnished by the Borrower to the Administrative Agent (either in its capacity
as Administrative Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders and on all holders of Notes. The Lenders hereby acknowledge that
the Administrative Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this
Agreement or any other Loan Document unless it shall be requested in writing
to do so by the Required Lenders. The Administrative Agent shall be fully
justified in failing or refusing to take any action hereunder and under any
other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability, cost and expense that
<PAGE>
it may incur by reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Administrative Agent may
execute any of its duties as Administrative Agent hereunder and under any
other Loan Document by or through employees, agents, and attorneys-in-fact and
shall not be answerable to the Lenders, except as to money or securities
received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. The
Administrative Agent shall be entitled to advice of counsel concerning all
matters pertaining to the agency hereby created and its duties hereunder and
under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Administrative Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit,
letter, telegram, statement, paper or document believed by it to be genuine
and correct and to have been signed or sent by the proper person or persons,
and, in respect to legal matters, upon the opinion of counsel selected by the
Administrative Agent, which counsel may be employees of the Administrative
Agent.
10.8. Administrative Agent's Reimbursement and Indemnification. The
Lenders agree to reimburse and indemnify the Administrative Agent ratably in
proportion to their respective Commitments (or, if the Commitments have been
terminated, in proportion to their Commitments immediately prior to such
termination) (i) for any amounts not reimbursed by the Borrower for which the
Administrative Agent is entitled to reimbursement by the Borrower under the
Loan Documents, (ii) for any other expenses incurred by the Administrative
Agent on behalf of the Lenders, in connection with the preparation, execution,
delivery, administration and enforcement of the Loan Documents and (iii) for
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby, or the enforcement of any of the terms thereof or of any such other
documents, provided that no Lender shall be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of the
Administrative Agent. The obligations of the Lenders under this Section 10.8
shall survive payment of the Obligations and termination of this Agreement.
10.9. Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Unmatured
Default hereunder unless the Administrative Agent has received written notice
from a Lender or the Borrower referring to this Agreement describing such
Default or Unmatured Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give prompt notice thereof to the Lenders.
10.10. Rights as a Lender. In the event the Administrative Agent is a
Lender, the Administrative Agent shall have the same rights and powers
hereunder and under any other Loan Document as any Lender and may exercise the
same as though it were not the Administrative Agent, and the term "Lender" or
"Lenders" shall, at any time when the Administrative Agent is a Lender, unless
the context otherwise indicates, include the Administrative Agent in its
individual capacity. The Administrative Agent may accept deposits from, lend
money to, and generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging with any
other Person. The Administrative Agent, in its individual capacity, is not
obligated to remain a Lender.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
<PAGE>
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
10.12. Successor Administrative Agent. The Administrative Agent may
resign at any time by giving written notice thereof to the Lenders and the
Borrower, such resignation to be effective upon the appointment of a successor
Administrative Agent or, if no successor Administrative Agent has been
appointed, forty-five days after the retiring Administrative Agent gives
notice of its intention to resign. If the Administrative Agent in its
capacity as a Lender shall no longer hold any Commitment hereunder, the
Required Lenders shall have the right to require the Administrative Agent to
resign pursuant to this Section 10.12. Upon any such resignation, the
Required Lenders shall have the right to appoint, on behalf of the Borrower
and the Lenders, a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Lenders
within thirty days after the resigning Administrative Agent's giving notice of
its intention to resign, then the resigning Administrative Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Administrative Agent.
If the Administrative Agent has resigned and no successor Administrative Agent
has been appointed, the Lenders may perform all the duties of the
Administrative Agent hereunder and the Borrower shall make all payments in
respect of the Obligations to the applicable Lender and for all other purposes
shall deal directly with the Lenders. No successor Administrative Agent shall
be deemed to be appointed hereunder until such successor Administrative Agent
has accepted the appointment. Any such successor Administrative Agent shall
be a commercial bank having capital and retained earnings of at least
$50,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the resigning Administrative Agent. Upon the
effectiveness of the resignation of the Administrative Agent, the resigning
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation of an Administrative Agent, the provisions of this Article X shall
continue in effect for the benefit of such Administrative Agent in respect of
any actions taken or omitted to be taken by it while it was acting as the
Administrative Agent hereunder and under the other Loan Documents.
10.13. Administrative Agent's Fee; Arranger's Fee. The Borrower agrees
to pay to the Administrative Agent, for its own account, and to the Arranger,
their respective fees pursuant to that certain fee letter dated of even date
herewith among the Administrative Agent, the Arranger and the Borrower, or as
otherwise agreed from time to time.
ARTICLE XI
NO WAIVER; RATABLE PAYMENTS
11.1. No Waiver. Nothing contained in this Agreement is, or shall in
the future be deemed to constitute, a waiver of any right, remedy, power or
protection available to the Lenders in law (including, without limitation,
common law) or in equity, now existing or hereafter arising, whether or not
such right, remedy, power or protection is expressly stated in this Agreement.
11.2. Ratable Payments. If any Lender has payment made to it upon its
Loans (other than payments received pursuant to Section 3.1, 3.2 or 3.4) in a
greater proportion than that received by any other Lender, such Lender agrees,
promptly upon demand, to purchase a portion of the Loans held by the other
Lenders so that after such purchase each Lender will hold its ratable
<PAGE>
proportion of Loans. If any Lender receives collateral or other protection
for its Obligations, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments
shall be made. If any such amount is to be applied to Indebtedness of the
Borrower to a Lender, other than Indebtedness evidenced by any of the Notes
held by such Lender, such amount shall be applied ratably to such other
Indebtedness and to the Indebtedness evidenced by such Notes.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under
the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with Section 12.3. Notwithstanding clause (ii) of this Section,
any Lender may at any time, without the consent of the Borrower or the
Administrative Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided, however, that no
such assignment to a Federal Reserve Bank shall release the transferor Lender
from its obligations hereunder. The Administrative Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.3 in the case of an assignment thereof or, in
the case of any other transfer, a written notice of the transfer is filed with
the Administrative Agent. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time
of making such request or giving such authority or consent is the holder of
any Note, shall be conclusive and binding on any subsequent holder, transferee
or assignee of such Note or of any Note or Notes issued in exchange therefor.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by
such Lender, any Commitment of such Lender, any participating interests in any
Letter of Credit or unrepaid L/C Drawing, or any other interest of such Lender
under the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Borrower under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than any
amendment, modification or waiver with respect to any Loan, Commitment, Letter
of Credit or unrepaid L/C Drawing in which such Participant has an interest
which forgives principal, interest or fees or reduces the interest rate or
fees payable with respect to any such Loan, Commitment, Letter of Credit or
unrepaid L/C Drawing, postpones any date fixed for any regularly-scheduled
payment of principal of, or interest or fees on, any such Loan, Commitment,
Letter of Credit or unrepaid L/C Drawing, releases any guarantor of any such
<PAGE>
Loan or releases any substantial portion of collateral, if any, securing any
such Loan.
12.3. Assignments.
12.3.1. Permitted Assignments. With prior written notice to the
Administrative Agent and the other Lenders, any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time
assign to one or more banks or other entities ("Purchasers") all or any part
of its rights and obligations under the Loan Documents. Such assignment shall
be substantially in the form of Exhibit "D" hereto or in such other form as
may be agreed to by the parties thereto. The consent of the Administrative
Agent shall be required prior to an assignment becoming effective with respect
to a Purchaser which is not a Lender or an Affiliate thereof. Such consent
shall not be unreasonably withheld or delayed. Each such assignment shall be
in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining
amount of the assigning Lender's Commitment (calculated as at the date of such
assignment).
12.3.2. Effect; Effective Date. Upon (i) delivery to the
Administrative Agent of a notice of assignment, substantially in the form
attached as Exhibit "I" to Exhibit "D" hereto (a "Notice of Assignment"),
together with any consents required by Section 12.3.1, and (ii) payment of a
$3,500 fee by the assignee to the Administrative Agent for processing such
assignment, such assignment shall become effective on the effective date
specified in such Notice of Assignment. The Notice of Assignment shall
contain a representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and Loans under the
applicable assignment agreement are "plan assets" as defined under ERISA and
that the rights and interests of the Purchaser in and under the Loan Documents
will not be "plan assets" under ERISA. On and after the effective date of
such assignment, such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by the Lenders and shall
have all the rights and obligations of a Lender under the Loan Documents, to
the same extent as if it were an original party hereto, and no further consent
or action by the Borrower, the Lenders or the Administrative Agent shall be
required to release the transferor Lender with respect to the percentage of
the Aggregate Commitment and Loans assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3.2,
the transferor Lender, the Administrative Agent and the Borrower shall make
appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting their
Commitment, as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in such Lender's possession
concerning the credit worthiness of the Borrower and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section
9.12 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of
such transfer, to comply with the provisions of Section 4.3.
<PAGE>
ARTICLE XIII
NOTICES
13.1. Notices. Except as otherwise permitted by Section 2.13 with
respect to borrowing notices, all notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Borrower or the Administrative Agent, at its address or facsimile
number set forth on the signature pages hereof, (y) in the case of any Lender,
at its address or facsimile number set forth on the signature pages hereof or
in its administrative questionnaire or (z) in the case of any party, such
other address or facsimile number as such party may hereafter specify for the
purpose by notice to the Administrative Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if given by
facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail,
72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Administrative Agent under Article II shall not be effective until
received.
13.2. Change of Address. The Borrower, the Administrative Agent and any
Lender may each change the address for service of notice upon it by a notice
in writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Administrative Agent and the Lenders and each party has notified the
Administrative Agent by telex or telephone, that it has taken such action.
ARTICLE XV
CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
CALIFORNIA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR CALIFORNIA
STATE COURT SITTING IN LOS ANGELES IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW
OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
ADMINISTRATIVE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE
AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN LOS ANGELES, CALIFORNIA.<PAGE>
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative
Agent have executed this Agreement as of the date first above written.
SYNCOR INTERNATIONAL CORPORATION
/s/ Haig Bagerdjian
By: ______________________________________
Haig Bagerdjian
Print Name: ______________________________
Senior Vice President
Title: ___________________________________
6464 Canoga Avenue
Woodland Hills, California 91367
Fax: (818) 737-4468
Attention: Mr. Michael E. Mikity
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender and as Administrative Agent
/s/ Gary S. Gage
By: ______________________________________
Gary S. Gage
Print Name: ______________________________
Senior Vice President
Title: ___________________________________
777 South Figueroa Street, 4th Floor
Los Angeles, California 90017
Fax: (213) 683-4999
Attention: Mr. James P. Moore
With copy to:
One First National Plaza, 10th Floor
Chicago, Illinois 60670
Fax: (312) 732-4840
Attention: Ms. Sharon Bosch
MELLON BANK, N.A., as a Lender
/s/ Richard M. McNiven
By: ______________________________________
Richard M. McNiven
Print Name: ______________________________
Asst. Vice President
Title: ___________________________________
400 South Hope Street, 5th Floor
Los Angeles, California 90071-2806
Fax: (213) 629-0484
Attention: Mr. Richard M. McNiven<PAGE>
EXHIBIT "A"
NOTE
Woodland Hills, California
________ __, ____
FOR VALUE RECEIVED, SYNCOR INTERNATIONAL CORPORATION, a __________
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of _____________________________________ (the "Lender") at the office of
The First National Bank of Chicago, a national banking association (the
"Administrative Agent"), located at One First National Plaza, Chicago,
Illinois 60670, in lawful money of the United States and in immediately
available funds, on the dates required under that certain Credit Agreement
dated as of January 5,1998 among the Borrower, the lenders from time to time
party thereto, including the Lender, and the Administrative Agent (as the same
may be amended or modified and in effect from time to time, the "Agreement"),
the aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to Article II of the Agreement.
The Borrower further agrees to pay interest in like money and funds at
the office of the Administrative Agent referred to above, on the unpaid
principal balance hereof from the date advanced until paid in full at the
applicable rates and on the dates set forth in the Agreement. The Borrower
shall pay the principal of and accrued and unpaid interest on the Loans in
full on or before the Facility Termination Date. The holder of this Note is
hereby authorized to record the date and amount of each Loan and the date and
amount of each payment of principal and interest, and applicable interest
rates and other information with respect thereto, on the schedules annexed to
and constituting a part of this Note (or by any analogous method the holder
hereof may elect consistent with its customary practices); provided, however,
that the failure to make a notation or the inaccuracy of any notation shall
not limit or otherwise affect the obligations of the Borrower under the
Agreement and this Note.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Agreement, to which reference is hereby made for a statement
of the terms and conditions governing this Note, including the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated. This Note is guaranteed pursuant to the Guaranties, all as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein
and not otherwise defined herein are used with the meanings attributed to them
in the Agreement.
SYNCOR INTERNATIONAL CORPORATION
By: ________________________________
Print Name: ________________________
Title: _____________________________
SCHEDULE OF LOANS AND PAYMENTS
TO
NOTE OF SYNCOR INTERNATIONAL CORPORATION,
DATED _________, ____
<PAGE>
EXHIBIT "B"
FORM OF OPINION
January __, 1998
The Administrative Agent and the Lenders who are parties to the
Credit Agreement described below.
Ladies and Gentlemen:
We have acted as counsel for Syncor International Corporation (the
"Borrower") and each of the Guarantors in connection with the execution and
delivery of that certain Credit Agreement dated as of January 5, 1998 (the
"Agreement") among the Borrower, the Lenders named therein, and The First
National Bank of Chicago, as Administrative Agent, and the other Loan
Documents in connection therewith. This opinion is being furnished to the
Administrative Agent and the Lenders pursuant to the provisions of Section
4.1(xi) of the Agreement. All capitalized terms used in this opinion and not
otherwise defined herein shall have the meanings attributed to them in the
Agreement.
We have examined executed copies of each of the Loan Documents and copies
of the articles of incorporation and by-laws (with all amendments respectively
thereto) of each of the Borrower and the Guarantors, and certified copies of
resolutions adopted by the Board of Directors of the Borrower on
_____________, 1997, authorizing the execution and delivery of the Loan
Documents to which the Borrower is party, and certified copies of resolutions
adopted by the Board of Directors of each of the Guarantors on ___________,
1997, authorizing the execution and delivery of the Loan Documents to which
such Guarantor is party. We are generally familiar with the business and
operations of the Borrower and the Guarantors. We have examined such
statutes, decisions and matters of law and other documents as we deemed
necessary to express the following opinions.
In our examination made for the purpose of rendering these opinions, we
have relied upon the certificates of incumbency this day furnished to us as to
the genuineness of all signatures. After due inquiry and examination, we have
assumed for the purpose of the opinions the authenticity of all other
documents submitted to us as originals and the conformity with originals of
all other documents submitted to us as certified copies. As to any questions
of fact material to such opinions, we have, when relevant facts were not
independently established, relied upon certificates of governmental officials
and certificates of officers of the Company, copies of which are attached
hereto.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) The effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally; and
(b) The effect of rules of law governing specific performance,
injunctive relief or other equitable remedies.
Based upon the foregoing, it is our opinion that:
l. Each of the Borrower and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite authority to conduct its
business in each jurisdiction in which its business is conducted.
2. Each of the Borrower and the Guarantors has the corporate power and
authority and legal right to execute and deliver the Loan Documents to which
it is party and to perform its obligations thereunder. The execution and
<PAGE>
delivery of the Loan Documents by the Borrower and the Guarantors and the
performance of their respective obligations thereunder have been duly
authorized by proper corporate proceedings, the Loan Documents to which the
Borrower is party constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their terms, and
the Loan Documents to which each Guarantor is party constitute legal, valid
and binding obligations of such Guarantor enforceable against such Guarantor
in accordance with their terms. The execution and delivery by the Borrower or
any Guarantor of the Loan Documents, the consummation of the transactions
therein contemplated, and compliance with the provisions thereof will not:
(a) require any consent of the Borrower's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or any of the Guarantors
or the Borrower's or any Guarantor's articles of incorporation or by-laws or
the provisions of any indenture, instrument or agreement to which the Borrower
or any of the Guarantors is a party or is subject; or
(c) result in, or require, the creation or imposition of any Lien
pursuant to the provisions of any indenture, instrument or agreement to which
the Borrower or any of the Guarantors is a party or is subject.
3. There is no litigation or proceeding against the Borrower or any of
its Subsidiaries which, if adversely determined, could have a Material Adverse
Effect.
4. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Borrower or any of
the Guarantors, is required to be obtained by the Borrower or any of the
Guarantors in connection with the execution and delivery of the Loan
Documents, the borrowings under the Agreement or in connection with the
payment by the Borrower or any Guarantor of the Obligations.
5. Neither the Borrower nor any Subsidiary thereof is an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
6. Neither the Borrower nor any Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
This opinion may be relied upon by the Administrative Agent, the Lenders
and their participants, assignees and other transferees.
Very truly yours,
EXHIBIT "C"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Credit
Agreement dated as of January 5, 1998 (as amended, modified, renewed or
extended from time to time, the "Agreement") among Syncor International
Corporation (the "Borrower"), the lenders party thereto and The First National
Bank of Chicago, as Administrative Agent for the Lenders. Unless otherwise
<PAGE>
defined herein, capitalized terms used in this Compliance Certificate have the
meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting
period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which
constitutes a Default or Unmatured Default during or at the end of the
accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
5. Schedule II attached hereto sets forth the determination of the
interest rate to be paid for Advances commencing the first day of the month
following the delivery hereof.
6. Schedule III attached hereto sets forth the various reports and
deliveries which are required under the Credit Agreement and the other Loan
Documents and the status of compliance.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
The foregoing certifications, together with the computations set forth in
Schedule I and Schedule II hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this _____day of
____________, 19____.
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, 199_ with
Provisions of _______ and _______ of
the Agreement
SCHEDULE II TO COMPLIANCE CERTIFICATE
Rate Determination
SCHEDULE III TO COMPLIANCE CERTIFICATE
Reports and Deliveries
<PAGE>
EXHIBIT "D"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
__________________________(the "Assignor") and __________________ (the
"Assignee") is dated as of______________________, 19__. The parties hereto
agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time
is herein called the "Credit Agreement") described in Item 1 of Schedule 1
attached hereto ("Schedule 1"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3(b) of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement and the other Loan Documents. The aggregate
Commitment purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of
Schedule 1 and the date a Notice of Assignment substantially in the form of
Exhibit "I" attached hereto has been delivered to the Administrative Agent.
Such Notice of Assignment must include any consents required to be delivered
to the Administrative Agent by Section 12.3.1 of the Credit Agreement. In no
event will the Effective Date occur if the payments required to be made by the
Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof
are not made on the proposed Effective Date. The Assignor will notify the
Assignee of the proposed Effective Date no later than the Business Day prior
to the proposed Effective Date. As of the Effective Date, (i) the Assignee
shall have the rights and obligations of a Lender under the Loan Documents
with respect to the rights and obligations assigned to the Assignee hereunder
and (ii) the Assignor shall relinquish its rights and be released from its
corresponding obligations under the Loan Documents with respect to the rights
and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Administrative Agent all payments of
principal, interest and fees with respect to the interest assigned hereby.
The Assignee shall advance funds directly to the Administrative Agent with
respect to all Loans and reimbursement payments made on or after the Effective
Date with respect to the interest assigned hereby. In consideration for the
sale and assignment of Loans hereunder, (i) the Assignee shall pay the
Assignor, on the Effective Date, an amount equal to the principal amount of
the portion of all Floating Rate Loans assigned to the Assignee hereunder and
(ii) with respect to each Fixed Rate Loan made by the Assignor and assigned to
the Assignee hereunder which is outstanding on the Effective Date, (a) on the
last day of the Interest Period therefor or (b) on such earlier date agreed to
by the Assignor and the Assignee or (c) on the date on which any such Fixed
Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (the
date as described in the foregoing clauses (a), (b) or (c) being hereinafter
referred to as the "Payment Date"), the Assignee shall pay the Assignor an
amount equal to the principal amount of the portion of such Fixed Rate Loan
assigned to the Assignee which is outstanding on the Payment Date. If the
Assignor and the Assignee agree that the Payment Date for such Fixed Rate Loan
shall be the Effective Date, they shall agree to the interest rate applicable
<PAGE>
to the portion of such Loan assigned hereunder for the period from the
Effective Date to the end of the existing Interest Period applicable to such
Fixed Rate Loan (the "Agreed Interest Rate") and any interest received by the
Assignee in excess of the Agreed Interest Rate shall be remitted to the
Assignor. In the event interest for the period from the Effective Date to but
not including the Payment Date is not paid by the Borrower with respect to any
Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee
shall pa to the Assignor interest for such period on the portion of such Fixed
Rate Loan sold by the Assignor to the Assignee hereunder at the applicable
rate provided by the Credit Agreement. In the event a prepayment of any Fixed
Rate Loan which is existing on the Payment Date and assigned by the Assignor
to the Assignee hereunder occurs after the Payment Date but before the end of
the Interest Period applicable to such Fixed Rate Loan, the Assignee shall
remit to the Assignor the excess of the prepayment penalty paid with respect
to the portion of such Fixed Rate Loan assigned to the Assignee hereunder over
the amount which would have been paid if such prepayment penalty was
calculated based on the Agreed Interest Rate. The Assignee will also promptly
remit to the Assignor (i) any principal payments received from the
Administrative Agent with respect to Fixed Rate Loans prior to the Payment
Date and (ii) any amounts of interest on Loans and fees received from the
Administrative Agent which relate to the portion of the Loans assigned to the
Assignee hereunder for periods prior to the Effective Date, in the case of
Floating Rate Loans or fees, or the Payment Date, in the case of Fixed Rate
Loans, and not previously paid by the Assignee to the Assignor. In the event
that either party hereto receives any payment to which the other party hereto
is entitled under this Assignment Agreement, then the party receiving such
amount shall promptly remit it to the other party hereto.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest or fees is made under the
Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or fees for the period prior to
the Effective Date or, in the case of Fixed Rate Loans, the Payment Date,
which the Assignee is obligated to deliver to the Assignor pursuant to Section
4 hereof). The amount of such fee shall be the difference between (i) the
interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable, which
would have been paid with respect to the amounts assigned to the Assignee
hereunder if each interest rate was ____ of 1% less than the interest rate
paid by the Borrower or if the fee was ____ of 1% less than the fee paid by
the Borrower, as applicable. In addition, the Assignee agrees to pay ____% of
the recordation fee required to be paid to the Administrative Agent in
connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It
is understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or credit worthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of
the terms or provisions of any of the Loan Documents, (v) inspecting any of
the Property, books or records of the Borrower, (vi) the validity,
enforceability, perfection, priority, condition, value or sufficiency of any
collateral securing or purporting to secure the Loans or (vii) any mistake,
error of judgment, or action taken or omitted to be taken in connection with<PAGE>
the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Administrative Agent, the Assignor
or any other Lender and based on such documents and information at it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, (iii) appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto, (iv) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan
Documents are required to be performed by it as a Lender, (v) agrees that its
payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption
hereunder are "plan assets" as defined under ERISA and that its rights,
benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA, and *[(vii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that the Assignee is entitled
to receive payments under the Loan Documents without deduction or withholding
of any United States federal income taxes].*
*to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 12.3.1 of the Credit Agreement to assign
the rights which are assigned to the Assignee hereunder to any entity or
person, provided that (i) any such subsequent assignment does not violate any
of the terms and conditions of the Loan Documents or any law, rule,
regulation, order, writ, judgment, injunction or decree and that any consent
required under the terms of the Loan Documents has been obtained and (ii)
unless the prior written consent of the Assignor is obtained, the Assignee is
not thereby released from its obligations to the Assignor hereunder, if any
remain unsatisfied, including, without limitation, its obligations under
Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between
the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of California.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
<PAGE>
addresses of the parties hereto (until notice of a change is delivered) shall
be the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above
written.
[NAME OF ASSIGNOR]
By: ________________________________
Title: _____________________________
[NAME OF ASSIGNEE]
By: ________________________________
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: _______________, 19___
3. Amounts (As of Date of Item 2 above):
a. Aggregate Commitment
under the
Credit Agreement $____________________
b. Assignee's percentage
of the Aggregate Commitment
purchased
under the Assignment
Agreement _____________________%
4. Assignee's Commitment purchased
under the Assignment Agreement $____________________
5. Proposed Effective Date:
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: _________________________ By: __________________________
Title: ______________________ Title: _______________________
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignee
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
__________, 19__
To: THE FIRST NATIONAL BANK OF CHICAGO
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Administrative Agent pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of _______________, 19__(the "Assignment"), pursuant to
which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to
by the Administrative Agent) after this Notice of Assignment and any consents
and fees required by Sections 12.3.1 and 12.3.2 of the Credit Agreement have
been delivered to the Administrative Agent, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and
the Administrative Agent notice of the assignment and delegation referred to
herein. The Assignor will confer with the Administrative Agent before the
date specified in Item 5 of Schedule 1 to determine if the Assignment
Agreement will become effective on such date pursuant to Section 3 hereof, and
will confer with the Administrative Agent to determine the Effective Date
pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall
notify the Administrative Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Administrative Agent, the Assignor will give the Administrative
Agent written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Administrative
Agent on or before the Effective Date the processing fee of $3,500 required by
Section 12.3.2 of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Administrative Agent prepare and
cause the Borrower to execute and deliver new Notes or, as appropriate,
replacements notes, to the Assignor and the Assignee. The Assignor and, if
applicable, the Assignee each agree to deliver to the Administrative Agent the
original Note received by it from the Borrower upon its receipt of a new Note<PAGE>
in the appropriate amount.
7. The Assignee advises the Administrative Agent that notice and
payment instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that
its rights, benefits, and interests in and under the Loan Documents will not
be "plan assets" under ERISA.
9. The Assignee authorizes the Administrative Agent to act as its
agent under the Loan Documents in accordance with the terms thereof. The
Assignee acknowledges that the Administrative Agent has no duty to supply
information with respect to the Borrower or the Loan Documents to the Assignee
until the Assignee becomes a party to the Credit Agreement.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: ___________________________ By: _____________________________
Title: ________________________ Title: __________________________
ACKNOWLEDGED AND CONSENTED TO BY
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By: ___________________________
Title: ________________________
[Attach photocopy of Schedule 1 to Assignment]
EXHIBIT "E"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Administrative Agent (the "Administrative Agent") under the Credit
Agreement
Described Below.
Re: Credit Agreement, dated January 5, 1998 (as the same may be amended or
modified, the "Credit Agreement"), among Syncor International Corporation (the
"Borrower"), the Lenders named therein and the Administrative Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Credit Agreement.
The Administrative Agent is specifically authorized and directed to act
upon the following standing money transfer instructions with respect to the
proceeds of Advances or other extensions of credit from time to time until
receipt by the Administrative Agent of a specific written revocation of such
instructions by the Borrower, provided, however, that the Administrative Agent
may otherwise transfer funds as hereafter directed in writing by the Borrower
in accordance with Section 13.1 of the Credit Agreement or based on any
telephonic notice made in accordance with Section 2.13 of the Credit
Agreement.
Facility Identification Number(s) _____________________________________
Customer/Account Name _________________________________________________
<PAGE>
Transfer Funds To _____________________________________________________
_____________________________________________________
_____________________________________________________
For Account No. _______________________________________________________
Reference/Attention To_________________________________________________
Authorized Officer (Customer Representative) Date ____________________
______________________________ ___________________________________
(Please Print) Signature
Bank Officer Name Date ___________________
______________________________ ___________________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
EXHIBIT "F"
GUARANTY
THIS GUARANTY (the "Guaranty") is made and dated as of the ___ day
of ______, 19__ by _________________________, a _______________________
("Guarantor").
RECITALS
A. This Guaranty is being executed and delivered to The First
National Bank of Chicago, acting in its capacity as administrative agent (in
such capacity, the "Administrative Agent") for the lenders from time to time
party to that certain Credit Agreement dated as of January 5, 1998 by and
among Syncor International Corporation (the "Borrower"), the Administrative
Agent, and the lenders from time to time party thereto (the "Lenders") (as
amended, extended and replaced from time to time, the "Credit Agreement," and
with capitalized terms not otherwise defined herein used with the meanings
given such terms in the Credit Agreement).
B. Pursuant to the Credit Agreement the Lenders have agreed to
extend credit to the Borrower on the terms and subject to the conditions set
forth therein.
C. Pursuant to the terms of the Credit Agreement, Guarantor is
required, among other things, to execute and deliver this Guaranty to the
Administrative Agent for the benefit of the Lenders.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor hereby agrees as follows:
AGREEMENT
1. Guarantor hereby absolutely and unconditionally guarantees the
payment when due, upon maturity, acceleration or otherwise, of all obligations
of the Borrower to the Lenders under the Credit Agreement and the other Loan
Documents (as defined in the Credit Agreement), whether heretofore, now, or
hereafter made, incurred or created, whether voluntary or involuntary and
however arising, absolute or contingent, liquidated or unliquidated,
determined or undetermined (collectively and severally, the "Guaranteed
<PAGE>
Obligations"), whether or not such Guaranteed Obligations are from time to
time reduced, or extinguished and thereafter increased or incurred, whether
the Borrower may be liable individually or jointly with others, whether or not
recovery upon such Guaranteed Obligations may be or hereafter become barred by
any statute of limitations, and whether or not such Guaranteed Obligations may
be or hereafter become otherwise unenforceable.
2. Guarantor hereby absolutely and unconditionally guarantees the
payment of the Guaranteed Obligations, whether or not due or payable by the
Borrower, upon: (a) the dissolution, insolvency or business failure of, or any
assignment for benefit of creditors by, or commencement of any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceedings by
or against, either the Borrower or Guarantor, or (b) the appointment of a
receiver for, or the attachment, restraint of or making or levying of any
order of court or legal process affecting, the property of either the Borrower
or Guarantor, and unconditionally promises to pay such Guaranteed Obligations
to the Administrative Agent for the benefit of Lenders, or order, on demand,
in lawful money of the United States.
3. The liability of Guarantor hereunder is exclusive and independent
of any security for or other guaranty of the Guaranteed Obligations, whether
executed by Guarantor or by any other party, and the liability of Guarantor
hereunder is not affected or impaired by (a) any direction of application of
payment by the Borrower or by any other party, or (b) any other guaranty,
undertaking or maximum liability of Guarantor or of any other party as to the
Guaranteed Obligations, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any revocation or release of any
obligations of any other guarantor of the Guaranteed Obligations, or (e) any
dissolution, termination or increase, decrease or change in personnel of
Guarantor, or (f) any payment made to the Administrative Agent or any Lender
on the Guaranteed Obligations which the Administrative Agent or any Lender
repays to the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
Guarantor waives any right to the deferral or modification of Guarantor's
obligations hereunder by reason of any such proceeding.
4. (a) The obligations of Guarantor hereunder are independent of
the obligations of the Borrower with respect to the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against
Guarantor whether or not action is brought against the Borrower and whether or
not the Borrower be joined in any such action or actions. Guarantor waives,
to the fullest extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to Guarantor.
(b) All payments made by Guarantor under this Guaranty shall be made
without set-off or counterclaim and free and clear of and without deductions
for any present or future taxes, fees, withholdings or conditions of any
nature ("Taxes"). Guarantor shall pay any such Taxes, including Taxes on any
amounts so paid, and will promptly furnish any Lender copies of any tax
receipts or such other evidence of payment as such Lender may require.
5. Guarantor authorizes the Administrative Agent and Lenders
(whether or not after termination of this Guaranty), without notice or demand
(except as shall be required by applicable statute and cannot be waived), and
without affecting or impairing its liability hereunder, from time to time to
(a) renew, compromise, extend, increase, accelerate or otherwise change the
time for payment of, or otherwise change the terms of Guaranteed Obligations
or any part thereof, including increase or decrease of the rate of interest
thereon; (b) take and hold security for the payment of this Guaranty or the
Guaranteed Obligations and exchange, enforce, waive and release any such
security; (c) apply such security and direct the order or manner of sale
<PAGE>
thereof as the Administrative Agent and Lenders in their discretion may
determine; and (d) release or substitute any one or more endorsers,
guarantors, the Borrower or other obligors. The Administrative Agent and
Lenders may, without notice to or the further consent of the Borrower or
Guarantor, assign this Guaranty in whole or in part to any person acquiring an
interest in the Guaranteed Obligations.
6. It is not necessary for the Administrative Agent or any Lender to
inquire into the capacity or power of the Borrower or the officers acting or
purporting to act on their behalf, and Guaranteed Obligations made or created
in reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
7. Guarantor waives any right to require the Administrative Agent or
any Lender to (a) proceed against the Borrower or any other party; (b) proceed
against or exhaust any security held from the Borrower; or (c) pursue any
other remedy whatsoever. Guarantor waives any personal defense based on or
arising out of any personal defense of the Borrower other than payment in full
of the Guaranteed Obligations, including, without limitation, any defense
based on or arising out of the disability of either the Borrower, or the
unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Borrower other
than payment in full of the Guaranteed Obligations. The Administrative Agent
and Lenders may, at their election, foreclose on any security held for the
Guaranteed Obligations by one or more judicial or nonjudicial sales, or
exercise any other right or remedy they may have against the Borrower, or any
security, without affecting or impairing in any way the liability of Guarantor
hereunder except to the extent the Guaranteed Obligations have been paid.
Guarantor waives all rights and defenses arising out of an election of
remedies, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has
destroyed Guarantor's rights of subrogation and reimbursement against the
principal by operation of Section 580d of the California Code of Civil
Procedure.
8. Guarantor hereby waives any claim or other rights which Guarantor
may now have or may hereafter acquire against the Borrower or any other
guarantor of all or any of the Guaranteed Obligations that arise from the
existence or performance of Guarantor's obligations under this Guaranty or any
other of the Loan Documents (all such claims and rights being referred to as
the "Guarantor's Conditional Rights"), including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution, or
indemnification, any right to participate in any claim or remedy which the
Administrative Agent or any Lender has against the Borrower or any collateral
which the Administrative Agent or any Lender now has or hereafter acquires for
the Guaranteed Obligations, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, by any payment made
hereunder or otherwise, including, without limitation, the right to take or
receive from the Borrower, directly or indirectly, in cash or other property
or by setoff or in any other manner, payment or security on account of such
claim or other rights. If, notwithstanding the foregoing provisions, any
amount shall be paid to Guarantor on account of Guarantor's Conditional Rights
and either (a) such amount is paid to Guarantor at any time when the
Guaranteed Obligations shall not have been paid or performed in full, or (b)
regardless of when such amount is paid to Guarantor any payment made by the
Borrower to the Administrative Agent or any Lender is at any time determined
to be a preferential payment, then such amount paid to Guarantor shall be
deemed to be held in trust for the benefit of Lenders and shall forthwith be
paid to the Administrative Agent for the benefit of Lenders to be credited and
applied upon the Guaranteed Obligations, whether matured or unmatured, in such
order and manner as Lenders, in their sole discretion, shall determine. To
the extent that any of the provisions of this Paragraph 8 shall not be
enforceable, Guarantor agrees that until such time as the Guaranteed
Obligations have been paid and performed in full and the period of time has
<PAGE>
expired during which any payment made by the Borrower or Guarantor may be
determined to be a preferential payment, Guarantor's Conditional Rights to the
extent not validly waived shall be subordinate to the Lenders' right to full
payment and performance of the Guaranteed Obligations and Guarantor shall not
seek to enforce Guarantor's Conditional Rights during such period.
9. Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional Guaranteed Obligations. Guarantor assumes all responsibility
for being and keeping itself informed of either the Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations and the nature, scope and extent of
the risks which Guarantor assumes and incurs hereunder, and agrees that
neither the Administrative Agent nor any Lender shall have a duty to advise
Guarantor of information known to it regarding such circumstances or risks.
10. In addition to the Guaranteed Obligations, Guarantor agrees to
pay reasonable attorneys' fees and all other reasonable costs and expenses
incurred by the Administrative Agent and Lenders in enforcing this Guaranty in
any action or proceeding arising out of or relating to this Guaranty.
11. Guarantor has reviewed and approved the Credit Agreement and the
Loan Documents. Guarantor agrees to execute any and all further documents,
instruments and agreements as the Administrative Agent from time to time
reasonably requests to evidence Guarantor's obligations hereunder.
12. This Guaranty and the other Loan Documents shall be governed by
and construed in accordance with the substantive laws of the State of
California.
_________________________________________, a
______________________ corporation
By: ________________________________
Name: ______________________________
Title: _____________________________
EXHIBIT "G"
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Subordination Agreement") is made and
dated as of the ___ day of _______, 19__ by and among SYNCOR INTERNATIONAL
CORPORATION, a Delaware corporation (the "Borrower"), THE FIRST NATIONAL BANK
OF CHICAGO, acting in its capacity as administrative agent (in such capacity,
the "Administrative Agent") for the lenders from time to time party to that
certain Credit Agreement dated as of January 5, 1998 by and among the
Borrower, the Administrative Agent, and the lenders from time to time party
thereto (the "Lenders") (as amended, extended and replaced from time to time,
the "Credit Agreement," and with capitalized terms not otherwise defined
herein used with the meanings given such terms in the Credit Agreement), and
____________________________, a _________________ corporation (the
"Creditor").
RECITALS
A. Pursuant to the Credit Agreement the Lenders have agreed to
extend credit to the Borrower on the terms and subject to the conditions set
forth therein.
B. Pursuant to the terms of the Credit Agreement, the Creditor is
required to subordinate its right to the payment of monies from the Borrower
<PAGE>
to the payment and performance of the Obligations under (and as defined in)
the Credit Agreement (the "Senior Obligations"), and to execute and deliver
this Subordination Agreement to the Administrative Agent for the benefit of
the Lenders as evidence thereof.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. The Creditor has extended and may in the future extend credit to
the Borrower from time to time. The principal of all now existing and
hereafter arising indebtedness of the Borrower to the Creditor together with
accrued but unpaid interest thereon is hereinafter referred to as the
"Claims".
2. The Creditor is or will be the sole and absolute owner of the
Claims and has not sold, assigned, transferred or otherwise disposed of any
right it may have to repayment of the Claims or any security therefor.
3. The Claims and all rights and remedies of the Creditor with
respect thereto and any lien securing payment thereof are and shall continue
to be subject, subordinate and rendered junior in the right of payment to the
Senior Obligations, as the same may be extended, amended or replaced form time
to time.
4. Unless and until the Senior Obligations shall have been fully
paid and discharged and any agreement by the Lenders to make further loans or
advances to the Borrower shall have terminated:
(a) The Borrower will not make or give, and the Creditor will
not receive, directly or indirectly, any payment, advance, credit or further
security of any kind whatsoever on account of the Claims, or any new or
further evidence thereof;
(b) The Creditor will not sell, assign, transfer or endorse the
Claims or any part or evidence thereof;
(c) The Creditor will not modify the Claims or any part or
evidence thereof; and
(d) The Creditor will not take, or permit any action to be
taken, to assert, collect or enforce the Claims or any part thereof.
5. Each of the Borrower and the Creditor waives notice of
acceptance of this Subordination Agreement by the Lenders, and each of the
Creditor waives notice of and consent to the amount and terms of any loan or
loans which the Lenders may from time to time make to the Borrower and any
renewal or extension thereof and any action which the Lenders in their sole
and absolute discretion may take or omit to take with respect thereto.
6. This Subordination Agreement shall constitute a continuing
agreement of subordination and the Lenders may, from time to time and without
notice to the Creditor, lend money to or make other financial arrangements
with the Borrower in reliance hereon until written notice of termination shall
be delivered by the Creditor to the Lenders by certified mail, return receipt
requested. The receipt by the Lenders of such notice shall not affect this
Subordination Agreement as it relates to any Senior Obligations then existing,
to any Senior Obligations incurred thereafter pursuant to a previous
commitment by the Lenders or to any amendments to, or extensions or renewals
of, any such Senior Obligations.
<PAGE>
7. In the event of a default in the performance or observance of
any of the foregoing, the Senior Obligations shall forthwith become due and
payable at the election of the Lenders, without presentment, demand or notice
of any kind, all of which are hereby waived.
8. The Creditor agrees as follows:
(a) Upon any distribution of all of the assets of the Borrower
to creditors of the Borrower upon the dissolution, winding up, liquidation,
arrangement, or reorganization of the Borrower, whether in any bankruptcy,
insolvency, arrangement, reorganization or receivership proceeding or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Borrower or otherwise, any payment or distribution of
any kind (whether in cash, property or securities) which otherwise would be
payable or deliverable upon or with respect to the Claims shall be paid or
delivered directly to the Administrative Agent for application (in the case of
cash) to, or as collateral (in the case of non-cash property or securities)
for, the payment or prepayment of the Senior Obligations until the Senior
Obligations shall have been paid in full.
(b) If any proceeding referred to in subsection (a) above is
commenced by or against the Borrower:
(1) The Lenders are hereby irrevocably authorized and
empowered (in their own name or in the name of the Creditor or otherwise), but
shall have no obligation, to demand, sue for, collect and receive every
payment or distribution referred to in subsection (a) above and give
acquittance therefor and to file claims and proofs of claim and take such
other action (including, without limitation, voting the Claims or enforcing
any security interest or other lien securing payment of the Claims) as the
Lenders may deem necessary or advisable for the exercise or enforcement of any
of the rights or interests of the Lenders hereunder; and
(2) The Creditor shall duly and promptly take such action
as the Lenders may request (i) to collect the Claims for account of the
Lenders and to file appropriate claims or proofs of claim in respect of the
Claims, (ii) to execute and deliver to the Administrative Agent such powers of
attorney, assignments, or other instruments as it may request in order to
enable it to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Claims, and (iii) to
collect and receive any and all payments or distributions which may be payable
or deliverable upon or with respect to the Claims.
(c) All payments or distributions upon or with respect to the
Claims which are received by the Creditor contrary to the provisions of this
Subordination Agreement shall be received in trust for the benefit of the
Lenders, shall be segregated from other funds and property held by the
Creditor and shall be forthwith paid over to the Administrative Agent in the
same form as so received (with any necessary endorsement) to be applied (in
the case of cash) to, or held as collateral (in the case of non-cash property
or securities) for, the payment or prepayment of the Senior Obligations.
(d) The Administrative Agent on behalf of the Lenders is hereby
authorized to demand specific performance of this Subordination Agreement,
whether or not the Borrower shall have complied with any or all of the
provisions hereof applicable to the Borrower, at any time when the Creditor
shall have failed to comply with any of the provisions of this Subordination
Agreement applicable to it.
9. It is the intent of the Creditor to create by this Subordination
Agreement a security interest in favor of the Administrative Agent for the
benefit of the Lenders in the Claims and in the Creditor's other rights to
receive money or other property from the Borrower, whether such rights shall
constitute accounts, contract rights, chattel paper, instruments, general
<PAGE>
intangibles or otherwise. The Creditor hereby grants to the Administrative
Agent for the benefit of the Lenders a security interest in the Claims in
order to secure the payment and performance of the Creditor' obligations
pursuant to this Subordination Agreement.
10. The Creditor authorizes the Administrative Agent and the Lenders
(whether or not after revocation of this Subordination Agreement), without
notice or demand (except as shall be required by applicable statute and cannot
be waived), and without affecting or impairing the Creditor's obligations
hereunder, from time to time to (a) renew, compromise, extend, increase,
accelerate or otherwise change the time for payment of, or otherwise change
the terms of the Senior Obligations or any part thereof, including without
limitation to increase or decrease the rate of interest thereon; (b) take and
hold security for the payment of the Senior Obligations and exchange, enforce,
waive and release any such security; (c) apply such security and direct the
order or manner of sale thereof as the Administrative Agent and the Lenders in
their sole discretion may determine; and (d) release and substitute any one or
more endorsers, warrantors, the Borrower or other obligors.
11. This Subordination Agreement shall extend to and be binding upon
the successors and assigns of each of the parties hereto.
12. This Subordination Agreement may be executed in any number of
counterparts all of which taken together shall constitute one agreement and
any party hereto may execute this Subordination Agreement by signing any such
counterpart.
13. This Subordination Agreement shall be construed in accordance
with and governed by the substantive laws of the State of California.
THE FIRST NATIONAL BANK OF CHICAGO
As Administrative Agent
By: ______________________________
Name: ____________________________
Title: ___________________________
SYNCOR INTERNATIONAL CORPORATION, a
Delaware corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
__________________________________
By: ______________________________
Name: ____________________________
Title: ___________________________
<PAGE>
SCHEDULE "1"
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.14)
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC:
Subsidiary/ Owned By Amount of Percent of Jurisdiction
Investment In Investment Ownership of
Organization
<S> <C> <C> <C> <C>
Syncor Management Syncor N/A 100% Delaware
Corporation International
Corporation
Syncor Syncor N/A 100% Delaware
Pharmaceuticals, International
Inc. Corporation
Comprehensive Syncor N/A 100% Delaware
Medical Imaging, International
Inc. Corporation
Radiopharmacy of Syncor N/A 100%
California
Northern California, International
Inc. Corporation
Syncor Midland, Inc. Syncor N/A 100% Texas
International
Corporation
Pharmaceutical & Syncor N/A 50% Utah
Diagnostic Services, International
Inc. Corporation
Central Source, Inc. Syncor N/A 50% Alabama
International
Corporation
Cheyenne Medical Cheyenne N/A 100%
California
Equipment, Inc. Investments, Inc.
PerImmune Holdings, Syncor $4,500,000 in 11%
[unknown]
Inc. International exchange for
Corporation preferred stock
Syncor Diagnostics, Syncor $5,000,000 50%
California
LLC International
Corporation
Syncor Diagnostics Syncor N/A 1% Texas
Dallas, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
<PAGE>
Syncor Diagnostics Syncor N/A 1%
California
Sacramento, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Laguna Hills Open Syncor N/A 1%
California
MRI, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Syncor Diagnostics Syncor N/A 1% California
Encino, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Syncor Diagnostics Syncor N/A 1% Utah
Salt Lake City, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Syncor Diagnostics Syncor N/A 1%
California
Bakersfield, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Syncor Diagnostics Syncor N/A 1%
California
Fresno, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Syncor Diagnostics Syncor N/A 1% Texas
Plano, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
Syncor Diagnostics Syncor N/A 1%
California
Fullerton, LLC International
Corporation
Syncor Diagnostics, 99%
LLC
West Texas Nuclear Syncor Midland, N/A 50% Texas
Pharmacy Partners Inc.<PAGE>
FOREIGN:
Syncor Overseas Syncor N/A 100% British
Virgin
Ltd. International
Islands
Corporation
Syncor Taiwan, Syncor Overseas N/A 100% Taiwan,
Republic
Inc. Ltd. of China
Syncor Hong Kong Syncor Overseas N/A 100% Hong
Kong,
Limited Ltd.
B.C.C.
Syncor Syncor N/A 100% Kingdom
International International
Thailand
(Thailand) Co., Corporation
Ltd.
Beijing Syncor Syncor N/A 69.283% People's
Medicine International
Republic of
Corporation, Corporation
China
Ltd.
Shanghai Syncor Syncor N/A 83.66% People's
Medicine International
Republic of
Corporation, Corporation
China
Ltd.
Syncor de Syncor Overseas N/A 100% United
Mexican
Mexico, S.A. de Ltd.
States
C.V.
Syncor Syncor Overseas N/A 100% Republic
of the
Philippines, Ltd.
Philippines
Inc.
Syncor de Puerto Syncor Overseas N/A 100%
Commonwealth of
Rico, Inc. Ltd.
Puerto Rico
Syncor Korea, Syncor Overseas N/A 100% Republic of
Inc. Ltd. Korea
Syncor New Syncor Overseas N/A 100% New
Zealand
Zealand, Ltd. Ltd.
<PAGE>
Syncor Syncor Overseas N/A 100%
Commonwealth of
Pharmacies Ltd.
Australia
Australia Pty
Ltd.
Specialized Syncor Overseas N/A 100%
Commonwealth of
Medical Trading Ltd.
Australia
Company Pty Ltd.
Diversicor Syncor Overseas N/A 100% Bahamas
International
Ltd.
Cheyenne Syncor N/A 100% British
Virgin
Investments Inc. International
Islands
Corporation
Pharmatopes Syncor Overseas N/A 100% South
Africa
Limited (trading Ltd.
as Syncor)
SCHEDULE "2"
INDEBTEDNESS AND LIENS
(See Sections 5.14, 6.11 and 6.15)
INDEBTEDNESS AND LIENS:
INDEBTEDNESS NOW IN CONNECTION WITH THE ACQUISITION OF INTERNATIONAL MAGNETIC
IMAGING, INC.:
</TABLE>
<TABLE>
<CAPTION>
Indebtedness Indebtedness Property Interest Maturity & Amount
Incurred By Owed To Encumbered (If any) Rate Of Indebtedness
<S> <C> <C> <C> <C>
Syncor Management Boston Capital Limited partnership 6.0% 4/3/2000;
Corporation Corporate Tax interest in the $969,615.15
Credit Fund II fund
Syncor Management John Hancock Limited partnership 9.58% 1/15/2003;
Corporation Interest in $1,827,810.88
American Tax Credit
Corporate Fund III,
L.P.
Syncor Guarantees in None N/A N/A
International favor of
Corporation landlords of
office space
used by
subsidiaries of
Syncor
Diagnostics,
LLC
<PAGE>
Syncor The First None 6.80% $6,500,000
Pharmaceuticals, National Bank
Inc. of Chicago
Syncor The First None Fluctuat 9/1/99; $20,000,000
International National Bank ing Line of credit
Corporation of Chicago
Syncor Mellon Bank, None 6.56% 12/31/2001;
International N.A. $7,162,304.94
Corporation
Syncor First Bank Albuquerque 12.0% 8/1/99; $808,576
International System Building
Corporation
Syncor Xerox Copier machine - 14.5% $6,709
Pharmaceuticals, SD13
Inc.
Syncor S. Augustine None 6.0% 11/1/98;
International $122,550.34
Corporation
Syncor D. Kanne None 6.0% 11/1/98; $76,220.33
International
Corporation
Syncor D. Jacobson None 6.0% 11/1/98; $25,406.78
International
Corporation
Syncor Great Plaines None 6.0% 11/1/98;
International $224,177.45
Corporation
Syncor P. Newby None 9.0% 11/1/98; $55,300
International
Corporation
Syncor T. Barr None 9.0% 11/1/98; $18,433
International
Corporation
<PAGE>
West Texas Ford Motor Auto 8.2% $18,948
Nuclear Pharmacy Credit
Partners
Central Source, Colonial Bank Auto 8.8% $52,575
Inc.
Pharmaceutical & Bill Baker None N/A $2,000
Diagnostic
Services, Inc.
Radiopharmacy of Kurt Dunphy None 6.3 $31,733
Northern
California, Inc.
Syncor Taiwan, Owner Building Taiwan N/A $508,830
Inc.
</TABLE>
<TABLE>
<CAPTION>
INDEBTEDNESS IN CONNECTION WITH THE ACQUISITION OF INTERNATIONAL MAGNETIC IMAGING, INC.:
REF # FINANCIAL INSTITUTION SECURITY BALANCE 9/97
INT RATE Due
<S> <C> <C> <C> <C> <C>
REVOLVERS
A-1 DVI (A) Accounts $ 2,806,259 11% 12/29/98
and Proceeds Prime + 2.75%
A-2 DVI (B) Accounts $ 2,710,350 12% 12/31/98
and Proceeds Prime + 3.5%
A-3 DVI (overadvance) N/A $ 750,000 Variable 12/29/98
Balloon
TOTAL $ 6,266,609
REAL ESTATE PROPERTY LOANS
B-1 Capital Bank Pine Island Bldg $ 196,873.89 9.75% 10/18/00
B-2 Suntrust Boca Raton Bldg $ 476,000 9.25% 5/16/00
<PAGE>
B-3 Banco Santandar San Juan Bldg $ 341,666.81 Prime + 1 2/8/99
TOTAL $ 1,014,540.70
EQUIPMENT LOANS
C-1 DVI Equipment $ 173,288.71 11.50% 4/4/00
(InstaScan, Pine
Island)
C-2 DVI Equipment $ 700,841.97 10.75% 1/1/02
(Siemens, No.
Miami Beach)
C-3 DVI Equipment $ 212,651.25 11.50% 4/1/00
(Resonex Refinancing,
Arlington)
C-4 DVI Equipment $ 173,288.72 11.50% 4/4/00
(InstaScan,
Boca Raton)
C-5 DVI Equipment $ 1,632,123.00 11.04% 1/1/01
(Term Loan,
General)
C-6 DVI Equipment $ 1,796,158.00 11.086% 9/1/02
(South Dade)
TOTAL $ 4,688,351.66
DVI TERM LOANS (1-6)
D-1 DVI #1 Equipment $ 599,737.02 11.50% 10/1/01
Intangibles and
Inventory
D-2 DVI #2 Equipment, $ 599,737.02 11.50% 10/1/01
Intangibles and
Inventory
D-3 DVI #3 Equipment $ 599,737.02 11.50% 10/1/01
Intangibles and
Inventory
<PAGE>
D-4 DVI #4 Equipment $ 599,737.02 11.50% 10/1/01
Intangibles and
Inventory
D-5 DVI #5 Equipment $ 599,737.02 11.50% 10/1/01
Intangibles and
Inventory
D-6 DVI #6 Equipment $ 42,839.67 11.50% 10/1/01
Intangibles and
Inventory
TOTAL $ 3,041,524.77
MORE DVI LOANS
For purchase of assets, payment of fees
E-1 DVI General (Arlington) $ 455,591.00 10.5% 9/30/99
E-2 DVI General (Kansas $ 405,536.33 10.5% 9/30/99
City)
E-3 DVI General (South $ 187,241.66 10.5% 9/30/99
Dade)
E-4 DVI General (Pine $ 628,002.00 10.5% 9/30/99
Island)
E-5 DVI General (Orlando) $ 234,052.32 10.5% 9/30/99
E-6 DVI General (Oakland $ 257,956.63 10.5% 9/30/99
Park)
E-7 DVI General (North $ 558,944.88 10.5% 9/30/99
Miami)
E-8 DVI General (Boca $ 589,070.15 10.5% 9/30/99
Raton)
TOTAL $ 3,316,394.97
TOTAL DEBT $18,327,421.10
/TABLE
<PAGE>
Summary of IMI Debt
Revolvers $ 6,266,609.00
Real Estate Loans $ 1,014,540.70
Equipment Loans $ 4,688,351.66
"Other" DVI Loans $ 6,357,919.74
TOTAL DEBT 9/30/97 $18,327,421.10*
*Syncor shall pay off the non-DVI loans and the DVI revolving loans before the
end of the first quarter of 1998. With respect to the non-revolving DVI loans,
Syncor will analyze each loan on a case-by-case basis, and if in its
reasonable business judgment it should pay off a DVI loan, it will pay off
such loan. A DVI loan, however, may only be secured by the equipment purchased
using the proceeds from such loan; if such loan is secured by assets other
than the equipment, Syncor must have such other emcumbrance removed, and if it
cannot remove the encumbrance, it must pay off the loan before the end of the
first quarter of 1998.
SCHEDULE "3"
LITIGATION
(See Section 5.7)
None.
SCHEDULE "4"
INITIAL COMMITMENT SCHEDULE
LENDER COMMITMENT
PERCENTAGE
The First National Bank of Chicago $45,000,000
60.0000%
Mellon Bank $30,000,000
40.0000%
SCHEDULE "5"
OUTSTANDING LETTERS OF CREDIT
(See Sections 4.1 (xiv))
BENEFICIARY FACE AMOUNT EXPIRY
DATE
Sam Augustine $314,500 12/31/98
Dave Jacobson $ 69,500 12/31/98
Duane Kanne $216,000 12/31/98
Perry Newby $120,000 11/30/98
Great Plaines Radiopharmacy $800,000 12/31/98
ADAC Asia $402,725 2/1/98
<PAGE>
SCHEDULE "6"
ENVIRONMENTAL MATTERS
(See Sections 5.16)
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, will not be
material.
<PAGE>
[ARTICLE] ARS
outside front cover:
Nuclear Medicine Image of a Human Heart
SYNCOR INTERNATIONAL CORPORATION 1997 ANNUAL REPORT
A RAPIDLY EXPANDING RADIOPHARMACY
AND MEDICAL IMAGING SERVICES COMPANY
inside front cover:
CORPORATE PROFILE
Syncor International Corporation is the leading provider of
radiopharmaceuticals and comprehensive value-added specialized pharmacy
services. In addition, Syncor has recently diversified to become one of the
nation's leading providers of outpatient medical imaging services.
Through its core specialized pharmacy services business, Syncor
compounds and dispenses radiopharmaceuticals - in patient-specific unit-dose
and multi-dose form - for diagnostic and therapeutic use by nuclear medicine
departments in hospitals and put-patient clinics. Syncor distributes these
time-critical products through an integrated network of strategically located
nuclear pharmacies: 119 domestic and 13 international. This network also
provides information management services and currently serves more than 7,000
customers. Syncor pioneered the outsourcing of radiopharmacy services in 1974
and has the potential to serve more than 80 percent of the domestic nuclear
medicine market.
In 1997 Syncor entered the $60 billion medical imaging services market
through a joint venture to establish 10 "open" MRI (magnetic resonance
imaging) centers in selected U.S. cities. In addition, as a result of
transactions completed in early 1998, Syncor will own or manage an additional
39 medical imaging centers in 11 states and Puerto Rico.
Last year Syncor also became a specialized radiopharmaceutical
manufacturer through the acquisition of a business that produces Iodine-123
capsules used in the diagnosis of thyroid disorders.
[Photos of 10 scanned images of a human heart]
[A bar graph containing Syncor's projected sales growth:]
375 | Syncor in 1997
350 | A $381 million single-business enterprise
325 |
300 |
275 |
250 |
225 |
200 |
175 |
150 |
125 |
100 |
75 |
50 |
25 |
SYNCOR'S COMMITMENT TO STOCKHOLDERS
Management is committed to enhancing Syncor's stockholder value by
doubling earnings per share over the next four years. Our objective is to
profitably grow Syncor from a $381 million single-business enterprise to a
$600 million multi-business corporation.
<PAGE>
Syncor in 2001
A $600 million multi-business corporation with two-thirds of sales generated
by radiopharmacy services and one-third by new businesses such as medical
imaging services.
Projected Business Composition
[Photos of a human heart and a human brain]
Radiopharmaceutical
(two-thirds)
[A photo of an MRI scanned image]
Medical Imaging and Manufacturing
(one-third)
<PAGE>
SYNCOR'S MISSION
Syncor will be the undisputed worldwide leader in providing
comprehensive imaging, specialized pharmacy and management services to the
healthcare community.
[4 photos of scanned images of human brain]
TABLE OF CONTENTS
- -----------------------
Financial Highlights 3
Letter to Stockholders 4
Core Business Strategy 6
New Business Strategy 8
International Business Strategy 10
Financial Information 12
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31 December 31 December 31
(In thousands, except per share data) 1997 1996 1995
_____________________________________________________________________________________________
<C> <S> <S> <S>
Net sales $380,563 $366,447 $331,435
Net income - continuing operations 10,032 6,900 4,984
Net income per basic share - continuing operations 1.00 0.66 0.48
Net income per diluted share - continuing operations 0.98 0.65 0.48
Cash, cash equivalents and marketable securities $ 29,301 $ 27,711 $ 26,559
Cash generated by operations $ 22,529 $ 16,070 $ 16,607
</TABLE>
There are (3) tables drawn as follows:
______________________________________
Net Sales
In Millions of Dollars
_________________________
Syncor has started from 320 in 1994 and gone up to 381 by 1997
Net Income - Continuing Operations
In thousands of Dollars
___________________________________
Syncor has started from 1,800 in 1994 and gone up to over 10,032 by 1997
Earnings Per Diluted Share Continuing Operations
In Dollars
_________________________________________________
Syncor has started from $.16 in 1994 and gone up to $.98 by 1997
<PAGE>
MANAGEMENT'S COMMITMENT TO PERFORMANCE
TO OUR STOCKHOLDERS
Since 1996, Syncor has been pursuing two growth objectives. The first
objective calls for the continued strengthening of our position as the
industry's leading provider of radiopharmacy services. The second objective
involves expanding syncor's role in healthcare services, including specialized
pharmacy services and medical imaging.
We are delighted to report substantial progress on both objectives
during 1997. Due to many profit improvement programs instituted in both 1996
and 1997, we improved our operating results. Our efforts were rewarded as
profitability from the radiopharmacy operations continued to improve
substantially. Earnings from continuing operations (composed primarily of
radiopharmacy operations), increased 45 percent to $10 million. Net income
increased by 139 percent to $11.1 million, or $1.08 per diluted share,
compared to $4.6 million, or $.44 per diluted share, in 1996. Syncor's gross
margin as a percent of sales rose to 23.7 percent in 1997 from 21.9 percent in
1996. As for new business, Syncor entered the medical imaging services market
and has already become, through a series of recent acquisitions, one of the
leaders in this field.
We are expanding into medical imaging because this is a rapidly changing
area in which we can leverage Syncor's existing strengths, competencies, and
experience to considerable advantage. By investing in new businesses such as
medical imaging, as well as strengthening and expanding the core radiopharmacy
services business, we intend to build Syncor into a $600 million company and
double earnings per share within the next four years.
Our Alignment with Stockholder Interests
Employees are also committed to Syncor's growth and stockholder value-
building objectives. Through an ESSOP plan introduced in 1989, approximately
75 percent of our 2,300-employee work force owns shares of Syncor stock.
Additionally, a significant portion of the compensation for the
management team and key employees is linked to Syncor's financial performance.
Preserving Our Values
As a company in the process of transition from a single-business
enterprise to a corporation with multiple business interests, Syncor is
clearly undergoing change. At the same time, there are two fundamental values
we are committed to preserving.
The first of these values is our dedication to customer service. We are
a health-care service organization that has achieved a leadership position
through our demonstrated ability to partner with customers in meeting the
needs of physicians and the patients they serve.
CORPORATE STRENGTHS:
* Syncor is the nation's
leading distributor of
radiopharmaceuticals.
* Syncor is a customer-focused
enterprise with a tradition of
operational excellence and
innovation.
* Syncor is a financially strong
company with ample resources
for aggressive expansion and
diversification.
* Syncor is well-positioned for
growth
<PAGE>
The other fundamental value is our commitment to innovation. Syncor
revolutionized nuclear medicine when it introduced the concept for nuclear
medicine departments to outsource
the compounding and distribution of radiopharmaceuticals in the early 1970s.
Since that time, Syncor has maintained its leadership position not only by
enlarging its distribution network and the range of products and services
offered but also by continuing to innovate. Since 1995, Syncor has been
setting new industry standards for radiopharmaceutical management information
and materials handling systems. We also recognize the importance of
anticipating and adapting to the changing needs of our customers. As the pace
of consolidation in the healthcare environment accelerates, Syncor will be
seeking ways to deliver greater value to our customers through more creative
partnering arrangements.
We are committed to the achievement of our financial goals and to
maintaining the strength of Syncor's balance sheet, while at the same time
preserving Syncor's values and the excellent relationships the Company has
established with customers, suppliers, employees and stockholders.
We thank you for your continued support. We look forward to updating you
on our progress toward our strategic growth objectives and the stockholder
value-building goals we aim to attain by 2001.
[There are 2 individual photos of Monty Fu and Robert Funari next to their
signatures in this page.]
/s/ Monty Fu
_________________________
Monty Fu
Chairman of the Board
/s/ Robert G. Funari
__________________________
Robert G. Funari
President and Chief Executive Officer
<PAGE>
CORE BUSINESS STRATEGY:
ACHIEVING UNDISPUTED LEADERSHIP
Achieving undisputed leadership in radiopharmacy services is the first
of Syncor's two strategies for growth. Our approach to meeting this objective
is to build on our existing relationships with major customers, enlarge our
role in nuclear medicine, differentiate ourselves through new products and
innovative services, upgrade our information technology capabilities, and
expand our operations geographically.
Syncor is well positioned to meet the needs of large national health
systems and provider groups. Contracts with national healthcare groups
represent approximately 51 percent of Syncor's net sales.
As healthcare organizations redesign the way they provide care and
place increasing emphasis on outsourcing, Syncor intends to enlarge its role
in nuclear medicine by offering a wider range of products and services. Though
nuclear medicine today is primarily a diagnostic imaging modality, Syncor
believes that the potential for additional therapeutic applications is large
and we are aggressively seeking opportunities to distribute new therapeutic
radiopharmaceutical products. For example, as a result of a 1997 distribution
agreement, Syncor is now distributing Quadramet(R), a radiopharmaceutical used
to relieve
bone pain in cancer patients and one of three new oncology products that
Syncor began offering in 1997. Syncor is the nation's premier provider of
oncology nuclear medicine products and has been the industry's leading
provider of radiopharmaceuticals used in cardiology since 1974.
Syncor also differentiates itself through innovative services. In 1995,
the Company introduced the SECURE(TM) Safety Insert System, a unique product
delivery system that eliminates the biohazards associated with the handling of
radiopharmaceutical injection devices. In June 1997, Syncor introduced a
family of proprietary radiopharmaceutical delivery systems, that sets new
standards for the safe transport and handling of radioactive substances.
These "Pigs" (Piglet(TM), Piglet2(TM) and PETPig(TM)) are tungsten
containers that weigh considerably less than current lead containers while
providing enhanced radiation shielding for our pharmacy personnel and
customers.
Syncor is also an innovator in the area of nuclear medicine department
management information systems. More than 1,300 U.S. hospitals and clinics
utilize the Company's proprietary, Unit Dose Manager(TM) or
Windows-based SYNtrac(TM) systems for monitoring and managing departmental
functions. During 1997, Syncor also invested substantially in software to
streamline internal administrative tasks and enable the Company to meet both
current and future customer needs for fast and reliable service.
The focus of Syncor's geographic expansion in the radiopharmacy services
market is international. Please see page 10 for an overview of the Company's
activities overseas.
STRENGTHS FOR CORE
BUSINESS GROWTH:
* Excellent relationships with the
NATION'S LEADING MANAGED-CARE AND
GROUP PURCHASING ORGANIZATIONS
* EXCELLENT SUPPLIER RELATIONSHIPS,
GIVING SYNCOR ONE OF THE INDUS-
TRY'S BROADEST ARRAYS OF RADIO-
PHARMACEUTICAL PRODUCTS
* SINGULAR STATUS AS THE ORIGINATOR
AND MOST SUCCESSFUL OPERATOR OF
STAND-ALONE RADIOPHARMACIES.
* TRACK RECORD AS AN INNOVATOR AND
STANDARD-SETTER IN THE INDUSTRY'S
MOST HEAVILY REGULATED ENVIRONMENT.
<PAGE>
PHOTO TO COME
[There is a photo of two of Syncor's products - Piglet and Piglet2 - on this
page.]
Piglet(TM) series tungsten containers for delivery of iodine
radiopharmaceuticals.
<PAGE>
On this page, there is a photo of one of Syncor's pharmacies showing employees
preparing doses to be delivered.
U.S. Radiopharmacy Locations.
[This is shown by a map marked with dots.]
Syncor's nuclear pharmacist fills prescriptions for time-critical radiopharma-
ceuticals around the clock.
<PAGE>
NEW BUSINESS STRATEGY:
EXPANDING OUR ROLE IN HEALTHCARE SERVICES
Expansion of Syncor's role in healthcare services is the second
component of the Company's two-part strategy for growth. Syncor's objective is
to have new businesses - that is, businesses outside the realm of
radiopharmacy services - generating at least one-third of corporate revenue by
the year 2001.
Syncor's initial step toward this objective was taken early in 1997 with
the formation of Syncor Diagnostics, LLC, a joint venture with National
Diagnostic Services, Inc. (NDS), to establish a network of 10 magnetic
resonance imaging (MRI) centers across the U.S. The first of these outpatient
centers, which feature a new, less-confining and less costly "open" MRI
technology, began operating in September in Laguna Hills, California. Syncor
expects to have all 10 centers open by the end of the third quarter of 1998.
Based on the experience Syncor gained in the Syncor Diagnostics, LLC
venture, we determined that the medical imaging field holds tremendous
opportunities for new business growth through leveraging and building on the
Company's existing strengths and unique competencies. In 1997, more than $60
billion was spent in the U.S. on medical imaging services. As the demand for
medical imaging continues to grow, health plans, managed care companies,
health maintenance organizations and hospitals are seeking external providers
who can offer a comprehensive set of medical imaging modalities much as
Syncor's radiopharmacies offer a full complement of nuclear medicine products
and services.
In January 1998, we accelerated Syncor's expansion into the medical
imaging field with three acquisitions. Upon closing of these transactions,
Syncor will own or manage an additional 39 medical imaging centers in 11
states and Puerto Rico and will be one of the nation's leading providers of
medical imaging services.
The expansion of Syncor's role in medical imaging will also build on the
Company's existing strengths and relationships. These strengths include
Syncor's track record in operating a nationwide network of radiopharmacies,
its reputation for quality customer service, and its considerable financial,
managerial, and information technology resources. Syncor's relationships
include contracts with the nation's leading managed-care and group purchasing
organizations as well as its day-to-day interactions with radiology
departments from coast to coast.
UNIQUE COMPETENCIES:
* Unequalled time-critical product
distribution skills.
* Unmatched experience in providing
consistent, reliable ancillary
services to medical institutions
on a national basis.
* Unsurpassed ability to improve
quality and consistency of ser-
vice while reducing costs by
eliminating duplication and
waste.
* Unparalleled record of meeting
and surpassing regulatory
requirements for the handling
of biohazardous materials.
<PAGE>
[On this page, there's a photo of one of Syncor's products.]
The PETPig(TM) unit-dose syringe shield for positron emission tomography (PET)
radiopharmaceutical.
<PAGE>
[On this page, there's a photo of one of Syncor's Medical Imaging Locations,
showing a patient being scanned.]
U.S. Medical Imaging Locations.
[There's a map marked with dots for locations.]
Syncor's medical imaging centers feature "open" magnetic resonance imaging
technology. Open MRI systems are non-confining, assuring patient comfort
during diagnostic imaging procedures.<PAGE>
INTERNATIONAL BUSINESS STRATEGY:
LAYING THE FOUNDATION FOR FUTURE GROWTH
The preceding pages focused on the steps Syncor is taking in order to
become a $600 million company by 2001. This section highlights what Syncor is
doing to ensure that this initial wave of rapid growth will be followed by
another wave of equal - if not greater - scope and significance.
Because more than half of the world's nuclear medicine market lies
outside the U.S., and is, for the most part, currently underserved, Syncor's
greatest growth after 2001 is expected to come from international operations.
The percentage of Syncor's business that will be international in the first
decade of the 21st century will depend largely on the Company's success in
converting overseas customers from buying radiopharmaceuticals in multi-dose
form to adopting our more accurate, convenient, cost-effective - and higher
margin - unit-dose approach.
Syncor is currently building foundations for the establishment of
businesses in relatively underdeveloped international healthcare services
markets. Led by Syncor founder and chairman Monty Fu, this effort is analogous
to what the Company did in the U.S. in the 1970s when it introduced the
advantages of purchasing prepared radiopharmaceuticals from a centralized
external supplier to domestic hospitals, clinics and national healthcare
systems.
At December 31, 1997, Syncor's international radiopharmacy network was
comprised of 13 pharmacy service centers, four of which were established
during the year. Syncor's pharmacy service centers are located in Puerto Rico,
South Africa, Mexico and six Pacific Rim countries, with the highest
concentration in Asia. We believe that the radiopharmacy model Syncor
introduced in these countries has applicability to other parts of the world.
Through strategic partnering arrangements, we plan to expand into Europe and
further into Asia and Latin America during 1998. By the end of the year,
Syncor intends to have a total of 20 international pharmacy service centers on
six continents.
The pace of the Company's overseas development is dictated by the
relative maturity of the targeted markets and the strength of our business
connections in those regions. In Taiwan, which has one of Asia's most advanced
health-care communities, Syncor is now profitably operating three
radiopharmacies and has begun to expand into other types of medical services.
For example, we are currently managing an in-house nuclear medicine department
on behalf of a major hospital. Starting in 1999, Syncor will also be operating
a cyclotron facility owned by another large Taiwanese hospital. This facility
will be used to produce isotopes employed in positron emission tomography
(PET), a highly accurate diagnostic imaging technology.
In addition to this expansion of Syncor's management service
capabilities, we are also exploring avenues for promoting the Company's new
medical imaging services business outside of the U.S. Among the more promising
of these activities is selling non-nuclear medical imaging devices as well as
cyclotrons and nuclear medicine cameras in selected overseas markets. The new
roles that Syncor is playing abroad are not only laying a foundation for
future international business but also providing valuable insight into ways in
which we might best broaden the range of services the Company offers to
customers at home.
[There's a photo of one of Syncor's products.]
Tungsten Dispensing System for positron emission tomography (PET)
pharmaceuticals.
<PAGE>
[On this page, there's a photo of a driver delivering radiopharmaceutical
product in China.]
International Pharmacy Service Centers.
[There's a world map marked with dots for Syncor's International Locations
around the world.]
With rapid, reliable radiopharmacy services, Syncor intends to revolutionize
nuclear medicine overseas. The People's Republic of China is among the nine
foreign countries served by Syncor in 1997.
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Twelve months ended December 31
(In thousands except per share data) 1997 1996 1995 1994 1993
_______________________________________________________
<S> <C> <C> <C> <C> <C>
Net Sales $380,563 $366,447 $331,435 $319,193 $241,289
Gross profit 90,165 80,193 73,626 66,186 78,926
Income (loss):
Continuing operations 10,032 6,900 4,984 1,390 6,633
Discontinued operations, net of taxes 1,063 (2,264) (315) (177) 120
Cumulative effect of accounting change - - - - 1,020
Net income 11,095 4,636 4,669 1,213 7,773
=======================================================
Earnings (loss) per basic share:
Continuing operations 1.00 .66 .48 .13 .65
Discontinued operations, net of taxes .11 (.22) (.03) (.02) .01
Cumulative effect of Accounting change - - - - .10
Net income $ 1.11 $ .44 $ .45 $ .11 $ .76
=======================================================
Earnings (loss) per diluted share:
Continuing operations .98 0.65 0.48 0.13 0.62
Discontinued operations, net of taxes 0.10 (0.21) (0.03) (0.02) 0.01
Cumulative effect of accounting change - - - - 0.10
Net income 1.08 0.44 0.45 0.11 0.73
=======================================================
Cash, cash equivalents and marketable securities 29,301 27,711 26,559 19,201 18,700
Working capital 34,685 35,515 34,286 26,616 27,121
Total assets 164,563 145,563 133,680 128,684 114,586
Long-term debt 17,332 7,595 5,200 5,154 6,837
Stockholders' equity 87,367 78,532 78,262 73,850 71,181
Weighted average shares outstanding:
Basic 9,998 10,424 10,341 10,507 10,169
Diluted 10,282 10,629 10,481 10,507 10,697
Current ratio 1.60 1.62 1.69 1.54 1.74
=======================================================
Number of domestic radiopharmacies 119 121 118 117 109
Days sales outstanding 51 50 55 55 52
=======================================================
/TABLE
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
CALENDAR YEARS 1997 AND 1996
NET SALES
Consolidated net sales in 1997 totaled $380.6 million, an increase of
3.9 percent or $14.2 million over the 1996 results. Syncor International
Corporation's 1997 net sales were affected by a number of conflicting factors.
The primary driving force behind the sales growth is the expansion of the
cardiology-imaging market. This market is currently estimated to be expanding
at an annual rate
of approximately 14 percent. The principal cardiology-imaging agent continues
to be DuPont Merck's cardiology product, Cardiolite(R), for which Syncor has
exclusive distribution rights. A competing radiopharmaceutical
manufacturer/distributor is currently marketing a rival product to
Cardiolite(R). This new product was introduced in 1996 and continues to gain
some market share, currently estimated at 12 percent of the total perfusion
market. During the current year, another generic cardiology product (also
distributed by the Company and available through a variety of sources)
experienced sharp declines as customers switched to a newer generic agent.
Pricing for all cardiology agents, with the exception of the one generic
product that experienced a significant decline, has been steady. When all of
the above factors are combined, the Company recorded an annual gain in overall
cardiology sales of approximately 8.2 percent. Cardiology sales currently
constitute approximately 65 percent of the Company's annual net sales. Syncor
expects the trends discussed above to continue. Sales on non-cardiology
products continue to be relatively flat.
In 1997, Syncor announced the loss, through the process of competitive
bidding, of a contract to supply products to a large hospital buying group.
The annual revenues associated with this buying group were estimated to be in
the range of $60 million to $65 million. The Company initiated certain steps
to minimize the impact of this contract loss. During 1997, Syncor was
successful in minimizing the potential sales loss associated with the contract
to less than $8 million, with estimated lost pre-tax profits of $1.6
million. Potential lost sales in 1998 from this contract are estimated to be
$15 million, with a range of lost pre-tax profits of $2.5 million to $3.5
million. The Company continues to implement steps to minimize the long-term
impact on revenues and profits from the lost contract.
The outlook for 1998 remains positive, as Syncor expects to post net
revenue gains from its radiopharmaceutical business.
GROSS PROFIT
Syncor's gross profit increased in 1997 to $90.2 million, an increase of
12.4 percent when compared to 1996. As a percentage of net sales, gross profit
increased to 23.7 percent, compared to 21.9 percent in 1996. The increase in
gross profit was mainly the result of a reduction in certain material
acquisition costs. In 1997, the Company announced the re-negotiation of a
contract for materials acquisition from one of its principal suppliers. The
contract contained certain volume commitments plus an increased period of time
in which the Company would continue to utilize the supplier as a primary source
basis. In exchange for these commitments, the Company received favorable
pricing on some of the products distributed by the supplier. Many of
these provisions expired in December 1997; however, marketplace economics have
dictated that these pricing levels remain in effect in 1998.
Partially offsetting the reduction in materials acquisition costs were
higher-than-expected labor costs in the core business. Increased labor costs
were being driven by shortages in key positions and market economics that were
not fully offset by sales price increases. In addition, Syncor instituted a
pilot program which provided for incentive bonuses if certain key business
goals were reached. The Company believes that the program was successful and
will be expanding it beyond the original pilot group in 1998. Labor costs<PAGE>
in 1998 have been targeted for increased focus in order to ensure optimal
utilization of resources. The goal will be to contain labor costs at the 1997
level in the core business.
OPERATING, SELLING AND ADMINISTRATIVE COSTS
Operating, selling and administrative expenses increased $6.1 million in
1997 as compared to 1996, and as a percentage of 1997 net sales to 17.7
percent compared to 16.7 percent in 1996. Operating expenses increased due to
a number of reasons, including the acquisition of a manufacturing facility,
the start-up and operation of the medical imaging business, the expansion of
the international radiopharmacy business, and severance costs associated with
the reorganization of certain aspects of the core business. Other expense
increases were due to the conversion of the Company's financial systems,
expansion of the information technology infrastructure, continued investment
in re-engineering certain critical business practices, and spending on
programs that focus on the long-term competitiveness of the Company.
Syncor expects the increased level of expenditures in these areas to
continue as the diagnostic imaging business is expanded, new systems are
implemented as a result of our re-engineering efforts, field systems are
upgraded, and expansion continues in the international marketplace.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization in 1997 decreased to $9.9 million from
$10.4 million in 1996. The decrease is due to capitalized start-up costs,
and consulting and non-compete agreements originating prior to 1997, and
becoming fully amortized during the year.
PROVISION FOR INCOME TAXES
The provision for income taxes as a percentage of income from continuing
operations before taxes increased to 41 percent in 1997 from 39 percent in
1996. The increase in the effective tax rate is due to an increase in non-tax
deductible expenses as a percentage of pre-tax income.
DISCONTINUED OPERATIONS
On May 6, 1997, the Company completed the sale of its interest in
P.E.T.Net(TM) Pharmaceutical Services(TM), LLC ("P.E.T.Net") to PETNet
Partners, LLC, an affiliate of the Company's former joint venture partner CTI,
Inc. Consideration received included a secured note of $2.25 million and
royalties of up to $1.5 million based on P.E.T.Net's future sales.
Additionally, Syncor is the preferred distributor of positron emission
tomography isotopes for all existing and future P.E.T.Net sites and has
exclusive distribution rights for cyclotrons, manufactured by CTI, Inc., in
Taiwan for two years. All costs associated with the Company's operation and
disposal of its interest in P.E.T.Net from December 31, 1996 to the March 18,
1997 the date the sale agreement was entered into, were included in the
results of operations for 1996. The Company recorded a gain on sale of the
discontinued operations of approximately $1.1 million, net of taxes of $0.7
million, during 1997.
RESULTS OF OPERATIONS
CALENDAR YEARS 1996 AND 1995
NET SALES
Consolidated net sales in 1996 totaled $366.4 million, an increase of
10.6 percent or $35.0 million, over 1995. Continued growth in the cardiology
market was the primary reason for the Company's overall growth in sales. This
growth came from several sources, including same store growth, the opening of
new facilities, sub-licensing of cardiology products to other distributors,
and the Company's success in achieving price increases on technetium-based
cardiology products. In addition, the Company enjoyed price stability through
1996. At the same time, the Company began to experience some erosion of its
market share in the cardiology market through the introduction of a competing
cardiology product that was manufactured and distributed by a competing
<PAGE>
radiopharmaceutical distributor. While the Company expected this erosion to
continue, it also expected the overall growth in the cardiology market to more
than offset the erosion of its share. Sales from cardiology products accounted
for approximately 62 percent and 64 percent of the Company's sales for 1996
and 1995, respectively.
GROSS PROFIT
The Company's gross profit in 1996 increased to $80.2 million, an
increase of 8.9 percent when compared to 1995. As a percentage of net sales
however gross profit declined slightly to 21.9 percent in 1996 compared to
22.2 percent in 1995. This decline was primarily attributable to a number of
factors including flatter sales in the second half of the year which reduced
material utilization, some increases in material acquisition costs from our
suppliers and to a smaller extent below average performance of an acquired
pharmacy chain. In addition, the Company also experienced an increase in core
business labor costs. The total of these cost increases were unable to be
absorbed through price increases to our customers. The Company took steps to
reduce material acquisition costs, and reviewed its operating procedures to
ensure optimal business practices in all its pharmacy operations.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses increased $5.8 million in
1996 compared to 1995 and as a percent of net sales remained constant at 16.7
percent for both 1996 and 1995. The dollar increase resulted from a number of
sources including costs associated with the resignation of the Company's
former Vice Chairman and Chief Executive Officer in July 1996, relocation
costs for the corporate headquarters, new radiopharmacy start-up costs and
expenses associated with the Company's core business improvement program.
The Company made significant investments in new business opportunities
which are aimed at increasing its long-term competitiveness. These
opportunities included continued domestic and international expansion, the re-
engineering of critical business practices and associated information systems,
backwards integration into the manufacturing of certain radiopharmaceuticals,
and investment in new imaging businesses. The increased operating, selling and
administrative expenses reflect the investments required for these
opportunities. 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 into manufacturing, and expansion.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization in 1996 decreased to $10.4 million from
$10.7 million in 1995. The decrease was due to capitalized start-up costs,
and consulting and non-compete agreements originating prior to 1996,
becoming fully amortized during the year.
PROVISION FOR INCOME TAXES
The provision for income taxes as a percentage of income from continuing
operations before taxes decreased to 39 percent in 1996 from 40 percent in
1995. The decrease in the effective tax rate was due to a reduction in non-tax
deductible expenses as a percentage of pre-tax income.
DISCONTINUED OPERATIONS
The Company entered into an agreement on March 18, 1997 with PETNet
Partners, LLC, an affiliate of the Company's former joint venture partner CTI,
Inc. which provided for the sale of the Company's interest in P.E.T.Net(TM)
Pharmaceutical Services(TM), LLC ("P.E.T.Net"). PETNet Partners, LLC purchased
the Company's interest and assumed all liabilities of the venture for a
secured note of $2.25 million and royalties of up to $1.5 million based on
P.E.T.Net's future sales. Additionally, as a part of this agreement Syncor
became the preferred distributor of positron emission tomography isotopes for
all existing and future P.E.T.Net sites and has exclusive distribution rights
for cyclotrons, manufactured by CTI, Inc., in Taiwan
<PAGE>
for two years. All costs associated with the Company's operation and disposal
of its interest in P.E.T.Net from December 31, 1996 to March 18, 1997 have been
included in the results of operations for 1996.
LIQUIDITY AND CAPITAL RESOURCES
In 1997, total cash and investments, which includes cash and cash
equivalents and short and long-term investments, increased to $29.3 million
from $27.7 million at December 31, 1996. The Company's total debt position of
$21.3 million was $11.4 million higher than the total debt position at
December 31, 1996. The increase in debt is the result of a term loan in the
amount of $6.5 million to finance the acquisition of Golden Pharmaceuticals,
$3.4 million for MRI imaging equipment associated with its Syncor Diagnostics,
LLC joint venture and a $3.6 million ESSOP loan. Working capital decreased by
$0.8 million to $34.7 million at December 31, 1997, compared to $35.5 million
at December 31, 1996. Days sales outstanding on accounts receivable increased
to 51 days at December 31, 1997, compared to 50 days at December 31, 1996.
The Company's core business is not capital intensive and as new products
become available, the capital requirements to accommodate these products will
be minimal. However, the Company is making a significant investment in its
nuclear pharmacy business both within the United States and internationally.
Additionally, in early 1998, the Company acquired new businesses in the field
of medical diagnostic imaging (See Note 14 in the Notes to Consolidated
Financial Statements). The field of medical imaging is more capital intensive
than the Company's core radiopharmacy business and an increase in capital
expenditures is anticipated as a result of this new business opportunity.
The Company believes sufficient internal and external capital sources
exist to fund operations and expansion. At December 31, 1997, the Company had
unused lines of credit of approximately $18.1 million to fund short-term
needs. On January 5, 1998, a new credit line facility became effective in the
amount of $75 million. This new credit line will be used to fund working
capital and acquisitions.
YEAR 2000
The Company has developed a plan to address issues related to the impact
on its computer systems of the year 2000. Financial and operational systems
have been assessed and plans have been developed to address systems
modification requirements which are expected to be completed in 1999.
The financial impact of making the required systems
changes is not expected to be material to the Company's consolidated financial
position, results of operation or cash flows.
NEW ACCOUNTING STANDARDS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS
No. 131 - "Disclosures about Segments of an Enterprise and Related
Information" were issued and are effective for periods beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting
comprehensive income and its components. SFAS No. 131 establishes standards
for reporting financial and descriptive information regarding an enterprise's
operating segments. These standards increase disclosure in the financial
statements, and will have no impact on the Company's financial position or
results of operations.
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 our products, competitor pricing,
maintenance of our current market position and other factors. Given these
uncertainties, undue reliance should not be placed on such forward looking
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31 December 31
(In thousands except per share data) 1997 1996
_________________________________________________________________________________
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 25,538 $ 25,214
Short-term investments 2,583 1,258
Accounts receivable, less allowances for
doubtful accounts of $1,040 and $911,
respectively 54,972 51,964
Inventory 5,574 7,827
Net assets of discontinued operations - 1,198
Prepaids and other current assets 3,913 5,519
___________________________
Total current assets 92,580 92,980
Marketable investment securities 1,180 1,239
Property and equipment, net 28,870 21,532
Excess of purchase price over net assets acquired,
net of accumulated amortization of
$5,354 and $4,783, respectively 14,319 14,207
Other 27,614 15,605
___________________________
$164,563 $145,563
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 34,755 $ 38,851
Accrued liabilities 4,353 3,249
Accrued wages and related costs 13,680 10,757
Federal and state taxes payable 1,129 2,284
Current maturities of long-term debt 3,978 2,324
___________________________
Total current liabilities 57,895 57,465
___________________________
Long-term debt, net of current maturities 17,332 7,595
Deferred compensation 1,969 1,971
Stockholders' Equity:
Common stock $.05 par value; authorized
20,000 shares; issued 11,435 and 11,341 shares
at December 31, 1997 and 1996, respectively 572 567
Additional paid-in capital 55,061 53,072
Unrealized loss on investments (17) (27)
Employee savings and stock ownership loan
guarantee (6,741) (4,544)
Foreign currency translation adjustment (313) (157)
Retained earnings 51,329 40,234
Treasury stock, at cost, 1,356 shares and
1,126 shares at December 31, 1997 and
1996, respectively (12,524) (10,613)
___________________________
Total stockholders' equity $ 87,367 $ 78,532
___________________________
$ 164,563 $ 145,563
===========================
See accompanying Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Year Ended Year Ended
Year Ended
December 31 December 31
December 31
(In thousands except per share data) 1997 1996
1995
______________________________________________________________________________
________________
<S> <C> <C>
<C>
Net sales $380,563 $366,447
$331,435
Cost of sales 290,398 286,254
257,809
______________________________________________
Gross profit 90,165 80,193
73,626
Operating, selling and administrative expenses 67,214 61,151
55,370
Depreciation and amortization 9,939 10,385
10,746
______________________________________________
Operating income 13,012 8,657
7,510
Other income (expense):
Interest income 1,324 1,703
1,227
Interest expense (1,207) (845)
(743)
Other, net 3,826 1,796
313
______________________________________________
Other income, net 3,943 2,654
797
Income from continuing operations before income taxes 16,955 11,311
8,307
Provision for income taxes 6,923 4,411
3,323
______________________________________________
Income from continuing operations 10,032 6,900
4,984
Discontinued operations, net of taxes 1,063 (2,264)
(315)
______________________________________________
Net income 11,095 4,636
4,669
==============================================
Net income per share - basic
Income from continuing operations $ 1.00 $ .66
$ .48
Discontinued operations, net of taxes .11 (.22)
(.03)
______________________________________________
Net income $ 1.11 $ .44
$ .45
==============================================
Weighted average shares outstanding 9,998 10,424
10,341
==============================================
Net income per share - diluted:
Income from continuing operations $ .98 $ .65
$ .48
Discontinued operations, net of tax benefit .10 (.21)
(.03)
______________________________________________
Net income $ 1.08 $ .44
$ .45
==============================================
Weighted average shares outstanding 10,282 10,629
10,481
==============================================
See accompanying Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Employee
Savings &
Stock Foreign
Additional Unrealized Ownership currency Total
COMMON STOCK Paid-In loss on Loan Translation Retained Treasury Stockholders'
In thousands Shares Amount Capital Investments Guarantee Adjustment Earnings Stock Equity
________________________________________________________________________________________________________________________
_________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 10,320 $529 $46,508 $ (52) $(1,934) $ 133 $30,929 $(2,263) $73,850
Issuance of common stock 92 4 550 554
Issuance of treasury stock 250 50 2,263 2,313
Tax benefit from the exercise
of stock options 61 61
Unrealized gain on investments 28 28
Foreign currency translation
adjustment (238) (238)
ESSOP loan guarantee (2,313) (2,313)
Reacquisition of common stock
for treasury (250) (1,911) (1,911)
Amortization of loan guarantee 1,249 1,249
Net income 4,669 4,669
________________________________________________________________________________________________________________________
______
Balance at December 31, 1995 10,412 533 47,169 (24) (2,998) (105) 35,598 (1,911) 78,262
Issuance of common stock 679 34 4,268 4,302
Issuance of treasury stock 250 (72) 2,854 2,782
Tax benefit from the exercise
of stock options 1,707 1,707
Unrealized loss on investments (3) (3)
Foreign currency translation
adjustment (52) (52)
ESSOP loan guarantee (2,781) (2,781)
Reacquisition of common stock
for treasury (1,126) (11,556) (11,556)
Amortization of loan guarantee 1,235 1,235
Net income 4,636 4,636
________________________________________________________________________________________________________________________
______
Balance at December 31, 1996 10,215 $567 $53,072 $(27) $(4,544) $(157) $40,234 $(10,613) $78,532
Issuance of common stock 94 5 1,754 1,759
Issuance of treasury stock 250 2,599 2,599
Tax benefit from the exercise
of stock options 235 235
Unrealized gain on investments 10 10
Foreign currency translation
adjustment (156) (156)
ESSOP loan guarantee (3,563) (3,563)
Reacquisition of common stock
for treasury (480) (4,510) (4,510)
Amortization of loan guarantee 1,366 1,366
Net income 11,095 11,095
________________________________________________________________________________________________________________________
______
Balance at December 31, 1997 10,079 $572 $55,061 $(17) $(6,741) $(313) $51,329 $(12,524) $87,367
========================================================================================================================
======
See accompanying Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended Year Ended
December 31 December 31 December 31
(In thousands) 1997 1996 1995
____________________________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities
Net income $11,095 $ 4,636 $ 4,669
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 9,939 10,385 10,746
Provision for losses on receivables 129 (186) (57)
Amortization of loan guarantee 1,366 1,235 1,249
Decrease (increase) in:
Accounts receivable (3,127) (923) (838)
Inventory 2,336 (2,674) 260
Prepaids and other current assets 1,699 (3,220) 650
Net assets of discontinued operations 1,198 (1,198) -
Other assets (8,368) (4,833) (1,504)
Increase (decrease) in:
Accounts payable (4,012) 5,553 (5,892)
Accrued liabilities 998 220 100
Accrued wages and related costs 2,927 695 4,509
Federal and state taxes payable (931) 3,236 816
Deferred compensation (2) 1,107 864
_____________________________________________
Net cash provided by operating activities 15,137 14,033 15,572
Cash flows from investing activities:
Purchase of property and equipment, net (10,889) (8,107) (3,784)
Payments for acquisitions (6,550) - (3,150)
Net decrease (increase) in short-term investments (1,323) 1,038 (2,066)
Net decrease (increase) in long-term investments 59 2 (31)
Unrealized gain (loss) in investments 10 (3) 28
_____________________________________________
Net cash used in investing activities: (18,693) (7,070) (9,003)
Cash flows from financing activities:
Issuance of common stock 1,759 4,302 554
Issuance of treasury stock 2,599 2,782 2,313
Reacquisition of common stock (4,510) (11,556) (1,911)
Increase in ESSOP loan guarantee (3,563) (2,781) (2,313)
Proceeds from long-term debt 10,634 4,930 3,663
Repayment of long-term debt (2,807) (2,435) (3,547)
_____________________________________________
Net cash provided by (used in) financing activities 4,112 (4,758) (1,241)
_____________________________________________
Net decrease in cash and cash equivalents (324) 2,205 5,328
Effect of exchange rate on cash - (13) (67)
Cash and cash equivalents at beginning of period 25,214 23,022 17,761
______________________________________________
Cash and cash equivalents at end of period $25,538 $25,214 $23,022
==============================================
During 1997, the Company financed capital expenditures totaling $3,414, through issuance of capital leases
and issued a $150 promissory note in conjunction with an acquisition.
See accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The Company's business is primarily compounding,
dispensing and distributing radiopharmaceuticals to hospitals and clinics. The
consolidated financial statements of Syncor International Corporation include
the assets, liabilities and operations of the Company and its subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
GENERAL: The unaudited quarterly operating results in Note 13 have been
prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, include all adjustments necessary for a
fair presentation for the periods presented.
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Short-term investments consist
principally of time deposits and tax-exempt municipal securities and are
carried at cost, which approximates market value.
FINANCIAL INSTRUMENTS: The carrying value of financial instruments such as
cash and cash equivalents, trade receivables, payables and floating rate short
and long-term debt, approximate their fair value.
INVENTORY: Inventories, consisting of purchased products, are stated at the
lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost and
depreciated or amortized on a straight-line basis over estimated useful lives
ranging from two to fifteen years.
SELF INSURANCE: The Company historically has purchased insurance in excess of
self-insured retentions or deductibles for losses and liabilities related to
vehicle claims, medical claims and general product liability claims.
Effective June 1, 1997, the Company eliminated the $100,000 deductible for its
automobile insurance and reduced the general/product liability self-insured
retention from $100,000 to $50,000 per occurrence. Losses accrued under self-
insured and deductible plans are based upon the Company's estimates of
aggregated liability claims incurred using certain actuarial assumptions
followed in the insurance industry and the Company's own experience.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED: The cost in excess of net
assets of acquired businesses is being amortized on a straight-line basis over
periods of 15 to 40 years. The Company periodically evaluates the carrying
value of these assets and, accordingly, considers the ability to generate
positive cash flow through projected undiscounted future operating cash flows
from the related operation as the key factor in determining whether the assets
have been impaired. The Company's accounting treatment is consistent with
Statement of Financial Accounting Standard (SFAS) No.121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
MARKETABLE INVESTMENT SECURITIES: Marketable investment securities consist
primarily of corporate debt and United States government obligations. The
Company classifies its debt and marketable equity securities in one of three
categories: trading, available-for-sale or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those securities that the
Company has the ability and intent to hold until maturity. All other
securities not included in trading or held-to-maturity are classified as
available-for-sale.
Held-to-maturity securities are recorded at amortized cost, adjusted for
the amortization or accretion of premiums or discounts. Unrealized holding
gains and losses on trading securities are included
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in earnings. Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from earnings and are
reported as a separate component of stockholders' equity until realized.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign operations are
translated into U.S. dollars based upon the prevailing exchange rates in
effect at the balance sheet date. Foreign exchange gains and losses resulting
from these translations are included as a separate component of stockholders'
equity. Actual gains or losses incurred on currency transactions in other than
the country's functional currency are included in net income currently.
STOCK OPTIONS: The Company measures stock-based compensation using the
intrinsic value method which assumes that options granted at market price at
the date of grant have no intrinsic value. In accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation," proforma net income and earnings
per share are presented in Note 9 as if the fair value method had been
applied.
INCOME TAXES: Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
USE OF ESTIMATES: Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the reporting
of sales and expenses and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
New Accounting Standards: In June 1997, SFAS No. 130 - "Reporting
Comprehensive Income" and SFAS No. 131 - "Disclosures about Segments of an
Enterprise and Related Information" were issued and are effective for periods
beginning after December 15, 1997. SFAS No. 130 establishes standards for
reporting comprehensive income and its components. SFAS No. 131 establishes
standards for reporting financial and descriptive information regarding an
enterprise's operating segments. These standards increase disclosure in the
financial statements, and will have no impact on the Company's financial
position or results of operations.
RECLASSIFICATIONS: Certain items in the prior years' consolidated financial
statements have been reclassified to conform to the current year's
presentation.
PRE-OPENING COSTS: Costs, included in "Other" in the consolidated balance
sheets relating to the opening of new radiopharmacies, are deferred and
amortized ratably over a 24-month period commencing at the date of opening. S
draft Statement of Position, "Reporting on the cost of start-up activities,"
has been issued which will require the costs of start-up activities be
expensed as incurred for fiscal years beginning after December 15, 1998.
2. ACQUISITIONS AND DISCONTINUED OPERATIONS
In November 1995, the Company acquired all the assets and certain
contracts of Pyramid Diagnostic Services, Inc. (Pyramid), a
radiopharmaceutical chain that competed directly with existing Syncor sites in
the Midwest and Southeast regions of the United States. The acquisition was
pursuant to a Tennessee
<PAGE>
bankruptcy court decision to approve the sale of the assets, and the
assumption and assignment of certain contracts to the Company for $3.15
million in cash. The purchase culminated eight months of legal proceedings
involving allegations against some of Pyramid's business practices, which the
Company claimed were illegal. The Company closed five of the acquired
radiopharmacies and incorporated the remaining three sites into Syncor's
nationwide distribution network. This transaction has been accounted for as a
purchase and the purchase price was allocated to fixed assets, non-compete and
consulting agreements, customer lists and goodwill. In conjunction with the
bankruptcy settlement, the Company received from Pyramid $.3 million in 1996
and $2.8 million in the first two quarters of 1997. These amounts have been
recorded in "Other Income" in the Consolidated Statements of Income.
In March 1997, the Company acquired certain assets of Golden
Pharmaceuticals, Inc. relating to Iodine-123, including the building and
equipment used to manufacturer Iodine-123 and the approved New Drug
Application for Iodine-123 capsules, for $6.5 million in cash and a promissory
note for $150,000. This transaction has been accounted for as a purchase.
The results of operations related to the above transactions are included
in the Company's consolidated financial statements from the effective
acquisition dates. Pro forma information is not presented since the
acquisitions were not material to the accompanying consolidated financial
statements.
On May 6, 1997, the Company completed the sale of its interest in
P.E.T.Net(TM) Pharmaceutical Services(TM), LLC ("P.E.T.Net") to PETNet
Partners, LLC, an affiliate of the Company's former joint venture partner CTI,
Inc. Consideration received included a secured note of $2.25 million and
royalties of up to $1.5 million based on P.E.T.Net's future sales.
Additionally, Syncor is the preferred distributor of positron emission
tomography isotopes for all existing and future P.E.T.Net sites and has
exclusive distribution rights for cyclotrons, manufactured by CTI, Inc., in
Taiwan for two years. All costs associated with the Company's operation and
disposal of its interest in P.E.T.Net from December 31, 1996 to March 18,
1997, the date the sale agreement was entered into were included in the
results of operations for 1996. The Company recorded a
gain on sale of the discontinued operations of approximately $1.1 million, net
of taxes of $0.7 million, during 1997.
<TABLE>
<CAPTION>
3. PROPERTY AND EQUIPMENT, NET
The major classes of property are:
December 31 December 31
(In thousands) 1997 1996
______________________________________________________________________________
<S> <C> <C>
Land and Buildings $ 4,312 $ 3,708
Furniture and equipment 50,254 41,042
Leasehold improvements 12,654 10,108
______________________________________________________________________________
67,220 54,858
Less accumulated depreciation and amortization 38,350 33,326
______________________________________________________________________________
$28,870 $21,532
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
4. MARKETABLE INVESTMENT SECURITIES
Marketable investment securities consist of:
December 31 December 31
(In thousands) 1997 1996
______________________________________________________________________________
<S> <C> <C>
Available-for-sale, at fair value, net of tax effect $ 680 $ 670
Held-to-maturity, at amortized cost 500 569
______________________________________________________________________________
$ 1,180 $ 1,239
______________________________________________________________________________
</TABLE>
The amortized cost, gross unrealized holding gains and losses and fair value
for available-for-sale and held-to-maturity securities by major security type
at December 31, 1997 and 1996 were as follows:
<PAGE>
<TABLE>
<CAPTION>
4. MARKETABLE INVESTMENT SECURITIES (CONTINUED)
1997 Unrealized
AMORTIZED HOLDING HOLDING FAIR
(In thousands) COST GAINS LOSSES VALUE
_____________________________________________________________________________
<S> <C> <C> <C> <C>
Available-for-sale:
Corporate debt securities $697 $ 30 $ (47) $680
_____________________________________________________________________________
$697 $ 30 $ (47) $680
=============================================================================
Held-to-maturity:
U.S. Treasury securities 500 - (1) 499
_____________________________________________________________________________
$500 $ - $ (1) $499
=============================================================================
1996 Unrealized
AMORTIZED HOLDING HOLDING FAIR
(In thousands) COST GAINS LOSSES VALUE
_____________________________________________________________________________
Available-for-sale:
Corporate debt securities $697 $ - $ (27) $670
_____________________________________________________________________________
$697 $ - $ (27) $670
=============================================================================
Held-to-maturity:
U.S. Treasury securities 500 1 - 501
Mortgage-backed securities 69 - (16) 53
_____________________________________________________________________________
$569 $ 1 $ (16) $554
=============================================================================
</TABLE>
The unrealized holding losses on held-to-maturity securities have not
been recognized in the accompanying consolidated financial statements.
Maturities of investment securities classified as available-for-sale and
held-to-maturity were as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
AMORTIZED FAIR AMORTIZED FAIR
(In thousands) COST VALUE COST VALUE
______________________________________________________________________________
<S> <C> <C> <C> <C>
Available-for-sale:
Due after one year through five years $ - $ - $ - $ -
Due after five years through ten years $499 $484 $499 $482
Due after ten years $198 196 198 188
Held-to-maturity:
Due within one year $500 $499 $500 $501
Due after one year through five years $ - $ - $ 69 $ 53
==============================================================================
</TABLE>
5. LINE OF CREDIT
At December 31, 1997, the Company had an unsecured line of credit for
short-term borrowings aggregating $20,000,000, bearing interest at the bank's
reference rate (8.5 percent at December 31, 1997) and expiring on September 1,
1999. The availability of this line of credit at December 31, 1997, was
reduced by $1,923,000 as a result of standby letters of credit. To maintain
this line of credit, the Company was required to pay a quarterly commitment
fee of 1/8 of one percent per annum on the unused portion. There were no other
amounts outstanding under the line of credit at December 31, 1997.
The line of credit agreement contained covenants that include
requirements to maintain certain financial covenants and ratios (including
minimum quick ratio, cash flow ratio and tangible net worth) and limitations
on payments of dividends, new borrowings and purchases of its stock. At
December 31, 1997, the Company was in compliance with all debt covenants under
the line of credit.
<PAGE>
The $20,000,000 line of credit agreement was replaced effective January
5, 1998 with a $75,000,000 revolving credit agreement. Terms of this new
revolving line of credit agreement include two variable interest rate
borrowing options; the Eurodollar rate plus an applicable margin or the prime
rate. The Company also pays a quarterly commitment fee of 1/8 of one percent
per annum on the unused portion, plus an annual administrative fee.
<TABLE>
<CAPTION>
6. LONG TERM DEBT
The Company's long-term debt was as follows:
December 31 December 31
(In thousands) 1997 1996
__________________________________________________________________________________________________
<S> <C> <C>
Capital lease obligations, payable in varying installments
through 2003, with interest rates ranging from 10%to 12% $ 4,094 $ 1,112
Notes payable, unsecured, payable in installments through 2012,
with effective interest rates ranging from 6% to 12.75% 1,160 886
Notes payable, unsecured, payable in installments through 2001,
with a floating interest rate of either the lower of prime,
LIBOR plus .75%, 6.66% and 6.57% at December 31, 1997 and 1996 6,741 4,544
Notes payable, secured, payable in installments through 2003,
with a non-interest bearing rate, net of unamortized discount
at 6% to 10% of $384 and $600 at December 31, 1997
and 1996, respectively 2,815 3,377
Note payable, unsecured, payable in installments through 2002,
with a floating interest rate of LIBOR plus .95%, 6.80%
at December 31, 1997 $ 6,500 $ -
___________________________________________________________________________________________________
Total debt 21,310 9,919
Less current maturities of long term debt 3,978 2,324
___________________________________________________________________________________________________
Long term debt, net of current maturities $17,332 $ 7,595
===================================================================================================
<TABLE/>
At December 31, 1997, long-term debt maturing over the next five years is as
follows: 1998, $3,978; 1999, $3,667; 2000, $3,753; 2001, $3,481; 2002, $5,719
and $712 thereafter.
Interest paid was $1,205, $834 and $666 for the years ended December 31,
1997, 1996 and 1995.
</TABLE>
<TABLE>
<CAPTION>
7. INCOME TAXES
Total income tax expense for the years ended December 31, 1997 and 1996
was allocated as follows:
YEAR ENDED YEAR ENDED
December 31 December 31
(In thousands) 1997 1996
____________________________________________________________________________________________
<S> <C> <C>
Income from continuing operations $6,923 $4,411
Stockholders' equity for compensation expense for tax purposes
in excess of amounts recognized for financial reporting (235) (1,707)
____________________________________________________________________________________________
$6,688 $2,704
============================================================================================
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Income tax expense (benefit) attributable to income from continuing
operations consisted of:
YEAR ENDED YEAR ENDED YEAR ENDED
December 31 December 31 December 31
(In thousands) 1997 1996 1995
____________________________________________________________________
<S> <C> <C> <C>
Current:
Federal $6,839 $5,758 $3,884
State 1,262 883 724
____________________________________________________________________
8,101 6,641 4,608
Deferred:
Federal (916) (2,101) (1,181)
State (262) (129) (104)
____________________________________________________________________
(1,178) (2,230) (1,285)
____________________________________________________________________
$6,923 $4,411 $3,323
====================================================================
</TABLE>
The amounts differed from the amounts computed by applying the federal income
tax rate of 35 percent to pretax income from continuing operations as a result
of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
December 31 December 31 December 31
(In thousands) 1997 1996 1995
_________________________________________________________________________________________________________
<S> <C> <C> <C>
Federal income taxes at "expected" rate $5,935 $3,959 $2,907
Increase (reduction) in income taxes resulting from:
Meals and entertainment 213 188 161
Tax exempt interest (109) (106) (117)
Amortization of intangible assets 143 143 143
State taxes, net of Federal benefit 650 490 403
Utilization of general business credits (235) (228) (201)
Other 326 (35) 27
__________________________________________________________________________________________________________
$6,923 $4,411 $3,323
==========================================================================================================
</TABLE>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1997
and 1996, are presented below:
<TABLE>
<CAPTION>
December 31 December 31
(In thousands) 1997 1996
_______________________________________________________________________________________________
<S> <C> <C>
Deferred tax assets:
Compensated absences, principally due to accrual
for financial reporting purposes $1,492 $1,330
Accounts receivable, due to allowance for doubtful accounts 400 355
Accrued liabilities, primarily due to self-insurance accrual for
financial reporting purposes 1,052 941
Deferred compensation, due to accrual for financial reporting purposes 2,507 1,338
Covenant not to compete due to difference in amortization 522 397
Plant and equipment, due to difference in depreciation 1,008 467
Deferred start-up expenses 389 428
Other 244 641
Total gross deferred tax asset 7,614 5,897
Deferred tax liabilities:
Long-term lease due to capitalization for financial reporting purposes 625 487
Goodwill due to difference in amortization 74 57
Other 384 0
Total gross deferred tax liabilities 1,083 544
Net deferred tax asset $6,531 $5,353
</TABLE>
Management has reviewed the recoverability of deferred income tax assets
and has determined that it is more likely than not that the deferred tax assets
will be fully realized through future taxable earnings.
Income tax payments amounted to $7,622, $5,222 and $3,280 for the years
ended December 31, 1997, 1996 and 1995, respectively.
<PAGE>
8. COMMITMENTS
The Company leases facilities, vehicles and equipment with terms ranging
from three years to fifteen years. The majority of property leases contain
renewal options and some have escalation clauses for increases in property
taxes, Consumer Price Index and other items.
The Company leases a building and certain items of equipment under
capital leases which had an approximate cost of $6,891, $2,598, and $3,738, at
December 31, 1997, 1996 and 1995 and accumulated depreciation of $2,181,
$1,942, and $2,841, respectively. The Company was not utilizing this building
and, accordingly, sublet it to a third party for the balance of the lease
term. The cost increase over the prior year was due to the acquisition of
"open" MRI equipment for Syncor Diagnostics, LLC.
Future minimum lease payments under capital leases and noncancelable
operating leases with terms greater than one year and related sublease income
were as follows at December 31, 1997:
<TABLE>
<CAPTION>
CAPITAL OPERATING SUBLEASE
(In thousands) LEASES LEASES INCOME
_____________________________________________________________________________
<S> <C> <C> <C>
Year ending December 31,
1998 $ 1,206 $ 6,326 $ 466
1999 1,148 5,366 376
2000 836 3,825 143
2001 836 2,945 7
2002 834 2,621 -
Thereafter 180 7,799 -
_____________________________________________________________________________
5,040 28,882 992
=============================================================================
Less amount representing interest (946)
_____________________________________________________
Present value of net minimum lease payments $4,094
=====================================================
</TABLE>
Rental expense under operating leases was $7,528, $6,579 and $6,054 for
the years ended December 31, 1997, 1996 and 1995, respectively.
9. STOCK OPTIONS AND RIGHTS
Options to purchase common stock have been granted under various plans
to officers, directors and other key employees at prices equal to the fair
market value at date of grant. An aggregate of 1,926,600 shares of stock have
been authorized for issuance under the various plans as of December 31, 1997.
Options are generally exercisable at a rate of 25 percent per year beginning
one year from the date of grant and expire ten years after the date of grant.
At December 31, 1997, 515,922 shares are reserved for issuance under the
various plans.
The per share weighted-average fair value of stock options granted
during 1997, 1996 and 1995 was $5.74, $6.96 and $5.27, respectively, on the
date of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1997 - expected dividend yield of 0%; risk-free
interest rate of 5.71%; expected volatility of 61.1% and an expected life of
5.26 years; 1996 - expected dividend yield of 0%; risk-free interest rate of
6.21%; expected volatility of 60.1% and an expected life of 5.10 years; 1995 -
expected dividend yield of 0%; risk-free interest rate of 5.37%; expected
volatility of 60.1% and an expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated in the following table:<PAGE>
<TABLE>
<CAPTION>
December 31 December 31 December 31
(In thousands, except per share data) 1997 1996 1995
______________________________________________________________________________
<S> <C> <C> <C>
Net income
As reported $11,095 $ 4,636 $ 4,669
Pro forma $10,802 $ 4,355 $ 4,624
Earnings per share
Basic:
As reported $ 1.11 $ .44 $ .45
Pro forma $ 1.08 $ .42 $ .45
Diluted:
As reported $ 1.08 $ .44 $ .45
Pro forma $ 1.05 $ .41 $ .44
</TABLE>
Pro forma net income reflects only options granted in 1997, 1996 and
1995. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented because compensation cost is reflected over the
options' vesting period of four years and compensation cost for options
granted prior to January 1, 1995 is not considered.
A summary of employee stock options is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
(In thousands, except share PRICE) SHARES EXERCISE PRICE
__________________________________________________________________________
<S> <C> <C>
Outstanding at December 31, 1994 1,637 $ 7.65
Granted 134 $ 9.31
Exercised (92) $ 6.02
Cancelled (139) $ 11.72
__________________________________________________________________________
Outstanding at December 31, 1995 1,540 $ 7.53
Granted 373 $ 12.05
Exercised (676) $ 6.32
Cancelled (91) $ 9.61
__________________________________________________________________________
Outstanding at December 31, 1996 1,146 $ 10.03
Granted 401 $ 9.80
Exercised (94) $ 8.47
Cancelled (42) $ 10.68
__________________________________________________________________________
Outstanding at December 31, 1997 1,411 $ 10.22
</TABLE>
At December 31, 1997, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $6.18 to $21.88 and
seven years, respectively.
At December 31, 1997, 1996 and 1995, the number of options exercisable
was approximately 590,000, 437,000 and 925,000, respectively, and the weighted
average price of those options was $10.12, $10.03 and $7.53, respectively.
The Company derives a tax benefit from the options exercised and sold by
employees and the benefit is credited to additional paid-in capital.
In November 1989, the Company made a rights distribution of one common
share purchase right on each outstanding share of common stock. When
exercisable, each right will entitle its holder to buy from the Company one-
fourth of a share of the Company's common stock at a price of $5 per share
subject to adjustments (the "Purchase Price"). The rights expire on September
30, 1999. With certain exceptions, subject to the approval of the Board of
Directors, the rights will become exercisable if a person
<PAGE>
("Acquiring Person") has acquired or makes an offer, the consummation of which
will result in beneficial ownership of 20 percent or more of the Company's
general voting power. At such time (the "Distribution Date"), the rights will
be evidenced by the certificates representing the common shares and will be
transferred with and only with the common shares. Except for certain
transactions approved by the Board of Directors, in the event: (i) the Company
is acquired in a merger; (ii) 50 percent or more of its consolidated assets or
earning power is sold; or (iii) any person becomes an Acquiring Person, proper
provisions shall be made so that each holder of the right (other than rights
beneficially owned by the Acquiring Person) receives, upon the exercise
thereof at the adjusted exercise price of the right, which shall be four times
the Purchase Price, that number shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the adjusted exercise price of the right.
10. EMPLOYEE BENEFIT PLANS
On July 31, 1986, the Company adopted a defined contribution 401(k)
plan. The plan is open to all employees who are at least 21 years of age and
have a minimum of twelve consecutive months of service. In 1989, the Company's
Board of Directors amended the plan to an Employees Savings and Stock
Ownership Plan (ESSOP) to allow the plan to acquire one million of the
Company's shares through a leveraged employee stock ownership plan
transaction. In June 1995, September 1996, and August 1997, an additional
750,000 shares, in total, which were purchased in the open market were
contributed to the plan. These shares were originally classified as "treasury
stock." The contributions totaled $8,657 and reflected the fair market value
at the time of contribution. In connection with these transactions, the
Company has made a loan to the ESSOP. The ESSOP loan had an outstanding
balance of $6,741, at December 31, 1997.
Under the ESSOP, participants may contribute one percent to fourteen
percent of their compensation to 401(k) investment options and an additional
two percent of their compensation to purchase Company stock. The Company makes
matching contributions to 50 percent of the employees' 401(k) investment
contributions of up to a maximum of four percent of the employees'
compensation and may make matching contributions to 100 percent of the
employees' Company stock purchases up to two percent of the employees'
compensation. The Company's matching contribution is made in cash and reflects
the ESSOP loan payment. The number of shares of stock available to match
employee contributions is directly related to the amount of principal payments
made on the ESSOP loan. Once the number of available shares is determined, the
Company matches the employees' contributions as described above by determining
the fair market value of the available stock. The remainder of any shares not
allocated after all matching is complete will be allocated to all eligible
employees based on relative compensation.
Participants are fully and immediately vested in their contributions and
vest in employer contributions over a five-year period of continuous
employment. After five years of continuous employment, any further employer
contributions are fully and immediately vested. The Company's contributions
for the years ended December 31, 1997, 1996 and 1995 amounted to $1,625,
$1,444 and $1,433 of which $1,366, $1,235 and $1,249 were used to pay down
principal on the ESSOP loan and $259, $209, and $184, to pay interest.
11. NET INCOME PER SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effect of options. Diluted earnings per share is very similar to
the previously reported primary earnings per share. All earnings per share
amounts for all periods have been restated to conform to SFAS No. 128
requirements.
<PAGE>
The reconciliations of the numerators and denominators of the basic and
diluted earnings per share computations are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
______________________________________________________________________________________________________________________________
PER PER PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing
operations $10,032 $6,900 $4,984
Basic EPS $10,032 9,998 $1.00 $6,900 10,424 $0.66 $4,984 10,341 $0.48
===== ===== =====
Effect of Dilutive
Stock Options 284 205 140
___ ___ ___
Diluted EPS $10,032 10,282 $0.98 $6,900 10,629 $0.65 $4,984 10,481 $0.48
===== ===== =====
</TABLE>
Options to purchase 45,000 shares of common stock at prices ranging from
$18.25 to $21.88 were outstanding during 1997, but were not included in the
computation of diluted EPS at December 31, 1997 because the option's exercise
prices were greater than the average market price of the common shares.
12. LITIGATION AND CONTINGENCIES
There are various litigation proceedings in which the Company and its
subsidiaries are involved. Many of the claims asserted against the Company in
these proceedings are covered by insurance. The results of litigation
proceedings cannot be predicted with certainty. However, in the opinion of the
Company's general counsel, such proceedings either are without merit or do not
have a potential liability which would materially affect the financial
condition of the Company and its subsidiaries on a consolidated basis.
<TABLE>
<CAPTION>
13. SELECTED QUARTERLY RESULTS OF OPERATIONS
Unaudited calendar quarterly information is summarized below:
(IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 1997
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net sales $93,084 $98,187 $94,493 $94,799 $380,563
Gross Profit $20,116 $23,854 $22,260 $23,935 $ 90,165
Net income from continuing operations $ 3,346 $ 3,237 $ 1,754 $ 1,695 $ 10,032
Net income per share from continuing operations:
Basic $ 0.33 $ 0.33 $ 0.18 $ 0.17 $ 1.00
Diluted $ 0.32 $ 0.33 $ 0.17 $ 0.16 $ 0.98
Net income $ 3,346 $ 4,300 $ 1,754 $ 1,695 $ 11,095
Net income per share:
Basic $ 0.33 $ 0.44 $ 0.18 $ 0.17 $ 1.11
Diluted $ 0.32 $ 0.44 $ 0.17 $ 0.16 $ 1.08
Weighted average shares outstanding:
Basic 10,168 9,829 9,920 10,074 9,998
Diluted 10,359 9,870 10,323 10,574 10,282
============================================================================================================
Market price per share
High $ 13.63 $ 10.88 $ 17.25 $ 17.44 $ 17.44
Low $ 8.63 $ 7.50 $ 10.13 $ 14.88 $ 7.50
============================================================================================================
(IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 1996
___________________________________________________________________________________________________________
Net sales $92,021 $93,296 $90,254 $90,876 $366,447
Gross Profit $20,220 $21,749 $18,653 $19,571 $ 80,193
Net income from continuing operations $ 1,826 $ 2,647 $ 1,390 $ 1,037 $ 6,900
Net income per share from continuing operations:
Basic $ 0.18 $ 0.26 $ 0.13 $ 0.10 $ 1.66
Diluted $ 0.17 $ 0.25 $ 0.13 $ 0.10 $ 0.65
Net income $ 1,706 $ 2,304 $ 472 $ 154 $ 4,636
Net income per share:
Basic $ 0.16 $ 0.22 $ 0.04 $ 0.01 $ 0.44
Diluted $ 0.16 $ 0.22 $ 0.04 $ 0.01 $ 0.44
Weighted average shares outstanding:
Basic 10,413 10,282 10,677 10,325 10,424
Diluted 10,468 10,636 10,944 10,468 10,629
============================================================================================================
Market price per share
High $ 7.13 $ 16.63 $ 15.13 $ 13.38 $ 16.63
Low $ 6.25 $ 6.69 $ 10.38 $ 8.31 $ 6.25
============================================================================================================
</TABLE>
14. SUBSEQUENT EVENTS
In January 1998, Syncor acquired a medical imaging business from
National Diagnostic Services, Inc. and an affiliate ("NDS"). The purchase
price for the acquisition was $12 million including the assumption of $4.8
million in debt. The acquired business included nine medical imaging centers
owned or managed by NDS. This transaction will be accounted for as a purchase.
Also in January 1998, a subsidiary of Syncor merged with and into TME,
Inc., a company based in Houston, Texas, pursuant to which TME, Inc. became a
wholly-owned subsidiary of Syncor. TME owns, operates and/or manages free-
standing medical imaging centers through joint ventures and partnerships. It
has 20 facilities in its network, with five additional facilities in
development. As consideration for the merger, Syncor paid $14.5 million in
cash to TME's stockholders. This transaction will be accounted for as a
purchase.
In January 1998, Syncor announced the proposed acquisition of the
medical imaging business of International Magnetic Imaging, Inc., a subsidiary
of Consolidated Technology Group Ltd. The business to be acquired includes ten
outpatient medical imaging centers and an imaging referral network operating
in 35 states. The purchase price for the acquisition is expected to be $20.5
million, plus the assumption of approximately $21 million in liabilities and
trade payables. The acquisition is expected to close in the second quarter
1998 and will be accounted for as a purchase.<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Syncor International Corporation
We have audited the accompanying consolidated balance sheets of Syncor
International Corporation and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Syncor
International Corporation and subsidiaries as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
___________________________
KPMG Peat Marwick LLP
Los Angeles, California,
February 25, 1998
<PAGE>
MANAGEMENT'S REPORT
The Management of Syncor International Corporation is responsible for
the consolidated financial statements and all other information presented in
this report. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances and, therefore, included in the consolidated financial
statements are certain amounts based on management's informed estimates and
judgments. Management is responsible for establishing and maintaining a system
of internal control designed to provide reasonable assurance as to the
integrity and reliability of financial reporting. The concept of reasonable
assurance is based on the recognition that there are inherent limitations in
all systems of internal control, and that the cost of such systems should not
exceed the benefits to be derived therefrom. Other financial information in
this report is consistent with that in the consolidated financial statements.
The consolidated financial statements have been examined by Syncor
International Corporation's independent certified public accountants and have
been reviewed by the Audit Committee of the Board of Directors.
[There is a group photo of Syncor's Board of Directors on this page.]
Syncor's Board of Directors:
(from left to right) George S. Oki, Gail R. Wilensky, PhD., Steven B. Gerber,
Arnold E. Spangler, Henry N. Wagner, Jr., MD, Monty Fu, and Robert G. Funari.
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
Monty Fu
Chairman of the Board
Director since 1985
Robert G. Funari
President and
Chief Executive Officer
Director since 1995
George S. Oki
Chairman of the Board,
Meta Information Services, Inc.
Director since 1985
Arnold E. Spangler
Managing Director,
Mancuso & Company
Director since 1985
Steven B. Gerber, MD
Managing Director,
CIBC Oppenheimer Corp.
Director since 1990
Henry N. Wagner, Jr., MD
Professor of Medicine and
Director of Nuclear Medicine
the Johns Hopkins Medical
Institutions
Director since 1992
Gail R. Wilensky, PhD
Senior Fellow, Project HOPE,
former HCFA Administrator and
Deputy Assistant to President Bush
Director Since 1993
OFFICERS
Monty Fu
Chairman of the Board
Robert G. Funari
President and
Chief Executive Officer
Brad Nutter
Executive Vice President and
Chief Operating Officer
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
Haig S. Bagerdjian
Senior Vice President,
Business Development,
Secretary and
General Counsel
Jack L. Coffey
Corporate Vice President,
Quality and Regulatory
Sheila H. Coop
Corporate Vice President,
Human Resources
Charles A. Smith
Corporate Vice President,
Business Development
STOCKHOLDER INFORMATION
INQUIRIES
Stockholders, interested investors and investment professionals are invited to
contact the Company for further information throughout the year.
The Company also has available a news-on-demand service whereby individuals
can obtain information via facsimile. Individuals may call (800) 546-8172 to
obtain press releases and other related information via facsimile.
WEB SITE
www.syncor.com
ANNUAL MEETING
The Company's Annual Meeting of Stockholders will be held at 1:00, Tuesday,
June 16, 1998, at the Warner Center Hilton Hotel, 6360 Canoga Avenue, Woodland
Hills, California 91367. Stockholders of record on April 21, 1998, are invited
to attend and vote at that meeting.
FORM 10-K
To receive a copy of The Company's Annual Report on form 10-K filed with the
Securities and Exchange Commission, contact the Corporate Headquarters, Syncor
International Corporation, Attn: Investor Relations department, 6464 Canoga
Avenue, Woodland Hills, California 91367.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 725 South Figueroa Street, Los Angeles, California
90017
STOCK DATA
The Company's common stock is quoted on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) under the symbol SCOR.
TRANSFER AGENT AND REGISTRAR
Stockholders wishing to report a change of address may forward details,
including both the old and new addresses to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10015
(212) 936-5100
STOCK MARKET INFORMATION
Stock price quotations are printed daily in major newspapers, including the
Wall Street Journal. As of March 30, 1998, there were 10,099,141 shares of
common stock outstanding. Stockholders of record at that date amounted to
1,196. The Company has not paid cash dividends on its stock and has no current
intention of paying cash dividends in the foreseeable future.
EXHIBIT 23
INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT
The Board of Directors and Stockholders
Syncor International Corporation
The audits referred to in our report dated February 25, 1998 included the
related financial statement schedule for each of the years in the three-year
period ended December 31, 1997, included in the registration statement of
Syncor International Corporation. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
We consent to incorporation by reference in the registration statement (No.
33-44345) on Form S-3 and the registration statements (Nos. 33-7325, 33-39251,
33-43692, 33-57762, 33-52607, 333-18373, 333-18375, 333-18377, 333-39999 and
333-40117) on Form S-8 of Syncor International Corporation of our report dated
February 25, 1998, relating to the consolidated balance sheets of Syncor
International Corporation and subsidiaries as of December 31, 1997 and 1996
and the related consolidated statements of income, stockholders' equity and
cash flows and related schedule for each of the years in the three-year period
ended December 31, 1997, which report appears in the December 31, 1997 annual
report on Form 10-K of Syncor International Corporation
/s/ KPMG Peat Marwick, LLP
___________________________
KPMG Peat Marwick, LLP
Los Angeles, California
March 31, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
1,000
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<S> <C>
Period type 12 mos
Fiscal year end Dec 31, 1997
Period start Jan 1, 1997
Period end Dec 31, 1997
Cash 25,538
Securities 2,583
Receivables 56,012
Allowances (1,040)
Inventory 5,574
Current assets 92,580
PP&E 67,220
Depreciation (38,350)
Total assets 164,563
Current liabilities 57,895
Bonds 0
Preferred mandatory 0
Preferred 0
Common 572
Other SE 86,795
Total Liability and Equity 164,563
Sales 380,563
Total Revenue 380,563
CGS 290,398
Total costs 290,398
Other expenses 77,153
Loss provision 0
Interest expense (1,207)
Income pre tax 16,955
Income tax 6,923
Income continuing 10,032
Discontinued 1,063
Extraordinary 0
Changes 0
Net income 11,095
EPS basic 1.11
EPS diluted 1.08
</TABLE>
