SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended August 31, 1995
Commission file number 0-9065
Golden Pharmaceuticals, Inc.
(Name of small business issuer in its charter)
Colorado 84-0645174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1313 Washington Avenue Golden, Colorado 80401
(Address of principal executive office) (Zip Code)
Issuer's telephone number (303) 279-9375
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has bensubject to such filing requirements for the past 90 days.
Yes No
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. $4,412,377
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of November 21, 1995 was $ . This calculation is
based upon the average of the bid ($.__) and asked ($.__) prices of the
voting stock on November 21, 1995.
The number of shares of common stock outstanding as of November 21,
1995 was 93,963,919.
Transitional Small Business Disclosure Format: Yes No Item
1.
Description of Business
General.
Golden Pharmaceuticals, Inc. (the "Company") was incorporated in 1973
under the name Mini-Dose Labs. In 1979, under the name Benedict Nuclear
Pharmaceuticals, Inc., the Company offered its initial public offering of
common stock. On October 7, 1992 the Company's name was changed to
North American Chemical Corporation and on March 4, 1994 it was changed
again to Golden Pharmaceuticals, Inc.
During the first six years of operation, the Company was engaged in the
distribution of radiopharmaceuticals throughout the Denver metropolitan area
for medical diagnostic use. Since 1979 the Company's primary business has
been the manufacture of Sodium Iodide I-123 Capsules ("I-123 Capsules").
Recent Developments.
On August 7, 1995, the Company purchased all of the issued and
outstanding
capital stock (the "QCP Stock") of Quality Care Pharmaceuticals, Inc., a
California Corporation ("QCP"). The Company purchased the QCP Stock
pursuant to a Stock Purchase Agreement (the "Agreement") among the Company,
QCP and the shareholders of QCP. The Company paid a total of $3,718,750 in
cash for the QCP Stock not including acquisition costs, of which $222,065 is
being held in escrow to secure the indemnification obligations of certain
hareholders of QCP pending the Company's receipt of audited financial
statements
for QCP for the fiscal year ending December 31, 1995.
QCP is engaged in the repackaging and distribution of pharmaceutical
products.
QCP's customers include physicians, hospitals, group practices, managed
care programs and other legally constituted medical facilities throughout the
United States. QCP's assets include, but are not limited to, (i) contracts
with
pharmaceutical suppliers and distributors, (ii) certain building and equipment
leases, (iii) licenses and permits, and (iv) certain intellectual property.
The
Company intends to continue substantially the same business uses for the
acquired
assets. In connection with the Agreement, the QCP has entered into employment
agreements with Daniel B. Guinn and Gary A. Klingsheim, its President and Vice
President, respectively.
To facilitate the financing of the acquisition of QCP, the Company
obtained
from a national bank (the "Bank") a $4,000,000 term loan (the "Term Loan"), a
$2,500,000 revolving line of credit (the "Revolving Facility") and a $400,000
term loan . See "Liquidity and Capital Resources."
Nuclear Medicine Industry.
Nuclear medicine is the branch of diagnostic medicine which utilizes
radiopharmaceuticals for the diagnosis and treatment of various human
illnesses.
Because of the relatively short half life of most useful medical
radioisotopes,
approximately twenty-four hours or less, they are produced, distributed, and
efficaciously passed through the patient in a short time period. Such
radiopharmaceuticals, used in conjunction with state-of-the-art imaging
equipment,
allow medical professionals to view and evaluate the normal and/or
abnormal functioning of specific organs. They are then able to prescribe
treatment accordingly. I-123 Capsules are sold primarily to authorized
professionals in the medical field, who are licensed to practice and
administer
nuclear medicine, in approximately 6,000 hospitals and clinics nationally with
accredited nuclear medicine departments.
Many radiopharmaceuticals are produced from portable lead shielded
generators at the hospital site or in central nuclear pharmacy distribution
centers. A range of radio- pharmaceuticals approved by the United States Food
and Drug Administration (the "FDA") are manufactured from Cyclotrons and
Linear
Accelerators. The isotopes currently produced using this method include
Thallium
201 (heart disorders); Sodium Iodide I-123 (thyroid abnormalities); and
Gallium
67 Citrate (soft tumor masses and cancer).
Many of the commercial radiopharmaceutical diagnostic products are
marketed
and shipped directly from the manufacturer to the end user. Centralized
nuclear
pharmacy programs are generally maintained by three companies: Mallinckrodt
Nuclear ("Mallinckrodt"), Amersham (Medi-Physics), and Syncor International
Corporation ("Syncor"). These companies, and a few independent distributors
with
similar programs, custom deliver radiopharmaceuticals in specific dosages to
medical professionals in the immediate vicinity of a nuclear pharmacy.
The Company's Products.
In 1982, the Company received approval from the FDA on its New Drug
Application ("NDA") for I-123 Capsules. I-123 Capsules are used for detection
of thyroid abnormalities. I-123 Capsules are the only drug product currently
manufactured by the Company and are primarily marketed and distributed in the
United States through Syncor, a national radiopharmaceutical distribution
company. The Company also has an approved New Drug Submission ("NDS") in
Canada
for I-123 Capsules, allowing distribution of I-123 Capsules in Canada. I-123
Capsules are marketed and distributed in Canada through Mallinckrodt of
Canada.
The Company also possesses an approved NDA for Stannous Macro-aggregated
Albumin ("SnMaa") a product used for detecting lung disorders. Although the
Company has an approved NDA for SnMaa, in order for the Company to manufacture
or sell SnMaa the Company would have to have its manufacturing facility
approved
by the FDA for the manufacture of SnMaa. Because of uncertain market
conditions
for SnMaa, the Company does not presently intend to seek approval to
manufacture
or market SnMaa.
The Company is also engaged in the receipt, processing, and shipment of
radiochemical products under its current approved radiochemical license. The
radiochemical is primarily used by licensed medical facilities involved in
research and development.
Manufacturing.
Because of the short half-life (13.2 hours) of the radioisotope I-123,
the
Company's manufacturing operations are scheduled so as to maximize the
distributionsystem for the I-123 Capsules while maintaining a high level of
quality.
The manufacturing process begins with the production of the radioactive
isotope in a cyclotron. The cyclotron process involves the bombardment of a
non-
adioactive "target" with protons at high velocity which transforms the target
into the radiochemical Sodium Iodide I-123. Since 1987, the Company's
exclusive
supplier of this radiochemical has been Nordion International, Inc.
("Nordion").
Nordion is recognized in the radiochemical industry for producing
exceptionally
pure radioisotopes in commercial quantities. Nordion possesses multiple
isotope
manufacturing facilities which helps to ensure that the Company has an
uninterrupted supply of the isotope. All raw material is purchased on a
weekly
basis by the Company.
The techniques and methods used for the manufacture of I-123 Capsules are
extensively regulated by the FDA. The Federal Food, Drug and Cosmetic Act,
the
Public Health Service Act and other federal statutes and regulations govern or
influence the testing, manufacture, safety, labelling, storage, record
keeping,
approval, advertising and promotion of such products. Noncompliance with
applicable requirements can result in fines, recall or seizure of products,
refusal of the government to approve product approval applications or to allow
the Company to enter into government supply contracts, withdrawal of
previously
approved NDA's and criminal prosecution. The FDA also has the authority to
revoke biological product licenses and establishment licenses previously
granted.
The Company's plant in Golden, Colorado, including personnel, equipment
and
processes therein, is subject to FDA regulations regarding current Good
Manufacturing Practices ("cGMP") and FDA approved Standard Operating
Procedures.
The production process takes approximately twelve hours from start to finish.
The I-123 Capsules are shipped to hospitals within twenty-four hours after
quality control release. The I-123 Capsules' labeled time of expiration is
approximately thirty-two hours thereafter.
In 1994 the Company installed a state-of-the-art automated capsule
manufacturing system. The system is controlled by a programmable logic
controller integrated with a mechanical capsule dosing and joining mechanism.
The system will allow for more efficient production and control of the
manufacture of I-123 Capsules, while substantially reducing the amount of time
spent handling the radioisotope by the Company's personnel. The system is
currently undergoing operational testing and validation by the Company for
subsequent implementation, which is currently expected to be in mid 1996.
QCP is licensed by the FDA as a manufacturer of repackaged prescription
drugs. QCP purchases bulk quantities of certain pharmaceuticals and repackages
them into smaller dispensing units for sale to its customers. QCP's
repackaging
facility, located in Huntington Beach, California, is licensed by the FDA, the
United States Drug Enforcement Administration and the California Health and
Services Department and maintains rigid quality control standards.
Distribution.
The Company's label on the I-123 Capsules is "Highest Purity, Highest
Quality, and Lowest Radiation Dose." The Company manufactures I-123 Capsules
under its own label. The Company sells the I-123 Capsules primarily to
Syncor,
as well as directly to hospitals and pharmacies in territories not serviced by
Syncor. The Company processes and manufactures capsules against customers'
weekly standing orders. I-123 Capsules are packaged to precisely meet the
needs
of distributors and customers and shipped nationally in Department of
Transportation approved containers by common carrier air transportation and
locally by van in smaller shielded containers. The entire process from
isotope
production to receipt of the I-123 Capsules by customers occurs in less than
twenty-four hours, four days a week.
QCP ships all orders for its products via United Parcel Service or other
types of overnight delivery services. . QCP's goal is to ship orders within
twenty-four hours of receipt of the order.
Suppliers.
The Company's exclusive supplier of the radiochemical Sodium Iodine I-123
is Nordion. The radiochemical is shipped by common carrier air transportation
from Nordion's plant in Vancouver, Canada in shielded containers to the
Company's
facility in Golden, Colorado. The Company believes its relationship with
Nordion
to be good.
QCP purchases pharmaceuticals from a number of FDA licensed American drug
manufacturers. QCP's largest supplier is Moore Medical Corporation located in
New
Britain, Connecticut and accounts for 20% of its inventory. QCP believes its
relationship with its suppliers to be good.
Backlog.
The Company does not have a backlog but operates on a standing order
basis
with its customers. Because of the short-lived characteristics of the I-123
Capsules, it must be shipped and consumed shortly after delivery to the
hospital.
Patients are scheduled by hospitals and clinics in recognition of the
short-lived
characteristics of I-123 Capsules.
Marketing.
The Company presently markets I-123 Capsules primarily through Syncor.
The
Company also markets directly to hospitals and pharmacies in territories that
are
not serviced by Syncor. Although management has from time to time considered
implementing a program for direct marketing and distribution of the I-123
Capsules to hospitals and pharmacies, it has determined that distributing the
I-
123 Capsules primarily through distributors such as Syncor is currently the
most
cost-effective alternative for the Company.
QCP markets its products primarily through independent sales
representatives who are paid commissions only.
Patent and Trademarks.
The I-123 Capsules are not protected by patent. Patent protection on
radio-
pharmaceuticals has been generally nonexistent since development in the field
arose out of individual research and private and institutional laboratories
with
results of formulation and processes published extensively. Further new
developments may be the subject of patent protection and may be a significant
factor in the business as a result of radiochemicals being used in combination
with genetic and other man-made biological chemicals.
It is the Company's opinion that brand name competition is not a
significant
factor in the marketing of radiopharmaceuticals and that product purity
specifications are more important to nuclear medicine.
Research and Development.
The Company is not currently conducting any significant research and
development activities.
Competition.
In the radiopharmaceutical industry the Company competes with companies
that
have substantially greater financial, technical, manufacturing, marketing,
distribution and other resources than the Company. In addition, the Company's
products may be subject to competition from products using techniques other
than
those developed by the Company or based on advances that may render the
Company's
I-123 Capsules obsolete. However, the Company is not currently aware of any
competitive products.
All the major manufacturers of radiopharmaceutical products produce various
radioisotopes from cyclotrons which they own. In contrast, the Company
obtains
its supply of radioisotopes from Nordion. Accordingly, the Company has less
control over the availability and price of its raw materials. However, the
Company has a long-term supply contract with Nordion and the Company believes
that the isotope supplied by Nordion provides greater purity in the finished
product than that of its competitors' products. Also, the Company believes
that
Nordion is a very reliable supplier because Nordion has two cyclotrons and the
Company is Nordion's largest customer for the radioisotope used for the
production of I-123 Capsules.
Because of the different dosage strengths available and the marketing
tactics of the Company's competitors, a direct price comparison is not
feasible.
However, the Company believes that the I-123 Capsules are priced
competitively.
Further, the cost of the capsule to the patient is less than 10% of the total
cost of the diagnostic procedure.
QCP competes with other repackagers of pharmaceuticals, including Allscrips
Pharmaceuticals, Inc. and PDRx. QCP believes it compares favorably with its
competitors on such factors as price, service and delivery, credit terms,
breadth
of product lines and customer support.
Government Regulations
The drug and radiopharmaceutical industries are highly regulated by federal
and state regulatory bodies. The Company's manufacturing is regulated
primarily
by the FDA and the Nuclear Regulatory Commission. The Department of
Transportation and Federal Aviation Administration regulate the transportation
of radioactive materials over land and through the air. The Company also has
to
comply with rules and regulations of the Environmental Protection Agency
concerning the storage and disposal of hazardous waste. In addition, it must
comply with all states that have regulatory agreements with any of the Federal
agencies as well as specific state agencies within the State of Colorado.
Companies in the drug industry must obtain approval primarily from the FDA
before any commercial activities can commence with a new product. In order to
obtain FDA approval or clearance of a new product, a Company must submit proof
of safety, purity, potency, and efficacy. In most cases such proof entails
extensive pre-clinical chemistry, clinical, and laboratory testing. The
testing,
preparation of necessary applications, and processing of those applications by
the FDA is expensive and time consuming and may take several years to
complete.
The FDA may also require post-marketing testing and surveillance to monitor
the effects of approved products and/or place conditions on any approvals that
could restrict the commercial applications of such products. The FDA has the
power to prevent or limit further marketing of the product based on the
results
of these post-marketing programs. I-123 Capsules approvals may be withdrawn
if
compliance with regulatory standards is not maintained or if problems occur
following initial marketing.
The Company's manufacture and distribution of the I-123 Capsules is
regulated
by the FDA and subject to approved Standard Operating Procedures. In
addition,
manufacturing takes place under a Quality Control and Quality Assurance
program
which provides for the continuous checking and testing of the product. The
manufacture of the I-123 Capsules is subject to all the same requirements of
any
drug manufacturer under cGMP guidelines as established by the FDA.
With respect to QCP's business, the United States Drug Enforcement
Administration, the FDA and various state bureaus of pharmacy regulate the
distribution of pharmaceutical products and controlled substances, requiring
distributors of such to register for permits and to meet various security and
operating standards. QCP has received all necessary regulatory approvals and
believes it is in substantial compliance with all applicable requirements.
Any change in government regulations cannot be predicted. The Company also
cannot predict whether any agency will adopt regulations that will have a
material
effect on the Company's or QCP's operations.
In addition, a variety of state and local permits are required under
regulations relating to the Company's and QCP's products.
Product Liability and Insurance
Each of the Company and QCP currently maintain product liability insurance
in the aggregate amount of $2 million per occurrence and per year with a
$5,000
deductible.
Employees
As of November 21, 1995 the Company employed nineteen (19) persons on a
full
time basis. Additional employees are hired from time to time during peak
production periods. As of November 21, 1995, QCP employed fifty (50) persons,
of
which forty (40) are employed on a full-time basis. None of the Company's or
QCP's employees are represented by a union or collective bargaining unit and
management considers relations with employees to be good.
Additional Information
Compliance with federal, state and local regulations regarding the
discharge
of materials into the environment or otherwise relating to the protection of
the
environment has not had, and is not expected by the Company to have, any
adverse
effect on capital expenditures, earnings or the competitive position of the
Company. The Company is not presently a party to any litigation or
administrative
proceeding with respect to its compliance with such environmental standards.
In
addition, the Company does not anticipate being required to expend any funds
in
the near future for environmental protection in connection with its
operations.
Item 2. Description of Properties
The Company's manufacturing and processing facility and administrative
offices are housed in two separate buildings in Golden, Colorado. The
manufacturing and processing facility, which is approximately 14,000 square
feet,
and the administrative offices, which are approximately 2,000 square feet,
were
purchased in 1983. The Company's equipment consists primarily of laboratory
equipment.
QCP leases a 8,500 square foot facility in Huntington Beach, California
pursuant to a lease which expires in April,1997. QCP is currently negotiating
a
lease on a 25,000 square foot facility and anticipates moving its operations
to
the new facility in early 1996. QCP intends to sublease its Huntington Beach
facility for the reaminder of the lease.
The Company believes that its facilities and equipment are well maintained
and
in good operating condition and will satisfy its current manufacturing and
processing needs.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
An Annual Meeting of Shareholders of the Company was held on August 11,
1995
for the purpose of electing directors, adopting a proposal to amend the
Company's
Articles of Incorporation to effect a reverse stock split of its common stock
in
a ratio not to exceed forty-for-one and to ratifying the appointment of the
Company's independent auditors. The following sets forth each of the
proposals
that the Shareholders were asked to vote upon and the results of the meeting:
1. Proposal to elect four directors to the Board of Directors:
Directors,Grant Authority
,Withhold Authority
Charles R. Drummond,73,574,918,198,269
Ladd A. Drummond,73,261,093,512,094
John H. Grant,73,578,468,194,719
Richard G. Wahl,73,179,338,593,849
2. Proposal to approve an amendment to the Company's Articles of
Incorporation to effect a reverse stock split in a ratio not to exceed
forty-for-
one:
,Shares Voted
For
,Shares
Voted Against,Shares Voted Abstained,
Broker
Non Votes
,72,617,897,980,580,174,708, 2
3. Proposal to ratify the Board of Directors selection of Grant Thornton
LLP
as the Company's independent auditors for the fiscal year ending August 31,
1995:
,Shares Voted
For
,Shares
Voted Against,Shares Voted Abstained,
Broker
Non Votes
,73,432,158, 83,439,257,588, 2
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The Company's common stock is traded in the over-the-counter market and is
quoted on the "OTC Bulletin Board" under the symbol "GPHI." The following
table
sets forth the high and low closing bid prices for the periods indicated, as
reported by the OTC Bulletin Board.
For year ended August 31, 1994 High Low
1st Quarter$.03$.01
2nd Quarter .03 .01
3rd Quarter .03 .01
4th Quarter .03 .01
For year ended August 31, 1995 High Low
1st Quarter $.03 $.02
2nd Quarter .02 .02
3rd Quarter * *
4th Quarter .08 .03
________________
* No quotes reported.
These quotations are inter-dealer prices without retail markup, markdown
or
commissions, and may not necessarily represent actual transactions.
As of November 21, 1995, there were approximately 2800 shareholders of
record
of the Company's common stock.
The Company has never paid cash dividends. The Board of Directors of the
Company currently anticipates that it will retain all available funds for use
in
the operation of the business and does not anticipate paying any cash
dividends in
the foreseeable future. The payment of cash dividends is restricted by the
Company's loan agreements with the Bank.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the selected
financial data and the financial statements and notes thereto filed herewith.
Results of Operations.
Fiscal Year Ended August 31, 1995 Compared to Fiscal Year Ended August
31,
1994.
Net Sales. Net sales for the fiscal year ended August 31, 1995 increased
to
$4,412,377 compared to $3,451,020 for the fiscal year ended August 31, 1994.
The
increase of $961,357 or 27.9% is primarily attributable to the consolidation
of the
operations of QCP with the Company's for the period August 1, 1995 to August
31,
1995, which represents $755,350 of the increase, and an increase in demand for
the
Company's product from its primary distributor.
Cost of Sales. Cost of sales as a percent of net assets was 50.9% for
the
fiscal year ended August 31, 1995 as compared to 45.9% for the same period in
1994.
This increase was primarily the result of the consolidation of QCP's
operations
with the Company's for the period August 1, 1995 to August 31, 1995. Cost of
sales
for the fiscal year ended August 31, 1995 was 47% prior to the consolidation.
Selling General and Administrative. Selling, general and administration
expenses ("SG&A") were $1,255,645 for the fiscal year ended August 31, 1995 as
compared to $1,037,502 for the fiscal year ended August 31, 1994. SG&A for
the
fiscal year ended August 31, 1995 were less than the prior period before
expenses related to (i) expansion of the Company's Quality Assurance and
Regulatory
Affairs departments through the hiring of two new employees; (ii) expenses
incurred
during the fiscal year ended August 31, 1995 for travel, due diligence, legal
fees,
accounting fees and consulting fees in connection with the Company's ongoing
efforts to expand its business through the acquisition of additional product
lines
or companies in the pharmaceutical industry.
Net Income. The Company reported net income of $978,574 in the fiscal
year
ended August 31, 1995 as compared to $1,329,112 for the same period in 1994.
The
decrease of $350,538 or 26.4% was attributable to not only the items listed
above,
but also do to the recognition of a greater tax benefit relating to the
Company's
net operating loss carryforward for the fiscal year ended August 31, 1994
Fiscal Year Ended August 31, 1994 Compared to Fiscal Year Ended August
31,
1993.
Net Sales. Net sales for the fiscal year ended August 31, 1994 were
$3,451,020 as compared to $3,253,584 for the fiscal year ended August 31,
1993.
This represents an increase of $197,436 or 6.1% which is primarily
attributable to
an increase in demand for the Company's products from the Company's primary
distributor.
Cost of Sales. Cost of sales as a percent of net sales were 45.9% for
the
fiscal year ended August 31, 1994 as compared to 50.4% for the fiscal year
ended
August 31, 1993. The decrease in the cost of sales as a percentage of net
sales
in the fiscal year ended August 31, 1994 was caused by several items. First,
labor
costs for the production of the I-123 Capsules was reduced without any
reduction
in the quality of the product. Second, increased sales volumes allowed fixed
costs
to be spread over more capsules thus improving the Company's margins and
allowed
the Company to reach volume discount levels with many different vendors. For
example, the Company's contract for raw materials has various cut-off points
resulting in quantity discounts. Based on this pricing structure, it is more
profitable for the Company to purchase raw material over and above the
requirements
for production. As volumes of sales increase, the Company uses this excess raw
material and thereby reduces its percentage of cost of sales to net sales.
Selling General and Administrative. Selling, general and administrative
expenses ("SG&A") were $1,255,245 for the fiscal year ended August 31, 1994 as
compared to $1,282,686 for the fiscal year ended August 31, 1993 or a 19.1%
decrease from the fiscal year ended August 31, 1993 to the fiscal year ended
August
31, 1994.
The decrease in SG&A for the fiscal year ended August 31, 1994 as
compared to
the fiscal year ended August 31, 1993, was due in part to recording $80,000
for
land expenses relating to the Company's land agreement dated November 4, 1991
in
the fiscal year ended August 31, 1993. (See "Note H to Consolidated Financial
Statements"). Also, there was a reduction in personnel during the fiscal year
ended August 31, 1994 as a part of management's ongoing efforts to reduce
overhead
costs and increase profitability of the Company.
Interest Expense. Interest expense for the fiscal year ended August 31,
1994
was $83,949 as compared to $136,338 for the fiscal year ended August 31, 1993.
The
decrease of $52,389 in the fiscal year ended August 31, 1994 as compared to
the
fiscal year ended August 31, 1993 was caused by reduction in long-term debt of
approximately $600,000.
Net Income. The Company reported net income of $1,329,112 for the fiscal
year
ended August 31, 1994 as compared to $418,590 for the fiscal year ended August
31,
1993. The increase of $910,522 or 217.5% for the fiscal year ended August 31,
1994
as compared to the fiscal year ended August 31, 1993 was due in part to
increased
sales resulting from increased demand for the Company's product. In addition
the
Company settled disputed notes payable, long-term debt payable and various
accounts
payable, resulting in extraordinary income of $76,560 during the fiscal year
ended
August 31, 1994. Also, in compliance with FASB 109, the Company recorded a
tax
benefit of $500,000 relating to the Company's large net operating loss
carryforward.
Liquidity and Capital Resources.
The following table is presented to facilitate the discussion of the
Company's
current liquidity and sets forth the Company's liquidity position as of August
31,
1995 as compared to August 31, 1994.
,August 31, 1995,August 31, 1994
Current Assets, $2,656,600*, $952,584
Current Liabilities,2,040,931, 428,703
Net Working Capital, $ 615,669, $523,881
* Includes $380,000 of deferred taxes per FASB 109 resulting from the
Company's
substantial net operating loss carryforward.
The $1,704,016 or 178.9% increase in current assets at August 31, 1995 as
compared to August 31, 1994 was primarily the result of the consolidation of
the
current assets of QCP with the Company's which represented $1,607,038 of the
increase. Current liabilities increased by $1,612,228 or 376.1% which
resulted
in a working capital position of $615,669 and a current ratio of 1.30:1. The
increase in current liabilities was primarily the result of the consolidation
of
the current liabilities of QCP with the Company's at August 31, 1995 which
represents $1,434,489 of the increase.
To facilitate the financing of the acquisition of QCP, to refinance
existing debt of the Company and QCP and to provide working capital for the
Company and QCP, the Company obtained the Term Loan and the Revolving
Facility.
Interest on the Term Loan is payable at the Bank prime plus 3% (which totalled
11.75% at August 31, 1995). The Term Loan is payable in sixteen quarterly
installments of $125,000 to be made August 1, 1996 through August 1, 2000 with
a lump sum payment of $2,000,000 due in August 2000. The Revolving Facility
is
payable at the Bank prime plus 2% andexpires in August, 2000. At August 31,
1995
the balance on the Revolving Facility was $343,454 and the interest rate was
10.75%. The Company has an additional term loan of $400,000 with an interest
rate at the Bank prime plus 3% (which totalled 11.75% at August 31, 1995) and
which is payable in monthly installments of $6,667 through August 1, 2000.
In November 1991, the Company entered into an Agreement Limiting
Execution
on Judgment (the "Settlement Agreement") in settlement of the matter of New
Crawford Valley Ltd. v. Benedict Nuclear Pharmaceuticals, Inc. and Golden
Research Corporation. Under the terms of the Settlement Agreement the Company
transferred certain undeveloped land (the "Property") to an entity controlled
by
New Crawford Valley, Ltd. ("New Crawford") to market the Property and
distribute
the proceeds from the sale of the Property to the mortgage holders on the
Property and in satisfaction of New Crawford's judgment against the Company.
Under the Settlement Agreement the Company was contingently liable to the
extent
proceeds from the sale or transfer of the Property were less than $2,715,000
($1,015,000, plus interest, payable on the first mortgage and $1,700,000
payable
to New Crawford). In August 1995, the Company, Golden Research Corporation
("GRC"), GHC, Inc. ("GHC"), Charles R. Drummond, New Crawford and Gulch
Holdings
Company entered into a First Amendment to Agreement Limiting Execution on
Judgment (the "Amendment") whereby GHC has assumed the obligations of the
Company
under the Settlement Agreement. Pursuant to the Amendment, GHC has been
substituted as a defendant to the lawsuit and the Company and GRC have been
dismissed as parties to the lawsuit. In exchange, the Company issued
2,000,000
shares of its common stock to GHC, upon which New Crawford may execute its
judgment in the event GHC defaults under the Settlement Agreement. These
shares
are required to be transferred back to the Company at such time as New
Crawford
has executed and filed an acknowledgment of the complete satisfaction of the
judgment. Mr. Charles R. Drummond is the sole shareholder of GHC and he has
personally guaranteed the obligations of GHC under the Amendment. See
"Certain
Relationships and Related Transactions."
As of August 31, 1995, the Company has two notes receivable agreements
totalling $165,000 from Harvey G. Mozer, an individual. Mr. Mozer is a
principal
of New Crawford, and an officer and director of Gulch Holdings Company. These
loans are evidenced by promissory notes in the principal amounts of $85,000
and
$80,000, respectively, with $85,000 note providing for interest on the unpaid
principal balance at the prime rate plus 1% as charged by the Company's bank
(totalling 9.75% at August 31, 1995). The $80,000 note is without interest.
The
notes mature on December 31, 1995 and February 29, 1996, respectively.
The Company's long term debt, including the current portion thereof, at
August 31, 1995 consisted of notes payable to the Bank totaling $4,761,945
incurred primarily as a result of the Acquisition.
The Company has capitalized leases and operating leases for equipment,
facilities and vehicles used in its business. Minimum lease payments for its
capitalized and operating leases are expected to be $52,227 and $80,704,
respectively, for the fiscal year ending August 31, 1996.
As of August 31, 1995, the Company had net operating loss carryforwards
of
approximately $17,467,000 available to reduce taxable income through 2006 for
federal and state income tax reporting purposes.
The Company believes that the Revolving Facility with the Bank, the line
of credit with the Chairman and net cash provided from operating activities
will
provide sufficient sources of liquidity to fund the Company's future financial
requirements. In the event that the Company should require significant
expansion
of its business resulting in additional capital requirements, the Company
would
attempt to finance such expansion through the placement of debt or equity.
However, there can be no assurance that the Company will be able to secure
such
financing.
The Company's long-term capital expenditure requirements will depend upon
numerous factors, including the demand for the Company's product and any
expansion activities. The Company currently has no commitments or
arrangements
for raising additional capital.
Item 7. Financial Statements
The financial statements of the Company are attached to this Report.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons of the
Registrant; Compliance with Section 16(a) of the Exchange Act
The following persons hold the positions indicated.
Name and Age,Principal Occupation or Employment During the Past Five Years;
Other
Directorships ,
Director
Since
Charles R. Drummond
(52),Chairman of the Board of Directors, Chief
Executive Officer, President and
Treasurer of the Company since 1992.
Owner and operator of Drummond Ranches, a
cattle ranching operation in Pawhuska,
Oklahoma, since 1965. Partner in
Drummond and Hull Oil Company.,1991
Ladd A. Drummond
(26),Director. Manager and co-owner of the
Bricktown Waterworks Restaurant in
Oklahoma City since February 1993.
Co-owner of Drummond Land and Cattle
Company since January 1991.,1994
Bruce A. Goldberg
(50),Chief Operating Officer and Vice
President, Business Development of the
Company since February, 1994. Director
of Reagent Operation at Lifescan, Inc.
from 1989 to 1994.,N/A
Arch G. Gothard III
(50),Director. President of First Kansas,
Inc. since October 1988. Mr. Gothard is
also a director for First State Bank,
Community Bank of Kansas, Emery Leasing
Co., Inc., Kenco Plastics, Inc., LDI,
Inc., Pay Phone Concepts, Inc. and
Collins Industries, Inc.,1995
John H. Grant
(53),Director. Professor of Business
Administration, University of Pittsburgh,
Pennsylvania since January 1972.
,1990
Richard G. Wahl
(59),Director and Corporate Secretary. Owner
and President of MRD Construction
Incorporated, since 1964. Mr. Wahl also
serves as managing partner of both G & W
Construction of Evergreen, Colorado, and
Willow Ridge Conference Center of
Morrison, Colorado.,1993
Glen H. Weaver
(40),Vice President, Finance and Controller of
the Company since 1994. Controller for
Border Fuel Supply Corporation from
August 1, 1989 to November 15, 1993.
,N/A
At each annual meeting of shareholders, the successors to the
directors
whose terms then expire are elected to hold office for a term expiring at the
next succeeding annual meeting. Each director holds office until their
respective successors have been evaluated and qualified. Officers are elected
annually by the Board of Directors and hold office until their successors are
duly elected and qualified.
Charles R. Drummond and Ladd A. Drummond are father and son. There
are no
other family relationships between any of the directors and executive officers
of the Company.
Reports under Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder
require the Company's officers and directors, and persons who own more than
ten
percent of a registered class of the Company's equity securities, to file
reports
of ownership and changes in ownership with the Securities and Exchange
Commission
and with the NASDAQ and to furnish the Company with copies.
Based solely on its review of the copies of the Section 16(a) forms
received
by it, or written representations from certain reporting persons, the Company
believes that, during the last fiscal year, all Section 16(a) filing
requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with except for the following: (i) Glen H. Weaver filed a
late
Form 5 regarding two transactions, (ii) Bruce A. Goldberg filed a late Form 5
regarding one transaction, (iii) Charles R. Drummond filed a late Form 5
regarding
one transaction, (iv) Ladd A. Drummond filed a late Form 5 regarding one
transaction, (v) Timothy E. Drummond filed a late Form 5 regarding one
transaction
and (vi) Drummond Land & Cattle Co. filed a late Form 5 regarding one
transaction.
Item 10. Executive Compensation
The following table sets forth certain information concerning
compensation
paid by the Company to the Chief Executive Officer and any executive officer
whose
total annual salary and bonus exceeded $100,000 for the last fiscal year:
Summary Compensation Table
(a)
Name and
Principal Position,
(b)
Year,
Annual
Compensation
(c)
Salary ($),
(d)
Bonus ($),Long-Term
Compensation
Awards
(g)
Securities
Underlying
Options/SARs (#),
(i)
All Other
Compensation ($)
Charles R. Drummond, Chairman, Chief Executive Officer, President and
Treasurer ,1995
1994
1993, 103,750
75,000
75,000,-0-
50,000
-0-,-0-
-0-
10,000,000,-0-
20,000(1)
31,500(2)
Bruce A. Goldberg
Chief Operating Officer and Vice President, Business Development,1995
1994, 96,000
56,000,13,333
-0-, -0-
6,000,000,-0-
-0-
__________
(1) $20,000 fee paid for securing a line of credit.
(2) Payments of certain legal expenses incurred by Mr. Charles R. Drummond in
connection with the conversion of debt and securities of the Company and
related
matters.
The foregoing compensation tables do not include certain fringe benefits made
available on a nondiscriminatory basis to all Company employees such as group
health insurance, dental insurance, long-term disability insurance, vacation
and
sick leave. In addition, the Company makes available certain non-monetary
benefits
to its executive officers with a view to acquiring and retaining qualified
personnel and facilitating job performance. The Company considers such
benefits
to be ordinary and incidental business costs and expenses. The aggregate
value of
such benefits in the case of each executive officer and of the group listed in
the
above table, which cannot be precisely ascertained but which is less than the
lesser of (a) ten percent of the cash compensation paid to each such executive
officer or to the group, respectively, or (b) $50,000, or $50,000 times the
number
of individuals in the group, as the case may be, is not included in such
table.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
(a),(d)
Number of Securities Underlying Unexercised
Options at Fiscal Year End
(#), (e)
Value of Unexercised
In-the-Money Options at
Fiscal Year End ($)(2)
Name,Exercisable,Unexercisable,Exercisable,Unexercisable
Charles R. Drummond,10,000,000,-,$450,000,$ -0-
Bruce A. Goldberg,1,200,000,4,800,000(1),66,000,264,000
__________
(1) 20% vests each year beginning March 4, 1995 through March 4, 1999.
(2) Values based on the average of the bid and ask prices of the Company's
common
stock on August 31, 1995.
Employment Agreements.
On September 1, 1991 the Company entered into an employment agreement
with Mr.
Charles R. Drummond whereby Mr. Charles R. Drummond was employed by the
Company
beginning on September 1, 1991 for a period of three years or the termination
of
the employment agreement. Pursuant to the terms of the agreement, Mr.
Drummond's
duties are to act as Chairman of the Board and Secretary of the Company. The
agreement provides that Mr. Charles R. Drummond will be paid an annual salary
of
$75,000, subject to periodic increases from time to time at the sole
discretion
of the Board. The agreement provides that Mr. Charles R. Drummond's
employment
with the Company may be terminated for cause, as defined therein. If Mr.
Charles
R. Drummond's employment is terminated without cause, the Company shall pay
Mr.
Charles R. Drummond, in addition to amounts accrued during the respective
periods
prior to such termination, severance pay in an amount equal to the amount of
compensation that would otherwise be payable to Mr. Charles R. Drummond under
the
agreement. The Board and Mr. Charles R. Drummond have agreed to extend the
employment agreement on a year to year basis. Mr. Charles R. Drummond's
salary for
the period of September 1, 1995 through August 31, 1996 will be $150,000.
In October 1992, the Company adopted a Performance Stock Option Plan (the
"Plan"), approved by the shareholders, for the benefit of employees, officers
and
directors of the Company, including the executive officers referred to in the
Summary Compensation Table. The Stock Option Committee of the Board of
Directors
selects the optionees and determines the terms and conditions of the stock
option
grants. As of August 31, 1995, options to purchase 450,000 shares of common
stock
were outstanding pursuant to the Plan.
Compensation of Directors.
Directors who are not employees of the Company are entitled to $1,500 for
each
board meeting attended in person, and $500 for each committee meeting attended
in
person plus reimbursement for travel and other expenses relating to attendance
at
the meeting.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of outstanding shares of common stock as of November 21, 1995, by
(i) each person who is known by the Company to own beneficially more than five
percent of the outstanding shares of the Company's common stock, (ii) the
Company's directors, Chief Executive Officer and executive officers whose
total
compensation exceeded $100,000 for the last fiscal year; and (iii) all
directors
and executive officers as a group.
Shares
Name Beneficially Owned Percent of Class
Drummond Land & Cattle Co. 21,000,000 22.00%
623 Kihekah
Pawhuska, Oklahoma 74056
Timothy E. Drummond(1)(2) 23,870,124 25.00%
623 Kihekah
Pawhuska, Oklahoma 74056
Charles R. Drummond(1)(2) 50,000,000 44.66%
1313 Washington Avenue
Golden, Colorado 80401
John H. Grant (1) 2,115,507 2.25%
1313 Washington Avenue
Golden, Colorado 80401
Richard G. Wahl(1) 3,075,052 3.27%
1313 Washington Avenue
Golden, Colorado 80401
Ladd A. Drummond(1)(2) 24,025,974 26.00%
1313 Washington Avenue
Golden, Colorado 80401
Arch G. Gothard III(1) 1,124,575 1.00%
1313 Washington Avenue
Golden, Colorado 80401
Bruce A. Goldberg(1) 1,311,000 1.38%
1313 Washington Avenue
Golden, Colorado 80401
All executive officers 59,721,533 52.77%
and directors as a group
(seven persons)(1)(2)
__________
(1) Shares are considered beneficially owned, for purposes of this table,
only if
held by the person indicated, or if such person, directly or indirectly,
through
any contract, arrangement, understanding, relationship or otherwise has or
shares
the power to vote, to direct the voting of and/or to dispose of or to direct
the
disposition of, such security, or if the person has the right to acquire
beneficial
ownership within 60 days, unless otherwise indicated. The foregoing share
amounts
include the following number of shares of common stock which may be acquired
pursuant of stock options and/or warrants exercisable within 60 days of
November
21, 1995; Mr. Charles R. Drummond, 18,000,000 shares; Mr. Goldberg, 1,200,000
shares; and all executive officers and directors as a group, 19,220,000
shares.
(2) Includes 21,000,000 shares owned by Drummond Land & Cattle Co., a general
partnership of which Charles R. Drummond, Ladd A. Drummond and Timothy E.
Drummond
are general partners.
Item 12. Certain Relationships and Related Transactions
Since January 1, 1991, Mr. Charles R. Drummond has loaned the Company
$304,066. The loans were evidenced by two promissory notes (i) one in the
principal amount of $56,122 bearing interest at prime; and (ii) one in the
principal amount of $247,944 bearing interest at 12% (the "Notes"). During
the
fiscal year ended August 31, 1993 and 1994 the Company paid $50,000 and
$15,000,
respectively, on the Notes. The $15,000 paid in the fiscal year ended August
31,
1994 was paid through the issuance of 750,000 shares of common stock. In
March,
1994, Mr. Charles R. Drummond converted the remaining $280,000 of principal
and
accrued interest into 14,000,000 shares of common stock.
At the annual meeting of the Company's shareholders held March 4, 1994,
the
Company's shareholders approved amendments to the Company's Articles of
Incorporation to (i) increase the authorized common stock from 50,000,000
to 200,000,000 shares; and (ii) change the name of the Company to Golden
Pharmaceuticals, Inc. The increase in the authorized shares permitted the
Company
to carry out an agreement with Mr. Charles R. Drummond, an officer and
director of
the Company, to (A) exchange $280,000 of debt and accrued interest owed to Mr.
Charles R. Drummond for (i) 14,000,000 shares of the Company's common stock at
a
price of $.02 per share and (ii) a grant of an option to acquire 10,000,000
shares
of common stock at the closing market price per share on September 1, 1994;
and
(B) issue shares of common stock to Messrs. Drummond and Wahl, directors, and
the
holders of all the outstanding shares of Class A Convertible Preferred Stock,
40,000 and 8,000 shares respectively, upon conversion of their shares of Class
A
Convertible Preferred Stock into 10,000,000 and 2,000,000 shares of common
stock,
respectively.
In August 1995, the Company issued 2,000,000 shares of its common stock to
a
corporation of which Mr. Charles R. Drummond is the sole shareholder in order
to
have the Company released from a contingent liability. These shares will
transfer
back to the Company when the judgement is completely satisfied. The Company
retained voting rights to these shares and dividends, if any, related to these
shares are paid to the Company. See "Liquidity and Capital Resources."
In November 1995, the Company issued Mr. Charles R. Drummond a warrant to
purchase 8,000,000 shares of the Company's common stock with an exercise price
of
$.075 per share. The Warrant was issued in consideration of certain personal
guarantees extended by Mr. Charles R. Drummond in connection with the
Amendment and
expires ten years from the date of grant.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) The following documents of the Company are filed as a part of this
Report
1. Financial Statements
2. Financial Statement Schedules
Schedules for which provision is made in the applicable regulations of
the
Securities and Exchange Commission have been omitted because they are not
required
under the related instructions or the information related is contained
elsewhere
in the financial statements.
3. Exhibits
Exhibit No. Description
*3.1 Articles of Incorporation filed October 4, 1973.
*3.2 Articles of Amendment to Articles of Incorporation filed
December
22, 1976.
*3.3 Articles of Amendment to Articles of Incorporation filed
August
25, 1978.
*3.4 Articles of Amendment to Articles of Incorporation filed
June 15,
1979.
*3.5 Articles of Amendment to Articles of Incorporation filed
January
12, 1981.
*3.6 Articles of Amendment to Articles of Incorporation filed
June 16,
1987.
*3.7 Articles of Amendment to Articles of Incorporation filed
October
9, 1992.
*3.8 Certificate of Designation of 15%/30% Cumulative Convertible
Preferred Stock filed December 9, 1987.
*3.9 Corrected Certificate of Designation of 15%/30% Cumulative
Convertible Preferred Stock filed December 14, 1987.
*3.10 Corrected Certificate of Designation of 15%/30% Cumulative
Convertible Preferred Stock filed February 5, 1988.
+3.11 Certificate of Designation of Class A Convertible Preferred
Stock
filed October 12, 1990.
**3.12 Second Amended and Restated Bylaws
*4.2 Specimen Certificate for Common Stock, no par value per
share.
*10.1 Approval by Food and Drug Administration of the Company's
New Drug
Application (NDA) for Sodium Iodide I-123 dated May 27,
1982.
*10.2 Agreement Limiting Execution on Judgment dated November 4,
1991
and Addendum A thereto by and among the Company, GRC, New
Crawford
Valley, Ltd. and Gulch Holdings Company.
**10.3 Amended and Restated Distribution Agreement between the
Company
and Syncor dated June 1, 1995.
+10.4 Option to lease between the Company and Syncor dated July,
1991.
++10.5 Agreement between the Company and Nordion dated June 10,
1992.
+++10.6 Stock Purchase Agreement dated June 7, 1995 by and among the
Company, Quality Care Pharmaceuticals, Inc., Daniel B.
Guinn, Gary
A. Klingsheim, Michael S. Mendelsohn and the Shareholders
listed on
Schedule A thereto.
**10.7 Employment Agreement between Quality Care Pharmaceuticals,
Inc.
and Charles R. Drummond.
**10.8 Employment Agreement between Quality Care Pharmaceuticals,
Inc.
and Daniel B. Guinn.
**10.9 Employment Agreement between Quality Care Pharmaceuticals,
Inc.
and Gary A. Klingsheim.
**10.10 First Amendment to Agreement Executing Judgment dated August
3,
1995 among the Company, GHC, Inc., Charles R. Drummond,
Golden
Research Corporation, New Crawford Valley, LTD and Gulch
Holdings
Company.
**10.11 Credit and Security Agreement dated August 7, 1995 among the
Company, Quality Care Pharmaceuticlas, Inc. and Norwest
Cedit, Inc.
**10.12 Credit and Security Agreement dated August 7, 1995 among the
Company and Norwest Bank Minnesota, National Association.
**10.13 Promissory Note dated August 7, 1995 executed by the Company
in
favor of Norwest Bank Minnesota, National Association in the
principal amount of $4,000,000.
**10.14 Revolving Note dated August 7, 1995 executed by the Company
in
favor of Norwest Credit, Inc. in the principal
amount of $400,000.
**10.15 Revolving Note dated August 7, 1995 executed by the Company
in
favor of Norwest Credit, Inc.in the principal
amount of $2,500,000.
**10.16 Revolving Note dated August 7, 1995 executed by the Company
and
QCP in favor of Norwest Credit, Inc. in the principal amount
of
$2,500,000.
**21 Subsidiaries of the Registrant.
**27 Financial Data Schedule.
(b) Reports on Form 8-K
A Report on Form 8-K dated August 7, 1995 was filed under Item 2.
__________
+Incorporated by reference to registrant's Annual Report on Form 10-K, dated
August
31, 1991, as filed with the Securities and Exchange Commission.
++Incorporated by reference to registrant's Current Report on Form 8-K, and
exhibits
thereto, dated June 25, 1992, as filed with the Securities and Exchange
Commission.
+++Incorporated by reference to registrant's Quarterly Report on Form 10-Q for
the
quarter ended May 31, 1995 as filed with the Securities and Exchange
Commission.
*Incorporated by reference to registrant's Registration Statement on Form S-1
and
all amendments thereto, Registration number 33-32887.
**Filed herewith.
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.
GOLDEN PHARMACEUTICALS, INC.
Dated: November 22, 1995 By /s/ Charles R. Drummond
Charles R. Drummond, President,
Chief Executive Officer and
Treasurer
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.
Signature Title Date
/s/ Charles R. Drummond Chairman of the Board,
November 22, 1995
Charles R. Drummond President, Chief Executive
Officer and Treasurer
/s/ Ladd A. Drummond Director November 22, 1995
Ladd A. Drummond
/s/ Bruce A. Goldberg Chief Operating Officer and November 22, 1995
Bruce A. Goldberg Vice President of Business
Development
/s/ Arch G. Gothard III Director November 22, 1995
Arch G. Gothard III
/s/ John H. Grant Director November 22, 1995
John H. Grant
/s/ Richard G. Wahl Director and Corporate November 22, 1995
Richard G. Wahl Secretary
/s/ Glen H. Weaver Vice President of Finance November 22, 1995
Glen H. Weaver and Controller
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.
GOLDEN PHARMACEUTICALS, INC.
Dated: November 22, 1995 By
Charles R. Drummond, President,
Chief Executive Officer and
Treasurer
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.
Signature Title Date
Chairman of the Board, November __, 1995
Charles R. Drummond President, Chief Executive
Officer and Treasurer
Director November __, 1995
Ladd A. Drummond
Chief Operating Officer and November __, 1995
Bruce A. Goldberg Vice President of Business
Development
Director November __, 1995
Arch G. Gothard III
Director November __, 1995
John H. Grant
Director and Corporate November __, 1995
Richard G. Wahl Secretary
Vice President of Finance November __, 1995
Glen H. Weaver and Controller
Exhibit Index
Exhibit No. Description
*3.1 Articles of Incorporation filed October 4, 1973.
*3.2 Articles of Amendment to Articles of Incorporation filed
December 22, 1976.
*3.3 Articles of Amendment to Articles of Incorporation filed
August
25, 1978.
*3.4 Articles of Amendment to Articles of Incorporation filed
June
15, 1979.
*3.5 Articles of Amendment to Articles of Incorporation filed
January 12, 1981.
*3.6 Articles of Amendment to Articles of Incorporation filed
June
16, 1987.
*3.7 Articles of Amendment to Articles of Incorporation filed
October 9, 1992.
*3.8 Certificate of Designation of 15%/30% Cumulative Convertible
Preferred Stock filed December 9, 1987.
*3.9 Corrected Certificate of Designation of 15%/30% Cumulative
Convertible Preferred Stock filed December 14, 1987.
*3.10 Corrected Certificate of Designation of 15%/30% Cumulative
Convertible Preferred Stock filed February 5, 1988.
*3.11 Certificate of Designation of Class A Convertible Preferred
Stock filed October 12, 1990.
**3.12 Second Amended and Restated Bylaws
*4.2 Specimen Certificate for Common Stock, no par value per
share.
*10.1 Approval by Food and Drug Administration of the Company's
New
Drug Application (NDA) for Sodium Iodide I-123 dated May 27,
1982.
*10.2 Agreement Limiting Execution on Judgment dated November 4,
1991
and Addendum A thereto by and among the Company, GRC, New
Crawford Valley, Ltd. and Gulch Holdings Company.
**10.3 Amended and Restated Distribution Agreement between the
Company
and Syncor dated June 1, 1995.
+10.4 Option to lease between the Company and Syncor dated July,
1991.
++10.5 Agreement between the Company and Nordion dated June 10,
1992.
+++10.6 Stock Purchase Agreement dated June 7, 1995 by and among the
Company, Quality Care Pharmaceuticals, Inc., Daniel B.
Guinn,
Gary A. Klingsheim, Michael S. Mendelsohn and the
Shareholders
listed on Schedule A thereto.
**10.7 Employment Agreement between the Company and Charles R.
Drummond.
**10.8 Employment Agreement between the Company and Daniel B.
Guinn.
**10.9 Employment Agreement between the Company and Gary A.
Klingsheim.
**10.10 First Amendment to Agreement Executing Judgment dated August
3,
1995 among the Company, GHC, Inc., Charles R. Drummond,
Golden
Research Corporation, New Crawford Valley, LTD and Gulch
Holdings Company.
**10.11 Credit and Security Agreement dated August 7, 1995 among the
Company, Quality Care Pharmaceuticlas, Inc. and Norwest
Cedit,
Inc.
**10.12 Credit and Security Agreement dated August 7, 1995 among the
Company and Norwest Bank Minnesota, National Association.
**10.13 Promissory Note dated August 7, 1995 executed by the Company
in
favor of Norwest Bank Minnesota, National Association in the
principal amount of $4,000,000.
**10.14 Revolving Note dated August 7, 1995 executed by the Company
in
favor of Norwest Credit, Inc. in the principal
amount of
$400,000.
**10.15 Revolving Note dated August 7, 1995 executed by the Company
in
favor of Norwest Credit, Inc. in the principal
amount of
$2,500,000.
**10.16 Revolving Note dated August 7, 1995 executed by the Company
and
QCP in favor of Norwest Credit, Inc. in the principal amount
of
$2,500,000.
**21 Subsidiaries of the Registrant.
**27 Financial Data Schedule.
__________
+Incorporated by reference to registrant's Annual Report on Form 10-K, dated
August 31, 1991, as filed with the Securities and Exchange Commission.
++Incorporated by reference to registrant's Current Report on Form 8-K, and
exhibits thereto, dated June 25, 1992, as filed with
the Securities and
Exchange Commission.
+++Incorporated by reference to registrant's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1995 as filed with the Securities and Exchange
Commission.
*Incorporated by reference to registrant's Registration Statement on Form S-1
and all amendments thereto, Registration number 33-32887.
**Filed herewith.
GOLDEN PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Page
FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of August 31, 1995 and 1994 F-3
Consolidated Statements of Operations for the Years Ended
August 31, 1995 and 1994 F-5
Consolidated Statement of Stockholders' Equity
(Deficiency) for the Years Ended August 31, 1995
and 1994 F-6
Consolidated Statements of Cash Flows for the Years Ended
August 31, 1995 and 1994 F-7
Notes to Consolidated Financial Statements F-9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Golden Pharmaceutical, Inc.
(formerly North American Chemical Corp.)
Golden, Colorado
We have audited the accompanying consolidated balance sheets of Golden
Pharmaceutical, Inc. (a Colorado corporation) and Subsidiary as of August 31,
1995 and 1994, and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for each of the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 audits 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Golden
Pharmaceutical, Inc. and Subsidiary as of August 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Denver, Colorado
October 11, 1995 (except for note M, as
to which the date is November 27, 1995)
GOLDEN PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
August 31,
1995 1994
CURRENT ASSETS
Cash $ 49,557$ 94,792
Receivables
Trade, net of allowance for doubtful
accounts of $63,700 and $1,063 at August 31,
1995 and 1994 1,255,475 309,244
Note receivable (note D) 165,000 -
Inventories (Note B) 674,955 52,356
Prepaid expenses and other 131,613 61,949
Deferred income taxes (Note H) 380,000 434,243
TOTAL CURRENT ASSETS 2,656,600 952,584
PROPERTY, PLANT AND EQUIPMENT - AT COST (Note B) 2,736,714 2,052,181
Less accumulated depreciation
and amortization 1,659,7681,555,033
TOTAL PROPERTY, PLANT & EQUIPMENT 1,076,946 497,148
OTHER ASSETS
Goodwill, less accumulated amortization of
$16,543 in 1995 3,953,735 -
Non-Compete Agreement (Note F) 172,624 -
Deferred income taxes (Note H) 220,000 65,757
TOTAL OTHER ASSETS 4,346,359 65,757
$ 8,079,905$ 1,515,489
See Notes to Consolidated Financial Statements.GOLDEN
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
August 31,
1995 1994
CURRENT LIABILITIES
Note payable $ 343,454$ -
Current maturities of long-term debt 276,179 256,078
Current maturities of capitalized lease
obligations 33,375 -
Accounts payable (Notes I and K) 1,198,689 128,673
Accrued liabilities
Salaries, wages and other compensation 133,192 -
Interest (Note G) 36,183 -
Other (Note I) 19,859 43,952
TOTAL CURRENT LIABILITIES 2,040,931 428,703
LONG-TERM OBLIGATIONS, less current
maturities (Note F) 4,314,936 562,568
CAPITALIZED LEASE OBLIGATIONS, less
current maturities (Note E) 178,745 -
CONTINGENCIES AND COMMITMENTS (Notes E and I) - -
STOCKHOLDERS' EQUITY (Note G)
Common stock - no par value; 200,000,000 shares
authorized; 93,967,583 and 90,342,583, issued
and outstanding in 1995 and 1994, respectively 21,288,851 21,246,351
Preferred stock-no par value; 10,000,000
shares authorized
Class A 15%/30% cumulative convertible,
29,653 shares, issued and outstanding in
1995 and 1994, respectively 292,558 292,558
Dividends accrued on Preferred Stock
stock 433,393 344,677
Accumulated deficit (20,469,509)(21,359,368)
TOTAL STOCKHOLDERS' EQUITY 1,545,293 524,218
$ 8,079,905$ 1,515,489
See Notes to Consolidated Financial Statements.GOLDEN
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended August 31,
1995 1994
REVENUES
Net sales $ 4,412,377 $ 3,451,020
Cost of sales 2,245,230 1,584,864
GROSS MARGIN 2,167,147 1,866,156
Selling, general and administrative 1,255,645 1,037,502
OPERATING INCOME 911,502 828,654
OTHER INCOME/(EXPENSE)
Interest expense (140,330) (83,949)
Gain on disposal of equipment 2,400 6,611
Other Income 13,731 1,236
TOTAL OTHER INCOME/(EXPENSE) (124,199) (76,102)
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 787,303 752,552
INCOME TAX EXPENSE (BENEFIT) (Note H) (91,594) (500,000)
INCOME BEFORE EXTRAORDINARY ITEMS 878,897 1,252,552
EXTRAORDINARY ITEM (Note J)
Settlement of notes and trade accounts
payable 99,677 7 6,560
NET INCOME $ 978,574 $ 1,329,112
INCOME PER COMMON SHARE (Note B)
Before extraordinary item $ .01 $ .01
Extraordinary item * *
NET INCOME $ .01 $ .01
*Less than $.01 per share
See Notes to Consolidated Financial Statements.GOLDEN
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY)
FOR THE YEARS ENDED AUGUST 31, 1995 AND 1994
COMMON STOCK PREFERRED STOCK
Dividends accrued
15%/30% CUMULATIVE
on preferred stockAccumulated
Shares Amount Shares Amount
Amount Deficit
BALANCE - September 1, 1993 49,501,774$ 19,096,525 84,242 $ 794,014
$ - $(22,463,464)
Transfer of accrued dividends on
preferred stock from liabilities
to equity - - - -
714,932 -
Accrued Dividends on Preferred Stock
(Notes B and G) - - - -
192,351 (192,351)
Accretion of redemption amount on
redeemable Preferred stock, Class
A Convertible - - - -
- (32,665)
Conversion of redeemable Preferred
stock, Class A Convertible 12,000,000 586,764 - -
- -
Conversion of Debt, Bonus, and
services to Common Stock 27,700,000 499,000 - -
- -
Conversion of 15%/30% Preferred stock
and accumulated dividends to Common 1,140,809 1,064,062
(54,589) (501,456) (562,606) -
Net Income - - - -
- 1,329,112
BALANCE - August 31, 1994 90,342,583 21,246,351 29,653 292,558
344,677 (21,359,368)
Accrued dividends on preferred
stock (Notes B and G) - - - -
88,716 (88,716)
Conversion of debt, bonus and services
to common stock 1,625,000 42,500 - -
- -
Common stock issued to release
contingency (Note I) 2,000,000 - - -
- -
Net income - - - -
- 978,574
BALANCE - August 31, 1995 93,967,583$ 21,288,851 29,653 $ 292,558
$ 433,393 $(20,469,510)
See Notes to Consolidated Financial Statements.
GOLDEN PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended August 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 978,574 $ 1,329,112
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 99,345 79,534
Settlement of notes payable and trade
accounts payable (99,677) (76,560)
Gain on sale of equipment (2,400) (6,611)
Stock bonus - 54,000
Stock issued for services and fees 42,500 35,000
Changes in assets and liabilities net of
effects of acquisition
Decrease (increase) in accounts receivable (23,952)
(281,852)
(Increase) in inventories (5,634) (4,705)
Decrease in prepaid expenses and other (33,664) (25,228)
Increase in deferred taxes (100,000) (500,000)
Increase (decrease) in accounts payable 5,060
(50,073)
Increase (decrease) in accrued expenses 66,142
(81,352)
TOTAL ADJUSTMENTS (52,280) (857,847)
NET CASH PROVIDED BY OPERATING ACTIVITIES 926,294
471,265
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (173,396)
(141,488)
Proceeds from sale of equipment 2,400 8,566
Payments for acquisition (4,025,596) -
Increase in note receivable (165,000) -
NET CASH (USED BY) PROVIDED
BY INVESTING ACTIVITIES (4,361,592) (132,922)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of note payable for acquisition
of business 4,400,000 -
Payments of note payable (704,270) (321,040)
Issuance of line of credit 735,652 -
Payments on line of credit (1,041,319) -
NET CASH (USED BY) PROVIDED BY
FINANCING ACTIVITIES 3,390,063 (321,040)
NET INCREASE (DECREASE) IN CASH (45,235) 17,303
CASH, BEGINNING OF YEAR 94,792 77,489
CASH, END OF YEAR $ 49,557 $ 94,792
Continued on following page.
See Notes to Consolidated Financial Statements.GOLDEN
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Continued from previous page.
Supplemental schedule of noncash investing and financing activities:
For the Years Ended August 31,
1995 1994
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest $ 140,330 $ 83,949
The company issued 10,360,000 shares
of common stock which was subscribed
at August 31, 1991 $ - $ -
Accretion of a discount on the Class A
Convertible Preferred Stock
charged to accumulated deficit - 32,665
Conversion of debt to common stock, consisting
of $280,000 in notes and accrued interest
and $130,000 in prior year accrued salaries - 410,000
Conversion of Preferred Stock and
Preferred Stock dividends to
Common Stock - 1,650,826
Accrued 15%/30% Cumulative
Convertible Preferred Stock
dividends charged to accumulated
deficit 88,716 192,351
Escrow account for business acquisition (222,065) -
The Company issued 2,000,000 shares of
restricted common stock to a major
stockholder and director of the Company
which is collateral for the
release of a contingent liability 2,000,000 -
Purchase of equipment under a capital lease 212,120 -
Details of business acquisition in
purchase transaction
Fair value of assets acquired,
other than cash 2,075,359 -
Liabilities assumed (2,003,498) -
Cash paid for acquisition 4,025,596 -
S ee Notes to Consolidated Financial Statements.
A. HISTORY AND BUSINESS ACTIVITY
GOLDEN PHARMACEUTICALS, INC. (GPI) is engaged in the manufacturing and
marketing
of radiopharmaceutical and radiochemical drug products. The Company grants
credit in the normal course of business to primarily one customer located in
the
State of California which has operations throughout the United States.
Quality Care Pharmaceuticals (QCP), a wholly-owned subsidiary of Golden
Pharmaceuticals, Inc., purchases pharmaceutical drugs from manufacturers and
repackages them for sale into single user prescription size packages. The
Company's clients consist of private physicians, hospitals, group practices,
managed care programs, pharmacies and other legally constituted medical
facilities throughout the United States.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the
accounts of GPI and its wholly-owned subsidiary Quality Care Pharmaceuticals,
Inc. (QCP), collectively referred to as the Company. All material
intercompany
balances and transactions have been eliminated in consolidation.
Inventories - Inventories consist primarily of supplies, raw materials and
finished goods which are stated at the lower of cost or market, determined by
the first-in, first-out (FIFO) method as follows.
1995 1994
Raw materials $ 260,097 $ 52,356
Work-in-progress - -
Finished goods 414,858 -
$ 674,955 $ 52,356
Property, Plant and Equipment - Property, plant and equipment are carried at
cost. Depreciation and amortization are computed on a straight-line basis for
book and tax purposes over the estimated useful lives of the respective assets
which range from three to thirty nine years. Property, plant and equipment
are
classified at August 31, as follows:
1995 1994
Building and improvements $ 822,799 $ 698,025
Machinery and equipment 1,216,365 784,256
Computers 185,961 209,267
Furniture and fixtures 363,589 212,633
Land 148,000 148,000
$ 2,736,714 $ 2,052,181
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Earnings Per Common Share - Earnings per common share was determined by
dividing
net income, less accrued preferred dividends, by the weighted average number
of
shares of common stock outstanding during the period. Common stock
equivalents
and stock held in escrow have been excluded from the computation because their
effect would be anti-dilutive.
For the Year Ended August 31,
1995 1994
Weighted average number of
shares outstanding 91,589,946 76,754,249
Cash Equivalents - For the purpose of the statements of cash flows, the
Company
considers all highly liquid cash investments with original maturity dates of
three months or less to be cash equivalents.
Reclassification - Certain reclassifications have been made to conform prior
years' information with the current year presentation.
C. ACQUISITION
On August 7, 1995, the Company acquired all of the outstanding shares of
common
stock of Quality Care Pharmaceuticals, Inc. (QCP). The acquisition has been
accounted for as a purchase and, accordingly, the results of operations for
the
period August 1 through August 31, 1995 of Quality Care Pharmaceuticals, Inc.
have been included in consolidated operations. The Company paid $4,025,596 in
cash (including $412,008 in acquisition costs) of which $222,065 is held in
escrow to be distributed to the QCP controlling shareholders upon the
registrants receipt of audited financial statements for the twelve months
ended
December 31, 1995. The excess of the purchase price over the fair value of
QCP's net assets at the date of acquisition has been recorded as goodwill.
Goodwill will be amortized on a straight-line basis over 20 years.
The following unaudited pro forma information shows the results of the
Company's
operations as though the purchase of Quality Care Pharmaceuticals, Inc.
occurred
at the beginning of fiscal years:
1995 1994
Net sales $ 10,238,512 $ 8,381,562
Net income before
extraordinary items 116,898 581,271
Net income 216,575 657,831
Earnings per common share - -
C. ACQUISITION - continued
The pro forma information above combines QCP's historical statements of
earnings
for the year ended December 31, 1994 and the twelve-month period ended August
31, 1995 with GPI's historical consolidated statements of operations for the
years ended August 31, 1994 and 1995, respectively. Accordingly, sales and
net
income of QCP for the period September 1, 1994 through December 31, 1994 of
$1,865,877 and $70,708, respectively, have been included as part of both
fiscal
year ends.
The pro forma results of operations are not necessarily indicative of the
actual
results of operations that would have occurred had the purchase actually been
made at the beginning of the respectively periods or of results which may
occur
in the future.
D. NOTE RECEIVABLE
The Company has entered into two note receivable agreements totaling $165,000
as
of August 31, 1995, in conjunction with the release of a contingency (see Note
I). The notes of $85,000 and $80,000 mature on December 31, 1995 and February
29, 1996, respectively. The $85,000 note accrues interest at the bank prime
plus 1% (totaling 9.75% at August 31, 1995) and the $80,000 is without
interest.
The notes are without collateral.
E. LEASE COMMITMENTS
Capitalized Leases
The Company leases equipment which is used in the production process and
administration of their business. For financial reporting purposes, minimum
lease rentals relating to the equipment have been capitalized.
The leases, which are noncancelable, expire at various dates through the year
2000. The recorded cost of assets under capital leases is $253,133.
Accumulated amortization associated with the recorded assets was $3,233 in
1995.
Future minimum annual lease payments under capitalized leases are as follows:
Year ending August 31,
1996 $ 52,227
1997 52,227
1998 52,227
1999 50,577
2000 71,914
279,172
Less amount representing interest 67,052
Discounted lease obligations 212,120
Less current portion 33,375
Long-term portion $ 178,745
E. LEASE COMMITMENTS - continued
Operating Leases
The Company leases office facilities, vehicles and equipment under operating
leases which expire at various dates through 1998. Under the terms of the
leases, the Company will pay monthly rental ranging from $7,266 in 1995 and
$2,372 in 1998.
Future minimum annual rental payments under operating leases are as follows:
Year ending August 31,
1996 $ 80,704
199762,715
1998 25,472
$ 168,891
Rent expense totaled approximately $40,000 for each of the years ended
August 31, 1995 and 1994.
F. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
August 31,
1995 1994
Notes payable - bank, with monthly
installments of $15,331, including
interest at bank prime plus 2.0%
(totaling 10.75% at August 31, 1995)
through October, 1994 when any unpaid
principal and interest is due.
Collateralized by trade accounts
receivable, inventory, first deeds of
trust on land and buildings, and
assignment of rights on Sodium
Iodine 123 Capsules. Paid in full in
August, 1995 $ - $
504,655
Note payable with monthly installments
of $2,503 including interest of 7.46%,
through March, 1996, uncollateralized 18,491
14,699
Note payable - supplier, with monthly
installments of $9,500, including
interest at 6.25% through April, 1997
when any unpaid principal and interest
is due. Paid in full in August, 1995 -
299,292
F. NOTES PAYABLE AND LONG-TERM DEBT - continued
August 31,
1995 1994
Note payable, term loan, payable in
sixteen quarterly installments of
$125,000, including interest at the
bank prime plus 3% (totaling 11.75%
at August 31, 1995). Payments commence
on August 1, 1996 and continue through
August 1, 2000, with a lump sum payment
of $2,000,000. The note accrues
contingent interest in an amount equal
to 10% of the total consolidated Company
value. Such contingent interest is
payable upon maturity of the note, with
a maximum contingent interest amount due
of $2,150,000. Collateralized by a
second perfected security interest
in all personal property of the Company
(inventory, accounts receivable,
equipment and general intangibles), all
issued and outstanding shares of common
stock of Quality Care Pharmaceuticals,
Inc. and a second deed of trust on real
property $ 4,000,000 $
-
Note payable, term loan, payable in
monthly installments of $6,667,
including interest at the bank prime
plus 3% (totaling 11.75% at August 31,
1995) through August 1, 2000.
Collateralized by equipment, general
intangibles, inventory and accounts
receivable 400,000 -
Note payable, $2,500,000 revolving
line of credit with interest payable
at bank prime plus 2% (totaling 10.75%
at August 31, 1995) through August 1,
2000. Collateralized by equipment,
general intangibles, inventory and
accounts receivable 343,454 -
Noninterest bearing note payable, to an
officer of Quality Care Pharmaceuticals,
Inc, payable in semi-annual installments
of $16,667 through July 15, 1998,
uncollateralized 86,312 -
Noninterest bearing note payable, to an
officer of Quality Care Pharmaceuticals,
Inc, payable in semi-annual installments
of $16,667 through July 15, 1998,
uncollateralized 86,312 -
4,934,569
818,646
Less: Note payable (343,454) -
Current maturities (276,179)
(256,078)
$ 4,314,936$ 562,568
F.NOTES PAYABLE AND LONG-TERM DEBT - continued
In connection with the note payable, the Company is required to maintain
compliance with certain covenants. At August 31, 1995, the Company was in
compliance with all covenants.
Aggregate annual principal payments applicable to notes payable and long-term
debt for years ending after 1995 are as follows:
Year Ending August 31, Total
1996 $ 619,633
1997 637,402
1998 642,534
1999 580,000
2000 2,455,000
$ 4,934,569
G. STOCKHOLDERS' EQUITY
In 1987 the Company initiated a private offering of equity securities
comprised
of units of Class A 15%/30% Cumulative Convertible Preferred ("15%/30%
Preferred") and Common Stock (one share of Preferred and two shares of Common
Stock) valued at $10 per unit. The offering became effective in October,
1988.
Maximum number of issuable shares of the 15%/30% Preferred Stock series is
700,000 shares.
The annual and quarterly dividend rates of the 15%/30% Preferred stock,
expressed as a percentage of original issue price, are as follows:
Period Annual RateQuarterly Rate
12 calendar months ended
October 1989 0% 0.00%
12 calendar months ended
October 1990 15% 3.75%
12 calendar months ended
October 1991 15% 3.75%
12 calendar months ended
October 1992 30% 7.50%
12 calendar months ended
October 1993 30% 7.50%
All periods thereafter 30% 7.50%
Dividends are payable from the net profits generated from the sale of Iodine
123
HIPDM ("HIPDM") (as defined in the Certificate of Designation). However, the
underlying license rights related to Iodine 123 HIPDM were fully impaired in
1991 and released upon termination of the license agreement on November 30,
1993. Because all rights to HIPDM were released, these dividends will only be
paid by conversion to common stock. Therefore, the accrued dividends were
transferred to equity as of August 31, 1994. G. STOCKHOLDERS' EQUITY -
continued
The holders of the 15%/30% Preferred may convert any accumulated and unpaid
dividends into one share of the Company's Common Stock for each dollar
accumulated. Additionally, each share of the 15%/30% Preferred may be
converted
into 10 shares of the Company's common stock. The Company is required to
reserve common shares sufficient to allow conversion of all preferred stock
and
accrued dividends.
The 15%/30% Preferred shareholders, in the event of liquidation of the
Company,
will receive an amount equal to the issue price plus accumulated and unpaid
dividends before any holder of common stock or any other stock ranking junior
to
the 15%/30% Preferred can be paid.
As of August 31, 1995 and 1994, 54,589 of the 84,242 15%/30% Preferred and
applicable accrued dividends were converted into Common Stock. Based on the
number of outstanding shares of 15%/30% Preferred at August 31, 1995 and 1994,
and the dividend rate schedule above, the estimated accrued cumulative
dividend
is $433,393 and $344,677, respectively. At August 31, 1995, the holders of
preferred stock can convert their shares into 890,517 shares of common stock
including accrued dividends.
In the event that the Company completes a public offering of its common stock
where the offering price is at least $1.00 per share, the 15%/30% Preferred
and
accumulated dividends will automatically convert to common shares in the
ratios
discussed above.
Commencing in 1991, the Company has the right but not the obligation to
convert
all of the outstanding 15%/30% Preferred into common stock at the conversion
price exhibited below plus any accumulated unpaid dividends.
Stated Redemption Date Percentage
January 1, 1994 - December 31, 1994 108%
January 1, 1995 - December 31, 1995 106%
January 1, 1996 - December 31, 1996 104%
All periods commencing January 1, 1997 102%
In October, 1990, the Company created a second series of Preferred stock,
Class
A Convertible Preferred Stock (Convertible Preferred). Issue price is $10 per
share and the maximum issuable shares under the series is 200,000 shares.
Commencing one year after the date of issuance of the Convertible Preferred,
each share was convertible into 250 shares of common stock or was redeemable
in
the form of a cash payment to the holder at the option of the holder. Cash
payments to the holder were limited to a maximum conversion of 25% annually
and
were redeemable at $12.50, $15.00, $17.50 and $20.00 in years two, three, four
and five from the date of issuance, respectively, and $22.50 for years
thereafter. The Company was not required, however, to reserve shares of common
stock for conversion of the Convertible Preferred shares. The Company's
G. STOCKHOLDERS' EQUITY - continued
obligation to redeem the Convertible Preferred Stock at the option of the
holder
was reflected in the accompanying balance sheets at the legal redemption rate
for the number of shares currently redeemable. The shares which were not
currently redeemable were stated at their original issue price of $10.00 per
share. The accretion of the redemption price was being recorded as a charge
to
accumulated deficit. All shares of Convertible Preferred were converted to
common stock in March, 1994, and the stock issue was canceled.
In fiscal 1994, the Board of Directors approved the conversion of $164,000 of
accrued liabilities to an officer, director and stockholder, at $.02 per
share,
into 8,200,000 shares of the Company's common stock. All of the above
liabilities were converted during the year ended August 31, 1994.
On March 28, 1992, the Board of Directors unanimously approved for submission
to
the Company's stockholders a Performance Stock Option Plan (the Plan). The
Plan
will permit the granting of stock options to certain directors, officers and
employees of the Company or any subsidiary thereof. Authority to grant
options
under the Plan will terminate on October 7, 2002. On October 30, 1992, the
Company's Stockholders approved the Plan which will provide 50,000,000 shares
of
common stock available for the granting of options.
The following summarizes the status of options and warrants granted at August
31, 1995:
Outstanding
Outstanding
at
at
Exercise Year September 1, Exercised/
August 31,
Price Granted 1994 Granted Expired
1995
$.075 1995 -
350,000 - 350,000
$.075 1995 -
10,000,000 - 10,000,000
$.03 1995 - 100,000
- 100,000
$.02 1992 500,000 (1) -
- 500,000
$.02 1994 6,000,000 -
- 6,000,000
6,500,000 10,450,000
- 16,950,000
G. STOCKHOLDERS' EQUITY - continued
The following summarizes the status of options and warrants granted at August
31, 1994:
Outstanding
Outstanding
at
at
Exercise Year September 1, Exercised/
August 31,
Price Granted 1993 Granted Expired
1994
$.20 1989 500,000 - 500,000
-
$.02 1992 500,000 (1) - -
500,000
$.02 1994 - 6,000,000 -
6,000,000
1,000,000 6,000,000 500,000
6,500,000
(1)Does not include options to acquire 750,000 shares of common stock pursuant
to
an employment agreement with a former officer and director which were
forfeited
upon termination.
H. INCOME TAXES
The following is a summary of the provision for income taxes:
Year Ended August 31,
1995 1994
Current provision
Federal $ 5,550 $ -
State 2,856 -
$ 8,406 $ -
Deferred provision (benefit)
Federal $ (88,000) $(452,000)
State (12,000) (48,000)
$(100,000) $(500,000)
Total provision (benefit)
Federal $ (82,450) $(452,000)
State (9,144) (48,000)
$ (91,594) $(500,000)
H. INCOME TAXES - continued
The provision for income taxes differs from the amount determined by applying
the statutory rate to net income before taxes, due to the following reasons
for
the years ended August 31:
1995 1994
Income taxes at statutory rate $ 346,000 $ 323,000
Benefits due to change in asset
valuation allowance (445,000)
(821,000)
Other 7,406 (2,000)
Income tax benefit $ (91,594)
$(500,000)
Sources of change in deferred taxes and the deferred tax effect of each were
as
follows for the year ended August 31:
1995 1994
Change in asset valuation
allowance $ 445,000 $ 821,000
Accrued liabilities 22,000 (79,000)
Depreciation and amortization 7,000 -
Carryforward of net operating
losses for income tax reporting (374,000)
(242,000)
$ 100,000 $ 500,000
Components of deferred tax assets at August 31, were as follows:
1995 1994
Assets
Net operating loss carryforwards $ 6,812,000 $ 7,186,000
Accrued liabilities 26,000 4,000
Depreciation and amortization 7,000 -
6,845,000 7,190,000
Valuation Allowance (6,245,000) (6,690,000)
NET ASSET $ 600,000 $ 500,000
H. INCOME TAXES - continued
The Company has net operating loss carryforwards for tax purposes as follows:
Federal
Year Net Operating Year
Generated Loss Expires
1981$ 2,027,000 1996
1982 3,338,000 1997
1983 3,009,000 1998
1984 2,941,000 1999
1985 992,000 2000
1986 909,000 2001
1987 1,074,000 2002
1988 - -
1989 - -
1990 2,086,000 2005
1991 1,091,000 2006
$ 17,467,000
I. CONTINGENCIES AND COMMITMENTS
Due to the nature of the products, the Company is subject to regulation by a
number of federal and state agencies, including the Federal Food and Drug
Administration (FDA), the State of California and the Drug Enforcement Agency
(DEA). The Company must comply with regulatory requirements. Should it
violate
such requirements, its ability to operate could be suspended or terminated.
Management believes it has the control system and policies in place so that it
will fully comply with regulatory requirements.
In May 1988, the Company issued 50,000 units of 15%/30% Preferred Stock and
Common Stock shares (consisting of 50,000 shares of preferred and 100,000
shares
of common) (Note E) held by the Company as collateral for the long-term debt-
upplier and trade account payable balance. Per the agreement, these units of
stock were returned to the Company in 1994 and cancelled.
On November 4, 1991, the Company entered into a settlement agreement which
transferred certain undeveloped land in satisfaction of a judgment against the
Company. As provided in the settlement agreement, the Company would remain
contingently liable to the extent proceeds from the sale of the land were less
than $2,715,000.
I. CONTINGENCIES AND COMMITMENTS - continued
In August, 1995, the Company amended the settlement agreement whereby another
corporation, 100% owned by a director, officer and stockholder, has assumed
the
obligations of the Company under the settlement agreement. In exchange, the
Board of Directors approved the issuance of 2,000,000 shares of the Company's
no
par value common stock to this corporation. These shares will transfer back
to
the Company when the judgement is completely satisfied. The Company retained
voting rights to those shares and dividends, if any, related to these shares
are
paid to the Company.
J. EXTRAORDINARY ITEM
During 1995, the Company settled long-term debt and accounts payable totaling
$299,262 for $200,850 resulting in an extraordinary gain of $98,412. During
1994, the Company settled notes payable, long-term debt, accrued interest and
accounts payable totaling $139,535 for $62,975 resulting in an extraordinary
gain of $76,560.
K. MAJOR CUSTOMERS AND VENDORS
The raw material needed for the Company's radiopharmaceutical drug product is
manufactured by a limited number of suppliers. The Company purchases all of
its
raw product (Iodine-123) from one supplier whose operations are based in
Canada.
All transactions between the Company and its supplier are in U.S. dollars.
Purchases for the years ended August 31, 1995 and 1994, totaled approximately
$1,087,000 and $996,000, respectively. Included in accounts payable and long-
erm debt at August 31, 1995 and 1994, are liabilities of approximately
$100,000
and $415,000, respectively, for these purchases.
GPI's radio pharmaceutical drug product is distributed by one
distributor/customer. Sales for the years ended August 31, 1995 and 1994
totaled approximately $3,608,000 and $3,313,000, respectively.
L. RELATED PARTY TRANSACTIONS
A employee and former shareholder of QCP controls a corporation which performs
the marketing and sales of QCP's products. Commissions paid for services
rendered were $26,000 in August, 1995. At December 31, 1995, QCP owed this
corporation $38,747.
M. SUBSEQUENT EVENT
On September 12, 1995, the Board of Directors entered into a settlement
agreement with a former officer, director and stockholder to purchase
3,275,000
shares of the Company's no par value common stock and 3,475,000 stock options
for a total of $90,562.
In November, 1995, a warrant to purchase 8,000,000 shares of the Company's no
par value common stock was issued to an officer, director and employee of the
Company. The warrant has a ten year life with an exercise price of $.075 per
share, which approximates market value.
Exhibit 3.12
Second Amended and Restated Bylaws
SECONDED AMENDED AND RESTATED BYLAWS
OF
GOLDEN PHARMACEUTICALS, INC.
ARTICLE I
OFFICES
Section 1.1. Principal Office. The principal offices of Golden
Pharmaceuticals, Inc., a Colorado Corporation (the "Corporation") shall be at
1313 Washington Avenue, Golden, Colorado 80401, but the Corporation may, in
the
discretion of the Board of Directors, maintain offices wherever the business
of
the Corporation may require, either within or outside the State of Colorado.
Section 1.2. Registered Office and Agent. The Corporation shall
continuously maintain in the State of Colorado a registered office and a
registered agent whose business office is identical with the registered
office.
The registered office may but need not be identical with the principal office
of
the Corporation. The Corporation may change its registered office, its
registered agent, or both, upon filing a statement as specified by law in the
office of the Secretary of State of Colorado.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1. Time and Place. Any meeting of the shareholders may be held
at such time and place, within or outside of the State of Colorado, as may be
fixed by the Board of Directors or as shall be specified in the notice or
waiver
of notice of the meeting.
Section 2.2. Annual Meeting. The annual meeting of the shareholders
shall be held on the date and at the time and place fixed from time to time by
the Board of Directors; provided, however, that each successive annual meeting
shall be held on a date that is within thirteen months after the date of the
preceding annual meeting.
Section 2.3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, may be called by the President, the Board of
Directors
or the holders of not less than one-tenth of all of the shares entitled to
vote
at the meeting. Special meeting shall be held at the principal offices of the
Corporation or at such other place as the Board of Directors may determine.
Section 2.4. Court Ordered Meetings.
(a)Any court of competent jurisdiction in the State of Colorado may
summarily order a meeting to be held:
(i)On application of any shareholder of the Corporation if
an annual meeting was not held within six months after the end of
the Corporation's fiscal year or fifteen months after its last
annual meeting, whichever is earlier; or
(ii)On application of a shareholder who participated in a
proper call for a special meeting if (i) notice of the special
meeting was not given within thirty days after the date the demand
was delivered to the Corporation's Secretary; or (ii) the special
meeting was not held in accordance with the notice.
(b)The court may fix the time and place of the meeting, specify a
record date for determining shareholders entitled to notice of and to
vote at the meeting, prescribe the form and content of the meeting
notice, fix the quorum required for the meeting or direct that the votes
represented at the meeting constitute a quorum for the meeting, and
enter other orders necessary to permit the meeting to be held.
Section 2.5. Record Date. In order to make a determination of
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date for such
determination of shareholders. The record date may be fixed not more than
fifty and, in the case of a meeting of the shareholders, not less than ten
days before the date of the proposed action, except
(i) when it is proposed that the number of authorized
shares be increased, in which case the record date shall be not
less than thirty days before the date of such action, and (ii)
when it is proposed that all or substantially all of the property
and assets of the Corporation be sold, leased, exchanged or
otherwise disposed of other than in the usual and regular course
of business or other than in liquidation (but not by way of
mortgage, pledge or other grant of security interest), in which
case the record date shall be not less than twenty days before the
date of such action. If no record date is so fixed, the date on
which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is
adopted, as the case may be, shall be the record date for such
determination of shareholders. Provision for the record date for
actions taken by the shareholders by written consent is made in
Section 2.10 of these Bylaws.
Section 2.6. Voting Record. At least ten days before each meeting of
shareholders, the Secretary of the Corporation, or such other officer or agent
having charge of the stock transfer books for shares of the Corporation, shall
make a complete list of the shareholders entitled to vote at such meeting or
any adjournment thereof. The list shall be arranged in alphabetical order and
shall contain the address of and number of shares held by each shareholder.
The list shall be kept on file at the principal office of the Corporation for
ten days prior to such meeting, shall be produced and kept open at the
meeting, and shall be subject to inspection by any shareholder for any purpose
germane to the meeting during usual business hours of the Corporation and
during the whole time of the meeting.
Section 2.7. Notices. Written notice stating the place, day and hour
of the meeting shall be delivered not less than ten nor more than fifty days
before the date of the meeting, except
(i) when it is proposed that the number of authorized shares be increased, in
which case at least thirty days' notice shall be given, and (ii) when it is
proposed that all or substantially all of the property and assets of the
Corporation be sold, leased, exchanged or otherwise disposed of other than in
the usual and regular course of business or other than in liquidation (but not
by way of mortgage, pledge or other grant of security interest), in which case
at least twenty days' notice shall be given. Notice shall be given either
personally or by mail, by or at the direction of the President, the Secretary
or the officer or person calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, the notice shall be deemed to be
delivered as to any shareholder of record when deposited in the United States
mail, postage prepaid, addressed to the shareholder at his address as it
appears on the stock transfer books of the Corporation. If delivered
personally, the notice shall be deemed to be delivered when handed to the
shareholder or deposited at his address as it appears on the stock transfer
books of the Corporation. In giving notice to a shareholder, the Corporation
shall be entitled to rely on the last address furnished to the Corporation for
such purpose by such shareholder, and, if three successive letters mailed to
the last-known address of any shareholder of record are returned as
undeliverable, no further notices to such shareholder shall be necessary until
another address for such shareholder is made known to the Corporation. In the
case of an annual meeting at which action will be taken with respect to
amendment to the articlesof incorporation, the merger, consolidation,
dissolution or liquidation of the Corporation, the exchange of any shares of
the Corporation for the shares of another corporation pursuant to a plan of
exchange to be approved by the shareholders, or the sale, lease, exchange or
other disposition of all or substantially all of the assets of the
Corporation, and in the case of any special meeting, the purpose or purposes
for which the meeting is called shall be stated in the notice.
Section 2.8. Quorum. A majority of the outstanding shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at any
meeting of the shareholders, except as otherwise provided by the Colorado
Corporation Code. If a quorum is not represented at any meeting of the
shareholders, the shareholders present in person or by proxy may adjourn the
meeting from time to time for up to sixty days at any one adjournment, until
the number of shares required for a quorum are present. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the meeting.
Otherwise, no such notice need be given other than announcement at the meeting
at which the adjournment is taken. At any adjourned meeting at which a quorum
is represented, any business may be transacted that could have been transacted
at the meeting originally called. The shareholders present or represented at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.9. Voting. Except as otherwise provided by law, all matters
shall be decided by a vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote of the shareholders. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise
providedin the proxy. At each election for directors, every shareholder
entitled to vote at such election shall have the right to vote, in person or
by proxy, the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote. Voting
on any question or in any election may be by voice vote unless the presiding
officer shall order or any shareholder shall demand that voting be by ballot.
Section 2.10. Voting of Shares by Certain Holders.
(a)If shares or other securities having voting power stand of record
in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety,
or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, those persons' act with respect
to voting shall have the following effect:
(i) If more than one person votes, the act of the majority
so voting binds all;
(ii) If more than one person votes, but the vote is evenly
split on any particular matter, each faction may vote the
securities in question proportionately, or any person voting the
shares of a beneficiary, if any, may apply to any court of
competent jurisdiction in the State of Colorado to appoint an
additional person to act with the persons so voting the shares.
The shares shall then be voted as determined by a majority of such
persons and the person appointed by the court.
(iii)If an instrument filed pursuant to paragraph (a) of
this Section 2.10 shows that a tenancy is held in unequal
interests, a majority or even split for the purpose of this
Section 2.10 shall be a majority or even split in interest.
(iv) The provisions of paragraph (a) of this Section 2.10
shall not apply if the Secretary of the Corporation is given
written notice of alternate voting provisions and is furnished
with a copy of the instrument or order appointing those persons or
creating the relationship wherein alternate voting provisions are
established.
(b) Shares standing in the name of another corporation may be
voted by such officer, agent or proxy as the bylaws of such corporation
may prescribe, or, in the absence of such provision, as the board of
directors of such other corporation may determine.
(c) Shares held by an administrator, executor, court appointed
guardian or conservator may be voted by him, either in person or by
proxy without a transfer of such shares into his name. Shares standing
in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him
without a transfer of such shares into his name.
(d) Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may
be voted by such receiver without the transfer thereof into his name if
authority to do so is contained in an appropriate order of the court by
which such receiver was appointed.
(e) A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of
the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(f) Redeemable shares which have been called for redemption
shall not be entitled to vote on any matter and shall not be deemed
outstanding shares on and after the date on which written notice of
redemption has been mailed to shareholders and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the
holders of the shares upon surrender of certificates therefor.
Section 2.11. Waiver of Notice. Whenever law or these Bylaws require
notice of a shareholders' meeting to be given, a written waiver of notice
signed by a shareholder entitled to notice, whether before, at, or after the
time stated in the notice, shall be equivalent to the giving of notice to that
shareholder. By attending a meeting, a shareholder waives any objection to
(i) lack of notice or defective notice of such meeting unless he objects, at
the beginning of the meeting, to the holding of the meeting or the transaction
of business at the meeting, or (ii) consideration at such meeting of any
matter not within the purpose or purposes described in the notice of the
meeting unless he objects to considering the matter when it is presented.
Section 2.12. Action by Shareholders Without a Meeting. Any action
required or permitted to be taken at a meeting of the shareholders may be
taken without a meeting if a consent in writing, describing the action so
taken, is signed by all of the shareholders entitled to vote with respect to
such action and is delivered to the secretary for inclusion in the minutes or
for filing with the corporate records. Such consent may be executed in
counterparts and shall be effective as of the date of the last signature
thereon, unless the consent specifies a different effective date. The record
date for determining shareholders entitled to take such action is the date the
first shareholder signs the consent.
ARTICLE III
DIRECTORS
Section 3.1. Authority of Board of Directors. The business and affairs
of the Corporation shall be managed by the Board of Directors, except as
otherwise provided by Colorado law or the Articles of Incorporation of the
Corporation or any amendments thereto.
Section 3.2. Number. The number of directors of this Corporation shall
be no fewer than three; provided however, that if all outstanding shares are
held of record by fewer than three shareholders, then there need be only as
many directors as there are shareholders of record. Subject to such
limitation, the number of directors shall be fixed by resolution of the Board
of Directors and may be increased or decreased by resolution of the board of
directors, but no decrease shall have the effect of shortening the term of any
incumbent director.
Section 3.3. Qualification. Directors shall be natural persons at least
eighteen years old, but need not be residents of the State of Colorado or
shareholders of the Corporation.
Section 3.4. Election. The Board of Directors shall be elected at the
annual meeting of the shareholders or at a special meeting called for that
purpose.
Section 3.5. Term. Each director shall be elected to hold office until
the next annual meeting of shareholders and until his successor is elected and
qualified.
Section 3.6. Removal and Resignation. Any director may be removed at a
meeting expressly called for that purpose, with or without cause, by a vote of
the holders of the majority of shares entitled to vote at any election of
directors. Any director may resign at any time by giving written notice to
the
Chairman of the Board, the President or to the Secretary of the Corporation,
and acceptance of such resignation shall not be necessary to make it effective
unless the notice so provides.
Section 3.7. Vacancies. Any vacancy occurring on the Board of Directors
and any directorship to be filled by reason of an increase in the size of the
Board of Directors shall be filled by an affirmative vote of a majority,
though
less than a quorum, of the remaining directors. A director elected to fill a
vacancy shall hold office during the unexpired term of his predecessor in
office. A director elected to fill a position resulting from an increase in
the board of directors shall hold office until the next annual meeting of
shareholders and until his successor is elected and qualified.
Section 3.8. Meetings. A regular, annual meeting of the Board of
Directors shall be held immediately prior to, and at the same place as, the
annual meeting of shareholders. No notice of this meeting of the Board of
Directors need be given. The Board of Directors may, by resolution, establish
a time and place for additional regular meetings which may thereafter be held
without further notice. Special meetings of the Board of Directors may be
called by the Chairman of the Board (if any), the President, or any two
members
of the Board of Directors.
Section 3.9. Notices. Notice of a special meeting, stating the date,
hour and place of such meeting, shall be given to each member of the Board of
Directors by the Chairman of the Board (if any), the President, the Secretary,
or the members of the Board calling the meeting. The notice may be deposited
in the United States mail or sent to each member by facsimile machine at least
three days before the meeting, unless emergency conditions justify less than
three day notice, addressed to the director at the last address he has
furnished to the Corporation for this purpose, and any notice so mailed shall
be deemed to have been given when it was mailed. Under emergency conditions,
notice may also be given at least twenty-four hours before the meeting in
person, or by telephone, prepaid telegram, telex, cablegram, radiogram, or
similar method, and such notice shall be deemed to have been given when the
personal or telephone conversation occurs, or when the telegram, telex,
cablegram, radiogram, or other form of notice is either personally delivered
to
the director or delivered to the last address of the director furnished to the
Corporation by him for this purpose.
Section 3.10. Quorum and Manner of Acting. Except as provided in
Section 3.7 of these Bylaws, a majority of the number of directors fixed in
accordance with these Bylaws shall constitute a quorum for the transaction of
business at all meetings of the Board of Directors, but a smaller number may
adjourn from time to time without further notice, until a quorum is secured.
The act of a majority of the directors present at any meeting at which a
quorum
is present shall be the act of the Board of Directors, except as otherwise
specifically required by law or by the Articles of Incorporation or these
Bylaws.
Section 3.11. Organization. The Board of Directors shall elect a
chairman from among the directors to preside at each meeting of the Board of
Directors and at all meetings of the stockholders. The Board of Directors
shall also elect a Vice Chairman from among the directors to preside at each
meeting of the Board of Directors and at all meetings of the shareholders
which
the Chairman is unable to attend. The Board of Directors shall elect a
secretary to record the discussions and resolutions of each meeting.
Section 3.12. Presumption of Assent. A director of the corporation who
is present at a meeting of the Board of Directors or a committee of the Board
of
Directors when corporate action is taken is deemed to have assented to the
action taken unless:
(a) He objects at the beginning of such meeting to the holding of
the meeting or the transacting of business at the meeting;
(b) He contemporaneously requests that his dissent from the
action taken be entered in the minutes of such meeting; or
(c) He gives written notice of his dissent to the presiding
officer of such meeting before its adjournment or to the Secretary of the
Corporation immediately after adjournment of such meeting.
The right of dissent as to a specific action taken in a meeting of the
Board of Directors or a committee of the Board of Directors is not available
to
a director who votes in favor of such action.
Section 3.13. Waiver of Notice. A written waiver of notice signed by a
director, whether before, at, or after the time stated therein, shall be
equivalent to the giving of notice to that director. By attending or
participating in any regular or special meeting, a director waives any
required
notice of such meeting unless the director objects, at the beginning of the
meeting, to the holding of the meeting or the transacting of business at the
meeting.
Section 3.14. Attendance by Telephone. One or more members of the Board
of Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment by which all directors
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
Section 3.15. Action by Directors Without a Meeting. Any action required
or permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting if a consent in writing, describing the action so taken, is
signed by all of the directors. Such consent may be executed in counterparts
and shall be effective as of the date of the last signature thereon, unless
the
consent specifies a different effective date. Such consent shall have the
same
force and effect as a unanimous vote of the directors.
Section 3.16. Compensation. By resolution of the Board of Directors any
director may be paid any one or more of the following: his expenses, if any,
of
attendance at meetings; a fixed sum for attendance at each meeting; or a
stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
Section 4.1. Authorization of Committees of the Board of Directors. The
Board of Directors, by resolution adopted by a majority of the full Board of
directors, may designate from among its members an executive committee and one
or more other committees, each of which, to the extent provided in the
resolution, shall have all of the authority, powers and duties of the Board of
Directors, except that (a) no such committee shall have the authority to do
any
of the following:
(i) declare dividends or distributions; (ii) approve or recommend to
shareholders actions or proposals required by the Colorado Corporation Code to
be approved by shareholders; (iii) fill vacancies on the Board of Directors or
any committee thereof; (iv) amend these Bylaws; (v) approve a plan of merger
not
requiring shareholder approval; (vi) reduce earned or capital surplus; (vii)
authorize or approve the reacquisition of shares of the Corporation unless
pursuant to a general formula or method specified by the Board of Directors;
or
(viii) authorize or approve the issuance or sale of, or any contract to issue
or
sell, shares of the Corporation, or designate the terms of a series of a class
of shares, and (b) the Board of Directors, having acted regarding general
authorization for the issuance or sale of shares of the Corporation or any
contract therefor and, in the case of a series, the designation thereof, may,
pursuant to a general formula or method specified by the Board by resolution
or
by adoption of a stock option or other plan, authorize a committee to fix the
terms of any contract for the sale of the shares and to fix the terms upon
which
such shares may be issued or sold, including, without limitation, the price,
the
dividend rate, provisions for redemption, sinking fund, conversion, or voting
or
preferential rights, and provision for other features of a class of shares or
a
series of a class of shares, with full power in such committee to adopt any
final resolution setting forth all terms thereof and to authorize the
statement
of the terms of a series for filing with the Secretary of State under the
Colorado Corporation Code. Subject to the foregoing, the Board of Directors
may
provide by resolution such powers, limitations and procedures for such
committees as the Board deems advisable. To the extent the Board of Directors
does not establish other procedures for such a committee, each committee shall
be governed by the procedures established in Section 3.8 (except as they
relate
to an annual meeting of directors) and Sections 3.9, 3.10, 3.13, 3.14, 3.15
and
3.16 of these Bylaws, as if the committee were the Board of Directors.
Neither
the designation of such committee, the delegation of authority to such
committee, nor any action by such committee pursuant to its authority shall
alone constitute compliance by any member of the Board of Directors, not a
member of the committee in question, with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
Section 4.2. Stock Option Committee. The Board of Directors, by a
resolution adopted by a majority of the entire Board, may designate two or
more
directors to constitute a Stock Option Committee, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as
amended, which Committee, unless its authority shall be otherwise expressly
limited by such resolution or other resolutions, shall have the following
duties, among others:
(a) to determine the employees, officers and directors to whom
stock options ("Options") shall be granted, pursuant to the 1992
Performance Stock Option Plan of the Corporation (the "Stock Option Plan")
as may be amended from time to time, the time when such Options shall be
granted, the number of shares of common stock which shall be subject to
each Option, the period(s) during which such Options shall be exercisable
(whether in whole or in part), and other terms and provisions thereof;
(b) to construe the Stock Option Plan and Options granted
thereunder, to amend the Stock Option Plan and Options granted thereunder,
to prescribe, amend and rescind rules and regulations relating to the
Stock Option Plan, to determine the terms and provisions of the respective
Options and to make all other determinations necessary or advisable for
administering the Stock Option Plan;
(c) any or all powers and functions of the Stock Option Committee
may at any time and from time to time be exercised by the Board of
Directors or the Executive Committee thereof; provided, however, that,
with respect to the participation in the Stock Option Plan by employees
who are members of the Board of Directors or the Executive Committee, as
the case may be, such powers and functions of the Stock Option Committee
may be exercised by the Board of Directors or the Executive Committee only
if, at the time of such exercise, a majority of the members of the Board
of Directors or the Executive Committee, as the case may be, and a
majority of the directors acting in the particular matter, are
"disinterested persons" within the meaning of Rule 16b-3 (or any successor
rule or regulation) promulgated under the Securities Exchange Act of 1934,
as amended;
(d) advise management on all other matters pertaining to the
Stock Option Plan as requested;
(e) report to the Board of Directors as and when appropriate with
respect to all of the foregoing.
Vacancies in the membership of the Stock Option Committee may be filled by
the Board of Directors at any regular or special meeting of the Board of
Directors or by unanimous written consent.
The Stock Option Committee shall keep regular minutes of its proceedings
and report the same to the Board of Directors when required. The designation
of
such Committee and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed upon the Board of Directors or the member by law.
The Board of Directors may from time to time designate the number of such
Stock Option Committee members that shall constitute a quorum and provide for
the holding of regular meetings thereof. In the absence of any such
designation, a majority of the members of the Stock Option Committee shall
constitute a quorum. The affirmative vote of a majority of those present at a
meeting of the Stock Option Committee at which a quorum is present, shall be
necessary for the adoption of any resolution or the taking of any action.
Meetings of the Stock Option Committee may be called by any member upon at
least three (3) days' prior written notice.
ARTICLE V
OFFICERS
Section 5.1. Number and Election. The officers of the Corporation shall
be a President, a Chief Executive Officer, a Chairman of the Board of
Directors,
a Secretary and a Treasurer, who shall be elected by the Board of Directors.
In
addition, the Board of Directors may elect a Chairman and a Vice Chairman of
the
Board, and the Board of Directors, the President or the Chief Executive
Officer
may appoint one or more vice presidents, assistant secretaries, assistant
treasurers, and such other subordinate officers and agents as it or he shall
deem necessary, who shall hold their offices and agencies for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by these Bylaws, the Board of Directors, or (with respect to such
officers appointed by the President Chief Executive Officer), the President or
Chief Executive Officer. Any two or more offices may be held by the same
person, except the offices of President and Secretary. The officers of the
Corporation shall be natural persons at least eighteen years old.
Section 5.2. President. The President shall preside at all meetings of
shareholders and, unless the Board of Directors has elected a Chairman or Vice
Chairman, at all meetings of the Board of Directors. Subject to the direction
and control of the Board of Directors, he shall have general and active
management of the business of the Corporation and shall see that all orders
and
resolutions of the Board of Directors are carried into effect. He may
negotiate, enter into and execute contracts, deeds and other instruments on
behalf of the Corporation as are necessary and appropriate or as are approved
by
the Board of Directors or any committee designated by the Board of Directors,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer
or
agent of the Corporation or shall be required by law to be otherwise signed or
executed. He shall have such additional authority, power and duties as are
appropriate and customary for the office of President and as the Board of
Directors may prescribe from time to time.
Section 5.3. Chief Executive Officer. The Chief Executive Officer shall
preside at all meetings of shareholders that the President or the Chairman of
the Board are unable to attend, and at all meetings of the Board of Directors
that the President or the Chairman of the Board are unable to attend. Subject
to the direction and control of the Board of Directors, he shall have general
and active management of the business of the Corporation and shall see that
all
orders and resolutions of the Board of Directors are carried into effect. He
may negotiate, enter into and execute contracts, deeds and other instruments
on
behalf of the Corporation as are necessary and appropriate or as are approved
by
the Board of Directors or any Committee designated by the Board of Directors,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer
or
agent of the Corporation or shall be required by law to be otherwise signed or
executed. He shall have such additional authority, power and duties as are
appropriate and customary for the office of Chief Executive Officer and as the
Board of Directors may prescribe from time to time.
Section 5.4. Chairman of the Board. The Chairman of the Board of
Directors shall chair all meetings of the Board of Directors and shareholders
at
which he is present, and shall have such other powers and duties as shall be
determined from time to time by the Board.
Section 5.5. Vice Chairman of the Board. The Vice Chairman of the Board
of Directors shall have the authority to act in the absence of the Chairman
and
shall chair all meetings of the Board of Directors and shareholders which the
Chairman is unable to attend, and shall have such other powers and duties as
shall be determined from time to time by the Board.
Section 5.6. Vice President. The Vice President, if any, or, if there
are more than one, the Vice Presidents in the order determined by the Board of
Directors or the President, shall be the officer or officers next in seniority
after the President. Each Vice President shall have such authority, power and
duties as are prescribed by the Board of Directors or President. Upon the
death, absence or disability of the President, the Vice President, if any, or,
if there are more than one, the Vice Presidents in the order determined by the
Board of Directors or the President, shall have the authority, power and
duties
of the President.
Section 5.7. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board
of
Directors, keep the minutes of such meetings, have charge of the corporate
seal
and stock records, be responsible for the maintenance of all corporate records
and files and the preparation and filing of reports to governmental agencies
(other than tax returns), have authority to affix the corporate seal to any
instrument requiring it (and, when so affixed, it may be attested by his
signature), and have such other authority, powers and duties as are
appropriate
and customary for the office of secretary or as the Board of Directors or the
President may prescribe from time to time.
Section 5.8. Assistant Secretary. The assistant secretary, if any, or,
if there are more than one, the assistant secretaries in the order determined
by
the Board of Directors or the President shall, under the supervision of the
President and the Secretary, perform such other duties and have such other
powers as may be prescribed from time to time by the Board of Directors or the
President. Upon the death, absence or disability of the Secretary, the
assistant secretary, if any, or, if there are more than one, the assistant
secretaries in the order designated by the Board of Directors or the
President,
shall have the authority, power and duties of the secretary.
Section 5.9. Treasurer. The treasurer shall have control of the funds
and the care and custody of all stocks, bonds and other securities owned by
the
Corporation, and shall be responsible for the preparation and filing of tax
returns. He shall receive all moneys paid to the Corporation and, subject to
any limits imposed by the Board of Directors or the President, shall have
authority to give receipts and vouchers, to sign and endorse checks and
warrants
in the Corporation's name and on the Corporation's behalf, and give full
discharge for the same. The treasurer shall also have charge of disbursement
of
funds of the Corporation, shall keep full and accurate records of the receipts
and disbursements, and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as shall be
designated by the Board of Directors. He shall have such additional
authority,
powers and duties as are appropriate and customary for the office of treasurer
and as the Board of Directors or President may prescribe from time to time.
In
the absence or disability of the President and Vice President or Vice
Presidents, the Treasurer shall perform the duties of the President.
Section 5.10. Assistant Treasurer. The assistant treasurer, if any, or,
if there are more than one, the assistant treasurers in the order determined
by
the Board of Directors or the President shall, under the supervision of the
President and the Treasurer, have such authority, powers and duties as may be
prescribed from time to time by the Board of Directors or the President. Upon
the death, absence or disability of the Treasurer, the assistant treasurer, if
any, or if there are more than one, the assistant treasurers in the order
determined by the Board of Directors or the President, shall have the
authority,
powers and duties of the Treasurer.
Section 5.11. Removal and Resignation. Any officer elected or appointed
by the Board of Directors may be removed at any time by the Board of
Directors,
and any officer appointed by the President may be removed at any time by the
Board of Directors or the President, whenever in its or his judgment the best
interests of the Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of any officer shall not itself create contract
rights.
Any officer may resign at any time by giving written notice of his resignation
to the Board of Directors, the President or the Secretary, and acceptance of
such resignation shall not be necessary to make it effective, unless the
notice
so provides. Any vacancy occurring in any office, the election or appointment
to which may be made only by the Board of Directors, may be filled by the
Board
of Directors. Any vacancy occurring in any other office of the Corporation
may
be filled by the Board of Directors or the President.
Section 5.12. Compensation. Officers shall receive such compensation for
their services as may be authorized or ratified by the Board of Directors.
Election or appointment of an officer shall not of itself create a contractual
right to compensation for services performed as such officer. No officer
shall
be prevented from such compensation by reason of the fact that he is also a
director of the Corporation.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Definitions. As used in this Article VI, (a) "Corporation"
includes any domestic or foreign predecessor entity of the Corporation in a
merger, consolidation or other transaction in which the predecessor's
existence
ceased upon consummation of the transaction; (b) "director or officer" means
an
individual who is or was a director or officer of the Corporation and an
individual who, while a director or officer of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee or agent of, or in another similar capacity for, any other entity (a
director or officer shall be considered to be serving an employee benefit plan
at the Corporation's request if his duties to the Corporation also impose
duties
on or otherwise involve services by him to the plan or to participants in or
beneficiaries of the plan), and, unless the context otherwise requires,
"director or officer" shall include the estate or personal representative of a
director or officer; (c) "entity" includes any foreign or domestic
corporation,
partnership, joint venture, trust, enterprise or employee benefit plan; (d)
"expenses" includes attorney fees; (e) "liability" means the obligation to pay
a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan), or reasonable expense incurred with
respect to a proceeding; (f) "official capacity," when used with respect to a
director or officer, means the office of the director or officer in the
Corporation ("official capacity" does not include service for any other
entity);
(g) "party" includes an individual who was, is, or is threatened to be made a
named defendant or respondent in a proceeding; (h) "proceeding" means any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal.
Section 6.2. Mandatory Indemnification.
(a) Except as provided in Section 6.2(d), the Corporation shall
indemnify against liability incurred in any proceeding an individual made
a party to the proceeding because he is or was a director or officer if:
(I) he conducted himself in good faith; (ii) he reasonably believed (A) in
the case of conduct in his official capacity with the Corporation, that
his conduct was in the Corporation's best interests; or (B) in all other
cases, that his conduct was at least not opposed to the Corporation's best
interests; and (iii) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(b) A director's or officer's conduct with respect to an employee
benefit plan for a purpose he reasonably believed to be in the interests
of the participants in or beneficiaries of the plan is conduct that
satisfies the requirements of Section 6.2(a)(ii)(B). A director's or
officer's conduct with respect to an employee benefit plan for a purpose
that he did not reasonably believe to be in the interests of the
participants in or beneficiaries of the plan shall be deemed not to
satisfy the requirements of Section 6.2(a)(i).
(c) The termination of any proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, is not of itself determinative that the individual did not
meet the standard of conduct set forth in Section 6.2(a).
(d) The Corporation may not indemnify a director or officer under
this Section 6.2 either: (i) in connection with a proceeding by or in the
right of the Corporation in which the director or officer was adjudged
liable to the Corporation; or (ii) in connection with any proceeding
charging improper personal benefit to the director or officer, whether or
not involving action in his official capacity, in which he was adjudged
liable on the basis that personal benefit was improperly received by him.
(e) Indemnification permitted under this Section 6.2 in
connection with a proceeding by or in right of the Corporation is limited
to reasonable expenses incurred in connection with the proceeding.
Section 6.3. Authorization.
(a) The Corporation shall not indemnify a director or officer
under Section 6.2 unless authorized in the specific case after a
determination has been made that indemnification of the director or
officer is required in the circumstances because he has met the standard
of conduct set forth in section 6.2(a).
(b) The determination required to be made by Section 6.3(a) shall
be made: (i) by the Board of Directors by a majority vote of a quorum,
which quorum shall consist of directors not parties to the proceeding; or
(ii) if a quorum cannot be obtained, by a majority vote of a committee of
the Board designated by the Board, which committee shall consist of two or
more directors not parties to the proceeding; except that directors who
are parties to the proceeding may participate in the designation of
directors for the committee.
(c) If the quorum cannot be obtained or the committee cannot be
established under Section 6.3(b), or, even if a quorum is obtained or a
committee is designated, if such quorum or committee so directs, the
determination required to be made by Section 6.3(a) shall be made: (i) by
independent legal counsel selected by a vote of the Board of Directors or
the committee in the manner specified in Section 6.3(b)(i) or Section
6.3(b)(ii) or, if a quorum of the full Board cannot be obtained and a
committee cannot be established, by independent legal counsel selected by
a majority vote of the full Board; or (ii) by the shareholders.
(d) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is required; except that, if the
determination that indemnification is required is made by independent
legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by the body that selected said
counsel.
Section 6.4. Advance Payment.
(a) The Corporation shall pay for or reimburse the reasonable
expenses incurred by a director or officer who is a party to a proceeding
in advance of the final disposition of the proceeding if: (i) the director
or officer furnishes the Corporation a written affirmation of his good-
faith belief that he has met the standard of conduct described in Section
6.2(a)(i); (ii) the director or officer furnishes the Corporation a
written undertaking, executed personally or on his behalf, to repay the
advance if it is determined that he did not meet such standard of conduct;
and (iii) a determination is made that the facts then known to those
making the determination would not preclude indemnification under this
Section 6.4.
(b) The undertaking required by Section 6.4(a)(ii) shall be an
unlimited general obligation of the director or officer but need not be
secured and may be accepted without reference to financial ability to make
repayment.
(c) Determinations and authorizations of payments under this
Section 6.4 shall be made in the manner specified in Section 6.3.
Section 6.5. Mandatory Indemnification Against Reasonable Expenses. The
Corporation shall indemnify a director or officer of the Corporation who was
wholly successful, on the merits or otherwise, in defense of any proceeding to
which he was a party because he is or was a director or officer, against
reasonable expenses incurred by him in connection with the proceeding.
Section 6.6. Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, fiduciary or agent of the Corporation or who, while a director,
officer, employee, fiduciary or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, fiduciary or agent of, or in another similar capacity for, any other
entity against any liability asserted against or incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VI. Any such insurance may be procured from any
insurance company designated by the Board of Directors of the Corporation,
whether such insurance company is formed under the laws of the State of
Colorado
or any other jurisdiction of the United States of America or elsewhere,
including any insurance company in which the Corporation has equity or any
other
interest, through stock ownership or otherwise.
Section 6.7. Notice to Shareholders. Any indemnification of, or advance
of expenses to, a director or officer in accordance with this Article VI, if
arising out of a proceeding by or on behalf of the Corporation, shall be
reported in writing to the shareholders with or before the notice of the next
shareholders' meeting.
ARTICLE VII
SHARES AND TRANSFER THEREOF
Section 7.1. Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the Corporation, including the
appointment of transfer agents and registrars.
Section 7.2. Certificates for Shares. The shares of the Corporation may,
but need not be represented by certificates. Unless the Colorado Corporation
Code or another law expressly provides otherwise, the fact that the shares are
not represented by certificates shall have no effect on the rights and
obligations of shareholders.
Certificates representing shares of the Corporation shall be respectively
numbered serially for each class of shares, or series thereof, as they are
issued, shall be impressed with the corporate seal or a facsimile thereof, and
shall be signed by the Chairman or Vice Chairman of the Board of Directors or
by
the President or a Vice President and by the Treasurer or an Assistant
Treasurer
or by the Secretary or an Assistant Secretary; provided that such signatures
may
be a facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar, both of which may be the Corporation itself or its
employee. Each certificate shall state the name of the Corporation, the fact
that the Corporation is organized or incorporated under the laws of the State
of
Colorado, the name of the person to whom issued, the date of issue, the class
(or series of any class), the number of shares represented thereby and the par
value of the shares represented thereby or a statement that such shares are
without par value. A statement of the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of
the
shares of each class shall be set forth in full or summarized on the face or
back of the certificates which the Corporation shall issue, or in lieu
thereof,
the certificate may set forth that such a statement or summary will be
furnished
to any shareholder upon request without charge. Each certificate shall be
otherwise in such form as may be prescribed by the Board of Directors and as
shall conform to the rules of any stock exchange on which the shares may be
listed.
The Corporation may issue certificates representing fractional shares and
may make transfers creating a fractional interest in a share of stock. The
Corporation may issue scrip in lieu of any fractional shares, such scrip to
have
terms and conditions specified by the Board of Directors.
Section 7.3. Facsimile Signatures. Where a certificate is (I)
countersigned by a transfer agent other than the Corporation or its employee,
or
(ii) registered by a registrar other than the Corporation or its employee, any
or all of the officers' signatures on the certificate required by Section 7.2
may be facsimile; except that if the Corporation acts as its own transfer
agent
or registrar, or both, it shall be allowed to countersign such certificates if
it is governed by the rules of a regulated securities exchange. If any
officer
who has signed, or whose facsimile signature has been placed upon, any
certificate, shall cease to be such officer, whether because of death,
resignation, or otherwise, before the certificate is issued by the
Corporation,
it may nevertheless be issued by the Corporation with the same effect as if he
were such officer at the date of issue.
Section 7.4. Cancellation of Certificates. All certificates surrendered
to the Corporation for transfer shall be cancelled and no new certificates
shall
be issued in lieu thereof until the former certificate for a like number of
shares shall have been surrendered and cancelled, except as herein provided
with
respect to lost, stolen or destroyed certificates.
Section 7.5. Lost, Stolen or Destroyed Certificates. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of the fact and lodge the same with the Secretary
of
the Corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
Corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the Corporation),
a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 7.6. Shares Held for Account of Another. The Board of
Directors may adopt by resolution a procedure whereby a shareholder of the
Corporation may certify in writing to the Corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution shall set forth (i) the
classification of shareholders who may certify; (ii) the purpose or purposes
for
which the certificate may be made; (iii) the form of certification and
information to be contained herein; (iv) if the certification is with respect
to
a record date or closing of the stock transfer books, the time after the
record
date or the closing of the stock transfer books within which the certification
must be received by the Corporation; and (v) such other provisions with
respect
to the procedure as are deemed necessary or desirable. Upon receipt by the
Corporation of a certification complying with the procedure, the persons
specified in the certification shall be deemed, for the purpose or purposes
set
forth in the certification, to be the holders of record of the number of
shares
specified in place of the shareholder making the certification.
Section 7.7. Consideration for Shares. Shares may be issued for such
consideration, expressed in dollars (but not less than the par value thereof),
as shall be fixed from time to time by the Board of Directors. Treasury
shares
may be disposed of for such consideration expressed in dollars as may be fixed
from time to time by the Board of Directors. Such consideration may consist,
in
whole or in part, of money, other property, tangible or intangible, or in
labor
or services actually performed for the Corporation, but neither promissory
notes
nor the promise of future services shall constitute payment or part payment
for
shares of the Corporation.
Section 7.8. Transfer of Shares. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of
the
Corporation shall be transferable on the books of the Corporation by the
holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares.
Upon
presentation and surrender of a certificate for shares properly endorsed and
payment of all taxes therefor, the transferee shall be entitled to a new
certificate or certificates in lieu thereof. As against the Corporation, a
transfer of shares can be made only on the books of the Corporation and in the
manner hereinabove provided, and the Corporation shall be entitled to treat
the
holder of record of any share as the owner thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the
part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of Colorado.
Section 7.9. Transfer Agent. The Board of Directors by resolution shall
appoint the transfer agent of the certificates representing the shares of
stock
of the Corporation. In addition, the Board of Directors must authorize any
change of the transfer agent of the Corporation. The transfer agent appointed
by the Board shall maintain a stock transfer book, the stubs in which shall
set
forth among other things, the names and addresses of the holders of all issued
shares of the Corporation, the number of shares held by each, the certificate
numbers representing such shares, the date of issue of the certificates
representing such shares, and whether or not such shares originate from
original
issue or from transfer. Subject to Section 2.5, the names and addresses of
the
shareholders as they appear on the stubs of the stock transfer book shall be
conclusive evidence as to who are the shareholders of record and as such
entitled to receive notice of the meetings of shareholders; to vote at such
meetings; to examine the list of the shareholders entitled to vote at
meetings;
to receive dividends; and to own, enjoy and exercise any other property or
rights deriving from such shares against the Corporation. Each shareholder
shall be responsible for notifying the Secretary in writing of any change in
his
name or address and failure so to do will relieve the Corporation, its
directors, officers and agents, from liability for failure to direct notices
or
other documents, or pay over or transfer dividends or other property or
rights,
to a name or address other than the name and address appearing on the stub of
the stock transfer book.
Section 7.10. Close of Transfer Book and Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders
for
any other proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period all in accordance with
Section 2.5 of these Bylaws.
Section 7.11. Shares Without Certificates.
(a) Unless provided otherwise in these bylaws or in the
Corporation's Articles of Incorporation, the Board of Directors may
authorize the issuance of any of the Corporation's classes or series of
shares without certificates. Such authorization shall not affect shares
already represented by certificates until they are surrendered to the
Corporation.
(b) Within a reasonable time following the issue or transfer of
shares without certificates, the Corporation shall send the shareholder a
complete written statement of the information required by Section 7.2
hereof to be on certificates.
ARTICLE VIII
BANKING
Section 8.1. Changes in Primary Banking Relationships. The Board of
Directors must, by resolution, authorize all changes in the primary banking
relationships of the Corporation.
ARTICLE IX
SEAL
Section 9.1. Corporate Seal. The Board of Directors may adopt a seal,
circular in form and bearing the name of the Corporation and the words "SEAL"
and "COLORADO," which, when adopted, shall constitute the seal of the
Corporation. The seal may be used by causing it or a facsimile of it to be
impressed, affixed, manually reproduced or stamped with indelible ink.
ARTICLE X
FISCAL YEAR
Section 10.1. Fiscal Year. The Board of Directors may, by resolution,
adopt a fiscal year for the Corporation.
ARTICLE XI
AMENDMENT
Section 11.1. Amendment of Bylaws. These Bylaws may at any time and from
time to time be amended, supplemented or repealed by the Board of Directors.
Notwithstanding the foregoing however, these Bylaws may be altered, amended or
repealed and new Bylaws adopted by a vote of a majority in interest of the
outstanding shares of the Corporation entitled to vote at a meeting duly
called
for that purpose.
ARTICLE XII
EMERGENCY BYLAWS
The Emergency Bylaws provided in this Article XII shall be operative
during any emergency in the conduct of the business of the Corporation
resulting
from an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding articles of the
Bylaws
or in the Articles of Incorporation of the Corporation or in the Colorado
Corporation Code. To the extent not inconsistent with the provisions of this
Article, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the Emergency Bylaws shall
cease
to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any
officer or director of the Corporation. Notice of the time and place of
the meeting shall be given by the person calling the meeting to such of
the directors as it may be feasible to reach by any available means of
communication. Such notice shall be given at such time in advance of the
meeting as circumstances permit in the judgment of the person calling the
meeting.
(b) At any such meeting of the Board of Directors, a quorum shall
consist of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such
emergency, may, effective in the emergency, change the principal office or
designate several alternative principal offices or regional offices, or
authorize the officers so to do.
(d) The Board of Directors, either before or during any such
emergency, may provide, and from time to time modify, lines of succession
in the event that during such an emergency any or all officers or agents
of the Corporation shall for any reason be rendered incapable of
discharging their duties.
(e) No officer, director or employee acting in accordance with
these Emergency Bylaws shall be liable except for willful misconduct. No
officer, director, or employee shall be liable for any action taken by him
in good faith in such an emergency in furtherance of the ordinary business
affairs of the Corporation even though not authorized by the Bylaws then
in effect.
(f) These Emergency Bylaws shall be subject to repeal or change
by further action of the Board of Directors or by action of the
shareholders, but no such repeal or change shall modify the provisions of
the next preceding paragraph with regard to action taken prior to the time
of such repeal or change. Any amendment of these Emergency Bylaws may
make any further or different provision that may be practical and
necessary for the circumstances of the emergency.
These Seconded Amended and Restated Bylaws were adopted on the 1st day of
April, 1994 by the Board of Directors.
By
Janice F. Brenton, Secretary
Exhibit 10. 3
Amended and Restated Distribution Agreement
between the Company and Syncor dated June 1, 1995
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
This Agreement, made and entered into as of this ____ day of April, 1995,
by and between GOLDEN PHARMACEUTICALS, INC. (formerly known as Benedict
Nuclear
Pharmaceuticals, Inc.), a corporation organized under the laws of the State of
Colorado, with its principal offices at 1313 Washington Avenue, Golden
Colorado
80401 (hereinafter referred to as "Supplier") and SYNCOR INTERNATIONAL
CORPORATION, organized under the laws of the State of California, with offices
at 20001 Prairie Street, Chatsworth, California 91311 (hereinafter referred to
as "Distributor").
WHEREAS, Supplier and Distributor entered into a Distribution Agreement
dated as of July 1, 1991 (the "Prior Agreement"),
WHEREAS, Supplier and Distributor desire to amend and restate the Prior
Agreement in its entirety,
NOW, THEREFORE, for and in consideration of the mutual agreements and
promises set forth herein, the parties hereto covenant and agree as follows:
1. Appointment. Supplier hereby appoints and Distributor hereby
accepts appointment as a non-exclusive distributor under Supplier's label for
Sodium Iodide I-123 100 and 200 Ci capsules (A 100 Ci capsule is one (1)
unit and a 200 Ci capsule is two (2) units.) meeting the product release
specifications ("Specifications") set forth in Supplier's NDA 18-671 and all
supplements and amendments thereto (hereinafter referred to as "Products"). A
copy of such Specifications is attached hereto as Exhibit A and hereby
incorporated by reference.
2. Term and Right of First Refusal.
(a) The term of this Agreement shall commence effective May 1,
1995 and shall continue for five (5) years with a one year option to
extend the Agreement by Distributor subject to the provisions of Section
17 hereof.
(b) For a period of one year from the date of termination of this
Agreement, in the event Supplier desires to enter into a distribution
agreement, Supplier shall first provide Distributor with a copy of such
proposed distribution agreement (a "Proposal"). Distributor shall have
15
calendar days from receipt of a Proposal to advise Supplier whether
Distributor will enter into a distribution agreement with Supplier that
contains the same terms and conditions as the Proposal. Supplier's
obligations in this paragraph 2(b) are subject to the prior receipt of an
executed Confidentiality Agreement in the form of Exhibit D attached
hereto.
If Distributor advises Supplier that it will enter into an agreement
that contains the same terms and conditions as the Proposal, then the
parties shall diligently proceed to enter into a distribution agreement
containing the same terms and conditions as the Proposal. In any event,
the effective date of the definitive distribution agreement will be the
same as that set forth in the Proposal, or if no date is set forth in the
Proposal it will be effective within fifteen days from the date of the
acceptance of the terms of the Proposal by Distributor. In the event
Distributor does not elect to enter into a distribution agreement
containing the same terms and conditions as the Proposal or fails to
notify Supplier within the time frame set forth in this Section 2(b),
then
Supplier may seek to enter into a distribution agreement containing the
same terms and conditions as the Proposal with other parties; provided,
however, if Supplier fails to enter into such distribution agreement with
another party within ninety (90) days of Distributor's failure or
refusal,
then Distributor shall have the same rights under any subsequent offer of
a distribution agreement as under the initial proposal.
Notwithstanding anything to the contrary contained in this paragraph
2(b) the Distributor shall have no right of first refusal if this
Agreement terminates upon the mutual agreement of the parties.
(c) If Supplier receives a written proposal for a distribution
agreement from a third party ("Third Party Proposal") under which such
third party proposes to enter into a distribution agreement with Supplier
and which Third Party Proposal contains more favorable terms to the
distributor than this Agreement and Supplier desires to accept such Third
Party Proposal, Supplier shall within three (3) days of receipt of such
written Third Party Proposal communicate such Third Party Proposal to
Distributor in writing. Distributor shall have fifteen (15) days after
receipt of such Third Party Proposal to agree to change this Agreement to
incorporate such more favorable terms. If Distributor agrees, this
Agreement shall be so amended within thirty (30) days of Distributor's
agreement.
3. Price. Distributor agrees to pay the prices for the Products as per
Exhibit B, attached hereto and hereby incorporated by reference.
4. Payment Terms. Supplier shall invoice Distributor on a weekly basis
via a statement and invoices/statements shall be addressed as directed by
Distributor. Payment shall be made in U.S. Dollars net thirty (30) days after
the date of Supplier's weekly statement.
5. Duties of Distributor. Distributor agrees to:
(a) provide an adequate sales organization and facilities to
assure adequate sales representation, prompt handling of inquiries,
orders
and careful attention to customer service requirements for Products; and
(b) comply with applicable laws and governmental regulations
affecting the use, possession and sale of the Products.
6. Duties of Supplier. Supplier agrees to:
(a) accept Distributor's orders for Products for shipment four
(4) days per week for 52 weeks per year; Supplier produces Products for
distribution by Time of Calibration on Monday through Thursday. If a
national holiday falls on a scheduled distribution day (i.e., Monday
through Thursday), capsules will not be produced or shipped for that
particular day. However, capsules may be produced for holiday
distribution if a minimum order of 500 capsules or an agreed to amount is
submitted in writing at least two (2) weeks prior to the holiday;
(b) provide Distributor with such technical assistance as is
reasonably necessary to help Distributor to effectively carry out its
responsibilities under this Agreement;
(c) use its best efforts to maintain a reasonable inventory of
Products, raw materials and supplies sufficient in view of Distributor's
forecasted purchases to promptly service orders received from
Distributor;
and
(d) provide such assistance as is reasonably necessary in
connection with customer complaints and investigations or recalls by any
state or federal governmental agency, including investigations, testing
and the preparation or compilation of reports and documents.
7. Transportation. Supplier shall ship Products at its expense by
commercially scheduled air carrier FOB Destination Airport to up to 25
Destination Airports on Sunday, Monday, Tuesday and Wednesday of each week and
Supplier shall be responsible for tracing and expediting said shipments.
Designation of the Destination Airport and ground transportation shall be the
responsibility of the Distributor and may be changed from time to time by
Distributor upon thirty (30) days prior written notice to Supplier.
8. Orders. Distributor shall place its daily orders for products to
Supplier by telephone. Order cut-off times will be mutually agreed upon
between
each location distributor and supplier.
9. Warranty. Supplier warrants that the Products:
(a) conform to the Specifications and are safe and effective
under the conditions of use described on the labelling for the Products;
(b) are not adulterated or misbranded as of the date of
manufacture within the meaning of the Federal Food, Drug and Cosmetic Act
as amended, or within the meaning of any applicable state or municipal
law
in which the definitions of adulteration and misbranding are
substantially
identical with those contained in the Federal Food, Drug and Cosmetic
Act,
and the Products are not articles which may not, under the provisions of
Sections 404 or 505 of said Act, be introduced into interstate commerce
or
which may not, under substantially similar provisions of any state or
municipal law, be introduced into commerce;
(c) comply with the applicable regulations of the United States
Nuclear Regulatory Commission, and in particular, the Products satisfy
the
standards set forth in Part 20 of the regulations of the Nuclear
Regulatory Commission;
(d) are packaged in containers that conform to the requirements
and regulations of the United States Department of Transportation for
shipment of radioactive materials NOS, USA D.O.T. 7A-Type A; and
(e) are not manufactured or sold in violation of any of the
provisions of the Fair Labor Standards Act of 1938, the Civil Rights Act
of 1964 as amended by the Equal Employment Opportunity Act of 1972 or the
Occupational Safety and Health Act of 1970.
10. No Change to Specifications. Supplier shall not change or modify
the Specifications without the prior consent of the FDA. Supplier shall
notify
Distributor of specification changes approved by the United States Food and
Drug
Administration ("FDA") prior to implementation of such changes.
11. Termination of Agreements. That certain Transfer Agreement, form of
Lease Agreement, short form of Option to Lease, form of Subordination and
Non-Disturbance Agreement, Option to Lease and Subordination and
Non-Disturbance
Agreement, all between Supplier and Distributor and attached to the Prior
Agreement as Exhibits A through D, respectively, are null and void and no
longer
of any force or effect and each party hereto agrees to take all such actions
as
are necessary or desirable, including but not limited to the preparation and
filing of releases and other documents with state, county and local agencies,
to
effectuate the release and termination of such agreements and to notify such
other parties that Supplier or Distributor may designate the fact that such
agreements have been terminated and are null and void and no longer of any
force
or effect. All costs and expenses associated with or related to such actions
shall be at the sole cost and expense of Supplier.
12. Infringement of Patents, Trademarks or Copyrights. Supplier shall
indemnify Distributor and its customers for any loss, damage, expense or
liability that may result by reason of any infringement or claim of
infringement
of any United States or foreign patent, trademark or copyright, based on the
manufacture, sale or distribution of any Products furnished hereunder.
Supplier
shall defend or settle, at its expense, any suit against Distributor for which
it is responsible hereunder. Distributor shall notify Supplier promptly of
any
claim of infringement for which Supplier may be responsible hereunder and
shall
cooperate with Supplier in every reasonable way to facilitate the defense
hereof.
13. Supplier's Indemnification. Supplier hereby agrees, upon receipt
from Distributor of reasonable written notice, to defend, indemnify and hold
harmless Distributor, its officers, directors, employees, agents and customers
from and against any and all:
(a) damages, charges, losses (including the cost of any Products
lost by libel, condemnation or recall), actions and proceedings brought
by
the United States of America or any state or local government or any
agency or instrumentality thereof, or any foreign government or agency
thereof, against the Distributor, its officers, directors, agents and/or
employees or customers or against any Products by reason of any finding
by
said public authority or by Distributor that any such Products are not as
herein warranted; and
(b) claims, demands, actions and causes which are hereafter made
or brought against Distributor, its officers, directors, agents and/or
employees or customers by any person, firm, corporation or association
for
the recovery of damages to property or damages for injury, illness and/or
death of any person which is caused or alleged to have been caused by the
possession, handling, use or consumption of any Products resulting from
or
allegedly resulting from Supplier's acts or omissions.
Distributor shall give prompt notice to Supplier concerning any claim as
to which these indemnification provisions apply. Distributor, its officers,
directors, agents and/or employees or customers may participate with the
Supplier in the defense of any such action at their own expense.
14. Distributor's Indemnification. Distributor shall indemnify and hold
harmless Supplier, its officers, directors, employees and agents from and
against any and all claims, damages, actions and judgments, including costs,
reasonable attorneys' fees and expenses, arising out of or in connection with
any representation made by Distributor with respect to any Product which is
inconsistent with the product label and package insert for the Products.
15. Force Majeure. Neither party to this Agreement shall be liable or
be in breach of any provision hereof for any failure or delay on its part to
perform any obligation (other than the obligation to make payments when due
under provision of this Agreement) because of force majeure, including but not
limited to war, insurrection, riot, fire, explosion, flood, sabotage,
accidents
of navigation or breakdown or damage of vessels, other conveyances for air,
land
or sea, strike or other labor disturbances, failure of Supplier's raw material
supplier to provide Supplier with I-123, governmental action or any other
cause
beyond the reasonable control of the party thus failing to perform or whose
performance is thus delayed.
16. Relationship of Parties. The relationship hereby established
between Distributor and Supplier is solely that of an independent contractor
and
this Agreement shall not create an agency, partnership, joint venture or
employer/employee relationship, and nothing hereunder shall be deemed to
authorize either party to act for, represent or bind the other or any of its
affiliates except as expressly provided in this Agreement.
17. Termination.
(a) Either party may terminate this Agreement immediately if FDA
approval of the Products is withdrawn.
(b) If either party materially defaults in the performance of any
obligation hereunder, then the other party shall have the right to
terminate this Agreement upon thirty (30) days prior written notice
unless
such defaulting party shall substantially cure such default to the
reasonable satisfaction of the other party during the thirty (30) day
notice period. In such event, this Agreement shall continue in effect
and
such notice of termination shall be of no effect.
(c) Either party may promptly terminate this Agreement without
penalty at any time by written notice in the event the other party passes
any resolution for or permits any proceedings for its winding up or
assignment in bankruptcy or otherwise is declared bankrupt or insolvent
or
in the event of a receiver or manager of its assets being appointed.
(d) Unless Section 15 is applicable or Nordion fails to supply I-
123 to Supplier without breach of Supplier's obligations to Nordion, in
the event that Supplier materially defaults in the performance of any
obligation under this Agreement or ceases to do business, Distributor or
its nominee shall have the option to acquire the NDA for the I-123
capsules, the master drug file for the I-123 capsules, the equipment for
producing the I-123 capsules, a list of such equipment is set forth on
Exhibit C attached hereto and incorporated herein (such equipment,
together with any equipment acquired by Supplier after the date hereof in
addition to or in substitution of such equipment is referred to herein as
the equipment) (collectively the "NDA") at fair market value under the
provisions of 17(e) below (the "Purchase Option"). Distributor shall
exercise said option by written notice to Supplier within ninety (90)
days
from the date of Supplier's failure to cure any such material default or
Supplier's cessation of business.
(e) Determination of Fair Market Value
(i) Supplier and Distributor agree that for purpose
of
determining the Purchase Price for the NDA that, Distributor and
Supplier shall attempt to agree upon the fair market value of the
NDA, the Master Drug File and the Equipment, respectively;
(ii) If Distributor and Supplier are unable to agree
on the
fair market value of the NDA, the Master Drug File or the Equipment,
respectively, within three (3) days after Distributor notifies
Supplier of its intent to exercise the Purchase Option, Distributor
and Supplier shall each designate in writing to the other party
within five (5) days after Distributor's exercise of the Purchase
Option the name of an experienced appraiser qualified to appraise
the NDA, the Master Drug File, or the Equipment, as the case may be.
If the parties are able to agree on the fair market value of the
NDA, the Master Drug File and the Equipment, respectively, such
value shall be used to determine the Purchase Price. The appraiser
shall be appointed only to determine the value of whichever of the
NDA, the Master Drug File, or the Equipment the parties are unable
to agree on;
(iii) Each party may designate a single appraiser to
appraise
all of the NDA, the Master Drug File, and the Equipment;
(iv) The appraiser(s) designated by Supplier and the
appraiser(s) designated by Distributor shall then, within seven (7)
days after Distributor's exercise of the Purchase Option, agree upon
and designate a third appraiser(s) qualified to appraise the NDA,
the Master Drug File and the Equipment, as the case may be. If more
than one appraiser is designated by any party, only the appraiser(s)
with expertise with respect to the particular asset shall take part
in designating a third appraiser for such particular asset; and
(v) Each such appraiser shall provide a written
appraisal
of the fair market value of the particular asset within fifteen (15)
days after Distributor's exercise of the Purchase Option. The fair
market value of the particular asset shall be the average of the
value as determined pursuant to all three appraisals. If either
party fails to designate an appraiser within three (3) days after
the breach, or such party's appraiser fails to deliver appraisal
within fifteen (15) days of the breach, the appraiser designated by
the other party shall be used to determine the fair market value of
the particular asset. If the two designated appraisers are unable
to agree upon a third appraiser, either party may appeal to the
Denver District Court for the appointment of a third appraiser.
18. Assignment. This Agreement and the rights hereunder shall not be
assignable by either party or transferred by merger without the prior written
consent of the other party, except that Distributor may assign this Agreement
to
its parent or subsidiary corporation or the successor to all or substantially
all of the business or assets related to the Products.
19. Notice. Except as otherwise provided herein, any notice, report,
invoice or other communication or request required hereunder shall be deemed
to
have been sufficiently given when deposited, prepaid, registered or certified
mail, addressed to the recipient at its address set forth below or to such
other
address as may be furnished in writing by the recipient.
To Distributor: Syncor International Corporation
20001 Prairie Street
Chatsworth, CA 91311
Attention: President
To Supplier: Golden Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, CO 80401
Attention: President
20. Governing Law. The validity, performance and construction of this
Agreement shall be construed and enforced in accordance with the laws of the
State of Colorado.
21. Waiver. Waiver of or failure to enforce, by either party, any of
the terms of this Agreement at any time shall not in any way limit or waive
such
party's rights thereafter to enforce or require compliance with the terms of
this Agreement.
22. Entire Agreement. The provisions set forth herein constitute the
entire agreement between the parties with respect to the subject matter
hereof.
This Agreement supersedes all previous communications, representations or
agreements, whether oral or written, between the parties relating to the
subject
matter hereof. NEITHER PARTY SHALL BE BOUND BY ANY PROVISIONS ADDITIONAL TO
OR
AT VARIANCE WITH THE TERMS HEREOF THAT MAY APPEAR IN THE OTHER PARTY'S
QUOTATION, PURCHASE, ORDER, ACKNOWLEDGEMENT, CONFIRMATION, INVOICE OR IN ANY
OTHER PRIOR OR LATER COMMUNICATION UNLESS SUCH PROVISION IS EXPRESSLY AGREED
TO
IN WRITING SIGNED BY BOTH PARTIES.
23. Amendments. Modification or amendment of this Agreement shall not
be of any force or effect unless such modification or amendment is in writing
and signed by the party to be bound thereby.
24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized representatives as of the day and year
first
written above.
SYNCOR INTERNATIONAL GOLDEN PHARMACEUTICALS, INC.
CORPORATION
By By
Bruce A. Goldberg,
Chief Operating Officer,
Vice President - Business
DevelopmentEXHIBIT A
Final Product Specification for the 100 Ci and 200 Ci capsule strengths of
Sodium Iodide I 123 Capsules, NDA 18-671.
100 Ci/Capsule
Sucrose 0.45-0.65 g
Sterile Water for Injection, USP* 1.9-49 ul
0.1N Sodium Hydroxide Solution* 1-7.1 ul
Concentrated Hydrochloric Acid* 0.01-0.075 ul
(Total Fluid Content)* (9-50 ul)
Sodium Thiosulfate, ACS* 0.00002 - 0.00057 mg
Gelatin Capsule:
Size: 0
Color: Opaque White QX
Approximate Weight: 0.1 g
*Amounts based on a raw material radioactive concentration range of 14-100
mCi/ml at BHPI TOC and a stock solution radioactive concentration range of
2-11
mCi/ml at BNPI TOC.Final Product Specification for the 100 Ci and 200 Ci
capsule strengths of
Sodium Iodide I 123 Capsules, NDA 18-671.
200 Ci/Capsule
Sucrose 0.45-0.65 g
Sterile Water for Injection, USP* 3.8-48 ul
0.1N Sodium Hydroxide Solution* 2-14.2 ul
Concentrated Hydrochloric Acid* 0.02-0.15 ul
(Total Fluid Content)* (18-50 ul)
Sodium Thiosulfate, ACS* 0.00004 - 0.0011 mg
Gelatin Capsule:
Size: 0
Color: Opaque Blue 1KJ/Orange "F" OF
Approximate Weight: 0.1 g
*Amounts based on a raw material radioactive concentration range of 14-100
mCi/ml at BHPI TOC and a stock solution radioactive concentration range of
4-11
mCi/ml at BNPI TOC.Final Product Specification for the 100 Ci and 200 Ci
capsule strengths of
Sodium Iodide I 123 Capsules, NDA 18-671.
100 Ci and 200 Ci Capsules
Radiochemical Purity,Radioactivity of the iodide band is not less than
95% of total radioactivity. Rf value for the iodide
band falls within 5.0% of the value found for NaI
123 specimen of known purity when determined under
similar conditions.
Radionuclide Identification,Spectrum is identical to an I 123 specimen of
known
purity that exhibits a major photopeak at
0.159 0.001 MeV.
Radionuclidic Purity,Not less than 97.0% I 123,
not more than 2.9% as I 125, and
not more than 0.1% as all other (I 121 and Te 121)
at BHPI TOC.
100% Assay,All accepted capsules are 90% to 100% of label
claim. Not less than 19 of 20 capsules are within
96.5% and 103.5% of the mean radioactivity value.
EXHIBIT B
PRICING SCHEDULE
IODINE I-123 SODIUM IODIDE CAPSULES
A. Purchase prices as specified in Paragraph 3 shall be the current purchase
prices for the Iodine 1-123 Sodium Iodide capsules ("Capsules").
B. On November 1, 1995 and on each succeeding anniversary date of this
Agreement, the parties shall discuss the aforementioned pricing.
Notwithstanding the above, for each subsequent year of the term of this
Agreement, the price for the Capsules shall be increased annually by a
percentage equal to the average increase (if any) in Distributor's price
for the Capsules to its customers as measured by the Syncor Price
Deviation Index for the Capsules for the proceeding year.
EXHIBIT B-1
What is it?
Stands for Price Deviation Index, this monthly report tracks a number of
selected products in 4 categories:
Tech, Core, Propriety, and Cardiology products.
1123 products are captured under the CORE category. Each month's QTY, ASP,
and
SALES $ are captured on a PDI report generated in Marketing. This monthly
information is then compared against a BASELINE ASP (derived from the average
of
the last 3 months of the previous calendar year). Therefore, for 1995
reports,
the baseline is calculated from the average of Oct-Dec 1994 data.
Since QTY changes are every month for each product, the PDI report tracks
pricing activities by keeping QTY constant and comparing the current SALES $
versus ADJUSTED SALES $ (derived from multiplying current QTY versus BASELINE
ASP). The result is a PDI index for each product (see sample below):
Sample
Prod,QTY,Sales,ASP,Baseline,Adj sls,PDI
XXX,12,$676,$48,$46.55,12 * $46.55 =
$558.60,$676/$558.6 =
1.031
The above sample shows that for Product XXX, the PDI for XX 1995 was at 1.031
indicating a 3.1% increase from its baseline which was the last quarter of
1994.
Conversely, if price decreases occurred, the PDI would show indexes of less
than
1.000. Example: 0.987 indicating a -1.3%.
How is PDI used?
The PDI report is generally used for INTERNAL price tracking purposes. This
information allows us to evaluate and monitor price level activities on
CUSTOMER, LOCATION, and NATIONAL levels and can be helpful in assessing the
success of any particular price increase program or policy implemented. It
has
not been, according to my knowledge, ever used as a basis of price increases
to
a customer.
EXHIBIT C
EQUIPMENT LIST OF EQUIPMENT USED TO PRODUCE I-123 CAPSULES
1. Lead
2. Geiger Counter
3. Cabinets
4. Refrigerator
5. Chromatography
6. Xeron Gas Trap
7. Stopchart Recorder
8. Lab Benchtable
9. Lab Platform
10. Lead Metal Box
11. 2 Flowhoods
12. Led Glass Shelves
13. Auto Dispensing Unit
14. Benches
15. 2 Generators
16. Lead bricks
17. Liquid Nitrogen Detector
18. Cover Assembly
19. HO Vacuum
20. Chart Recorder
21. Analytic Balance
22. 3 Freeze Dryers
23. 36 Load Pigs
24. 2 Zeron Units
25. Class 5 Weights
26. PH meters, tools
27. Various Tools
28. Lead Glass Goggles
29. Counter Centrefuge
30. Volocoty Meter
31. Incubator
32. Pawn Crimper
33. Timec
34. Conveyer
35. 13m Crimper
36. Sterilizer
37. Sodium Lead Crystal
38. Shelves
39. Survey Metals
40. Hepa Filters
41. Digital Isotope Monitor
42. Electrophorsis
43. Silver Xeobie
44. Hood Filter Housing
45. Capentec
46. Vacuum
47. 2 Radiation Calibrators
48. Isotope Draqing Station
49. Omega Digital Thermal Hood
50. Counter Assembly
51. Graphic Printer
52. Canberra
53. Incubator & Monitor Equipment
54. Fumehoods
55. 4 Radiation Monitor
56. NP Xray, M099 Assy
57. Emprinter, T201
58. Heabler
59. Venetron
60. Shielding
61. Capsule Assemble
62. Ontec/Ampci
63. Data Design/Davis
64. Canberra/Egg Ortec
65. Calibrator, Col Comutermetc
66. Conveyor/Epson Printer
67. Quaratee Cards
68. Union Supply
69. Channel 5-80 Processor
70. AC/DC Mixer Router
71. Metal Finisher
72. Stepper Motor
73. Ladder
74. Hand Truck
75. Nexco Osmometer
76. Steam Sterilizer Component
77. Capsule Filling Assembly
78. Turntable For Filling
79. Apple II
80. Kewaune
81. Lead Shield
82. Getinger Int'l.
83. Gluid Metering
84. Branson Sonic Power
85. Charcoal Service Corp.
86. Target Blks, Shielding in Manifolds
87. Dose Calibrator, Shield Unit
88. 2-3 Shelf Carts on Casters
89. Thermowatch (Lab Controller)
90. Hitachi 650f Oscliscope
91. Kewanee Hopehood
92. Single Spindle Dissolution Station
93. Lead Lined Cabinet
94. Shredder/2205 Destroyit
95. Lead Sleaves (Gamma Products)
96. UniSlide Assembly B2621k2j Motor M061-FD08
97. Disbersion Equipment (Ivek Corp)
98. Plastic Pallets (McMaster-Carr)
99. Lab Hood (Genesse Energy)
100. Dose Meter (Victoreen)
101. Rapid Assey System Electronics
102. Analyzer, Amplifier, Connector
103. Trash Compactor
104. Binding Machine
105. Timeclock
106. Coffee Makers
107. IBM Wheelwriter 6 Typewriter
108. Eberlie Low Energy Gamma Pro.
109. Bionic Scope
110. 9-Pen Plotter
111. Fax Machine
112. Airborne P.C. Climent
113. Spectronic 601 (fr/Fischer Scientific)
114. Spectrophotometer Beckman Model 36 s/n 4350105
115. Charcoal Service Corp Carbon Absorber Model No. CSC-12-101-NS
116. Cole-Parmer GT4000G Balance
117. Hewlett Packard Chemstation
118. Clean Room, Western States Sales (9-150)
119. Quad Counter/Timer
120. Airflow Calibrator
121. Lead Shield
122. Computer Adj. Pump
123. 1-388 & 1-486 Computer
124. Toshiba Copier
125. Automatic Assay System
126. Talk Horn-TSI Colorado
127. Automatic Dosing
128. Manual Fork Lift
EXHIBIT D
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement ("Agreement") is being entered into
between
Golden Pharmaceuticals, Inc. ("Golden") and Syncor International Corporation
("Syncor") in order to allow Syncor to exercise its rights under paragraph
2(b)
of the Amended and Restated Distribution Agreement (the "Amended Distribution
Agreement"). As a condition to your being furnished a copy of the
distribution
agreement referred to in paragraph 2(b) of the Amended Distribution Agreement
(the "Confidential Material"), you agree to treat the Confidential Material in
accordance with the provisions of this Agreement and to take or abstain from
taking certain other actions herein set forth. The term "Confidential
Material"
does not include information which (i) was published or in the public domain
at
the time disclosed or used other than as a result of a disclosure by or
through
you, (ii) was or becomes available to you from a source other than Golden or
their advisors, provided that the source of such information was not bound by
an
obligation to maintain such information as confidential, (iii) was known to
you
at the time of disclosure as evidenced by written records maintained by you in
the ordinary course of business or (iv) is disclosed or used by you after five
(5) years from the date of disclosure.
1) Without the prior written consent of Golden, you agree that you will
not and will direct your representatives not to, disclose to any person the
fact
that any Confidential Material has been made available to you, nor otherwise
make any public disclosure (whether written or oral) with respect to this
Agreement, except and only to the extent that you have been advised by legal
counsel in writing that such disclosure is required by law and then only after
prior notice to and consultation with Golden. The term "person" as used in
this
Agreement shall be broadly interpreted to include, without limitation, any
corporation, company, partnership, trust or individual, excluding your
employees, officers, directors or consultants hired by you who agree to be
bound
by this Agreement.
2) You also agree that the Confidential Material will be used solely
for the purpose of evaluating the possibility of entering into a distribution
agreement and that such information will be kept confidential by you and your
directors, officers, employees and representatives.
3) In view of the fact that the Confidential Material consists of
confidential and non-public information, you agree not to acquire, directly or
indirectly, in any manner, for a period of one year from the date of this
Agreement, beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), or act as an advisor to any person seeking to do the
same, of any securities of Golden.
4) In the event that you do not proceed to enter into a distribution
agreement containing the same terms as a Proposal, you shall promptly return
the
Confidential Material and all written material containing or reflecting any
information contained in the Confidential Material (whether prepared by
Golden,
their respective advisors or otherwise) and will not retain any copies,
extracts
or other reproductions in whole or in part of such written material, except
one
copy which shall be retained by your legal department for reference only in
the
event of a dispute relating to this Agreement.
5) You agree that if any of your agreements in this Agreement are
breached, a remedy at law may be inadequate and, therefore, without limiting
any
other remedy available at law or in equity, an injunction, specific
performance
or other forms of equitable relief, money damages or any combination thereof
shall be available to Golden.
6) You further understand and agree that no failure or delay by Golden
in exercising any right, power or privilege hereunder shall operate as a
waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege.
7) You agree and acknowledge that your agreements in this Agreement are
not only for the benefit of Golden, but also their respective successors and
assigns and they shall be third party beneficiaries hereof having all the
rights
to enforce your agreements in this Agreement.
8) Capitalized terms used and not otherwise defined herein shall have
the meanings given to such terms in the Amended Distribution Agreement.
9) This Agreement shall be governed and construed in accordance with
the laws of the State of Colorado.
IN WITNESS WHEREOF the parties hereto have executed this Agreement by
their respective duly authorized representative as of the date set forth
below.
GOLDEN PHARMACEUTICALS, INC.
By:
Its:
Confirmed and Agreed to:
SYNCOR INTERNATIONAL CORPORATION
By:
Its:
Dated: , 19
Exhibit 10.7
Employment Agreement between the Company and Charles R. Drummond
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the
1st
day of September 1991, between Benedict Nuclear Pharmaceuticals, Inc., a
Colorado corporation (the "Company"), and Charles R. Drummond (the
"Employee").
RECITALS
WHEREAS, the Board of Directors of the Company has elected Employee to
the
position of Chairman of the Board of Directors and Secretary of the Company,
effective as of the date hereof; and
WHEREAS, the Company and the Employee desire to set forth herein the
terms
and conditions of Employee's employment with the Company.
NOW, THEREFORE, the Company and the Employee hereby agree as follows:
ARTICLE I
EMPLOYMENT
Section 1.01. Employment. The Company hereby employs Employee for the
Employment Period specified in Article II below in the capacity of Chairman of
the Board of Directors and Secretary of the Company, and in such other
capacities as the Board of Directors of the Company (the "Board of Directors")
may reasonably determine from time to time.
Section 1.02. Responsibilities. Employee shall assume and discharge the
responsibilities of his offices as set forth in the Bylaws of the Company and
such other responsibilities as may be assigned to him by the Board of
Directors,
or as may be more particularly described in business plans approved by the
Board
of Directors. Employee shall perform such responsibilities on a part-time
basis
and to the best of his ability.
Section 1.03. Authority. Employee's duties and authority shall be
governed by the Board of Directors. The Board of Directors may, in its sole
discretion, broaden or limit the scope of Employee's authority.
Section 1.04. Employment Period. This Agreement shall be for a period
of
three years (the "Employment Period"), commencing on its effective date,
subject, however, to termination during such period as provided in Article V
hereof. This Agreement shall be renewed automatically for succeeding periods
of
one year on the terms and conditions as contained in this Agreement unless
either the Company, by its Board of Directors, or the Employee shall, at least
30 days prior to the expiration of any three year period, give written notice
of
the intention not to renew this Agreement. Such renewals shall be effective
in
subsequent years on the same day of the same month as the original effective
date of this Agreement.
ARTICLE II
COMPENSATION
Section 2.01. Salary. As compensation for all services rendered and to
be rendered pursuant to this Agreement, the Company agrees to pay the Employee
an annual salary (the "Base Annual Salary") of $75,000 subject to periodic
increase from time to time at the sole discretion of the Board of Directors.
The Base Annual Salary shall accrue and be payable in accordance with the
payroll practices of the Company as in effect from time to time. The Company
shall have the right to deduct from any compensation paid to Employee
hereunder
all taxes and other amounts which may be required to be deducted or withheld
by
law (including, but not limited to, income tax withholding and social security
payments), whether such laws are now in effect or become effective after the
date of this Agreement.
Section 2.02. Stock Option. Employee shall be entitled to participate
in
the Company's (a) Incentive Stock Option Plan; (b) Non-Qualified Stock Option
Plan; and (c) any successor stock option plan under the terms and conditions
set
forth therein.
Section 2.03. Expenses. The Company shall promptly reimburse the
Employee for all reasonable out-of-pocket expenses incurred by the Employee on
behalf of the Company or in connection with the Employee's performance of his
duties hereunder, including without limitation travel and lodging expenses
incurred by the Employee away from his home in connection with the performance
of his duties hereunder upon presentation by Employee of an itemized account
of
such expenditures. Such expenditures shall, however, be subject at all times
to
approval of the Board of Directors.
Section 2.04. Vacations. During the Employment Period, the Employee
shall be entitled each year to a reasonable vacation in accordance with the
established practices of the Company now or hereafter in effect for executive
officers during which time the Employee's compensation shall be paid in full.
Section 2.05. Employment Benefits. Employee shall be entitled to
participate in all employee benefit programs maintained by the Company,
including health, life, disability and dental insurance.
Section 2.06. Indemnity. Employee shall be entitled to the benefits of
any indemnity arrangements and liability insurance policies authorized for
officers and directors of the Company in the Company's Articles of
Incorporation
and Bylaws or now or hereafter enacted for the benefit of such officers and
directors by the Board of Directors.
ARTICLE III
PROPRIETARY INFORMATION
Section 3.01. Proprietary Information. The Company possesses, and will
continue to possess certain information that has been created, developed or
has
otherwise become known to the Company, or in which property rights have been
assigned or otherwise conveyed to the Company, which information has
commercial
value in the Company's business (the "Proprietary Information"). Such
Proprietary Information extends to, but is not necessarily limited to,
information created, developed or made known by Employee during the period of
or
arising out of his employment with the Company. In addition, Proprietary
Information includes, but is not limited to, trade secrets, processes,
computer
programs, formulas, data, know-how, improvements, inventions, techniques,
marketing plans, strategies, business methods and techniques, forecasts,
customer lists and information relating to any acquisition prospects.
Proprietary Information does not include any information as to which (a) at
the
time of disclosure to Employee such information was in the public domain or
later entered the public domain other than as a result of a breach of an
obligation herein; or (b) at the time of disclosure to Employee such
information
was known to, and reduced to writing by, Employee prior to the receipt
thereof;
or (c) subsequent to disclosure to Employee, Employee received such
information
from a third party under no obligation to maintain such information in
confidence, and the third party came into possession of such information other
than as a result of a breach of an obligation herein.
Section 3.02. Ownership of Proprietary Information. Employee agrees
that
all Proprietary Information shall be the sole property of the Company and its
assigns, and the Company and its assigns shall be the sole owner of all
licenses
and other rights in connection with such Proprietary Information. At all
times,
both during Employee's employment by the Company and after termination of such
employment, Employee will keep in strictest confidence and trust all
Proprietary
Information and will not use or disclose such Proprietary Information, or
anything relating to such information, without the prior written consent of
the
Company, except as may be necessary in the ordinary course of performing his
duties under this Agreement.
Section 3.03. Documents and Other Property. All materials or articles
of
information of any kind furnished to Employee by the Company or developed by
Employee in the course of his employment hereunder are and shall remain the
sole
property of the Company; and if the Company requests the return of such
information at any time during, upon or after the termination of Employee's
employment hereunder, Employee shall immediately deliver the same to the
Company. Employee will not, without the prior written consent of the Company,
retain any documents, data or property, or any reproduction thereof of any
description, belonging to the Company or pertaining to any Proprietary
Information.
Section 3.04. Third Party Information. The Company from time to time
receives from third parties confidential or proprietary information subject to
a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes ("Third Party Information").
During the term of Employee's employment and thereafter, Employee will hold
Third Party Information in the strictest confidence and will not disclose or
use
Third Party Information except as permitted by the agreement between the
Company
and such third party.
Section 3.05. Noncompetition. During the term of employment hereunder
and for a period of one year thereafter, Employee shall not (except in
conjunction with duties as an Employee of the Company) engage in or devote any
time or abilities to the planning, organization, promotion, direction,
management or conduct of any competitive business activity, whether or not
such
business activity is pursued for the gain, profit or pecuniary advantage of
Employee, without first having obtained the written consent of the Company.
Employee further agrees that without the prior written consent of the Company,
Employee shall not during the term of employment and for a period of one year
thereafter, directly or indirectly (a) invest in any business which is
competitive with that of the Company or a customer of the Company (this shall
not be construed to prevent Employee from purchasing or selling shares of any
business whose shares are traded on a national or local public securities
exchange); (b) attempt to influence customers and other business associates
not
to do business with or not to continue to do business with the Company; or
take
any other action inconsistent with the responsibility of an employee to his
employer.
Section 3.06. Equitable Relief. Employee acknowledges that, in view of
the nature of the business in which the Company is engaged, the restrictions
contained in this Article III (the "Restrictions") are reasonable and
necessary
in order to protect the legitimate interests of the Company, and that any
violation thereof would result in irreparable injuries to the Company, and
Employee therefore further acknowledges that, in the event Employee violates,
or
threatens to violate, any of such Restrictions, the Company shall be entitled
to
obtain from any court of competent jurisdiction, without the posting of any
bond
or other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other
benefits
arising from such violation, which rights shall be cumulative and in addition
to
any other rights or remedies in law or equity to which the Company may be
entitled.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations by Employee. The Employee hereby
represents and warrants to the Company that (a) the Employee's execution and
delivery of this Agreement and his performance of his duties and obligations
hereunder will not conflict with, or cause a default under, or give any party
a
right to damages under, or to terminate, any other agreement to which the
Employee is a party or by which he is bound, and (b) there are no agreements
or
understandings that would make unlawful the Employee's execution or delivery
of
this Agreement or his employment hereunder.
Section 4.02. Representations of the Company. The Company hereby
represents and warrants to Employee as follows:
(a) The Company is a corporation duly authorized and established
pursuant to the corporate laws of the State of Colorado and has all
requisite power and authority to enter into this Agreement and perform
its
obligations hereunder. The consummation of the transactions contemplated
by this Agreement will not violate, nor be in conflict with any agreement
or instrument to the Company is a party or by which it is bound.
(b) The execution, delivery and performance of this Agreement and
the transactions contemplated hereby have been duly and validly
authorized
by all requisite corporate action on the part of the Company and are
valid, legal and binding obligations of the Company, enforceable in
accordance with their terms.
ARTICLE V
THE COMPANY'S LIABILITY ON TERMINATION
Section 5.01. Expiration of Agreement. This Agreement shall terminate
three years from the Employment Date or any extensions thereof as provided in
Section 1.04 hereof, unless earlier terminated pursuant to any, singularly or
in
combination, of the following provisions in this Article V.
Section 5.02. Resignation. Employee may terminate this Agreement at any
time by written notice to the Company. The Company shall not be liable to
Employee for any salary or benefits beyond the date of Employee's voluntary
termination of employment with the Company.
Section 5.03. Termination by the Company. This Agreement may be
terminated by the Company only upon written notice to the Employee. If such
termination is with Cause (as hereinafter defined), all of the Employee's
rights
to compensation under Article II above shall terminate upon such termination,
except amounts accrued in respect to periods prior to such termination. If
such
termination is without Cause, the Company shall pay to the Employee in
addition
to amounts accrued in respect of periods prior to such termination severance
pay
in an amount equal to the amount of compensation that would otherwise be
payable
to the Employee under this Agreement through the remainder of the Employment
Period based upon the Base Annual Salary then in effect (payable in one lump
sum
payment upon the date of such termination). "Cause" shall mean (a) fraud or
willful misconduct in office on the part of the Employee, (b) a material
breach
by the Employee of any of his obligations hereunder, (c) conviction of the
Employee for fraud, misappropriation, embezzlement or any felony (excluding
traffic violations), or (d) the Employee's violation of any rule, regulation,
procedure or administrative order of any federal, state or local regulatory
agency or authority which violation results in administrative, civil or
criminal
action against the Employee or the Company or results in censure or the
entering
into of a consent decree against the Employee or Company.
Section 5.04. Death. If the Employee shall die during the Employment
Period, this Agreement shall terminate, and the Company shall pay to any
beneficiary or beneficiaries designated by the Employee in writing or, if
none,
to his estate or legal representative, only the amount of compensation due to
such Employee under this Agreement through the date of death prorated through
the date of termination.
Section 5.05. Disability. If the Employee is unable to discharge his
duties hereunder for a period of six consecutive months, or for a total of six
months in any 12-month period, by reason of physical or mental illness, injury
or incapacity, the Company may, by written notice to the Employee, terminate
this Agreement. In such case, the Company shall provide to the Employee
severance pay and benefits in an amount as provided in Section 5.03 above in
the
case of termination without Cause, less the amount of any and all proceeds
received by the Employee from any disability insurance policies maintained by
the Company.
Section 5.06. Termination Upon Sale of Business. If this Agreement is
terminated before the end of the Employment Period for any of the following
events:
(a) The sale by the Company of substantially all of its assets to
a single purchaser or to a group of associated purchasers;
(b) The sale, exchange, or other disposition in one transaction,
of two-thirds of the outstanding capital stock of the Company;
(c) A decision by the Board of Directors or the shareholders of
the Company to terminate the Company's business, liquidate its assets, or
upon the appointment of a receiver or trustee, or the filing of a
petition
in bankruptcy; or
(d) The merger or consolidation of the Company in a transaction
in which the shareholders of the Company receive less than 50% of the
outstanding voting shares of the new or continuing corporation or other
business entity;
the Company shall pay Employee in addition to amounts accrued in respect of
periods prior to such termination an amount equal to the amount of
compensation
that would otherwise be payable to the Employee under this Agreement through
the
remainder of the Employment Period based upon the Base Annual Salary then in
effect (payable in one lump sum payment upon the date of such termination).
ARTICLE VI
GENERAL PROVISIONS
Section 6.01. Notices. Any notice or other communication provided for
in
this Agreement or contemplated hereby shall be sufficiently given if given in
writing and delivered personally or by certified mail, return receipt
requested,
and addressed,
in the case of the Company, to: Benedict Nuclear Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, Colorado 80401
Attention: President
with a copy to: Warren L. Troupe, Esq.
Kutak Rock
Suite 2900
717 Seventeenth Street
Denver, Colorado 80202
and,
in the case of the Employee, to: Charles R. Drummond
623 Kihekah
Pawhuska, Oklahoma 74056
Notices shall be effective when so delivered personally or, if mailed, three
days after deposit thereof with postage prepaid in the U.S. mails. The
parties
may designate a different address by giving notice of change of address in the
manner provided above.
Section 6.02. Waiver. No waiver or modification in whole or in part of
this Agreement, or any term or condition hereof, shall be effective against
any
party unless in writing and duly signed by the party sought to be bound. Any
waiver of any breach or any provisions hereof or any right or power by any
party
on one occasion shall not be construed as a waiver of, or a bar to, the
exercise
of such right or power on any other occasion or as a waiver of any subsequent
breach.
Section 6.03. Binding Effect; Successors. This Agreement shall be
binding upon and shall inure to the benefit of the Company and its successors
and assigns, and shall inure to the benefit of and be binding upon the
Employee
and his executors, administrators, heirs and legal representatives. Because
the
Employee's duties and services hereunder are special, personal and unique in
nature, the Employee may not transfer, sell or otherwise assign his rights,
obligations or benefits under this Agreement.
Section 6.04. Controlling Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Colorado
applicable to contracts made and to be performed therein, without regard to
conflict of laws provisions.
Section 6.05. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect or impair the validity or enforceability of the remaining
provisions
of this Agreement, which shall remain in full force and effect and the parties
hereto shall continue to be bound thereby.
Section 6.06. Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof and shall
supersede all previous agreements between the parties, whether written or
oral,
with respect to the subject matter hereof. This Agreement cannot be modified,
altered or amended except by a written agreement signed by both parties
hereto.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
COMPANY: EMPLOYEE:
BENEDICT NUCLEAR
PHARMACEUTICALS, INC.
By
Dr. Douglas R. Currin, Charles R. Drummond
President
Exhibigt 10.8
Employment Agreement between the Company and Daniel B. Guinn
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of July 7, 1995, by and
between
QUALITY CARE PHARMACEUTICALS, INC., a California corporation ("Employer"), and
Daniel B. Guinn ("Employee"), with respect to the following facts:
A. Employer desires to assure itself of the services of Employee for
the term hereof, upon the terms and conditions herein set forth.
B. Employee is willing to be employed by Employer upon the terms and
conditions herein stated.
NOW, THEREFORE, for and in consideration of the promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Employment Duties. Employee agrees to and hereby does employ
Employee, and Employee agrees to and hereby does enter the employ of Employer
as
the President of Employer. The duties to be performed by Employee shall
include
such duties as are customary for a President, in all cases subject to the
direction of Employer's Board of Directors.
2. Term. The term of this Agreement shall commence at 12:00 a.m. on
the date of the transaction whereby Golden Pharmaceuticals, Inc. acquires the
stock of QCP (the "Effective Date") and shall remain in force for a period of
five years.
3. Exclusive Employment.
(a) Employee shall, during the term of this Agreement, perform
is services for and duties to Employer to the best of his skill, ability
and talent, and subject to Section 3(d) hereof, shall devote his working
time and attention to the fulfillment of his obligations to Employer
under
this Agreement. Employer recognizes that Employee shall have flexibility
in business hours commensurate with his status as an executive officer.
(b) All corporate opportunities conceived, devised, established,
developed or perfected by Employee during the period of his employment
and
related in any way to the business of the Employer shall be promptly
disclosed to and become the exclusive property of Employer.
(c) Employee agrees that he will not knowingly and intentionally
divulge to any person, firm or corporation, except as may be necessary in
the course of business of Employer, and that he will not knowingly and
intentionally use to the detriment of Employer, in any business
competitive with or similar to any business of Employer, at any time
during employment with Employer, any trade secrets or confidential
information of a material nature obtained during the course of his
employment with Employer, without first obtaining the consent of the
Board
of Directors of Employer. At the time of leaving the employ of Employer,
Employee shall use his good faith efforts to deliver to Employer, and not
keep or deliver to anyone else, any and all memoranda, specifications,
documents, and in general any and all material relating to any trade
secrets or confidential information of Employer which Employee then has
in
his possession.
(d) The provisions of this Section 3 shall not preclude Employee:
(1) from investing in personal investments, provided such investments (A)
are not in business or activities competitive with employer, or represent
less than five percent (5%) of the outstanding equity securities of any
such competitive company, the stock of which is publicly traded on a
national securities exchange or in the over-the-counter market, and (B)
do
not materially interfere with the performance by Employee of his duties
and responsibilities hereunder, or (2) from engaging in personal, civic
or
charitable activities.
4. Compensation. For all services to be rendered by Employee
hereunder, Employee shall be paid (A) an annual base salary (B) an incentive
Merit Award bonus program and (C) annual bonus program.
(a) Base Salary. Employee's annual base salary will start at
$109,000 and will increase January 1 of each year by an amount equivalent
to the prior years CPI.
(b) Merit Award Bonus (Award). The Employee will earn Merit
Awards ("Awards") during the first three years of employment. Employee
will earn 100 Awards during the three-year term of employment according
to
the following schedule:
Year,Awards Earned
,
One,25
Two,35
Three,40
(i) Once an Award has been earned, Employee may
elect to
sell and Employer agrees to purchase any or all of such Awards for
cash or mutually acceptable cash equivalents at any time commencing
with the period first beginning after audited financial statements
are available for the year ending December 31, 1996. The reference
to years one, two and three above refer to the years from the
Effective Date.
(ii) Commencing with the fourth anniversary of the
Effective
Date, Employer shall have the option to purchase any or all of the
Awards.
(iii) The value of the 100 Awards will be calculated
by
multiplying the last two years average of QCP's earnings before
interest, depreciation, Awards and income tax ("EBITD") by 7.8 then
by 10%, then deducting $483,438. The value of one Award is 1/100 of
this total, as calculated at the time the Award is sold.
(iv) If a total of 20 Awards are offered for sale to
Employer for cash in any one year Employer may, at its option, elect
to pay purchase price over two years as follows: (A) 1/3 within 30
days of the sale of Awards (B) 1/3 at the end of the first year, and
(C) the balance at the end of the second year. If Employee chooses
to pay the purchase price over two years, it shall pay interest on
the unpaid balance at the prime rate established, from time to time,
by the Chase Manhattan Bank, N.A.
(v) EBITD for purposes of this awards calculation
will be
determined using the Employers audited financial statements. It is
understood by Employer and Employee that certain fees may be charged
to QCP by its parent for services rendered. Such fees shall be no
greater than ______________ with this mount being reviewed
semiannually in light of the services provided. Any increase in the
total annual fees that may be charged by the parent (for the
calculation of the Awards) requires a unanimous vote of the Board.
(vi) The Employee may protest any expense per the
above
paragraph by notifying the Board of the protest in writing at or
before the time the expense is incurred. Employee may require
arbitration as follows unless a super majority of the Board votes to
include the protested expense in the calculation of the Award.
Employee and Employer shall each select a Certified Public
Accountant ("Accountant"). The two selected accountants shall then
mutually agree on the selection of a third accountant who shall then
act as the sole arbitrator and who's decision shall be binding upon
Employer and Employee. The cost of said Arbitrator shall be borne
equally by the parties. If the Accountants selected by Employer and
Employee are unable to agree on the Arbitrator, a Judge of the
Superior Court shall make the selection.
The directive to the arbitrator will be to (a) determine if
the protested expenses and related benefit did have a net negative
impact on the value of the employee's award program and (b)
determine the net negative effect of the expense. The amount hereby
calculated will be included in the adjusted EBITD for that year.
(vii) QCP's auditors will prepare a report depicting EBITD
immediately after completion of the annual audit if neither party
protests the report within 30 days of receiving that report, that
report becomes the final definition of EBITD for that year. Should
QCP or Employee choose to protest the Award calculation based on
that report, either party may call for arbitration as follows:
Employee and Employer shall each select a Certified Public
Accountant ("Accountant"). The two selected accountants shah
then mutually agree on the selection of a third accountant
who shall then act as the sole arbitrator and who's decision
shall be binding upon Employer and Employee. The cost of
said Arbitrator shall be borne equally by the parties. If
the Accountants selected by Employer and Employee are unable
to agree on the Arbitrator, a Judge of the Superior Court
shall make the selection.
The directive to the arbitrator will be to determine whether any
adjustments to the EBITD are justified. The sum of any such adjustments
will then be allied to the EBITD for Awards calculations.
(viii) Once the adjusted EBITD and Awards calculation
have
been made, QCP will issue an irrevocable letter stating (A) that the
appropriate awards have been earned by and are the property of the
Employee and (B) the then current value of those awards.
(ix) In the event of the termination of the Employee
for any
reason, a pro rata amount of that year's Awards will be deemed to
have been earned on a daily basis through the last day of
employment.
(x) If any "Change-of-Control Transaction" shall
occur
during the term of employment the Employee shall be deemed to have
earned any remaining Awards which shall be granted effective as of
the date of the "Change-of-Control Transaction." A "Change-of-
Control Transaction" shall mean the occurrence of one or more of the
following events: (i) a sale or merger of all or substantially all
of the stock or assets of Employer, or (ii) the effective date of an
underwritten public offering of QCP's common stock. Upon a "Change-
of-Control Transaction" the Employee may require Employer to
purchase the remaining Awards at a price equal to the remaining
Awards divided by 100 times 10% of (a) the proceeds of any
underwritten public offering or (b) the total market value of QCP.
In the event of a "Change-of-Control Transaction" Employee will
receive full, payment for Awards within 60 days of the closing of
the "Change of-Control Transaction."
(xi) In the event that Employee successfully files
suit to
collect any or all of the compensation relative to the Merit Awards
Program and prevails in that suit, he is to be reimbursed for legal
expenses and paid punitive damages in the amount equaling 25% simple
interest on the disputed amount from the time the court determines
the moneys were due until all claims are settled.
(c) Annual Bonus. The Employee may elect to receive an annual
bonus as outlined in Attachment A. The Bonus will be paid within ten
(10)
days after the completion of Quality Care Pharmaceuticals annual
financial
audit.
5. Expenses. Employer shall upon submission of appropriate bills or
vouchers, pay or reimburse Employee for any reasonable expenses incurred by
him
in performing services hereunder; provided, however, that Employee has
complied
with all policies and procedures relating to the reimbursement of such
expenses
as shall, from time to time, be established by Employer. Any expense, as
defined above, in excess of five thousand dollars ($5,000) shall require the
approval of the Board prior to any reimbursement by Employer.
6. Benefits. Employer shall provide to Employee the fringe benefits,
perquisites and other benefits of employment equivalent to such benefits and
perquisites as are provided to other executive officers of Employer and,
subject
to any limitations on such participation imposed by applicable law. Nothing
paid to Employee under any arrangement or perquisite presently in effect or
made
available in the future shall be deemed to be in lieu of the Base Salary or
other compensation paid to Employee under this Agreement.
7. Non-Compete Agreement. Employee and Employer agree that Employer
would suffer irreparable harm and incur substantial damage if Employee were to
compete against Employer. Therefore, for Employer to protect its legitimate
business interests Employee agrees as follows:
For the five-year period following the termination of employment,
Employee
shall not directly or indirectly:
(a) become engaged as owner, shareholder, employee, consultant or
otherwise in any capacity for, or by, any business entity that is deemed
to be significantly participating in any business activities that compete
with or are the same as Employer at the time of the termination of this
agreement.
(b) Induce any employee, customer, vendor, dealer or distributor
of Employer to adversely change its relationship with Employer.
The consideration for this agreement not to compete will be $100,000 to
be
paid in the form of a three-year note (see attachment B).
8. Board of Directors. The Employee shall be entitled to hold one
board seat on the Employees Board of Directors. The Employers board will
consist of 5 directors. Any additional directors will require a super
majority
(super majority is defined as no more than two dissenting votes) approval by
the
Board.
9. Placement Fee. If Employer elects to raise capital through a
private placement ("Offering") using documents prepared by R.A.W. Enterprises
&
Associates, Employer will pay Employee a bonus equal to 5% of the total equity
raised under the Offering. Employer will pay 50% of the bonus upon the
closing
of the Offering and the balance pro rata over three years following the
termination of the Offering.
10. Life Insurance. Employer shall, at its cost and expense, provide
Employee with life insurance protection with death benefits of no less than 2
times the employee's annual base salary, payable to such beneficiaries as
Employee may from time to time designate and may, at Employer's discretion,
apply for and procure in its own name and for its own benefit life and/or
disability insurance in any amount or amounts Employer may consider advisable.
Employee agrees to submit to any medical or other examination and to execute
and
delivery any application or other instrument reasonable necessary to
effectuate
such insurance protection.
11. Termination of Employment. Employer may terminate the relationship
between Employer and employee at any time for cause. Employer shall only have
cause to terminate Employee if Employee:
(a) is convicted of a felony; or
(b) conducts his duties as an officer of the Employer in a
grossly negligent manner. Gross negligence as defined as the intentional
failure to perform a manifested duty in reckless disregard of the
consequences effecting employer; or
(c) becomes permanently disabled. Disability, as defined in the
Employees disability policy (Section 9), shall be considered permanent if
the Employee is disabled for a period exceeding one year; or
(d) dies.
In the event that Employee is terminated by Employer from his employment
during the term of this Agreement for reasons other than cause as defined
above, Employee shall be entitled to continue to receive all salary and
benefits including all benefits of the Merit Awards Program provided for
under this Agreement for the full five year term of this Agreement.
Employee shall terminate this Agreement for any reason by providing 120
days written notice to Employer.
12. Disability. In the event the Employee becomes disabled during the
term of this Agreement, Employer will pay Employee their full salary and
benefits for a period ninety days or until Employee is eligible to receive
benefits under the Employee's own disability program. Employer will reimburse
Employee for the monthly cost of a disability program that guarantees a
maximum
monthly benefit of $5,000 after the first ninety days of disability.
13. Death. If Employee dies during the term of this Agreement, this
Agreement shall terminate as of the date of Employee's death. In such event,
Employer's obligations hereunder shall thereafter be limited to the following:
(a) payment to Employee's beneficiary of Employee's annual base
salary up to the end of the ninety day period after the end of the month
in which Employee's death occurs, payment of life insurance benefit as
delineated in Section 10 hereof; and (c) payment to Employee's
beneficiary
of the Merit Award Bonus as computed pursuant to Section 4 hereof.
14. Attorney's Fees. In the event of any litigation arising under this
Agreement, the prevailing party (or parties), shall be entitled to recover
from
the other party (or parties) the costs of such arbitration or litigation,
including reasonable attorney's fees.
15. Vacation. Vacation policies shall be governed by the policies
governing the vacation policies of the executives of QCP's parent. But in no
case less than three weeks each calendar year.
16. Headings. The subject headings of the sections of this Agreement
are included for purposes of convenience only, and shall not affect the
construction of interpretation of any of its provisions.
17. Severability. It is agreed that if any term, covenant, provision,
section or condition of this Agreement shall be illegal, such illegality shall
not invalidate the whole Agreement but it shall be construed as if not
containing the illegal part, and the fights and obligations of the parties
shall
be construed and enforced accordingly.
18. Entire Agreement. The parties hereto agree that this Agreement
superseded all existing employment agreements between Employer and Employee,
whether they be oral or written, express or implied, and contains the entire
understanding and agreement among the parties concerning the employment of
Employee by Employer.
19. Choice of Law. This Agreement and the performance hereunder shall
be governed by and construed in accordance with and under and pursuant to the
laws of the State of California.
20. Notices. Any notices under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered (if to Employee, to an
officer of Employer other than Employee) or when mailed by United States
registered or certified mail, postage prepaid to the following address:
If to Employer: Quality Care Pharmaceuticals
17911 Sampson Lane
Huntington Beach, CA 92647
If to Employee: Daniel B. Guinn
1445 Valley View #13
Glendale, CA 91202
Any party hereto may change its or his address for purposes of this Section 18
by giving the other parties written notice of the new address in the manner
set
forth above.
21. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there by any estoppel to enforce any provisions
of this Agreement, except by written instrument signed by the party to be
changed with such waive or estoppel.
22. Successors: Affiliates. This Agreement shall inure to the benefit
of and be binding upon Employer, its successors, and assigns, including
without
limitation any person, partnership or corporation which may acquire all or
substantially all of the assets and business of Employer, or with or into
which
Employer may be consolidated, merged or otherwise reorganized, and this
provision shall apply in the event of any subsequent merger, consolidation,
reorganization or transfer.
23. Corporate Authority. Employer represents and warrants that the
execution and delivery of this Agreement by it has been duly and properly
authorized b Employees Board of directors and that when so executed and
delivered this agreement shall constitute the lawful and binding obligation of
Employer.
24. Amendments. This Agreement shall not be amended, modified or
supplemented in any respect except by a subsequent written agreement entered
into by the affected parties. Employer may not take such action to modify
this
Agreement or Employee's employment hereunder, including Employee's offices,
duties or responsibilities, without the approval of Employee.
25. Arbitration. Any claim that Employee may have arising out of or
relating to this Agreement, or the breach thereof or employee's employment by
the Employer, shall be settled by binding arbitration in accordance with the
rules and regulations of the American Arbitration Association.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
By
Chuck Drummond
Title: Chairman of the Board of
Quality Care Pharmaceuticals, Inc.
EMPLOYEE
By
Daniel B. Guinn
ATTACHMENT A
The Employee is to receive an annual bonus per 4c in the attached
Employment Agreement to be calculated based on the annual earnings before
interest, taxes and depreciation (Earnings) of Employer as follows:
If the Earnings is between:,The Bonus for that year will be:
,
$250,000 - 600,000,2.5% of the EBIDT
600,001 - 1,250,000,2.3% of the EBIDT
1,250,001 - 2,225,000,2.2% of the EBIDT
2,225,001 - 3,500,000,2.1% of the EBIDT
3,500,001 - 4,500,000,2.0% of the EBIDT
4,500,001 and up,1.8% of the EBIDT
This Bonus is due and payable within 10 days of the availability of the
audited financial statements for that year.
Exhibit 10.9
Employment Agreement between the Company and Gary A. Klingsheim
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of July 7, 1995, by and
between
QUALITY CARE PHARMACEUTICALS, INC., a California corporation ("Employer"), and
Gary A. Klingsheim ("Employee"), with respect to the following facts:
A. Employer desires to assure itself of the services of Employee for
the term hereof, upon the terms and conditions herein set forth.
B. Employee is willing to be employed by Employer upon the terms and
conditions herein stated.
NOW, THEREFORE, for and in consideration of the promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Employment Duties. Employee agrees to and hereby does employ
Employee, and Employee agrees to and hereby does enter the employ of Employer
as
the Executive Vice President of Employer. The duties to be performed by
Employee shall include such duties as are customary for an Executive Vice
President, in all cases subject to the direction of Employer's Board of
Directors.
2. Term. The term of this Agreement shall commence at 12:00 a.m. on
the date of the transaction whereby Golden Pharmaceuticals, Inc. acquires the
stock of QCP (the "Effective Date") and shall remain in force for a period of
five years.
3. Exclusive Employment.
(a) Employee shall, during the term of this Agreement, perform
his services for and duties to Employer to the best of his skill, ability
and talent, and subject to Section 3(d) hereof, shall devote his working
time and attention to the fulfillment of his obligations to Employer
under
this Agreement. Employer recognizes that Employee shall have flexibility
in business hours commensurate with his status as an executive officer.
(b) All corporate opportunities conceived, devised, established,
developed or perfected by Employee during the period of his employment
and
elated in any way to the business of the Employer shall be promptly
disclosed to and become the exclusive property of Employer.
(c) Employee agrees that he will not knowingly and intentionally
divulge to any person, firm or corporation, except as may be necessary in
the course of business of Employer, and that he will not knowingly and
intentionally use to the detriment of Employer, in any business
competitive with or similar to any business of Employer, at any time
during employment with Employer, any trade secrets or confidential
information of a material nature obtained during the course of his
employment with Employer, without first obtaining the consent of the
Board
of Directors of Employer. At the time of leaving the employ of Employer,
Employee shall use his good faith efforts to deliver to Employer, and not
keep or deliver to anyone else, any and all memoranda, specifications,
documents, and in general any and all material relating to any trade
secrets or confidential information of Employer which Employee then has
in
his possession.
(d) The provisions of this Section 3 shall not preclude Employee:
(1) from investing in personal investments, provided such investments (A)
are not in business or activities competitive with employer, or represent
less than five percent (5%) of the outstanding equity securities of any
such competitive company, the stock of which is publicly traded on a
national securities exchange or in the over-the-counter market, and (B)
do
not materially interfere with the performance by Employee of his duties
and responsibilities hereunder, or (2) from engaging in personal, civic
or
charitable activities.
4. Compensation. For all services to be rendered by Employee
hereunder, Employee shall be paid (A) an annual base salary (B) an incentive
Merit Award bonus program and (C) annual bonus program.
(a) Base Salary. Employee's annual base salary will start at
$109,000 and will increase January 1 of each year by an amount equivalent
to the prior years CPI.
(b) Merit Award Bonus (Award). The Employee will earn Merit
Awards ("Awards") during the first three years of employment. Employee
will earn 100 Awards during the three-year term of employment according
to
the following schedule:
Year,Awards Earned
,
One,25
Two,35
Three,40
(i) Once an Award has been earned, Employee may
elect to
sell and Employer agrees to purchase any or all of such Awards for
cash or mutually acceptable cash equivalents at any time commencing
with the period first beginning after audited financial statements
are available for the year ending December 31, 1996. The reference
to years one, two and three above refer to the years from the
Effective Date.
(ii) Commencing with the fourth anniversary of the
Effective
Date, Employer shall have the option to purchase any or all of the
Awards.
(iii) The value of the 100 Awards will be calculated
by
multiplying the last two years average of QCP's earnings before
interest, depreciation, Awards and income tax ("EBITD") by 7.8 then
by 10%, then deducting $483,438. The value of one Award is 1/100 of
this total, as calculated at the time the Award is sold.
(iv) If a total of 20 Awards are offered for sale to
Employer for cash in any one year Employer may, at its option, elect
to pay purchase price over two years as follows: (A) 1/3 within 30
days of the sale of Awards (B) 1/3 at the end of the first year, and
(C) the balance at the end of the second year. If Employee chooses
to pay the purchase price over two years, it shall pay interest on
the unpaid balance at the prime rate established, from time to time,
by the Chase Manhattan Bank, N.A.
(v) EBITD for purposes of this awards calculation
will be
determined using the Employers audited financial statements. It is
understood by Employer and Employee that certain fees may be charged
to QCP by its parent for services rendered. Such fees shall be no
greater than ______________ with this mount being reviewed
semiannually in light of the services provided. Any increase in the
total annual fees that may be charged by the parent (for the
calculation of the Awards) requires a unanimous vote of the Board.
(vi) The Employee may protest any expense per the
above
paragraph by notifying the Board of the protest in writing at or
before the time the expense is incurred. Employee may require
arbitration as follows unless a super majority of the Board votes to
include the protested expense in the calculation of the Award.
Employee and Employer shall each select a Certified Public
Accountant ("Accountant"). The two selected accountants
shall then mutually agree on the selection of a third
accountant who shall then act as the sole arbitrator and
who's decision shall be binding upon Employer and Employee.
The cost of said Arbitrator shall be borne equally by the
parties. If the Accountants selected by Employer and
Employee are unable to agree on the Arbitrator, a Judge of
the Superior Court shall make the selection.
The directive to the arbitrator will be to (a) determine if
the protested expenses and related benefit did have a net
negative impact on the value of the employee's award program
and (b) determine the net negative effect of the expense.
The amount hereby calculated will be included in the adjusted
EBITD for that year.
(vii) QCP's auditors will prepare a report depicting
EBITD
immediately after completion of the annual audit if neither party
protests the report within 30 days of receiving that report, that
report becomes the final definition of EBITD for that year. Should
QCP or Employee choose to protest the Award calculation based on
that report, either party may call for arbitration as follows:
Employee and Employer shall each select a Certified Public
Accountant ("Accountant"). The two selected accountants shah
then mutually agree on the selection of a third accountant
who shall then act as the sole arbitrator and who's decision
shall be binding upon Employer and Employee. The cost of
said Arbitrator shall be borne equally by the parties. If
the Accountants selected by Employer and Employee are unable
to agree on the Arbitrator, a Judge of the Superior Court
shall make the selection.
The directive to the arbitrator will be to determine whether any
adjustments to the EBITD are justified. The sum of any such
adjustments will then be allied to the EBITD for Awards
calculations.
(viii) Once the adjusted EBITD and Awards calculation
have
been made, QCP will issue an irrevocable letter stating (A) that the
appropriate awards have been earned by and are the property of the
Employee and (B) the then current value of those awards.
(ix) In the event of the termination of the Employee
for any
reason, a pro rata amount of that year's Awards will be deemed to
have been earned on a daily basis through the last day of
employment.
(x) If any "Change-of-Control Transaction" shall
occur
during the term of employment the Employee shall be deemed to have
earned any remaining Awards which shall be granted effective as of
the date of the "Change-of-Control Transaction." A "Change-of-
ontrol Transaction" shall mean the occurrence of one or more of the
following events: (i) a sale or merger of all or substantially all
of the stock or assets of Employer, or (ii) the effective date of an
underwritten public offering of QCP's common stock. Upon a "Change-
of-Control Transaction" the Employee may require Employer to
purchase the remaining Awards at a price equal to the remaining
Awards divided by 100 times 10% of (a) the proceeds of any
underwritten public offering or (b) the total market value of QCP.
In the event of a "Change-of-Control Transaction" Employee will
receive full, payment for Awards within 60 days of the closing of
the "Change of-Control Transaction."
(xi) In the event that Employee successfully files
suit to collect any or all of the compensation relative to the Merit Awards
Program and prevails in that suit, he is to be reimbursed for legal
expenses and paid punitive damages in the amount equaling 25% simple
interest on the disputed amount from the time the court determines
the moneys were due until all claims are settled.
(c) Annual Bonus. The Employee may elect to receive an annual
bonus as outlined in Attachment A. The Bonus will be paid within ten
(10)
days after the completion of Quality Care Pharmaceuticals annual
financial
audit.
5. Expenses. Employer shall upon submission of appropriate bills or
vouchers, pay or reimburse Employee for any reasonable expenses incurred by
him
in performing services hereunder; provided, however, that Employee has
complied
with all policies and procedures relating to the reimbursement of such
expenses
as shall, from time to time, be established by Employer. Any expense, as
defined above, in excess of five thousand dollars ($5,000) shall require the
approval of the Board prior to any reimbursement by Employer.
6. Benefits. Employer shall provide to Employee the fringe benefits,
perquisites and other benefits of employment equivalent to such benefits and
perquisites as are provided to other executive officers of Employer and,
subject
to any limitations on such participation imposed by applicable law. Nothing
paid to Employee under any arrangement or perquisite presently in effect or
made
available in the future shall be deemed to be in lieu of the Base Salary or
other compensation paid to Employee under this Agreement.
7. Non-Compete Agreement. Employee and Employer agree that Employer
would suffer irreparable harm and incur substantial damage if Employee were to
compete against Employer. Therefore, for Employer to protect its legitimate
business interests Employee agrees as follows:
For the five-year period following the termination of employment,
Employee
shall not directly or indirectly:
(a) become engaged as owner, shareholder, employee, consultant or
otherwise in any capacity for, or by, any business entity that is deemed
to be significantly participating in any business activities that compete
with or are the same as Employer at the time of the termination of this
agreement.
(b) Induce any employee, customer, vendor, dealer or distributor
of Employer to adversely change its relationship with Employer.
8. Board of Directors. The Employee shall be entitled to hold one
board seat on the Employees Board of Directors. The Employers board will
consist of 5 directors. Any additional directors will require a super
majority
(super majority is defined as no more than two dissenting votes) approval by
the
Board.
9. Placement Fee. If Employer elects to raise capital through a
private placement ("Offering") using documents prepared by R.A.W. Enterprises
&
Associates, Employer will pay Employee a bonus equal to 5% of the total equity
raised under the Offering. Employer will pay 50% of the bonus upon the
closing
of the Offering and the balance pro rata over three years following the
termination of the Offering.
10. Life Insurance. Employer shall, at its cost and expense, provide
Employee with life insurance protection with death benefits of no less than 2
times the employee's annual base salary, payable to such beneficiaries as
Employee may from time to time designate and may, at Employer's discretion,
apply for and procure in its own name and for its own benefit life and/or
disability insurance in any amount or amounts Employer may consider advisable.
Employee agrees to submit to any medical or other examination and to execute
and
delivery any application or other instrument reasonable necessary to
effectuate
such insurance protection.
11. Termination of Employment. Employer may terminate the relationship
between Employer and employee at any time for cause. Employer shall only have
cause to terminate Employee if Employee:
(a) is convicted of a felony; or
(b) conducts his duties as an officer of the Employer in a
grossly negligent manner. Gross negligence as defined as the intentional
failure to perform a manifested duty in reckless disregard of the
consequences effecting employer; or
(c) becomes permanently disabled. Disability, as defined in the
Employees disability policy (Section 9), shall be considered permanent if
the Employee is disabled for a period exceeding one year; or
(d) dies.
In the event that Employee is terminated by Employer from his employment
during the term of this Agreement for reasons other than cause as defined
above, Employee shall be entitled to continue to receive all salary and
benefits including all benefits of the Merit Awards Program provided for
under this Agreement for the full five year term of this Agreement.
Employee shall terminate this Agreement for any reason by providing 120
days written notice to Employer.
12. Disability. In the event the Employee becomes disabled during the
term of this Agreement, Employer will pay Employee their full salary and
benefits for a period ninety days or until Employee is eligible to receive
benefits under the Employee's own disability program. Employer will reimburse
Employee for the monthly cost of a disability program that guarantees a
maximum
monthly benefit of $5,000 after the first ninety days of disability.
13. Death. If Employee dies during the term of this Agreement, this
Agreement shall terminate as of the date of Employee's death. In such event,
Employer's obligations hereunder shall thereafter be limited to the following:
(a) payment to Employee's beneficiary of Employee's annual base salary up to
the
end of the ninety day period after the end of the month in which Employee's
death occurs, payment of life insurance benefit as delineated in Section 10
hereof; and (c) payment to Employee's beneficiary of the Merit Award Bonus as
computed pursuant to Section 4 hereof.
14. Attorney's Fees. In the event of any litigation arising under this
Agreement, the prevailing party (or parties), shall be entitled to recover
from
the other party (or parties) the costs of such arbitration or litigation,
including reasonable attorney's fees.
15. Vacation. Vacation policies shall be governed by the policies
governing the vacation policies of the executives of QCP's parent. But in no
case less than three weeks each calendar year.
16. Headings. The subject headings of the sections of this Agreement
are included for purposes of convenience only, and shall not affect the
construction of interpretation of any of its provisions.
17. Severability. It is agreed that if any term, covenant, provision,
section or condition of this Agreement shall be illegal, such illegality shall
not invalidate the whole Agreement but it shall be construed as if not
containing the illegal part, and the fights and obligations of the parties
shall
be construed and enforced accordingly.
18. Entire Agreement. The parties hereto agree that this Agreement
superseded all existing employment agreements between Employer and Employee,
whether they be oral or written, express or implied, and contains the entire
understanding and agreement among the parties concerning the employment of
Employee by Employer.
19. Choice of Law. This Agreement and the performance hereunder shall
be governed by and construed in accordance with and under and pursuant to the
laws of the State of California.
20. Notices. Any notices under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered (if to Employee, to an
officer of Employer other than Employee) or when mailed by United States
registered or certified mail, postage prepaid to the following address:
If to Employer: Quality Care Pharmaceuticals
17911 Sampson Lane
Huntington Beach, CA 92647
If to Employee: Gary A. Klingsheim
3857 Birch Street #314
Newport Beach, CA 91202
Any party hereto may change its or his address for purposes of this Section 18
by giving the other parties written notice of the new address in the manner
set
forth above.
21. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there by any estoppel to enforce any provisions
of this Agreement, except by written instrument signed by the party to be
changed with such waive or estoppel.
22. Successors: Affiliates. This Agreement shall inure to the benefit
of and be binding upon Employer, its successors, and assigns, including
without
limitation any person, partnership or corporation which may acquire all or
substantially all of the assets and business of Employer, or with or into
which
Employer may be consolidated, merged or otherwise reorganized, and this
provision shall apply in the event of any subsequent merger, consolidation,
reorganization or transfer.
23. Corporate Authority. Employer represents and warrants that the
execution and delivery of this Agreement by it has been duly and properly
authorized b Employees Board of directors and that when so executed and
delivered this agreement shall constitute the lawful and binding obligation of
Employer.
24. Amendments. This Agreement shall not be amended, modified or
supplemented in any respect except by a subsequent written agreement entered
into by the affected parties. Employer may not take such action to modify
this
Agreement or Employee's employment hereunder, including Employee's offices,
duties or responsibilities, without the approval of Employee.
25. Arbitration. Any claim that Employee may have arising out of or
relating to this Agreement, or the breach thereof or employee's employment by
the Employer, shall be settled by binding arbitration in accordance with the
rules and regulations of the American Arbitration Association.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
By
Chuck Drummond
Title: Chairman of the Board of
Quality Care Pharmaceuticals, Inc.
EMPLOYEE
By
Gary A. Klingsheim
ATTACHMENT A
The Employee is to receive an annual bonus per 4c in the attached
Employment Agreement to be calculated based on the annual earnings before
interest, taxes and depreciation (Earnings) of Employer as follows:
If the Earnings is between:,The Bonus for that year will be:
,
$250,000 - 600,000,2.5% of the EBIDT
600,001 - 1,250,000,2.3% of the EBIDT
1,250,001 - 2,225,000,2.2% of the EBIDT
2,225,001 - 3,500,000,2.1% of the EBIDT
3,500,001 - 4,500,000,2.0% of the EBIDT
4,500,001 and up,1.8% of the EBIDT
This Bonus is due and payable within 10 days of the availability of the
audited financial statements for that year.
Exhibit 10.10
First Amendment to Agreement Executing Judgment dated August 3, 1995
among the Company, GHC, Inc., Charles R. Drummond, Golden Research
Corporation,
New Crawford Valley, LTD and Gulch Holdings Company
FIRST AMENDMENT
TO
AGREEMENT LIMITING EXECUTION ON JUDGMENT
THIS FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION OF JUDGMENT (the
"First Amendment") is made and entered into this 31st day of August 1995, by
and
between GOLDEN PHARMACEUTICALS, INC., f/k/a BENEDICT NUCLEAR PHARMACEUTICALS,
INC., a Colorado corporation ("GPI"), GOLDEN RESEARCH CORPORATION, a Delaware
corporation ("GRC"), CHARLES R. DRUMMOND ("Drummond"), GHC, INC., a Colorado
corporation ("GHC"), NEW CRAWFORD VALLEY, LTD., a Colorado limited partnership
("New Crawford Valley"), and GULCH HOLDINGS COMPANY, a Colorado corporation
("Gulch Holdings Company").
RECITALS
A. GPI, GRC, New Crawford Valley and Gulch Holdings Company are parties
to that certain Agreement Limiting Execution on Judgment dated November 4,
1991,
as modified by that certain Addendum dated November 29, 1991 (collectively,
the
"Agreement").
B. New Crawford Valley and Gulch Holdings Company are also parties to
that certain Agreement Concerning Deed of Trust, Releases and Judgment Lien,
which is referred to in the Agreement as the "Marketing Agreement."
C. GPI, New Crawford Valley and Gulch Holdings Company have fully and
completely performed under the Agreement and the Marketing Agreement without
breach or violation since November 4, 1991.
D. The Marketing Agreement contemplates that the BNPI Lots and the GRC
Lots will be sold by Gulch Holdings Company and payments from those sales
distributed to Crawford Gulch Land Venture ("Crawford Gulch"), as payments on
the Note and the Deed of Trust, as more particularly described in the
Marketing
Agreement.
E. Sales Of the BNPI Lots and the GRC Lots have not occurred as quickly
as contemplated under the Agreement.
F. The parties desire to allow GHC to assume and agree to pay the
obligations of GPI and GRC under the Agreement as modified by this First
Amendment and to extend the covenant not to execute provided in the Agreement
year to year for up to an additional three years.
G. In connection with this First Amendment, the parties desire to allow
GHC to be substituted as a party defendant in the Civil Action.
(a) GPI and GRC shall no longer be parties to the Civil Action or
liable on the Judgment.
(b) GPI and GRC shall be released and discharged from any further
claims, liabilities or obligations under the Agreement without further
action on the part of any patty hereto.
3. Assumption by GHC. GHC unconditionally assumes and agrees (a) to
pay the Judgment, jointly and severally, subject to the terms and provisions
of
the Agreement as modified by this First Amendment, and (b) to perform any and
all obligations required by GPI and/or GRC under the Agreement (as modified by
this First Amendment) in the same manner and to the same extent as if GPI and
GRC remained parties to the Agreement (as modified by this First Amendment).
GHC
further acknowledges and agrees that upon the entry of the orders from the
court
in the Civil Action approving the joinder of GHC as a party defendant and
approving the dismissal of GPI and GRC as parties defendant, GHC shall be
liable
under and bound by the Judgment to the same extent as GPI and GRC were
immediately prior to GHC's Joinder in the Civil Action, without any rights to
assert claims or defenses different from those available to GPI or GRC in the
Civil Action immediately before such joinder.
4. Paragraph 2(a) of the Agreement shall be deleted in its entirety.
5. Limited Covenant Not to Execute. Subject to the conditions that (a)
GHC or Drummond shall perform all of GRC's duties and obligations under the
Agreement as modified by this First Amendment, including but not limited to
the
duties and obligations assumed by GHC in this First Amendment; (b) all
covenants
and agreements, representations and warranties made by BNPI and GRC in the
Agreement (as modified by this First Amendment) are and continue to be
fulfilled
or satisfied; (c) all covenants and agreements, representations and warranties
made by GHC and Drummond in this First Amendment are and continue to be
fulfilled or satisfied; and (d) all conditions to New Crawford Valley's
obligations under the Agreement as modified by this First Amendment are and
continue to be fulfilled or satisfied, for a period not to exceed eight (8)
years after the execution date of the Agreement (except as provided in this
First Amendment or in Paragraph 7 of the Agreement as modified by this First
Amendment), New Crawford Valley shall not attempt, commence or pursue any
actions or proceedings to execute on the Judgment against any assets, money or
property of GHC or Drummond. The limited covenant not to execute described in
the preceding sentence shall continue for a period of one (1) year beginning
on
the fifth anniversary of the execution date of the Agreement, and unless the
Judgment is completely satisfied or the Agreement (as modified by this First
Amendment) is otherwise sooner terminated, shall automatically continue for
successive one (1) year terms not to exceed eight (8) years after the
execution
date of the Agreement. Notwithstanding anything in the Agreement or this
paragraph to the contrary, New Crawford Valley shall be entitled to take any
steps it deems necessary or appropriate to enforce or partially satisfy the
Judgment out of the proceeds of the sale of the GRC Lots or the BNPI Lots. In
the event that one or more of the conditions to New Crawford Valley's duties
and
obligations under the Agreement as modified by this First Amendment is
unfulfilled or unsatisfied at any time, or any covenant or obligation,
representation or warranty of BNPI or GRC under the Agreement (as modified by
this First Amendment) shall be unfulfilled or unsatisfied at any time, or any
covenant or obligation, representation or warranty of GHC shall be unfulfilled
or unsatisfied at any time, New Crawford Valley shall be entitled to
immediately
pursue any available means to enforce the Judgment including but not by way of
limitation, actions or proceedings to execute against the BNPI Lots, the GHC
Lots, and any assets, money or property of GHC.
6. Paragraph 1(b) of the Agreement shall be deleted in its entirety and
replaced with the following:
(b) Approval of Sales. Gulch Holdings Company shall
present any written offer to purchase or any written offer to sell any of
the BNPI Lots for a purchase price of less than $125,000.00 to GHC for
approval in accordance with Paragraph 3(g), before Gulch Holdings Company
may accept or extend any such offer.
7. The third sentence of Paragraph 2(c) of the Agreement is hereby
deleted in its entirety and the following substituted in its place:
From time to time, but on at least an annual basis, Gulch
Holdings Company shall provide GHC with an itemized and detailed
description of its income and expenses setting forth the amount of income
received, the nature and amount of costs and expenses incurred, and the
amount of net cash proceeds paid either to Crawford Gulch or New Crawford
Valley or both, as the case may be.
8. In Paragraph 3(e) of the Agreement, the phrase "BNPI or GRC" shall
be deleted and shall be replaced with the phrase "GHC or Drummond" in all
places
where such phrase occurs in such paragraph.
9. The first sentence of Paragraph 3(g) of the Agreement hereby deleted
in its entirety and replaced with the following:
GHC shall have the right to approve, which approval shall not
be unreasonably withheld, the terms of any written offer to purchase any
of the GRC Lots or BNPI Lots for a purchase price less than $125,000.00
before any such offer may be accepted or extended by Gulch Holdings
Company.
10. Paragraph 7(b) of the Agreement is deleted in its entirety.
11.Deficiency.
(a) In the event that New Crawford Valley has not received cash
proceeds, purchase money promissory notes, or Dots distributed in kind in
an amount of not less than $1,700,000.00 in principal only (as determined
in accordance with paragraph 2 of the Agreement) within eight (8) years
after the date of execution of the Agreement, New Crawford Valley shall
deliver to GHC and Drummond a written notice with a verified statement
setting forth (i) the amounts paid or distributed to New Crawford Valley,
and (ii) the unpaid balance of the Judgment required before GHC is
entitled to a complete satisfaction of the Judgment.
(b) If New Crawford Valley receives the claimed amount in
immediately available funds within thirsty (30) days after delivery of
the
notice described in subparagraph a. above, New Crawford Valley shall
promptly execute and film an acknowledgment of the complete satisfaction
of the Judgment, and shall obtain and record a transcript of the Judgment
reflecting such complete satisfaction. In that event, the Agreement (as
modified by this First Amendment) shall immediately terminate upon the
filing of such acknowledgment and all parties shall be released from
further obligations hereunder.
(c) If New Crawford Valley does not receive the claimed amount,
to the extent the Judgment remains unpaid New Crawford Valley may at its
option and in its sole discretion immediately execute on the Judgment
against the Lots or any assets of GHC or both.
12. Limited Guarantee by Drummond. As additional consideration for the
modifications of the Agreement and New Crawford Valley's performance under
this
First Amendment, Drummond unconditionally guarantees New Crawford Valley and
Gulch Holdings Company that:
(a) if GHC fails to pay all advances to Crawford Gulch under the
Marketing Agreement as requested by Gulch Holdings Company under
paragraph
3(e) of the Agreement (as modified by paragraph 8 above), Drummond shall
pay such amount timely as required.
(b) if New Crawford Valley first (i) proceeds against or takes
the Lots (or any that are still owned by Gulch Holdings Company or
returned to GHC, or both, at the expiration of the limited covenant not
to
execute provided in Paragraph 4 of this First Amendment) in partial
satisfaction of the Judgment, and (ii) proceeds against the GPI Stock in
the manner permitted by law or any agreement between the parties hereto,
and (iii) there still remains a deficiency on the Judgment after New
Crawford Valley has completed (i) and (ii), Drummond shall pay to New
Crawford Valley an amount equal to the lesser of $500,000.00 and the
resulting deficiency on the Judgment determined after New Crawford Valley
has resorted to the Lots and the GPI Stock.
13. Conflict.
(a) Any references to GPI in this First Amendment shall embrace
and include any references to BNPI in the Agreement.
(b) In the event of any conflict between the provisions of this
First Amendment and the Agreement, the terms and provisions of this First
Amendment shall control. Except as modified by this First Amendment, the
Agreement shall remain in full force and effect.
(c) Capitalized terms not defined in this First Amendment shall
have the meanings ascribed to them in the Agreement or the Marketing
Agreement.
(d) In the event the course in the Civil Action does not approve
the joinder of GHC as a party defendant and the dismissal of GPI and GRC,
this First Amendment shall be null and void and all parties Shall be
released and discharged from any obligations hereunder without any
further
action or notice.
(e) Each party shall use its best efforts to take, or cause to be
taken, all things and actions necessary or desirable to consummate the
transactions contemplated by this First Amendment.
IN WITNESS WHEREOF, the parties have executed this First Amendment on the
day and year first above written.
GOLDEN PHARMACEUTICALS, INC., f/k/a BENEDICT
NUCLEAR PHARMACEUTICALS, INC., a Colorado corporation
By
President
GOLDEN RESEARCH CORPORATION, a Delaware
corporation
By
President
NEW CRAWFORD VALLEY, LTD., a Colorado limited
partnership
By
General Partner
GULCH HOLDINGS COMPANY, a Colorado corporation
By
President
Charles R. Drummond
GHC, INC., a Colorado corporation
By
President
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The above and foregoing FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION
ON
JUDGMENT was acknowledged before me this 3rd day of August 1995 by Charles R.
Drummond, as President of Golden Pharmaceuticals, Inc., f/k/a Benedict Nuclear
Pharmaceuticals, Inc., a Colorado corporation.
Witness my hand and official seal.
Notary Public
My Commission Expires:
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The above and foregoing FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION
ON
JUDGMENT was acknowledged before me this 3rd day of August 1995 by Charles R.
Drummond, as President of Golden Research Corporation, a Delaware corporation.
Witness my hand and official seal.
Notary Public
My Commission Expires:
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The above and foregoing FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION
ON
JUDGMENT was acknowledged before me this 3rd day of August 1995 by Robert
Sanders, as General Partner of New Crawford Valley, Ltd., a Colorado limited
partnership.
Witness my hand and official seal.
Notary Public
My Commission Expires:
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The above and foregoing FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION
ON
JUDGMENT was acknowledged before me this 3rd day of August 1995 by Harvey G.
Mozer, as President of Gulch Holdings Company, a Colorado corporation.
Witness my hand and official seal.
Notary Public
My Commission Expires:
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The above and foregoing FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION
ON
JUDGMENT was acknowledged before me this 3rd day of August 1995 by Charles R.
Drummond.
Witness my hand and official seal.
Notary Public
My Commission Expires:
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The above and foregoing FIRST AMENDMENT TO AGREEMENT LIMITING EXECUTION
ON
JUDGMENT was acknowledged before me this 3rd day of August 1995 by Charles R.
Drummond, as President of GHC, Inc., a Colorado corporation.
Witness my hand and official seal.
Notary Public
My Commission Expires:
Exhibit 10.11
Credit and Security Agreement dated August 7, 1995
among the Company, Quality Care Pharmaceuticlas, Inc. and Norwest Cedit, Inc.
CREDIT AND SECURITY AGREEMENT
Dated as of August 7, 1995
GOLDEN PHARMACEUTICALS, INC., a Colorado corporation, QUALITY CARE
PHARMACEUTICALS, INC., a California corporation (collectively, the
"Borrowers"),
and NORWEST CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Agreement, except
as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting
principles.
"Acquisition" means the acquisition by Golden of 100% of the issued and
outstanding capital stock of QCP on the terms set out in the Stock Purchase
Agreement dated June 7, 1995 among Golden, QCP and the shareholders of QCP.
"Advance" means an advance to a Borrower by the Lender pursuant to
Section 2.01.
"Affiliate" or "Affiliates" means any Person controlled by, controlling
or
under common control with a Borrower, including (without limitation) any
Subsidiary of either Borrower. For purposes of this definition, "control,"
when
used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether
through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Banking Day" means a day other than a Saturday on which banks are
generally open for business in Denver, Colorado and Minneapolis, Minnesota.
"Base Rate" means the rate of interest publicly announced from time to
time by the Norwest as its "base rate" or, if the Norwest ceases to announce a
rate so designated, any similar successor rate designated by the Lender.
"Book Net Worth" of the Borrowers means the difference between:
(a) the consolidated assets of the Borrowers determined in
accordance with generally accepted accounting principles after deducting
adequate reserves in each case where, in accordance with generally
accepted accounting principles, a reserve is proper, and
(b) all Debt of the Borrowers.
"Borrowers" means Golden and QCP, collectively.
"Collateral" means all of the Equipment, General Intangibles, Inventory
and Receivables, together with all substitutions and replacements for and
products of any of the foregoing Collateral and together with proceeds of any
and all of the foregoing Collateral and, in the case of all tangible
Collateral,
together with all accessions and together with (a) all accessories,
attachments,
parts, equipment and repairs now or hereafter attached or affixed to or used
inconnection with any such goods, and (b) all warehouse receipts, bills of
lading
and other documents of title now or hereafter covering such goods.
"Collateral Account" has the meaning specified in Section 4.01(d) hereof.
"Commitment" means $1,500,000, provided, however, that provided no
Default
or Event of Default then exists, the Borrowers may increase the Commitment in
increments of $500,000 to an amount not to exceed $2,500,000 by written notice
to the Lender accompanied by payment of a nonrefundable commitment fee of
$5,000
per $500,000 increment.
"Credit Facility" means the credit facility being made available to the
Borrowers by the Lender pursuant to Article II hereof.
"Debt" of a Borrower means (a) all items of indebtedness or liability
which in accordance with generally accepted accounting principles would be
included in determining total liabilities as shown on the liabilities side of
the balance sheet of such Borrower as at the date as of which Debt is to be
determined, and (b) indebtedness secured by any mortgage, pledge, lien or
security interest existing on property owned by cheek Borrower, whether or not
the indebtedness secured thereby shall have been assumed.
"Deed of Trust" means the First Combination Deed of Trust, Security
Agreement and Fixture Financing Statement of even date herewith from Golden to
the Lender.
"Default" means an event that, with giving of notice or passage of time
or
both, would constitute an Event of Default.
"Eligible Accounts" means all unpaid Accounts of a Borrower, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
6.a..0.a.i That portion of Accounts which are 90 days past the
invoice date thereof;
6.a..0.a.ii That portion of Accounts that are disputed or subject
to a claim of offset or a contra account;
6.a..0.a.iii That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as applicable, by the
Borrower to its customer:
6.a..0.a.iv Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be included in
Eligible Accounts that portion of Accounts owed by such units of
government with respect to which the Borrower has provided evidence
satisfactory to the Lender that (i) the Lender has a first priority
security interest and (ii) such Account may be enforced by the Lender
directly against such unit of government under all applicable laws);
6.a..0.a.v Accounts owed by an account debtor located outside
the
United States or Canada which are not backed by a bank letter of credit
assigned to the Lender, in the possession of the Lender and acceptable to
the Lender in all respects, in its sole discretion, or insured by a
policy
of foreign receivables insurance acceptable to the Lender in its sole
discretion:
6.a..0.a.vi Accounts owed by an account debtor that is the
subject
of bankruptcy proceedings or has gone out of business;
6.a..0.a.vii Accounts owed by a shareholder, subsidiary,
Affiliate, officer or employee of such Borrower;
6.a..0.a.viii Accounts not subject to a duly perfected security
interest in favor of the Lender or which are subject to any lien,
security
interest or claim in favor of any Person other than the Lender or
Norwest;
6.a..0.a.ix That portion of Accounts that have been restructured,
extended, amended or modified;
6.a..0.a.x That portion of Accounts that constitutes finance
charges, service charges or sales or excise taxes;
6.a..0.a.xi Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount due under
Accounts from such debtor is ineligible under clauses or (a), (b) or (I)
above:
6.a..0.a.xii In the case of QCP, that portion of Accounts owed
by Moore Medical Corporation in excess of 20% of the total Eligible
Accounts of QCP determined without regard to this clause (l); and
6.a..0.a.xiii Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all inventory of QCP consisting of bulk or
repackaged drugs, at the lower of cost or market value as determined in
accordance with generally accepted accounting principles: provided, however,
that the following shall not in any event be deemed Eligible Inventory:
(a) Inventory that is: in-transit; located at any warehouse or
other premises not approved by the Lender in writing; located outside of
the states, or localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security interest in
such
inventory; covered by any negotiable or non-negotiable warehouse receipt,
bill of lading or other document of title; on consignment to or from any
other person or subject to any bailment;
(b) Supplies or packaging inventory;
(c) Inventory consisting of controlled substances and Inventory
which is less than six months from its expiration date;
(d) Inventory that is damaged, obsolete, or not useable in the
normal course of QCP's operations or with respect to the QCP's current
product lines;
(e) Inventory that the QCP has returned, has attempted to return,
is in the process of returning or intends to return to the vendor
thereof;
(f) Inventory that is subject to a security interest in favor of
any Person other than the Lender or Norwest; and
(g) Inventory otherwise deemed ineligible by the Lender in its
sole discretion.
"Environmental Laws" has the meaning specified in Section 5.12 hereof.
"Equipment" means all of the equipment of either Borrower, as such term
is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
pans, tools, supplies, and including specifically (without limitation) the
goods
described in any equipment schedule or list herewith or hereafter furnished to
he Lender by either Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning specified in Section 8.01 hereof.
"General Intangibles" means all of the general intangibles of either
Borrower, as such term is defined in the UCC, whether now owned or hereafter
acquired, including without limitation all present and future patents, patent
applications, FDA approvals, applications and registrations, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and
contracts, manuals, operating instructions, permits, licenses, franchises, the
right to use the name of either Borrower, and the goodwill of each Borrower's
business.
"Golden" means Golden Pharmaceuticals, Inc., a Colorado corporation.
"Golden Borrowing Base" means at any time and subject to change from time
to time in the Lender's sole discretion, the lesser of: (i) the Commitment, or
(ii) 80% of the Eligible Accounts of Golden.
"Golden Revolving Note" means the promissory note of Golden payable to
the
order of the Lender in substantially the form of Exhibit A-1.
"Guaranty" means the guaranty by QCP of the Obligations of Golden.
"Intercreditor Agreement" means the Intercreditor Agreement of even date
herewith between the Lender and Norwest.
"Inventor" means all of the inventory of either Borrower, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether
consisting
of whole goods, spare parts or components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.
"Lockbox" has the meaning specified in Section 4.01(e).
"Loan Documents" means this Agreement, the Note and the Deed of Trust.
"Norwest" means Norwest Bank Minnesota, National Association.
"Norwest Credit Agreement" means the Credit and Security Agreement of
even
date herewith between the Borrower and Norwest.
"Notes" means the Golden Revolving Note, the QCP Revolving Note and the
Term Note.
"Obligations" has the meaning specified in Section 3.01 hereof.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of either Borrower and covered by Title IV of ERISA.
"Premises" means all premises where any Borrower conducts its business
and
has any rights of possession, including (without limitation) the premises
legally described in Exhibit E attached hereto.
"QCP" means Quality Care Pharmaceuticals, Inc., a California corporation.
"QCP Borrowing Base" means at any time and subject to change from time to
time in the Lender's sole discretion, the lesser of:
(a) the Commitment, or
(b) the sum of (i) 80% of the Eligible Accounts of QCP, plus (ii)
the lesser of $450,000 or 60% of the Eligible Inventory of QCP.
"QCP Revolving Note" means the joint and several promissory note of the
Borrowers payable to the order of the Lender in substantially the form of
Exhibit A-2.
"QCP Tangible Net Worth" means the difference between:
(a) the assets of QCP which in accordance with generally accepted
accounting principles would be classified as tangible assets after (I)
deducting adequate reserves in each case where, in accordance with
generally accepted accounting principles, a reserve is proper, and (ii)
treating all loans or advances by QCP to Golden and all other obligations
of Golden to QCP as intangible assets; and
(b) all Debt of QCP other than any debt incurred pursuant to the
Guaranty.
"Receivables" means each and every right of either Borrower to the
payment
of money, whether such right to payment now exists or hereafter arises,
whether
such fight to payment arises out of a sale, lease or other disposition of
goods
or other property, out of a rendering of services, out of a loan, out of the
overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by such Borrower or by some other person who subsequently transfers
such
person's interest to such Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens
and
security interests) which such Borrower may at any time have by law or
agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt
instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Security Interest" has the meaning specified in Section 3.01 hereof.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such
corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by either Borrower,
by
either Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Term Note" means the promissory note of Golden payable to the order of
the Lender in substantially the form of Exhibit A-3.
"Termination Date" means July 31, 2000.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the state designated in Section 9.12 hereof as the state whose laws shall
govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.01. Advances. On the terms and subject to conditions of this
Section, the Lender agrees to make Advances to the Borrowers as follows:
(a) Revolving Advances. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make Advances to each
Borrower from time to time during the period from the date hereof to and
including the Termination Date, or the earlier date of termination in
whole of the Credit Facility pursuant to Sections 2.04(c) or 8.02 hereof,
in an aggregate amount at any time outstanding not to exceed such
Borrower's Borrowing Base, which Advances shall be secured by the
Collateral as provided in Article III hereof. The Credit Facility made
available to each Borrower pursuant to this Section 2.01(a) shall be a
revolving facility and it is contemplated that the Borrowers will request
advances, make prepayments and request additional Advances. The
Borrowers
agree to comply with the following procedures in requesting Advances
under
this Section 2.01(a):
(i) No Borrower will request any Advance under this
Section
2.01(a) if, after giving effect to such requested Advance, (A) the
outstanding and unpaid Advances made to such Borrower under this
Section 2.01(a) would exceed such Borrower's Borrowing Base, or (B)
the aggregate Advances made to both Borrowers under this Section
2.01(a) would exceed the Commitment.
(ii) Each request for an Advance under this Section
2.01(a)
shall be made to the Lender prior to 11:00 a.m. (Colorado time) of
the day of the requested Advance. Each request for an Advance may
be made in writing or by telephone, specifying the date of the
requested Advance and the amount thereof, and shall be by (A) any
officer of the Borrower requesting the Advance; or (B) any person
designated as such Borrower's agent by any officer of such Borrower
in a writing delivered to the Lender; or (C) any person reasonably
believed by the Lender to be an officer of such Borrower or such a
designated agent.
(iii) Upon fulfillment of the applicable conditions
set forth
in Article IV hereof, the Lender shall promptly disburse loan
proceeds by crediting the same to such Borrower's demand deposit
account maintained with Norwest Bank Colorado, N.A. unless the
Lender and such Borrower shall agree in writing to another manner of
disbursement. Upon request of the Lender, such Borrower shall
promptly confirm each telephonic request for an Advance by executing
and delivering an appropriate confirmation certificate to the
sender. Such Borrower shall be obligated to repay all Advances
under this Section 2.01(a) notwithstanding the failure of the Lender
to receive such confirmation and notwithstanding the fact that the
person requesting the same was not in fact authorized to do so. Any
request for an Advance under this Section 2.01(a), whether written
or telephonic, shall be deemed to be a joint and several
representation by the Borrowers that (A) the condition set forth in
Section 2.01(a)(i) hereof has been met, and (B) the conditions set
forth in Section 4.02 hereof have been met as of the time of the
request.
(b) Term Loan. The Lender agrees on the terms and subject to the
conditions herein set forth, to make a single Advance to Golden in the
principal amount of $400,000, which Advance shall be secured by the
Collateral as provided in Article III hereof. Upon fulfillment of the
applicable conditions set forth in Article IV hereof, the Lender shall
promptly disburse the proceeds of such Advance by depositing the same to
Golden's demand deposit account maintained with Norwest Bank Colorado,
N.A., unless the Lender and Golden shall agree in writing to another
manner of disbursement.
Section 2.02. Notes.
(a) All Advances made by the Lender under Section 2.01(a) hereof
shall be evidenced by and be repayable with interest in accordance with,
in the case of Advances requested by QCP, the QCP Revolving Note, and, in
the case of Advances requested by Golden, the Golden Revolving Note. The
principal of the QCP Revolving Note and the Golden Revolving Note shall
be
payable as provided herein and on the earlier of the Termination Date or
acceleration by the Lender pursuant to Section 8.02 hereof, and shall
bear
interest as provided herein.
(b) The Advance made by the Lender under Section 2.01(b) hereof
shall be evidenced by and be repayable with interest in accordance with
the Term Note. The principal of the Term Note shall be payable in 60
equal monthly installments of $6,667.00 each, commencing on September 1,
1995, and continuing on the first day of each month thereafter until the
earlier of August 1, 2000, or acceleration by the Lender pursuant to
Section 8.02 hereof, when the outstanding principal balance thereof shall
be due and payable in full. The Term Note shall bear interest as
provided
herein.
Section 2.03. Interest.
(a) The principal of the Advances outstanding from time to time
during any month shall bear interest (computed on the basis of actual
days
elapsed in a 360-day year) as follows:
(i) Advances pursuant to Section 2.01(a) hereof and
evidenced by the QCP Revolving Note or the Golden Revolving Note
shall bear interest at an annual rate equal to the sum of the Base
Rate plus 2.0%, which rate shall change when and as the Base Rate
changes.
(ii) The advance made pursuant to Section 2.01(b)
hereof and
evidenced by the Term Note shall bear interest at an annual rate
equal to the sum of the Base Rate plus 3.0%, which rate shall change
when and as the Base Ram changes.
(iii) Notwithstanding anything contained in this
Section 2.03
or the Notes to the contrary (A) from the first day of any month
during which any Default or Event of Default occurs or exists at any
time, in the Lender's discretion and without waiving any of its
other rights and remedies, the rate of interest payable on any and
all Advances and on the Notes shall be the rate otherwise payable
with respect to such Advances and the Notes plus 2%, and (B) in no
event shall any rate change be put into effect which would result in
a rate greater than the highest rate permitted by law.
(b) Interest accruing on the principal balance of the Advances
outstanding from time to time shall be payable on the last day of each
month and on the Termination Date or earlier maturity or prepayment in
full.
(c) If any Person shall acquire a participation in Advances under
this Agreement, the Borrower shall be obligated to the Lender to pay the
full amount of all interest calculated under Section 2.03(a) hereof,
along
with all other fees, charges and other amounts due under this Agreement,
regardless if such Person elects to accept interest with respect to its
participation at a lower rate, or otherwise elects to accept less than
its
pro rata share of such fees, charges and other amounts due under this
Agreement.
Section 2.04. Voluntary Prepayment; Termination of Agreement by
Borrower.
(a) Either Borrower may, in its discretion, prepay its Revolving
Note in whole or from time to time in part without penalty or premium.
(b) Golden may, in its discretion, prepay the Term Note in whole
or from time to time in part, provided, however, if such prepayment is
made with the proceeds of a loan or other financing from a source other
than an affiliate of Norwest Corporation or if Golden enters into a
credit
facility with or borrows money from any source other than an affiliate of
Norwest Corporation within 90 days from the date of such prepayment,
Golden shall pay a prepayment premium equal to 3.0% of such prepayment if
the prepayment is made prior to January 1, 1996, 2.0% of such prepayment
if the prepayment is made after December 31, 1995, and prior to January
1,
1997, and 1.0% of such prepayment if the prepayment is made after
December 31, 1996.
(c) The Borrowers may terminate this Agreement at any time and,
subject to payment and performance of all the Borrowers' obligations to
the Lender, may obtain any release or termination of the Security
Interests to which the Borrower is otherwise entitled by law by (i)
giving
at least 30 days' prior written notice to the Lender of the Borrowers'
intention to terminate this Agreement; and (ii) paying the Lender a
termination fee equal to 3.0% of the Commitment if such termination
occurs
prior to January 1, 1996, 2.0% of the Commitment if such termination
occurs after December 31, 1995, but prior to January 1, 1997, and 1.0% of
the Commitment if such termination occurs after December 31, 1996, if the
Borrowers terminate this Agreement effective as of any date other than
the
Termination Date or under circumstances whereby the Credit Facility is
refinanced by a lender other than an affiliate of Norwest Corporation or
if either Borrower enters into a credit facility with or borrows money
from any source other than an affiliate of Norwest Corporation within 90
days from the date of such termination.
Section 2.05. Mandatory Prepayment. Without notice or demand, if
the sum of outstanding principal balance of the Advances made to a Borrower
pursuant to Section 2.01
(a) shall at any time exceed the Borrowing Base of such Borrower,
such Borrower shall immediately repay the Advances made to it to the
extent necessary to reduce the sum of the outstanding principal balance
of
the Advances made to it pursuant to Section 2.01(a) to Borrowing Base of
each Borrower. Any payment received by the Lender under this Section
2.05
or under Section 2.04 may be applied to the Advances to such Borrower,
including interest thereon and any Fees, commissions, costs and expenses
hereunder and under the other Loan Documents, in such order and in such
amounts as the Lender, in its discretion, may from time to time
determine.
Section 2.06. Payment. All payments of principal of and interest on the
Advances shall be made to the Lender in immediately available funds. Each
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time and without request by the Borrower, to make an Advance to such
Borrower in the amount of any interest due and payable by such Borrower
hereunder or the amount of any fees, costs or expenses due and payable
hereunder
or under any other Loan Documents by such Borrower.
Section 2.07. Payment on Non-Banking Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such
extension
of time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
Section 2.08. Liability Records. The Lender may maintain from time to
time, at its discretion, liability records as to any and all advances made or
repaid and interest accrued or paid under this Agreement. All entries made on
any such record shall be presumed correct until the Borrowers establish the
contrary. On demand by the Lender, the Borrowers will admit and certify in
writing the exact principal balance that the Borrowers then assert to be
outstanding to the Lender under this Agreement. In the absence of manifest
error, any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on the Borrowers unless specific written notice
of
exception is given to the Lender by the Borrowers within 30 days after its
receipt by the Borrowers.
Section 2.09. Setoff. The Borrowers agree that the Lender may at any
time or from time to time, at its sole discretion and without demand and
without
notice to anyone, setoff any liability owed to the Borrowers by the Lender,
whether or not due, against any indebtedness owed to the Lender by the
Borrowers
(for the Advance or for any other transaction or event), whether or not due.
In
addition, each other Person holding a participating interest in the Note shall
have the right to appropriate or setoff any deposit or other liability then
owed
by such Person to the Borrowers, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to the Borrowers the amount of such participating interest.
Section 2.10. Fees.
(a) The Borrowers hereby jointly and severally agree to pay the
Lender a fully earned and non-refundable origination fee of $19,000, due
and payable upon the execution of this Agreement.
(b) The Borrowers jointly and severally agree to pay the Lender a
commitment fee at the rate of one-fourth of one percent (0.25%) per annum
on the daily unused amount of the Commitment (determined taking into
account the aggregate outstanding Advances to both Borrowers) from the
date hereof to and including the date on which the Credit Facility is
terminated, due and payable in arrears commencing November 1, 1995, and
continuing on the first day of each February, May, August and November
thereafter, provided that any commitment fee remaining unpaid upon
termination of the Credit Facility or acceleration of the Note by the
Lender pursuant to Section 8.02 hereof shall be due and payable on the
date of such termination or cancellation. Such fee shall be calculated
on
the basis of the actual number of days elapsed in a 360-day year.
(c) The Borrowers hereby jointly and severally agree to pay the
Lender, on demand, audit fees of $50.00 per auditor (or if different, the
Lender's then current hourly auditor charge) in connection with any
audits
or inspections by the Lender of any collateral or the operations or
business of either Borrower, together with all reasonable out-of-pocket
costs and expenses incurred in conducting any such audit or inspection.
Section 2.11. Capital Adequacy. If the Lender shall determine that the
adoption after the date hereof of any applicable law, rule or regulation
regarding capital adequacy, or any change therein after the date hereof, any
change after the date hereof in the interpretation or administration thereof
by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender or its
parent corporation with any guideline or request issued after the date hereof
regarding capital adequacy (whether nor not having the force of law) of any
such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's or the Lender's parent
corporation's
capital as a consequence of the Lender's obligations hereunder to a level
below
that which the Lender or its parent corporation could have achieved but such
adoption, change or compliance (taking into consideration the Lender's
policies
with respect to capital adequacy and those of the Lender's parent corporation)
by an amount deemed to the Lender or its parent corporation to be material,
then
from time to time on demand by the Lender the Borrowers shall jointly and
severally pay to the Lender such additional amount or amounts as will
compensate
the Lender or its parent corporation for such reduction. Certificates of the
Lender sent to the Borrowers from time to time claiming compensation under
this
Section, stating the reason therefor and setting forth in reasonable detail
the
calculation of the additional amount or amounts to be paid to the Lender
hereunder shall be conclusive absent manifest error. In determining such
amounts, the Lender or its parent corporation may use any reasonable averaging
and attribution methods.
ARTICLE III
SECURITY INTEREST
Section 3.01. Grant of Security Interest. Each Borrower hereby assigns
and grants to the Lender a security interest (collectively referred to as the
"Security Interests") in the Collateral, as security for the payment and
performance of each and every debt, liability and obligation of every type and
description which such Borrower may now or at any time hereafter owe to the
Lender (whether such debt, liability or obligation now exists or is hereafter
created or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of such Borrower, and
whether it is direct or indirect, due or to become due, absolute or
contingent,
primary or secondary, liquidated or unliquidated, or sole, joint, several or
joint and several, and including specifically, but not limited to, all
indebtedness of such Borrower arising under this Agreement or any other loan
or
credit agreement or guaranty between such Borrower and the Lender, whether now
in effect or hereafter entered into; all such debts, liabilities and
obligations
are herein collectively referred to as the "Obligations" of such Borrower).
Section 3.02. Notification of Account Debtors and Other Obligors. In
addition to the rights of the Lender under Section 6.10 hereof, with respect
to
any and all rights to payment constituting Collateral the Lender may, at any
time before the occurrence of an Event of Default, notify any account debtor
or
other person obligated to pay the amount due that payment shall be made
directly
to the Lockbox, and may at any time after the occurrence of an Event of
Default
which is continuing, notify such Person that the right to such payment has
been
assigned to the Lender for security and shall be paid directly to the Lender.
The Borrowers will join in giving such notice if the Lender so requests. At
any
time after the occurrence of an Event of Default which is continuing, the
Lender
may, but need not, in the Lender's name or in such Borrower's name, (a)
demand,
sue for, collect or receive any money or property at any time taxable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as agent and
attorney in fact of such Borrower, notify the United States Postal Service to
change the address for delivery of such Borrower's mail to any address
designated by the Lender, otherwise intercept such Borrower's mail, and
receive,
open and dispose of such Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for such Borrower's account or
forwarding such mail to such Borrower's last known address.
Section 3.03. Assignment of Insurance. As additional security for the
payment and performance of the Obligations, each Borrower hereby assigns to
the
Lender any and all monies (including, without limitation, proceeds of
insurance
and refunds of unearned premiums) due or become due under, and all other
rights
of such Borrower with respect to, any and all policies insurance now or at any
time hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and such Borrower hereby
directs
the issuer of any such policy to pay all such monies directly to the Lender.
At
any time, whether before or after the occurrence of any Event of Default, the
Lender may (but need not), in the Lender's name or in such Borrower's name,
execute and deliver proof of claim, receive all such monies, endorse checks
and
other instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.04. Occupancy.
(a) Each Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises of such Borrower at any time
after the occurrence and during the continuance of an Event of Default.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good faith deem to be related or incidental purposes.
(c) The right of the Lender to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations, and (ii) final sale or disposition of all goods constituting
Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any
rent or other compensation for the possession, occupancy or use of any of
the Premises; provided, however, in the event that the Lender does pay or
account for any rent or other compensation for the possession, occupancy
or use of any of the Premises, the Borrowers shall jointly and severally
reimburse the Lender promptly for the full amount thereof. In addition,
the Borrowers will jointly and severally pay, or reimburse the Lender
for,
all taxes, fees, duties, imposts, charges and expenses at any time
incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.04.
Section 3.05. License. Each Borrower hereby grants to the Lender a non-
exclusive, worldwide and royalty-free license to use or otherwise exploit all
trademarks, franchises, trade names, copyrights and patents of such Borrower
for
the purpose of selling, leasing or otherwise disposing of any or all
Collateral
following an Event of Default.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.01. Conditions Precedent to the Initial Advance. The
obligation of the Lender to make the initial Advance under the Credit Facility
shall be subject to the condition precedent that the Lender shall have
received
all of the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed on behalf of the Borrowers.
(b) The QCP Revolving Note, properly executed on behalf of the
Borrowers, and the Golden Revolving Note and the Term Note properly
executed on behalf of Golden.
(c) The Deed of Trust, properly executed on behalf of Golden,
with a policy of title insurance in an amount satisfactory to the Lender
insuring the priority of the Deed of Trust.
(d) Separate Collateral Account Agreements, duly executed by each
Borrower and Norwest Bank Colorado, N.A., pursuant to which such Borrower
and such bank establish a depository account (the "Collateral Account")
in
the name of and under the sole and exclusive control of the Lender, from
which such institution agrees to transfer finally collected funds to the
Lender for application to such Borrower's Obligations.
(e) Separate Lockbox Agreements, duly executed by each Borrower
and Norwest Bank Colorado, N.A., pursuant to which such Borrower agrees
to
maintain and direct account debtors to make payments to, and such bank
agrees to maintain and process payments received in, a lockbox for the
benefit of the Lender (the "Lockbox"), from which Lockbox, such bank
shall
deposit funds to such Borrower's Collateral Account.
(f) The Guaranty, properly executed by QCP.
(g) A true and correct copy of any and all leases, pursuant to
which either Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(h) Current searches of appropriate filing offices showing that
(I) no state or federal tax liens have been filed and remain in effect
against either Borrower, (ii) no financing statements have been filed and
remain in effect against either Borrower, except those financing
statements relating to liens permitted pursuant to Section 7.01 hereof
and
those financing statements filed by the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the Security
Interests granted hereunder, to the extent the Security Interests are
capable of being perfected by filing.
(i) A certificate of the Secretary or an Assistant Secretary of
each Borrower, certifying as to (i) the resolutions of the directors and,
if required, the shareholders of such Borrower, authorizing the
execution,
delivery and performance of this Agreement and the Security Documents,
(ii) the articles of incorporation and bylaws of such Borrower, and (iii)
the signatures of the officers or agents of such Borrower authorized to
execute and deliver this Agreement, the Security Documents and other
instruments, agreements and certificates, including Advance requests, on
behalf of such Borrower.
(j) A current certificate issued by the Secretary of State of the
state of each Borrower's incorporation, certifying that such Borrower is
in compliance with all corporate organizational requirements of such
state.
(k) Evidence that the each Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(l) A certificate of an officer of each Borrower confirming, in
his personal capacity, the representations and warranties set forth in
Article V hereof.
(m) An opinion of counsel to each Borrower, addressed to the
Lender.
(n) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in favor
of the Lender and with all liability insurance naming the Lender as an
additional insured.
(o) Payment of the fees due through the date of the initial
Advance under Section 2.10 hereof and expenses incurred by the Lender
through such date and required to be paid by the Borrowers under
Section 9.07 hereof.
(p) Evidence satisfactory to the Lender that the Acquisition has
closed on terms and conditions satisfactory to the Lender.
(q) Support Agreements satisfactory to the Lender duly executed
by Daniel B. Guinn, Gary A. Klingsheim, Charles R. Drummond, Bruce A.
Goldberg and Glen H. Weaver.
(r) Evidence that the judgment against the Borrower in favor of
New Crawford Valley, Ltd. has been released and that the Borrower has no
further liability in respect thereof.
(s) Such other documents as the Lender in its sole discretion may
require.
(t) Evidence satisfactory to the Lender that immediately after
the closing of the Acquisition and the payment of the consideration to be
paid by Golden in connection therewith and all fees payable under this
Agreement and the Norwest Credit Agreement, the sum of the Golden
Borrowing Base and the QCP Borrowing Base exceeds the aggregate principal
balances of the Golden Revolving Note and the QCP Revolving Note by at
least $200,000.
Section 4.02. Conditions Precedent to All Advances. The obligation of
the Lender to make each Advances shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V
hereof are correct on and as of the date of the Advance as though made on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
the Advance which constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers jointly and severally represent and warrant to the Lender
as
follows:
Section 5.01. Corporate Existence and Power; Name; Chief Executive
Officer Inventory and Equipment Locations. Golden is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State
of Colorado and QCP is a corporation duly incorporated, validly existing and
in
good standing under the laws of the State of California, and each Borrower is
duly licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes much licensing or qualification necessary. Each
Borrower
has all requisite power and authority, corporate or otherwise, to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under, the Loan Documents. During its corporate existence,
each Borrower has done business solely under the names set forth in Exhibit B
hereto. The chief executive office and principal place of business of each
Borrower is located at the address set forth in Exhibit B hereto, and all of
such Borrower's records relating to its business or the collateral are kept at
that location. All Inventory and Equipment is located at that location or at
one of the other locations set forth in Exhibit B hereto.
Section 5.02. Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by each Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (a)
require
any consent or approval of the stockholders of either Borrower, (b) require
any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or Instrumentality, domestic or foreign, or any third party, except
such
authorization, consent, approval, registration, declaration, filing or note as
has been obtained, accomplished or given prior to the date hereof, (c) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of
any
order, writ, injunction or decree presently in effect having applicability to
either Borrower or of the Articles of Incorporation or Bylaws of either
Borrower, (d) result in a breach of or constitute a default under any
indentureor loan or credit agreement or any other material agreement, lease or
instrument to which either Borrower is a party or by which it or its
properties
may be bound or affected, or (e) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature (other than the Security Interests)
upon or with respect to any of the properties now owned or hereafter acquired
by
either Borrower.
Section 5.03. Legal Agreements. This Agreement constitutes and, upon
due
execution by the Borrower executing the same, the other Loan Documents will
constitute, the legal, valid and binding obligations of the Borrower executing
the same, enforceable against such Borrower in accordance with their
respective
terms.
Section 5.04. Subsidiaries. Except as set forth in Exhibit B attached
hereto, the Borrowers have no Subsidiaries.
Section 5.05. Financial Condition; No Adverse Change. Golden has
heretofore furnished to the Lender audited financial statements of Golden for
its fiscal year ended August 31, 1994, audited financial statement for QCP for
its fiscal year ended December 31, 1994, unaudited financial statements of
Golden for the ten months ended June 30, 1995, unaudited financial statements
of
QCP for the six months ended June 30, 1995, and pro forma financial statements
presenting the consolidated financial condition of the Borrowers immediately
following the Acquisition, and those statements fairly present the financial
condition of Golden and QCP, as the case may be, on the dates thereof and the
results of their operations and cash flows for the periods then ended, and the
pro forma consolidated financial condition of the Borrowers immediately
following the Acquisition, and were prepared in accordance with generally
accepted accounting principles. Since the date of the most recent financial
statements, there has been no material adverse change in the business,
properties or condition (financial or otherwise) of Golden or QCP.
Section 5.06. Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of either Borrower, threatened against or
affecting
either Borrower or any of its Affiliates or the properties of either Borrower
or
any of its Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to such Borrower or any of its Affiliates, would have
a material adverse effect on the financial condition, properties or operations
of such Borrower or any of its Affiliates.
Section 5.07. Regulation U. Neither Borrower is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of the Advance will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose
of purchasing or carrying any margin stock.
Section 5.08. Taxes. Each Borrower and each of its Affiliates have paid
or caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. Each Borrower and each
of
its Affiliates have filed all federal, state and local tax returns which to
the
knowledge of the officers of such Borrower or any such Affiliate, as the case
may be, are required to be filed, and such Borrower and its Affiliates have
paid
or caused to be paid to the respective taxing authorities all taxes as shown
on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.09. Titles and Liens. Each Borrower has good and absolute
title to all Collateral described in the collateral reports provided to the
Lender and all other Collateral, properties and assets reflected in the latest
balance sheet referred to in Section 5.05 hereof and all proceeds thereof,
free
and clear of all mortgages, security interests, liens and encumbrances, except
for (a) mortgages, security interests and liens permitted by Section 7.01
hereof, and (b) in the case of the real property subject to the Deed of Trust,
matters disclosed on the policy of title insurance described in Section 4.01
hereof. No financing statement naming either Borrower as debtor is on file in
any office except to perfect only security interests permitted by Section 7.01
hereof.
Section 5.10. Plans. Except as disclosed to the Lender in writing prior
to the date hereof, neither Borrower nor any of its Affiliates maintains or
has
maintained any Plan. Neither Borrower nor any Affiliate of either Borrower
has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or
other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither Borrower nor any
Affiliate of either Borrower has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation,
the Internal Revenue Service, the Department of Labor or any participant
in connection with any Plan (other than accrued benefits which or which
may become payable to participants or beneficiaries of any such Plan).
Section 5.11. Default. Each Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or
default
of which could have a material adverse effect on the financial condition,
properties or operations of such Borrower.
Section 5.12. Environmental Protection. Each Borrower has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws and regulations relating to emissions, discharges,
releases
of pollutants, contaminants, hazardous or toxic materials, or wastes into
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport handling of pollutants, contaminants or hazardous or toxic materials
or wastes Environmental Laws") at such Borrower's facilities or in connection
with the operation of its facilities. Except as previously disclosed to the
Lender in writing, each Borrower and all activities of such Borrower at its
facilities comply with all Environmental Laws and with all terms and
conditions
of any required permits, licenses and authorizations applicable to such
Borrower
with respect thereto. Except as previously disclosed to the Lender in
writing,
each Borrower is also in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Laws or contained in any plan, order,
decree, judgment or notice of which such Borrower is aware. Except as
previously disclosed to the Lender in writing, neither Borrower is aware of,
nor
has either Borrower received notice of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent continued compliance with, or which may give rise to any liability
under, any Environmental Laws.
Section 5.13. Submissions to Lender. All financial and other
information
provided to the Lender by or on behalf of a Borrower in connection with the
Borrowers' request for the credit facilities contemplated hereby is true and
correct in all material respects and, as to projections, valuations or
proforma
financial statements, present a good faith opinion as to such projections,
valuations and proforma condition and results.
Section 5.14. Financing Statements. Each Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the
Security
Interests and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the Security Documents which is capable of
being perfected by filing financing statements. None of the Collateral or
other
collateral covered by the Security Documents is or will become a fixture on
real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.15. Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be
when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor obligated to pay such obligation.
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWERS
So long as the Note shall remain unpaid or any Credit Facility shall be
outstanding, the Borrowers jointly and severally agree that they will comply
with the following requirements, unless the Lender shall otherwise consent in
writing:
Section 6.01. Reporting Requirements. The Borrowers will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after
the end of each fiscal year of the Borrowers, audited financial
statements
of the Borrowers with the unqualified opinion of independent certified
public accountants selected by the Borrowers and acceptable to the
Lender,
which annual financial statements shall include the consolidated and
consolidating balance sheet of the Borrowers as at the end of such fiscal
year and the related consolidated and consolidating statements of income,
retained earnings and cash flows of the Borrowers for the fiscal year
then
ended, all in reasonable detail and prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices applied in the preparation of the pro forma
financial
statements referred to in Section 5.05 hereof, together with (i) a report
signed by such accountants stating that in making the investigations
necessary for said opinion they obtained no knowledge, except as
specifically stated, of any Default or Event of Default hereunder and all
relevant facts in reasonable detail to evidence, and the computations as
to, whether or not the Borrowers are in compliance with the requirements
set forth in Sections 6.12 through 6.15 and Section 7.10 hereof; and (ii)
a certificate of the chief financial officer of the Borrowers stating
that
such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices reflected in the annual financial statements
referred
to in Section 5.05 hereof and whether or not such officer has knowledge
of
the occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;
(b) (i) as soon as available and in any event within 20 days
after the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of each Borrower as at the end
of and for such month and for the year to date period then ended, (ii) as
soon as available, and in any event within 5 days of discovery of any
adjustments to such unconsolidated financial statements, restatements
thereof, and (iii) as soon as available, and in any event within 40 days
after the end of each month, an internal unaudited consolidated balance
sheet and consolidated statements of income and retained earnings of the
Borrowers as at the end of and for such month and for the year to date
period then ending, in each case, prepared in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, in accordance with generally accepted
accounting principles applied on a basis consistent with the accounting
practices reflected in the pro forma financial statements referred to in
Section 5.05 hereof, but subject to year-end audit adjustments; and
accompanied by a certificate of the chief financial officer of each
Borrower, substantially in the form of Exhibit D hereto stating (A) that
such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices reflected in the pro forma financial statements
referred to in Section 5.05 hereof, subject to year-end audit
adjustments,
(B) whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with respect
thereto, and (C) in the case of the consolidated financial statements,
all
relevant facts in reasonable detail to evidence, and the computations as
to, whether or not the Borrowers are in compliance with the requirements
set forth in Sections 6.12 through 6.15 and Section 7.10 hereof;
(c) within 15 days after the end of each month, separate agings
of each Borrower's accounts receivable and its accounts payable and a
collateral certification report for such Borrower as at the end of such
month;
(d) on the second Banking Day of each week, a report of the
outstanding obligations of QCP to Moore Medical Corporation as of close
of
business on the last Banking Day of the immediately proceeding week;
(e) on each Banking Day, an assignment and collection report for
each Borrower certified by the chief financial officer of such Borrower;
(f) at least 30 days before the beginning of each fiscal year of
the Borrowers, the projected balance sheets and income statements for
each
month of such year for each of the Borrowers individually and for the
Borrowers on a consolidated basis, each in reasonable detail,
representing
the good faith projections of the Borrowers and certified by the
Borrowers' chief financial officer as being the most accurate projections
available and identical to the projections used by the Borrowers for
internal planning purposes, together with such supporting schedules and
information as the Lender may in its discretion require;
(g) immediately after the commencement thereof, notice in writing
of all litigation and of all proceedings before any governmental or
regulatory agency affecting either Borrower of the type described in
Section 5.06 hereof or which seek a monetary recovery against such
Borrower in excess of $25,000;
(h) as promptly as practicable (but in any event not later than
five business days) after an officer of either Borrower obtains knowledge
of the occurrence of any breach, default or event of default under any
Loan Document or any event which constitutes a Default or Event of
Default
hereunder, notice of such occurrence, together with a detailed statement
by a responsible officer of such Borrower of the steps being taken by the
Borrowers to cure the effect of such breach, default or event;
(i) as soon as possible and in any event within 30 days after
either Borrower knows or has reason to know that any Reportable Event
with
respect to any Plan has occurred, the statement of the chief financial
officer of such Borrower setting forth details as to such Reportable
Event
and the action which the Borrowers propose to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension
Benefit Guaranty Corporation;
(j) as soon as possible, and in any event within 10 days after
either Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code of
1986, as amended, the statement of the chief financial officer of such
Borrower setting forth details as to such failure and the action which
the
Borrowers propose to take with respect thereto, together with a copy of
any notice of such failure required to be provided to the Pension Benefit
Guaranty Corporation;
(k) promptly upon knowledge thereof, notice of (i) any disputes
or claims by customers of either Borrower involving amounts which, in the
aggregate, exceed $10,000; (ii) any goods returned to or recovered by
either Borrower involving amounts which, in the aggregate, exceed
$10,000;
and (iii) any change in the persons constituting the officers and
directors of either Borrower;
(l) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any Collateral
or such other collateral or the prospect of payment thereof;
(m) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which Golden shall file with the
Securities and Exchange Commission or any national securities exchange;
(n) promptly upon knowledge thereof, notice of the violation by
either Borrower of any law, rule or regulation, the non-compliance with
which could materially and adversely affect its business or its financial
condition;
(o) promptly upon receipt thereof, copies of all FDA and DEA
reports received by QCP; and
(p) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
Section 6.02. Books and Records; Inspection and Examination. Each
Borrower will keep accurate books of record and account for itself pertaining
to
the Collateral and pertaining to such Borrower's business and financial
condition and such other matters as the Lender may from time to time request
in
which true and complete entries will be made in accordance with generally
accepted accounting principles consistently applied and, upon request f the
Lender, will permit any officer, employee, attorney or accountant for the
Lender
(upon reasonable notice unless the Lender in good faith believes that the
accuracy of the audit may be affected by notice) to audit, review, make
extracts
from or copy any and all corporate and financial books and records of such
Borrower at all times during ordinary business hours, to send and discuss with
account debtors and other obligors requests for verification of amounts owed
to
such Borrower, and to discuss the affairs of such Borrower with any of its
directors, officers, employees or agents. Each Borrower will permit the
Lender,
or its employees, accountants, attorneys or agents, to examine and inspect any
Collateral, other collateral covered by the Security Documents or any other
property of such Borrower at any time during ordinary business hours.
Section 6.03. Account Verification. Each Borrower will at any time and
from time to time upon request of the Lender send requests for verification of
accounts or notices of assignment to account debtors and other obligors.
Section 6.04. Compliance with Laws; Environmental Indemnity. Each
Borrower will (a) comply with the requirements of applicable laws and
regulations, the non-compliance with which would materially and adversely
affect
its business or its financial condition, (b) comply with all applicable
Environmental Laws and obtain any permits, licenses or similar approvals
required by any such Environmental Laws, and (c) use and keep the Collateral,
and will require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or
ordinance. Each Borrower will indemnify, defend and hold the Lender harmless
from and against any claims, loss or damage to which the Lender may be
subjected
as a result of any past, present or future existence, use, handling, storage,
transportation or disposal of any hazardous waste or substance or toxic
substance by the Borrower or on property owned, leased or controlled by such
Borrower. This indemnification agreement shall survive the termination of
this
Agreement and payment of the indebtedness hereunder.
Section 6.05. Payment of Taxes and Other Claims. Each Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interests,
prior
to the date on which penalties attach thereto, (b) all federal, state and
local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of such Borrower; provided, that no Borrower shall be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 6.06. Maintenance of Properties.
(a) Each Borrower will keep and maintain the Collateral, the
other collateral covered by the Loan Documents and all of its other
properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided,
however, that nothing in this Section 6.06 shall prevent any Borrower
from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Lender, desirable in the
conduct of the Borrower's business and not disadvantageous in any
material
respect to the Lender.
(b) Each Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender or Norwest) claiming the
Collateral or any interest therein.
(c) Each Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except the Security Interests and other
security interests permitted by Section 7.01 hereof.
Section 6.07. Insurance. Each Borrower will obtain and at all times
maintain insurance with insurers believed by such Borrower to be responsible
and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such
risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which such Borrower operates.
Without limiting the generality of the foregoing, each Borrower will at all
times keep all tangible Collateral insured against risks of fire (including
so-
called extended coverage), theft, collision (for Collateral consisting of
motor
vehicles) and such other risks and in such amounts as the Lender may
reasonably
request, with any loss payable to the Lender to the extent of its Interest,
and
all policies of such insurance shall contain a lender's loss payable
endorsement
for the benefit of the Lender. All policies of liability insurance required
hereunder shall name the Lender as an additional insured.
Section 6.08. Preservation of Corporate Existence. Each Borrower will
preserve and maintain its corporate existence and all of its rights,
privileges
and franchises necessary or desirable in the normal conduct of its business
and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.09. Delivery of Instruments, etc. Upon request by the Lender,
each Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or
assigned
by such Borrower.
Section 6.10. Lockbox; Collateral Account.
(a) Each Borrower will irrevocably direct all present and future
Account debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to such Borrower's Lockbox.
All
of such Borrower's invoices, account statements and other written or oral
communications directing, instructing, demanding or requesting payment of
any Account or any other amount constituting Collateral shall
conspicuously direct that all payments be made to such Lockbox and shall
include the Lockbox address. All payments received in such Lockbox shall
be processed to the Collateral Account.
(b) Each Borrower agrees to deposit in the Collateral Account or,
at the Lender's option, to deliver to the Lender all collections on
Accounts, contract rights, chattel paper and other rights to payment
constituting Collateral, and all other cash proceeds of Collateral, which
such Borrower may receive directly notwithstanding its direction to
Account debtors and other obligors to make payments to its Lockbox,
immediately upon receipt thereof, in the form received, except for such
Borrower's endorsement when deemed necessary. Until delivered to the
Lender or deposited in the Collateral Account, all proceeds or
collections
of Collateral shall be held in trust by such Borrower for and as the
property of the Lender and shall not be commingled with any funds or
property of such Borrower. Amounts deposited in the Collateral Account
of
a Borrower shall not bear interest and shall not be subject to withdrawal
by such Borrower, except after full payment and discharge of all
Obligations of such Borrower. All such collections shall constitute
proceeds of Collateral and shall not constitute payment of any Obligation
of such Borrower. Collected funds from the Collateral Account of a
Borrower shall be transferred to the Lender's general account, and the
Lender may deposit in its general account or in such Collateral Account
any and all collections received by it directly from such Borrower. The
Lender may commingle such funds with other property of the Lender or any
other person. The Lender from time to time shall, upon initiation by
such
Borrower, after allowing two Banking Days, apply such funds to the
payment
of any and all Obligations of such Borrower, in any order or manner of
application satisfactory to the Lender. All items delivered to the
Lender
or deposited in the Collateral Account of a Borrower shall be subject
to final payment. If any such item is returned uncollected, such
Borrower
will immediately pay the Lender, or, for items deposited in the
Collateral
Account of a Borrower, the bank maintaining such account, the amount of
that item, or such bank at its discretion may charge any uncollected item
to such Borrower's commercial account or other account. Such Borrower
shall be liable as an endorser on all items deposited in the Collateral
Account, whether or not in fact endorsed by such Borrower.
Section 6.11. Performance by the Lender. If either Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a
period
of ten calendar days after the Lender gives such Borrower written notice
thereof
(or in the case of the agreements contained in Sections 6.05, 6.07 and 6.10
hereof, immediately upon the occurrence of such failure, without notice or
lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrowers (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrowers shall
thereupon jointly and severally pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable attorneys'
fees
and legal expenses) incurred by the Lender in connection with or as a result
of
the performance or observance of such agreements or the taking of such action
by
the Lender, whether with interest thereon from the date expended or incurred
at
the default rate of interest payable on the Term Note. To facilitate the
performance or observance by the Lender of such covenants of the Borrowers,
each
Borrower hereby irrevocably appoints the Lender, or the delegate of the
Lender,
acting alone, as the attorney in fact of such Borrower (which appointment is
coupled with an interest) with the right (but not the duty) from time to time
to
create, prepare, complete, execute, deliver, endorse or file in the name and
on
behalf of such Borrower any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and
other
agreements and writings required to be obtained, executed, delivered or
endorsed
by such Borrower under this Section 6.11.
Section 6.12. Book Net Worth. The Borrowers shall, on the last day of
each month in each of the periods set forth below, maintain their consolidated
Book Net Worth at an amount which is greater than or equal to the amount set
forth opposite such period:
Period,Book Net Worth
,
Date hereof to and including November 29, 1995,$1,350,000
November 30, 1995 to and including February 28,
1996,1,470,000
February 29, 1996 to and including May 30, 1996,1,645,000
May 31, 1996 to and including August 30, 1996,1,945,000
August 31, 1996 to and including November 29,
1996,2,245,000
November 30, 1996 to and including February 27,
1997,2,595,000
February 28, 1997 to and including May 30, 1997,3,045,000
May 31, 1997 to and including August 30, 1997,3,620,000
August 31, 1997 to and including November 29,
1997,4,170,000
November 30, 1997 to and including February 27,
1998,4,745,000
February 28, 1998 to and including May 30, 1998,5,595,000
May 31, 1998 to and including August 30, 1998,6,595,000
Prior to August 1, 1998, the Borrowers and the Lender shall negotiate in good
faith as to the Book Net Worth that the Borrowers shall be required to
maintain
for periods after such date, but if the Borrowers and the Lender do not agree,
the Lender may designate the required amounts in its sole discretion, and the
failure by the Borrowers to maintain the designated amounts shall be a default
hereunder.
Section 6.13. Debt Service Coverage. The Borrower shall, on the last
day
of each of the periods set forth below, maintain the ratio between (a) the sum
of the consolidated interest expense of the Borrowers required to be paid
during
such period plus net after-tax income plus appreciation, amortization and
other
non-cash deductions from net income of the Borrowers determined on a
consolidated basis, to (b) the sum of interest expense required to be paid by
the Borrowers during such period and scheduled payments of principal of the
Borrowers in respect of its Debt (other the Debt to the Lender incurred
pursuant
to Section 2.01(a) of this Agreement), in each case determined in accordance
with generally accepted accounting principles for such period, at a ratio that
is greater than or equal to the ratio set forth opposite such period:
Period,Ratio
,
Three months ending November 30, 1995,2.20 to 1
Three months ending February 29, 1996,3.50 to 1
Three months ending May 31, 1996,4.50 to 1
Three months ending August 31, 1996,2.40 to 1
Three months ending November 30, 1996,2.50 to 1
Three months ending February 28, 1997,2.90 to 1
Three months ending May 31, 1997,3.20 to 1
Three months ending August 31, 1997,3.20 to 1
Three months ending November 30, 1997,3.50 to 1
Three months ending February 28, 1998,4.50 to 1
Three months ending May 31, 1998,5.30 to 1
Three months ending August 31, 1998,5.20 to 1
Prior to August 1, 1998, the Borrowers and the Lender shall negotiate in
good faith as to the ratios that the Borrowers shall be required to maintain
for
periods after such date, but if the Borrowers and the Lender do not agree, the
Lender may designate the required ratios in its sole discretion, and the
failure
by the Borrowers to maintain the designated ratios shall be a default
hereunder.
Section 6.14. Interest Coverage. The Borrowers shall, on the last day
of
each of the periods set forth below, maintain the ratio of (a) the sum of
their
interest expense required to be paid during such period plus net after-tax
income plus depreciation, amortization and other non-cash deductions from
income, to (b) interest expense required to be paid during such period, in
each
case determined in accordance with generally accepted accounting principles on
a
consolidated basis for such period, at a ratio which is greater than or equal
to
the ratio set forth opposite such period:
Period,Ratio
,
Three months ending November 30, 1995,2.50 to 1
Three months ending February 29, 1996,4.50 to 1
Three months ending May 31, 1996,5.00 to 1
Three months ending August 31, 1996,5.00 to 1
Three months ending November 30, 1996,5.50 to 1
Three months ending February 28, 1997,6.50 to 1
Three months ending May 31, 1997,7.00 to 1
Three months ending August 31, 1997,7.00 to 1
Three months ending November 30, 1997,8.50 to 1
Three months ending February 28, 1998,11.00 to 1
Three months ending May 31, 1998,13.00 to 1
Three months ending August 31, 1998,13.00 to 1
Prior to August 31, 1998, the Borrowers and the Lender shall negotiate in good
faith as to the ratios that the Borrowers shall be required to maintain for
periods after such date, but if the Borrowers and the Lender do not agree, the
Lender may designate the required ratios in its sole discretion, and the
failure
by the Borrowers to maintain the designated ratios shall be a default
hereunder.
Section 6.15. Net Income. The Borrowers shall, on the last day of each
of the periods set forth below, have after-tax net income, determined in
accordance with generally accepted accounting principles on a consolidated
basis
for such period, but excluding extraordinary gain, which does not exceed the
amount set forth opposite such period:
Period,Net Income
,
Three months ending November 30, 1995,$ 40,000
Three months ending February 29, 1996,175,000
Three months ending May 31, 1996,300,000
Three months ending August 31, 1996,300,000
Three months ending November 30, 1996,350,000
Three months ending February 28, 1997,450,000
Three months ending May 31, 1997,575,000
Three months ending August 31, 1997,550,000
Three months ending November 30, 1997,575,000
Three months ending February 28, 1998,850,000
Three months ending May 31, 1998,1,000,000
Three months ending August 31, 1998,1,000,000
Prior to August 31, 1998, the Borrowers and the Lender shall negotiate in good
faith as to the net income that the Borrowers shall be required to maintain
for
periods after such date, but if the Borrowers and the Lender do not agree, the
Lender may designate the required amounts in its sole discretion, and the
failure by the Borrowers to maintain the designated amounts shall be a default
hereunder.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Credit Facility shall
remain outstanding, the Borrowers jointly and severally agree that, without
the
prior written consent of the Lender:
Section 7.01. Liens. Neither Borrower will create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness: excluding, however, from the operation of the
foregoing:
(a) Mortgages, deeds of trust, pledges, liens, security interests
and assignments in existence on the date hereof and listed in Exhibit C
hereto, securing indebtedness for borrowed money permitted under
Section 7.02 hereof;
(b) the Security Interests;
(c) junior security interests in favor of Norwest; and
(d) purchase money security interests relating to the acquisition
of machinery and equipment of the Borrower so long as the Borrower is in,
and maintains, compliance with every other provision of this Agreement.
Section 7.02. Indebtedness. Neither Borrower will incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations,
except:
(a) indebtedness arising hereunder;
(b) indebtedness of such Borrower in existence on the date hereof
and listed in Exhibit C hereto;
(c) indebtedness relating to liens permitted in accordance with
Section 7.01(c) hereof;
(d) indebtedness of Golden to QCP permitted in accordance with
Section 7.04; and
(e) Debt payable to Norwest.
Section 7.03. Guaranties. Neither Borrower will assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by such Borrower
for deposit or collection or similar transactions in the ordinary course
of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Exhibit C hereto and the
guaranty by QCP of Golden's Obligations to the Lender.
Section 7.04. Investments and Subsidiaries.
(a) Neither Borrower will purchase hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit exist
any
loans or advances to, or make any investment or acquire any interest
whatsoever any other Person, including specifically, but without
limitation, any partnership or joint venture, except:
(i) investments in direct obligations of the United
States
of America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the
United States of America having a maturity of one year or less,
commercial paper issued by U.S. corporations rated "A-1" or "A-2" by
Standard & Poors Corporation or "P-1" or "P-2" by Moody's Investors
Service or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the Federal
Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by
the Federal Deposit Insurance Corporation);
(ii) travel advances or loans to officers and
employees of
such Borrower not exceeding at any one time an aggregate of $5,000;
(iii) advances in the form of progress payments,
prepaid rent
or security deposits;
(iv) investments by Golden in QCP; and
(v) loans or advances made by QCP to Golden
thereafter
provided that immediately after such loan or advances is made (A)
QCP the Tangible Net Worth is greater than zero, and (B) the QCP
Borrowing Base exceeds the outstanding principal balance of the QCP
Revolving Note by at least $200,000.
(b) Neither Borrower will create or permit to exist any
Subsidiary, other than any Subsidiary in existence on the date hereof and
listed in Exhibit B hereto.
Section 7.05. Dividends. Golden will not declare or pay any dividends
(other than dividends payable solely in stock of Golden) on any class of its
stock or make any payment on account of the purchase, redemption or other
retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly; provided, however, that Golden may
redeem up to $90,000 of its capital stock provided that no Default or Event of
Default will exist immediately thereafter, and provided further that
immediately
thereafter, (a) the sum of the Golden Borrowing Base and the QCP Borrowing
Base
exceeds the sum of the outstanding principal balance of the Golden Revolving
Note and the QCP Revolving Note by at least $200,000, and (b) the average
difference between (i) sum of the Golden Borrowing Base and the QCP Borrowing
Base, and (ii) the outstanding principal balances of the Golden Revolving Note
and the QCP Revolving Note during the 30 days immediately preceding the date
of
such prepayment was at least $200,000. QCP will not declare or pay any
dividends (other than dividends payable solely in stock of QCP) on any class
of
its stock or make any payment on account of the purchase, redemption or other
retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly, except that QCP may declare and pay
dividends on its capital stock held by Golden provided that immediately after
such dividend is paid (A) the QCP Tangible Net Worth is greater than zero, and
(B) the QCP Borrowing Base exceeds the outstanding principal balance of the
QCP
Revolving Note by at least $200,000.
Section 7.06. Sale or Transfer of Assets; Suspension of Business
Operations. Neither Borrower will sell, lease, assign, transfer or otherwise
dispose of (a) the stock of any Subsidiary, (b) all or a substantial part of
its
assets, or (c) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. Neither Borrower will in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.07. Consolidation and Merger; Asset Acquisitions. Neither
Borrower will consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of
any
other Person.
Section 7.08. Sale and Leaseback. Neither Borrower will enter into any
arrangement, directly or indirectly, with any other Person whereby such
Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such
property
or any part thereof or any other property which such Borrower intends to use
for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.09. Restrictions on Nature of Business. Neither Borrower will
engage in any line of business materially different from that presently
engaged
in by such Borrower and will not purchase, lease or otherwise acquire assets
not
related to its business.
Section 7.10. Capital Expenditures. The Borrowers will not expend or
contract to expend more than $250,000 in the aggregate for both Borrowers
during
the period from the date hereof to and including December 31, 1995, of which
any
amount in excess of $100,000 must be financed with third parties, or more
than
$100,000 in the aggregate for both Borrowers during any calendar year
thereafter
for the lease or purchase of any other asset, whether payable currently or in
the future.
Section 7.11. Accounting. Neither Borrower will adopt any material
change in accounting principles other than as required by generally accepted
accounting principles. Neither Borrower will adopt, permit or consent to any
change in its fiscal year.
Section 7.12. Discounts, etc. Neither Borrower will, after notice from
the Lender, grant any discount, credit or allowance to any customer of such
Borrower or accept any return of goods sold, or at any time (whether before
after notice from the Lender) modify, amend, subordinate, cancel or terminate
the obligation of any account debtor or other obligor of such Borrower.
Section 7.13. Defined Benefit Pension Plans. Neither Borrower will
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10 hereof.
Section 7.14. Other Defaults. Neither Borrower will permit any breach,
default or event of default to occur under any note, loan agreement,
indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon such Borrower.
Section 7.15. Place of Business; Name. Neither Borrower will transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. Neither Borrower will permit any
tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interests. Neither Borrower will
change
its name.
Section 7.16. Organizational Documents. Neither Borrower will amend its
certificate of incorporation, articles of incorporation or bylaws.
Section 7.17. Salaries. Neither Borrower will pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 10% in any one year, either individually or for
all
such persons in the aggregate, or pay any such increase from any source other
than profits earned in the year of payment.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.01. Events of Default. "Event of Default," wherever used
herein, means any one of the following events:
(a) Default in the payment of any interest on or principal of any
Note when it becomes due and payable; or
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by either Borrower under this Agreement; or
(c) Default in the performance, or breach, of any covenant or
agreement of either Borrower contained in this Agreement and the
continuance thereof for a period of 15 days after receipt of notice of
such default from the Lender; or
(d) Either Borrower shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or either Borrower shall apply
for or consent to the appointment of any receiver, trustee, or similar
officer for it for all or any substantial pan of its property; or such
receiver, trustee or similar officer shall be appointed without the
application or consent of either Borrower; or either Borrower shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt,
dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against either Borrower; or any
judgment, writ, warrant of attachment, garnishment or execution or
similar
process shall be issued or levied against a substantial part of the
property of either Borrower; or
(e) A petition shall be filed by or against either Borrower under
the United States Bankruptcy Code naming such Borrower as debtor; or
(f) Any representation or warranty made by either Borrower in
this Agreement, or by either (or any of its officers) in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with
this Agreement shall prove to have been incorrect in any material respect
when deemed to be effective; or
(g) The rendering against either Borrower of a final judgment,
decree or order for the payment of money in excess of $25,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution; or
(h) A default under any bond, debenture, note or other evidence
of indebtedness of either Borrower owed to any Person other than the
Lender, or under any indenture or other instrument under which any such
evidence of indebtedness has been issued or by which it is governed, or
under any lease of any of the Premises, and the expiration of the
applicable period of grace, if any, specified in such evidence of
indebtedness, indenture, other instrument or lease; or
(i) Any Reportable Event, which the Lender determines in good
aith might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee
to administer any Plan, shall have occurred and be continuing 30 days
after written notice to such effect shall have been given to either
Borrower by the Lender; or a trustee shall have been appointed by an
appropriate United States District Court to administer any Plan; or the
Pension Benefit Guaranty Corporation shall have instituted proceedings to
terminate any Plan or to appoint a trustee to administer any Plan; or
either Borrower shall have filed for a distress termination of any Plan
under Title IV of ERISA; or either Borrower shall have failed to make any
quarterly contribution required with respect to any Plan under
Section 412(m) of the Internal Revenue Code of 1986, as amended, which
the
Lender determines in good faith may by itself, or in combination with any
such failures that the Lender may determine are likely to occur in the
future, result in the imposition of a lien on the assets of either
Borrower in favor of the Plan; or
(j) An event of default shall occur under any Loan Document or
under any other security agreement, mortgage, deed of trust, assignment
or
other instrument or agreement securing any obligations of either Borrower
hereunder or under any note; or
(k) Either Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its business
in the ordinary course, or sell all or substantially all of its assets,
without the prior written consent of the Lender; or
(l) Either Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued; or
(m) Default in the payment of any amount owed by either Borrower
to the Lender other than any indebtedness arising hereunder and the
expiration of the applicable grace period, if any, with respect thereto;
or
(n) Any breach, default or event of default by or attributable to
any Affiliate under any agreement between such Affiliate and the Lender
and the expiration of the applicable grace period, if any, with respect
thereto; or
(o) An "event of default" shall occur under the Norwest Credit
Agreement.
Section 8.02. Rights and Remedies. Upon the occurrence of an Event of
Default or at any time thereafter, the Lender may exercise any or all of the
following rights and remedies:
(a) The Lender may, by notice to the Borrowers, declare the
Credit Facility to be terminated, whereupon the same shall forthwith
terminate.
(b) The Lender may, by notice to the Borrowers, declare to be
forthwith due and payable the entire unpaid principal amount of the Notes
then outstanding, all interest accrued and unpaid thereon, all amounts
payable under this Agreement and any other Obligations, whereupon such
Notes, all such accrued interest and all such amounts and Obligations
shall become and be forthwith due and payable, without presentment,
notice
of dishonor, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrowers;
(c) The Lender may, without notice to the Borrowers and without
further action, apply any and all money owing by the Lender to either
Borrower to the payment of the Advances, including interest accrued
thereon, and of all other sums then owing by the Borrowers hereunder;
(d) The Lender may, exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral,
or any evidence thereof, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which the
Borrowers hereby expressly waive) and the right to sell, lease or
otherwise dispose of any or all of the Collateral, and, in connection
therewith, the Borrowers will on demand assemble the Collateral and make
it available to the Lender at a place to be designated by the Lender
which
is reasonably convenient to both parties;
(e) The Lender may exercise and enforce its rights and remedies
under the Loan Documents; and
(f) The Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 8.01(e) hereof, the entire unpaid principal amount of the
Note, all interest accrued and thereon, all other amounts payable under this
Agreement and any other Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.
Section 8.03. Certain Notices. If notice to either Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, notice shall be deemed commercially reasonable
if
given (in the manner specified in Section 9.03) at least ten calendar days
prior
to the date of intended disposition or other action.
ARTICLE IX
MISCELLANEOUS
Section 9.01. No Waiver; Cumulative Remedies. No failure or delay on
the
part of the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative
and
not exclusive of any remedies provided by law.
Section 9.02. Amendments, Etc. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any departure by
the Borrowers therefrom or any release of a Security Interest shall be
effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on a Borrowers in
any
case shall entitle either Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.03. Addresses for Notices, Etc. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed to the party to whom notice is being given at its address
as
set forth below and, if telecopied, transmitted to that party at its
telecopier
number set forth below:
If to the Borrowers: Golden Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, Colorado 80401
Telecopier: (303) 279-4390
Attention: Charles Drummond
Quality Care Pharmaceuticals, Inc.
c/o Golden Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, Colorado 80401
Telecopier: (303) 279-4390
Attention: Charles Drummond
If to the Lender: Norwest Credit, Inc.
1740 Broadway
Denver, Colorado 80274-8625
Telecopier: (303) 863-4904
Attention: Pam Kempel
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given
on
(a) the date received if personally delivered, (b) when deposited in the mail
if
delivered by mail, or (c) the date sent if sent by overnight courier, or (d)
the
date of transmission if delivered by telecopy.
Section 9.04. Financing Statement. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrowers is sufficient as a financing statement and may be filed as a
financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtors: Golden Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, Colorado 80401
Federal Tax Identification No. 84-0645174
Quality Care Pharmaceuticals, Inc.
17911 Sampson Lane
Huntington Beach, California 92674
Federal Tax Identification No. 33-0576246
Name and address of Secured Party: Norwest Credit, Inc.
1740 Broadway
Denver, Colorado 80274-8625
Section 9.05. Further Documents. The Borrowers will from time to time
execute and deliver or endorse any and all instruments, documents,
conveyances,
assignments, security agreements, financing statements and other agreements
and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interests or the rights of the Lender under
this
Agreement (but any failure to request or assure that any Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of this Agreement and the Security Interests,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
Section 9.06. Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrowers are entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third
person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral. The Lender shall not be obligated to preserve any rights the
Borrowers may have against prior parties, to realize on the Collateral at all
or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Section 9.07. Costs and Expenses. The Borrowers jointly and severally
agree to pay on demand all costs and expenses, including (without limitation)
attorneys' fees, incurred by the Lender in connection with the Obligations,
this
Agreement, the Loan Documents and any other document or agreement related
hereto
or thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interests.
Section 9.08. Indemnity. In addition to the payment of expenses
pursuant
to Section 9.07 hereof and the environmental indemnity pursuant to Section
6.04
hereof, the Borrowers jointly and severally agree to indemnify, defend and
hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees and agents of the
foregoing (the "Indemnitees"), from and against (a) any and all transfer
taxes,
documentary taxes, assessments or charges made by any governmental authority
by
reason of the execution and delivery of this Agreement and the other Loan
Documents or the making of the Advance, and (b) any and all liabilities,
losses,
damages, penalties, judgments, suits, claims, costs and expenses of any kind
or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) in connection with any investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall be designated a
party thereto, which may be imposed on, incurred by or asserted against such
Indemnitee, in any manner relating to or arising out of or in connection with
the making of the Advance, this Agreement and all other Loan Documents or the
use or intended use of the proceeds of the Advance (the "Indemnified
Liabilities"). If any investigative, judicial or administrative proceeding
arising from any of the foregoing is brought against any Indemnitee, upon
request of such Indemnitee, the Borrowers, or counsel designated by the
Borrowers and satisfactory to the Indemnitee, will resist and defend such
action, suit or proceeding to the extent and in the manner directed by the
Indemnitee, at the Borrowers' sole cost and expense. Each Indemnitee will use
its best efforts to cooperate in the defense of any such action, suit or
proceeding. If the foregoing undertaking to indemnify, defend and hold
harmless
may be held to be unenforceable because it violates any law or public policy,
the Borrowers shall nevertheless make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law, The obligation of the Borrowers under this Section 9.08
shall survive the termination of this Agreement and the discharge of the
Borrowers' other Obligations.
Section 9.09. Participants. The Lender and its participants, if any,
are
not partners or joint venturers, and the Lender shall not have any liability
or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be
transferred
or delegated to any of the participants, successors or assigns of the Lender.
Section 9.10. Execution in Counterparts. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.11. Binding Effect; Assignment; Complete Agreement. The Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lender and their respective successors and assigns, except that neither
Borrower shall have the right to assign its rights thereunder or any interest
therein without the prior written consent of the Lender. This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof.
Section 9.12. Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. Each
party consents to the personal jurisdiction of the state and federal courts
located in the State of Colorado in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in
connection
with this Agreement shall be venued in either the District Court of the City
and
County of Denver, Colorado, or the United States District Court, District of
Colorado. The parties waive any right to trial by jury, in any action or
proceeding based on or pertaining to this Agreement.
Section 9.13. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.14. Headings. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a
part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed
by their respective officers thereunto duly authorized as of the date first
above written.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title:
QUALITY CARE PHARMACEUTICALS. INC.
By
Name:
Title:
NORWEST CREDIT, INC.
By
Name:
Title:
EXHIBIT A-1 to Credit and Security Agreement
REVOLVING NOTE
$2,500,000 Denver, Colorado
August ___, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation, (the "Borrower"), hereby promises to pay on July 31,
2000,
to the order of Norwest Credit, Inc. (the "Lender"), at its main office in
Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million and Five Hundred
Thousand and No/100 Dollars ($2,500,000), or, if less, the aggregate unpaid
principal amount of all advances made by the Lender to he Borrower hereunder,
together with interest on the principal amount hereunder remaining unpaid from
time to time, computed on the basis of the actual number of days elapsed and a
360-day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of even
date
herewith (the "Credit Agreement") by and between the Lender, the Borrower and
Quality Care Pharmaceuticals, Inc. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This
Note
may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Golden Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title: EXHIBIT
A-2 to Credit and Security Agreement
REVOLVING NOTE
$2,500,000 Denver, Colorado
August ___, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation, and QUALITY CARE PHARMACEUTICALS, INC., a California
corporation (the "Borrowers"), hereby jointly and severally promise to pay on
July 31, 2000, to the order of Norwest Credit, Inc., a Minnesota corporation
(the "Lender"), at its main office in Minneapolis, Minnesota, or at any other
place designated at any time by the holder hereof, in lawful money of the
United
States of America and in immediately available funds, the principal sum of Two
Million Five Hundred Thousand and No/100 Dollars ($2,500,000) or, if less, the
aggregate unpaid principal amount of all advances made by the Lender to the
Borrowers hereunder, together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and
Security
Agreement of even date herewith (the "Credit Agreement") by and between the
Lender and the Borrowers. The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may
be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
QCP Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrowers hereby jointly and severally agree to pay all costs of
collection, including attorneys' fees and legal expenses in the event this
Note
is not paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title:
QUALITY CARE PHARMACEUTICALS, INC.
By
Name:
Title:
EXHIBIT A-3 to Credit and Security Agreement
REVOLVING NOTE
$400,000 Denver, Colorado
August ___, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation (the "Borrower"), hereby promises to pay to the order of
Norwest Credit, Inc., Minnesota corporation (the "Lender"), at its main office
in Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Four Hundred Thousand and
No/100 Dollars ($400,000) together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a 360-day year, from the date hereof until
this Note is fully paid at the rate from time to time in effect under the
Credit
and Security Agreement of even date herewith (the "Credit Agreement") by and
between the Lender, the Borrower and Quality Care Pharmaceuticals, Inc. The
principal hereof shall be payable in equal monthly installments of $6,667.00
each, commencing on September 1, 1995, and continuing on the first day of each
month thereafter until August 1, 2000, when the principal balance hereof shall
be due and payable in full. Interest accruing thereon shall be due and
payable
on the last day of each month and on maturity or earlier payment in full.
This
Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Term Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title:
EXHIBIT B to Credit and Security Agreement
Names
Golden: Golden Pharmaceuticals, Inc.
Benedict Nuclear Pharmaceuticals, Inc.
QCP: Quality Care Pharmaceuticals, Inc.
Chief Executive Office/Principal Place of Business
Golden: 1313 Washington Avenue
Golden, Colorado 80401
710 14th Street
Golden, Colorado 80401
QCP: 17911 Sampson Lane
Huntington Beach, California 92674
Other Inventory and Equipment Locations
None
Subsidiaries
QCP and Golden Research Corporation are wholly owned subsidiaries of
Golden
EXHIBIT C to Credit and Security Agreement
Permitted Liens, Indebtedness and Guaranties
Liens
Golden: None
QCP: Equipment Lease in favor of JLA Credit
Corporation
Indebtedness
Golden: None
QCP: Equipment Lease in favor of JLA Credit
Corporation (Original Purchase Price
$203,425)
Guaranties
None
EXHIBIT D to Credit and Security Agreement
COMPLIANCE CERTIFICATE
In accordance with our Credit and Security Agreement dated as of
August ___, 1995 (the "Credit Agreement"), attached are the financial
statements
of ___________________ (the "Borrower") as of and for the month and
year-to-date
period ended _______________ ___, 199__ (the "Current Financials").
I certify that the Current Financials have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with
the accounting practices reflected in the pro forma financial statements
referred to in Section 5.05 of the Credit Agreement, subject to year-end audit
adjustments.
Defaults and Events of Default (check one)
I have no knowledge of the occurrence of any Default or Event of
Default under the Credit Agreement which has not previously been
reported to you and remedied.
Attached is a detailed description of all Defaults and Events of
Default of which I have knowledge and which have not previously been
reported to you and remedied.
For the date and periods covered by the Current Financials, the Borrower
is in compliance with the covenants set forth in Sections 6.12 through 6.15
and
7.10 of the Credit Agreement, except as indicated below. The calculations
made
to determine compliance are as follows:
Covenant,Actual,Requirement
,,
6.12),,
6.13),,
6.14),,
6.15),,
7.10),,
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title:
QUALITY CARE PHARMACEUTICALS, INC.
By
Name:
Title:
EXHIBIT E to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are
described as follows:
Golden: 1313 Washington Avenue
Golden, Colorado 80401
710 14th Street
Golden, Colorado 80401
QCP: 17911 Sampson Lane
Huntington Beach, California 92674
Exhibit 10.12
Credit and Security Agreement dated August 7, 1995
among the Company and Norwest Bank Minnesota, National Association
CREDIT AND SECURITY AGREEMENT
Dated as of August 7, 1995
GOLDEN PHARMACEUTICALS, INC., a Colorado corporation (the "Borrower"),
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (the "Lender"), hereby agree as
follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting
principles.
"Acquisition" means the acquisition by the Borrower of 100% of the issued
and outstanding capital stock of QCP on the terms set out in the Stock
Purchase
Agreement dated June 7, 1995 among the Borrower, QCP and the shareholders of
QCP.
"Advance" means an advance to the Borrower by the Lender under the Credit
Facility.
"Affiliate" or "Affiliates" means any Person controlled by, controlling
or
under common control with the Borrower, including (without limitation) any
Subsidiary of the Borrower. For purposes of this definition, "control," when
used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether
through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Banking Day" means a day other than a Saturday on which banks are
generally open for business in Denver, Colorado and Minneapolis, Minnesota.
"Base Rate" means the rate of interest publicly announced from time to
time by the Lender as its "base rate" or, if the Lender ceases to announce a
rate so designated, any similar successor rate designated by the Lender.
"Book Net Worth" means the difference between:
(a) the consolidated assets of the Borrower and QCP determined in
accordance with generally accepted accounting principles after deducting
adequate reserves in each case where, in accordance with generally
accepted accounting principles, a reserve is proper, and
(b) all Debt of the Borrower and QCP.
"Collateral" means all of the Equipment, General Intangibles, Inventory
and Receivables, together with all substitutions and replacements for and
products of any of the foregoing Collateral and together with proceeds of any
and all of the foregoing collateral and, in the case of all tangible
Collateral,
together with all accessions and together with (i) all accessories,
attachments,
parts, equipment and repairs now or hereafter attached or affixed to or used
in
connection with any such goods, and (ii) all warehouse receipts, bills of
lading
and other documents of title now or hereafter covering such goods.
"Collateral Account" has the meaning specified in Section 6.10(b) hereof.
"Credit Facility" means the credit facility being made available to the
Borrower by the Lender pursuant to Article II hereof.
"Current Interest" has the meaning set forth in Section 2.3(a) hereof.
"Debt" of a Person means (i) all items of indebtedness or liability which
in accordance with generally accepted accounting principles would be included
in
determining total liabilities as shown on the liabilities side of a balance
sheet of such Person as at the date as of which Debt is to be determined, (ii)
indebtedness secured by any mortgage, pledge, lien or security interest
existing
on property owned by such Person, whether or not the indebtedness secured
thereby shall have been assumed.
"Deed of Trust" means the Second Combination Deed of Trust, Security
Agreement and Fixture Financing Statement of even date herewith from the
Borrower to the Lender.
"Default" means an event that, with giving of notice or passage of time
or
both, would constitute an Event of Default.
"Environmental Laws" has the meaning specified in Section 5.12 hereof.
"Equipment" means all of the Borrower's equipment, as such term is
defined
in the UCC, whether now owned or hereafter acquired, including but not limited
to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning specified in Section 8.1 hereof.
"General Intangibles" means all of the Borrower's general intangibles, as
such term is defined in the UCC, whether now owned or hereafter acquired,
including (without limitation) all present and future patents, patent
applications, FDA approvals, applications and registrations, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and
contracts, manuals, operating instructions, permits, licenses, franchises, the
right to use the Borrower's name, and the goodwill of the Borrower's business.
"Intercreditor Agreement" means the Intercreditor Agreement of even date
herewith between the Lender and NCI.
"Inventory" means all of the Borrower's inventory, as such term is
defined
in the UCC, whether now owned or hereafter acquired, whether consisting of
whole
goods, spare parts or components, supplies or materials, whether acquired,
held
or furnished for sale, for lease or under service contracts or for manufacture
or processing, and wherever located.
"Loan Documents" means this Agreement, the Note, the Deed of Trust and
the
Collateral Pledge Agreement.
"NCI" means Norwest Credit, Inc., a Minnesota corporation.
"NCI Credit Agreement" means the Credit and Security Agreement of even
date herewith between the Borrower and NCI.
"Note" means the Promissory Note of the Borrower payable to the order of
the Lender in substantially the form of Exhibit A.
"Obligations" has the meaning specified in Section 3.1 hereof.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of the Borrower and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and
has any rights of possession, including (without limitation) the premises
legally described in Exhibit E attached hereto.
"QCP" means Quality Care Pharmaceuticals, Inc., a California corporation.
"Receivables" means each and every right of the Borrower to the payment
of
money, whether such right to payment now exists or hereafter arises, whether
such right to payment arises out of a sale, lease or other disposition of
goods
or other property, out of a rendering of services, out of a loan, out of the
overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens
and
security interests) which the Borrower may at any time have by law or
agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt
instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in Title
IV of ERISA.
"Security Interest" has the meaning specified in Section 3.1 hereof.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such
corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by
the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the state designated in Section 9.12 hereof as the state whose laws shall
govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
ARTICLE II
Amount and Terms of the Credit Facility
Section 2.1 Advance. The Lender agrees, on the terms and subject to the
conditions herein set forth, to make a single Advance to the Borrower on the
later of the date hereof or the date on which the conditions precedent
therefor
contained in Article IV hereof are satisfied in the amount of $4,000,000,
which
Advance shah be secured by the Collateral as provided in Article III hereof.
Upon fulfillment of the applicable conditions set forth in Article IV hereof,
the Lender shall disburse the proceeds of the Advance by crediting the same to
the Borrower's demand deposit account maintained with Norwest Bank Colorado,
N.A. unless the Lender and the Borrower shall agree in writing to another
manner
of disbursement. The Credit Facility made available pursuant to this Section
2.1(a) is not a revolving facility. The Lender acknowledges that a portion of
the Advance will be held by First Interstate Bank of California, N.A., in an
escrow account and will be released to the shareholders of QCP upon delivery
by
such shareholders of their share certificates to Kutak Rock. The Lender
agrees
to cooperate with such bank in authorizing the release of such funds upon
delivery of such original share certificates.
Section 2.2 Note. The Advance made by the Lender under Section 2.1(a)
hereof shall be evidenced by and be repayable with interest in accordance with
the Note. The principal of the Note shall be payable in 16 equal quarterly
installments of $125,000 each, commencing on August 1, 1996 and continuing on
the first day of each November, February, May and August thereafter until
August
1, 2000, or the earlier acceleration by the Lender pursuant to Section 8.2
hereof, when the principal balance remaining unpaid shall be due and payable
in
full. The Note shall bear interest as provided herein.
Section 2.3 Interest.
(a) The principal of the Note outstanding from time to time
during any month shall bear interest payable currently ("Current
Interest") computed on the basis of actual days elapsed in a 360-day year
at an annual rate equal to the sum of the Base Rate plus 3.0%, which rate
shall change when and as the Base Rate changes. The Current Interest
accruing each month shall be payable on the last day of such month or
upon
final maturity of the Note (whether in accordance with the terms thereof
or as a result of acceleration of the maturity thereof) and upon earlier
payment of the Note in full.
(b) In addition to the interest payable pursuant to Section
2.3(a), the Borrower shall pay contingent interest ("Contingent
Interest")
in an mount equal to 10% of the total consolidated company value of the
Borrower and its Subsidiaries. The Contingent Interest shall be
determined as of, and shall be due and payable on the date of the final
maturity of the Note (whether in accordance with the terms thereof or as
a
result of acceleration thereof) and upon earlier payment of the Note in
full. As used in this Section, the "total consolidated company value"
shall mean the product between the total number of issued and outstanding
shares of common stock of the Borrower determined on a fully diluted
basis
is to reflect the conversion of all securities of the Borrower which are
convertible into common stock and the exercise of all warrants, stock
options and similar rights to purchase common stock of the Borrower to
the
extent exercisable for consideration below the market value of the common
stock of the Borrower multiplied by the average midpoint between the bid
and ask price for the common stock of the Borrower during the 30 days
immediately before the due date of the Contingent Interest payment as
quoted by the NASD. If no Default or Event of Default then exists, and
the Borrower prepays the Note in full prior to August 1, 1998, the
Contingent Interest shall not exceed $2,150,000.
Section 2.4 Voluntary Prepayment. The Borrower may, in its discretion,
prepay the Note in whole or from time to time in part, to the extent, but
only to the extent permitted the Intercreditor Agreement. All prepayments of
the Note in part shall be made in the amount of $100,000 or an integral
multiple
thereof and any prepayment of the Note in full shall include accrued and
unpaid
Current Interest and Deferred Interest.
Section 2.5 Payment. All payments of principal of and interest on the
Note shall be made to the Lender in immediately available funds.
Section 2.6 Payment on Non-Banking Days. Whenever any payment to be
made
hereunder shall be stated to be due on a day which is not a Banking Day, such
payment may be made on the next succeeding Banking Day, and such extension of
time shall in such case be in included in the computation of interest on the
Note or the fees hereunder, as the case may be.
Section 2.7 Liability Records. The Lender may maintain from time to
time, at its discretion, liability records as to any and all advances made or
repaid and interest accrued or paid under this Agreement. All entries made on
any such record shall be presumed correct until the Borrower establishes the
contrary. On demand by the Lender, the Borrower will admit and certify in
writing the exact principal balance that the Borrower then asserts to be
outstanding to the Lender under this Agreement. In the absence of manifest
error, any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on the Borrower unless specific written notice of
exception is given to the Lender by the Borrower within 30 days after its
receipt by the Borrower.
Section 2.8 Setoff. The Borrower agrees that the Lender may at any time
or from time to time, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due against any indebtedness owed to the Lender by the Borrower
(for the Advance or for any other transaction or event), whether or not due.
In
addition, each other Person holding a participating interest in the Note shall
have the right to appropriate or setoff any deposit or other liability then
owed
by such Person to the Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to the Borrower the amount of such participating interest.
Section 2.9 Fees. The Borrower hereby agrees to pay the Lender a fully
earned and non-refundable origination fee of $56,000.00, due and payable upon
the execution of this Agreement.
Section 2.10 Capital Adequacy. If the Lender shall determine that the
adoption after the date hereof of any applicable law, rule or regulation
regarding capital adequacy, or any change therein after the date hereof, any
change after the date hereof in the interpretation or administration thereof
by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender or its
parent corporation with any guideline or request issued after the date hereof
regarding capital adequacy (whether nor not having the force of law) of any
such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's or the Lender's parent
corporation's
capital as a consequence of the Lender's obligations hereunder to a level
below
that which the Lender or its parent corporation could have achieved but for
such
adoption, change or compliance (taking into consideration the Lender's
policies
with respect to capital adequacy and those of the Lender's parent corporation)
by an amount deemed to the Lender or its parent corporation to be material,
then
from time to time on demand by the Lender, the Borrower shall pay to the
Lender
such additional amount or amounts as will compensate the Lender or its parent
corporation for such reduction. Certificates of the Lender sent to the
Borrower
from time to time claiming compensation under this Section, stating the reason
therefor and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to the Lender hereunder shall be
conclusive absent manifest error. In determining such amounts, the Lender or
its parent corporation may use any reasonable averaging and attribution
methods.
ARTICLE III
Security Interest
Section 3.1 Grant of Security Interest. The Borrower hereby assigns and
grants to the Lender a security interest (collectively referred to as the
"Security Interests") in the Collateral, as security for the payment and
performance of each and every debt, liability and obligation of every type and
description which the Borrower may now or at any time hereafter owe to the
Lender (whether such debt, liability or obligation now exists or is hereafter
created, incurred, whether it arises in a transaction involving the Lender
alone
or in a transaction involving other creditors of the Borrower, and whether it
is
direct or indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or sole, joint, several or joint and
several, and including specifically, but not limited to, all indebtedness of
the
Borrower arising under this Agreement or any other loan or credit agreement or
guaranty between the Borrower and the Lender, whether now in effect or
hereafter
entered into; all such debts, liabilities and obligations are herein
collectively referred to as the "Obligations").
Section 3.2 Notification of Account Debtors and Other Obligors. In
addition to the rights of the Lender under Section 6.10 hereof, but subject to
the rights of NCI, with respect to any and all rights to payment constituting
Collateral the Lender may at any time before the occurrence of an Event of
Default, notify any account debtor or other person obligated to pay the amount
due that such payment shall be made directly to the Lockbox, and may at any
time
after the occurrence of an Event of Default which is continuing, notify such
Person that such payment has been assigned or transferred to the Lender for
security and shall be paid directly the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the
occurrence
of an Event of Default which is continuing, the Lender may, but need not, in
the
Lender's name or in the Borrower's name, (a) demand, sue for, collect or
receive
any money or property at any time payable or receivable on account of, or
securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (b) as agent and attorney in fact the Borrower,
notify the United States Postal Service to change the address for delivery of
the Borrower's mail to any address designated by the Lender, otherwise
intercept
the Borrower's mail, and receive, open and dispose of the Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all
other
mail for the Borrower's account or forwarding such mail to the Borrower's last
known address.
Section 3.3 Assignment of Insurance. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of
insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, any and all policies of insurance now
or
at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower
hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether before or after the occurrence of any Event of
Default, but subject to the rights of NCI, the Lender may (but need not), in
the
Lender's name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time after the occurrence
and during the continuance of an Event of Default.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good faith deem to be related or incidental purposes.
(c) The right of the Lender to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations, and (ii) final sale or disposition of all goods constituting
Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any
rent or other compensation for the possession, occupancy or use of any of
the Premises; provided, however, in the event that the Lender does pay or
account for any rent or other compensation for the possession, occupancy
or use of any of the Premises, the Borrower shall reimburse the Lender
promptly for the full amount thereof. In addition, the Borrower will
pay,
or reimburse the Lender for, all taxes, fees, duties, imposts, charges
and
expenses at any time incurred by or imposed upon the Lender by reason of
the execution, delivery, existence, recordation, performance or
enforcement of this Agreement or the provisions of this Section 3.4.
Section 3.5 License. The Borrower hereby grants to the Lender a non-
exclusive, worldwide and royalty-free license to use or otherwise exploit all
trademarks, franchises, trade names, copyrights and patents of the Borrower
for
the purpose of selling, leasing or otherwise disposing of any or all
Collateral
following an Event of Default.
ARTICLE IV
Conditions of Lending
Section 4.1 Conditions Precedent to the Initial Advance. The obligation
of the Lender to make the initial Advance under the Credit Facility shall be
subject to the condition precedent that the Lender shall have received all of
the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed on behalf of the Borrower.
(b) The Note, properly executed on behalf of the Borrower.
(c) The Deed of Trust, properly executed on behalf of the
Borrower, and a policy of title insurance in an amount satisfactory to
the
Lender ensuring the priority of the Deed of Trust.
(d) The Collateral Pledge Agreement, properly executed on behalf
of the Borrower, together with certificates representing all issued and
outstanding shares of capital stock of QCP and stock powers signed in
blank therefor.
(e) Current searches of appropriate filing offices showing that
(I) no state or federal tax liens have been filed and remain in effect
against the Borrower, (ii) no financing statements have been filed and
remain in effect against the Borrower, except those financing statements
relating to liens permitted pursuant to Section 7.1 hereof and those
financing statements filed by the Lender, and (iii) the Lender has duly
filed all financing statements necessary to perfect the Security
Interests
granted hereunder, to the extent the Security Interests are capable of
being perfected by filing.
(f) A certificate of the Secretary or an Assistant Secretary of
the Borrower, certifying as to (i) the resolutions of the directors and,
if required, the shareholders of the Borrower, authorizing the execution,
delivery and performance of this Agreement and the Security Documents,
(ii) the articles of incorporation and bylaws of the Borrower, and (iii)
the signatures of the officers or agents of the Borrower authorized to
execute and deliver this Agreement, the Security Documents and other
instruments, agreements and certificates, including Advance requests, on
behalf of the Borrower.
(g) A current certificate issued by the Secretary of State of the
state of the Borrower's incorporation, certifying that the Borrower is in
compliance with all corporate organizational requirements of such state.
(h) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the
property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary.
(i) A certificate of an officer of the Borrower confirming, in
his personal capacity, the representations and warranties set forth in
Article V hereof.
(j) An opinion of counsel to the Borrower, addressed to the
Lender.
(k) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in favor
of the Lender and with all liability insurance naming the Lender as an
additional insured.
(l) Payment of the fees due through the date of the initial
Advance under Section 2.9 hereof and expenses incurred by the Lender
through such date and required to be paid by the Borrower under Section
9.7 hereof.
(m) Evidence satisfactory to the Lender that the Acquisition has
closed on terms and conditions satisfactory to the Lender.
(n) Evidence that the judgment against the Borrower in favor of
New Crawford Valley Ltd. has been released and that the Borrower has no
further liability in respect thereof.
(o) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 Conditions Precedent to All Advances. The obligation of the
Lender the Advance shall be subject to the further conditions precedent that
on
such date:
(a) the representations and warranties contained in Article V
hereof are correct on and as of the date of the Advance as though made on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
the Advance which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State
of Colorado, and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the
nature
of the business transacted by it makes such licensing or qualification
necessary. The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents.
During its corporate existence, the Borrower has done business solely under
the
names set forth in Exhibit B hereto. The chief executive office and principal
place of business of the Borrower is located at the address set forth in
Exhibit
B hereto, and all of the Borrower's records relating to its business or the
Collateral are kept at that location. All Inventory and Equipment is located
at
that location or at one of the other locations set forth in Exhibit B hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the
Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (a)
require
any consent or approval of the stockholders of the Borrower, (b) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except
such
authorization, consent, approval, registration, declaration, filing or notice
as
has been obtained, accomplished or given prior to the date hereof, (c) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of
any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Articles of Incorporation or Bylaws of the Borrower,
(d)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected, or (e) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interests) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 5.3 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the
Borrower
in accordance with their respective terms.
Section 5.4 Subsidiaries. Except as set forth in Exhibit B attached
hereto, the Borrower has no Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change. The Borrower has
heretofore furnished to the Lender audited financial statements of the
Borrower
for its fiscal year ended August 31, 1994, unaudited financial statements of
the
Borrower for the ten months ended June 30, 1995, and pro forma consolidated
financial statements presenting the consolidated financial condition of the
Borrower and QCP immediately following the Acquisition, and those statements
fairly present the financial condition of the Borrower on the dates thereof
and
the results of its operations and cash flows for the periods then ended, and
the
pro forma financial condition of the Borrower immediately following the
Acquisition, and were prepared in accordance with generally accepted
accounting
principles. Since the date of the most recent financial statements, there has
been no material adverse change in the business, properties or condition
(financial or otherwise) of the Borrower.
Section 5.6 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of its Affiliates or the properties of the Borrower or any
of its Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to the Borrower or any of its Affiliates, would have a
material adverse effect on the financial condition, properties or operations
of
the Borrower or any of its Affiliates.
Section 5.7 Regulation U. The Borrower is not engaged in the business
of
extending credit for the purpose of purchasing or carrying margin stock
(within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase
or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
Section 5.8 Taxes. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local
taxes
required to be withheld by each of them. The Borrower and its Affiliates have
filed all federal, state and local tax returns which to the knowledge of the
officers of the Borrower or any Affiliate, as the case may arc required to be
filed, and the Borrower and its Affiliates have paid or caused to be paid the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.
Section 5.9 Titles and Liens. The Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender
and
all other Collateral, properties and assets reflected in the latest balance
sheet referred to in Section 5.5 hereof and all proceeds thereof, free and
clear
of all mortgages, security interests, liens and encumbrances, except for (I)
mortgages, security interests and liens permitted by Section 7.1 hereof, and
(ii) in the case of the real property subject to the Deed of Trust, matters
disclosed on the policy of title insurance described in Section 4.1 hereof.
No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only security interests permitted by Section 7.1 hereof.
Section 5.10 Plans. Except as disclosed to the Lender in writing prior
to the date neither the Borrower nor any of its Affiliates maintains or has
maintained any Plan. Neither the Borrower nor any Affiliate has received any
notice or has any knowledge to the effect that it is not in full compliance
with
any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified
status
exists in connection with any Plan. Neither the Borrower nor any of its
Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation,
the Internal Revenue Service, the Department of Labor or any participant
in connection with any Plan (other than accrued benefits which or which
may become payable to participants or beneficiaries of any such Plan).
Section 5.11 Default. The Borrower is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or
by
which it or its property is bound or affected, the breach or default of which
could have a material adverse effect on the financial condition, properties or
operations of the Borrower.
Section 5.12 Environmental Protection. The Borrower has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws and regulations relating to emissions, discharges,
releases
of pollutants, contaminants, hazardous or toxic materials, or wastes into
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes ("Environmental Laws") at the Borrower's facilities or in
connection with the operation of its facilities. Except as previously
disclosed
to the Lender in writing, the Borrower and all activities of the Borrower at
its
facilities comply with all Environmental Laws and with all terms and
conditions
of any required permits, licenses and authorizations applicable to the
Borrower
with respect thereto. Except as previously disclosed to the Lender in
writing,
the Borrower is also in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Laws or contained in any plan, order,
decree, judgment or notice of which the Borrower is aware. Except as
previously
disclosed to the Lender in writing, the Borrower is not aware of, nor has the
Borrower received notice of, any events, conditions, circumstances,
activities,
practices, incidents, actions or plans which may interfere with or prevent
continued compliance with, or which may give rise to any liability under, any
Environmental Laws.
Section 5.13 Submissions to Lender. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is true and
correct in all material respects and, as to projections, valuations or
proforma
financial statements, present a good faith opinion as to such projections,
valuations and proforma condition and results.
Section 5.14 Financing Statements. The Borrower has provided to the
Lender signed financing statement sufficient when filed to perfect the
Security
Interests and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the other Loan Documents which is capable of
being perfected by filing financing statements. None of the Collateral or
other
collateral covered by the other Loan Documents is or will become a fixture on
real estate, unless a sufficient fixture filing is in effect with respect
thereto.
Section 5.15 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be
when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
ARTICLE VI
Affirmative Covenants of the Borrower
So long as the Note shall remain unpaid, the Borrower will comply with
the
following requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrower will deliver, or cause
to be delivered, to the Lender each of the following, which shall be in form
and
detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after
the end of each fiscal year of the Borrower, audited consolidated
financial statements of the Borrower and its Subsidiaries with the
unqualified opinion of independent certified public accountants selected
by the Borrower and acceptable to the Lender, which annual financial
statements shall include the consolidated and consolidating balance sheet
of the Borrower and its Subsidiaries as at the end of such fiscal year
and
the related consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for the
fiscal year then ended, all in reasonable detail and prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices applied in the pro forma
financial statements referred to in Section 5.5 hereof, together with (I)
a report signed by such accountants stating that in making the
investigations necessary for said opinion they obtained no knowledge,
except as specifically stated, of any Default or Event of Default
hereunder and all relevant facts in reasonable detail to evidence, and
the
computations as to whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.12 through 6.15 and Section 7.10
hereof; and (ii) a certificate of the chief financial officer of the
Borrower stating that such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices reflected in the pro forma
annual financial statements referred to in Section 5.5 hereof and whether
or not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
(b) (i) as soon as available and in any event within 20 days
after the end of each month, an unaudited internal balance sheet and
statements of income and retained earnings of each of the Borrower and
QCP
as at the end of and for such month and for the year to date period then
ended, (ii) as soon as available, and in any event within 5 days of
discovery of any adjustments to such unconsolidated financial statements,
restatements thereof, and (iii) as soon as available, and in any event
within 40 days after the end of each month, an internal, unaudited
consolidated balance sheet and consolidated statements of income and
retained earnings of the Borrower and its Subsidiaries as at the end of
and for such month and for the year to date period then ending, prepared
in each case, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices reflected in
the pro forma financial statements referred to in Section 5.5 hereof,
subject to year-end audit adjustments; and accompanied by a certificate
of
the chief financial officer of the Borrower, substantially in the form of
Exhibit D hereto stating ill that such financial statements have been
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices reflected in
the pro forma financial statements referred to in Section 5.5 hereof,
subject to year-end audit adjustments, (ii) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) in the case
of
the consolidated financial statements, all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Sections
6.12
through 6.15 and Section 7.10 hereof;
(c) at least 30 days before the beginning of each fiscal year of
the Borrower, the projected balance sheets and income statements for each
month of such year, each in reasonable detail, representing the good
faith
projections of the Borrower and certified by the Borrower's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as the
Lender may in its discretion require;
(d) immediately after the commencement thereof, notice in writing
of all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower of the type described in Section
5.6 hereof or which seek a monetary recovery against the Borrower in
excess of $25,000;
(e) as promptly as practicable (but in any event not later than
five business days) after an officer of the Borrower obtains knowledge of
the occurrence of any breach, default or event of default under any
Security Document or any event which constitutes a Default or Event of
Default hereunder, notice of such occurrence, together with a detailed
statement by a responsible officer of the Borrower of the steps being
taken by the Borrower to cure the effect of such breach, default or
event;
(f) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the chief financial
officer of the Borrower setting forth details as to such Reportable Event
and the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension
Benefit Guaranty Corporation;
(g) as soon as possible, and in any event within 10 days after
the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code of
1986, as amended, the statement of the chief financial officer of the
Borrower setting forth details as to such failure and the action which
the
Borrower proposes to take with respect thereto, together with a copy of
any notice of such failure required to be provided to the Pension Benefit
Guaranty Corporation;
(h) promptly upon knowledge thereof, notice of (i) any disputes
or claims by customers of the Borrower involving an amount which, in the
aggregate, exceeds $10,000; (ii) any goods returned to or recovered by
the
Borrower involving an amount which, in the aggregate, exceeds $10,000;
and
(iii) any change in the persons constituting the officers and directors
of
the Borrower;
(i) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any Collateral
or such other collateral or the prospect of payment thereof;
(j) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Borrower shall file with
the Securities and Exchange Commission or any national securities
exchange; and
(k) promptly upon knowledge thereof, notice of the violation by
the Borrower of any law, rule or regulation, the non-compliance with
which
could materially and adversely affect its business or its financial
condition.
Section 6.2 Books and Records; Inspection and Examination. The Borrower
will, and will cause each of its Subsidiaries to, keep accurate books of
record
and account for itself and pertaining to its business and financial condition
and such other matters as the Lender may from time to time request in which
true
and complete entries will be made in accordance with generally accepted
accounting principles consistently applied and, upon request of the Lender,
will, and will cause each of its Subsidiaries to, permit any officer,
employee,
attorney or accountant for the Lender (upon reasonable notice unless the
Lender
in good faith believes that the accuracy of the audit may be effected by
notice)
to audit, review, make extracts from or copy any and all of its corporate and
financial books and records at all times during ordinary business hours, to
send
and discuss with account debtors and other obligors requests for verification
of
amounts owed to it, and to discuss the affairs of the Borrower or any
Subsidiary
with any of its directors, officers, employees or agents. The Borrower and
each
of its Subsidiaries will permit the Lender, or its employees, accountants,
attorneys or agents, to examine and inspect any Collateral, other collateral
covered by the Loan Documents or any other property of the Borrower or such
Subsidiary at any time during ordinary business hours.
Section 6.3 Account Verification. The Borrower will at any time and
from
time upon request of the Lender send requests for verification of accounts or
notices of assignment to account debtors and other obligors.
Section 6.4 Compliance with Laws; Environmental Indemnity. The Borrower
will, and will cause each of its Subsidiaries to, (a) comply with the
requirements of applicable laws and regulations, the non-compliance with which
would materially and adversely affect its business or its financial condition,
(b) comply with all applicable Environmental Laws and obtain any permits,
licenses or similar approvals required by any such Environmental Laws, and
(c)the case of the Borrower, use and keep the Collateral, and will require
that
others use and keep the Collateral, only for lawful purposes, without
violation
of any federal, state or local law, statute or ordinance. The Borrower will
indemnify, defend and hold the Lender harmless from and against any claims,
loss
or damage to which the Lender may be subjected as a result of any past,
present
or future existence, use, handling, storage, transportation or disposal of any
hazardous waste or substance or toxic substance by the Borrower or any of its
Subsidiaries or on property owned, leased or controlled by the Borrower or any
of its Subsidiaries. This indemnification agreement shall survive the
termination of this Agreement and payment of the indebtedness hereunder.
Section 6.5 Payment of Taxes and Other Claims. The Borrower will, and
will cause each of its Subsidiaries to, pay or discharge, when due, (a) all
taxes, assessments and governmental charges levied or imposed upon it or upon
its income or profits, upon any properties belonging to it (including, without
limitation, the Collateral) or upon or against the creation, perfection or
continuance of the Security Interests, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld
by it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien or charge upon any properties of the
Borrower
or any Subsidiary; provided, that neither the Borrower nor any Subsidiary
shall
be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 6.6 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral, the other
collateral covered by the Loan Documents and will keep and maintain, and
will cause each of its Subsidiaries to keep and maintain, all of its
other
properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to
time replace or repair, and will cause each of its Subsidiaries to
replace
or repair, any worn, defective or broken pans; provided, however, that
nothing in this Section 6.6 shall prevent the Borrower or any of its
Subsidiaries from discontinuing the operation and maintenance of any of
its properties if such discontinuance is in the judgment of the Borrower
or such Subsidiary, desirable in the conduct of the Borrower's or such
Subsidiary's business and not, in the judgment of the Lender,
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender or NCI) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the other Loan Documents free and clear of all security
interests, liens and encumbrances except the Security Interests and other
security interests permitted by Section 7.1 hereof.
Section 6.7 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, obtain and at all tunes maintain insurance with insurers
believed by the Borrower to be responsible and reputable, in such amounts and
against such risks as may from time to time be required by the Lender, but in
all events in such amounts and against such risks as is usually carried by
companies engaged in similar business and owning similar properties in the
same
general areas in which the Borrower or such Subsidiary operates. Without
limiting the generality of the foregoing, the Borrower will at all times keep
all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may
reasonably
request, with any loss payable to the Lender to the extent of its interest,
and
all policies of such insurance shall contain a lender's loss payable
endorsement
for the benefit of the Lender. All policies of liability insurance required
of
the Borrower hereunder shall name the Lender as an additional insured.
Section 6.8 Preservation of Corporate Existence. The Borrower will, and
will cause each of its Subsidiaries to, preserve and maintain its corporate
existence and all of its rights, privileges and franchises necessary or
desirable in the normal conduct of its business and shall conduct its business
in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel rapers constituting Collateral, duly endorsed or
assigned
by the Borrower.
Section 6.10 Lockbox; Collateral Account.
(a) At the request of the Lender, but subject to the prior rights
of NCI, the Borrower will irrevocably direct all present and future
Account debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to a lockbox maintained by or
for the Lender. If the Lender has initiated the provisions of this
Section 6.10, all of the Borrower's invoices, account statements and
other
written or oral communications directing, instructing, demanding or
requesting payment of any Account or any other amount constituting
Collateral shall conspicuously direct that all payments be made to the
Lockbox and shall include the Lockbox address. All payments received in
the lockbox shall be processed to the Collateral Account.
(b) At the request of the Lender, but subject to the prior rights
of NCI, the Borrower agrees to deposit in the Collateral Account or, at
the Lender's option, to deliver to the Lender all collections on
Accounts,
contract rights, chattel paper and other rights to payment constituting
Collateral, and all other cash proceeds of Collateral, which the Borrower
may receive directly notwithstanding its direction to Account debtors and
other obligors to make payments to a lockbox, immediately upon receipt
thereof, in the form received, except for the Borrower's endorsement when
deemed necessary. Until delivered to the Lender or deposited in the
Collateral Account, all proceeds or collections of Collateral shall be
held in trust by the Borrower for and as the property of the Lender and
shall not be commingled with any funds or property of the Borrower.
Amounts deposited in the Collateral Account shall not bear interest and
shall not be subject to withdrawal by the Borrower, except after full
payment and discharge of all Obligations. All such collections shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation. Collected funds from the Collateral Account shall be
transferred to the Lender's general account, and the Lender may deposit
in
its general account or in the Collateral Account any and all collections
received by it directly from the Borrower. The Lender may commingle such
funds with other property of the Lender or any other person. The Lender
shall upon initiation by the Borrower, after allowing two Banking Days,
apply such funds to the payment of any and all then due and payable
Obligations, in any order or manner of application satisfactory to the
Lender, and, provided no Default or Event of Default has occurred and is
continuing, remit the balance to the Borrower. All items delivered to
the
Lender or deposited in the Collateral Account shall be subject to final
payment. If any such item is returned uncollected, the Borrower will
immediately pay the Lender, or, for items deposited in the Collateral
Account, the bank maintaining such account, the amount of that item, or
such bank at its discretion may charge any uncollected item to the
Borrower's commercial account or other account. The Borrower shall be
liable as an endorser on all items deposited in the Collateral Account,
whether or not in fact endorsed by the Borrower.
Section 6.11 Performance by the Lender. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a
period
of ten calendar days after the Lender gives the Borrower written notice
thereof
(or in the case of the agreements contained in Sections 6.5, 6.7 and 6.10
hereof, immediately upon the occurrence of such failure, without notice or
lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrower (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and
all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
default
rate of interest payable on the Note. To facilitate the performance or
observance by the Lender of such covenants of the Borrower, the Borrower
hereby
irrevocably appoints the Lender, or the delegate of the Lender, acting alone,
as
the attorney in fact of the Borrower (which appointment is coupled with an
interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or
endorsed
by the Borrower under this Section 6.11.
Section 6.12 Book Net Worth. The Borrower shall, on the last day of
each
month in each of the periods set forth below, maintain the consolidated Book
Net
Worth of the Borrower and its QCP at an amount which is greater than or equal
to
the amount set forth opposite such period:
Period,Book Net Worth
,
Date hereof to and including
November 29, 1995,$1,350,000
November 30, 1995 to and
including February 28, 1996,$1,470,000
February 29, 1996 to and
including May 30, 1996,$1,645,000
May 31, 1996 to and including
August 30, 1996,$1,945,000
August 31, 1996 to and including
November 29, 1996,$2,245,000
November 30, 1996 to and
including February 27, 1997,$2,595,000
February 28, 1997 to and
including May 30, 1997,$3,045,000
May 31, 1997 to and including
August 30, 1997,$3,620,000
August 31, 1997 to and including
November 29, 1997,$4,170,000
November 30, 1997 to and
including February 27, 1998,$4,745,000
February 28, 1998 to and
including May 30, 1998,$5,595,000
May 31, 1998 to and including
August 30, 1998,$6,595,000
Prior to August 1, 1998, the Borrower and the Lender shall negotiate in good
faith as to the Book Net Worth that the Borrower shall be required to maintain
for periods after such date, but if the Borrower and the Lender do not agree,
the Lender may designate the required amounts in its sole discretion, and the
failure by the Borrower to maintain the designated amounts shall be a default
hereunder.
Section 6.13 Debt Service Coverage. The Borrower shall, on the last day
of each of the periods set forth below, maintain the ratio between (i) the sum
of the consolidated interest expense of the Borrower and QCP required to be
paid
during such period plus net after-tax income plus depreciation, amortization
and
other non-cash deductions from net income of the Borrower and QCP determined
on
a consolidated basis, to (ii) the sum of interest expense required to be paid
by
the Borrower and QCP during such period and scheduled payments of principal of
the Borrower and QCP in respect of its Debt (other the Debt to NCI incurred
pursuant to Section 2.1(a) of the NCI Credit Agreement), in each case
determined
in accordance with generally accepted accounting principles for such period,
at
a ratio that is greater than or equal to the ratio set forth opposite such
period:
Period,Ratio
,
Three months ending November 30, 1995,2.20 to 1
Three months ending February 29, 1996,3.50 to 1
Three months ending May 31, 1996,4.50 to 1
Three months ending August 31, 1996,2.40 to 1
Three months ending November 30, 1996,2.50 to 1
Three months ending February 28, 1997,2.90 to 1
Three months ending May 31, 1997,3.20 to 1
Three months ending August 31, 1997,3.20 to 1
Three months ending November 30, 1997,3.50 to 1
Three months ending February 28, 1998,4.50 to 1
Three months ending May 31, 1998,5.30 to 1
Three months ending August 31, 1998,5.20 to 1
Prior to August 1, 1998, the Borrower and the Lender shall negotiate in good
faith as to the ratios that the Borrower shall be required to maintain for
periods after such date, but if the Borrower and the Lender do not agree, the
Lender may designate the required ratios in its sole discretion, and the
failure
by the Borrower to maintain the designated ratios shall be a default
hereunder.
Section 6.14 Interest Coverage. The Borrower shall, on the last day of
each of the periods set forth below, maintain the ratio of (i) the sum of the
consolidated interest expense of the Borrower and QCP required to be paid
during
such period plus net after-tax income plus depreciation, amortization and
other
non-cash deductions from income of the Borrower and QCP determined on a
consolidated basis, to (ii) the consolidated interest expense of the Borrower
and required to be paid during such period, in each case determined in
accordance with generally accepted accounting principles for such period, at a
ratio which is greater than or equal to the ratio set forth opposite such
period:
Period,Ratio
,
Three months ending November 30, 1995,2.50 to 1
Three months ending February 29, 1996,4.50 to 1
Three months ending May 31, 1996,5.00 to 1
Three months ending August 31, 1996,5.00 to 1
Three months ending November 30, 1996,5.50 to 1
Three months ending February 28, 1997,6.50 to 1
Three months ending May 31, 1997,7.00 to 1
Three months ending August 31, 1997,7.00 to 1
Three months ending November 30, 1997,8.50 to 1
Three months ending February 28, 1998,11.00 to 1
Three months ending May 31, 1998,13.00 to 1
Three months ending August 31, 1998,13.00 to 1
Prior to August 1, 1998, the Borrower and the Lender shall negotiate in good
faith as to the ratios that the Borrower shall be required to maintain for
periods after such date, but if the Borrower and the Lender do not agree, the
Lender may designate the required ratios in its sole discretion, and the
failure
by the Borrower to maintain the designated ratios shall be a default
hereunder.
Section 6.15 Net Income. The Borrower shall, on the last day of each of
the periods set forth below, have consolidated after-tax net income,
determined
in accordance with generally accepted accounting principles on a consolidated
basis for such period, but excluding extraordinary gain, which does not exceed
the amount set forth opposite such period:
Period,Net Income
,
Three months ending November 30, 1995,$ 40,000
Three months ending February 29, 1996,175,000
Three months ending May 31, 1996,300,000
Three months ending August 31, 1996,300,000
Three months ending November 30, 1996,350,000
Three months ending February 28, 1997,450,000
Three months ending May 31, 1997,575,000
Three months ending August 31, 1997,550,000
Three months ending November 30, 1997,575,000
Three months ending February 28, 1998,850,000
Three months ending May 31, 1998,1,000,000
Three months ending August 31, 1998,1,000,000
Prior to August 1, 1998, the Borrower and the Lender shall negotiate in good
faith as to the net income that the Borrower shall be required to maintain for
periods after such date, but if the Borrower and the Lender do not agree, the
Lender may designate the required amounts in its sole discretion, and the
failure by the Borrower to maintain the designated amounts shall be a default
hereunder.
ARTICLE VII
Negative Covenants
So long as the Note shall remain unpaid, the Borrower agrees that,
without
the prior written consent of the Lender:
Section 7.1 Liens. The Borrower will not, and will not permit any
Subsidiary to create, incur or suffer to exist any mortgage, deed of trust,
pledge, lien, security interest, assignment or transfer upon or of any of its
assets, now owned or hereafter acquired, to secure any indebtedness;
excluding,
however, from the operation of the foregoing:
(a) mortgages, deeds of trust, pledges, liens, security interests
and assignments in existence on the date hereof and listed in Exhibit C
hereto, securing indebtedness for borrowed money permitted under Section
7.2 hereof;
(b) the Security Interests;
(c) senior security interests in favor of NCI; and
(d) purchase money security interests relating to the acquisition
of machinery and equipment of the Borrower so long as the Borrower is in,
and maintains, compliance with every other provision of this Agreement.
Section 7.2 Indebtedness. The Borrower will not, and will not permit any
Subsidiary to incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or advances or any indebtedness for borrowed
money, or any other indebtedness or liability evidenced by notes, bonds,
debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower or QCP in existence on the date
hereof and listed in Exhibit C hereto;
(c) indebtedness relating to liens permitted in accordance with
Section 7.1(c) hereof; and
(d) Debt payable to NCI.
Section 7.3 Guaranties. The Borrower will not, and will not permit any
Subsidiary to, assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:
(a) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Exhibit C hereto.
Section 7.4 Investments and Subsidiaries.
(a) The Borrower will not, and will not permit any Subsidiary to,
purchase or hold beneficially any stock or other securities or evidences
of indebtedness of, make or permit to exist any loans or advances to, or
make any investment or acquire any interest whatsoever in any other
Person, including specifically but without limitation any partnership or
joint venture, except:
(1) investments in direct obligations of the United States
of America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the
United States of America having a maturity of one year or less,
commercial paper issued by U.S. corporations rated "A-1" or "A-2" by
Standard & Poor's Corporation or "P-1" or "P-2" by Moody's Investors
Service or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the Federal
Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by
the Federal Deposit Insurance Corporation);
(2) travel advances or loans to officers and employees of
the Borrower not exceeding at any one time an aggregate of $5,000;
(3) advances in the form of progress payments, prepaid rent
or security deposits;
(4) investments by the Borrower in QCP; and
(5) loans or advances by QCP to Golden permitted by the NCI
Credit Agreement.
(b) The Borrower will not create or permit to exist any
Subsidiary, other than any Subsidiary in existence on the date hereof and
listed in Exhibit B hereto.
Section 7.5 Dividends. The Borrower will not declare or pay, and will
not permit any Subsidiary to declare or pay, any dividends (other than
dividends
payable solely in stock of the Borrower) on any class of its stock or make any
payment on account of the purchase, redemption or other retirement of any
shares
of such stock or make any distribution in respect thereof, either directly or
indirectly; provided, however, that the Borrower or QCP may declare and pay
dividends or redeem stock to the extent permitted by the NCI Credit Agreement.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not, and will not permit any Subsidiary to,
sell,
lease, assign, transfer or otherwise dispose of (i) the stock of any
Subsidiary,(ii) all or a substantial part of its assets, or (iii) any
Collateralor any interest therein (whether in one transaction or in a series
of
transactions) to any other Person other than the sale of Inventory in the
ordinary course of business, and the Borrower will not, and will not permit
any
Subsidiary to liquidate, dissolve or suspend business operations. The
Borrower
will not, and will not permit any Subsidiary to, in any manner transfer any
property without prior or present receipt of full and adequate consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions. The
Borrowerwill not, and will not permit any Subsidiary to, consolidate with or
merge into any Person, or permit any other Person to merge into it, or acquire
(in a transaction analogous in purpose or effect to a consolidation or merger)
all or substantially all the assets of any other Person.
Section 7.8 Sale and Leaseback. The Borrower will not, and will not
permit any Subsidiary to enter into any arrangement, directly or indirectly,
with any other Person whereby the Borrower or such Subsidiary shall sell or
transfer any real or personal property, whether now owned or hereafter
acquired,
and then or thereafter rent or lease as lessee such property or any part
thereof
or any other property which the Borrower or such Subsidiary intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 Restrictions on Nature of Business. The Borrower will not,
and will not permit any Subsidiary to, engage in any line of business
materially
different from that presently engaged in by the Borrower or such Subsidiary
and
will not purchase, lease or otherwise acquire assets not related to its
business.
Section 7.10 Capital Expenditures. The Borrower will not, and will not
permit any Subsidiary to, expend or contract to expend more than $250,000 in
the
aggregate from the Borrower and QCP during the period from the date hereof to
and including December 31, 1995, of which any amount in excess of $100,000
must
be financed with third parties, or more than $100,000 in the aggregate for the
Borrower and all of its Subsidiaries during any calendar year thereafter, for
the lease, purchase or other acquisition of any capital asset, or for the
lease
of any other asset, whether payable currently or in the future.
Section 7.11 Accounting. The Borrower will not, and will not permit any
Subsidiaries to, adopt any material change in accounting principles other than
as required by generally accepted accounting principles. The Borrower will
not,
and will not permit any Subsidiaries to, adopt, permit or consent to any
change
in its fiscal year.
Section 7.12 Discounts, etc. The Borrower will not, and will not permit
any Subsidiaries to, after notice from the Lender, grant any discount, credit
or
allowance to any customer of the Borrower or such Subsidiary or accept any
return of goods sold, or at any time (whether before after notice from the
Lender) modify, amend, subordinate, cancel or terminate the obligation of any
account debtor or other obligor of the Borrower or such Subsidiary.
Section 7.13 Defined Benefit Pension Plans. The Borrower will not, and
will not permit any Subsidiary to, adopt, create, assume or become a party to
any defined benefit pension plan, unless disclosed to the Lender pursuant to
Section 5.10 hereof.
Section 7.14 Other Defaults. The Borrower will not, and will not permit
any Subsidiary to, permit any breach, default or event of default to occur
under
any note, loan agreement, indenture, lease, mortgage, contract for deed,
security agreement or other contractual obligation binding upon the Borrower
or
such Subsidiary.
Section 7.15 Place of Business; Name. The Borrower will not transfer
its
chief executive office or principal place of business, or move, relocate,
close
or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located m any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in
order to perfect the Security Interests. The Borrower will not change its
name.
Section 7.16 Organizational Documents. The Borrower will not amend its
certificate of incorporation, articles of incorporation or bylaws.
Section 7.17 Salaries. The Borrower will not, and will not permit any
Subsidiary to, pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other compensation or increase the salary, bonus,
commissions, consultant fees or other compensation of any director, officer or
consultant, or any member of their families, by more than 10% in any one year,
either individually or for all such persons in the aggregate, or pay any such
increase from any source other than profits earned in the year of payment.
ARTICLE VIII
Events of Default, Rights and Remedies
Section 8.1 Events of Default. "Event of Default," wherever used
herein,
means any one of the following events:
(a) Default in the payment of any interest on or principal of the
Note when it becomes due and payable; or
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement; or
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement and the continuance
thereof for a period of 15 days after receipt of notice of such default
from the Lender; or
(d) The Borrower or QCP shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors or the Borrower or QCP shall
apply
for or consent to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its property; or
such
receiver, trustee or similar officer shall be appointed without the
application or consent of the Borrower or QCP or the Borrower or QCP
shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt,
dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted by
petition, application or otherwise) against the Borrower or QCP; or any
judgment, writ, warrant of attachment, garnishment or execution or
similar
process shall be issued or levied against a substantial part of the
property of the Borrower or QCP; or
(e) A petition shall be filed by or against the Borrower or QCP
under the United States Bankruptcy Code naming the Borrower or QCP as
debtor; or
(f) Any representation or warranty made by the Borrower in this
Agreement (or any of its officers) in any agreement, certificate,
instrument or financial statement or other statement contemplated by or
made or delivered pursuant to or in connection with this Agreement shall
prove to have been incorrect in any material respect when deemed to be
effective; or
(g) The rendering against the Borrower or QCP of a final
judgment, decree or order for the payment of money in excess of $25,000
and the continuance of such judgment, decree or order unsatisfied and in
effect for any period of 30 consecutive days without a stay of execution;
or
(h) A default under any bond, debenture, note or other evidence
of indebtedness of the Borrower or QCP owed to any Person other than the
Lender, or under any indenture or other instrument under which any such
evidence of indebtedness has been issued or by which it is governed, or
under any lease of any of the Premises, and the expiration of the
applicable period of grace, if any, specified in such evidence of
indebtedness, indenture, other instrument or lease; or
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee
to administer any Plan, shall have occurred and be continuing 30 days
after written notice to such effect shall have been given to the Borrower
by the Lender or a trustee shall have been appointed by an appropriate
United States District Court to administer any Plan; or the Pension
Benefit Guaranty Corporation shall have instituted proceedings to
terminate any Plan or to appoint a trustee to administer any Plan; or the
Borrower shall have filed for a distress termination of any Plan under
Title IV of ERISA; or the Borrower shall have failed to make any
quarterly
contribution required with respect to any Plan under Section 412(m) of
the
Internal Revenue Code of 1986, as amended, which the Lender determines in
good faith may by itself, or in combination with any such failures that
the Lender may determine are likely to occur in the future, result in the
imposition of a lien on the assets of the Borrower or QCP in favor of the
Plan; or
(j) An event of default shall occur under any other Loan Document
or under any other security agreement, mortgage, deed of trust,
assignment
or other instrument or agreement securing any obligations of the Borrower
hereunder or under any note; or
(k) The Borrower or QCP shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its business
in the ordinary course, or sell all or substantially all of its assets,
without the prior written consent of the Lender; or
(l) The Borrower or QCP shall fail to pay, withhold, collect or
remit any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued; or
(m) Default in the payment of any amount owed by the Borrower or
QCP to the Lender other than any indebtedness arising hereunder, and the
expiration of the applicable grace period, if any, with respect thereto;
or
(n) Any breach, default or event of default by or attributable to
any Affiliate under any agreement between such Affiliate and the Lender
and the expiration of the applicable grace period, if any, with respect
thereto; or
(o) An "event of default" shall occur under the NCI Credit
Agreement.
Section 8.2 Rights and Remedies. Upon the occurrence of an Event of
Default or at any time thereafter, the Lender may exercise any or all of the
following rights and remedies:
(a) The Lender may, by notice to the Borrower, declare to be
forthwith due and payable the entire unpaid principal amount of any Note
then outstanding, all interest accrued and unpaid thereon, all amounts
payable under this Agreement and any other Obligations, whereupon such
Note, all such accrued interest and all such amounts and Obligations
shall
become and be forthwith due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower;
(b) The Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Advances, including interest accrued
thereon, and of all other sums then owing by the Borrower hereunder;
(c) The Lender may, exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral,
or any evidence thereof, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which the
Borrower hereby expressly waives) and the right to sell, lease or
otherwise dispose of any or all of the Collateral, and, in connection
therewith, the Borrower will on demand assemble the Collateral and make
it
available to the Lender at a place to be designated by the Lender which
is
reasonably convenient to both parties;
(d) the Lender may exercise and enforce its rights and remedies
under the Loan Documents; and
(e) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 8.1(e) hereof, the entire unpaid principal amount of the
Note, all interest accrued and unpaid thereon, all other amounts payable under
this Agreement and any other Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.
Section 8.3 Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten calendar days
prior
to the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1 No Waiver; Cumulative Remedies. No failure or delay on the
part of the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative
and
not exclusive of any remedies provided by law.
Section 9.2 Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by
the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in
any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.3 Addresses for Notices, Etc. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed to the party to whom notice is being given at its address
as
set forth below and, if telecopied, transmitted to that party at its
telecopier
number set forth below:
If to the Borrower:
Golden Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, Colorado 80401
Telecopier: (303) 279-4390
Attention: Charles Drummond
If to the Lender:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0089
Telecopier: (612) 667-8589
Attention: Ron Leaf
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given
on
(a) the date received if personally delivered, (b) when deposited in the mail
if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II hereof shall not
be effective until received by the Lender.
Section 9.4 Financing Statement. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a
financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtor:
Golden Pharmaceuticals, Inc.
1313 Washington Avenue
Golden, Colorado 80401
Federal Tax Identification No. 84-0645174
Name and address of Secured Party:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette
Minneapolis, Minnesota 55479-0089
Section 9.5 Further Documents. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents,
conveyances,
assignments, security agreements, financing statements and other agreements
and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interests or the rights of the Lender under
this
Agreement (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of this Agreement and the Security Interests,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
Section 9.6 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any
deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the
custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender
shall not be obligated to preserve any rights the Borrower may have against
prior parties, to realize on the Collateral at all or in any particular manner
or order or to apply any cash proceeds of the Collateral in any particular
order
of application.
Section 9.7 Costs and Expenses. The Borrower agrees to pay on demand
all
costs and expenses, including (without limitation) attorneys' fees, incurred
by
the Lender in connection with the Obligations, this Agreement, the Loan
Documents and any other document or agreement related hereto or thereto, and
the
transactions contemplated hereby, including, without limitation, all such
costs,
expenses and fees incurred in connection with the negotiation, preparation,
execution, amendment, administration, performance, collection and enforcement
of
the Obligations and all such documents and agreements and the creation,
perfection, protection, satisfaction, foreclosure or enforcement of the
Security
Interests.
Section 9.8 Indemnity. In addition to the payment of expenses pursuant
to Section 9.7 hereof and the environmental indemnity pursuant to Section 6.4
hereof, the Borrower agrees to indemnify, defend and hold harmless the Lender,
and any of its participants, parent corporations, subsidiary corporations,
affiliated corporations, successor corporations, and all present and future
officers, directors, employees and agents of the foregoing (the
"Indemnitees"),
from and against (i) any and all transfer taxes, documentary taxes,
assessments
or charges made by any governmental authority by reason of the execution and
delivery of this Agreement and the other Loan Documents or the making of the
Advances, and (ii) any and all liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) in connection with any investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party
thereto,
which may be imposed on, incurred by or asserted against such Indemnitee, in
any
manner relating to or arising out of or in connection with the making of the
Advances, this Agreement and all other Loan Documents or the use or intended
use
of the proceeds of the Advances (the "Indemnified Liabilities"). If any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon request of such Indemnitee,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the
extent
and in the manner directed by the Indemnitee, at the Borrower's sole cost and
expense. Each Indemnitee will use its best efforts to cooperate in the
defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the
Indemnified
Liabilities which is permissible under applicable law. The obligation of the
Borrower under this Section 9.8 shall survive the termination of this
Agreement
and the discharge of the Borrower's other Obligations.
Section 9.9 Participants. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability
or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be
transferred
or delegated to any of the participants, successors or assigns of the Lender.
Section 9.10 Execution in Counterparts. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.11 Binding Effect; Assignment; Complete Agreement. The Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights thereunder or any interest
therein
without the prior written consent of the Lender. This Agreement, together
with
the Loan Documents, comprises the complete and integrated agreement of the
parties on the subject matter hereof and supersedes all prior agreements,
written or oral, on the subject matter hereof.
Section 9.12 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. Each
party consents to the personal jurisdiction of the state and federal courts
located in the State of Colorado in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in
connection
with this Agreement shall be venued in either the District Court of the City
and
County of Denver, Colorado, or the United States District Court, District of
Colorado. The parties waive any right to trial by jury in any action or
proceeding based on or pertaining to this Agreement.
Section 9.13 Severability of Provisions. Any provision of this
Agreement
which is prohibited or unenforceable shall be ineffective to the extent of
such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Section 9.14 Headings. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a
part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
GOLDEN PHARMACEUTICALS, INC.
By
Its:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By
Its:
Exhibit A to Credit and Security Agreement
PROMISSORY NOTE
$4,000,000 Denver, Colorado
August __, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation (the "Borrower"), hereby promises to pay to the order of
Norwest Bank Minnesota, National Association (the "Lender"), at its main
office
in Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Four Million and No/100
Dollars ($4,000,000), together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and
Security
Agreement of even date herewith (the "Credit Agreement") by and between the
Lender and the Borrower. The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may
be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the Loan Documents as therein defined, and may now or hereafter be secured
by one or more other security agreements, mortgages, deeds of trust,
assignments
or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Its:
Exhibit B to Credit and Security Agreement
Names
Golden Pharmaceuticals, Inc.
Benedict Nuclear Pharmaceuticals, Inc.
Chief Executive Office/Principal Place of Business
1313 Washington Avenue
Golden, Colorado 80401
710 14th Street
Golden, Colorado 80401
Other Inventory and Equipment Locations
None
Subsidiaries
Quality Care Pharmaceuticals, Inc.
Golden Research CorporationExhibit C to Credit and
Security Agreement
Permitted Liens, Indebtedness and Guaranties
Liens
None
Indebtedness
None
Guaranties
Guaranty of indebtedness of Quality Care Pharmaceuticals in favor of
Norwest Credit, Inc.
Exhibit D to Credit and Security Agreement
Compliance Certificate
In accordance with our Credit and Security Agreement dated as of August
__, 1995 (the "Credit Agreement"), attached are the financial statements of
____________________ (the "Borrower") as of and for the month and year-to-date
period ended __________, 199_ (the "Current Financials").
I certify that the Current Financials have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with
the accounting practices reflected in the financial statements referred to in
Section 5.5 of the Credit Agreement, subject to year-end audit adjustments.
Defaults and Events of Default (check one)
I have no knowledge of the occurrence of any Default or Event of
Default under the Credit Agreement which has not previously been
reported to you and remedied.
Attached is a detailed description of all Defaults and Events of
Default of which I have knowledge and which have not previously been
reported to you and remedied.
For the date and periods covered by the Current Financials, the Borrower
is in compliance with the covenants set forth in Sections 6.12 through 6.14
and
7.10 of the Credit Agreement, except as indicated below. The calculations
made
to determine compliance are as follows:
Covenant,Actual,Requirement
6.12),,
6.13),,
6.14),,
6.15),,
7.10),,
GOLDEN PHARMACEUTICALS, INC.
By
Its: Exhibit E
to Credit and Security Agreement
Premises
The Premises referred to in the Credit and Security Agreement are
described as follows:
1313 Washington Avenue
Golden, Colorado 80401
710 14th Street
Golden, Colorado 80401Exhibit 10.13
Promissory Note dated August 7, 1995 executed by the Company
in favor of Norwest Bank Minnesota, National Association
in the principal amount of $4,000,000
PROMISSORY NOTE
$4,000,000 Denver, Colorado
August 7, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation (the "Borrower"), hereby promises to pay to the order of
Norwest Bank Minnesota, National Association (the "Lender"), at its main
office
in Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Four Million and No/100
Dollars ($4,000,000), together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and
Security
Agreement of even date herewith (the "Credit Agreement") by and between the
Lender and the Borrower. The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may
be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Its:
Exhibit 10.14
Revolving Note dated August 7, 1995 executed by the Company
in favor of Norwest Credit, Inc. in the principal amount of $400,000
REVOLVING NOTE
$400,000 Denver, Colorado
August 7, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation (the "Borrower"), hereby promises to pay to the order of
Norwest Credit, Inc., a Minnesota corporation (the "Lender"), at its main
office
in Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Four Hundred Thousand and
No/100 Dollars ($400,000) together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a 360-day year, from the date hereof until
this Note is fully paid at the rate from time to time in effect under the
Credit
and Security Agreement of even date herewith (the "Credit Agreement") by and
between the Lender, the Borrower and Quality Care Pharmaceuticals, Inc. The
principal hereof shall be payable in equal monthly installments of $6,667.00
each, commencing on September 1, 1995, and continuing on the first day of each
month thereafter until August 1, 2000, when the principal balance hereof shall
be due and payable in full. Interest accruing thereon shall be due and
payable
on the last day of each month and on maturity or earlier payment in full.
This
Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Term Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title: Exhibit
10.15
Revolving Note dated August 7, 1995 executed by the Company
in favor of Norwest Credit, Inc. in the principal amount of $2,500,000
REVOLVING NOTE
$2,500,000Denve r, Colorado
August 7, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation, (the "Borrower"), hereby promises to pay on July 31,
2000,
to the order of Norwest Credit, Inc. (the "Lender"), at its main office in
Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million and Five Hundred
Thousand and No/100 Dollars ($2,500,000), or, if less, the aggregate unpaid
principal amount of all advances made by the Lender to he Borrower hereunder,
together with interest on the principal amount hereunder remaining unpaid from
time to time, computed on the basis of the actual number of days elapsed and a
360-day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of even
date
herewith (the "Credit Agreement") by and between the Lender, the Borrower and
Quality Care Pharmaceuticals, Inc. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This
Note
may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Golden Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title:
Exhibit 10.16
Revolving Note dated August 7, 1995 executed by the Company and QCP
in favor of Norwest Credit, Inc. in the principal amount of $2,500,000
REVOLVING NOTE
$2,500,000 Denver, Colorado
August 7, 1995
For value received, the undersigned, GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation, and QUALITY CARE PHARMACEUTICALS, INC., a California
corporation (the "Borrowers"), hereby jointly and severally promise to pay on
July 31, 2000, to the order of Norwest Credit, Inc,, a Minnesota corporation
(the "Lender"), at its main office in Minneapolis, Minnesota, or at any other
place designated at any time by the holder hereof, in lawful money of the
United
States of America and in immediately available funds, the principal sum of Two
Million Five Hundred Thousand and No/100 Dollars ($2,500,000) or, if less, the
aggregate unpaid principal amount of all advances made by the Lender to the
Borrowers hereunder, together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and
Security
Agreement of even date herewith (the "Credit Agreement") by and between the
Lender and the Borrowers. The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may
be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
QCP Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement
and the other Loan Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrowers hereby jointly and severally agree to pay all costs of
collection, including attorneys' fees and legal expenses in the event this
Note
is not paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
GOLDEN PHARMACEUTICALS, INC.
By
Name:
Title:
QUALITY CARE PHARMACEUTICALS, INC.
By
Name:
Title:
Exhibit 21
Subsidiaries of the Company
Subsidiaries of the Company
Quality Care Pharmaceuticals, Inc., a
California Corporation
Golden Research Corporation, a Delaware Corporation
Exhibit 27
Financial Data Schedule
