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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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/ / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED OCTOBER 3, 1999
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-9428
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ADAC LABORATORIES
(Exact name of registrant as specified in its charter)
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CALIFORNIA 94-1725806
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
MILPITAS, CALIFORNIA 95035
(Address of principal (Zip Code)
executive offices)
(408) 321-9100
(Registrant's telephone number including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None None
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Securities registered pursuant to Section 12(g) of the Act:
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COMMON STOCK
(Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / / No /X/
Indicate by check mark if disclosures of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of the Registrant's knowledge, in definitive proxy or information
definitive proxy or information statements incorporated by reference in
Part III of the Form 10-K or any amendments to this Form 10-K. /X/
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant, based upon the closing price of the Common Stock on November 30,
1999, on the Nasdaq National Market System of $11.69 per share, was
approximately $232,281,000. For the purpose of the foregoing computation, only
the directors and executive officers of the Registrant were deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of November 30, 1999, Registrant had outstanding 20,543,443 shares of
Common Stock, no par value.
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THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE DESCRIBED IN ANY SUCH FORWARD LOOKING
STATEMENTS. RISKS INHERENT IN THE COMPANY'S BUSINESS AND FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE WITHOUT LIMITATION THE
CONSIDERATIONS SET FORTH UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--BUSINESS CONSIDERATIONS." THE
COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION TO UPDATE ANY FORWARD LOOKING
STATEMENTS.
PART I
ITEM 1. BUSINESS
GENERAL
ADAC designs, develops, manufactures, sells and services medical imaging
equipment and radiation therapy planning and health care information software
systems used in hospitals and clinics worldwide. The Company conducts its
business primarily through its Medical Systems, Radiation Therapy Products
("RTP") and Health Care Information Systems ("HCIS") business units.
On October 1, 1999, the Company purchased two related companies, UGM Medical
Systems, Inc. and UGM Laboratory, Inc. (together referred to as "UGM'). UGM is a
leading developer and manufacturer of positron emission tomography ("PET")
equipment and had been a long-term strategic partner of the Company. ADAC and
UGM co-developed MCD-PET-TM-, the first coincidence detection technology, which
enables ADAC's nuclear medicine systems to perform PET imaging. In addition,
ADAC had been the principal distributor of UGM's C-PET-TM-, a clinically
optimized dedicated PET scanner. The Company believes the acquisition will allow
ADAC to better position itself in the rapidly growing PET imaging market and
accelerate its product leadership in all areas of PET imaging.
In October 1996, the United States Department of Commerce awarded ADAC a
Malcolm Baldrige National Quality Award in the large manufacturing category in
recognition of its performance management system and its achievements in quality
and business performance. ADAC is the first health care manufacturer ever to
receive this award.
ADAC was incorporated in California on October 14, 1970. Its principal
offices are located at 540 Alder Drive, Milpitas, California, 95035. Its
telephone number at that location is (408) 321-9100.
MEDICAL SYSTEMS
The Medical Systems business unit includes the Company's nuclear medicine
product and service businesses. Revenues also include sales from the Company's
ADAC Medical Technologies ("AMT") products. In the third quarter of fiscal 1999,
the Company decided to close its AMT refurbishing facility in Washington,
Missouri, and to relocate part of the business to Milpitas, California, where it
has been combined with the Medical Systems business unit. Medical Systems
revenues represented 75%, 74% and 83% of the Company's total revenues in fiscal
1999, 1998 and 1997, respectively. See Note 12 "Segment Reporting and Foreign
Operations" of Notes to Consolidated Financial Statements.
NUCLEAR MEDICINE. Nuclear medicine is a diagnostic imaging modality that
images the function or physiology of organs and lesions. In a typical nuclear
medicine procedure, the patient is administered a small amount of a
radiopharmaceutical that localizes in normal and abnormal tissues according to
the make-up of the radiopharmaceutical, the functionality of the tissue, and the
procedure being utilized. The patient is then imaged with a gamma camera and the
images are recorded on a computer. These images may be processed further as
described below. The physician uses the final images and related clinical
information to evaluate the functional and metabolic performance of the portion
of the patient's body under examination. Nuclear medicine is used primarily for
oncology and cardiology procedures, which account for approximately 70% of all
nuclear medicine procedures performed. The Company believes the
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functional imaging capability of nuclear medicine may allow for earlier
diagnosis of certain diseases than anatomical imaging modalities such as
magnetic resonance imaging ("MRI"), computerized tomography ("CT"), and
ultrasound.
In its Medical Systems business, the Company designs, develops,
manufactures, sells and services a broad line of nuclear medicine cameras and
related computer systems capable of performing single photon imaging and
positron emission tomography ("PET") imaging. These systems consist primarily of
a camera, a computer workstation and clinical software that permits the
physician to process the resulting data.
SINGLE PHOTON IMAGING. There are three general methods for acquiring single
photon nuclear medicine images: single photon emission computed tomography
("SPECT"), planar imaging and total or whole body imaging. In SPECT imaging, the
camera rotates around the patient to create three-dimensional images. Planar or
static images are acquired at a single angle relative to a patient and are
similar to a "snapshot" image. In total body imaging, the camera moves along the
length of the patient to form a single image of the whole body.
The Company offers two different types of gamma cameras for performing
single photon imaging: single head cameras with one detector head and dual head
cameras with two detector heads. Dual head cameras offer better patient
throughput and higher image quality than single head cameras. Dual head cameras
may include fixed angle or variable angle detectors. The detectors on a fixed
angle camera are generally fixed at a 90 degrees orientation for cardiac imaging
or at a 180 degrees orientation for oncology or general purpose imaging. The
detectors on a variable angle camera may be positioned in both of these two
orientations as well as other positions which allow for more versatile clinical
applications.
All of the Company's gamma cameras are equipped with the Company's EPIC-TM-
digital detector. This innovative technology improves the reliability and
stability of the nuclear image over that achieved through the use of analog
technology. The EPIC detector also includes auto-tuning and remote diagnostics
capabilities which facilitate improved field service efficiency and customer
satisfaction.
The Company's dual head camera product line currently includes the
following:
- SKYLIGHT-TM---the Company's recently introduced, revolutionary,
gantry-free nuclear medicine gamma camera. This system provides greater
openness and flexibility of applications. The SKYLight system is based on
an architecture that allows gamma detectors to be mounted directly into a
room structure, thus reducing limitations associated with gantry-based
cameras. SKYLight is currently a work in progress, and, accordingly, will
not contribute to the Company's revenues in fiscal 2000.
- FORTE-TM---the Company's newest open gantry, variable angle camera. This
camera features the Company's unique FreeDOME-TM- open gantry, which
enables a fuller range of image acquisition without obstruction from
detector arms or gantry feet and improved patient comfort for all imaging
positions, including patients on hospital beds, gurneys and wheelchairs.
This camera is sold with the latest Pegasys computer workstation, the Sun
Ultra-TM-60, which offers a two-fold increase in processing speed and
power over previous generations.
- VERTEX-TM-V60--the Company's latest generation Vertex dual ring, variable
angle camera. This camera is also sold with the Pegasys Sun Ultra 60
computer workstation. The Company's advanced imaging technologies,
including Molecular Coincidence Detection ("MCD-PET-TM-"), MCD with
attenuation correction ("MCD/AC-PET-TM-") and Vantage-TM- ExSPECT-TM- are
currently available on this camera.
- CARDIO-TM- EPIC--the Company's dual ring, fixed 90 degree camera. This
camera is based on the Vertex design and was engineered especially for the
cardiology market. Due to the fixed angle of the detectors, this camera is
less expensive than the Vertex V60 but also offers EPIC image quality and
dual head throughput advantages for cardiology imaging.
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- SOLUS-TM- EPIC--the Company's dual ring, fixed 180 degree camera. This
camera is based on the Vertex design and was engineered especially for the
oncology market. Like the Cardio, this camera is less expensive than the
Vertex V60 but offers EPIC image quality and dual head throughput
advantages for oncology imaging. MCD-PET and MCD/AC-PET are both available
on the Solus, thus enhancing the oncology applications of the camera.
The Company's single head product line currently includes the following
cameras:
- SINGLE HEAD GENESYS-TM---the Company's first single detector gamma camera
that was designed for general purpose nuclear medicine studies. The
robotics and patient ergonomics provide efficient patient handling and
transition from total body to SPECT studies in oncology applications. The
compact design allows installation into small rooms.
- ARGUS-TM---the Company's second single detector gamma camera that was
designed to perform general purpose nuclear medicine studies and give
added flexibility for imaging patients when they are seated or in their
hospital bed. The detector orientation affords a larger imaging field for
SPECT procedures, especially for oncology imaging.
The Company also manufactures and sells the Transcam-TM- and Thyrus-TM-
gamma cameras, which are niche cameras with a small field of view and are
produced by the Company's Danish subsidiary, ADAC Laboratories A/S. These
cameras offer planar imaging for specific clinical diagnostic procedures. In
addition the Transcam is mobile and allows imaging to be performed in the
hospital ward without moving the patient.
The Company's gamma cameras are sold with a computer workstation that
enables the user to acquire the data collected by the detectors, to generate a
digital image from that data and to process the data and the resulting image
using a number of clinical software applications. Most of the Company's gamma
cameras are sold with the Sun Ultra or Ultra 60 workstation from Sun
Microsystems.
POSITRON EMISSION TOMOGRAPHY IMAGING ("PET"). PET imaging is a valuable
diagnostic tool because of its high resolution and high accuracy in oncology,
cardiology and neurology. The Company's positron emission tomography products
consist of MCD-PET, and C-PET MCD-PET is a hardware and software upgrade to the
Vertex V60 and Solux Epic cameras that enables these SPECT cameras to perform
PET imaging. MCD-PET offers physicians the ability to perform PET imaging with a
gamma camera at a fraction of the cost of a dedicated PET system. C-PET is a
clinically optimized, dedicated PET scanner. C-PET was designed and developed by
UGM, which the Company acquired on October 1, 1999. See Note 4 "Acquisitions" of
Notes to Consolidated Financial Statements. ADAC had served as the exclusive
distributor of C-PET prior to the acquisition. The Company believes the
acquisition will allow ADAC to better position itself in the rapidly growing PET
imaging market and accelerate its product leadership in all areas of PET
imaging. C-PET gives ADAC a full line of PET systems to meet different customer
needs. The C-PET system enables more patients to be imaged in a day than the
camera-based PET systems and is focused on customers with a higher PET patient
load.
ENHANCEMENTS AND OPTIONS. In addition to MCD-PET, the Company offers a
number of other clinical hardware and software enhancements to its gamma cameras
that enable physicians to extract clinical information from nuclear medicine
procedures to aid in the diagnosis of disease including the following:
- Vantage ExSPECT--Co-developed with Emory University, this product is
offered as an upgrade to the Company's Vantage-TM- product, and corrects
for image distortions created by variations in tissue density, scatter and
resolution. Vantage ExSPECT is particularly useful in cardiac studies, and
the Company believes it offers important advantages over cardiac
ultrasound, the alternate competitive procedure. Vantage ExSPECT permits
evaluations of perfusion.
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- MCD/AC-PET--This product is designed to correct for attenuation when
imaging with MCD-PET and provides substantial improvements in image
quality. Similar to Vantage, MCD/AC-PET corrects for image distortions
created by variations in tissue density. It is important to note that
attenuation is a greater problem in positron imaging because the photons
travel twice as far through the body than in traditional nuclear medicine
procedures. To date, the Company is the only vendor to offer attenuation
correction for coincidence imaging with a gamma camera.
- Quantitative Gated SPECT ("QGS-TM-")--Developed with Cedars Sinai Medical
Center, this software provides essential information for the detection and
analysis of cardiac disease and enables physicians to study a number of
different snapshots of the heart simultaneously.
- AutoSPECT Plus-TM---This product allows physicians to automatically
process through the use of a single button one or more cardiac SPECT,
gated SPECT, Vantage SPECT and MCD/AC-PET data sets. Automated processing
offers the following advantages over manual processing: reproducible and
accurate results, reduced artifacts and processing time and increased
efficiency.
- AutoQUANT-TM---Jointly developed and under an exclusive license with
Cedars Sinai Medical Center, this product provides comprehensive cardiac
quantitative analysis capability with state of the art algorithms and an
intuitive user interface. This product combines perfusion and functional
information that is essential for the detection and analysis of cardiac
disease and enables physicians to study a number of different quantitative
parameters of the heart simultaneously.
- Shadow-TM---This product enables remote processing of cardiac studies. The
physician can process and review patient studies using a desktop PC
networked to a Pegasys computer system. Shadow improves workflow by
allowing the physician to obtain direct access from their office or
viewing area to patient data acquired using a gamma camera.
- Image Fusion and Review--This product is used to align and display
different images such as MCD-PET, SPECT, PET, CT and MRI in three
dimensions as composite images. Image Fusion also permits the operator to
manipulate and align the images. This functionality facilitates image
interpretation by a physician by combining functional and anatomical data
in the same image.
ADAC MEDICAL TECHNOLOGIES. In the third quarter of fiscal 1999, the Company
decided to close its AMT refurbishing facility in Washington, Missouri, and
relocate the business to Milpitas, California. A restructuring charge of
$0.5 million was taken as a result of this action. See Note 3 "Restructuring
Charges" of Notes to Consolidated Financial Statements. Also in the third
quarter of fiscal 1999, the Company decided to discontinue refurbishment of a
number of lines of older and non-ADAC nuclear medicine equipment, the demand for
which was declining. These decisions, as well as existing market conditions,
rendered obsolete substantial inventories of equipment and parts, resulting in a
non-ordinary charge of $2.4 million in the third quarter of fiscal 1999. See
Note 10 "Non-Ordinary Charges and Expenses" of Notes to Consolidated Financial
Statements.
CUSTOMER SUPPORT AND FIELD SERVICE. The Company maintains a customer
support center in California, and field service forces in North America and
Europe for its Medical Systems business. The Company's network of service
engineers and customer support specialists provide installation, warranty,
repair, training and support services. Together with its distributors, the
Company services over 10,800 installed systems at over 3,650 sites worldwide,
including approximately 600 systems manufactured by vendors other than ADAC. The
Company generates service revenue under service contracts and by providing
service on a time and materials basis.
RADIATION THERAPY PRODUCTS ("RTP")
The RTP business unit includes the Company's Radiation Therapy Planning and
its Radiology Solutions ("ARS") divisions. Revenues from the RTP business unit
represented 14%, 13% and 6% of the
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Company's total revenues in fiscal 1999, 1998 and 1997, respectively. See
Note 12 "Segment Reporting and Foreign Operations" of Notes to Consolidated
Financial Statements.
RADIATION THERAPY PRODUCTS. In RTP, the Company designs, develops, markets
and supports turnkey radiation therapy planning systems that assist hospital
radiation oncology departments and cancer treatment centers in planning patient
treatments. The systems combine third-party workstations and printers with the
Company's proprietary application software, Pinnacle-TM-(3).
RTP's principal product, Pinnacle(3), is a radiation therapy treatment
planning system that includes two-dimensional and three-dimensional planning
capabilities for radiation treatments. This includes implanting radioactive
sources (brachytherapy) and delivery of photon or electron particles at several
angles (stereotactic radiosurgery) for treatments of patients with cancer, as
well as certain benign conditions. Pinnacle(3)'s three-dimensional volumetric
image processing and dose computation capabilities enable physicians to plan the
precise application of high energy radiation to a specific targeted area for the
treatment of cancer and other diseases. The Company believes Pinnacle(3)
provides improved image processing and dose calculation methods compared to
other currently available products.
ADAC RADIOLOGY SOLUTIONS. In its ARS business, the Company refurbishes,
sells and services previously owned CT systems. The Company entered this
business in fiscal 1998 through the acquisition of Southern CATS, Inc. in
October 1997 and CT Solutions, Inc. in January 1998. See Note 4 "Acquisitions"
of Notes to Consolidated Financial Statements. The ARS business benefits from
synergies with ADAC's existing RTP division in the area of CT simulation. CT
simulation is a growing trend in radiation therapy planning. By bundling a
refurbished CT with the CT simulation component of the Pinnacle(3) treatment
planning system, ADAC is able to offer a very cost-effective solution enabling
oncology centers to adopt this new technology sooner.
HEALTH CARE INFORMATION SYSTEMS ("HCIS")
The Company's HCIS division designs, develops, markets, sells and supports
integrated solutions consisting of computer equipment and software applications
that offer health care providers the necessary tools to process and archive
patient and clinical information. HCIS revenues represented 11%, 13% and 11% of
the Company's total revenues in fiscal 1999, 1998 and 1997, respectively. See
Note 12 "Segment Reporting and Foreign Operations" of Notes to Consolidated
Financial Statements.
The Company's principal HCIS products are ENVOI-TM-, an integrated Image and
Information Management Solution, and CorCAAT-TM-, a cardiology information
system product. ENVOI includes QuadRIS-TM-, Physician Desktop-TM-, Intranet
Image Server, DICOM, Diagnostic and Clinical review workstations, and the
recently introduced integrated Workflow Manager. ENVOI's open clinical
architecture combines Oracle's-TM- relational database technology with Microsoft
Windows-TM- client/server software to deliver radiology information not just
within the radiology department, but throughout the health care delivery
network. In this environment, the product solution must meet the demands of
multiple health care facilities that act as a single integrated delivery
network. Physician Desktop, with integrated voice recognition and digital
dictation, enables radiologists to review patient examination history and
previous reports, as well as verify and sign-off on reports. ENVOI's Intranet
Image Server delivers an integrated image and information management solution
that provides real-time access to images and reports for radiologists, referring
physicians, and emergency room, intensive care and cardiac care unit
technologists. Utilizing an Internet browser and industry communications
standard such as DICOM, as well as other Internet protocols, ENVOI provides
immediate, secure access to images and reports for radiologists, referring
physicians and technologists.
In October 1999, the Company signed a strategic alliance agreement with
Cedara Software to develop and market Picture Archiving Communications Systems
("PACS"). The Company believes that the integration of Cedara's image management
technology into the ENVOI product line will allow it to provide a clearly
differentiated full scale PACS offering to the market.
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In November 1999, the Company signed an agreement with Perot Systems. Under
this multi-year agreement Perot Systems Healthcare Services Group will provide
implementation and related services for the QuadRIS and ENVOI-TM- product lines.
Perot Systems will supply the full scope of services required for successful
large scale implementations, including system integration, network design and
implementation, clinical process reengineering and implementation of the
Company's Web-based technology.
The Company also markets CorCAAT, a cardiac catheterization laboratory
information system. CorCAAT performs a number of functions that previously
required equipment and systems from multiple vendors and eliminates the need for
expensive and inflexible interfaces. CorCAAT also simplifies the patient
monitoring, inventory management, case reporting, image management and outcomes
management processes by providing a single point of access to all
catheterization laboratory data. The product is based on networked computing
technology and standard components including Microsoft Windows NT-TM-, Microsoft
SQL Server-TM- and Intel-TM--based computers. CorCAAT is currently installed at
25 sites in the United States.
In the first quarter of fiscal 1998, the Company discontinued developing and
marketing LabStat-TM-, the Company's laboratory information system, while
retaining its laboratory support and maintenance business. As a result, the
Company took an non-ordinary charge of $11.3 million in that quarter. See
Note 10 "Non-Ordinary Charges and Expenses" of Notes to Consolidated Financial
Statements.
The Company also supports a line of other more mature products, including
LabCare-TM-, MARS II-TM-, and IMAGES/3000-TM-, which are installed in hospitals
throughout the United States and Canada.
OTHER
From time to time, the Company explores other opportunities for expanding
its business. On October 30, 1997, ADAC Radiology Services exercised an option
to acquire the business of Medical Transition Strategies, Inc., which was in the
business of forming and managing radiology networks. Because, among other
things, this business did not contribute meaningfully to the Company's results
in fiscal 1998, and was not expected to do so in future periods, the Company
decided to discontinue this business in the fourth quarter of fiscal 1998. As a
result, the Company took a non-ordinary charge of $1.9 million in that quarter.
See Note 10 "Non-Ordinary Charges and Expenses" of Notes to Consolidated
Financial Statements.
MARKETING AND SALES
ADAC has a direct sales force in the United States. The Company also
conducts certain direct sales and/or service activities through its subsidiaries
in the Netherlands, Germany, France, Italy, Denmark, the United Kingdom, Canada
and Brazil. Sales and service in other countries are generally handled by
distributors. The Company is currently in the process of restructuring its
operations in Brazil and intends to handle all future sales through a
distributor. North America is the largest market for the Company's products and
services followed by Europe, Japan, Asia Pacific and South America. ADAC is
represented in all of these geographic areas. See Note 12 "Segment Reporting and
Foreign Operations" of Notes to Consolidated Financial Statements.
RESEARCH AND DEVELOPMENT
Developing products, systems and services based on advanced technological
concepts is essential to ADAC's ability to compete effectively. The Company
currently maintains a product development and engineering staff responsible for
product design and engineering. In addition, as part of ADAC's research and
development programs, the Company has established the Advanced Clinical Research
Program, which provides annual grants to clinical trial sites at major
institutions to assist the Company in product development concepts and to aid in
verifying engineering and design activities. There can be no assurance that the
Company's product development efforts will result in the development or
commercialization of
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successful products or product enhancements. Research and development
expenditures, net of software capitalization, totaled $18.2, $16.8 and
$16.7 million in fiscal 1999, 1998, and 1997, respectively.
COMPETITION
The markets in which the Company competes are characterized by rapidly
evolving technology, intense competition and pricing pressure. There are a
number of companies that currently offer or are in the process of developing
products that compete with products offered by the Company. Some of these
competitors have substantially greater capital, manufacturing and other
resources than the Company. These competitors could develop technologies and
products that are more effective than those currently used or produced by the
Company or that could render the Company's products obsolete or noncompetitive.
In addition, as the Company enters new markets, there can be no assurance that
the Company will be able to penetrate such markets successfully.
In the nuclear medicine market, the Company competes with several other
major suppliers. From the end of fiscal 1998 to the end of fiscal 1999, the U.S.
nuclear medicine market grew approximately 4%. According to data provided by the
National Electronics Manufacturers Association ("NEMA"), ADAC's share of the
U.S. market, based on bookings volume, was approximately 41% for fiscal 1999,
which represents approximately a 3% percentage point decrease in market share
from the prior year. During this period, according to the same NEMA data, the
Company maintained its price premium of approximately 5% in the dual head market
over its competitors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Business Considerations."
The Company believes that the key to success in its markets is to provide
technologically superior products that deliver cost-effective, high quality
clinically diagnostic data and images that meet or exceed customer quality and
service expectations. ADAC's ability to compete successfully depends on its
ability to commercialize new products ahead of its competitors. In addition to
the rapid development of innovative and cost-effective new products, the Company
believes that other competitive factors include patient throughput, system
functionality and reliability, image quality, computer processing speed,
customer service and support, and worldwide distribution network. The Company's
products also must focus on solutions for the managed care environment in order
to improve clinical outcomes at lower clinical process costs.
The Company believes that other key competitive factors in RTP and HCIS
include system architecture, key proprietary algorithms, functionality of the
application software, post-sales support services, time to market, integration
expertise with hospital information systems and price/performance.
MANUFACTURING AND SUPPLIERS
The Company's manufacturing process includes mechanical assembly, final
system integration and testing. In 1996, the Company's nuclear medicine
manufacturing operations in Milpitas, California were certified to the
requirements of the international quality system requirements of ISO 9001.
The Company purchases certain sub-systems, including Sun-TM- workstations,
disk drives and sodium iodide crystals, from third party suppliers. Although
most materials and purchased components for its products are available from more
than one source of supply, certain essential components such as the sodium
iodide crystals included in its gamma cameras are presently available from only
one supplier. The Company also relies on several significant vendors for
hardware and software components for its HCIS products such as Hewlett-Packard
Company, Oracle Corporation and others. The loss of any of these suppliers,
including any single-source supplier, would require obtaining one or more
replacement suppliers as well as potentially requiring a significant level of
hardware and software development to incorporate the new parts into the
Company's products. Although the Company has obtained insurance to protect
against loss due to business interruption from these and other sources, there
can be no assurance that such coverage would be adequate.
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GOVERNMENT REGULATION
ADAC's Medical Systems and RTP businesses, as well as certain portions of
its HCIS business, are regulated by the United States Food and Drug
Administration ("FDA"). The FDA regulates the development, testing,
manufacturing, packaging, labeling, distribution and marketing of medical
devices under the Federal, Food, Drug and Cosmetic Act (the "FDC Act") and
regulations promulgated by the FDA. The State of California (through its
Department of Health Services), where the Company maintains its factory, as well
as other states, also regulates the manufacture of medical devices.
In general, these laws require that manufacturers adhere to certain
standards designed to ensure the safety and effectiveness of medical devices.
Under the FDC Act, each medical device manufacturer must comply with
requirements applicable to manufacturing practices, clinical investigations
involving humans, sale and marketing of medical devices, post-market
surveillance, repairs, replacements and refunds, recalls and other matters. The
FDA is authorized to obtain and inspect devices and their labeling and
advertising, and to inspect the facilities in which they are manufactured.
The FDC Act also requires compliance with specific manufacturing and quality
assurance standards, including regulations promulgated by the FDA with respect
to good manufacturing practices ("GMP"). FDA regulations, specifically the
Quality System Regulation ("QSR"), require that each manufacturer establish a
quality assurance program by which the manufacturer monitors the manufacturing
process and maintains records that show compliance with FDA regulations and the
manufacturer's written specifications and procedures relating to the devices.
Compliance is necessary to receive FDA clearance to market new products and is
necessary for a manufacturer to be able to continue to market cleared product
offerings. Recently, the FDA promulgated new design process regulations that
revised and expanded the good manufacturing practices applicable to medical
device manufacturers. Among other things, these new regulations require that
manufacturers establish a formalized design control process. The QSR took effect
on June 1, 1997, and included a twelve-month transition period during which
enforcement action with respect to design control requirements was not to be
taken. That transition period has expired and the regulation is in full force
and effect.
The FDA makes unannounced inspections of medical device manufacturers and
may issue reports of observations where the manufacturer has failed to comply
with applicable regulations and/or procedures. Failure to comply with applicable
regulatory requirements can, among other things, result in warning letters,
civil penalties, injunctions, suspensions or losses of regulatory clearances,
product recalls, seizure or administrative detention of products, operating
restrictions through consent decrees or otherwise, and criminal prosecution,
which could have a material adverse effect upon the Company.
The FDA requires that a new medical device or a new indication for use of or
other significant change in an existing medical device obtain either 510(k)
premarket notification clearance or an approved Pre-Market Approval Application
("PMAA") before orders can be obtained and the product distributed in the United
States. The 510(k) clearance process is applicable when the new product being
submitted is substantially equivalent to an existing commercially available
product. If a product does not meet the eligibility requirements for the 510(k)
process, then it must instead be submitted under the PMAA process. The process
of obtaining 510(k) clearance may take at least three months from the date of
filing of the application and generally requires the submission of supporting
data, which can be extensive and extend the process for a considerable period of
time. Under the PMAA process, the applicant must generally conduct at least one
clinical investigation and submit extensive supporting data and clinical
information in the PMAA, which typically takes from one to two years, but
sometimes longer for the FDA to review. Generally, the Company has not been
required to resort to the PMAA process for approval of its products.
The sale of medical devices outside the United States is subject to foreign
regulatory requirements that vary widely from country to country. The time
required to obtain clearance in foreign countries may be longer or shorter than
in the United States. In 1995, ADAC implemented a program to enter the Japanese
market and has, through its distributor, received Japanese Ministry of Health
and Welfare
9
<PAGE>
(JMHW) approval to market the Forte, Vertex V60, Cardio Epic, Solus Epic, and
MCD-PET with the Company's Pegasys Ultra-TM- computer system. In addition, ADAC
has met the requirements of the European Medical Device Directive, which became
effective in the European Community in June 1998, for its principal products.
Failure of the Company to comply with these requirements could have a material
adverse effect on the Company's results of operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Business Considerations".
In mid-1997, the FDA conducted an inspection of the Company's newly acquired
subsidiary, Cortet, Inc. ("Cortet"). As a result of that inspection, Cortet
received a Warning Letter from the FDA containing inspectional observations
relating to the adequacies of Cortet's quality assurance system. Cortet
responded to the FDA's observations and Warning Letter and, in October 1997,
received correspondence from the FDA indicating that Cortet's responses appeared
to adequately address the FDA's concerns. In mid-1998, the State of California,
under a contract with the FDA, completed a routine inspection of ADAC's facility
in Milpitas, California. The state investigator issued a FDA Form 483 containing
observations of non-compliance of the recently implemented QSR. The state
investigator also placed a temporary shipment hold on Pinnacle(3) pending the
Company satisfactorily responding to the State's concerns regarding the
Company's quality systems. The Company promptly responded to the FDA and the
State and initiated a number of corrective actions. The State lifted the
Pinnacle(3)shipment hold on August 28, 1998 and, in September 1998, ADAC
received a letter from the FDA indicating that the Company had adequately
responded to the FDA's concerns. Although the Company was deemed to have
adequately responded to the State and FDA following the mid-1998 inspection, the
Company is responsible for the full implementation of all corrective actions. In
addition, as all companies are, the Company remains subject to periodic
inspections in the future and there can be no assurance as to the timing or
outcome of any subsequent inspection. The scope of any re-inspection could be
more comprehensive than the inspections of Cortet and the Company's Milpitas
facility, and there can be no assurance that the FDA, upon re-inspection, will
deem the Company's corrective actions to be adequate or that additional
corrective action, in areas not addressed in the Warning Letter or the
Form 483, will not be required. Any failure by the Company to fully implement
the required corrective actions or to comply with any other applicable
regulatory requirements could have a material adverse effect on the Company's
ability to continue to manufacture and distribute its products, and in more
serious cases, could result in seizure, recall, injunction and/or civil fines.
Any of the foregoing, would have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Business Considerations".
Certain additional requirements of other Federal laws and of state, local
and foreign governments exist which may apply to the manufacture and marketing
of the Company's products and to products such as radiopharmaceuticals or
possession and use of radioactive materials that are used in conjunction with
the Company's products.
The Company is subject to various environmental laws and regulations both in
the United States and abroad. The operations of the Company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws.
PATENT, COPYRIGHTS AND ROYALTIES
The Company relies on a combination of trade secret, copyright, patent and
trademark laws and contractual provisions to protect its proprietary rights. The
Company has a policy of undertaking an ongoing review of its products with
patent counsel to determine to what extent its products may be prosecutable
under the patent or copyright laws and taking appropriate action to protect its
intellectual property based on such review. While the Company believes that it
benefits from such patents, competitors may develop competing products by
"designing around" patents held by the Company or may claim that the Company's
products infringe their proprietary rights.
10
<PAGE>
The Company develops application software for its products and also licenses
software components from third parties. Third party software developers include
software companies and clinical development sites that provide turnkey products
or software code. Under its agreements with third parties, the Company generally
obtains a license to use the third party software and to include such software
in its own products for a specified period of time in exchange for the payment
of a royalty to the developer. These agreements may be either exclusive or
non-exclusive.
EMPLOYEES
As of November 30, 1999, the Company had approximately 1,070 full-time
employees worldwide, including 800 employed in Medical Systems, 100 in RTP and
170 in HCIS business units. None of the Company's employees are represented by a
labor union. The Company believes its relations with its employees are good.
Many of the Company's employees are highly skilled and competition in recruiting
and retaining such employees is intense. The Company believes its continued
success is dependent in part upon its ability to continue to attract and retain
highly qualified personnel.
ITEM 2. PROPERTIES
The Company's principal administrative, manufacturing and research
operations occupy approximately 200,000 square feet of leased space in buildings
located in Milpitas, California, under leases expiring through 2006. The
Company's principal health care information systems operations occupy
approximately 54,000 square feet of leased space in buildings located in
Houston, Texas, under leases expiring in 2002. Other smaller facilities are
leased in various states and foreign countries. Management believes that the
Company's facilities are adequate at least through fiscal 2000 to meet presently
anticipated manufacturing and other requirements. See Note 6 "Commitments and
Contingencies" of Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
Commencing in December 1998, a total of eleven class action lawsuits were
filed in federal court by or on behalf of stockholders who purchased Company
stock between January 10, 1996 and December 28, 1998. These actions name as
defendants the Company and certain of its present and former officers and
directors. The complaints allege various violations of the federal securities
laws in connection with the restatement of the Company's financial statements
and seek unspecified but potentially significant damages. In April 1999, these
actions were ordered consolidated and, in July 1999, the plaintiffs filed a
consolidated amended complaint. The Company intends to contest this action
vigorously. A stockholder derivative action, purportedly on behalf of the
Company and naming as defendants Company officers and directors was also filed
in state court seeking recovery for the Company based on stock sales by these
defendants during the above time period. The Company is also a defendant in
various legal proceedings incidental to its business.
While it is not possible to determine the ultimate outcome of these actions
at this time, management is of the opinion that any liability resulting from
these claims would not have a material adverse effect on the Company's
consolidated financial position. However, the outcome of these actions could
have a material adverse effect on the Company's results of operations or cash
flows.
The Company has been informed that the United States Securities and Exchange
Commission (SEC) has issued a Formal Order of Private Investigation in
connection with matters relating to the Company's previously announced
restatement of its financial results for 1996, 1997 and the first three quarters
of 1998. The Company is continuing to cooperate with the SEC. The Company is
unable to predict the outcome of the investigation at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded in the Nasdaq National Market System
under the Nasdaq symbol "ADAC". There were 2,448 shareholders of record of the
Company's Common Stock on November 30, 1999. The table below provides the
quarterly high, low and closing prices in the Nasdaq National Market System, as
reported by Nasdaq, during the last two fiscal years of the Company by fiscal
quarter.
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
-------------------------------------------- ----------------------------------------
PER SHARE PER SHARE
-------------------------------------------- ----------------------------------------
HIGH LOW CLOSE HIGH LOW CLOSE
------------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter........................... $30 $19 15/16 $20 $22 1/4 $15 3/4 $17 7/8
Second Quarter.......................... 23 9/16 13 1/16 13 1/16 26 5/8 18 3/8 23
Third Quarter........................... 13 13/16 6 1/2 7 9/16 24 1/16 19 3/8 22 7/8
Fourth Quarter.......................... 9 7/8 5 7/8 9 1/2 30 5/8 20 7/8 25
</TABLE>
The Company did not pay any dividends in fiscal 1999 or 1998, and presently
intends to retain its earnings for use in its business. Accordingly, the Company
does not anticipate paying dividends to its shareholders in the foreseeable
future.
ITEM 6. SELECTED FINANCIAL DATA
ADAC LABORATORIES AND SUBSIDIARIES
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995(4)
- - - --------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues................................... $342,131 $300,528 $263,887 $222,586 $184,809
Cost of revenues(1)(2)..................... 239,768 192,697 160,102 142,483 117,320
Operating expenses(1)(2)(3)................ 141,527 91,385 76,425 67,709 49,264
Other expense.............................. 4,501 4,338 5,271 4,225 1,222
-------- -------- -------- -------- --------
Income (loss) before income taxes.......... (43,665) 12,108 22,089 8,169 17,003
Provision (benefit) for income taxes....... (10,045) 4,722 8,615 3,023 5,930
-------- -------- -------- -------- --------
Net income (loss)(1)(2)(3)................. $(33,620) $ 7,386 $ 13,474 $ 5,146 $ 11,073
======== ======== ======== ======== ========
Net income (loss) per share:(1)(2)(3)
Basic.................................... $ (1.64) $ .38 $ .73 $ .30 $ .68
Diluted.................................. $ (1.64) $ .36 $ .69 $ .28 $ .65
Number of shares used in net income (loss)
per share calculations:
Basic.................................... 20,466 19,500 18,419 17,360 16,332
Diluted.................................. 20,466 20,387 19,534 18,507 17,079
Dividends declared per share............... -- -- -- $ .48 $ .48
Total assets............................... $239,662 $229,783 $195,099 $177,890 $159,097
</TABLE>
- - - ------------------------
(1) Cost of revenues, operating expenses, net loss and net loss per share in
fiscal 1999 include the effects of non-ordinary pre-tax charges of
approximately $13.6 million for inventory, $6.0 million for receivables
(excluding South American receivables), $8.9 million for South American
receivables and recourse obligations, $4.0 million, net, for restructuring
related to Europe, South America and AMT, $1.4 million for in-process
research and development acquired in the UGM purchase and $1.2 million for
litigation related to the class action lawsuit and stockholder derivative
action. See Note 3 "Restructuring Charges", Note 4 "Acquisitions" and
Note 10 "Non-Ordinary Charges and Expenses"
12
<PAGE>
of Notes to Consolidated Financial Statements. Excluding these charges, cost
of revenues, operating expenses, net loss and net loss per share for fiscal
1999 would have been $228.8 million, $118.2 million, $6.6 million and $0.32,
respectively.
(2) Cost of revenues, operating expenses, net income and net income per share in
fiscal 1998 include the effects of non-ordinary pre-tax charges of
approximately $13.7 million for discontinued products, $1.3 million for
write off of acquisition costs for non-consummated transactions and
$1.9 million for the discontinuing of physician network services business.
Note 10 "Non-Ordinary Charges and Expenses" of Notes to Consolidated
Financial Statements. Excluding these charges, cost of revenues, operating
expenses, net income and net income per share (diluted), for fiscal 1998
would have been $179.0 million, $88.2 million, $17.7 million and $0.87,
respectively.
(3) Operating expenses, net income and net income per share in fiscal 1997
include the effects of non-ordinary pre-tax charges of approximately
$0.5 million for in-process research and development related to the
acquisition of Cortet, Inc., and $0.7 million of uncompleted acquisition
costs and related expenses. Note 10 "Non-Ordinary Charges and Expenses" of
Notes to Consolidated Financial Statements. Excluding these charges,
operating expenses, net income, and net income per share (diluted) for
fiscal 1997 would have been $75.4 million, $14.2 million and, $0.73,
respectively.
(4) Selected financial data for fiscal year 1995 has not been restated and is
not comparable to financial data for fiscal years 1998, 1997, and 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and related Notes thereto contained
elsewhere within this document.
OVERVIEW
The Company's fiscal year ends on the Sunday closest to September 30. Fiscal
1999 included 53 weeks, while fiscal 1998 and 1997 included 52 weeks.
Prior to fiscal 1999, the results of the Company's RTP and HCIS divisions
were combined under Software Business for the purposes of Management's
Discussion and Analysis. However, due to continued growth, the results of each
division are now presented separately. The results of the Company's ARS business
unit were presented under Medical Systems prior to fiscal 1999 for the purposes
of Management's Discussion and Analysis. The ARS business unit is now presented
under RTP, this coincides with the Company's decision to move the management of
ARS under RTP. The ARS business benefits from synergies with the RTP division in
the area of CT simulation. All historical data and comparisons have been
restated to reflect these changes.
UGM ACQUISITION
On October 1, 1999, the Company acquired two related companies, UGM Medical
Systems Inc. and UGM Laboratories, Inc. (together "UGM") for $18.5 million. UGM
was an independent developer and manufacturer of PET equipment, for which the
Company has been its principal distributor. The acquisition was accounted for
using the purchase method of accounting and the results of UGM have been
included in the Company's financial statements subsequent to October 1, 1999.
The amortization of goodwill, acquired technology and workforce is being
computed on the straight-line basis over lives of 6 to 15 years.
The Company recognized a pre-tax charge to operations of $1.4 million for
the purchase of acquired in-process research and development. This charge was
computed using the percent complete method, discounting the relevant future cash
flows at 40% to reflect the weighted average cost of capital and the specific
risks associated with each in-process product.
13
<PAGE>
Further, the Company may be required to pay additional purchase price
consideration and incur future compensation in amounts not exceeding $18.0 and
$2.0 million, respectively, pursuant to the terms of certain earn out
provisions. The performance period for such provisions is five years.
FISCAL 1999 COMPARED TO FISCAL 1998 AND FISCAL 1997
Revenues for fiscal years 1999, 1998 and 1997 were $342.1, $300.5 and
$263.9 million, respectively. Revenues increased 14% from fiscal 1998 to 1999
and 14% from fiscal 1997 to 1998. Medical Systems revenues represented 75%, 74%
and 83% of the Company's total revenues in fiscal 1999, 1998 and 1997,
respectively. RTP revenues represented approximately 14%, 13% and 6% of the
Company's total revenues in fiscal 1999, 1998 and 1997, respectively. HCIS
revenues represented approximately 11%, 13% and 11% of the Company's total
revenues in fiscal 1999, 1998 and 1997, respectively. Gross profit for fiscal
1999 totaled $102.4 million, a decrease of 5% from gross profit of
$107.8 million in fiscal 1998, which increased 4% over gross profit of
$103.8 million in fiscal 1997.
NON-ORDINARY CHARGES AND EXPENSES
INVENTORY AND RECEIVABLES
During fiscal 1998, the Company began an examination of the performance,
profitability and prospects of its various business units as part of an overall
evaluation of its business and internal controls. In connection with this
examination, the Company identified issues relating to its application of
accounting principles and conducted a review of its asset carrying values,
accruals and expenses in historical financial periods, leading to a restatement
of reported financial results for fiscal 1996, fiscal 1997 and the first three
quarters of fiscal 1998. Following the restatement, the Company continued to
focus on its accounting systems and weaknesses in its internal controls and the
assessment of its business units. As part of this focus and assessment, and
against the background of increasing competition in certain of the Company's
markets, new product introductions by the Company and its competitors, and its
customers deferring purchasing decisions due to their perceived Year 2000
compliance risks, the Company revised its estimates of 1) the recoverability of
the Company's inventory to reflect its lower build plans which resulted in
increased levels of potentially excess and obsolete inventory, 2) the
collectibility of receivables, and 3) the value of certain other assets carried
on the Company's books.
The Company also decided to close its AMT refurbishing facility in
Washington, Missouri, relocate the business to Milpitas, California, and
discontinue refurbishment of a number of lines of older nuclear medicine
equipment, the demand for which was declining. These fiscal 1999 decisions, as
well as existing market conditions, rendered obsolete substantial inventories of
equipment and parts.
The Company's financial statements for fiscal 1999 include charges for these
changes in estimates of $13.6 million related to inventory and $6.0 million
related to receivables (excluding South American receivables).
SOUTH AMERICA
As previously disclosed in the Company's Form 10-Q for the quarter ended
April 4, 1999, a significant number of the Company's customers in its principal
South American markets of Brazil, Argentina and Colombia are delinquent in
making periodic payments due under the terms of sales previously made to them,
many of which were supported by third-party financing arrangements that involve
full or partial recourse to the Company. Deteriorating economic conditions and
currency devaluations occurring primarily during fiscal 1999, and ineffective
monitoring of delinquencies and collection efforts by the Company, may have all
contributed to delays in the collection of accounts receivable from customers in
these markets. During fiscal 1999, the Company undertook renewed collection
efforts and completed an evaluation of each receivable balance and recourse
obligation to determine the level of reserves required
14
<PAGE>
for these customers. As a result of this evaluation, the Company has revised its
estimate of the recoverability of its South American receivables and recourse
obligations and provided additional reserves of $8.9 million during fiscal 1999,
of which, $1.8 million was recorded in the fourth quarter. These charges
resulted in total reserves of $9.8 million against total gross receivables and
recourse obligations for South America of approximately $12.8 million.
Consequently, at October 3, 1999, the Company has net South American receivables
of $1.8 million and recourse contingencies of $1.2 million.
LITIGATION
In the fourth quarter of fiscal 1999, the Company incurred $1.2 million in
litigation expenses related to the pending class action lawsuit and stockholder
derivative action. See Note 6 "Commitments and Contingencies" of Notes to
Consolidated Financial Statements.
The following table summarizes the non-ordinary charges and expenses for
fiscal 1999:
<TABLE>
<S> <C>
INVENTORY
Medical Systems product inventory
Inventory obsolescence.................................... $ 5,653
Engineering obsolescence.................................. 1,468
Offsite inventory obsolescence............................ 746
European inventory write-off.............................. 393
AMT product line discontinuance........................... 2,394
AMT inventory reduced to market value..................... 415
-------
Total Medical Systems product inventory................... 11,069
-------
Medical Systems excess consumable spares write-off.......... 788
ARS inventory reduced to market value....................... 877
Nuclear European sales and marketing inventory write-off.... 680
HCIS inventory obsolescence................................. 200
-------
Total inventory charges..................................... 13,614
-------
RECEIVABLES
Increase in receivable reserves, excluding South America.... 5,960
-------
SOUTH AMERICA
South American receivables and recourse reserves............ 8,890
-------
LITIGATION EXPENSE.......................................... 1,220
-------
Total non-ordinary charges and expenses..................... $29,684
=======
</TABLE>
The Company has concentrated resources on continuing to improve its
accounting systems and internal controls, and has retained a nationally
recognized accounting firm as a consultant and internal auditor. That firm has
developed a number of recommendations and has been retained to assist the
Company in implementing them. Among other things, the Company is attempting to
integrate more closely its inventory procurement procedures with the process of
developing and introducing new products in order to reduce the risk of
substantial inventories being obsoleted by product introductions. Furthermore,
with respect to receivables, the Company is improving its sales order and
collection procedures related to product and field service sales, and the sale
of ancillary products which resulted in the majority of the additional
receivables reserves added during fiscal 1999.
15
<PAGE>
MEDICAL SYSTEMS
Medical Systems includes revenues from the sale of the Company's nuclear
medicine products and customer service related to those products. Revenues also
include sales from the Company's ADAC Medical Technologies ("AMT") products.
Summary information related to Medical Systems revenues and gross profit margins
for fiscal 1999 compared to fiscal 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
(DOLLAR AMOUNTS IN THOUSANDS) 1999 1998 1997
- - - ----------------------------- -------- -------- --------
<S> <C> <C> <C>
Revenues:
Product................................................... $175,784 $159,973 $164,274
Service................................................... 80,497 62,230 54,103
-------- -------- --------
Total................................................... $256,281 $222,203 $218,377
-------- -------- --------
Geographical mix:
United States............................................. 86% 80% 76%
International............................................. 14% 20% 24%
Gross profit:
Product................................................... $ 38,399 $ 59,881 $ 65,238
Service................................................... 21,010 18,302 16,863
-------- -------- --------
Total................................................... $ 59,409 $ 78,183 $ 82,101
-------- -------- --------
Gross margin:
Product................................................... 22% 37% 40%
Service................................................... 26% 29% 31%
Total................................................... 23% 35% 38%
</TABLE>
Medical Systems product revenues increased 10% from fiscal 1998 to fiscal
1999 and decreased 3% from fiscal 1997 to fiscal 1998. The increase in fiscal
1999 was driven by increased sales and installations due to readiness of
customers sites matched with the availability of cameras. The proportion of the
Company's revenues derived from North America increased because of the relative
deterioration of economic and business conditions in Europe and South America,
and because the Company was able to more quickly complete installations of
ordered products in North America than in those other regions. The product
revenue decline in fiscal 1998 was due to the timing of delivery for
installations caused by a longer product installation process.
Gross margins for Medical Systems products decreased 15% and 3% in fiscal
1999 and 1998, respectively. The decline in gross margin for fiscal 1999 is
primarily attributable to the non-ordinary charges and expenses associated with
product inventory of $11.1 million. See Note 10 "Non-Ordinary Charges and
Expenses" of Notes to Consolidated Financial Statements. There was a further
charge of $3.3 million from a book to physical inventory adjustment identified
in fiscal 1999 in the Company's AMT equipment refurbishment business.
Gross margins for fiscal 1999 were also adversely affected by a reduced
build plan, due to the Company's effort to decrease finished goods inventory.
With fewer units manufactured the cost per unit increased. Gross margins were
further adversely affected by competitive pricing pressures, the transition to
new products with higher costs on initial shipments and higher overhead expenses
associated with adding to the management team.
The decline in gross margin for fiscal 1998 is attributable to a charge of
$4.9 million related to a carrying value adjustment for inventory and a
discontinued product charge for the Company's Digital Subtraction Angiography
("DSA") of $2.4 million. See Note 10 "Non-Ordinary Charges and Expenses" of
Notes to Consolidated Financial Statements.
16
<PAGE>
Medical Systems service revenues increased 29% from fiscal 1998 to fiscal
1999 and increased 15% from fiscal 1997 to fiscal 1998. The increases in fiscal
1999 and 1998 resulted from a continued higher number of customers under service
contract as the installed base of the Company's equipment grew. Additionally,
revenue for upgrades increased from services provided to bring customer's
equipment into Year 2000 compliance. Service margins decreased 3% from fiscal
1998 to fiscal 1999 and decreased 2% from fiscal 1997 to fiscal 1998. The
decline in fiscal 1999 was caused by the write-off of approximately
$0.8 million of excess inventory of consumable spare parts held in the field and
from increases in international parts expenses. Service margins decreased in
fiscal 1998 due to increased staffing and higher retrofit costs.
Parts used for servicing installed equipment are stated at cost and
depreciation is computed over the estimated useful life. During fiscal 1999, the
Company reviewed the composition of its capitalized field service inventory and
the estimated collective useful life of this asset. As a result of this review,
effective beginning in the fourth quarter of fiscal 1999, the Company revised
its method of computing depreciation on its existing service parts inventory
from 10 years using the declining balance method to 5 years on the straight line
method. Depreciation on all service parts capitalized in the future will be
computed over 7 years on the straight line method. These revisions had an
immaterial effect on the results of operations. The Company will continue to
monitor recoverability of the collective asset under SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
RADIATION THERAPY PRODUCTS ("RTP")
RTP revenues are generated primarily from the sale and support of the
Company's Pinnacle(3) radiation therapy planning system. RTP revenues also
include sales from the Company's CT refurbishing business unit, ARS. Summary
information related to RTP product and support revenues and gross profit margins
for fiscal 1999 compared to fiscal 1998 and fiscal 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
(DOLLAR AMOUNTS IN THOUSANDS) 1999 1998 1997
- - - ----------------------------- -------- -------- --------
<S> <C> <C> <C>
Revenues:
Product................................................... $45,959 $37,002 $16,954
Service................................................... 2,197 2,698 --
------- ------- -------
Total................................................... $48,156 $39,700 $16,954
------- ------- -------
Geographical mix:
United States............................................. 87% 83% 75%
International............................................. 13% 17% 25%
Gross profit:
Product................................................... $25,250 $23,544 $ 9,894
Service................................................... 306 127 --
------- ------- -------
Total................................................... $25,556 $23,671 $ 9,894
------- ------- -------
Gross margin:
Product................................................... 55% 64% 58%
Service................................................... 14% 5% --
Total................................................... 53% 60% 58%
</TABLE>
RTP product revenues increased 24% from fiscal 1998 to fiscal 1999 and
increased 118% from fiscal 1997 to fiscal 1998. The increase in fiscal 1999 and
1998 was driven by the market acceptance of the Pinnacle(3) product and the
formation of the ARS refurbishing business early in fiscal 1998.
17
<PAGE>
Gross margins for RTP products decreased 9% from fiscal 1998 to fiscal 1999
and increased 6% from fiscal 1997 to fiscal 1998. The decrease in fiscal 1999
resulted from several factors. First, there was a change in product mix, with
the lower margin ARS refurbishing business being a larger share of revenue. This
resulted in a decline in the overall RTP margin of 4%. Second, there was a
charge of $0.9 million for the reduced market value of ARS inventory, which
reduced the margin by 2%. See Note 10 "Non-Ordinary Charges and Expenses" of
Notes to Consolidated Financial Statements. Lastly, pricing pressures and other
margin charges account for the remainder of the overall decline in gross
margins. The increase in fiscal 1998 compared to fiscal 1997 was the result of
increased sales of the higher margin Pinnacle(3) product.
RTP service revenues for fiscal 1999 and 1998 were from the ARS refurbishing
business that was formed in early fiscal 1998. In November 1998, ARS exited the
low margin x-ray service business, causing service revenues to decrease 19% and
service margins to increase 9% in fiscal 1999.
HEALTH CARE INFORMATION SYSTEMS ("HCIS")
HCIS historically generated revenues from the sale of radiology, laboratory
and cardiology information systems as well as from providing support for these
products. In the first quarter of fiscal 1998, the Company took a non-ordinary
charge of $11.3 million to discontinue the development and marketing of LabStat,
its laboratory information system product, based on a decision by the Company's
Board of Directors made in that quarter. See Note 10 "Non-Ordinary Charges and
Expenses" of Notes to Consolidated Financial Statements. HCIS' current revenues
are derived from the sale and support of radiology and cardiology information
systems and the support of the Company's legacy laboratory information systems.
Summary information related to HCIS product and support revenues and gross
profit margins for fiscal 1999 compared to fiscal 1998 and fiscal 1997 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS) 1999 1998 1997
- - - ----------------------------- -------- -------- --------
<S> <C> <C> <C>
Revenues:
Product...................................... $22,531 $22,071 $12,726
Service...................................... 15,163 16,554 15,546
------- ------- -------
Total...................................... $37,694 $38,625 $28,272
------- ------- -------
Geographical mix:
United States................................ 96% 96% 97%
International................................ 4% 4% 3%
Gross profit (loss):
Product...................................... $ 9,379 $(2,153) $ 4,183
Service...................................... 8,019 8,130 7,323
------- ------- -------
Total...................................... $17,398 $ 5,977 $11,506
------- ------- -------
Gross margin:
Product...................................... 42% (10)% 33%
Service...................................... 53% 49% 47%
Total...................................... 46% 15% 41%
</TABLE>
HCIS product revenues increased 2% from fiscal 1998 to fiscal 1999 and
increased 73% from fiscal 1997 to fiscal 1998. The Company believes the reduced
revenue growth for fiscal 1999 was due to customers deferring purchasing
decisions due to their perceived Year 2000 risks. The revenue growth in fiscal
1998 was due to greater penetration of the commercial sector by HCIS' QuadRIS
product and continued growth in government sales under the Company's digital
imaging network--picture archiving communications systems (DIN-PACS) contract
with the United States Department of Defense.
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Gross margins on HCIS products from fiscal 1998 to fiscal 1999 increased due
to a $11.3 million charge associated with the discontinuance of the LabStat in
fiscal 1998. See Note 10 "Non-Ordinary Charges and Expenses" of Notes to
Consolidated Financial Statements. Excluding the effects of this discontinued
product charge, gross profit margins for HCIS products were comparable in fiscal
1998 and 1999, and increased in fiscal 1998 from fiscal 1997 due to DIN-PACS
contracts, fixed costs being absorbed by a greater number of unit sales, and the
discontinuance of the lower margin LabStat product.
HCIS service revenues decreased 8% from fiscal 1998 to fiscal 1999 due to
fewer laboratory service contracts from the legacy product, LabStat. Service
revenues increased 6% from fiscal 1997 to fiscal 1998 due to increased radiology
hardware support revenues and growth in the QuadRIS installed base. Service
gross margins increased 4% from fiscal 1998 to fiscal 1999 due to the decline in
lower margin third party maintenance fees. Service gross margins increased 2%
from fiscal 1997 to fiscal 1998 due to the increased QuadRIS installed base.
OPERATING AND OTHER EXPENSES
As a percentage of the Company's revenues, operating and other expense were
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating expenses:
Marketing and sales................................... 18.2% 16.5% 15.8%
Research and development, net of software
capitalization...................................... 5.3% 5.6% 6.3%
General and administrative............................ 15.7% 6.5% 6.0%
Goodwill amortization................................. 0.6% 0.7% 0.4%
Acquired in-process research and development.......... 0.4% 0.0% 0.2%
Restructuring charges................................. 1.2% 0.0% 0.0%
Discontinued products................................. 0.0% 0.6% 0.0%
Acquisition expense write off......................... 0.0% 0.4% 0.2%
---- ---- ----
41.4% 30.3% 28.9%
---- ---- ----
Other expense, net...................................... 1.3% 1.4% 2.0%
</TABLE>
Marketing and sales expenses totaled $62.4, $49.6 and $41.6 million in
fiscal 1999, 1998 and 1997, respectively. Marketing and sales expenses increased
$12.8 million in fiscal 1999 and $8.0 million in fiscal 1998, when compared to
respective prior fiscal years. The fiscal 1999 increase can be attributed to
commissions associated with higher revenues, increased international sales
expense from RTP, HCIS ENVOI product marketing spending and field service
commissions related to year 2000 compliance work. The fiscal 1998 increase is
primarily attributed to higher revenues.
Research and development expenses, net of software capitalization, totaled
$18.2, $16.8 and $16.7 million in fiscal 1999, 1998, and 1997, respectively.
Research and development expenses, net of software capitalization expenses,
increased $1.4 million in fiscal 1999 and $0.1 million in fiscal 1998, when
compared to respective prior fiscal years. The increase in fiscal 1999 is due to
new development programs in Medical Systems and RTP. The increase in fiscal 1998
is a result of additional investments made by the Company to accelerate the
development of the Company's laboratory product and to maintain and enhance the
Company's radiology product. Capitalized software costs were $8.9, $7.0 and
$4.5 million in fiscal 1999, 1998 and 1997, respectively.
General and administrative expenses totaled $53.6, $19.5 and $15.9 million
in fiscal 1999, 1998 and 1997, respectively. General and administrative expenses
increased $34.1 million in fiscal 1999 and $3.6 million in fiscal 1998, when
compared to respective prior fiscal years. In fiscal 1999, the Company revised
its estimates of the recoverability of its South American receivables and
provided additional reserves of
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$8.9 million. Additionally in fiscal 1999, following a review of all receivables
on the Company's books other than South American receivables, the Company
increased its bad debt reserves by $6.0 million. The Company incurred
$9.3 million of extra expenses related to the additional employees and the
increased use of consultants associated with business development, finance,
quality systems, information technologies, and legal. The Company had expenses
of $1.2 million in the fourth quarter of fiscal year 1999, associated with
litigation expenses related to the pending class action lawsuit and shareholder
derivative action. See Note 10 "Non-Ordinary Charges and Expenses" of Notes to
Consolidated Financial Statements. The increase in fiscal 1998 as a percentage
of sales and in dollar volume from fiscal 1997 to fiscal 1998 was due to higher
staffing levels.
Goodwill amortization totaled $2.0, $2.2 and $1.0 million in fiscal 1999,
1998 and 1997, respectively. Goodwill amortization decreased $0.2 million in
fiscal 1999 and increased $1.2 million in fiscal 1998, when compared to
respective prior fiscal years. The decrease in fiscal 1999 is due to having
fully amortized a goodwill asset from an older acquisition. The increase in
fiscal 1998 resulted from the amortization of goodwill expenses associated with
acquisitions of Southern Cats, CT Solutions and ONES in fiscal 1998. See Note 4
"Acquisitions" of Notes to Consolidated Financial Statements.
The Company also recognized a pre-tax charge to operations of $1.4 million
for the purchase of acquired in-process research and development related to the
acquisition of UGM. This charge was computed using the percent complete method,
discounting the relevant future cash flows at 40% reflecting the weighted
average cost of capital and the specific risks associated with each in-process
product. See Note 4 "Acquisitions" of Notes to Consolidated Financial
Statements.
Restructuring charges totaled $4.0 million in fiscal 1999. On September 27,
1998, the Company concluded a comprehensive review of its international
operations and decided to restructure its European and South American
businesses. As a result, the Company recorded charges in fiscal 1999 of $2.5 and
$0.8 million, respectively. In June of 1999, the Company also decided to
restructure its ADAC Medical Technologies ("AMT") business and recorded a charge
of $0.5 million. See Note 10 "Non-Ordinary Charges and Expenses". In
September 1999, the Company decided to carry out additional restructuring of its
South American business and recorded a charge of $0.5 million and recovered
$0.2 million of European restructuring charges due to revised estimates related
to employee severance costs. The fiscal 1999 restructuring costs were comprised
of $2.3 million for severance expenses, $0.8 million for legal and consulting
costs, $0.2 million for facilities and $0.8 million for other costs associated
with the restructuring. As of October 3, 1999, $2.0 million remained in the
accrual for restructuring costs comprised of $1.1 million for severance
expenses, $0.5 million for legal and consulting, $0.2 million for facilities and
$0.2 million for other costs associated with the restructuring. The Company
currently anticipates that these restructuring costs will be paid during fiscal
2000. See Note 3 "Restructuring Charges" of Notes to Consolidated Financial
Statements.
In fiscal 1998, the Company recognized non-ordinary pre-tax charges of
approximately $1.3 million to write off capitalized expenses relating to
specific acquisitions activities which were discontinued by the Company and
$1.9 million for discontinuing the Company's physician network services
business. See Note 10 "Non-Ordinary Charges and Expenses" of Notes to
Consolidated Financial Statements.
Other expense, net, which primarily consists of interest expense and foreign
currency transaction gains and losses, totaled $4.5, $4.3 and $5.3 million in
fiscal 1999, 1998 and 1997, respectively. Other expense, net, increased
$0.2 million in fiscal 1999 and decreased $1.0 million in fiscal 1998, when
compared to respective prior fiscal years. The fiscal 1999 increase was due to
increased interest expense incurred on higher debt levels. The 1998, decrease
was primarily due to foreign currency gains in fiscal 1998, partially offset by
increased interest expense.
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<PAGE>
INCOME TAXES
The Company's effective tax rate for fiscal years 1999, 1998 and 1997 was
23%, 39% and 39%, respectively. The principal reasons for the difference between
the statutory tax rate of 35% and the effective tax rate of 23% in fiscal 1999
related to (1) changes in assumptions regarding the realization of certain
deferred tax assets, and (2) state income taxes and certain permanent
differences. Fiscal 1998 and 1997 effective tax rates were approximately equal
to the Company's statutory federal and state tax rates after utilization of tax
credits. The Company currently expects the fiscal 2000 effective tax rate to be
between 35% and 40%.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes its available cash and cash equivalents, cash to be
generated primarily from operations, and its available credit lines, will
provide adequate funds to finance the Company's operations in fiscal 2000. If
necessary, the Company will seek to increase its credit lines to support the
Company's future growth. There can be no assurance that credit lines sufficient
to satisfy the Company's cash requirements will be available on terms acceptable
to the Company, if at all.
Cash provided by operating activities was $6.2 million in fiscal 1999. The
primary source of cash was the net loss from operations of $33.6 million, which
includes $53.5 million (net) of non-cash charges. Net changes in operating
assets and liabilities of $13.6 million reduced the amount of cash otherwise
provided by operating activities. Cash of $27.3 million was provided by the
decrease in inventories primarily due to a work-down of finished goods
inventory. These sources of cash were partially offset by the $25.1 million net
increase in accounts receivable due to a decrease in accounts receivable sold to
third party finance companies and, to a lesser degree, increased sales for
fiscal 1999 when compared to fiscal 1998.
Cash provided by operating activities was $5.3 million in fiscal 1998. The
primary source of cash from operations was the net income of $7.4 million with
non-cash charges of $33.8 million. The non-cash charges primarily consist of
amounts provided for discontinued products, and depreciation and amortization.
These sources of cash were partially offset by a $30.8 increase in inventories.
Cash of $37.0 million was used for investing activities in fiscal 1999. This
activity consisted primarily of $17.0 million for the UGM acquisition (see
Note 4 "Acquisitions" of Notes to Consolidated Financial Statements),
$9.7 million capital equipment expenditures, and $8.9 million increase in
capitalized software. Capital expenditures were primarily for internal use
engineering and sales demonstration equipment and equipment to support new
enterprise software being installed for the sales and service groups. The
increase in capitalized software is from the continued investment in the next
generation of software products. Cash of $18.2 million was used for investing
activities in fiscal 1998. This activity consisted principally of capitalized
software and intangibles from the acquisitions of CT Solutions and ONES.
Financing activities provided $32.1 million of cash in fiscal 1999. This was
primarily attributable to $28.6 million of increased borrowings and
$3.9 million of proceeds from common stock issued to employees under the
Company's employee stock purchase and option plans. Financing activities
provided $12.7 million of cash in fiscal 1998. This was primarily attributable
to $12.8 million of proceeds from common stock issued to employees under the
Company's employee stock purchase and option plans.
The Company has a $75.0 million revolving credit facility with a bank
syndicate. The credit facility offers borrowings in either U.S. dollars or in
foreign currencies and expires on March 29, 2002. The Company pays interest and
commitment fees on its borrowings based on its debt level in relation to its
cash flow. Commitment fees range from 0.25% to 0.75% of unused commitment and
interest rates are based on the bank prime rate or LIBOR plus rates ranging from
1.0% to 2.5%. At October 3, 1999, the Company had $23.4 million available for
borrowing under this facility. Borrowings are collateralized by all of the
Company's assets, and the Company is required to comply with certain financial
and other covenants. In February 1999, the Company delayed delivering financial
statements and related information to its banks in connection with the
restatement occurring at that time. This constituted a default under the
facility. In
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<PAGE>
May 1999, the Company again delayed delivering financial statements and related
information to its banks in connection with the delayed public release of second
quarter financials for fiscal 1999. This also constituted a default under the
facility. In both cases, the banks waived the defaults and consented to an
extension of time required to provide such information. The Company has since
delivered all required information within the time frames required by the
covenants. In addition, the results of the Company's operations in the second
and third quarters of fiscal 1999 caused the Company to be out of compliance
with all financial covenants in the facility. The banks waived this default for
the second quarter of fiscal 1999. The Company amended the facility on
August 17, 1999, modifying the financial covenants to be more reflective of the
Company's recent financial performance. The Company was in compliance with all
financial covenants in the facility on October 3, 1999.
The Company's liquidity is affected by many factors, some based on the
normal ongoing operations of the business and others related to the
uncertainties of the industry and global economies. Although the Company's cash
requirements will fluctuate based on the timing and extent of these factors,
management believes that cash to be generated from operations, together with the
liquidity provided by existing cash balances and borrowing capability, will be
sufficient to satisfy commitments for capital expenditures and other cash
requirements for the next fiscal year. However, the Company may need to increase
its sources of capital through additional borrowings or the sale of securities
in response to changing business conditions or to pursue new business
opportunities. There can be no assurance that such additional sources of capital
will be available on terms favorable to the Company, if at all.
RECENT PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standard 133, "Accounting
for Derivative Instruments and Hedging Activities" ("FAS 133"), was issued and
is effective for fiscal years commencing after June 15, 2000. The Company will
comply with the requirements of FAS 133 in fiscal year 2001. Currently the
Company does not hold any derivative instruments or engage in any hedging
activities.
BUSINESS CONSIDERATIONS
From time to time, the Company may disclose, through press releases, filings
with the SEC or otherwise, certain matters that constitute forward looking
statements within the meaning of the Federal securities laws. These statements,
including the forward looking statements contained in this Form 10-K, are
subject to a number of risks and uncertainties, which could cause actual results
to differ materially from those projected, including without limitation those
set forth below. These forward looking statements include statements concerning
the Company's future bookings, revenue, expenses and earnings, the establishment
of additional reserves and the recording of non-ordinary charges. Factors that
could cause actual results to differ materially from those contained in such
forward-looking statements include, but are not limited to, the existence of
significant competition in each of the business segments in which the Company
conducts business; the impact of Year 2000 on the Company's results; the
Company's dependence on successfully developing, introducing and commercializing
new products and developing enhancements to existing products; the
collectibility of the Company's receivables; changes to the Company's operating
structure and charges and dislocations that may result therefrom; the impact of
international economic conditions on the Company's business; and a number of
factors that can introduce variability in the Company's operating results,
including the timing of product orders, shipments, and installations. Further
information on these and other factors is found below. All forward-looking
statements are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update such statements.
LITIGATION
Commencing in December 1998, a total of eleven class action lawsuits were
filed in federal court by or on behalf of stockholders who purchased Company
stock between January 10, 1996 and December 28, 1998. These actions name as
defendants the Company and certain of its present and former officers and
22
<PAGE>
directors. The complaints allege various violations of the federal securities
laws in connection with the restatement of the Company's financial statements
and seek unspecified but potentially significant damages. In April 1999, these
actions were ordered consolidated and, in July 1999, the plaintiffs filed a
consolidated amended complaint. The Company intends to contest this action
vigorously. A stockholder derivative action, purportedly on behalf of the
Company and naming as defendants Company officers and directors was also filed
in state court seeking recovery for the Company based on stock sales by these
defendants during the above time period. The Company is also a defendant in
various legal proceedings incidental to its business.
While it is not possible to determine the ultimate outcome of these actions
at this time, management is of the opinion that any liability resulting from
these claims would not have a material adverse effect on the Company's
consolidated financial position. However, the outcome of these actions could
have a material adverse effect on the Company's results of operations or cash
flows.
The Company has been informed that the United States Securities and Exchange
Commission (SEC) has issued a Formal Order of Private Investigation in
connection with matters relating to the Company's previously announced
restatement of its financial results for 1996, 1997 and the first three quarters
of 1998. The Company is continuing to cooperate with the SEC. The Company is
unable to predict the outcome of the investigation at this time.
SOUTH AMERICAN OPERATIONS
As previously disclosed in the Company's Form 10-Q for the quarter ended
April 4, 1999, a significant number of the Company's customers in its principal
South American markets of Brazil, Argentina and Colombia are delinquent in
making periodic payments due under the terms of sales previously made to them,
many of which were supported by third-party financing arrangements that involve
full or partial recourse to the Company. Deteriorating economic conditions and
currency devaluations occurring primarily during fiscal 1999, and ineffective
monitoring of delinquencies and collection efforts by the Company, may have all
contributed to delays in the collection of accounts receivable from customers in
these markets. During fiscal 1999, the Company undertook renewed collection
efforts and completed an evaluation of each receivable balance and recourse
obligation to determine the level of reserves required for these customers. As a
result of this evaluation, the Company has revised its estimate of the
recoverability of its South American receivables and recourse obligations and
provided additional reserves of $8.9 million during fiscal 1999, of which
$1.8 million was recorded in the fourth quarter. These charges resulted in total
reserves of $9.8 million against total gross receivables and recourse
obligations for South America of approximately $12.8 million. Consequently, at
October 3, 1999, the Company has net South American receivables of $1.8 million
and recourse contingencies of $1.2 million.
GOVERNMENT REGULATION
The design, clinical activities, manufacturing, labeling, distribution,
sale, marketing, advertising and promotion of the company's products are subject
to extensive and rigorous governmental regulation in the United States and
foreign countries. In the United States and certain foreign countries, the
process of obtaining and maintaining required regulatory clearances or approvals
is lengthy, expensive and uncertain. There can be no assurance that any
necessary clearance or approval will be granted the Company or that FDA or other
regulatory agency review will not involve delays adversely affecting the
Company. In addition, a failure to comply with applicable regulatory
requirements could result in enforcement actions including Warning Letters, as
well as civil penalties, injunctions, suspensions or losses of regulatory
clearances, product recalls, seizure or administrative detention of products,
operating restrictions through consent decrees or otherwise, and criminal
prosecution, which could have a material adverse effect upon the Company.
Following an inspection in mid-1997, Cortet, Inc., which the Company
acquired in May 1997, received a Warning Letter from the FDA concerning
inspectional observations relating to the adequacies of
23
<PAGE>
Cortet's quality assurance system. Cortet responded to the observations and the
Warning Letter and received correspondence from the FDA's Florida District
Office indicating that Cortet's responses appeared to adequately address the
FDA's concerns. In mid-1998, the State of California, under a contract with the
FDA, completed a routine inspection of ADAC's facility in Milpitas, California.
The state investigator issued a FDA Form 483 containing observations of
non-compliance of the recently implemented QSR. The state investigator also
placed a temporary shipment hold on Pinnacle(3) pending the Company
satisfactorily responding to the State's concerns regarding the Company's
quality systems. The Company promptly responded to the FDA and the State and
initiated a number of corrective actions. The State lifted the Pinnacle(3)
shipment hold on August 28, 1998 and, in September 1998, ADAC received a letter
from the FDA indicating that the Company had adequately responded to the FDA's
concerns. Although the Company was deemed to have adequately responded to the
State and FDA following the foregoing inspections, the Company is responsible
for the full implementation of all corrective actions. In addition, as all
companies are, the Company remains subject to periodic inspections in the future
and there can be no assurance as to the timing or outcome of any subsequent
inspection. The scope of any re-inspection could be more comprehensive than the
inspections of Cortet and the Company's Milpitas facility, and there can be no
assurance that the FDA, upon re-inspection, will deem the Company's corrective
actions to be adequate or that additional corrective action, in areas not
addressed in the Warning Letter or the Form 483, will not be required. Any
failure by the Company to fully implement the required corrective actions or to
comply with any other applicable regulatory requirements could have a material
adverse effect on the Company's ability to continue to manufacture and
distribute its products, and in more serious cases, could result in seizure,
recall, injunction and/or civil fines. Any of the foregoing, would have a
material adverse effect on the Company.
The Company is also subject to FTC restrictions on advertising and numerous
federal, state and local laws relating to such matters as safe working
conditions, manufacturing practices, environmental protection and disposal of
hazardous substances. Changes in existing requirements, adoption of new
requirements or failure to comply with applicable requirements could have a
material adverse effect on the Company.
COMPETITION
The markets served by the Company are characterized by rapidly evolving
technology, intense competition and pricing pressure. There are a number of
companies that currently offer, or are in the process of developing, products
that compete with products offered by the Company. Some of the Company's
competitors have substantially greater capital, engineering, manufacturing and
other resources than the Company. These competitors could develop technologies
and products that are more effective than those currently used or marketed by
the Company or that could render the Company's products obsolete or
noncompetitive, which could have a material adverse effect on the Company's
business.
DEPENDENCE ON NEW PRODUCTS AND PRODUCT ENHANCEMENTS
ADAC's success is dependent upon the successful development, introduction
and commercialization of new products and the development of enhancements to
existing products. Because the markets in which the Company competes are highly
competitive, the Company must continue to develop and successfully commercialize
innovative new products and product enhancements such as SKYLight, C-PET, Forte,
MCD-PET, MCD/AC-PET and ENVOI in order to pursue its growth strategy. The
development of new products and product enhancements entails considerable time
and expense, including research and development costs, and the time, expense and
uncertainty involved in obtaining any necessary regulatory clearances. Failure
of the Company to develop, market and sell new products and enhancements
effectively in future periods could have a material adverse effect on the
Company's results of operations and financial condition.
24
<PAGE>
FUTURE OPERATING RESULTS
The Company's future operating results may vary substantially from period to
period. The timing and amount of revenues are subject to a number of factors
that make estimation of revenues and operating results prior to the end of the
quarter uncertain. The timing of revenues can be affected by delays in product
introductions, shipments and installation scheduling, as well as general
economic and industry conditions. Furthermore, of the orders received by the
Company in any fiscal quarter, a disproportionately large percentage has
typically been received and shipped toward the end of that quarter, which is
typical for the industry. Accordingly, results for a given quarter can be
adversely affected if there is a substantial order shortfall late in that
quarter. In addition, the Company's bookings and backlog cannot necessarily be
relied upon as an accurate predictor of future revenues as the timing of such
revenues is dependent upon completion of customer site preparation and
construction, installation scheduling, receipt of applicable regulatory
approvals, customer financing and other factors. Accordingly, there can be no
assurance that orders will mature into revenue. The Company has accounts
receivable due from customers in South America. Recent changes in economic
conditions in that region, including the devaluation of Brazilian currency, may
adversely affect the Company's ability to collect these accounts receivable. The
Company recorded reserves during 1999 relating to a majority of these accounts
receivable. If the Company were unable to collect the remaining portion of these
accounts receivable its future results of operations could be adversely
affected.
MATERIAL WEAKNESSES IN INTERNAL CONTROLS
After completion of their audit of the Company's fiscal 1998 consolidated
financial statements, the Company's independent accountants reported to the
Company's audit committee that they had found material weaknesses in the
Company's internal accounting controls. Following receipt of this report, the
Company retained a nationally recognized accounting firm as consultant and
internal auditor other than its independent accountants to review its controls.
That firm has developed a number of recommendations and has been retained to
assist the Company in implementing certain process improvements. The Company
believes that it has already taken steps to remedy certain weaknesses in its
control functions, and that improvements already in place, coupled with
improvements the Company plans to make in the near future, are expected to
substantially improve the timeliness and accuracy of the Company's internal
financial reporting and monitoring functions.
RISKS RELATED TO ACQUISITIONS
In the past three years, the Company has acquired a number of businesses,
and anticipates that it may continue to acquire businesses whose products and
services complement the Company's businesses. Acquisitions involve numerous
risks, including, among other things, difficulties in successfully integrating
the businesses (including products and services, as well as sales and marketing
efforts), failure to retain existing customers or attract new customers to the
acquired business operations, failure to retain key technical and management
personnel, coordinating geographically separated organizations, and diversion of
ADAC management attention. These risks, as well as liabilities of any acquired
business (whether known or unknown at the time of acquisition), could have a
material adverse effect on the results of operations and financial condition of
the Company, including adverse short-term effects on its reported operating
results. The Company seeks to mitigate these risks by taking reserves when
appropriate in connection with these acquisitions. In addition, the Company has
in the past and may in the future issue stock as consideration for acquisitions.
Future sales of shares of the Company's stock issued in such acquisitions could
adversely affect or cause fluctuations in the market price of the Company's
Common Stock.
25
<PAGE>
YEAR 2000 COMPLIANCE
The following statements are a "Year 2000 Readiness Disclosure" within the
meaning of the Year 2000 Information and Readiness Disclosure Act. Many
currently installed computer systems and software products are coded to accept
only 2 digit entries in the date code field. Beginning in the Year 2000, these
date code fields will need to accept 4 digit entries to distinguish 21st century
dates from 20th century dates. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. As a
result, computer systems and/or software used by many companies may need to be
upgraded to comply with such Year 2000 requirements. The Company has utilized
both internal and external resources to identify, correct or reprogram, and test
its internal systems, for Year 2000 compliance. Although management is
continuing to assess the expense associated with internal Year 2000 compliance,
the Company does not believe that the costs incurred in connection with its Year
2000 compliance program will have a material adverse effect on the Company's
results of operations or financial condition.
The Company has completed an assessment and analysis of its internal
information technology systems, software and manufacturing equipment. The
Company has implemented the significant system changes needed to correct its
internal Year 2000 issues. While the Company currently expects that the Year
2000 will not pose significant internal operational problems, failure to fully
identify all Year 2000 dependencies in the Company's systems could have a
material adverse effect on the Company's results of operations.
The Company has established a program to assess its products to ensure that
they are Year 2000 compliant. To monitor this program and to inform customers
about the Year 2000 issues with respect to its products, the Company has created
a website at www.adaclabs.com/about/year20001.html. This website identifies the
status of Year 2000 compatibility of its products, including products that are
Year 2000 compliant, products that need software updates, products that require
hardware upgrades, and products that cannot be made Year 2000 compliant.
The Company is selling, or providing under warranty or service contracts,
software license upgrades to update its installed base to make its products Year
2000 compliant. For older equipment which the Company no longer manufactures,
the Company will sell hardware upgrades to its customers which will address the
Year 2000 compliance where possible. The Company has contacted by mail all
customers which require computer hardware upgrades, and has also posted
information relating to Year 2000 compliance for its products on the Company's
website as described above.
The Company has completed gathering information from its suppliers and
vendors to determine the extent to which the Company's capabilities are
vulnerable to failure by those third parties to remedy their own Year 2000
issues. The Company does not believe that there will be any material adverse
effect on the Company's results of operations. However, there is no guarantee
that the systems and products of other companies on which the Company relies
will be timely converted or that they will not have a material adverse effect on
the Company.
The Company has implemented a Year 2000 contingency plan and incurred Year
2000 costs of approximately $1.2 million. This amount does not include any
potential costs related to any customer or other claim. In addition, these costs
are based on current assessments of the activities already completed and are
subject to any changes necessary, after the Year 2000 transition occurs.
Actual results may vary as a result of number of factors, including those
described herein. There can be no assurance that the Company has successfully
modified all such products, services and systems to comply with Year 2000
requirements, which failure could have a material adverse effect on the
Company's operating results.
In addition, the Company has ensured that the software included in its
products and other systems is Year 2000 compliant. Failure (or perceived
failure) of such products to be Year 2000 compliant could significantly
adversely affect sales of such products, which could have a material adverse
effect on the
26
<PAGE>
Company's results of operations and financial condition. In addition, the
Company believes that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues in a variety of ways. Potential
customers may choose to defer purchasing Year 2000 compliant products until they
believe it is absolutely necessary, thus resulting in potentially stalled market
sales within the industries in which the Company competes. Conversely, Year 2000
issues may cause other companies to accelerate purchases, thereby causing an
increase in short-term demand and a consequent decrease in long-term demand for
the Company's products. Additionally, Year 2000 issues could cause a significant
number of companies, including current Company customers, to reevaluate their
current system needs, and as a result consider switching to other systems or
suppliers. Any of the foregoing could result in a material adverse effect on the
Company's business, operating results and financial condition.
HEALTH CARE REFORM; REIMBURSEMENT AND PRICING PRESSURE
There is significant concern today about the availability and rising cost of
health care in the United States. Cost containment initiatives, market pressures
and proposed changes in applicable laws and regulations may have a dramatic
effect on pricing or potential demand for medical devices, the relative costs
associated with doing business and the amount of reimbursement by both
government and third party payors, which could have a material adverse effect on
the Company's results of operations.
INTELLECTUAL PROPERTY RIGHTS
The Company's success depends in part on its continued ability to obtain
patents, to preserve its trade secrets and to operate without infringing the
proprietary rights of third parties. There can be no assurance that pending
patent applications will mature into issued patents or that third parties will
not make claims of infringement against the Company's products or technologies
or will not be issued patents that may require payment of license fees by the
Company or prevent the sale of certain products by the Company.
RELIANCE ON SUPPLIERS
Certain components used by the Company to manufacture its products such as
the sodium iodide crystals used in the Company's Medical Systems are presently
available from only one supplier. The Company also relies on several significant
vendors for hardware and software components for its health care information
systems products. The loss of any of these suppliers, including any
single-source supplier, would require obtaining one or more replacement
suppliers as well as potentially requiring a significant level of hardware and
software development to incorporate the new parts into the Company's products.
Although the Company has obtained insurance to protect against loss due to
business interruption from these and other sources, there can be no assurance
that such coverage would be adequate.
PRODUCT LIABILITY
Although the Company maintains product liability insurance coverage in an
amount that it deems sufficient for its business, there can be no assurance that
such coverage will ultimately prove to be adequate or that such coverage will
continue to remain available on acceptable terms, if at all.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock is and is expected to
continue to be subject to significant fluctuations in response to variations in
anticipated or actual operating results, market speculation, announcements of
new products or technology by the Company or its competitors, changes in
earnings estimates by the Company's analysts, trends in the health care industry
in general and other factors, many of which are beyond the control of the
Company. In addition, broad market fluctuations as well as general economic or
political conditions or initiatives, such as health care reform, may adversely
impact the market price of the Common Stock regardless of the Company's
operating results.
27
<PAGE>
MARKET RISK
FOREIGN CURRENCY EXCHANGE
The Company faces exposure to adverse movements in foreign currency exchange
rates. These exposures may change over time as business practices evolve and
could have a material adverse impact on the Company's financial results. The
Company's primary exposures relate to non-U.S. dollar denominated sales in
Europe and Canada where the principal currencies are Dutch Guilders, German
Deutsche Marks and Canadian Dollars. Currently, the Company does not hedge
foreign currency exchange rate exposures.
INTEREST RATE RISK
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's cash equivalents and notes payable to banks. The
Company's cash equivalents include highly liquid instruments with an original
maturity of three months or less. The Company primarily enters into debt
obligations to support general corporate purposes, including working capital
requirements, capital expenditures, and acquisitions. The Company is subject to
fluctuating interest rates that may impact, adversely or otherwise, its results
of operations or cash flows for its variable rate notes payable and cash
equivalents.
The estimated fair value of the Company's cash and cash equivalents
approximates their carrying values based on the short maturities of these
financial instruments. The estimated fair value of the Company's debt
obligations approximates their carrying values based on rates currently
available to the Company for debt with similar terms and remaining maturities.
Although payments under certain of the Company's operating leases for its
facilities are tied to market indices, the Company is not exposed to material
interest rate risk associated with these obligations. The Company does not hedge
interest rate change exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Financial Statements
Consolidated Statements of Operations..................... 29
Consolidated Balance Sheets............................... 30
Consolidated Statements of Cash Flows..................... 31
Consolidated Statements of Shareholders' Equity........... 32
Notes to Consolidated Financial Statements................ 33-55
Report of Independent Accountants......................... 56
Financial Statement Schedules:
For the Fiscal Years Ended October 3, 1999,
September 27, 1998 and September 28, 1997:
Schedule I--Valuation and Qualifying Accounts............. 62
Schedule II--Supplementary Statement of Operations
Information............................................. 63
</TABLE>
28
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
---------------- ------------------- -------------------
<S> <C> <C> <C>
REVENUES, NET:
Product..................................... $244,274 $219,046 $194,238
Service..................................... 97,857 81,482 69,649
-------- -------- --------
342,131 300,528 263,887
-------- -------- --------
COST OF REVENUES:
Product..................................... 171,246 124,113 114,639
Service..................................... 68,522 54,923 45,463
Discontinued product........................ -- 13,661 --
-------- -------- --------
239,768 192,697 160,102
-------- -------- --------
Gross profit.................................. 102,363 107,831 103,785
-------- -------- --------
OPERATING EXPENSES:
Marketing and sales......................... 62,387 49,637 41,570
Research and development.................... 18,188 16,836 16,728
General and administrative.................. 53,570 19,537 15,930
Goodwill amortization....................... 1,951 2,165 1,015
Acquired in-process research and
development............................... 1,407 -- 531
Restructuring charges....................... 4,024 -- --
Discontinued products....................... -- 1,910 --
Acquisition expense write off............... -- 1,300 651
-------- -------- --------
141,527 91,385 76,425
-------- -------- --------
Operating income (loss)....................... (39,164) 16,446 27,360
-------- -------- --------
OTHER EXPENSE:
Interest and other, net..................... 4,501 4,338 5,271
-------- -------- --------
Income (loss) before provision (benefit) for
income taxes................................ (43,665) 12,108 22,089
Provision (benefit) for income taxes.......... (10,045) 4,722 8,615
-------- -------- --------
Net income (loss)............................. $(33,620) $ 7,386 $ 13,474
-------- -------- --------
Net income (loss) per share:
Basic....................................... $ (1.64) $ .38 $ .73
Diluted..................................... $ (1.64) $ .36 $ .69
Number of shares used in per share
calculations:
Basic....................................... 20,466 19,500 18,419
Diluted..................................... 20,466 20,387 19,534
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 3, 1999 SEPTEMBER 27, 1998
---------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,796 $ 4,869
Trade receivables, net of allowance for doubtful accounts
of $14,707 in 1999 and $2,319 in 1998................... 80,393 55,316
Tax and other receivables................................. 2,265 7,294
Inventories, net.......................................... 35,076 78,311
Prepaid expenses and other current assets................. 5,620 3,718
Current deferred income taxes............................. 13,717 3,701
-------- --------
Total current assets.................................... 142,867 153,209
Service parts, net.......................................... 18,297 18,063
Fixed assets, net........................................... 15,555 11,007
Capitalized software, net of accumulated amortization of
$13,167 in 1999 and $9,938 in 1998........................ 17,417 11,770
Intangibles, net............................................ 41,024 26,546
Deferred income taxes....................................... 3,230 6,440
Other assets, net........................................... 1,272 2,748
-------- --------
Total Assets............................................ $239,662 $229,783
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks.................................... $ 51,961 $ 23,396
Accounts payable.......................................... 13,492 22,887
Deferred revenues......................................... 17,185 11,591
Accrued compensation...................................... 12,750 8,903
Customer deposits and advances............................ 6,757 5,317
Warranty and installation................................. 5,835 6,595
Other accrued liabilities................................. 20,461 11,110
-------- --------
Total current liabilities............................... 128,441 89,799
Non-current liabilities..................................... 3,708 3,082
-------- --------
Total Liabilities......................................... 132,149 92,881
-------- --------
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock, no par value: Authorized: 5,000 shares;
issued and outstanding: none
Common stock, no par value: Authorized: 50,000 shares;
issued and outstanding: 20,542 shares as of October 3,
1999 and 20,253 shares as of September 27, 1998......... 154,275 149,599
Accumulated deficit....................................... (43,886) (10,266)
Accumulated other comprehensive loss...................... (2,876) (2,431)
-------- --------
Total shareholders' Equity.................................. 107,513 136,902
-------- --------
Total Liabilities and Shareholders' Equity.................. $239,662 $229,783
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
---------------- ------------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $(33,620) $ 7,386 $13,474
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 17,670 12,395 11,125
Provision for doubtful accounts........................... 20,005 1,905 2,513
Deferred income taxes..................................... (9,382) 3,093 14,835
Stock compensation expenses............................... 548 343 --
Inventory allowance....................................... 19,205 (785) 1,008
Restructuring charges..................................... 4,024 -- --
Acquired in-process research and development.............. 1,407 -- 531
Discontinued products..................................... -- 15,571 --
Acquisition expense write off............................... -- 1,300 651
Changes in operating assets and liabilities:
Trade receivable.......................................... (45,078) (12,025) (6,160)
Tax and other receivables................................. 5,029 (5,834) (1,460)
Inventories............................................... 27,311 (30,841) (3,062)
Prepaid expenses and other current assets................. (2,525) (2,176) 2,364
Service parts............................................. (5,459) (3,996) (3,007)
Accounts and dividends payable............................ (7,912) 11,679 (3,419)
Deferred revenues......................................... 4,863 (1,303) (654)
Accrued compensation...................................... 3,819 1,336 (1,342)
Customer deposits and advances............................ 1,440 2,176 14
Warranty and installation, and other accrued
liabilities............................................. 3,852 6,029 (5,765)
Non-current liabilities................................... 1,013 (920) 246
-------- ------- -------
Net cash provided by operating activities................... 6,210 5,333 21,892
-------- ------- -------
Cash flows from investing activities:
Capital expenditures...................................... (9,746) (4,930) (6,166)
Capitalized software...................................... (8,877) (6,987) (4,536)
Intangibles and other assets.............................. (1,404) (6,249) (11,176)
Acquisition of UGM, net of acquired cash.................. (16,991) -- --
-------- ------- -------
Net cash used in investing activities....................... (37,018) (18,166) (21,878)
-------- ------- -------
Cash flows from financing activities:
Borrowings (repayments) under short-term debt
Arrangements, net....................................... 28,565 188 (5,009)
Payments under capital lease agreements................... (388) (259) (246)
Proceeds from issuance and repurchase of common stock,
net..................................................... 3,946 12,750 10,733
Dividends paid............................................ -- -- (2,137)
-------- ------- -------
Net cash provided by financing activities................... 32,123 12,679 3,341
-------- ------- -------
Effect of exchange rate changes on cash..................... (388) (65) (1,348)
-------- ------- -------
Net change in cash and cash equivalents..................... 927 (219) 2,007
Cash and cash equivalents, at beginning of the year......... 4,869 5,088 3,081
-------- ------- -------
Cash and cash equivalents, at end of the year............... $ 5,796 $ 4,869 $ 5,088
-------- ------- -------
Supplemental cash flow disclosure:
Interest paid............................................. $ 4,160 $ 4,369 $ 3,835
Income taxes paid......................................... 971 5,281 4,185
Noncash investing and financing activities:
Assets purchased under capital leases..................... 1,534 -- --
Issuance of common stock pursuant to the acquisitions of Southern Cats, Geometrics, Photon and Cortet (see Note 4
"Acquisitions").
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED OTHER
------------------- ACCUMULATED COMPREHENSIVE
SHARES AMOUNT DEFICIT LOSS TOTAL
-------- -------- ----------- ----------------- --------
<S> <C> <C> <C> <C> <C>
Balances, September 29, 1996......... 17,781 $110,943 $(31,126) $(1,018) $ 78,799
Employee stock purchases and
exercises of employee stock
options............................ 623 6,323 -- -- 6,323
Shares sold under dividend
reinvestment plan.................. 38 776 -- -- 776
Shares withheld in payment of stock
options exercised.................. (37) (794) -- -- (794)
Income tax benefit resulting from
exercises of stock options......... -- 2,765 -- -- 2,765
Pooling of interest with Photon...... 57 -- -- -- --
Acquisition of Cortet and
Geometrics......................... 350 7,827 -- -- 7,827
Warrants exercised................... -- 269 -- -- 269
Translation adjustment............... -- -- -- (1,348) (1,348)
Net income........................... -- -- 13,474 -- 13,474
------ -------- -------- ------- --------
Balances, September 28, 1997......... 18,812 128,109 (17,652) (2,366) 108,091
Employee stock purchases and
exercises of employee stock
options............................ 1,215 13,147 -- -- 13,147
Shares sold under dividend
reinvestment plan.................. 50 1,013 -- -- 1,013
Shares withheld in payment of stock
options exercised.................. (51) (1,067) -- -- (1,067)
Income tax benefit resulting from
exercises of stock options......... -- 5,597 -- -- 5,597
Acquisition of Southern Cats......... 139 2,800 -- -- 2,800
Warrants exercised................... 88 -- -- -- --
Translation adjustment............... -- -- -- (65) (65)
Net income........................... -- -- 7,386 -- 7,386
------ -------- -------- ------- --------
Balances, September 27, 1998......... 20,253 149,599 (10,266) (2,431) 136,902
Employee stock purchases and
exercises of employee stock
options............................ 241 3,509 -- -- 3,509
Shares sold under dividend
reinvestment plan.................. 48 825 -- -- 825
Income tax benefit resulting from
exercises of stock options......... -- 342 -- -- 342
Translation adjustment............... -- -- (445) (445)
Net loss............................. -- -- (33,620) -- (33,620)
------ -------- -------- ------- --------
Balances, October 3, 1999............ 20,542 $154,275 $(43,886) $(2,876) $107,513
------ -------- -------- ------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's fiscal year ends on the Sunday closest to September 30. Fiscal
1999 included 53 weeks, while fiscal 1998 and 1997 included 52 weeks.
FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of ADAC
Laboratories and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in the financial statements.
Certain amounts in the prior years' financial statements have been reclassified
to conform to the fiscal 1999 presentation.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The Company's foreign subsidiaries' functional currencies are considered to
be their respective local currencies. Adjustments that arise in translating
their financial statements into U.S. dollars are included as a separate
component of shareholders' equity in the consolidated balance sheets. Gains and
losses from foreign currency transactions have been immaterial for the periods
presented.
REVENUE RECOGNITION
Beginning in fiscal 1999, the Company adopted Statement of Position 97-2
("SOP 97-2") "Software Revenue Recognition," as amended by Statements of
Position 98-4 "Deferral of the Effective Date of a Provision of SOP 97-2,
Software Revenue Recognition" and 98-9 "Modification of SOP 97-2 with Respect to
Certain Transactions". The adoption of SOP 97-2, as amended, applied to revenue
recognized in the Company's RTP and HCIS businesses.
Medical Systems: Revenues related to the Company's Medical Systems business
product sales are recognized upon shipment to the customer, at which time title
and risk of ownership pass. In circumstances where customers request the product
to be temporarily stored or shipped to a site other than where it is intended to
be used, revenue is recognized where the customer makes a written request based
on its circumstances which prevent immediate on site delivery, title and risk of
ownership pass to the customer, a significant down payment is received, and
delivery to the end use site is generally expected within a specified period.
Estimated provisions for installation and warranty are accrued upon revenue
recognition for the product sales. Revenues related to Medical Systems services
are recognized ratably over the relevant contractual period or as the services
are performed. Medical Systems services revenue billed but unearned is included
on the consolidated balance sheets as deferred revenue.
Radiation Therapy Products ("RTP") and Health Care Information Systems
("HCIS") Cardiology: Revenues related to the RTP and HCIS Cardiology businesses
are derived from software licenses, computer hardware sales, related
implementation, training and support services and maintenance contracts.
Revenues for software licenses are recognized at the shipment date. Revenues for
computer hardware sales are recognized at the time of shipment. When software is
sold in conjunction with hardware, revenue is recognized when both software and
hardware have been shipped. The Company's obligations subsequent to shipment
primarily relate to implementation, training and maintenance, such revenues are
recognized as services are performed based on vendor specific objective evidence
of fair value. Revenues from support services and maintenance contracts are
recognized ratably over the relevant contractual period.
33
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Health Care Information Systems (other than Cardiology): Revenues related to
the HCIS business are derived from software licenses, computer hardware sales,
related implementation, training and support services and maintenance contracts.
The installation of HCIS systems typically occurs over a nine to twelve month
period. During fiscal 1997 and 1998, revenues in the HCIS business were
recognized as described in the preceding paragraph. Adoption of SOP 97-2, as
amended, in fiscal 1999 resulted in changes in revenue recognition for the
Company's HCIS business. Commencing with contracts entered into in fiscal 1999,
HCIS recognized revenue for software licenses, computer hardware, implementation
and training under the percentage of completion method, based on the ratio of
labor costs incurred versus total estimated labor costs. Revenues from support
services and maintenance contracts are recognized ratably over the relevant
contractual period. Renewal of software licenses are recognized over the renewal
period.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
INCOME TAXES
Under the asset and liability method of accounting for income taxes,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rate is recognized as
income in the period that includes the enactment date. A valuation allowance is
established if it is more likely than not that the related deferred tax assets
will not be realized.
INCOME (LOSS) PER SHARE
Basic net income (loss) per share has been computed using the weighted
average number of common shares outstanding. Diluted net income (loss) per share
includes the effect of common stock options and warrants using the treasury
stock method, if dilutive. The calculation of basic and diluted net income
(loss) per share is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
($000, EXCEPT PER SHARE DATA) OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ----------------------------- ---------------- ------------------- -------------------
<S> <C> <C> <C>
Basic EPS:
Net income (loss)...................................... $(33,620) $ 7,386 $13,474
Weighted average common shares outstanding............. 20,466 19,500 18,419
Basic net income (loss) per share...................... $ (1.64) $ .38 $ .73
Diluted EPS:
Net income (loss)...................................... $(33,620) $ 7,386 $13,474
Weighted average common shares outstanding............. 20,466 19,500 18,419
Options and warrants................................... -- 887 1,115
-------- ------- -------
Total shares........................................... 20,466 20,387 19,534
-------- ------- -------
Diluted net income (loss) per share.................... $ (1.64) $ .36 $ .69
</TABLE>
If the Company had recorded net income in fiscal 1999, total diluted shares
would have been increased by shares for 284,000 options.
34
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company sells its products to hospitals and clinics worldwide. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains allowances for potential credit
losses. The Company invests any excess cash on deposits with a major investment
bank. The Company has not experienced any losses on these deposits.
RELIANCE ON CERTAIN SUPPLIERS
Certain components and services used by the Company to manufacture and
develop its products are presently available from only one or a limited number
of suppliers or vendors. The loss of any of these suppliers or vendors would
potentially require a significant level of hardware and/or software development
to incorporate the products or services from new suppliers or vendors into the
Company's products. Although the Company has obtained business interruption
insurance to protect against such losses, there is no assurance that such
coverage would be adequate.
INVENTORIES
Inventories are stated at the lower of standard cost (which approximates
cost on a first-in, first-out basis) or market. Inventory reserves are recorded
in the period when slow moving or obsolete materials are first identified.
SERVICE PARTS
Parts used for servicing installed equipment are stated at cost and
depreciation is computed over the estimated useful life. During fiscal 1999, the
Company reviewed the composition of its capitalized field service inventory and
the estimated collective useful life of this asset. As a result of this review,
effective beginning in the fourth quarter of fiscal 1999, the Company revised
its method of computing depreciation on its existing service parts inventory
from 10 years using the declining balance method to 5 years on the straight line
method. Depreciation on all service parts capitalized in the future will be
computed over 7 years on the straight line method. These revisions had an
immaterial effect on the results of operations. The Company will continue to
monitor recoverability of the collective asset under SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
FIXED ASSETS
Major additions and improvements are capitalized at cost, while maintenance
and repairs which do not improve or extend the life of the respective assets are
expensed as incurred. When assets are retired or otherwise disposed of, the
costs and related accumulated depreciation are removed from the financial
statements, and any gain or loss on disposal is included in the consolidated
statements of operations. Depreciation on fixed assets, other than leasehold
improvements, is computed on a straight-line basis over their estimated useful
lives (3-5 years). Leasehold improvements are amortized on a straight-line basis
over the lesser of their estimated useful lives or the remaining term of the
related leases.
35
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITALIZED SOFTWARE FOR PRODUCTS
Costs related to the conceptual formulation and design of software products
to be licensed or sold are expensed as research and development. Costs incurred
subsequent to establishing technological feasibility of software products to be
licensed or sold are capitalized. Amortization of capitalized software
development costs, which begins when products are available for general release
to customers, is computed using the greater of 1) the ratio that current gross
revenues bear to the total of current and anticipated future gross revenues; or
2) a straight-line basis over the expected product lives, generally estimated to
be three to seven years.
Software costs capitalized during fiscal 1999, 1998 and 1997 were
approximately $8.9 million, $7.0 million and $4.5 million, respectively.
Amortization of capitalized development software costs during the fiscal 1999,
1998 and 1997 of approximately $3.2 million, $3.4 million and $3.2 million,
respectively, has been charged to cost of product revenues. Capitalized software
development costs relating to products which have not yet been released were
approximately $4.9 million at October 3, 1999. See Note 10, "Non-Ordinary
Charges and Expenses", relating to the write-off of LabStat capitalized
software.
INTERNAL USE SOFTWARE
The Company adopted Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." Costs related to the
purchase, design, coding, testing and installation of internal use software are
capitalized. Amortization of internal use software costs, which begins when
software is used in business operations, is computed using the straight-line
method over the expected lives, generally estimated to be five years. Internal
use software costs capitalized during fiscal 1999 amounted to approximately
$0.9 million. The Company had no internal use software costs capitalized before
fiscal 1999.
INTANGIBLES
Goodwill and other purchased intangibles, including acquired technology, are
capitalized and amortized on a straight-line basis over the estimated useful
life of the related asset (7-20 years). The Company evaluates the recoverability
of long-lived assets not held for sale by measuring the carrying amount of the
assets against the estimated undiscounted future cash flows associated with
them. At the time such flows are not sufficient to recover the carrying value of
such assets, the assets are adjusted to their fair values. Based on these
evaluations, there were no adjustments to the carrying value of long-lived
assets in fiscal 1999 or 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
36
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 BALANCE SHEET DETAIL:
<TABLE>
<CAPTION>
OCTOBER 3, 1999 SEPTEMBER 27, 1998
---------------- -------------------
<S> <C> <C>
Inventories consist of:
Purchased parts and sub-assemblies........................ $ 14,679 $ 17,452
Work-in-process........................................... 5,518 5,713
Finished goods............................................ 25,481 59,217
-------- --------
45,678 82,382
Less reserves............................................. (10,602) (4,071)
-------- --------
$ 35,076 $ 78,311
-------- --------
Service parts consist of:
Field service parts, at cost.............................. $ 28,424 $ 26,327
Less accumulated depreciation............................. (10,127) (8,264)
-------- --------
$ 18,297 $ 18,063
-------- --------
Fixed assets, at cost, consist of:
Production and test equipment............................. $ 3,819 $ 4,351
Field service equipment................................... 709 1,168
Office and demonstration equipment........................ 23,707 14,401
Leasehold improvements.................................... 1,659 1,261
-------- --------
29,894 21,181
Less accumulated depreciation and amortization............ (14,339) (10,174)
-------- --------
$ 15,555 $ 11,007
-------- --------
Intangibles consist of:
Goodwill.................................................. $ 27,961 $ 21,849
Acquired technology....................................... 17,626 8,984
Capitalized design costs.................................. 2,847 1,210
Other..................................................... 1,725 510
-------- --------
50,159 32,553
Less accumulated amortization............................. (9,135) (6,007)
-------- --------
$ 41,024 $ 26,546
-------- --------
Other accrued liabilities consist of:
Accrued cost of revenue................................... $ 4,566 $ 3,354
South American recourse obligations....................... 4,259 --
Accrued royalties......................................... 2,067 956
Accrued restructuring..................................... 1,978 --
Sales and other taxes payable............................. 1,429 528
Accrued legal and accounting fees......................... 974 194
Accrued loan obligations and bank fees.................... 794 --
Other accrued expenses.................................... 4,394 6,078
-------- --------
$ 20,461 $ 11,110
-------- --------
Non-current liabilities consist of:
Accrued rent.............................................. $ 1,462 $ 1,162
Non current lease and note liabilities.................... 1,474 438
Deferred contract revenue................................. 772 927
Other non-current liabilities............................. -- 555
-------- --------
$ 3,708 $ 3,082
-------- --------
</TABLE>
37
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 RESTRUCTURING CHARGES
On September 27, 1998, the Company concluded a comprehensive review of its
international operations and decided to restructure its European and South
American businesses. As a result, the Company recorded charges in fiscal 1999 of
$2.5 and $0.8 million, respectively. In June of 1999, the Company also decided
to restructure its ADAC Medical Technologies ("AMT") business and recorded a
charge of $0.5 million. In September 1999, the Company decided to carry out
additional restructuring of its South American Business and recorded a charge of
$0.5 million and recovered $0.2 million of European restructuring charges due to
revised estimates related to employee severance costs. The fiscal 1999
restructuring costs were comprised of $2.3 million for severance expenses,
$0.8 million for legal and consulting costs, $0.2 million for facilities and
$0.8 million for other costs associated with the restructuring. As of
October 3, 1999, $2.0 million remained in the accrual for restructuring costs
comprised of $1.1 million for severance expenses, $0.5 million for legal and
consulting, $0.2 million for facilities and $0.2 million for other costs
associated with the restructuring. The Company currently anticipates that these
restructuring costs will be paid during fiscal 2000.
NOTE 4 ACQUISITIONS
On October 1, 1999, the Company acquired two related companies, UGM Medical
Systems Inc. and UGM Laboratories, Inc. (together "UGM") for $18.5 million. UGM
was an independent developer and manufacturer of PET equipment, for which the
Company has been its principal distributor. The acquisition was accounted for
using the purchase method of accounting and the results of UGM have been
included in the Company's financial statements subsequent to October 1, 1999.
The allocation of the purchase price to the tangible and identifiable intangible
assets acquired in connection with this acquisition was based on estimated fair
values as determined by management as follows:
<TABLE>
<CAPTION>
AMORTIZATION LIFE
-----------------
<S> <C> <C>
Goodwill................................................. $ 5,931 15 years
Other identifiable assets, net........................... 4,692 --
Acquired technology...................................... 9,063 15 years
Acquired workforce....................................... 324 6 years
Acquired in-process research and development............. 1,407 --
Deferred income taxes.................................... (2,898) --
-------
Total purchase price..................................... $18,519
-------
</TABLE>
The amortization of goodwill, acquired technology and workforce is being
computed on the straight-line basis. The Company also recognized a pre-tax
charge to operations of $1.4 million for the purchase of acquired in-process
research and development. This charge was computed using the percent complete
method, discounting the relevant future cash flows at 40% to reflect the
weighted average cost of capital and the specific risks associated with each
in-process product.
The total purchase price consisted of cash of $18.0 million and transaction
costs of $0.5 million. Further, the Company may be required to pay additional
purchase price consideration and incur future compensation in amounts not
exceeding $18.0 and $2.0 million, respectively, pursuant to the terms of certain
earn out provisions. The performance period for such provisions is five years.
UGM is not material to the consolidated results of operations of the Company.
38
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 ACQUISITIONS (CONTINUED)
In January 1998, the Company acquired CT Solutions, Inc. ("CT Solutions")
and O.N.E.S. Medical Services, Inc. ("ONES") for $3.0 and $1.1 million,
respectively, in cash. CT Solutions was an independent provider of computed
tomography refurbished equipment and service. ONES was a provider of nuclear
medicine service and refurbished equipment. The acquisitions were accounted for
using the purchase method of accounting. CT Solutions and ONES are not material
to the financial position or results of operations of the Company.
In October 1997, the Company acquired substantially all of the assets of
Southern Cats, Inc. and its affiliates (Southern Cats) in exchange for 139,131
shares of the Company's common stock valued at $2.8 million. Southern Cats was
an independent provider of computed tomography and X-ray equipment refurbishment
and service. The acquisition was accounted for using the purchase method of
accounting. Southern Cats is not material to the financial position or results
of operations of the Company.
In May 1997, the Company acquired Cortet, Inc. (Cortet), of Winter Park,
Florida, in exchange for 159,087 shares of the Company's common stock valued at
approximately $3.9 million including acquisition related costs. Cortet was a
developer of client-server information systems for use in cardiac
catheterization laboratories. The acquisition was accounted for using the
purchase method of accounting and the results of Cortet have been included in
the Company's consolidated financial statements subsequent to May 1997. In
connection with the acquisition, the Company recognized a pre-tax charge to
operations of $0.5 million for the purchase of acquired in-process research and
development.
In February 1997, the Company acquired Photon Diagnostic Technologies, Inc.
(Photon), of Miami, Florida, in exchange for 57,143 shares of the Company's
common stock valued at approximately $1.5 million. Photon refurbished, serviced
and supported Elscint nuclear medicine imaging systems. The acquisition was
accounted for as a pooling of interests. Prior period financial statements were
not restated because Photon was not material to the financial position or
results of operations of the Company.
In November 1996, the Company acquired Geometrics Corporation (Geometrics),
of Madison, Wisconsin, a developer of specialized medical software used in the
planning of radiation therapy treatments for cancer patients, in exchange for
190,561 shares of the Company's common stock valued at approximately
$3.9 million. The acquisition was accounted for using the purchase method of
accounting and the results of Geometrics have been included in the Company's
consolidated financial statements subsequent to November 1997. In connection
with the acquisition, the Company recognized $3.9 million of acquired technology
that is being amortized over seven years.
NOTE 5 CREDIT AND BORROWING ARRANGEMENTS
The Company has a $75.0 million revolving credit facility with a bank
syndicate. The credit facility offers borrowings in either U.S. dollars or in
foreign currencies and expires on March 29, 2002. The Company pays interest and
commitment fees on its borrowings based on its debt level in relation to its
cash flow. Commitment fees range from 0.25% to 0.75% of unused commitment and
interest rates are based on the bank prime rate or LIBOR plus rates ranging from
1.0% to 2.5%. At October 3, 1999, the Company had $23.4 million available for
borrowing under this facility. Borrowings are collateralized by all of the
Company's assets, and the Company is required to comply with certain financial
and other covenants. In February 1999, the Company delayed delivering financial
statements and related information to its banks in connection with the
restatement occurring at that time. This constituted a default under the
facility. In May 1999, the Company again delayed delivering financial statements
and related information to its banks
39
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 CREDIT AND BORROWING ARRANGEMENTS (CONTINUED)
in connection with the delayed public release of second quarter financials for
fiscal 1999. This also constituted a default under the facility. In both cases,
the banks waived the defaults and consented to an extension of time required to
provide such information. The Company has since delivered all required
information within the time frames required by the covenants. In addition, the
results of the Company's operations in the second and third quarters of
fiscal 1999 caused the Company to be out of compliance with all financial
covenants in the facility. The banks waived this default for the second quarter
of fiscal 1999. The Company amended the facility on August 17, 1999, modifying
the financial covenants to be more reflective of the Company's recent financial
performance. The Company was in compliance with all financial covenants in the
facility on October 3, 1999.
Additional information with respect to such revolving lines of credit is as
follows:
<TABLE>
<CAPTION>
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998
- - - ------ ---------------- -------------------
<S> <C> <C>
Maximum borrowings during the year............ $58,300 $61,346
Average borrowings during the year............ $46,071 $40,418
Weighted average interest rates during the
year........................................ 7.09% 6.70%
</TABLE>
NOTE 6 COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its office and manufacturing facilities under operating
leases which expire at various dates through 2008. The Company is responsible
for maintenance, taxes and insurance on its principal facilities.
As of October 3, 1999, future annual minimum lease payments for all
non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING ($000) BUILDING EQUIPMENT
- - - ------------------------- -------- ---------
<S> <C> <C>
2000..................................................... $ 5,793 $2,704
2001..................................................... 5,870 824
2002..................................................... 5,814 163
2003..................................................... 4,975 6
2004..................................................... 4,345 0
Thereafter............................................... 5,791 0
------- ------
Total minimum lease payments............................. $32,588 $3,697
------- ------
</TABLE>
Rent expense totaled $8.6 million, $6.4 million and $5.9 million for
fiscal 1999, 1998 and 1997, respectively.
CAPITAL LEASES
During fiscal 1999, the Company entered into five additional capital leases
all with terms of five years. Under these agreements, certain leased fixed
assets are pledged as collateral.
40
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of October 3, 1999, future annual minimum lease payments for all capital
leases were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING ($000)
- - - -------------------------
<S> <C>
2000........................................................ $ 446
2001........................................................ 361
2002........................................................ 360
2003........................................................ 360
2004........................................................ 222
------
Total minimum lease payments................................ 1,749
Amount representing interest................................ (245)
------
Present value of net minimum lease payments................. 1,504
Less current portion........................................ (354)
------
$1,150
------
</TABLE>
Payments under these capital lease obligations totaled $0.4, $0.3 and
$0.2 million in fiscal 1999, 1998 and 1997, respectively. As of October 3, 1999,
the Company had $2.3 million of equipment under capital leases with accumulated
amortization of $0.9 million.
LITIGATION
Commencing in December 1998, a total of eleven class action lawsuits were
filed in federal court by or on behalf of stockholders who purchased Company
stock between January 10, 1996 and December 28, 1998. These actions name as
defendants the Company and certain of its present and former officers and
directors. The complaints allege various violations of the federal securities
laws in connection with the restatement of the Company's financial statements
and seek unspecified but potentially significant damages. In April 1999, these
actions were ordered consolidated and, in July 1999, the plaintiffs filed a
consolidated amended complaint. The Company intends to contest this action
vigorously. A stockholder derivative action, purportedly on behalf of the
Company and naming as defendants Company officers and directors was also filed
in state court seeking recovery for the Company based on stock sales by these
defendants during the above time period. The Company is also a defendant in
various legal proceedings incidental to its business.
While it is not possible to determine the ultimate outcome of these actions
at this time, management is of the opinion that any liability resulting from
these claims would not have a material adverse effect on the Company's
consolidated financial position. However, the outcome of these actions could
have a material adverse effect on the Company's results of operations or cash
flows.
The Company has been informed that the United States Securities and Exchange
Commission (SEC) has issued a Formal Order of Private Investigation in
connection with matters relating to the Company's previously announced
restatement of its financial results for 1996, 1997 and the first three quarters
of 1998. The Company is continuing to cooperate with the SEC. The Company is
unable to predict the outcome of the investigation at this time.
OTHER
Under third party financing programs in effect prior to fiscal 1999, the
Company has contingent liabilities and certain recourse obligatons ranging from
10% to 100% of the amounts financed. As of October 3, 1999, the contingent
liability in excess of amounts accrued was $1.2 million.
41
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has in place performance bonds to shield certain customers from
potential damages that might result should the Company fail to deliver equipment
as promised. The amount of the bonds at October 3, 1999 was $0.6 million.
NOTE 7 CAPITAL STOCK
PREFERRED STOCK
The Board of Directors is authorized to determine the rights and preferences
of the preferred stock, issuable in series. The Board of Directors may increase
or decrease the number of shares of any series of preferred stock, but not below
the number of shares of such series then outstanding.
COMMON STOCK
In fiscal 1997 and 1995, the Board of Directors approved the issuance of
warrants to purchase up to 24,000 and 60,000 shares of common stock,
respectively, to a consulting firm as partial compensation for services rendered
and to be rendered. The exercise price for these warrants were $22.00 and
$11.88, respectively. The warrants were issued proportionately as services were
performed. As of October 3, 1999, 24,000 of these warrants were still
outstanding. For fiscal 1999, the warrants had no effect on the shares used for
calculation of diluted net loss per share. For fiscal 1998 and 1997, the effect
on shares used for calculation of diluted net income per share were 46,494 and
69,655, respectively.
NOTE 8 STOCK PLANS
STOCK OPTION PLANS
The Company currently has two stock option plans for employees, the 1992
Stock Option Plan, as amended, and the 1999 Long-Term Incentive Plan which was
approved by the Company's stockholders in May 1999.
The 1992 Stock Option Plan allows for non-qualified as well as incentive
options to be granted to employees, officers, consultants and others. Incentive
stock options must be granted at exercise prices of not less than fair market
value and expire within 10 years from the date of grant. Under the plan,
non-qualified stock options can have exercise prices of not less than 85% of
fair market value and also expire within 10 years of grant date.
The 1999 Long-term Plan (the "1999 Plan") authorizes the issuance of
incentive stock options, non-qualifying stock options, restricked stock and
other incentives to directors, employees, and consultants. The exercise price
under the 1999 Plan can not be less than the fair market value per share on the
date of the grant. The term of the options are 10 years and generally vest over
a five-year period. The 1999 Plan limits the number of options that can be
granted to any one individual in any fiscal year to 300,000 shares.
In fiscal 1999, the Company adopted the 1999 Supplemental Incentive Plan
("the Supplemental Plan"). The Supplemental Plan provides for the issuance of
options and restricted stock grants to directors, employees and consultants of
the Company. The restricted stock generally vests over four years. During fiscal
1999, the Board of Directors approved the issuance of 150,000 shares of common
stock under the supplemental plan. As of October 3, 1999, no shares have been
issued. The Company recognized $160,000 of compensation expense in fiscal 1999.
42
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 STOCK PLANS (CONTINUED)
In addition, the Company has a directors' stock option plan under which
options are granted to non-employee directors. Options under this plan are
granted for a period of 5 years from the date of grant at an option exercise
price equal to fair market value.
A summary of the activity under these plans is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
(SHARES IN THOUSANDS) OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
- - - --------------------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year...... 3,070 $16.19 3,280 $13.38 2,873 $11.08
Granted............................... 1,967 8.52 1,182 18.42 1,131 17.33
Exercised............................. (106) 12.20 (1,174) 10.31 (564) 9.23
Canceled.............................. (766) 15.17 (218) 17.69 (160) 14.60
----- ------ -----
Outstanding at end of year............ 4,165 13.00 3,070 16.19 3,280 13.38
----- ------ -----
Options exercisable at end of year.... 1,261 $15.75 846 $13.32 1,073 $10.61
Options available for grant at end of
year................................ 514 294 638
</TABLE>
The following table summarizes information about stock options outstanding
at October 3, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------ OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
(SHARES IN THOUSANDS) NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING IN YEARS PRICE EXERCISABLE PRICE
- - - ------------------------ ----------- ---------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$6.31 to $7.75.................. 1,601 9.67 $ 7.18 25 $ 7.45
7.88 to 15.88................... 716 6.88 13.12 515 13.30
16.00 to 19.38.................. 990 7.25 16.36 474 16.65
19.50 to 24.25.................. 858 8.43 19.89 247 19.98
----- -----
4,165 8.36 13.00 1,261 15.75
----- -----
</TABLE>
43
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 STOCK PLANS (CONTINUED)
The following table discloses the Company's pro forma net income (loss) and
net income (loss) per share assuming compensation costs for employee stock
options had been determined using the Black-Scholes option-pricing model with
the following assumptions: (i) no dividends, (ii) expected volatility of 90%,
56% and 55% for fiscal 1999, 1998 and 1997, respectively, (iii) risk free
interest rate of 5.12%, 5.95% and 6.16% for fiscal 1999, 1998 and 1997,
respectively, (iv) and expected lives of 3 years, 3 years and 2 years for fiscal
1999, 1998 and 1997, respectively:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ------ ---------------- ------------------- -------------------
<S> <C> <C> <C>
Net income (loss):
As reported................. $(33,620) $7,386 $13,474
Pro forma................... (37,754) 4,243 11,078
Net income (loss) per share:
Basic
As reported................. $ (1.64) $ .38 $ .73
Pro forma................... (1.84) .22 .60
Diluted
As reported................. (1.64) .36 .69
Pro forma................... (1.84) .21 .57
</TABLE>
Because the accounting method prescribed by SFAS 123 is not applicable to
options granted prior to October 3, 1995, the compensation cost reflected in the
pro forma amounts shown above may not be representative of the amounts to be
expected in future years.
On November 10, 1997, HCIS adopted a stock option plan, the HCIS 1997 Stock
Option Plan, for its employees under which options may be granted. Total shares
of HCIS common stock reserved under the plan are 1,485,000. During fiscal 1999,
583,000 options were granted under the plan. Total options outstanding at
October 3, 1999 are 1,044,000, and total options available for grant are
441,000. The Company recognized $388,000 and $343,000 of compensation expense in
fiscal 1999 and 1998, respectively, related to this plan.
EMPLOYEE STOCK PURCHASE PLAN
This plan, as amended, permits eligible employees to purchase common stock
through payroll deductions (which cannot exceed 10% of the employee's
compensation and cannot exceed 200 shares per employee per interim offering
period) at the lower of 85% of fair market value at the beginning of the
applicable offering period or at the end of each interim period. During fiscal
1999, 1998 and 1997, 75,000, 99,000 and 56,000 shares were issued at an average
price of $13.11, $16.22 and $15.05 per share, respectively. At October 3, 1999,
there were 263,000 share available under this plan.
PREFERRED SHARE PURCHASE RIGHTS PLAN
In April 1996, the Company's Board of Directors adopted a Preferred Share
Purchase Rights Plan (the "Rights Plan"). Under the Rights Plan, a dividend of
one preferred share purchase right (a "Right") for each outstanding share of
common stock, of the Company was declared. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior
44
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 STOCK PLANS (CONTINUED)
Participating Preferred Stock, without par value (the "Preferred Stock"), at a
price of seventy dollars ($70.00) per one one-hundredth of a Preferred Share.
Each one one-hundredth of a share of Preferred Stock has designations and the
powers, preferences and rights, and the qualifications, limitations and
restrictions which make its value approximately equal to the value of a share of
common stock. In general, the Rights are exercisable upon the commencement of,
or announcement of an intention to make, a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the Company's outstanding common stock. The Rights
expire in April 2006 unless the expiration date is extended or unless the Rights
are earlier redeemed by the Company.
The Rights Plan is designed to provide an adequate opportunity for the
Company's Board of Directors to consider and evaluate all strategic alternatives
of the Company in the event an unsolicited attempt is made to acquire the
Company. The Rights are intended to enable all of the Company's shareholders to
realize the full value of their investment and to provide for fair and equal
treatment for all shareholders. The adoption of the Rights Plan will not, nor is
it intended to, prevent all takeover actions. The Rights were not distributed in
response to any proposal to acquire the Company.
As of October, 3 1999, the Company has reserved a total of 5,415,000 shares
of common stock for issuance under its employee stock option, incentive and
purchase plans.
NOTE 9 RETIREMENT SAVINGS PLANS
The Company maintains a qualified retirement plan, under the provisions of
Section 401(k) of the Internal Revenue Code, in which eligible employees may
participate. Substantially all participants in this plan are able to defer
compensation up to the annual maximum amount allowable under Internal Revenue
Service regulations. Additionally, the Company may match employee contributions
with discretionary amounts as may be determined by the Board of Directors.
During fiscal 1999, 1998 and 1997, the Company matched employee contributions up
to a maximum of $750, $500 and $500, respectively, per employee. The Company's
total contributions to the plan were $0.9, $0.3 and $0.3 million in fiscal 1999,
1998 and 1997, respectively.
Effective June 1, 1999, the Company adopted an unfunded nonqualified
Deferred Compensation Plan (the "Plan"). The Plan permits certain employees,
consultants and directors to annually elect to defer a portion of their
compensation and qualifying gain with respect to exercises of eligible stock
options, until their retirement. The Plan allows for voluntary contributions by
the Company. There were no company contributions to the Plan in fiscal year
ending October 3, 1999. Total deferred compensation liabilities, under the Plan
were $159,000 as of October 3, 1999.
To assist in funding the deferred compensation liability, the Company has
invested in corporate-owned life insurance policies. The cash surrender value of
these policies as of October 3, 1999 is $512,182 which are recorded as assets of
the Company in the consolidated balance sheet.
NOTE 10 NON-ORDINARY CHARGES AND EXPENSES
FISCAL 1999
INVENTORY AND RECEIVABLES
During fiscal 1998, the Company began an examination of the performance,
profitability and prospects of its various business units as part of an overall
evaluation of its business and internal controls. In
45
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 NON-ORDINARY CHARGES AND EXPENSES (CONTINUED)
connection with this examination, the Company identified issues relating to its
application of accounting principles and conducted a review of its asset
carrying values, accruals and expenses in historical financial periods, leading
to a restatement of reported financial results for fiscal 1996, fiscal 1997 and
the first three quarters of fiscal 1998. Following the restatement, the Company
continued to focus on its accounting systems and weaknesses in its internal
controls and the assessment of its business units. As part of this focus and
assessment, and against the background of increasing competition in certain of
the Company's markets, new product introductions by the Company and its
competitors, and its customers deferring purchasing decisions due to their
perceived Year 2000 compliance risks, the Company revised its estimates of
1) the recoverability of the Company's inventory to reflect its lower build
plans which resulted in increased levels of potentially excess and obsolete
inventory, 2) the collectibility of receivables, and 3) the value of certain
other assets carried on the Company's books.
The Company also decided to close its AMT refurbishing facility in
Washington, Missouri, relocate the business to Milpitas, California, and
discontinue refurbishment of a number of lines of older nuclear medicine
equipment, the demand for which was declining. These fiscal 1999 decisions, as
well as existing market conditions, rendered obsolete substantial inventories of
equipment and parts.
The Company's financial statements for fiscal 1999 include charges for these
changes in estimates of $13.6 million related to inventory and $6.0 million
related to receivables (excluding South American receivables).
SOUTH AMERICA
As previously disclosed in the Company's Form 10-Q for the quarter ended
April 4, 1999 a significant number of the Company's customers in its principal
South American markets of Brazil, Argentina and Colombia are delinquent in
making periodic payments due under the terms of sales previously made to them,
many of which were supported by third-party financing arrangements that involve
full or partial recourse to the Company. Deteriorating economic conditions and
currency devaluations occurring primarily during fiscal 1999, and ineffective
monitoring of delinquencies and collection efforts by the Company, may have all
contributed to delays in the collection of accounts receivable from customers in
these markets. During fiscal 1999, the Company undertook renewed collection
efforts and completed an evaluation of each receivable balance and recourse
obligation to determine the level of reserves required for these customers. As a
result of this evaluation, the Company has revised its estimate of the
recoverability of its South American receivables and recourse obligations and
provided additional reserves of $8.9 million during fiscal 1999, of which
$1.8 million was recorded in the fourth quarter. These charges resulted in total
reserves of $9.8 million against total gross receivables and recourse
obligations for South America of approximately $12.8 million. Consequently, at
October 3, 1999, the Company has net South American receivables of $1.8 million
and recourse contingencies of $1.2 million.
LITIGATION
In the fourth quarter of fiscal 1999, the Company incurred $1.2 million in
litigation expenses related to the pending class action lawsuit and stockholder
derivative action, see Note 6 "Commitments and Contingencies."
46
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 NON-ORDINARY CHARGES AND EXPENSES (CONTINUED)
The following table summarizes the non-ordinary charges and expenses for
fiscal 1999:
<TABLE>
<S> <C>
Inventory
Medical Systems product inventory
Inventory obsolescence.................................... $ 5,653
Engineering obsolescence.................................. 1,468
Offsite inventory obsolescence............................ 746
European inventory write-off.............................. 393
AMT product line discontinuance........................... 2,394
AMT inventory reduced to market value..................... 415
-------
Total Medical Systems product inventory................... 11,069
-------
Medical Systems excess consumable spares write-off.......... 788
ARS inventory reduced to market value....................... 877
Nuclear European sales and marketing inventory write-off.... 680
HCIS inventory obsolescence................................. 200
-------
Total inventory charges..................................... 13,614
-------
Receivables
Increase in receivable reserves, excluding South America.... 5,960
-------
South America
South American receivables and recourse reserves............ 8,890
-------
Litigation expense.......................................... 1,220
-------
Total non-ordinary charges and expenses..................... $29,684
=======
</TABLE>
Of the amounts summarized above, substantially all of the inventory charges
were recorded in cost of product and service revenues in the statement of
operations. Substantially all the other charges were recorded in general and
administrative expense in the statement of operations.
The Company has concentrated resources on continuing to improve its
accounting systems and internal controls, and has retained a nationally
recognized accounting firm as consultant and internal auditor. That firm has
developed a number of recommendations and has been retained to assist the
Company in implementing certain process improvements. Among other things, the
Company is attempting to integrate more closely its inventory procurement
procedures with the process of developing and introducing new products in order
to reduce the risk of substantial inventories being obsoleted by product
introductions. Furthermore, with respect to receivables, the Company is
improving its sales order and collection procedures related to product and field
service sales, and the sale of ancillary products which sales resulted in the
majority of the additional receivables reserves added during fiscal 1999.
FISCAL 1998
On September 25, 1998, the Company concluded a comprehensive review of its
operations and decided to discontinue its physician network services business.
As a result, the Company recorded a
47
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 NON-ORDINARY CHARGES AND EXPENSES (CONTINUED)
non-ordinary charge in the fourth quarter of fiscal 1998 of $1.9 million. The
Company decided to discontinue this business in the fourth quarter of fiscal
1998 and focus on its core businesses, since, among other things, this business
did not contribute meaningfully to the Company's results in fiscal 1998, and was
not expected to do so in future periods.
In connection with the Company's evaluation of its operations, the Company
identified certain assets, consisting of capitalized consulting and banking
expenses relating to potential acquisitions, and determined it was appropriate
to write off these assets since the acquisitions would not occur. Accordingly,
the Company recorded a charge of $1.3 million in its results of operations for
the fourth quarter of fiscal 1998 for these assets.
On February 10, 1998, the Company decided to discontinue the HCIS business
unit's LabStat product while retaining the laboratory support and maintenance
business. The decision was made after it was determined that continuing
development and marketing of LabStat was not in the best interest of the Company
and its shareholders and that all meaningful discussions with possible strategic
partners had ceased. This decision has allowed the Company to increase its focus
on the radiology business resulting in greater profitability for both HCIS and
ADAC as a whole.
The Company's decision to discontinue LabStat resulted in a non-ordinary
discontinued product charge of $11.3 million. The charge is a consequence of the
Company determining that certain assets utilized in the development and
marketing of LabStat became impaired as a result of the Company's decision. The
discontinued business charge consisted principally of non-cash charges, includes
the write off of $4.9 million of capitalized software, $4.7 million of deferred
product costs, $0.6 million of fixed assets that were specifically utilized in
the LabStat product, $1.0 million in legal and other expenses and $0.1 million
in receivables.
In connection with the Company's evaluation of its laboratory information
systems business, the Company also conducted an analysis of the recoverability
of certain assets utilized in the Company's Digital Subtraction Angiography
(DSA) business and determined it was appropriate to write off certain of these
assets. Accordingly, the Company included an impairment charge of $2.4 million
in its results of operations for the first quarter of fiscal 1998 related to
these assets. The decision to write off the DSA assets, consisting primarily of
inventory, was a result of the Company's decision to no longer market the
product due to steadily declining revenues. The combined a non-ordinary write
off for LabStat and DSA was $13.7 million.
FISCAL 1997
In conjunction with the acquisition of Cortet in June 1997, the Company
identified certain assets, consisting of capitalized consulting and banking
expenses relating to other potential acquisitions, and determined it was
appropriate to write off these assets since the acquisitions would not occur. As
a result, the Company included a charge for $0.7 million in its results of
operations for the third quarter of fiscal 1997 for these assets.
48
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 INCOME TAXES
The provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ------ ---------------- ------------------- -------------------
<S> <C> <C> <C>
Current:
Federal..................... $ -- $ 6,495 $ (854)
Foreign and state........... 494 496 411
-------- ------- -------
494 6,991 (443)
-------- ------- -------
Deferred:
Federal..................... (10,008) (2,537) 8,165
State....................... (531) 268 893
-------- ------- -------
(10,539) (2,269) 9,058
-------- ------- -------
Total......................... $(10,045) $ 4,722 $ 8,615
-------- ------- -------
</TABLE>
A reconciliation of the provision (benefit) for income taxes computed at the
marginal federal statutory income tax rate compared to the reported amounts is
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ------ ---------------- ------------------- -------------------
<S> <C> <C> <C>
Provision (benefit) at
Statutory rate of 35%....... $(15,282) $4,238 $7,731
State income taxes, net of
federal benefit............. (727) 475 720
Non-deductible items.......... 1,408 1,184 949
Change in valuation
allowance................... 821 (834) (704)
Business credits.............. (500) (833) (597)
Changes in estimates.......... 4,099 -- --
Other......................... 136 492 516
-------- ------ ------
Provision (benefit) for income
taxes....................... $(10,045) $4,722 $8,615
-------- ------ ------
</TABLE>
In fiscal 1999, changes in estimates reducing the benefit recorded for
income taxes consisted primarily of business credits which expired unused during
the year and revisions to certain estimated income tax balances.
As of October 3, 1999, the Company had net operating loss carryforwards of
approximately $75.6 million available to offset future federal taxable income
and approximately $3.7 million available to offset future taxable income in
various foreign jurisdictions. Federal net operating loss carryforwards of
$15.7 million expire 2001, $30.8 million expire 2006 to 2010, $29.1 million
expire 2009 to 2014, and foreign operating loss carryforwards expire beginning
in fiscal year 2008. The federal operating loss carryforwards expiring in 2006
to 2010 are subject to certain restrictions on their annual utilization. The
Company also has business credit carryforwards of $6.4 million, of which
$0.4 million will expire in fiscal 2000, $3.8 million will expire 2006 to 2014,
and $2.2 million have no expiration date.
49
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998
- - - ------ ---------------- -------------------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards............ $ 28,249 $ 21,452
Business credit carryforwards............... 6,397 9,877
Inventory allowances........................ 4,264 1,101
Employee benefits........................... 842 722
Accrued customer service costs.............. 1,824 --
Deferred revenues........................... 1,356 2,259
Receivable allowances....................... 4,229 --
Other....................................... 448 816
-------- --------
47,609 36,227
Less valuation allowance...................... (12,881) (12,060)
-------- --------
Deferred income tax assets.................... 34,728 24,167
-------- --------
Deferred income tax liabilities:
Acquired technology......................... 4,939 2,579
Fixed assets................................ 5,238 6,596
Software development costs.................. 7,393 4,470
Other....................................... 211 381
-------- --------
Deferred income tax liabilities............... 17,781 14,026
-------- --------
Net deferred income tax assets................ $ 16,947 $ 10,141
-------- --------
</TABLE>
The valuation allowance identified above relates to net operating loss
carryforwards of certain foreign and domestic subsidiaries, where management
believes it is more likely than not that such amounts will not be realized.
Approximately $8.5 million of the valuation allowance, if reduced, will be first
credited to unamortized goodwill relating to an acquisition in accordance with
SFAS 109, "Accounting for Income Taxes."
50
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 SEGMENT REPORTING AND FOREIGN OPERATIONS
In fiscal 1999, the Company adopted statement of Financial Accounting Standard
("SFAS") 131, "Disclosures about Segments of an Enterprise and Related
Information." Accordingly, the prior year's segment information has been
restated to present the Company's reportable segments, Medical Systems ("MS"),
Radiation Therapy and Planning ("RTP"), Health Care Information Systems
("HCIS"), and Other. The Other segment comprises the Company's physician network
services business that was discontinued in fiscal 1998, see Note 10
"Non-Ordinary Charges and Expenses." The adoption of this statement did not
affect the results of operations or financial position of the Company. The
accounting policies of the Company's operating segments are the same as those
described in Note 1 "Summary of Significant Accounting Policies." The Company is
organized on the basis of products and services. The Company's reportable
segments are strategic business units that offer different products and include
corporate allocations of general and administrative expenses. The following
table summarizes information about the Company's reportable segments for fiscal
1999, 1998 and 1997. Asset information by reportable segment has not been
presented as the Company does not produce and rely on such information.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 3, 1999
-----------------------------------------
($000) MS RTP HCIS OTHER TOTAL
- - - ------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues, net:
Product..................................... $175,784 $45,959 $22,531 $ -- $244,274
Service..................................... 80,497 2,197 15,163 -- 97,857
-------- ------- ------- ------ --------
256,281 48,156 37,694 -- 342,131
-------- ------- ------- ------ --------
Goodwill amortization......................... 140 403 1,408 -- 1,951
Depreciation and amortization, excluding
goodwill.................................... 12,055 936 2,728 -- 15,719
Interest and other expense.................... 3,915 1,125 (539) -- 4,501
Income (loss) before provision (benefit) for
income taxes................................ $(15,414) $ 6,083 $ 781 $ -- $ (8,550)
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 27, 1998
-----------------------------------------
($000) MS RTP HCIS OTHER TOTAL
- - - ------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues, net:
Product.................................... $159,973 $37,002 $22,071 $ -- $219,046
Service.................................... 62,230 2,698 16,554 -- 81,482
-------- ------- ------- ------- --------
222,203 39,700 38,625 -- 300,528
-------- ------- ------- ------- --------
Goodwill amortization........................ 80 455 1,492 138 2,165
Depreciation and amortization, excluding
goodwill................................... 6,716 872 2,642 -- 10,230
Interest and other expense................... 3,627 538 173 -- 4,338
Income (loss) before provision for income
taxes...................................... $ 16,418 $11,217 $ 2,016 $ (672) $ 28,979
</TABLE>
51
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 SEGMENT REPORTING AND FOREIGN OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 28, 1997
-----------------------------------------
($000) MS RTP HCIS OTHER TOTAL
- - - ------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues, net:
Product..................................... $164,274 $16,954 $12,726 $ 284 $194,238
Service..................................... 54,103 -- 15,546 -- 69,649
-------- ------- ------- ------ --------
$218,377 16,954 28,272 284 263,887
-------- ------- ------- ------ --------
Goodwill amortization......................... $ -- $ 159 $ 856 $ -- $ 1,015
Depreciation and amortization, excluding
goodwill.................................... 5,786 585 3,739 -- 10,110
Interest and other expense.................... 3,556 208 1,507 -- 5,271
Income (loss) before provision (benefit) for
income taxes.................................. 24,230 4,587 (5,050) (496) 23,271
</TABLE>
The following is a reconciliation of total segment income (loss) before
provision (benefit) for income taxes to consolidated income (loss) before
provision (benefit) for income taxes:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ------ ---------------- ------------------- -------------------
<S> <C> <C> <C>
Total segment income (loss) before provision
(benefit) for income taxes.................. $ (8,550) $28,979 $23,271
-------- ------- -------
Excluded charges and expenses:
Inventory allowances........................ 13,614 -- --
Receivables--doubtful accounts.............. 5,960 -- --
South America receivables and expenses...... 8,890 -- --
Litigation expense.......................... 1,220 -- --
Discontinued products....................... -- 15,571 --
Acquired in-process research and
development............................... 1,407 -- 531
Restructuring charges....................... 4,024 -- --
Acquisition expense write off............... -- 1,300 651
-------- ------- -------
35,115 16,871 1,182
-------- ------- -------
Total consolidated income (loss) before
provision (benefit) for income taxes........ $(43,665) $12,108 $22,089
======== ======= =======
</TABLE>
Internationally, the Company markets and supports its products and services
primarily through its subsidiaries and various distributors. Revenues attributed
to geographic areas are based on the country in which the customer is domiciled.
In fiscal 1999, 1998 and 1997, no one customer accounted for more than
52
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 SEGMENT REPORTING AND FOREIGN OPERATIONS (CONTINUED)
10% of total revenues. The following table presents a summary of revenue and
long-lived assets by geographic region for fiscal 1999, 1998 and 1997:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
($000) OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ------ ---------------- ------------------- -------------------
<S> <C> <C> <C>
Revenues:
United States............................... $ 299,173 $250,510 $207,312
International............................... 42,958 50,018 56,575
--------- -------- --------
Totals.................................... $ 342,131 $300,528 $263,887
--------- -------- --------
Income (loss) before provision (benefit) for
income taxes:
United States............................... $ (31,351) $ 9,460 $ 16,561
International............................... (12,314) 2,648 5,528
--------- -------- --------
Totals.................................... $ (43,665) $ 12,108 $ 22,089
--------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
---------------- ------------------- -------------------
<S> <C> <C> <C>
Long-lived assets:
United States............................... $14,480 $10,456 $9,161
International............................... 1,075 551 628
------- ------- ------
Totals.................................... $15,555 $11,007 $9,789
------- ------- ------
</TABLE>
NOTE 13 COMPREHENSIVE INCOME (LOSS)
Effective September 28, 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income" ("FAS 130.") FAS 130 establishes standards for reporting
and displaying income and its components (revenue, expenses, gains and losses)
in a full set of general-purpose financial statements. FAS 130 requires the
classification of items of comprehensive income by their nature in a financial
statement and the accumulated balance of other comprehensive income separately
in the shareholders' equity section of the balance sheet. The Company's
accumulated other comprehensive income consists solely of translation
adjustments. Comprehensive income (loss) for fiscal 1999, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 27, SEPTEMBER 28,
(DOLLAR AMOUNTS IN THOUSANDS) OCTOBER 3, 1999 1998 1997
- - - ----------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Net income (loss).................................. $(33,620) $7,386 $13,474
Change in accumulated translation adjustment, net
of tax........................................... (343) (40) (822)
-------- ------ -------
Comprehensive income (loss)........................ $(33,963) $7,346 $12,652
-------- ------ -------
</TABLE>
53
<PAGE>
ADAC LABORATORIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 RECENT PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standard 133, "Accounting
for Derivative Instruments and Hedging Activities" ("FAS 133"), was issued and
is effective for fiscal years commencing after June 15, 2000. The Company will
comply with the requirements of FAS 133 in fiscal year 2001. Currently the
Company does not hold any derivative instruments or engage in any hedging
activities.
NOTE 15 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
FISCAL 1999
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
($000, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER
- - - ----------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues, net..................................... $94,279 $ 87,393 $ 75,620 $84,839
Gross profit...................................... 38,615 13,446 (2) 21,072 (3) 29,230 (4)
Net income (loss)................................. 3,856(1) (20,791)(2) (13,214)(3) (3,471)(4)
Net income (loss) per share....................... .19(1) (1.02)(2) (.64)(3) (.17)(4)
</TABLE>
- - - ------------------------
(1) The Company's net income and net income per share in the first quarter
includes the effects of a non-ordinary pre-tax charge of approximately
$2.5 million to restructure its European operations.
(2) Gross profit, net loss and net loss per share in the second quarter includes
the effects of non-ordinary pre-tax charges of approximately $11.2 million
related to inventory obsolescence. Net loss and net loss per share in the
second quarter also includes the effects of non-ordinary pre-tax charges of
approximately $6.0 and $0.8 million related to increased receivable reserves
and restructuring the Company's South American operations.
(3) In the third quarter, the Company recorded non-ordinary pre-tax charges of
$7.1 million for additional reserves for South American receivables and
recourse obligations. The Company also decided to close its AMT refurbishing
facility in Washington, Missouri and relocate the business to Milpitas
California. This decision resulted in a non-ordinary pre-tax restructuring
charge of $0.5 million. The Company also decided to discontinue
refurbishment of a number of older nuclear medicine equipment lines. This
decision rendered obsolete substantial inventories of equipment and parts,
resulting in a non-ordinary pre-tax charges of $2.4 million.
(4) In the fourth quarter the Company purchased UGM. This purchase resulted in a
pre-tax charge of $1.4 million for the value of acquired in-process research
and development. The Company took non-ordinary pre-tax charges of
$1.8 million for additional reserves for South American receivables and
recourse obligations, $1.2 million for litigation expenses related to the
pending class action lawsuit and stockholder derivative action. The Company
also decided to carry out additional restructuring of its South American
business and took a charge of $0.5 million, partially off-set by a
$0.2 million recovery of European restructuring charges due to revised
estimates related to employee severance costs.
54
<PAGE>
NOTE 15 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED): (CONTINUED)
FISCAL 1998
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
($000 EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER
- - - ---------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................................... $67,438 $74,522 $69,756 $88,812
Gross profit........................................... 13,941 (1) 31,679 29,368 32,843(1)
Net income (loss)...................................... (5,476)(1) 5,379 3,383 4,100
Net income (loss) per share............................ (.29)(1) .27 .17 .20
</TABLE>
- - - ------------------------
(1) Gross profit, net loss and net loss per share in the first quarter includes
the effects of a non-ordinary pre-tax charge of approximately
$14.5 million. The charge consists of $11.6 million for the discontinuance
of the Company's LabStat product and $2.9 million for impairment of assets
utilized in the Company's DSA business. $0.3 million and $0.5 million of
this charge were reversed in the fourth quarter because the Company lowered
estimates of liabilities associated with LabStat and because the Company was
able to redeploy certain of impaired DSA assets elsewhere in its business,
respectively.
(2) Fourth quarter adjustments include the effect of non-ordinary pre-tax
charges aggregating approximately $8.2 million. These charges include a
$4.9 million carrying value adjustment for inventory at the Company's AMT
facility, a $1.0 million write off of a European distributor receivable, the
write off of $1.3 million of acquisition costs for non-consummated
transactions and a charge of $1.9 million related to the discontinuation of
the MTS business, less $0.9 million in charges taken in the first quarter
reversed as the amount of the charges was reexamined at the end of the
fiscal year.
55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of ADAC Laboratories and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of ADAC
Laboratories and its Subsidiaries (the "Company") at October 3, 1999 and
September 27, 1998, and the results of their operations and their cash flows for
each of the three years in the period ended October 3, 1999, in conformity with
accounting principles generally accepted in the United States. 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 of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
November 12, 1999
56
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Items 10, 11, 12 and 13 is included in the Proxy
Statement for the Company's 2000 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the 1999 fiscal year and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) (1) FINANCIAL STATEMENTS. Consolidated Financial Statements, Notes to
Consolidated Financial Statements, and the Report of Independent Accountants
are included under Item 8. Financial Statements and Supplemental Data.
(2) FINANCIAL STATEMENT SCHEDULES. See "Index to Financial Statement
Schedules" attached hereto and made a part hereof.
(3) EXHIBITS. The following exhibits are included or, as indicated by
the footnote, incorporated by reference into this filing:
<TABLE>
<CAPTION>
EXHIBIT # EXHIBIT NAME
- - - --------- ------------
<C> <S>
3.1(1) Amended and Restated Articles of Incorporation.
3.2 Bylaws, as amended.
4.1(5) Rights Agreement dated as of April 22, 1996 between the
Company and Chemical Mellon Shareholder Services, LLC.
10.01(2) Leases for two buildings located at 540 Alder Drive,
Milpitas, California, between the Company and John
Arrillaga and Richard T. Peery, dated June 25, 1986.
10.02(3) Amendment to leases for two buildings located at 540 Alder
Drive, Milpitas, California, Between the Company and John
Arrillaga and Richard T. Peery, dated February 2, 1992.
10.04(4) Lease agreement for building located at 630 Alder Drive,
Milpitas, California, between the Company and John
Arrillaga and Richard T. Peery, dated December 6, 1993.
10.05(1) Directors' Stock Option Plan (1987), as amended by
Amendments Nos. 1 to 4.
10.06(1) 1992 Stock Option Plan, as amended by Amendments Nos. 1 to
6.
10.07(8) Amended and Restated Employee Stock Purchase Plan (1994).
10.08(4) Employment/Severance agreement between the Company and
Stanley D. Czerwinski, dated November 2, 1994.
10.10(7) Form of ADAC Executive Severance Agreement.
10.11(7) Form of ADAC Health Care Information Systems, Inc. Executive
Severance Agreement.
10.16(6) ADAC Health Care Information Systems, Inc. 1997 Stock Option
Plan and related Stock Option Agreement.
10.20(7) Amendment No. 7 to 1992 Stock Option Plan.
</TABLE>
57
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT # EXHIBIT NAME
- - - --------- ------------
<C> <S>
10.21(7) Amendments to leases for three buildings located at 540
Alder Drive, Milpitas, California, between the Company and
John Arrillaga and Richard T. Perry dated July 6,1998.
10.22(7) Lease agreement for building located at 1860 Barber Lane,
Milpitas, California, Between the Company and Golden
Pacific Properties, LLC. dated August 19,1998.
10.23(8) 1999 Long-Term Incentive Plan
10.24(8) Amendment No. 3 to Employee Stock Purchase Plan (1994)
10.25(9) 1999 Supplemental Incentive Plan
10.26 Amended and Restated Credit Agreement, dated March 29, 1999
10.27 Amended and Restated Credit Agreement, dated August 17, 1999
21 Subsidiaries.
23 Consent of Independent Accountants.
27 Financial Data Schedule
</TABLE>
- - - ------------------------
(B) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
(1) Incorporated by reference to Exhibits filed with the Company's Report on
Form 10-Q for the quarter ended June 29, 1997.
(2) Incorporated by reference to Exhibits filed with the Company's Annual Report
on Form 10-K (file no. 0-9428) for the fiscal year ended September 28, 1986.
(3) Incorporated by reference to Exhibits filed with the Company's Annual Report
on Form 10-K (file no. 0-9428) for the fiscal year ended. October 1, 1989
(4) Incorporated by reference to Exhibits filed with the Company's Annual Report
on Form 10-K (file no. 0-9428) for the fiscal year ended. October 2, 1994
June 30, 1995.
(5) Incorporated by reference to Exhibits filed with the Company's Current
Report on Form 8-K (file no. 0-9428) dated April 22, 1996.
(6) Incorporated by reference to Exhibits filed with the Company's Annual Report
on Form 10-K (file no. 0-9428) for the fiscal year ended September 28, 1997.
(7) Incorporated by reference to Exhibits filed with the Company's Annual Report
on Form 10-K (file no. 0-9428) for the fiscal year ended September 27, 1998.
(8) Incorporated by reference to Exhibits filed with the Company's Quarterly
Report on Form 10-Q (file no. 0-9428) for the quarter Ended April 4,1999.
(9) Incorporated by reference to Exhibits filed with the Company's Quarterly
Report on Form 10-Q (file no. 0-9428) for the quarter Ended July 4,1999.
58
<PAGE>
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.
Date: December 30, 1999
<TABLE>
<S> <C> <C>
ADAC LABORATORIES
(Registrant)
BY: /s/ R. ANDREW ECKERT
-----------------------------------------
R. Andrew Eckert,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
</TABLE>
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITIES DATE
--------- ---------- ----
<C> <S> <C>
Senior Vice President,
/s/ NEIL J. LAIRD Chief Financial Officer
------------------------------------------- (Principal Financial and December 30, 1999
Neil J. Laird Accounting Officer)
/s/ STANLEY D. CZERWINSKI
------------------------------------------- Director December 30, 1999
Stanley D. Czerwinski
/s/ DENNIS R. RANEY
------------------------------------------- Director December 30, 1999
Dennis R. Raney
/s/ F. DAVID ROLLO
------------------------------------------- Director December 30, 1999
F. David Rollo
/s/ EDMUND H. SHEA, JR.
------------------------------------------- Director December 30, 1999
Edmund H. Shea, Jr.
</TABLE>
59
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants
Financial Statement Schedules
Schedule I--Consolidated Valuation and Qualifying Accounts
Schedule II--Consolidated Statement of Operations Information
Other schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the
consolidated financial statements or the notes thereto.
60
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of ADAC Laboratories and its
Subsidiaries is included on page 56 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedules listed in the index on page 28 of this Form 10-K. In our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
PricewaterhouseCoopers LLP
San Jose, California
November 12, 1999
61
<PAGE>
SCHEDULE I
ADAC LABORATORIES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
FOR THE THREE YEARS IN THE PERIOD ENDED OCTOBER 3, 1999
<TABLE>
<CAPTION>
ADDITIONS
-------------------------------------
BALANCE CHARGED TO ACQUISITION BALANCE
AT BEGINNING COSTS AND OF AT END
DESCRIPTION OF PERIOD EXPENSES BUSINESS DEDUCTIONS OF PERIOD
- - - ----------- ------------ ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended September 28, 1997:
Deducted from asset accounts:
Allowance for product returns and
doubtful accounts...................... $ 305 $ 2,513 $-- $ 999 $ 1,819
Provision for inventories................ 3,847 3,370 -- 2,361 4,856
Year Ended September 27, 1998:
Deducted from asset accounts:
Allowance for product returns and
doubtful accounts...................... $1,819 $ 1,905 -- $ 1,405 $ 2,319
Provision for inventories................ 4,856 5,942 -- 6,727 4,071
Year Ended October 3, 1999:
Deducted from asset accounts:
Allowance for product returns
and doubtful accounts.................... $2,319 $20,005 $-- $ 7,617 $14,707
Provision for inventories................ 4,071 19,205 20 12,694 10,602
</TABLE>
62
<PAGE>
SCHEDULE II
ADAC LABORATORIES AND SUBSIDIARIES
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
(IN THOUSANDS)
FOR THE THREE YEARS IN THE PERIOD ENDED OCTOBER 3, 1999
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
ITEM OCTOBER 3, 1999 SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
- - - ---- ---------------- ------------------- -------------------
<S> <C> <C> <C>
Depreciation and amortization of intangible
assets:
Goodwill.................................... $1,580 $1,658 $1,014
Acquired technology......................... 1,201 1,284 695
Other....................................... 381 134 119
</TABLE>
Amounts charged to costs and expenses do not exceed one percent of net
revenues for all other items for all periods presented.
63
<PAGE>
BYLAWS OF
ADAC LABORATORIES
------------------
ARTICLE I
OFFICES
1.01 PRINCIPAL OFFICE. The corporation shall maintain its principal
executive office at the following address:
255 San Geronimo Way
Sunnyvale, California 94086
1.02 OTHER OFFICES. The board of directors may change the location
of the principal office of the corporation, or establish and maintain
additional offices at such other places as it may from time to time designate.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.01 PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of California designated by the board
of directors. In the absence of any such designation, shareholders meetings
shall be held at the principal executive office of the corporation.
2.02 ANNUAL MEETING. The annual meeting of the shareholders, after
the year of incorporation, shall be held at four o'clock on the third
Wednesday of the first month of the calendar year. If this day falls on a
legal holiday, the annual meeting shall be held at the same time on the
following business day thereafter.
2.03 SPECIAL MEETING. A special meeting of the shareholders may be
called at any time by the board of directors, or by the chairman of the
board, or by the president or by one or more shareholders holding shares in
the aggregate entitled to cast not less than 10% of the votes at that meeting.
If a special meeting is called by any person or persons other
than the board of directors, the request shall be in writing specifying the
time of such meeting and the general nature
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of the business proposed to be transacted, and shall be delivered personally
or sent by registered mail or by telegraphic or other facsimile transmission
to the chairman of the board, the president, any vice president or the
secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in
accordance with the provisions of Section 601 of the Corporations Code of the
State of California, that a meeting will be held at the time requested by the
person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 2.03 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by action of the
board of directors may be held.
2.04 NOTICE OF SHAREHOLDERS MEETINGS. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 2.05
of this Article 2 not less than ten (10) nor more than sixty (60) days before
the date of the meeting. The notice shall specify the place, date and hour
of the meeting and (i) in the case of a special meeting, the general nature
of the business to be transacted, or (ii) in the case of the annual meeting,
those matters which the board of directors, at the time of giving the notice,
intends to present for action by the shareholders. The notice of any meeting
at which directors are to be elected shall include the name of any nominee or
nominees whom, at the time of the notice, management intends to present for
election.
If action is proposed to be taken at any meeting for approval
of (i) a contract or transaction in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the Corporations Code of
California, (ii) an amendment of the articles of incorporation, pursuant to
Section 902 of that Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of that code, (iv) a voluntary dissolution of the
corporation, pursuant to Section 1900 of that Code, or (v) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of that Code, the notice shall also state
the general nature of that proposal.
2.05 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first class
mail or telegraphic or other written communication, charges prepaid,
addressed to the shareholder at the address of that shareholder appearing on
the books of the corporation or given by the shareholder to the corporation
for the purpose of notice. If no such address appears on the corporation's
books or is given, notice shall be deemed to have been given if sent to that
shareholder by first class mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least
once in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other
means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
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<PAGE>
shareholder at that address, all future notices or reports shall be deemed to
have been duly given without further mailing if these shall be available to
the shareholder on written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the date of
the giving of the notice.
An affidavit of the mailing or other means of giving any notice
of any shareholders meeting shall be executed by the secretary, assistant
secretary or any transfer agent of the corporation giving the notice, and
shall be filed and maintained in the minute book of the corporation.
2.06 QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required
to constitute a quorum.
2.07 ADJOURNED MEETING; NOTICE. Any shareholders meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to
time by the vote of the majority of the shares represented at that meeting,
either in person or by proxy, but in the absence of a quorum, no other
business may be transacted at that meeting, except as provided in Section
2.06 of this Article 2.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from
the date set for the original meeting, in which case the board of directors
shall set a new record date. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Sections 2.04 and 2.05 of this Article
2. At any adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting.
2.08 VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section
701 of the Corporations Code of the State of California, subject to the
provisions of Section 702, Section 703 and Section 704 of the Corporations
Code of the State of California (relating to voting shares held by a
fiduciary, in the name of a corporation, or in joint ownership). The
shareholders vote may be by voice vote or by ballot; provided, however, that
any election for directors must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than election of directors,
any shareholder may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares, or vote them against the proposal,
but, if the shareholder fails to specify the number of shares which the
shareholder is voting affirmatively, it will be conclusively presumed that
the shareholders approving vote is with respect to all shares that the
shareholder is entitled to vote. If a quorum is present, the affirmative
vote of the majority of the shares represented at the meeting and entitled to
vote on any
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<PAGE>
matter (other than the election of directors) shall be the act of the
shareholders, unless the vote of a greater number or voting by classes is
required by California General Corporation Law or by the articles of
incorporation.
At a shareholders meeting at which directors are to be elected,
no shareholder shall be entitled to cumulate votes (i.e., cast for any one or
more candidates a number of votes greater than the number of the shareholders
shares) unless the candidates names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholders intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled
to vote may cumulate votes for candidates in nomination and give one
candidate a number of votes equal to the number of directors to be elected,
multiplied by the number of votes to which that shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among
any or all of the candidates as the shareholder thinks fit. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected.
2.09 WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of shareholders, either annual or special,
however called and noticed and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting,
each person entitled to vote who was not present in person or by proxy signs
a written waiver of notice or a consent to a holding of the meeting, or an
approval of the minutes. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any annual or special
meeting of shareholders, except that if action is taken or proposed to be
taken for approval for any of those matters specified in Section 601 of the
Corporations Code of the State of California; the waiver of notice or consent
shall state the general nature of the proposal. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a
waiver of notice of that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration of
matters not included in the notice of the meeting if that objection is
expressly made at the meeting.
2.10 SHAREHOLDERS ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any annual or special meeting of shareholders
may be taken without a meeting and without prior notice if a consent in
writing setting forth the action so taken is signed by the holders of
outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted. In the case
of election of directors, such a consent shall be effective only if signed by
the holders of all outstanding shares entitled to vote for the election of
directors; provided, however, that a director may be elected at any time to
fill a vacancy on the board of directors that has not been filled by the
directors by the written consent of the holders of a majority of the
outstanding
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<PAGE>
shares entitled to vote for the election of directors. All such consents
shall be filed with the secretary of the corporation and shall be maintained
in the corporate records. Any shareholder giving a written consent, or the
shareholder's proxy holders, or a transferee of the shares or a personal
representative of the shareholder of their respective proxy holders, may
revoke the consent by a writing received by the secretary of the corporation
before written consents of the number of shares required to authorize the
proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a
meeting. This notice shall be given in the manner specified in Section 2.05
of this Article 2. In the case of approval of (i) contracts or transactions
in which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Corporations Code of California, (ii) indemnification of
agents of the corporation, pursuant to Section 317 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of that Code, and
(iv) a distribution in dissolution other than in accordance with the rights
of outstanding preferred shares, pursuant to Section 2007 of that Code, the
notice shall be given at least ten (10) days before the consummation of any
action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days before any such action without a
meeting, and in this event only shareholders of record on the date so fixed
are entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date except as otherwise provided in the California General
Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no
prior action by the board has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action of the board has been
taken, shall be at the close of business on the day on which the board adopts
the resolution relating to that action, or the sixtieth (60th) day before the
date of such other action, whichever is later.
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<PAGE>
2.12 PROXIES. Every person entitled to vote for directors or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which does not
state that it is irrevocable shall continue in full force and effect unless
(i) revoked by the person executing it, before the vote pursuant to that
proxy, by a writing delivered to the corporation stating that the proxy is
revoked, or by a subsequent proxy executed by, or attendance at the meeting
and voting in person by, the person executing the proxy; or (ii) written
notice of the death or incapacity of the maker of that proxy is received by
the corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven (11)
months from the date of the proxy, unless otherwise provided in the proxy.
2.13 INSPECTORS OF ELECTION. Before any meeting of shareholders,
the board of directors may appoint any persons other than nominees for office
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and
on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any shareholder or a
shareholder's proxy shall, appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the results; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
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<PAGE>
ARTICLE III
DIRECTORS
3.01 POWERS. Subject to the provisions of the California General
Corporation Law and any limitations in the articles of incorporation and
these bylaws relating to action required to be approved by the shareholders
or by the outstanding shares, the business and affairs of the corporation
shall be managed and all corporate powers shall be exercised by or under the
direction of the board of directors. Notwithstanding the foregoing, until
November 30, 1980, the issuance of shares or the granting of options to
purchase shares of this corporation's common stock to officers and directors
of this corporation, shall require the unanimous approval by all members of
the board of directors.
3.02 NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors
shall be not less than five (5) or more than eight (8), the exact number of
directors shall be fixed from time to time by a resolution duly adopted by
the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that an amendment reducing the
number of directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting, or the shares not consenting in
the case of action by written consent, are equal to more than 16 2/3% of the
outstanding shares entitled to vote.
3.03 ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the shareholders to hold office until the
next annual meeting. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
3.04 VACANCIES. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders, or by court
order, may be filled only by the vote of a majority of the shares entitled to
vote represented at a duly held meeting at which a quorum is present, or by
the shares entitled to vote. Each director so elected shall hold office
until the next annual meeting of the shareholders and until a successor has
been elected and qualified.
A vacancy or vacancies in the board of directors shall be
deemed to exist in the event of the death, resignation or removal of any
director, or if the board of directors who has been declared of unsound mind
by an order of court or convicted of a felony, or if the authorized number of
directors is increased, or if the shareholders fail, at any meeting of
shareholders at which any director or directors are elected, to elect the
number of directors to be voted for at that meeting.
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The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors, but any such
election by written consent shall require the consent of a majority of the
outstanding shares entitled to vote.
Any director may resign effective on giving written notice to
the chairman of the board, the president, the secretary or the board of
directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
No reduction of the authorized number of directors shall have
the effect of removing any director before that director's term of office
expires.
3.05 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings
of the board of directors may be held at any place within or outside the
State of California that has been designated from time to time by resolution
of the board. In the absence of such a designation, regular meetings shall
be held at the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or outside the State
of California that has been designated in the notice of the meeting, or if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all
directors participating in the meeting can hear one another, and all such
directors shall be deemed to be present in person at the meeting.
3.06 ANNUAL MEETING. Immediately following, or jointly therewith,
each annual meeting of shareholders, the board of directors shall hold a
regular meeting for the purpose of organization, any desired election of
officers and the transaction of other business. Notice of this meeting shall
not be required.
3.07 OTHER REGULAR MEETINGS. Regular meetings of the board of
directors shall be held without call at such time as shall from time to time
be fixed by the board of directors. Such regular meetings may be held
without notice.
3.08 SPECIAL MEETINGS. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president, or any vice president, or the secretary or any two
directors. Notice shall be given in the manner prescribed by Section 307 of
the Corporations Code of the State of California.
3.09 QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 3.11 of this Article 3. Every act or decision done or
made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the board of directors
subject to the provisions of Section 310 of the Corporations Code of
California (as to approval of contracts or transactions in which a director
has a direct or indirect material financial interest), Section 311 of that
Code (as to appointment of committees) and Section 317(e) of that Code (as to
indemnification of directors). A
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meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 WAIVER OF NOTICE. The transactions of any meeting of the board
of directors, however called and noticed or wherever held, shall be as valid
as though had at a meeting duly held after regular call and notice if a
quorum is present, and if either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding
the meeting or an approval of the minutes. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to
any director who attends the meeting without protesting before or at its
commencement the lack of notice to that director.
3.11 ADJOURNMENT. A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
3.12 NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given, unless the meeting is adjourned for
more than twenty-four hours, in which case notice of the time and place shall
be given before the time of the adjourned meeting, in the manner specified in
Section 307 of the California General Corporation Law, to the directors who
were not present at the time of the adjournment.
3.13 ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the board of directors may be taken without a meeting if all members
of the board shall individually or collectively consent in writing to that
action. Such action by written consent shall have the same force and effect
as a unanimous vote of the board of directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the board.
3.14 FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
board of directors. This Section 3.11 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
ARTICLE IV
COMMITTEES
4.01 COMMITTEES OF DIRECTORS. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors,
to serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any
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meeting of any committee. Any committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except
with respect to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholder approval or approval
of the outstanding shares;
(b) the filling of vacancies on the board of directors or in
any committee;
(c) the fixing of compensation of the directors for serving
on the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board
of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range determined
by the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of these committees.
ARTICLE V
OFFICERS
5.01 OFFICERS. The officers of the corporation shall be a
president, a secretary and a chief financial officer. The corporation may
also have, at the discretion of the board of directors, a chairman of the
board, one or more vice presidents, one or more assistant secretaries, one or
more assistant treasurers and such other officers as may be appointed in
accordance with the provisions of Section 5.03 of this Article 5. Any number
of officers may be held by the same person.
5.02 ELECTION OF OFFICERS. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of
Section 5.03 of this Article 5, shall be chosen by the board of directors,
and each shall serve at the pleasure of the board, subject to the rights, if
any, of an officer under any contract of employment.
5.03 SUBORDINATE OFFICERS. The board of directors may appoint, and
may empower the president to appoint, such other officers as the business of
the Corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the bylaws or
as the board of directors may from time to time determine.
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5.04 REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the board of directors, at any
regular or special meeting of the board, or, except in case of an officer
chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the corporation under any contract to
which the officer is a party.
5.05 VACANCIES IN OFFICES. A vacancy in any office because of the
death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these bylaws for regular appointments to
that office.
5.06 CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer be elected, shall if present, preside at meetings of the board of
directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the board of directors or prescribed by
the bylaws. If there is no president, the chairman of the board shall, in
addition, be the chief executive officer of the corporation, and shall have
the powers and duties prescribed in Section 5.07 of this Article 5.
5.07 PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and officers of
the corporation. He shall preside at all meetings of the shareholders, and
in the absence of the chairman of the board, or if there be none, at all
meetings of the board of directors. He shall have the general powers and
duties of management usually vested in the office of the president of a
corporation, and shall have such other powers and duties as may be prescribed
by the board of directors or the bylaws.
5.08 VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by
the board of directors, or if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the president, and when
so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the board of directors or the bylaws, and the
president or the chairman of the board.
5.09 SECRETARY. The secretary shall keep or cause to be kept at the
principal executive office, or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors,
committees of directors and shareholders, with the time and place of holding,
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whether regular or special, and if special, how authorized, the notice given,
the names of those present at directors meetings or committee meetings, the
number of shares present or represented at shareholders meetings and the
proceedings.
The secretary shall keep or cause to be kept at the principal
executive office, or at the office of the corporation's transfer agent or
registrar as determined by resolution of the board of directors, a share
register or a duplicate share register showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all
meetings of the shareholders and of the board of directors required by the
bylaws, or by law to be given, and he shall keep the seal of the corporation,
if one be adopted, in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the board of directors or
by the bylaws.
5.10 CHIEF FINANCIAL OFFICER. The chief financial officer shall
receive and have custody of all funds and securities of the corporation,
shall keep adequate and correct accounts of the corporation's properties and
business transactions and shall perform such other duties as may be required
of him by the board of directors or by the president.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
6.01 AGENTS, PROCEEDINGS AND EXPENSES. For the purposes of this
Article, "agent" means any person who is or was a director, officer, employee
or other agent of this corporation, or is or was serving at the request of
this corporation as a director, officer, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of this corporation
or of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under Section 6.04 or Section 6.05(c)
of this Article.
6.02 ACTIONS OTHER THAN BY THE CORPORATION. This corporation shall
indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
corporation to procure a judgment in its favor) by reason of the fact that
such person is or was an agent of this corporation, against expenses,
judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with such proceedings if that person
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acted in good faith and in a manner that person reasonably believed to be in
the best interests of this corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of that person was
unlawful, conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which the person reasonably believed to be in the
best interests of this corporation or that the person has reasonable cause to
believe that the person's conduct was unlawful.
6.03 ACTIONS BY THE CORPORATION. This corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of this
corporation to procure a judgment in its favor by reason of the fact that
person is or was an agent of this corporation, against expenses actual and
reasonably incurred by that person in connection with the defense or
settlement of that action if that person acted in good faith, in a manner
that person believed to be in the best interest of this corporation and with
such care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances. No indemnification
shall be made under this Section 6.03.
(a) In respect of any claim, issue or matter as to which
that person shall have been adjudged to be liable to this corporation in the
performance of that person's duty to this corporation, unless and only to the
extent that the court in which that proceeding is or was pending shall
determine upon application that, in view of the circumstances of the case,
that person is fairly and reasonably entitled to indemnity for the expenses
which the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(c) Of expenses incurred in depending a threatened or
pending action which is settled or otherwise disposed of without court
approval.
6.04 SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this corporation has been successful on the merits in defense of any
proceeding referred to in Sections 6.02 or 6.03 of this Article, or in
defense of any claim, issue or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.
6.05 REQUIRED APPROVAL. Except as provided in Section 6.04 of this
Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 6.02 or 6.03
of this Article, by:
(a) A majority vote of a quorum consisting of directors who
are not parties to the proceeding;
(b) Approval by the affirmative vote of a majority of the
shares of this corporation entitled to vote represented at a duly held
meeting at which a quorum is present or by the written
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<PAGE>
consent of holders of a majority of the outstanding shares entitled to vote.
For this purpose, the shares owned by the person to be indemnified shall not
be considered outstanding or entitled to vote thereon; or
(c) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or not such
application by the agent, attorney or other person is opposed by this
corporation.
6.06 ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this corporation before the final disposition
of the proceeding on receipt of an undertaking by or on behalf of the agent
to repay the amount of the advance unless it shall be determined ultimately
that the agent is entitled to be indemnified as authorized in this Article.
6.07 OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than
directors and officers of this corporation or any subsidiary hereof may be
entitled by contract or otherwise.
6.08 LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Section 6.04 or Section 6.05(c), in any
circumstance where it appears:
(a) That it would be inconsistent with a provision of the
articles, a resolution of the shareholders or an agreement in effect at the
time of the accrual of the alleged cause of action asserted in the proceeding
in which the expenses were incurred or other amounts were paid, which
prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
6.09 INSURANCE. Upon and in the event of a determination by the
board of directors of this corporation to purchase such insurance on behalf
of any agent of the corporation against any liability asserted against or
incurred by the agent in such capacity or arising out of the agent's status
as such whether or not this corporation would have the power to indemnify the
agent against that liability under the provisions of this section.
6.10 FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This Article
does not apply to any proceeding against any trustee, investment manager or
other fiduciary of an employee benefit plan in that person's capacity as
such, even though that person may also be an agent of the corporation as
defined in Section 6.01 of this article. Nothing contained in this Article
shall limit any right to indemnification to which such a trustee, investment
manager or other fiduciary may be entitled by contract or otherwise, which
shall be enforceable to the extent permitted by 2.07 of the California
Corporations Code.
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<PAGE>
ARTICLE VII
RECORDS AND REPORT
7.01 MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation
shall keep at its principal executive office, or at the office of its
transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving
the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding voting shares of
the corporation may (i) inspect and copy the records of shareholders' names
and addresses and share holdings during usual business hours on five (5) days
prior written demand on the corporation, and (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the shareholders'
names and addresses, who are entitled to vote for the election of directors,
and their share holdings, as of the most recent record date for which that
list has been compiled or as of a date specified by the shareholder after the
date of demand. This list shall be made available to any such shareholder by
the transfer agent on or before the later of five (5) days after the demand
is received or the date specified in the demand as the date as of which the
list is to be compiled. The record of shareholders shall also be open to
inspection on the written demand of any shareholder or holder of a voting
trust certificate, at any time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. Any inspection and copying under this
Section 7.01 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the demand.
7.02 MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall
keep at its principal executive office, or if its principal executive office
is not in the State of California, at its principal business office in this
state, the original or a copy of the bylaws as amended to date, which shall
be open to inspection by the shareholders at all reasonable times during
office hours. If the principal executive office of the corporation is
outside the State of California and the corporation has no principal business
office in this state, the secretary shall, upon the written request of any
shareholder, furnish to that shareholder a copy of the bylaws as amended to
date.
7.03 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders
and the board of directors and any committee or committees of the board of
directors shall be kept at such place or places designated by the board of
directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written
demand of any shareholder or holder of a voting trust certificate, at any
reasonable time during usual business hours, for a purpose reasonably related
to the holder's interests as a shareholder or as the holder of a
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<PAGE>
voting trust certificate. The inspection may be made in person or by an
agent or attorney, and shall include the right to copy and make extracts.
These rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
7.04 INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation and
each of its subsidiary corporations. This inspection by a director may be
made in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts of documents.
7.05 ANNUAL REPORT TO SHAREHOLDERS. The Board of Directors shall
issue an annual report to the shareholders of the corporation and such other
periodic reports as they consider appropriate.
7.06 FINANCIAL STATEMENTS. A copy of any annual financial statement
and any income statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the corporation as of the
end of each such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for twelve
(12) months and each such statement shall be exhibited at all reasonable
times to any shareholder demanding an examination of any such statement or a
copy shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a
written request to the corporation for an income statement of the corporation
for the three month, six month or nine month period of the then current
fiscal year ended more than thirty (30) days before the date of the request,
and a balance sheet of the corporation as of the end of that period, the
chief financial officer shall cause that statement to be prepared, if not
already prepared, and shall deliver personally or mail that statement or
statements to the person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the shareholders
its annual report for the last fiscal year, this report shall likewise be
delivered or mailed to the shareholder or shareholders within thirty (30)
days after the request.
The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared
without audit from the books and records of the corporation.
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<PAGE>
ARTICLE VIII
GENERAL CORPORATE MATTERS
8.01 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action
by shareholders by written consent without a meeting), the board of directors
may fix, in advance, a record date, which shall not be more than sixty (60)
days before any such action, and in that case only shareholders of record on
the date so fixed are entitled to receive the dividend rights, as the case
may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date so fixed, except as otherwise provided in
the California General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close
of business on the day on which the board adopts the applicable resolution or
the sixtieth (60th) day before the date of that action, whichever is later.
8.02 CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts
or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time
to time, shall be determined by resolution of the board of directors.
8.03 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board
of directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and this
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power
of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
8.04 CERTIFICATES FOR SHARES. A certificate or certificates for
shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares are fully paid, and the board of
directors may authorize the issuance of certificates or shares as partly paid
provided that these certificates shall state the amount of the consideration
to be paid for them and the amount paid. All certificates shall be signed in
the name of the corporation by the chairman of the board or vice chairman of
the board or the president or vice president and by the chief financial
officer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed on a certificate shall
have ceased to be that officer, transfer agent or registrar before that
certificate is issued, it may be issued by the corporation with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue.
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<PAGE>
8.05 LOST CERTIFICATES. Except as provided in this Section 8.05, no
new certificates for shares shall be issued to replace an old certificate
unless the latter is surrendered to the corporation and canceled at the same
time. The board of directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed, authorize
the issuance of a replacement certificate on such terms and conditions as the
board may require, including provision for indemnification of the corporation
secured by a bond or other adequate security sufficient to protect the
corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft or destruction of
the certificate or the issuance of the replacement certificate.
8.06 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman
of the board, the president or any vice president or any other person
authorized by resolution of the board of directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any
and all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to these
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person authorized to
do so by a proxy duly executed by these officers.
8.07 CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in
the California General Corporation Law shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular and the
term "person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENT OF BYLAWS
9.01 AMENDMENT OF BYLAWS BY SHAREHOLDERS. The bylaws and every part
thereof may from time to time, and at any time, be amended, altered,
repealed; and, new or additional bylaws may be adopted by the vote of the
shareholders entitled to exercise a majority of the voting power of the
corporation or by the written assent of such shareholders, except where a
greater number is required by law or the Articles of Incorporation or by
these bylaws.
9.02 AMENDMENT OF BYLAWS BY DIRECTORS. Subject to the right of the
shareholders to adopt, amend or repeal bylaws, bylaws may be adopted, amended
or repealed by a majority vote of the directors present at any meeting of the
board at which a quorum is present; provided, however, that the board of
directors may not adopt a bylaw or amendment thereof changing the authorized
number of directors.
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<PAGE>
CERTIFICATE OF AMENDMENT
OF BYLAWS OF
ADAC LABORATORIES
Article 3, Section 3.02 of the Bylaws of this corporation was amended
effective November 12, 1984, by the Board of Directors to provide as follows:
"SECTION 3.02. NUMBER AND QUALIFICATION OF DIRECTORS. The number
of directors of the corporation shall be not less than five (5)
nor more than eight (8). The exact number of directors shall be
six (6) until changed, within the limits specified above, by a
bylaw amending this Section 3.02 duly adopted by the board of
directors or approved by the shareholders. The indefinite number
of directors may be changed, or a definite number fixed within
provision for an indefinite number, by a duly adopted amendment to
the Articles of Incorporation or by an amendment to this bylaw
duly adopted by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the
minimum number of directors to a number less than five (5) cannot
be adopted if the vote cast against its adoption at a meeting of
the shareholders, or the shares not consenting in the case of
action by written consent, are equal to more than sixteen and
two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number
of authorized directors to a number greater than two (2) times the
stated minimum number of directors minus one (1)."
<PAGE>
CERTIFICATE OF AMENDMENT
OF BYLAWS OF
ADAC LABORATORIES
Article 3, Section 3.02 of the Bylaws of this corporation was amended
effective May 31, 1985, by the Board of Directors to provide as follows:
"SECTION 3.02. NUMBER AND QUALIFICATION OF DIRECTORS. The number
of directors of the corporation shall be not less than five (5)
nor more than eight (8). The exact number of directors shall be
five (5) until changed, within the limits specified above, by a
bylaw amending this Section 3.02 duly adopted by the board of
directors or approved by the shareholders. The indefinite number
of directors may be changed, or a definite number fixed within
provision for an indefinite number, by a duly adopted amendment to
the Articles of Incorporation or by an amendment to this bylaw
duly adopted by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the
minimum number of directors to a number less than five (5) cannot
be adopted if the votes cast against its adoption at a meeting of
the shareholders, or the shares not consenting in the case of
action by written consent, are equal to more than sixteen and
two-thirds percent (16 2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number
of authorized directors to a number greater than two (2) times the
stated minimum number of directors minus one (1)."
<PAGE>
AMENDMENT OF BYLAWS
OF
ADAC LABORATORIES
ARTICLE 3, Section 3.02(b), of the Bylaws of this Corporation was
amended on November 5, 1987, by this Board of Directors, to provide as
follows:
"SECTION 3.02. NUMBER OF DIRECTORS.
(b) The number of directors of the Corporation shall be five (5)."
<PAGE>
AMENDMENT OF BYLAWS
OF
ADAC LABORATORIES
ARTICLE 6, of the Bylaws of this Corporation was amended by the Board
of Directors of the Corporation on November 5, 1987 and was approved and
adopted by the shareholders of the Corporation on January 14, 1988, to delete
Sections 6.01 - 6.10, inclusive, and to substitute in their place Section
6.1, as hereinafter set forth as follows:
"ARTICLE 6
SECTION 6.1. INDEMNIFICATION AGREEMENT. The corporation
shall indemnify, defend and hold harmless in the manner and to the
full extent permitted by law, each agent (as defined below) who is
or was a party to any proceeding (as defined below), whether or
not by or in the right of the Corporation, by reason of the fact
that such person is or was an Agent of the Corporation. The
Corporation may, to the full extent permitted by law, purchase and
maintain insurance on behalf of any Agent against any liability
which may be asserted against him. To the full extent permitted
by law, the indemnification provided herein shall include, but is
not limited to, expenses (including attorneys' fees), levies,
costs, judgments, fines and amounts paid in settlement, and, in
the manner provided by law, any such expenses shall be paid by the
Corporation in advance of the final disposition of such
proceeding.
The indemnification provided herein shall not be deemed to
limit the right of the Corporation to indemnify any other person
for any such expenses to the full extent
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<PAGE>
permitted by law, nor shall it be deemed exclusive of any other
rights to which any Agent seeking indemnification from the
Corporation may be entitled under any agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in an official capacity and as to action in any capacity
while holding such office. For purpose of this Section, "Agent"
means any person who is or was a director, officer, employee,
consultant or other agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee, consultant or other agent of another corporation,
partnership, joint venture, trust or other enterprise, or was a
director, officer, employee, consultant or other agent of the
Corporation or entity which was a predecessor corporation or
entity to this Corporation, or of another enterprise at the
request of such predecessor entity; "proceeding" shall mean any
threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative."
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<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors hereby amends Article 3, Section 3.02(b) of the
Bylaws to read as follows:
"Section 3.02 Number and Qualification of Directors.
(b) Subject to the foregoing provisions for
changing the number of directors, the number of
directors of this Corporation has been fixed at
seven (7)."
Approved by Board of Directors
on June 12, 1995
<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors hereby amends Article 3, Section 3.02(b) of the
Bylaws to read as follows:
"Section 3.02 Number and Qualification of Directors.
(b) Subject to the foregoing provisions for
changing the number of directors, the number of
directors of this Corporation has been fixed at six
(6)."
Approved by Board of Directors
on December 12, 1995 to be
Effective as of March 6, 1996
<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors hereby amends Article 3, Section 3.02(b) of the
Bylaws to read as follows:
"Section 3.02 Number and Qualification of Directors.
(b) Subject to the foregoing provisions for
changing the number of directors, the number of
directors of this Corporation has been fixed at
seven (7)."
Approved by the Board of Directors and
effective as of March 6, 1996
<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors and Shareholders adopted the following
amendments to Sections 3.02 and 9.02 of the Bylaws:
"SECTION 3.02. NUMBER AND QUALIFICATION OF DIRECTORS. The number
of directors of the corporation shall be not less than six (6) nor
more than eleven (11). The exact number of directors shall be six
(6) until changed, within the limits specified above, by a bylaw
amending this Section 3.02 duly adopted by the board of directors
or approved by the shareholders; provided, however, that any
amendment reducing the fixed number or the minimum number of
directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting of the shareholders,
or the shares not consenting in the case of action by written
consent, are equal to more than sixteen and two-thirds percent
(16 2/3%) of the outstanding shares entitled to vote thereon. No
amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated
minimum number of directors minus one (1)."
"SECTION 9.02. AMENDMENT OF BYLAWS BY DIRECTORS. Subject to
the right of the shareholders to adopt, amend or repeal bylaws,
bylaws may be adopted, amended or repealed by a majority vote of
the directors present at any meeting of the board at which a
quorum is present; provided, however, that the board of directors
may not adopt a bylaw or amendment thereof specifying or changing
a fixed number of directors or the maximum or minimum number of
directors or changing from a fixed to a variable board or vice
versa."
Approved by the Board on October
31, 1996 and by the Shareholders
on May 15, 1997
<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors of the Company adopted the following amendment
to Section 3.02 of the Bylaws:
NOW THEREFORE BE IT RESOLVED, that, the first clause of the second
sentence of Section 3.02 of the Bylaws of the Corporation is hereby
amended and restated to read as follows: "The exact number of directors
shall be seven (7) until changed,".
Approved by the Board on March 15, 1999
<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors of the Company adopted the following amendment
to Section 3.02 of the Bylaws:
NOW THEREFORE BE IT RESOLVED, that, the second and third sentences of
Section 3.02 of the Bylaws of the Corporation are hereby amended and
restated to read as follows: "The exact number of directors shall be six
(6) until changed within the limits specified above, by a bylaw amending
this Section 3.02 duly adopted by the board of directors or approved by
the shareholders; provided, however, that any amendment reducing the
fixed number or the minimum number of directors to a number less than
five (5) cannot be adopted if the votes cast against its adoption at a
meeting of the shareholders, or the shares not consenting in the case of
action by written consent, are equal to more than sixteen and two-thirds
percent (16 2/3%) of the outstanding shares entitled to vote thereon. No
amendment may change the stated maximum number of authorized directors to
a number greater than two (2) times the stated minimum number of
directors minus one (1)".
Approved by the Board on June 4, 1999,
effective as of May 28, 1999
<PAGE>
AMENDMENT TO BYLAWS
The Board of Directors of the Company adopted the following amendment
to Section 3.02 of the Bylaws:
NOW THEREFORE BE IT RESOLVED, that, the second and third sentences of
Section 3.02 of the Bylaws of the Corporation are hereby amended and
restated to read as follows: "The exact number of directors shall be
five (5) until changed within the limits specified above, by a bylaw
amending this Section 3.02 duly adopted by the board of directors or
approved by the shareholders; provided, however, that any amendment
reducing the fixed number or the minimum number of directors to a number
less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting of the shareholders, or the shares not consenting
in the case of action by written consent, are equal to more than sixteen
and two-thirds percent (16 2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of
authorized directors to a number greater than two (2) times the stated
minimum number of directors minus one (1)".
Approved by the Board on September 29, 1999,
effective as of August 9, 1999
<PAGE>
EXHIBIT 26
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
March 29, 1999, is entered into by and among:
(1) ADAC LABORATORIES, a California corporation ("BORROWER");
(2) Each of the financial institutions from time to time
listed in SCHEDULE I hereto, as amended from time to time (such
financial institutions to be referred to herein collectively as the
"LENDERS"); and
(3) ABN AMRO BANK N.V., a Netherlands public company acting
through its San Francisco International Branch, as agent for the
Lenders (in such capacity, "AGENT").
RECITALS
A. Borrower, Agent and certain of the Lenders are parties to
that certain Credit Agreement, dated as of July 31, 1996 (as amended, the
"EXISTING CREDIT AGREEMENT"), pursuant to which such Lenders have provided to
Borrower certain credit facilities upon the terms and subject to the conditions
set forth therein.
B. Borrower has requested Agent and such Lenders to amend the
Existing Credit Agreement in certain respects, including without limitation, to
add a new Person as a Lender and to increase the amount available for borrowing
under the Existing Credit Agreement.
C. Agent, such Lenders and the new Lender have agreed to
amend the Existing Credit Agreement upon the terms and subject to the
conditions set forth herein. For convenience of reference, the parties hereto
wish to restate the Existing Credit Agreement as so amended in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the
mutual covenants herein contained, the parties hereto hereby agree that the
Existing Credit Agreement shall be amended and restated as of the date hereof to
read in its entirety as follows
SECTION I. INTERPRETATION.
1.1. DEFINITIONS. Unless otherwise indicated in this Agreement or any
other Credit Document, each term set forth below, when used in this Agreement or
any other Credit Document, shall have the respective meaning given to that term
below or in the provision of this Agreement or other document, instrument or
agreement referenced below.
"ABN" shall mean ABN AMRO Bank N.V., a Netherlands public
company.
<PAGE>
"ACQUISITION IN-PROCESS R&D CHARGES" shall mean non-recurring
charges, not to exceed $50,000,000 (pre-tax) in the aggregate, to be
taken by Borrower as a result of write-offs of in process research and
development expenses and charges incurred in connection with the
consummation of acquisitions by Borrower otherwise permitted pursuant
to SUBPARAGRAPH 5.02(d).
"AFFILIATE" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, five percent
(5%) or more of any class of Equity Securities of such Person, (b) each
Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person or (c) each of such
Person's officers, directors, joint venturers and partners; PROVIDED,
HOWEVER, that in no case shall Agent or any Lender be deemed to be an
Affiliate of Borrower or any of its Subsidiaries for purposes of this
Agreement. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AGENT" shall have the meaning given to that term in CLAUSE
(3) OF THE INTRODUCTORY PARAGRAPH.
"AGENT'S FEE LETTER" shall mean the letter agreement dated as
of March 29, 1999 between Borrower and Agent.
"AGREEMENT" shall mean this Amended and Restated Credit Agreement.
"AMENDED AND RESTATED GUARANTY" shall have the meaning given
to that term in SUBPARAGRAPH 2.12(a).
"AMENDED AND RESTATED NOTES" shall have the meaning given to
that term in SUBPARAGRAPH 2.06(a).
"APPLICABLE LENDING OFFICE" shall mean, with respect to any
Lender, (a) initially, its office designated as such in SCHEDULE I (or,
in the case of any Lender which becomes a Lender by an assignment
pursuant to SUBPARAGRAPH 8.05(c), its office designated as such in the
applicable Assignment Agreement) and (b) subsequently, such other
office or offices as such Lender may designate to Agent as the office
at which such Lender's Loans will thereafter be maintained and for the
account of which all payments of principal of, and interest on, such
Lender's Loans will thereafter be made.
"APPLICABLE MARGIN" shall mean, with respect to any Loan at
any time, the per annum margin which is determined pursuant to the
Pricing Grid and added to the Base Rate or LIBO Rate, as the case may
be, for such Loan; PROVIDED, HOWEVER, that each Applicable Margin
determined pursuant to the Pricing Grid shall be increased by two
percent (2.00%) on the date an Event of Default occurs and shall
continue at such increased rate unless and until such Event of Default
is waived in accordance with this
<PAGE>
Agreement.
"ASSIGNEE LENDER" shall have the meaning given to that term
in SUBPARAGRAPH 8.05(c).
"ASSIGNMENT" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(c).
"ASSIGNMENT AGREEMENT" shall have the meaning given to that
term in SUBPARAGRAPH 8.05(c).
"ASSIGNMENT EFFECTIVE DATE" shall have, with respect to
each Assignment Agreement, the meaning set forth therein.
"ASSIGNOR LENDER" shall have the meaning given to that term
in SUBPARAGRAPH 8.05(c).
"BASE RATE" shall mean, on any day, the greater of (a) the
Prime Rate in effect on such date and (b) the Federal Funds Rate for such day
PLUS one-half percent (0.50%).
"BASE RATE LOAN" shall mean, at any time, a Loan which then
bears interest as provided in CLAUSE (i) OF SUBPARAGRAPH 2.01(c).
"BNP" shall mean Banque National de Paris, acting through
its San Francisco Branch.
"BORROWER" shall have the meaning given to that term in
CLAUSE (1) OF THE INTRODUCTORY PARAGRAPH.
"BORROWER NOTE GUARANTIES" shall mean, collectively, all
guaranties executed by Borrower in favor of ABN, Sanwa, BNP or UBOC in
connection with sales by Borrower to such Person of promissory notes or other
instruments of indebtedness owed to Borrower and all other documents,
instruments and agreements executed by Borrower and delivered to such Person
in connection with such sales.
"BORROWING" shall mean a borrowing by Borrower consisting
of the Loans made by each of the Lenders on the same date and of the same
Type pursuant to a single Notice of Borrowing.
"BUSINESS DAY" shall mean any day on which (a) commercial
banks are not authorized or required to close in San Francisco, California or
New York, New York and (b) if such Business Day is related to a LIBOR Loan,
dealings in Dollar deposits are carried out in the London interbank market.
"CAPITAL ADEQUACY REQUIREMENT" shall have the meaning given to
that term in SUBPARAGRAPH 2.09(d).
"CAPITAL ASSET" shall mean, with respect to any Person, any
tangible fixed or
<PAGE>
capital asset owned or leased (in the case of a Capital Lease) by such
Person, or any expense incurred by such Person that is required by GAAP to be
reported as a non-current asset on such Person's balance sheet.
"CAPITAL EXPENDITURES" shall mean, with respect to any
Person and any period, all amounts expended by such Person during such period
for the acquisition of Capital Assets (including all amounts paid or accrued
on Capital Assets and other Indebtedness incurred or assumed to acquired
Capital Assets but excluding Capital Assets acquired as a result of a
consolidation or merger with any other Person or the acquisition of
substantially all of the assets of any other Person).
"CAPITAL LEASES" shall mean any and all lease obligations
that, in accordance with GAAP, are required to be capitalized on the books of
a lessee.
"CASH EQUIVALENTS" shall mean:
(a) Direct obligations of, or obligations the
principal and interest on which are unconditionally guaranteed
by, the United States of America or obligations of any agency
of the United States of America to the extent such obligations
are backed by the full faith and credit of the United States
of America, in each case maturing within one year from the
date of acquisition thereof;
(b) Certificates of deposit maturing within one year
from the date of acquisition thereof issued by a commercial
bank or trust company organized under the laws of the United
States of America or a state thereof or that is a Lender,
provided that (A) such deposits are denominated in Dollars,
(B) such bank or trust company has capital, surplus and
undivided profits of not less than $100,000,000 and (C) such
bank or trust company has certificates of deposit or other
debt obligations rated at least A-1 (or its equivalent) by
Standard and Poor's Ratings Group or P-1 (or its equivalent)
by Moody's Investors Service, Inc.;
(c) Open market commercial paper maturing within 270
days from the date of acquisition thereof issued by a
corporation organized under the laws of the United States of
America or a state thereof, provided such commercial paper is
rated at least A-1 (or its equivalent) by Standard and Poor's
Ratings Group or P-1 (or its equivalent) by Moody's Investors
Service, Inc.;
(d) Any repurchase agreement entered into with a
commercial bank or trust company organized under the laws of
the United States of America or a state thereof or that is a
Lender, provided that (A) such bank or trust company has
capital, surplus and undivided profits of not less than
$100,000,000, (B) such bank or trust company has certificates
of deposit or other debt obligations rated at least A-1 (or
its equivalent) by Standard and Poor's Ratings Group or P-1
(or its equivalent) by Moody's Investors Service, Inc., (C)
the repurchase obligations of such bank or trust company under
such repurchase agreement are fully secured by a perfected
security interest in a security or instrument of the type
described in
<PAGE>
CLAUSE (i), (ii) OR (iii) above and (D) such security or
instrument so securing the repurchase obligations has a fair
market value at the time such repurchase agreement is entered
into of not less than 100% of such repurchase obligations; and
(e) Other Investments permitted from time to time
under Borrower's corporate investment policy as it exists on
the date of this Agreement and as it may be amended from time
to time with the approval of Agent.
"CHANGE OF CONTROL" shall mean, with respect to Borrower, the
occurrence of any of the following events: (a) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) shall (i) acquire beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended) of forty percent (40%) or more of the outstanding
Equity Securities of Borrower entitled to vote for members of the board
of directors or (ii) acquire all or substantially all of the assets of
Borrower and its Subsidiaries taken as a whole or (b) during any period
of twelve (12) consecutive calendar months, individuals who are
directors of Borrower on the first day of such period ("Initial
Directors") and any directors of Borrower who are specifically approved
by two-thirds of the Initial Directors and previously-approved
Directors shall cease to constitute a majority of the Board of
Directors of Borrower before the end of such period.
"CHANGE OF LAW" shall have the meaning given to that term in
SUBPARAGRAPH 2.09(b).
"CLOSING DATE" shall mean the Business Day, not later than
March 31, 1999, that each of the conditions set forth in PARAGRAPH 3.01
and SCHEDULE 3.01 has been satisfied by Borrower or waived in writing
by Agent on behalf of the Lenders.
"COMMITMENT" shall mean, with respect to any Lender at any
time, such Lender's Proportionate Share at such time of the Total
Commitment at such time.
"COMMITMENT FEE PERCENTAGE" shall mean, with respect to the
Unused Commitment at any time, the per annum rate which is determined
pursuant to the Pricing Grid and used to calculate the Commitment Fees.
"COMMITMENT FEES" shall have the meaning given to that term in
SUBPARAGRAPH 2.03(b).
"CONTINGENT OBLIGATION" shall mean, with respect to any
Person, (a) any Guaranty Obligation of that Person; and (b) any direct
or indirect obligation or liability, contingent or otherwise, of that
Person (i) in respect of any Surety Instrument issued for the account
of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments, (ii) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document
<PAGE>
or obligation requires that payment for such materials, supplies or
other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever
made or tendered, or such services are ever performed or tendered, or
(iii) in respect to any Rate Contract that is not entered into in
connection with a bona fide hedging operation that provides offsetting
benefits to such Person. The amount of any Contingent Obligation shall
(subject, in the case of Guaranty Obligations, to the last sentence of
the definition of "Guaranty Obligation") be deemed equal to the maximum
reasonably anticipated liability in respect thereof, and shall, with
respect to ITEM (b)(iii) of this definition be marked to market on a
current basis.
"CONTRACTUAL OBLIGATION" of any Person shall mean, any
indenture, note, lease, loan agreement, security, deed of trust,
mortgage, security agreement, guaranty, instrument, contract, agreement
or other form of contractual obligation or undertaking to which such
Person is a party or by which such Person or any of its property is
bound.
"CREDIT DOCUMENTS" shall mean and include this Agreement, the
Amended and Restated Notes, the Amended and Restated Guaranty, all Rate
Contracts of Borrower with any Lender related to any Loan and the
Agent's Fee Letter; all other documents, instruments and agreements
delivered to Agent or any Lender pursuant to PARAGRAPH 3.01; and all
other documents, instruments and agreements delivered by Borrower or
any of its Subsidiaries to Agent or any Lender in connection with this
Agreement on or after the date of this Agreement.
"CREDIT EVENT" shall mean the making of any Loan, the
conversion of any Loan into a LIBOR Loan or the selection of a new
Interest Period for any LIBOR Loan.
"DEBT/EBITDA RATIO" shall mean, with respect to Borrower and
its Subsidiaries on the last day of any fiscal quarter, the ratio,
determined on a consolidated basis in accordance with GAAP, of (a) the
sum of the Funded Indebtedness of Borrower and its Subsidiaries at such
time to (b) the EBITDA of Borrower and its Subsidiaries for the
consecutive four-quarter period which ended on the last day of such
fiscal quarter.
"DEFAULT" shall mean any event or circumstance not yet
constituting an Event of Default which with the giving of any notice or
the lapse of any period of time or both, would become an Event of
Default.
"DISCLOSURE LETTER" shall mean the letter from Borrower to
Agent, dated the date of this Agreement, which identifies itself as the
"Disclosure Letter" under this Agreement.
"DOLLARS" and "$" shall mean the lawful currency of the United
States of America and, in relation to any payment under this Agreement,
same day or immediately available funds.
"DOMESTIC SUBSIDIARY" shall mean each Subsidiary of Borrower
which is "domestic" within the meaning of Section 7701(a)(4) of the
IRC.
<PAGE>
"EBITDA" shall mean, with respect to Borrower and its
Subsidiaries for any period, the sum of the following, determined on a
consolidated basis in accordance with GAAP:
(a) The net income of Borrower and its Subsidiaries
for such period before provision for income taxes;
PLUS
(b) The sum (to the extent deducted in calculating
such Adjusted Net Income) of (i) all Interest Expenses of
Borrower and its Subsidiaries accrued during such period and
(ii) all depreciation and amortization expenses of Borrower
and its Subsidiaries accrued during such period;
PLUS
(c) To the extent deducted in calculating such net
income for such period under CLAUSE (a) above, all Acquisition
In-Process R&D Charges taken by Borrower and its Subsidiaries
during such period.
"EBITDAR" shall mean, with respect to Borrower and its
Subsidiaries for any period, the sum of the following, determined on a
consolidated basis in accordance with GAAP:
(a) EBITDA of Borrower and its Subsidiaries for such
period;
PLUS
(b) The sum of all lease Rental Obligations of
Borrower and its Subsidiaries accrued during such period.
"EBITDAR/FIXED CHARGE COVERAGE RATIO" shall mean, with respect
to Borrower and its Subsidiaries for any period, the ratio, determined
on a consolidated basis in accordance with GAAP, of:
(a) EBITDAR of Borrower and its Subsidiaries for the
consecutive four-quarter period which ended on the last day of
such fiscal quarter;
TO
(b) The sum of (i) to the extent deducted in
calculating such EBITDAR for such period, all Interest
Expenses of Borrower and its Subsidiaries for such period,
PLUS (ii) to the extent deducted in calculating such EBITDAR
for such period, all payments of Rental Obligations made by
Borrower and its Subsidiaries for such period, PLUS (iii) the
aggregate principal amount of all long-term Indebtedness of
Borrower and its Subsidiaries that matures during the
consecutive four-quarter period immediately following such
period.
<PAGE>
"ELIGIBLE ASSIGNEE" shall mean (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the United States; or
(c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of
a Person of which a Lender is a Subsidiary, or (iii) a Person of which
a Lender is a Subsidiary.
"EMPLOYEE BENEFIT PLAN" shall mean any employee benefit plan
within the meaning of section 3(3) of ERISA maintained or contributed
to by Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"ENVIRONMENTAL LAWS" shall mean all Requirements of Law
relating to the protection of human health and the environment,
including, without limitation, all Requirements of Law, pertaining to
reporting, licensing, permitting, transportation, storage, disposal,
investigation, and remediation of emissions, discharges, releases, or
threatened releases of Hazardous Materials, chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials
or wastes, whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of chemical substances, pollutants, contaminants, or
hazardous or toxic substances, materials, or wastes, whether solid,
liquid, or gaseous in nature.
"EQUITY SECURITIES" of any Person shall mean (a) all common
stock, preferred stock, participations, shares, partnership interests
or other equity interests in and of such Person (regardless of how
designated and whether or not voting or non-voting) and (b) all
warrants, options and other rights to acquire any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended or supplemented,
including any rules or regulations issued in connection therewith.
"ERISA AFFILIATE" shall mean any Person which is treated as a
single employer with Borrower under Section 414 of the IRC.
"EVENT OF DEFAULT" shall have the meaning given to that term
in PARAGRAPH 6.01.
"EXISTING CREDIT AGREEMENT" shall have the meaning given to
that term in the RECITAL B.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per
annum set forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the Federal
Reserve Board (including any such successor publication, "H.15
<PAGE>
(519)") for such day opposite the caption "Federal Funds (Effective)".
If on any relevant day, such rate is not yet published in H.15 (519),
the rate for such day shall be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations
for U.S. Government Securities, or any successor publication, published
by the Federal Reserve Bank of New York (including any such successor
publication, the "Composite 3:30 p.m. Quotations") for such day under
the caption "Federal Funds Effective Rate". If on any relevant day,
such rate is not yet published in either H.15 (519) or the Composite
3:30 p.m. Quotations, the rate for such day shall be the arithmetic
means, as determined by Agent, of the rates quoted to Agent for such
day by three (3) Federal funds brokers of recognized standing selected
by Agent.
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of
the Federal Reserve System.
"FINANCIAL STATEMENTS" shall mean, with respect to any
accounting period for any Person, statements of income, shareholders'
equity and cash flows of such Person for such period, and a balance
sheet of such Person as of the end of such period, setting forth in
each case in comparative form figures for the corresponding period in
the preceding fiscal year if such period is less than a full fiscal
year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and
in accordance with GAAP.
"FUNDED INDEBTEDNESS" of any Person shall mean, without
duplication:
(a) All obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments and all
other obligations of such Person for borrowed money (including
obligations to repurchase receivables and other assets sold
with recourse);
(b) All obligations of such Person for the deferred
purchase price of property or services (including obligations
under letters of credit and other credit facilities which
secure or finance such purchase price and obligations under
"synthetic" leases), but excluding trade accounts payable,
provided that (A) such accounts arise in the ordinary course
of business and are not evidenced by a note or similar
instrument and (B) no material part of any such account is
more than ninety (90) days past due (unless subject to a bona
fide dispute and for which adequate reserves have been
established);
(c) All obligations of such Person under conditional
sale or other title retention agreements with respect to
property acquired by such Person (to the extent of the value
of such property if the rights and remedies of the seller or
lender under such agreement in the event of default are
limited solely to repossession or sale of such property);
(d) All obligations of such Person as lessee under
or with respect to Capital Leases;
<PAGE>
(e) All non-contingent payment or reimbursement
obligations of such Person under or with respect to Surety
Instruments;
(f) All Guaranty Obligations of such Person with
respect to the obligations of other Persons of the types
described in CLAUSES (a) - (e) above; and
(g) All obligations of other Persons of the types
described in CLAUSES (a) - (e) above to the extent secured by
(or for which any holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien in
any property (including accounts and contract rights) of such
Person, even though such Person has not assumed or become
liable for the payment of such obligations.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to
time, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof,
any department, agency, authority or bureau of any of the foregoing, or
any other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, the Comptroller of the
Currency, any central bank or any comparable authority.
"GOVERNMENTAL CHARGES" shall mean, with respect to any Person,
all levies, assessments, fees, claims or other charges imposed by any
Governmental Authority upon such Person or any of its property or
otherwise payable by such Person.
"GOVERNMENTAL RULE" shall mean any law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive,
guidelines, policy or similar form of decision of any Governmental
Authority.
"GUARANTY OBLIGATION" shall mean, with respect to any Person,
any direct or indirect liability of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation
(the "primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person, whether or not contingent, (a)
to purchase, repurchase or otherwise acquire such primary obligations
or any property constituting direct or indirect security therefor, or
(b) to advance or provide funds (i) for the payment or discharge of any
such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (d) otherwise to assure or
hold harmless the holder of any such primary obligation against loss in
respect thereof. (Without limiting the generality of the foregoing
definition, the Guaranty Obligations of Borrower shall include the
obligations of Borrower under the Borrower Note Guaranties.) The amount
<PAGE>
of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof.
"HAZARDOUS MATERIALS" shall mean all materials, substances and
wastes which are classified or regulated as "hazardous," "toxic" or
similar descriptions under any Environmental Law or which are
hazardous, toxic, harmful or dangerous to human health.
"INDEBTEDNESS" of any Person shall mean, without duplication:
(a) All obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments and all
other obligations of such Person for borrowed money (including
non-contingent obligations to repurchase receivables and other
assets sold with recourse;
(b) All obligations of such Person for the deferred
purchase price of property or services (including obligations
under letters of credit and other credit facilities which
secure or finance such purchase price and obligations under
"synthetic" leases), but excluding trade accounts payable,
provided that (A) such accounts arise in the ordinary course
of business and are not evidenced by a note or similar
instrument and (B) no material part of any such account is
more than ninety (90) days past due (unless subject to a bona
fide dispute and for which adequate reserves have been
established);
(c) All obligations of such Person under conditional
sale or other title retention agreements with respect to
property acquired by such Person (to the extent of the value
of such property if the rights and remedies of the seller or
lender under such agreement in the event of default are
limited solely to repossession or sale of such property);
(d) All obligations of such Person as lessee under or
with respect to Capital Leases;
(e) All obligations of such Person, contingent or
otherwise, under or with respect to Surety Instruments;
(f) All obligations of such Person, contingent or
otherwise, under or with respect to Rate Contracts;
(g) All Guaranty Obligations of such Person with
respect to the obligations of other Persons of the types
described in CLAUSES (a) - (f) above and all other Contingent
Obligations of such Person; and
(h) All obligations of other Persons of the types
described in CLAUSES
<PAGE>
(a) - (f) above to the extent secured by (or for which any
holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien in any
property (including accounts and contract rights) of such
Person, even though such Person has not assumed or become
liable for the payment of such obligations.
"INTEREST ACCOUNT" shall have the meaning given to that term
in SUBPARAGRAPH 2.06(b).
"INTEREST EXPENSES" shall mean, with respect to any Person for
any period, the sum, determined on a consolidated basis in accordance
with GAAP, of all interest accruing on the Indebtedness of such Person
during such period (including interest attributable to Capital Leases).
"INTEREST PERIOD" shall mean, with respect to any LIBOR Loan,
the time periods selected by Borrower pursuant to SUBPARAGRAPH 2.01(b)
or SUBPARAGRAPH 2.01(d) which commences on the first day of such Loan
or the effective date of any conversion and ends on the last day of
such time period, and thereafter, each subsequent time period selected
by Borrower pursuant to SUBPARAGRAPH 2.01(e) which commences on the
last day of the immediately preceding time period and ends on the last
day of that time period.
"INVESTMENT" of any Person shall mean any loan or advance of
funds by such Person to any other Person (other than advances to
employees of such Person for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business),
any purchase or other acquisition of any Equity Securities or
Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person
(including any Guaranty Obligations of such Person and any indebtedness
of such Person of the type described in CLAUSE (h) of the definition of
"Indebtedness" on behalf of any other Person); PROVIDED, HOWEVER, that
Investments shall not include (a) accounts receivable or other
indebtedness owed by customers of such Person which are current assets
and arose from sales of inventory in the ordinary course of such
Person's business for ordinary terms or (b) prepaid expenses of such
Person incurred and prepaid in the ordinary course of business.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"LENDERS" shall have the meaning given to that term in CLAUSE
(2) OF THE INTRODUCTORY PARAGRAPH.
"LIBO RATE" shall mean, with respect to any Interest Period
for the LIBOR Loans in any Borrowing consisting of LIBOR Loans, a rate
per annum equal to the quotient of (a) the arithmetic mean (rounded
upward if necessary to the nearest 1/16 of one percent) of the rates
per annum provided to Agent by each of the Reference Banks as the rate
at which Dollar deposits are offered to such Reference Bank in the
London interbank market on the second Business Day prior to the first
day of such Interest Period at or about
<PAGE>
11:00 A.M. (London time) (for delivery on the first day of such
Interest Period) in an amount substantially equal to such Reference
Bank's LIBOR Loan in such Borrowing and for a term comparable to
such Interest Period, DIVIDED BY (b) one minus the Reserve
Requirement for such Loans in effect from time to time. If for any
reason any of the Reference Banks fails to provide Agent with a rate
on any day as provided in CLAUSE (a) of the preceding sentence,
Agent shall calculate the LIBO Rate based upon the rate(s) provided
by the remaining Reference Bank(s). The LIBO Rate shall be adjusted
automatically as to all LIBOR Loans then outstanding as of the
effective date of any change in the Reserve Requirement.
"LIBOR LOAN" shall mean, at any time, a Loan which then bears
interest as provided in CLAUSE (ii) OF SUBPARAGRAPH 2.01(c).
"LIEN" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, charge or other encumbrance in, of,
or on such property or the income therefrom, including, without
limitation, the interest of a vendor or lessor under a conditional sale
agreement, Capital Lease or other title retention agreement, or any
agreement to provide any of the foregoing, and the filing of any
financing statement or similar instrument under the Uniform Commercial
Code or comparable law of any jurisdiction.
"LOAN" shall have the meaning given to that term in
SUBPARAGRAPH 2.01(a).
"MARGIN STOCK" shall have the meaning given to that term in
Regulation U issued by the Federal Reserve Board, as amended from time
to time, and any successor regulation thereto.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (a) the business, assets, operations, prospects or financial or
other condition of Borrower and its Subsidiaries on a consolidated
basis; (b) the ability of Borrower to pay or perform the Obligations in
accordance with the terms of this Agreement and the other Credit
Documents; or (c) the rights and remedies of Agent or any Lender under
this Agreement, the other Credit Documents or any related document,
instrument or agreement.
"MATURITY" shall mean, with respect to any Loan, interest, fee
or other amount payable by Borrower under this Agreement or the other
Credit Documents, the date such Loan, interest, fee or other amount
becomes due, whether upon the stated maturity or due date, upon
acceleration or otherwise.
"MATURITY DATE" shall mean March 29, 2002 or, if such date is
extended from time to time pursuant to SUBPARAGRAPH 2.01(h), any later
date to which so extended.
"MATURITY DATE EXTENSION REQUEST" shall have the meaning given
to that term in SUBPARAGRAPH 2.01(h).
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within
the meaning of
<PAGE>
section 3(37) of ERISA maintained or contributed to by Borrower or
any ERISA Affiliate.
"NET PROCEEDS" shall mean, with respect to any sale or
issuance of any Equity Security or the incurrence of any Indebtedness
by any Person, the aggregate consideration received by such Person from
such sale, issuance or incurrence LESS the sum of the actual amount of
the reasonable fees and commissions payable to Persons other than such
Person or any Affiliate of such Person, the reasonable legal expenses
and the other reasonable costs and expenses directly related to such
sale, issuance or incurrence that are to be paid by such Person.
"NOTICE OF BORROWING" shall have the meaning given to that
term in SUBPARAGRAPH 2.01(b).
"NOTICE OF CONVERSION" shall have the meaning given to that
term in SUBPARAGRAPH 2.01(d).
"NOTICE OF INTEREST PERIOD SELECTION" shall have the meaning
given to that term in SUBPARAGRAPH 2.01(e).
"OBLIGATIONS" shall mean and include, with respect to
Borrower, all loans, advances, debts, liabilities, and obligations,
howsoever arising, owed by Borrower to Agent or any Lender of every
kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of this Agreement or any of the
other Credit Documents, including without limitation all interest,
fees, charges, expenses, attorneys' fees and accountants' fees
chargeable to Borrower or payable by Borrower hereunder or thereunder.
"PARTICIPANT" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation,
or any successor thereto.
"PERMITTED INDEBTEDNESS" shall have the meaning given to
that term in SUBPARAGRAPH 5.02(a).
"PERMITTED LIENS" shall have the meaning given to that term
in SUBPARAGRAPH 5.02(b).
"PERSON" shall mean and include an individual, a partnership,
a corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint
venture, a trust or other entity or a Governmental Authority.
"PRICING GRID" shall mean SCHEDULE 1.01(a).
<PAGE>
"PRIME RATE" shall mean the per annum rate publicly announced
by ABN from time to time at its Chicago office as its prime commercial
lending rate. The Prime Rate is determined by ABN from time to time as
a means of pricing credit extensions to some customers and is neither
directly tied to any external rate of interest or index nor necessarily
the lowest rate of interest charged by ABN at any given time for any
particular class of customers or credit extensions. Any change in the
Base Rate resulting from a change in the Prime Rate shall become
effective on the Business Day on which each change in the Prime Rate
occurs.
"PROPORTIONATE SHARE" shall mean, with respect to each Lender,
the percentage set forth under the caption "Proportionate Share"
opposite such Lender's name on SCHEDULE I, or, if changed, such
percentage as may be set forth for such Lender in the Register.
"RATE CONTRACTS" shall mean swap agreements (as that term is
defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as
amended) and any other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"REFERENCE BANKS" shall mean ABN, Sanwa and BNP.
"REGISTER" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(d).
"RENTAL OBLIGATIONS" shall mean all present and future
obligations of Borrower or any of its Subsidiaries under rental
agreements or leases of real or personal property, other than (a)
obligations that can be terminated by the giving of notice without
liability to Borrower or such Subsidiary in excess of the liability for
rent due as of the date on which such notice is given and under which
no penalty or premium is paid as a result of any such termination, and
(b) current obligations in respect of Capital Leases or "synthetic
leases".
"REPORTABLE EVENT" shall have the meaning given to that term
in ERISA and applicable regulations thereunder.
"REQUIRED LENDERS" shall mean (a) at any time Loans are
outstanding, Lenders holding sixty-six and two-thirds percent (66 2/3%)
or more of the aggregate principal amount of such Loans and (b) at any
time no Loans are outstanding, Lenders whose Proportionate Shares equal
or exceed sixty-six and two-thirds percent (66 2/3%).
"REQUIREMENT OF LAW" applicable to any Person shall mean (a)
the Articles or Certificate of Incorporation and By-laws, Partnership
Agreement or other organizational or governing documents of such
Person, (b) any Governmental Rule applicable to such Person, (c) any
license, permit, approval or other authorization granted by any
Governmental Authority to or for the benefit of such Person or (d) any
judgment, decision or determination of any Governmental Authority or
arbitrator, in each case applicable to or binding upon such Person or
any of its property or to which such Person
<PAGE>
or any of its property is subject.
"RESERVE REQUIREMENT" shall mean, with respect to any day in
an Interest Period for a LIBOR Loan, the aggregate of the reserve
requirement rates (expressed as a decimal) in effect on such day for
eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of the Federal Reserve Board) maintained
by a member bank of the Federal Reserve System. As used herein, the
term "reserve requirement" shall include, without limitation, any
basic, supplemental or emergency reserve requirements imposed on Lender
by any Governmental Authority.
"RESPONSIBLE OFFICER" shall mean, with respect to Borrower,
the Chairman, Chief Executive Officer, Chief Operating Officer,
President, Chief Financial Officer, Treasurer or General Counsel of
Borrower (or, if the titles are changed, the persons having similar
responsibilities for Borrower).
"SANWA" shall mean Sanwa Bank California, a California
banking corporation.
"SECURITY DOCUMENTS" shall mean and include the "Security
Agreement", the "Pledge Agreement", the "IP Security Agreement" (as
each such term is defined in the Existing Credit Agreement), and all
other instruments, agreements, certificates, opinions and documents
(including Uniform Commercial Code financing statements and fixture
filings and landlord waivers) previously delivered to Agent or any
Lender in connection with the Existing Credit Agreement, other than the
Guaranties.
"SUBSIDIARY" of any Person shall mean (a) any corporation of
which more than 50% of the issued and outstanding Equity Securities
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency) is
at the time directly or indirectly owned or controlled by such Person,
by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries, (b) any partnership, joint
venture, or other association of which more than 50% of the equity
interest having the power to vote, direct or control the management of
such partnership, joint venture or other association is at the time
owned and controlled by such Person, by such Person and one or more of
the other Subsidiaries or by one or more of such Person's other
Subsidiaries or (c) any other Person included in the Financial
Statements of such Person on a consolidated basis.
"SURETY INSTRUMENTS" shall mean all letters of credit
(including standby and commercial), banker's acceptances, bank
guaranties, shipside bonds, surety bonds and similar instruments.
"TANGIBLE NET WORTH" shall mean, with respect to Borrower and
its Subsidiaries at any time, the remainder at such time, determined on
a consolidated basis in accordance with GAAP, of (a) the total assets
of Borrower and its Subsidiaries MINUS (b) the sum (without limitation
and without duplication of deductions) of (i) the total liabilities of
<PAGE>
Borrower and its Subsidiaries, (ii) all reserves established by
Borrower and its Subsidiaries for anticipated losses and expenses (to
the extent not deducted in calculating total assets in CLAUSE (a)
above), (iii) all intangible assets of Borrower and its Subsidiaries
(to the extent included in calculating total assets in CLAUSE (a)
above), including, without limitation, goodwill (including any amounts,
however designated on the balance sheet, representing the cost of
acquisition of businesses and investments in excess of underlying
tangible assets), trademarks, trademark rights, trade name rights,
copyrights, patents, patent rights, licenses, unamortized debt
discount, marketing expenses, organizational expenses, non-compete
agreements and deferred research and development and (iv) all loans
owed to Borrower and its Subsidiaries by officers, directors and
employees of Borrower and its Subsidiaries.
"TAXES" shall have the meaning given to such term in
SUBPARAGRAPH 2.10(a).
"TOTAL COMMITMENT" shall mean, at any time, Seventy Five
Million Dollars ($75,000,000) or, if such amount is reduced pursuant to
SUBPARAGRAPH 2.02(a), the amount to which so reduced and in effect at
such time.
"TYPE" shall mean, with respect to any Loan or Borrowing at
any time, the classification of such Loan or Borrowing by the type of
interest rate it then bears, whether an interest rate based upon the
Base Rate or the LIBO Rate.
"UBOC" shall mean Union Bank of California, a California
banking corporation.
"UNUSED COMMITMENT" shall mean, at any time, the remainder of
(a) the Total Commitment at such time minus (b) the aggregate principal
amount of all Loans outstanding at such time.
1.2. GAAP. Unless otherwise indicated in this Agreement or any other
Credit Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP
changes during the term of this Agreement such that any covenants contained
herein would then be calculated in a different manner or with different
components, Borrower, the Lenders and Agent agree to negotiate in good faith to
amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating Borrower's financial condition to
substantially the same criteria as were effective prior to such change in GAAP;
PROVIDED, HOWEVER, that, until Borrower, the Lenders and Agent so amend this
Agreement, all such covenants shall be calculated in accordance with GAAP as in
effect immediately prior to such change.
1.3. HEADINGS. Headings in this Agreement and each of the other
Credit Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.4. PLURAL TERMS. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and VICE VERSA.
<PAGE>
1.5. TIME. All references in this Agreement and each of the other
Credit Documents to a time of day shall mean San Francisco, California time,
unless otherwise indicated.
1.6. GOVERNING LAW. This Agreement and each of the other Credit
Documents (unless otherwise provided in such other Credit Documents) shall be
governed by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
1.7. CONSTRUCTION. This Agreement is the result of negotiations
among, and has been reviewed by, Borrower, each Lender, Agent and their
respective counsel. Accordingly, this Agreement shall be deemed to be the
product of all parties hereto, and no ambiguity shall be construed in favor
of or against Borrower, any Lender or Agent.
1.8. ENTIRE AGREEMENT. This Agreement and each of the other Credit
Documents, taken together, constitute and contain the entire agreement of
Borrower, the Lenders and Agent and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, respecting the subject matter hereof.
1.9. CALCULATION OF INTEREST AND FEES. All calculations of interest
and fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 360 days for actual
days elapsed, except that during any period any Loan bears interest based upon
the Prime Rate, such interest shall be calculated on the basis of a year of 365
or 366 days, as appropriate, for actual days elapsed.
1.10. OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and
schedules herein and hereto unless otherwise indicated. References in this
Agreement and each of the other Credit Documents to any document, instrument or
agreement (a) shall include all exhibits, schedules and other attachments
thereto, (b) shall include all documents, instruments or agreements issued or
executed in replacement thereof, and (c) shall mean such document, instrument or
agreement, or replacement or predecessor thereto, as amended, modified and
supplemented from time to time and in effect at any given time. References in
this Agreement and each of the other Credit Documents to any statute or other
law (i) shall include any successor statute or law, (ii) shall include all rules
and regulations promulgated under such statute or law (or any successor statute
or law), and (iii) shall mean such statute or law (or successor statute or law)
and such rules and regulations, as amended, modified, codified or reenacted from
time to time and in effect at any given time. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement or any other
Credit Document shall refer to this Agreement or such other Credit Document, as
the case may be, as a whole and not to any particular provision of this
Agreement or such other Credit Document, as the case may be. The words "include"
and "including" and words of similar import when used in this Agreement or any
other Credit Document shall not be construed to be limiting or exclusive. In the
event of any inconsistency between the terms of this Agreement and the terms of
any other Credit Document, the terms of this Agreement shall govern.
SECTION II. CREDIT FACILITY.
<PAGE>
2.1. REVOLVING LOAN FACILITY.
(a) LOAN AVAILABILITY. Subject to the terms and conditions of
this Agreement (including the amount limitations set forth in PARAGRAPH
2.02 and the conditions set forth in SECTION III), each Lender
severally agrees to advance to Borrower from time to time during the
period beginning on the Closing Date and ending on the Maturity Date
such loans as Borrower may request under this PARAGRAPH 2.01
(individually, a "LOAN"); PROVIDED, HOWEVER, that (i) the aggregate
principal amount of all Loans made by such Lender at any time
outstanding shall not exceed such Lender's Commitment at such time and
(ii) the aggregate principal amount of all Loans made by all Lenders at
any time outstanding shall not exceed the Total Commitment at such
time. All Loans shall be made on a pro rata basis by the Lenders in
accordance with their respective Proportionate Shares, with each
Borrowing to be comprised of a Loan by each Lender equal to such
Lender's Proportionate Share of such Borrowing. Except as otherwise
provided herein, Borrower may borrow, repay and reborrow Loans until
the Maturity Date.
(b) NOTICE OF BORROWING. Borrower shall request each Borrowing
by delivering to Agent an irrevocable written notice in the form of
EXHIBIT A, appropriately completed (a "NOTICE OF BORROWING"), which
specifies, among other things:
(i) The principal amount of the requested Borrowing,
which shall be in the amount of (A) $100,000 or an integral
multiple of $50,000 in excess thereof in the case of a
Borrowing consisting of Base Rate Loans; or (B) $400,000 or an
integral multiple of $100,000 in excess thereof in the case of
a Borrowing consisting of LIBOR Loans;
(ii) Whether the requested Borrowing is to consist of
Base Rate Loans or LIBOR Loans;
(iii) If the requested Borrowing is to consist of
LIBOR Loans, the initial Interest Period selected by Borrower
for such Loans in accordance with SUBPARAGRAPH 2.01(e); and
(iv) The date of the requested Borrowing, which shall
be a Business Day;
Borrower shall give each Notice of Borrowing to Agent at least three
(3) Business Days before the date of the requested Borrowing in the
case of a Borrowing consisting of LIBOR Loans with Interest Periods of
one month or longer and on or before the date of the requested
Borrowing in the case of any other Borrowing. Each Notice of Borrowing
shall be delivered by first-class mail or facsimile to Agent at the
office or facsimile number and during the hours specified in PARAGRAPH
8.01; PROVIDED, HOWEVER, that Borrower shall promptly deliver to Agent
the original of any Notice of Borrowing initially delivered by
facsimile. Agent shall promptly notify each Lender of the contents of
each Notice of Borrowing and of the amount and Type of (and, if
applicable, the Interest Period for) each Loan to be made by such
Lender as part of the requested Borrowing.
<PAGE>
(c) LOAN INTEREST RATES. Borrower shall pay interest on the
unpaid principal amount of each Loan from the date of such Loan until
the maturity thereof, at one of the following rates per annum:
(i) During such periods as such Loan is a Base Rate
Loan, at a rate per annum equal to the Base Rate PLUS the
Applicable Margin therefor, such rate to change from time to
time as the Applicable Margin or Base Rate shall change; and
(ii) During such periods as such Loan is a LIBOR
Loan, at a rate per annum equal at all times during each
Interest Period for such LIBOR Loan to the LIBO Rate for such
Interest Period PLUS the Applicable Margin therefor, such rate
to change from time to time during such Interest Period as the
Applicable Margin shall change.
All Loans in each Borrowing shall, at any given time prior to maturity,
bear interest at one, and only one, of the above rates. The number of
Borrowings consisting of LIBOR Loans shall not exceed seven (7) at any
time.
(d) CONVERSION OF LOANS. Borrower may convert any Borrowing
from one Type of Borrowing to the other Type; PROVIDED, HOWEVER, that
any conversion of a Borrowing consisting of LIBOR Loans into a
Borrowing consisting of Base Rate Loans shall be made on, and only on,
the last day of an Interest Period for such LIBOR Loans. Borrower shall
request such a conversion by an irrevocable written notice to Agent in
the form of EXHIBIT B, appropriately completed (a "NOTICE OF
CONVERSION"), which specifies, among other things:
(i) The Borrowing which is to be converted;
(ii) The Type of Borrowing into which such Borrowing
is to be converted;
(iii) If such Borrowing is to be converted into a
Borrowing consisting of LIBOR Loans, the initial Interest
Period selected by Borrower for such Loans in accordance with
SUBPARAGRAPH 2.01(e); and
(iv) The date of the requested conversion, which
shall be a Business Day.
Borrower shall give each Notice of Conversion to Agent at least three
(3) Business Days before the date of the requested conversion in the
case of a conversion into a Borrowing consisting of LIBOR Loans with
Interest Periods of one month or more and on or before the date of the
requested conversion in the case of a conversion into any other
Borrowing. Each Notice of Conversion shall be delivered by first-class
mail or facsimile to Agent at the office or to the facsimile number and
during the hours specified in PARAGRAPH 8.01; PROVIDED, HOWEVER, that
Borrower shall promptly deliver to Agent the original of any Notice of
Conversion initially delivered by facsimile. Agent shall promptly
notify each Lender of the contents of each Notice of Conversion.
<PAGE>
(e) LIBOR LOAN INTEREST PERIODS.
(i) The initial and each subsequent Interest Period
selected by Borrower for a LIBOR Loan shall be one (1) week,
two (2) weeks, one (1) month, two (2) months, three (3) months
or six (6) months; PROVIDED, HOWEVER, that (A) any Interest
Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business
Day unless such next Business Day falls in another calendar
month, in which case such Interest Period shall end on the
immediately preceding Business Day; (B) any Interest Period
(other than a one-week or two-week Interest Period) which
begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end
on the last Business Day of a calendar month; and (C) no such
Interest Period shall end after the Maturity Date.
(ii) Borrower shall notify Agent by an irrevocable
written notice in the form of EXHIBIT C, appropriately
completed (a "NOTICE OF INTEREST PERIOD SELECTION"), at least
three (3) Business Days prior to the last day of each Interest
Period for LIBOR Loans of the Interest Period selected by
Borrower for the next succeeding Interest Period for such
Loans. Each Notice of Interest Period Selection shall be given
by first-class mail or facsimile to the office or the
facsimile number and during the hours specified in PARAGRAPH
8.01; PROVIDED, HOWEVER, that Borrower shall promptly deliver
to Agent the original of any Notice of Interest Period
Selection initially delivered by facsimile. If Borrower fails
to notify Agent of the next Interest Period for LIBOR Loans in
accordance with this SUBPARAGRAPH 2.01(e), such Loans shall
automatically convert to Base Rate Loans on the last day of
the current Interest Period therefor.
(f) SCHEDULED LOAN PAYMENTS. Borrower shall repay the
principal amount of the Loans on the Maturity Date. Borrower shall pay
accrued interest on the unpaid principal amount of each Loan in arrears
(A) in the case of a Base Rate Loan, on the last day in each March,
June, September and December, (B) in the case of a LIBOR Loan, on the
last day of each Interest Period therefor (and, if any such Interest
Period is longer than three (3) months, every three (3) months); and
(C) in the case of all Loans, upon prepayment (to the extent thereof)
and at maturity.
(g) PURPOSE. Borrower shall use the proceeds of the Loans (i)
first, to repay on the Closing Date all indebtedness outstanding under
the Existing Credit Agreement and (ii) thereafter, for Borrower's
general corporate needs, including the consummation of acquisitions
otherwise permitted pursuant to the terms of this Agreement.
(h) MATURITY DATE EXTENSIONS. On or before the last Business
Day of each December beginning on December 31, 2001, Borrower may
request the Lenders to extend the Maturity Date for an additional
one-year period. Borrower shall request each such extension by
appropriately completing, executing and delivering to Agent a written
<PAGE>
request in the form of EXHIBIT D (a " MATURITY DATE EXTENSION
REQUEST"). Borrower understands that this SUBPARAGRAPH 2.01(h) is
included in this Agreement for Borrower's convenience in requesting
extensions and acknowledges that neither Agent nor any Lender has
promised (either expressly or by implication), and neither Agent nor
any Lender has any obligation or commitment, to extend the Maturity
Date at any time. Agent shall promptly deliver to each Lender three (3)
copies of each Maturity Date Extension Request received by Agent. If a
Lender, in its sole and absolute discretion, consents to any Maturity
Date Extension Request, such Lender shall evidence such consent by
executing and returning two (2) copies of the Maturity Date Extension
Request to Agent not later than the last Business Day which is thirty
(30) days after the date Borrower delivered to Agent the Maturity Date
Extension Request. Any failure by any Lender to execute and return a
Maturity Date Extension Request shall be deemed a denial thereof. If
Borrower shall deliver a Maturity Date Extension Request to Agent
pursuant to the first sentence of this SUBPARAGRAPH 2.01(h), then not
later than the last Business Day which is thirty-five (35) days after
the date Borrower delivered to Agent the Maturity Date Extension
Request, Agent shall notify Borrower in writing whether (i) Agent has
received a copy of the Maturity Date Extension Request executed by each
Lender, in which case the definition of " Maturity Date" set forth in
PARAGRAPH 1.01 shall be deemed amended as provided in the Maturity Date
Extension Request as of the date of such written notice from Agent to
Borrower, or (ii) Agent has not received a copy of the Maturity Date
Extension Request executed by each Lender, in which case such Maturity
Date Extension Request shall be deemed denied. Agent shall deliver to
Borrower, with each written notice under CLAUSE (i) of the preceding
sentence which notifies Borrower that Agent has received a Maturity
Date Extension Request executed by each Lender, a copy of the Maturity
Date Extension Request so executed by each Lender.
2.2. COMMITMENT REDUCTIONS, ETC.
(a) OPTIONAL REDUCTION OR CANCELLATION OF COMMITMENTS.
Borrower may, upon three (3) Business Days written notice to Agent,
permanently reduce the Total Commitment by the amount of one million
Dollars ($1,000,000) or an integral multiple of one million Dollars
($1,000,000) in excess thereof or cancel the Total Commitment in its
entirety; PROVIDED, HOWEVER, that:
(i) Borrower may not reduce the Total Commitment
prior to the Maturity Date, if, after giving effect to such
reduction, the aggregate principal amount of all Loans then
outstanding would exceed the Total Commitment; and
(ii) Borrower may not cancel the Total Commitment
prior to the Maturity Date, if, after giving effect to such
cancellation, any Loans would then remain outstanding.
(b) MANDATORY REDUCTION OR CANCELLATION OF COMMITMENTS. If, at
any time, Borrower is required to make any mandatory prepayment of
Loans pursuant to CLAUSE (ii) OF SUBPARAGRAPH 2.04(c), the Total
Commitment shall be automatically and permanently
<PAGE>
reduced or cancelled by an amount equal to the full amount of any
required prepayment.
(c) EFFECT OF COMMITMENT REDUCTIONS. From the effective date
of any reduction of the Total Commitment, the Commitment Fees payable
pursuant to SUBPARAGRAPH 2.03(b) shall be computed on the basis of the
Total Commitment as so reduced. Once reduced or cancelled, the Total
Commitment may not be increased or reinstated without the prior written
consent of all Lenders. Any reduction of the Total Commitment pursuant
to SUBPARAGRAPH 2.02(a) or SUBPARAGRAPH 2.02(b) shall be applied
ratably to reduce each Lender's Commitment in accordance with CLAUSE
(i) OF SUBPARAGRAPH 2.08(a).
2.3. FEES.
(a) AGENT'S FEE. Borrower shall pay to Agent, for its own
account, agent's fees and other compensation in the amounts and at the
times set forth in the Agent's Fee Letter.
(b) COMMITMENT FEES. Borrower shall pay to Agent, for the
ratable benefit of the Lenders as provided in CLAUSE (iii) OF
SUBPARAGRAPH 2.08(a), nonrefundable commitment fees (the "COMMITMENT
FEES") equal to the Commitment Fee Percentage on the daily average
Unused Commitment for the period beginning on the date of this
Agreement and ending on the Maturity Date. The Commitment Fee
Percentage shall be determined as provided in the Pricing Grid and may
change for each calendar quarter. Borrower shall pay the Commitment
Fees in arrears on the last day in each March, June, September and
December and on the Maturity Date (or if the Total Commitment is
cancelled on a date prior to the Maturity Date, on such prior date).
(c) PARTICIPATION FEE. On the Closing Date, Borrower shall pay
to Agent, for the benefit of the Lenders, a one-time non-refundable
participation fee equal to 0.15% of the Total Commitment to be shared
among the Lenders pro rata in accordance with such Lenders' respective
proportionate share of the Total Commitment.
2.4. PREPAYMENTS.
(a) TERMS OF ALL PREPAYMENTS. Upon the prepayment of any Loan
(whether such prepayment is an optional prepayment under SUBPARAGRAPH
2.04(b), a mandatory prepayment required by SUBPARAGRAPH 2.04(c) or a
mandatory prepayment required by any other provision of this Agreement
or the other Credit Documents, including, without limitation, a
prepayment upon acceleration), Borrower shall pay to the Lender which
made such Loan (i) all accrued interest to the date of such prepayment
on the amount prepaid and (ii) if such prepayment is the prepayment of
a LIBOR Loan on a day other than the last day of an Interest Period for
such LIBOR Loan, all amounts payable to such Lender pursuant to
PARAGRAPH 2.11.
(b) OPTIONAL PREPAYMENTS. At its option, Borrower may, upon
three (3) Business Days notice to Agent, prepay the Loans in any
Borrowing in part, in an aggregate principal amount of $1,000,000 or
more, or in whole; except that Borrower may prepay the Loans in any
Borrowing consisting of Base Rate Loans on the last Business Day in
<PAGE>
any fiscal quarter of Borrower upon same day notice to Agent if
Borrower delivers such notice to Agent not later than 1:00 p.m. on
the date of such prepayment.
(c) MANDATORY PREPAYMENTS. Borrower shall immediately repay
Loans as follows:
(i) If, at any time, the aggregate principal amount
of all Loans then outstanding exceeds the Total Commitment at
such time, Borrower shall immediately prepay Loans in an
aggregate principal amount equal to such excess; and
(ii) Upon the incurrence by Borrower of unsecured
Indebtedness of the type permitted pursuant to CLAUSE (xi) OF
SUBPARAGRAPH 5.02(a), Borrower shall immediately prepay Loans
in an amount equal to the Net Proceeds derived from the
Indebtedness so incurred.
2.5. OTHER PAYMENT TERMS.
(a) PLACE AND MANNER. Borrower shall make all payments due to
each Lender or Agent hereunder by payments to Agent at Agent's office
located at the address specified in PARAGRAPH 8.01, with each payment
due to a Lender to be for the account of such Lender and such Lender's
Applicable Lending Office. Borrower shall make all payments hereunder
in lawful money of the United States and in same day or immediately
available funds not later than 12:00 noon on the date due, except that
Borrower may make prepayments of the Loans in a Borrowing consisting of
Base Rate Loans on the last Business Day of a fiscal quarter as late as
1:00 p.m. Agent shall promptly disburse to each Lender each payment
received by Agent for the account of such Lender.
(b) DATE. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included
in the computation of interest or fees, as the case may be.
(c) LATE PAYMENTS. If any amounts required to be paid by
Borrower under this Agreement or the other Credit Documents (including,
without limitation, principal or interest payable on any Loan, any fees
or other amounts) remain unpaid after such amounts are due, Borrower
shall pay interest on the aggregate, outstanding balance of such
amounts from the date due until those amounts are paid in full at a per
annum rate equal to the Base Rate PLUS two percent (2.00%), such rate
to change from time to time as the Base Rate shall change.
(d) APPLICATION OF PAYMENTS. All payments hereunder shall be
applied first to unpaid fees, costs and expenses then due and payable
under this Agreement or the other Credit Documents, second to accrued
interest then due and payable under this Agreement or the other Credit
Documents and finally to reduce the principal amount of outstanding
Loans.
(e) FAILURE TO PAY AGENT. Unless Agent shall have received
notice from Borrower at
<PAGE>
least one (1) Business Day prior to the date on which any payment is
due to the Lenders hereunder that Borrower will not make such
payment in full, Agent shall be entitled to assume that Borrower has
made or will make such payment in full to Agent on such date and
Agent may, in reliance upon such assumption, cause to be paid to the
Lenders on such due date an amount equal to the amount then due such
Lenders. If and to the extent Borrower shall not have so made such
payment in full to Agent, each such Lender shall repay to Agent
forthwith on demand such amount distributed to such Lender together
with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such
amount to Agent, at (i) the Federal Funds Rate for the first three (3)
days and (ii) the per annum rate applicable to Base Rate Loans
thereafter. A certificate of Agent submitted to any Lender with respect
to any amounts owing by such Lender under this SUBPARAGRAPH 2.05(e)
shall be conclusive absent manifest error.
2.6. NOTES AND INTEREST ACCOUNT.
(a) NOTES. The obligation of Borrower to repay the Loans made
by each Lender and to pay interest thereon at the rates provided herein
shall be evidenced by a promissory note in the form of EXHIBIT E
(individually, an "AMENDED AND RESTATED NOTE") which note shall be (i)
payable to the order of such Lender, (ii) in the amount of such
Lender's Commitment, (iii) dated the Closing Date and (iv) otherwise
appropriately completed. Borrower authorizes each Lender to record on
the schedule annexed to such Lender's Amended and Restated Note the
date and amount of each Loan made by such Lender and of each payment or
prepayment of principal thereon made by Borrower, and agrees that all
such notations shall constitute prima facie evidence of the matters
noted; PROVIDED, HOWEVER, that any failure by a Lender to make any such
notation shall not affect the Obligations. Borrower further authorizes
each Lender to attach to and make a part of such Lender's Amended and
Restated Note continuations of the schedule attached thereto as
necessary.
(b) INTEREST ACCOUNT. Borrower authorizes Agent to record in
an account or accounts maintained by Agent on its books (the "INTEREST
ACCOUNT") (i) the interest rates applicable to all Loans and the
effective dates of all changes thereto, (ii) the Interest Period for
each LIBOR Loan, (iii) the date and amount of each principal and
interest payment on each Loan and (iv) such other information as Agent
may determine is necessary for the computation of interest payable by
Borrower hereunder.
2.7. LOAN FUNDING.
(a) LENDER FUNDING AND DISBURSEMENT TO BORROWER. Each Lender
shall, before 12:00 noon on the date of each Borrowing, make available
to Agent at Agent's office specified in PARAGRAPH 8.01, in same day or
immediately available funds, such Lender's Proportionate Share of such
Borrowing. After Agent's receipt of such funds and upon satisfaction of
the applicable conditions set forth in SECTION III, Agent shall
promptly disburse such funds to Borrower in same day or immediately
available funds. Unless
<PAGE>
otherwise directed by Borrower, Agent shall disburse the proceeds of
each Borrowing by disbursement to the account or accounts specified
in the applicable Notice of Borrowing.
(b) LENDER FAILURE TO FUND. Unless Agent shall have received
notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to Agent such Lender's Proportionate
Share of such Borrowing, Agent shall be entitled to assume that such
Lender has made or will make such portion available to Agent on the
date of such Borrowing in accordance with SUBPARAGRAPH 2.07(a), and
Agent may on such date, in reliance upon such assumption, disburse or
otherwise credit to Borrower a corresponding amount. If any Lender does
not make the amount of its Proportionate Share of any Borrowing
available to Agent on or prior to the date of such Borrowing, such
Lender shall pay to Agent, on demand, interest which shall accrue on
such amount from the date of such Borrowing until such amount is paid
to Agent at rates equal to (i) the daily Federal Funds Rate during the
period from the date of such Borrowing through the third Business Day
thereafter and (ii) the rate applicable to Base Rate Loans thereafter.
A certificate of Agent submitted to any Lender with respect to any
amounts owing under this SUBPARAGRAPH 2.07(b) shall be conclusive
absent manifest error. If the amount of any Lender's Proportionate
Share of any Borrowing is not paid to Agent by such Lender within three
(3) Business Days after the date of such Borrowing, Borrower shall
repay such amount to Agent, on demand, together with interest thereon,
for each day from the date such amount was disbursed to Borrower until
the date such amount is repaid to Agent, at the interest rate
applicable at the time to the Loans comprising such Borrowing.
(c) LENDERS' OBLIGATIONS SEVERAL. The failure of any Lender to
make the Loan to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation hereunder to make its Loan
on the date of such Borrowing, but no Lender shall be obligated in any
way to make any Loan which another Lender has failed or refused to make
or otherwise be in any way responsible for the failure or refusal of
any other Lender to make any Loan required to be made by such other
Lender on the date of any Borrowing.
2.8. PRO RATA TREATMENT.
(a) BORROWINGS, COMMITMENT REDUCTIONS, ETC. Except as
otherwise provided herein:
(i) Each Borrowing and reduction of the Total
Commitment shall be made or shared among the Lenders pro rata
according to their respective Proportionate Shares;
(ii) Each payment of principal of Loans in any
Borrowing shall be shared among the Lenders which made or
funded the Loans in such Borrowing pro rata according to the
respective unpaid principal amounts of such Loans so made or
funded by such Lenders;
(iii) Each payment of interest on Loans in any
Borrowing shall be shared among the Lenders which made or
funded the Loans in such Borrowing pro rata
<PAGE>
according to (A) the respective unpaid principal amounts of
such Loans so made or funded by such Lenders and (B) the
dates on which such Lenders so made or funded such Loans;
(iv) Each payment of Commitment Fees shall be shared
among the Lenders pro rata according to (A) their respective
Proportionate Shares and (B) in the case of each Lender which
becomes a Lender hereunder after the date hereof, the date
upon which such Lender so became a Lender;
(v) Each payment of interest (other than interest on
Loans) shall be shared among the Lenders and Agent owed the
amount upon which such interest accrues pro rata according to
(A) the respective amounts so owed such Lenders and Agent and
(B) the dates on which such amounts became owing to such
Lenders and Agent; and
(vi) All other payments under this Agreement and the
other Credit Documents shall be for the benefit of the Person
or Persons specified.
(b) SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of Loans owed to it in excess
of its ratable share of payments on account of such Loans obtained by
all Lenders entitled to such payments, such Lender shall forthwith
purchase from the other Lenders such participations in the Loans as
shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; PROVIDED, HOWEVER, that if all or
any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase shall be rescinded and each other
Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such other
Lender's ratable share (according to the proportion of (i) the amount
of such other Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount
so recovered. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this SUBPARAGRAPH 2.08(b)
may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of
Borrower in the amount of such participation.
2.09. CHANGE OF CIRCUMSTANCES.
(a) INABILITY TO DETERMINE RATES. If, on or before the first
day of any Interest Period for any LIBOR Loan, (i) any Lender shall
advise Agent that the LIBO Rate for such Interest Period cannot be
adequately and reasonably determined due to the unavailability of funds
in or other circumstances affecting the London interbank market or (ii)
any Lender shall advise Agent that the rate of interest for such Loan
does not adequately and fairly reflect the cost to such Lender of
making or maintaining such LIBOR Loan, Agent shall immediately give
notice of such condition to Borrower and the other Lenders. After the
giving of any such notice and until Agent shall otherwise notify
Borrower that the
<PAGE>
circumstances giving rise to such condition no longer exist,
Borrower's right to request the making of or conversion to, and the
Lenders' obligations to make or convert to LIBOR Loans shall be
suspended. Any LIBOR Loans outstanding at the commencement of any such
suspension shall be converted at the end of the then current Interest
Period for such LIBOR Loans into a Base Rate Loans unless such
suspension has then ended.
(b) ILLEGALITY. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by any Lender with any request or directive (whether or
not having the force of law) of any Governmental Authority (a "CHANGE
OF LAW") shall make it unlawful or impossible for any Lender to make or
maintain any LIBOR Loan, such Lender shall immediately notify Agent and
Borrower of such Change of Law. Upon receipt of such notice, (i)
Borrower's right to request the making of or conversion to, and such
Lender's obligation to make or convert to LIBOR Loans shall be
terminated, and (ii) Borrower shall, at the request of such Lender,
either (A) pursuant to SUBPARAGRAPH 2.01(d) convert any such then
outstanding LIBOR Loans into Base Rate Loans at the end of the current
Interest Period for such LIBOR Loans or (B) immediately repay or
convert any such LIBOR Loans if such Lender shall notify Borrower that
such Lender may not lawfully continue to fund and maintain such LIBOR
Loans. Any conversion or prepayment of LIBOR Loans made pursuant to the
preceding sentence prior to the last day of an Interest Period for such
LIBOR Loans shall be deemed a prepayment thereof for purposes of
PARAGRAPH 2.11. After any Lender notifies Agent and Borrower of such a
Change of Law and until such Lender notifies Agent and Borrower that it
is no longer unlawful or impossible for such Lender to make or maintain
a LIBOR Loan, all Loans of such Lender shall be Base Rate Loans.
(c) INCREASED COSTS. If, after the date of this Agreement, any
Change of Law:
(i) Shall subject any Lender to any tax, duty or
other charge with respect to any LIBOR Loan, or shall change
the basis of taxation of payments by Borrower to any Lender on
such a LIBOR Loan or in respect to such a LIBOR Loan under
this Agreement (except for changes in the rate of taxation on
the overall net income of any Lender imposed by its
jurisdiction of incorporation or the jurisdiction in which its
principal executive office is located); or
(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve to
the extent included in the calculation of the LIBO Rate for
any Loans), special deposit or similar requirement against
assets held by, deposits or other liabilities in or for the
account of, advances or loans by, or any other acquisition of
funds by any Lender for any LIBOR Loan; or
(iii) Shall impose on any Lender any other condition
related to any LIBOR
<PAGE>
Loan or such Lender's Commitment;
And the effect of any of the foregoing is to increase the cost to such
Lender of making, renewing, or maintaining any such LIBOR Loan or its
Commitment or to reduce any amount receivable by such Lender hereunder;
then Borrower shall from time to time, within five (5) days after
demand by such Lender, pay to such Lender additional amounts sufficient
to reimburse such Lender for such increased costs or to compensate such
Lender for such reduced amounts. A certificate as to the amount of such
increased costs or reduced amounts, submitted by such Lender to
Borrower shall, in the absence of manifest error, be conclusive and
binding on Borrower for all purposes. The obligations of Borrower under
this SUBPARAGRAPH 2.09(c) shall survive the payment and performance of
the Obligations and the termination of this Agreement.
(d) CAPITAL REQUIREMENTS. If, after the date of this
Agreement, any Lender determines that (i) any Change of Law affects the
amount of capital required or expected to be maintained by such Lender
or any Person controlling such Lender (a "CAPITAL ADEQUACY
REQUIREMENT") and (ii) the amount of capital maintained by such Lender
or such Person which is attributable to or based upon the Loans, the
Commitments or this Agreement must be increased as a result of such
Capital Adequacy Requirement (taking into account such Lender's or such
Person's policies with respect to capital adequacy), Borrower shall pay
to such Lender or such Person, within five (5) days after demand of
such Lender, such amounts as such Lender or such Person shall determine
are necessary to compensate such Lender or such Person for the
increased costs to such Lender or such Person of such increased
capital. A certificate of any Lender setting forth in reasonable detail
the computation of any such increased costs, delivered by such Lender
to Borrower shall, in the absence of manifest error, be conclusive and
binding on Borrower for all purposes. The obligations of Borrower under
this SUBPARAGRAPH 2.09(d) shall survive the payment and performance of
the Obligations and the termination of this Agreement.
(e) MITIGATION. Any Lender which becomes aware of (i) any
Change of Law which will make it unlawful or impossible for such Lender
to make or maintain any LIBOR Loan or (ii) any Change of Law or other
event or condition which will obligate Borrower to pay any amount
pursuant to SUBPARAGRAPH 2.09(c) or SUBPARAGRAPH 2.09(d) shall notify
Borrower and Agent thereof as promptly as practical. If any Lender has
given notice of any such Change of Law or other event or condition and
thereafter becomes aware that such Change of Law or other event or
condition has ceased to exist, such Lender shall notify Borrower and
Agent thereof as promptly as practical. Each Lender affected by any
Change of Law which makes it unlawful or impossible for such Lender to
make or maintain any LIBOR Loan or to which Borrower is obligated to
pay any amount pursuant to SUBPARAGRAPH 2.09(c) or SUBPARAGRAPH 2.09(d)
shall use reasonable commercial efforts (including changing the
jurisdiction of its Applicable Lending Office) to avoid the effect of
such Change of Law or to avoid or materially reduce any amounts which
Borrower is obligated to pay pursuant to SUBPARAGRAPH 2.09(c) or
SUBPARAGRAPH 2.09(d) if, in the reasonable opinion of such Lender, such
efforts would not be disadvantageous to such Lender or contrary to such
Lender's normal banking practices.
<PAGE>
2.10. TAXES ON PAYMENTS.
(a) PAYMENTS FREE OF TAXES. All payments made by Borrower
under this Agreement and the other Credit Documents shall be made free
and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (except net income taxes and franchise taxes in
lieu of net income taxes imposed on Agent or any Lender by its
jurisdiction of incorporation or the jurisdiction in which its
Applicable Lending Office is located) (all such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions and withholdings
being hereinafter called "TAXES"). If any Taxes are required to be
withheld from any amounts payable to Agent or any Lender hereunder or
under the other Credit Documents, the amounts so payable to Agent or
such Lender shall be increased to the extent necessary to yield to
Agent or such Lender (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the other Credit Documents. Whenever
any Taxes are payable by Borrower, as promptly as possible thereafter,
Borrower shall send to Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original
official receipt received by Borrower showing payment thereof. If
Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Agent the required receipts or other
required documentary evidence, Borrower shall indemnify Agent and the
Lenders for any incremental taxes, interest or penalties that may
become payable by Agent or any Lender as a result of any such failure.
The obligations of Borrower under this SUBPARAGRAPH 2.10(a) shall
survive the payment and performance of the Obligations and the
termination of this Agreement.
(b) WITHHOLDING EXEMPTION CERTIFICATES. On or prior to the
date of the initial Borrowing or, if such date does not occur within
thirty (30) days after the date of this Agreement, by the end of such
30-day period, each Lender which is not organized under the laws of the
United States of America or a state thereof shall deliver to Borrower
and Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 (or successor applicable form), as the case
may be, certifying in each case that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Lender which delivers to
Borrower and Agent a Form 1001 or 4224 pursuant to the immediately
preceding sentence further undertakes to deliver to Borrower and Agent
two further copies of Form 1001 or 4224 (or successor applicable
forms), as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by such
Lender to Borrower and Agent, certifying that such Lender is entitled
to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes. Each Lender
which is not organized under the laws of the United States of America
or a state thereof further agrees (i) promptly to notify Agent and
Borrower of any change of circumstances (including without limitation
any change in any treaty, law or regulation) which would prevent such
Lender from receiving payments hereunder
<PAGE>
without any deduction or withholding of United States federal income
tax and (ii) to furnish to Agent and Borrower any other manner of
certification as Agent or Borrower may reasonably request to establish
the right of such Lender to receive payments hereunder without any
deduction or withholding of United States federal income tax.
(c) MITIGATION. If Agent or any Lender claims any additional
amounts to be payable to it pursuant to this PARAGRAPH 2.10, such
Person shall use reasonable commercial efforts to file any certificate
or document requested in writing by Borrower (including without
limitation copies of Internal Revenue Service Form 1001 (or successor
forms) reflecting a reduced rate of withholding) or to change the
jurisdiction of its Applicable Lending Office if the making of such a
filing or such change in the jurisdiction of its Applicable Lending
Office would avoid the need for or materially reduce the amount of any
such additional amounts which may thereafter accrue and if, in the
reasonable opinion of such Person, in the case of a change in the
jurisdiction of its Applicable Lending Office, such change would not be
disadvantageous to such Person or contrary to such Person's normal
banking practices.
(d) TAX RETURNS. Nothing contained in this PARAGRAPH 2.10
shall require Agent or any Lender to make available any of its tax
returns (or any other information relating to its taxes which it deems
to be confidential).
2.11. FUNDING LOSS INDEMNIFICATION. If Borrower shall (a) repay, prepay
or convert any LIBOR Loan on any day other than the last day of an Interest
Period therefor (whether a scheduled payment, an optional prepayment or
conversion, a mandatory prepayment or conversion, a payment upon acceleration or
otherwise), (b) fail to borrow any LIBOR Loan for which a Notice of Borrowing
has been delivered to Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise) or (c) fail to convert any Loans into LIBOR
Loans in accordance with a Notice of Conversion delivered to Agent (whether as a
result of the failure to satisfy any applicable conditions or otherwise),
Borrower shall, upon demand by any Lender, reimburse such Lender for and hold
such Lender harmless from all costs and losses incurred by such Lender as a
result of such repayment, prepayment, conversion or failure. Borrower
understands that such costs and losses may include, without limitation, losses
incurred by a Lender as a result of funding and other contracts entered into by
such Lender to fund a LIBOR Loan. Each Lender demanding payment under this
PARAGRAPH 2.11 shall deliver to Borrower, with a copy to Agent, a certificate
setting forth the amount of costs and losses for which demand is made, which
certificate shall set forth in reasonable detail the calculation of the amount
demanded. Such a certificate so delivered to Borrower shall constitute PRIMA
FACIE evidence of such costs and losses. The obligations of Borrower under this
PARAGRAPH 2.11 shall survive the payment and performance of the Obligations and
the termination of this Agreement.
2.12. GUARANTIES.
(a) GUARANTIES. The Obligations shall be secured by an Amended
and Restated Guaranty in the form of EXHIBIT F, duly executed by each
Domestic Subsidiary of Borrower (the "AMENDED AND RESTATED GUARANTY").
<PAGE>
(b) FURTHER ASSURANCES. Borrower shall deliver, or cause its
Subsidiaries to deliver, to Agent such additional guaranties and other
instruments, agreements, certificates, opinions and documents as
Required Lenders may reasonably request to cause all Domestic
Subsidiaries of Borrower to guarantee the Obligations on the terms set
forth in the Amended and Restated Guaranty and otherwise establish,
maintain, protect and evidence the rights provided to Agent, for the
benefit of Agents and the Lenders, pursuant to the Amended and Restated
Guaranty. Borrower shall fully cooperate with Agent and the Lenders and
perform all additional acts reasonably requested by Agent or any Lender
to effect the purposes of this PARAGRAPH 2.12.
2.13. REPLACEMENT OF LENDERS. If any Lender shall (a) suspend its
obligation to make or maintain LIBOR Loans pursuant to SUBPARAGRAPH 2.09(b) for
a reason which is not applicable to the Lenders (or a material number of the
Lenders) generally, or (b) demand any payment under SUBPARAGRAPH 2.09(c),
2.09(d) OR 2.10(a) for a reason which is not applicable to the Lenders (or a
material number of the Lenders) generally, then Agent may (or upon the written
request of Borrower so long as no Default or Event of Default shall have
occurred and be continuing, shall) replace such Lender (the "AFFECTED LENDER"),
or cause such affected Lender to be replaced, with another lender (the
"REPLACEMENT LENDER") satisfying the requirements of an Assignee Lender under
SUBPARAGRAPH 8.05(c), by having the affected Lender sell and assign all of its
rights and obligations under this Agreement and the other Credit Documents to
the replacement lender pursuant to SUBPARAGRAPH 8.05(c); PROVIDED, HOWEVER, that
if Borrower seeks to exercise such right, it must do so within one hundred
twenty (120) days after it first knows or should have known of the occurrence of
the event or events giving rise to such right, and neither Agent nor any Lender
shall have any obligation to identify or locate a replacement lender for
Borrower. Upon receipt by any affected Lender of a written notice from Agent
stating that Agent is exercising the replacement right set forth in this
PARAGRAPH 2.1e, such affected Lender shall sell and assign all of its rights and
obligations under this Agreement and the other Credit Documents to the
replacement lender pursuant to an Assignment Agreement and SUBPARAGRAPH 8.05(c)
for a purchase price equal to the sum of the principal amount of the affected
Lender's Loans so sold and assigned, all accrued and unpaid interest thereon and
its ratable share of all fees to which it is entitled.
SECTION III. CONDITIONS PRECEDENT.
3.1. INITIAL CONDITIONS PRECEDENT. The obligations of the Lenders to
make the Loans comprising the initial Borrowing are subject to receipt by Agent,
on or prior to the Closing Date, of each item listed in SCHEDULE 3.01, each in
form and substance satisfactory to Agent and each Lender, and with sufficient
copies for, Agent and each Lender.
3.2. CONDITIONS PRECEDENT TO EACH CREDIT EVENT. The occurrence of each
Credit Event (including the initial Borrowing) is subject to the further
conditions that:
(a) Borrower shall have delivered to Agent the Notice of
Borrowing, Notice of Conversion or Notice of Interest Period Selection,
as the case may be, for such Credit Event in accordance with this
Agreement; and
<PAGE>
(b) On the date such Credit Event is to occur and after giving
effect to such Credit Event, the following shall be true and correct:
(i) The representations and warranties of Borrower
and its Subsidiaries set forth in PARAGRAPH 4.01 and in the
other Credit Documents are true and correct in all material
respects as if made on such date (except for representations
and warranties expressly made as of a specified date, which
shall be true as of such date);
(ii) No Default or Event of Default has occurred and
is continuing or will result from such Credit Event; and
(iii) All of the Credit Documents are in full force
and effect.
The submission by Borrower to Agent of each Notice of Borrowing, each
Notice of Conversion (other than a notice for a conversion to a Base
Rate Loan) and each Notice of Interest Period Selection shall be deemed
to be a representation and warranty by Borrower that each of the
statements set forth above in this SUBPARAGRAPH 3.02(b) is true and
correct as of the date of such notice.
3.3. COVENANT TO DELIVER. Borrower agrees (not as a condition but as a
covenant) to deliver to Agent each item required to be delivered to Agent as a
condition to the occurrence of any Credit Event if such Credit Event occurs.
Borrower expressly agrees that the occurrence of any such Credit Event prior to
the receipt by Agent of any such item shall not constitute a waiver by Agent or
any Lender of Borrower's obligation to deliver such item.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.1. BORROWER'S REPRESENTATIONS AND WARRANTIES. In order to induce
Agent and the Lenders to enter into this Agreement, Borrower hereby represents
and warranties to Agent and the Lenders as follows:
(a) DUE INCORPORATION, QUALIFICATION, ETC. Each of Borrower
and Borrower's Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization; (ii) has the power and authority to own,
lease and operate its properties and carry on its business as now
conducted; and (iii) is duly qualified, licensed to do business and in
good standing as a foreign corporation in each jurisdiction where the
failure to be so qualified or licensed is reasonably likely to have a
Material Adverse Effect.
(b) AUTHORITY. The execution, delivery and performance by
Borrower of each Credit Document executed, or to be executed, by
Borrower and the consummation of the transactions contemplated thereby
(i) are within the power of Borrower and (ii) have been duly authorized
by all necessary actions on the part of Borrower.
(c) ENFORCEABILITY. Each Credit Document executed, or to be
executed, by Borrower
<PAGE>
has been, or will be, duly executed and delivered by Borrower and
constitutes, or will constitute, a legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms,
except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors'
rights generally and general principles of equity.
(d) NON-CONTRAVENTION. The execution and delivery by Borrower
of the Credit Documents executed by Borrower and the performance and
consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to Borrower; (ii) violate any
provision of, or result in the breach or the acceleration of, or
entitle any other Person to accelerate (whether after the giving of
notice or lapse of time or both), any Contractual Obligation of
Borrower; or (iii) result in the creation or imposition of any Lien (or
the obligation to create or impose any Lien) upon any property, asset
or revenue of Borrower (except such Liens as may be created in favor of
Agent pursuant to this Agreement or the other Credit Documents).
(e) APPROVALS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Credit Documents executed by Borrower and
the performance and consummation of the transactions contemplated
thereby, except such as have been made or obtained and are in full
force and effect.
(f) NO VIOLATION OR DEFAULT. Neither Borrower nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if
not in effect, would result in such a violation or default), where, in
each case, such violation or default is reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the
foregoing, neither Borrower nor any of its Subsidiaries (A) has
violated any Environmental Laws, (B) has any liability under any
Environmental Laws or (C) has received notice or other communication of
an investigation or is under investigation by any Governmental
Authority having authority to enforce Environmental Laws, where such
violation, liability or investigation is reasonably likely to have a
Material Adverse Effect. No Event of Default or Default has occurred
and is continuing.
(g) LITIGATION. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of Borrower, threatened against Borrower or any of
its Subsidiaries at law or in equity in any court or before any other
Governmental Authority which (i) are reasonably likely (alone or in the
aggregate) to have a Material Adverse Effect or (ii) seek to enjoin,
either directly or indirectly, the execution, delivery or performance
by Borrower of the Credit Documents or the transactions contemplated
thereby.
(h) TITLE; POSSESSION UNDER LEASES. Borrower and its
Subsidiaries own and have good and marketable title, or a valid
leasehold interest in, all their respective properties
<PAGE>
and assets as reflected in the most recent Financial Statements
delivered to Agent (except those assets and properties disposed of
in the ordinary course of business or otherwise in compliance with
this Agreement since the date of such Financial Statements) and all
respective assets and properties acquired by Borrower and its
Subsidiaries since such date (except those disposed of in the
ordinary course of business or otherwise in compliance with this
Agreement). Such assets and properties are subject to no Lien,
except for Permitted Liens. Each of Borrower and its Subsidiaries
has complied with all obligations under all leases to which it is a
party and enjoys peaceful and undisturbed possession under such
leases except where the failure to so comply or enjoy is not
reasonably likely to have a Material Adverse Effect.
(i) FINANCIAL STATEMENTS. The Financial Statements of Borrower
and its Subsidiaries which have been delivered to Agent, (i) are in
accordance with the books and records of Borrower and its Subsidiaries,
which have been maintained in accordance with good business practice;
(ii) have been prepared in conformity with GAAP; and (iii) fairly
present the financial conditions and results of operations of Borrower
and its Subsidiaries as of the date thereof and for the periods covered
thereby. Neither Borrower nor any of its Subsidiaries has any
Contingent Obligations or other outstanding obligations which are
material in the aggregate, except as disclosed in the audited Financial
Statements dated September 27, 1998, furnished by Borrower to Agent
prior to the date hereof, or in the Financial Statements delivered to
Agent pursuant to CLAUSE (i) OR (ii) OF SUBPARAGRAPH 5.01(a).
(j) NO AGREEMENTS TO SELL ASSETS; ETC. Neither Borrower nor
any of its Subsidiaries has any legal obligation, absolute or
contingent, to any Person to sell all or substantially all of the
assets of Borrower or, except to the extent permitted pursuant to
SUBPARAGRAPH 5.02(d) OR 5.02(e), any of its Subsidiaries (other than
sales in the ordinary course of business), or to effect any merger,
consolidation or other reorganization of Borrower or, except to the
extent permitted pursuant to SUBPARAGRAPH 5.02(d) OR 5.02(e), any of
its Subsidiaries or to enter into any agreement with respect thereto.
(k) EMPLOYEE BENEFIT PLANS.
(i) Based on the latest valuation of each Employee
Benefit Plan that either Borrower or any ERISA Affiliate
maintains or contributes to, or has any obligation under
(which occurred within twelve months of the date of this
representation), the aggregate benefit liabilities of such
plan within the meaning of Section 4001 of ERISA did not
exceed the aggregate value of the assets of such plan. Neither
Borrower nor any ERISA Affiliate has any liability with
respect to any post-retirement benefit under any Employee
Benefit Plan which is a welfare plan (as defined in section
3(1) of ERISA), other than liability for health plan
continuation coverage described in Part 6 of Title I(B) of
ERISA, which liability for health plan contribution coverage
is not reasonably likely to have a Material Adverse Effect.
<PAGE>
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its terms,
ERISA and the IRC, and no condition exists or event has
occurred with respect to any such plan which would result in
the incurrence by either Borrower or any ERISA Affiliate of
any material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of
Borrower or any ERISA Affiliate is legally valid and binding
and in full force and effect. No Employee Benefit Plan is
being audited or investigated by any government agency or is
subject to any pending or threatened claim or suit. Neither
Borrower nor any ERISA Affiliate nor any fiduciary of any
Employee Benefit Plan has engaged in a prohibited transaction
under section 406 of ERISA or section 4975 of the IRC.
(iii) Neither Borrower nor any ERISA Affiliate
contributes to or has any material contingent obligations to
any Multiemployer Plan. Neither Borrower nor any ERISA
Affiliate has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result of
a complete or partial withdrawal from such Multiemployer Plan
under Section 4201 of ERISA or as a result of a sale of assets
described in Section 4204 of ERISA. Neither Borrower nor any
ERISA Affiliate has been notified that any Multiemployer Plan
is in reorganization or insolvent under and within the meaning
of Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated
under Section 4041A of ERISA.
(l) OTHER REGULATIONS. Borrower is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, any state public utilities
code or to any other Governmental Rule limiting its ability to incur
indebtedness.
(m) PATENT AND OTHER RIGHTS. Borrower and its Subsidiaries own
or license (or could obtain such ownership or license on terms not
materially adverse to Borrower and its Subsidiaries, taken as a whole)
under validly existing agreements, and have the full right to license
in the ordinary course of business as currently contemplated without
the consent of any other Person, all patents, licenses, trademarks,
trade names, trade secrets, service marks, copyrights and all rights
with respect thereto, which are required to conduct their businesses as
now conducted.
(n) GOVERNMENTAL CHARGES. Borrower and its Subsidiaries have
filed or caused to be filed all tax returns which are required to be
filed by them. Borrower and its Subsidiaries have paid, or made
provision for the payment of, all taxes and other Governmental Charges
which have or may have become due pursuant to said returns or otherwise
and all other indebtedness, except such Governmental Charges or
indebtedness, if any, which are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been
provided or which are not reasonably likely to have a Material Adverse
Effect if unpaid.
<PAGE>
(o) MARGIN STOCK. Borrower owns no Margin Stock which would
cause it to be in violation of SUBPARAGRAPH 5.01(f).
(p) SUBSIDIARIES, ETC. Set forth in SCHEDULE 4.01(q) (as
supplemented by Borrower from time to time in a written notice to
Agent) is a complete list of all of Borrower's Subsidiaries; the
jurisdiction of incorporation of each such Subsidiary; and the
percentage of each such Subsidiary's outstanding Equity Securities
owned directly by Borrower or another Subsidiary of Borrower. Except
for such Subsidiaries, Borrower has no Subsidiaries, is not a partner
in any partnership or a joint venturer in any joint venture.
(q) CATASTROPHIC EVENTS. Neither Borrower nor any of its
Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty
that is reasonably likely to have a Material Adverse Effect. There are
no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements,
employment contracts or employee welfare or incentive plans to which
Borrower or any of its Subsidiaries is a party, and there are no
strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Borrower, jurisdictional disputes or organizing activities
occurring or threatened which alone or in the aggregate are reasonably
likely to have a Material Adverse Effect.
(r) BURDENSOME CONTRACTUAL OBLIGATIONS, ETC. Neither Borrower
nor any of its Subsidiaries and none of their properties is subject to
any Contractual Obligation or Requirement of Law which is reasonably
likely to have a Material Adverse Effect.
(s) NO MATERIAL ADVERSE EFFECT. No event has occurred and no
condition exists which is reasonably likely to have a Material Adverse
Effect.
(t) ACCURACY OF INFORMATION FURNISHED. None of the Credit
Documents and none of the other certificates, statements or information
furnished to Agent or any Lender by or on behalf of Borrower or any of
its Subsidiaries in connection with the Credit Documents or the
transactions contemplated thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that it is recognized by Agent and the Lenders that
projections and forecasts provided and developed by Borrower, while
reflecting Borrower's good faith projections or forecasts based upon
methods and data Borrower believed to be reasonable and accurate when
made, are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may
differ from the projected or forecasted results.
(u) YEAR 2000 COMPATIBILITY. Borrower and its Subsidiaries
have reviewed the areas within their business and operations which
could be adversely affected by, and have developed or are developing a
program to address on a timely basis, the "Year 2000 Problem" (that is,
the risk that computer applications used by Borrower and its
Subsidiaries may be unable to recognize and perform properly
date-sensitive functions
<PAGE>
involving certain dates prior to and any date on or after December 31,
1999), and have made related appropriate inquiry of material
suppliers and vendors. Based on such review and program, Borrower
believes that the "Year 2000 Problem" will not have a Material
Adverse Effect.
4.2. REAFFIRMATION. Borrower shall be deemed to have reaffirmed, for
the benefit of the Lenders and Agent, each representation and warranty contained
in PARAGRAPH 4.01 and in the other Credit Documents on and as of the date of
each Credit Event (except for representations and warranties expressly made as
of a specified date, which shall be true as of such date).
SECTION V. COVENANTS.
5.1. AFFIRMATIVE COVENANTS. Until the termination of this Agreement
and the satisfaction in full by Borrower of all Obligations, Borrower will
comply, and will cause compliance, with the following affirmative covenants,
unless Required Lenders shall otherwise consent in writing:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish
to Agent, with sufficient copies for each Lender, the following, each
in such form and such detail as Agent or the Required Lenders shall
reasonably request:
(i) As soon as available and in no event later than
fifty (50) days after the last day of the first three fiscal
quarters of Borrower in each fiscal year, a copy of the
Financial Statements of Borrower and its Subsidiaries
(prepared on a consolidated basis) for such quarter and for
the fiscal year to date, certified by a Responsible Officer of
Borrower to present fairly the financial condition, results of
operations and other information reflected therein and to have
been prepared in accordance with GAAP (subject to normal
year-end audit adjustments);
(ii) As soon as available and in no event later than
one hundred, twenty (120) days after the close of each fiscal
year of Borrower, (A) copies of the audited Financial
Statements of Borrower and its Subsidiaries (prepared on a
consolidated basis) for such year, prepared by independent
certified public accountants of recognized national standing
acceptable to Agent and (B) copies of the unqualified opinions
(or qualified opinions reasonably acceptable to Agent) and
management letters delivered by such accountants in connection
with all such Financial Statements;
(iii) Contemporaneously with the quarterly and
year-end Financial Statements required by the foregoing
CLAUSES (i) AND (ii), a compliance certificate of a
Responsible Officer of Borrower which (A) states that no Event
of Default and no Default has occurred and is continuing, or,
if any such Event of Default or Default has occurred and is
continuing, a statement as to the nature thereof and what
action Borrower proposes to take with respect thereto, (B)
sets forth, for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year (as
the case may be), the calculation of the financial ratios and
tests provided in PARAGRAPH 5.03, (C) sets forth, as of the
last day of such quarter
<PAGE>
or year, the amounts at such time of all Guaranty Obligations
and all obligations on account of Rate Contracts and Surety
Instruments of Borrower and its Subsidiaries to others,
(D) states that the year 2000 remediation efforts of Borrower
and its Subsidiaries are proceeding as scheduled, and
(E) indicates whether an auditor, regulator or third party
consultant has issued a management letter or other
communication regarding the year 2000 exposure, program or
progress of Borrower and/or its Subsidiaries;
(iv) As soon as possible and in no event later than
five (5) Business Days after any Responsible Officer of
Borrower (or, in the case of (A) below, any Responsible
Officer or any Vice President of Human Resources) knows of the
occurrence or existence of (A) any Reportable Event under any
Employee Benefit Plan or Multiemployer Plan; (B) any actual or
threatened litigation, suits, claims or disputes against
Borrower or any of its Subsidiaries which could reasonably be
expected to result in monetary damages payable by Borrower or
its Subsidiaries of $1,000,000 or more (alone or in the
aggregate); (C) any other event or condition which is
reasonably likely to have a Material Adverse Effect; or (D)
any Default or Event of Default; the statement of the
President, Chief Financial Officer or Vice President-Finance
of Borrower setting forth details of such event, condition,
Default or Event of Default and the action which Borrower
proposes to take with respect thereto;
(v) As soon as available and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of (A) all registration statements and reports
filed by Borrower or any of its Subsidiaries with any
securities exchange or the Securities and Exchange Commission
(including, without limitation, all 10-Q, 10-K and 8-K
reports); (B) all reports, proxy statements and financial
statements sent or made available by Borrower or any of its
Subsidiaries to its security holders; and (C) all press
releases and other similar public concerning any material
developments in the business of Borrower or any of its
Subsidiaries made available by Borrower or any of its
Subsidiaries to the public generally;
(vi) As soon as available and in no event later than
thirty (30) days before the first day of each fiscal year of
Borrower, the consolidated plan and forecast of Borrower and
its Subsidiaries for such fiscal year, including quarterly
cash flow projections; and
(vii) Such other instruments, agreements,
certificates, opinions, statements, documents and information
relating to the operations or condition (financial or
otherwise) of Borrower or its Subsidiaries, and compliance by
Borrower with the terms of this Agreement and the other Credit
Documents as Agent may from time to time reasonably request.
(b) BOOKS AND RECORDS. Borrower and its Subsidiaries shall at
all times keep proper books of record and account in which full, true
and correct entries will be made of their
<PAGE>
transactions in accordance with GAAP.
(c) INSPECTIONS. Borrower and its Subsidiaries shall permit
any Person designated by any Lender, upon reasonable notice and during
normal business hours, to visit and inspect any of the properties and
offices of Borrower and its Subsidiaries, to examine the books and
records of Borrower and its Subsidiaries and make copies thereof and to
discuss the affairs, finances and business of Borrower and its
Subsidiaries with, and to be advised as to the same by, their officers,
auditors and accountants, all at such times and intervals as any Lender
may reasonably request.
(d) INSURANCE. Borrower and its Subsidiaries shall:
(i) Carry and maintain insurance of the types and in
the amounts customarily carried from time to time during the
term of this Agreement by others engaged in substantially the
same business as such Person and operating in the same
geographic area as such Person, including, but not limited to,
fire, public liability, property damage and worker's
compensation;
(ii) Carry and maintain each policy for such
insurance with (A) a company which is rated A or better by
A.M. Best and Company at the time such policy is placed and at
the time of each annual renewal thereof or (B) any other
insurer which is reasonably satisfactory to Agent; and
(iii) Deliver to Agent from time to time, as Agent
may request, schedules setting forth all insurance then in
effect.
(e) GOVERNMENTAL CHARGES. Borrower and its Subsidiaries shall
promptly pay and discharge when due all taxes and other Governmental
Charges prior to the date upon which penalties accrue thereon, except
such taxes and other Governmental Charges as may in good faith be
contested or disputed, or for which arrangements for deferred payment
have been made, provided that in each such case appropriate reserves
are maintained to the reasonable satisfaction of Agent.
(f) USE OF PROCEEDS. Borrower shall use the proceeds of the
Loans only for the purposes set forth in SUBPARAGRAPH 2.01(g). Borrower
shall not use any part of the proceeds of any Loan, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock
or for the purpose of purchasing or carrying or trading in any
securities under such circumstances as to involve Borrower, any Lender
or Agent in a violation of Regulations T, U or X issued by the Federal
Reserve Board.
(g) GENERAL BUSINESS OPERATIONS. Except to the extent
otherwise permitted pursuant to SUBPARAGRAPH 5.02(d), each of Borrower
and its Subsidiaries shall (i) preserve and maintain its corporate
existence and all of its rights, privileges and franchises reasonably
necessary to the conduct of its business; PROVIDED, HOWEVER, that
Borrower may cause any wholly-owned Subsidiary to be liquidated if
Borrower's board of directors determines that it is in the best
interests of Borrower and its Subsidiaries, taken as a whole and the
<PAGE>
assets of such dissolved wholly-owned Subsidiary are placed with
Borrower or any Guarantor hereunder; (ii) conduct its business
activities in compliance with all Requirements of Law and Contractual
Obligations applicable to such Person, the violation of which is
reasonably likely to have a Material Adverse Effect; and (iii) keep all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted, except where any failure to
do so is not reasonably likely to have a Material Adverse Effect.
Borrower shall maintain its chief executive office and principal place
of business in the United States and shall not relocate its chief
executive office or principal place of business outside of California
except upon not less than ninety (90) days prior written notice to
Agent.
(h) YEAR 2000 COMPATIBILITY. Borrower and its Subsidiaries
shall take all acts reasonably necessary to ensure that all software,
hardware, firmware, equipment, goods and systems utilized by or
material to their business operations or financial condition will
properly perform date sensitive functions before, during and after the
year 2000. At the request of Agent, Borrower shall provide to Agent
such certifications or other evidence of compliance with this
SUBPARAGRAPH 5.01(h) as Agent may from time to time require.
(i) PARI PASSU RANKING. Borrower shall take, or cause to be
taken, all actions necessary to ensure that the Obligations of Borrower
are and continue to rank at least PARI PASSU in right of payment with
all other unsecured Indebtedness of Borrower.
5.2. NEGATIVE COVENANTS. Until the termination of this Agreement and
the satisfaction in full by Borrower of all Obligations, Borrower will comply,
and will cause compliance, with the following negative covenants, unless
Required Lenders shall otherwise consent in writing:
(a) INDEBTEDNESS. Neither Borrower nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except
for the following ("PERMITTED INDEBTEDNESS"):
(i) The Obligations of Borrower under the Credit
Documents;
(ii) Indebtedness of Borrower and its Subsidiaries
listed in the Disclosure Letter and existing on the date of
this Agreement;
(iii) Indebtedness of Borrower and its Subsidiaries
arising from the endorsement of instruments for collection in
the ordinary course of Borrower's or a Subsidiary's business;
(iv) Indebtedness of Borrower and its Subsidiaries
under Rate Contracts, provided that (A) all such arrangements
are entered into in connection with bona fide hedging
operations and not for speculation and (B) the aggregate net
amount owed by Borrower and its Subsidiaries under, on account
of or otherwise in connection with such Rate Contracts does
not exceed $5,000,000 (marked to market) at any time;
<PAGE>
(v) Indebtedness of Borrower and its Subsidiaries
under purchase money and construction loans and Capital Leases
incurred by Borrower or any of its Subsidiaries to finance the
acquisition by such Person of real property, fixtures or
equipment or the construction of improvements to real property
provided that (A) in each case, (y) such Indebtedness is
incurred by such Person at the time of, or not later than
sixty (60) days after, the acquisition by such Person of the
property so financed or so constructed and (z) such
Indebtedness does not exceed the purchase price or
construction price (including acquisition of fixtures) of the
property so financed or so constructed and (B) the aggregate
amount of such Indebtedness outstanding at any time does not
exceed $5,000,000;
(vi) Indebtedness of Borrower and its Subsidiaries
under initial or successive refinancings of any Indebtedness
permitted by CLAUSE (ii) above, provided that (A) the
principal amount of any such refinancing does not exceed the
principal amount of the Indebtedness being refinanced and (B)
the material terms and provisions of any such refinancing
(including maturity, redemption, prepayment, default and
subordination provisions) are no less favorable to the Lenders
than the Indebtedness being refinanced;
(vii) Indebtedness of Borrower and its Subsidiaries
with respect to Surety Instruments in the ordinary course of
business, provided that the aggregate amount of the
obligations secured by such Surety Instruments at any time
does not exceed $8,000,000;
(viii) Guaranty Obligations of Borrower in respect of
Permitted Indebtedness of its Subsidiaries;
(ix) Guaranty Obligations incurred by Borrower in
connection with sales by Borrower of promissory notes,
accounts receivable and other indebtedness owed to Borrower
(including, without limitation, obligations under Borrower
Note Guaranties), provided that the aggregate amount of all
such notes, receivables and other indebtedness outstanding and
so guaranteed by Borrower does not exceed $25,000,000 at any
time;
(x) Indebtedness of Borrower to any of its
Subsidiaries, Indebtedness of any of Borrower's Subsidiaries
to Borrower or Indebtedness of any of Borrower's Subsidiaries
to any of Borrower's other Subsidiaries, provided that any
Indebtedness of Borrower to any of its Subsidiaries and any
Indebtedness of any of Borrower's Subsidiaries to Borrower
shall be subject to SUBPARAGRAPH 5.02(j);
(xi) Unsecured Indebtedness of Borrower, provided
that (A) the Indebtedness arising under this Agreement shall
at all times rank at least PARI PASSU in right of payment with
such unsecured Indebtedness, (B) such unsecured Indebtedness
does not contain material provisions that are more restrictive
to Borrower and its Subsidiaries than the material provisions
contained in this Agreement, (C) no principal payable in
connection with such unsecured Indebtedness is scheduled for
<PAGE>
payment on or prior to the Maturity Date, (D) the Net Proceeds
of such unsecured Indebtedness are applied to prepay the Loans
pursuant to CLAUSE (ii) OF SUBPARAGRAPH 2.04(c) and reduce the
Total Commitment pursuant to SUBPARAGRAPH 2.02(b), and (E) the
aggregate principal amount of all such unsecured Indebtedness
outstanding at any time (measured at the time of the
incurrence of such unsecured Indebtedness) does not exceed
Fifty Million Dollars ($50,000,000); and
(xii) Other Indebtedness of Borrower and its
Subsidiaries, provided that the aggregate principal amount of
all such Indebtedness does not exceed $5,000,000 at any time
(b) LIENS. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for the following ("PERMITTED LIENS"):
(i) Liens granted to Agent or any Lender
pursuant to any Credit Documents to secure the Obligations;
(ii) Liens listed in the Disclosure Letter and
existing on the date of this Agreement;
(iii) Liens for taxes or other Governmental Charges
not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided that
adequate reserves for the payment thereof have been
established in accordance with GAAP;
(iv) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided
that adequate reserves for the payment thereof have been
established in accordance with GAAP;
(v) Deposits under workers' compensation,
unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure
statutory obligations of surety or appeal bonds or to secure
indemnity, performance or other similar bonds in the ordinary
course of business;
(vi) Zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which
alone or in the aggregate are not substantial in amount and do
not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
of Borrower or any of its Subsidiaries;
<PAGE>
(vii) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(viii) Liens on property or assets of any corporation
which becomes a Subsidiary of Borrower after the date of this
Agreement, provided that (A) such Liens exist at the time of
such acquisition and (B) such Liens were not created in
contemplation of such acquisition;
(ix) Judgment Liens, provided that the judgment does
not yet constitute an Event of Default under SUBPARAGRAPH
6.01(h);
(x) Rights of vendors or lessors under conditional
sale agreements, Capital Leases or other title retention
agreements, provided that, in each case, (A) such rights
secure or otherwise relate to Permitted Indebtedness, (B) such
rights do not extend to any property other than property
acquired with the proceeds of such Permitted Indebtedness and
(C) such rights do not secure any Indebtedness other than such
Permitted Indebtedness;
(xi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties and in connection with the importation of goods
in the ordinary course of Borrower's and its Subsidiaries'
businesses;
(xii) Liens securing Indebtedness which constitutes
Permitted Indebtedness under CLAUSE (v) OF SUBPARAGRAPH
5.02(a) provided that, in each case, such Lien (A) covers only
those assets (together with accessions thereto, replacements
and proceeds, including insurance proceeds, and substitutions
therefor), the acquisition of which was financed by such
Permitted Indebtedness, and (B) secures only such Permitted
Indebtedness;
(xiii) Liens on the property or assets of any
Subsidiary of Borrower in favor of Borrower or any other
Subsidiary of Borrower;
(xiv) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured
by the Liens described in CLAUSE (ii) OR (xii) above, provided
that any extension, renewal or replacement Lien (A) is limited
to the property covered by the existing Lien and (B) secures
Indebtedness which is no greater in amount and has material
terms no less favorable to the Lenders than the Indebtedness
secured by the existing Lien;
(xv) Liens on insurance proceeds in favor of
insurance companies with respect to the financing of insurance
premiums;
(xvi) Leases and subleases of, and licenses and
sublicenses with respect to, property where Borrower or a
Subsidiary is the lessor or licensor (or sublessor or
sublicensor); provided that such leases, subleases, licenses
and sublicenses do not in the aggregate materially interfere
with the business of Borrower and its
<PAGE>
Subsidiaries taken as a whole; and
(xvii) Other Liens in an amount not to exceed
$100,000.
(c) ASSET DISPOSITIONS. Neither Borrower nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
its assets or property, whether now owned or hereafter acquired, except
for the following:
(i) Sales of inventory by Borrower and its
Subsidiaries in the ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete
equipment or inventory for not less than fair market value;
(iii) Sales or other dispositions of Investments
permitted by CLAUSE (i) OF SUBPARAGRAPH 5.02(e) for not less
than fair market value;
(iv) Sales or assignments of defaulted receivables to
a collection agency in the ordinary course of business;
(v) Sales or other dispositions of assets and
property by Borrower to any of Borrower's Subsidiaries or by
any of Borrower's Subsidiaries to Borrower or any of its other
Subsidiaries, provided that the terms of any such sales or
other dispositions by or to Borrower are terms which are no
less favorable to Borrower then would prevail in the market
for similar transactions between unaffiliated parties dealing
at arm's length;
(vi) Sales by Borrower of promissory notes, accounts
receivable and other indebtedness owed to Borrower, provided
that each such sale is (A) for cash consideration which is not
less than the fair market value of the promissory notes,
accounts receivable or other indebtedness sold and (B) without
any recourse to Borrower or any of its Subsidiaries except to
the extent permitted by CLAUSE (x) OF SUBPARAGRAPH 5.02(a);
(vii) Sales and licenses by Borrower of its
intellectual property, in the ordinary course of its business,
provided that, in each case, the terms of the transaction are
terms which then would prevail in the market for similar
transactions between unaffiliated parties dealing at arm's
length; and
(viii) Other sales, leases, transfers and disposals
of assets and property, provided that the aggregate value of
all such assets and property (based upon the greater of the
fair market or book value of such assets and property) so
sold, leased, transferred or otherwise disposed of in any
fiscal year does not exceed $10,000,000 per year.
(d) MERGERS, ACQUISITIONS, ETC. Neither Borrower nor any of
its Subsidiaries shall
<PAGE>
consolidate with or merge into any other Person or permit any other
Person to merge into it, establish any Subsidiary or acquire any
Person or all or substantially all of the assets of any Person,
except that:
(i) Any Subsidiary of Borrower may merge into
Borrower or any wholly-owned Subsidiary of Borrower;
(ii) Borrower and its Subsidiaries may acquire any
Person or all or substantially all of the assets of any
Person, provided that (A) such Person or such assets are in a
line of business permitted under SUBPARAGRAPH 5.02(f) and (B)
immediately after giving effect to such acquisition, Borrower
is in compliance with each of the financial covenants
contained in PARAGRAPH 5.03; and
(iii) Borrower and its Subsidiaries may acquire any
other Person or all or substantially all of the assets of any
other Person, provided that the aggregate cost of such
acquisitions does not exceed ten percent (10%) of the Tangible
Net Worth of Borrower and its Subsidiaries. In determining the
aggregate amount of acquisitions permitted under this CLAUSE
(iii) at any time during a fiscal year subject to this clause,
the Tangible Net Worth of Borrower and its Subsidiaries as of
the last day of the most recently ended fiscal quarter shall
be used.
(e) INVESTMENTS. Neither Borrower nor any of its Subsidiaries
shall make any Investment except for Investments in the following:
(i) Investments of Borrower and its
Subsidiaries in Cash Equivalents;
(ii) Any transaction permitted by SUBPARAGRAPH
5.2(a) or CLAUSES (II), AND (III) OF SUBPARAGRAPH 5.02(d);
(iii) Investments by Borrower and its Subsidiaries in
each other, provided that the book value of Borrower's
aggregate Investment in its Foreign Subsidiaries shall not
exceed $5,000,000 at any time;
(iv) Investments consisting of loans to
employees, officers and directors;
(v) Investments arising under Rate Contracts
otherwise permitted pursuant to SUBPARAGRAPH 5.02(a)(iv);
(vi) Investments listed in the Disclosure Letter and
existing on the date of this Agreement;
(vii) Investments received in the settlement of
delinquent obligations or disputes, including Investments
received in connection with the bankruptcy or reorganization
of third Persons;
(viii) Investments consisting of deposit accounts
maintained in the ordinary course of business;
<PAGE>
(ix) Investments accepted in connection with
dispositions of assets otherwise permitted under SUBPARAGRAPH
5.02(c); and
(x) Other Investments not otherwise permitted
pursuant to this SUBPARAGRAPH 5.02(e); provided that the
aggregate amount of such Investments does not exceed
$5,000,000 at any time.
(f) CHANGE IN BUSINESS. Neither Borrower nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any business substantially different from businesses
associated or connected with radiology or cardiology information
systems, radiation planning, or servicing or manufacturing new or used
nuclear medical equipment.
(g) INDEBTEDNESS PAYMENTS, ETC. Neither Borrower nor any of
its Subsidiaries shall (i) prepay, redeem, purchase, defease or
otherwise satisfy in any manner prior to the scheduled payment thereof
any Indebtedness for borrowed money (other than the Obligations or any
Indebtedness owed by any Subsidiary to Borrower) or lease obligations
or (ii) amend, modify or otherwise change the terms of any document,
instrument or agreement evidencing Indebtedness for borrowed money
(other than the Obligations or any Indebtedness owed by any Subsidiary
to Borrower) or lease obligations so as to accelerate the scheduled
payment thereof.
(h) ERISA. Neither Borrower nor any ERISA Affiliate shall (i)
adopt or institute any Employee Benefit Plan that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA, (ii)
take any action which will result in the partial or complete
withdrawal, within the meanings of sections 4203 and 4205 of ERISA,
from a Multiemployer Plan, (iii) engage or permit any Person to engage
in any transaction prohibited by section 406 of ERISA or section 4975
of the IRC involving any Employee Benefit Plan or Multiemployer Plan
which would subject either Borrower or any ERISA Affiliate to any tax,
penalty or other liability including a liability to indemnify, (iv)
incur or allow to exist any accumulated funding deficiency (within the
meaning of section 412 of the IRC or section 302 of ERISA), (v) fail to
make full payment when due of all amounts due as contributions to any
Employee Benefit Plan or Multiemployer Plan, (vi) fail to comply with
the requirements of section 4980B of the IRC or Part 6 of Title I(B) of
ERISA, or (vii) adopt any amendment to any Employee Benefit Plan which
would require the posting of security pursuant to section 401(a)(29) of
the IRC, where singly or cumulatively, the above would have a Material
Adverse Effect.
(i) TRANSACTIONS WITH AFFILIATES. Neither Borrower nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate(other than Borrower or any direct or indirect wholly-owned
Subsidiary of Borrower) or engage in any other transaction with any
Affiliate (other than Borrower or any direct or indirect wholly-owned
Subsidiary of Borrower) except upon terms at least as favorable to
Borrower or such Subsidiary as an arms-length transaction with
unaffiliated Persons.
(j) CAPITAL EXPENDITURES. Borrower and its Subsidiaries shall
not make Capital
<PAGE>
Expenditures on a consolidated basis in excess of $20,000,000 in any
fiscal year.
(k) ACCOUNTING CHANGES. Neither Borrower nor any of its
Subsidiaries shall change (i) its fiscal year (currently October 1
through September 30) or (ii) its accounting practices except as
required by GAAP.
5.3. FINANCIAL COVENANTS. Until the termination of this Agreement
and the satisfaction in full by Borrower of all Obligations, Borrower will
comply, and will cause compliance, with the following financial covenants,
unless Required Lenders shall otherwise consent in writing:
(a) EBITDAR/FIXED CHARGE COVERAGE RATIO. Borrower shall not
permit the EBITDAR/Fixed Charge Coverage Ratio of Borrower and its
Subsidiaries to be less than 3.25 to 1.00 on the last day of any
consecutive four-quarter period ending on the last day of each fiscal
quarter of Borrower.
(b) TANGIBLE NET WORTH. Borrower shall not permit the Tangible
Net Worth of Borrower and its Subsidiaries on the last day of any
fiscal quarter (any such date to be referred to herein as a
"determination date") which occurs on or after January 3, 1999 (such
date to be referred to herein as the "base date") to be less than the
sum on such determination date of the following:
(i) Eighty five percent (85%) of the Tangible
Net Worth of Borrower and its Subsidiaries on the base date;
PLUS
(ii) Fifty percent (50%) of the sum of the
consolidated quarterly net income (ignoring any quarterly
losses) of Borrower and its Subsidiaries for each quarter
after the base date through and including the quarter ending
immediately prior to the determination date;
PLUS
(iii) Seventy five percent (75%) of the Net Proceeds
realized by Borrower and its Subsidiaries from the issuance
and/or sale of Equity Securities during the period commencing
on the base date and ending on the determination date;
MINUS
(iv) If the determination date is after the date of
any permitted acquisition by Borrower pursuant to SUBPARAGRAPH
5.02(d), an amount equal to the after-tax sum of the
Acquisition In-Process R&D Charges taken by Borrower during
any such fiscal quarter.
(c) DEBT/EBITDA RATIO. Borrower shall not permit the
Debt/EBITDA Ratio of Borrower and its Subsidiaries to be greater than
2.50 to 1.00 on the last day of any fiscal quarter.
<PAGE>
(d) PROFITABILITY. Borrower shall not permit the consolidated
net income of Borrower and its Subsidiaries for any fiscal quarter to
be less than $1.00. In calculating the consolidated net income of
Borrower and its Subsidiaries for any quarter for the purposes of this
subparagraph, an amount equal to the after-tax sum of any Acquisition
In-Process R&D Charges taken by Borrower during such fiscal quarter
shall be ignored.
SECTION VI. DEFAULT.
6.1. EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) NON-PAYMENT. Borrower shall (i) fail to pay within one (1)
day after the same becomes due any principal of any Loan or (ii) fail
to pay within five (5) days after the same becomes due any interest,
fees or other amount required under the terms of this Agreement or any
of the other Credit Documents; or
(b) SPECIFIC DEFAULTS. Borrower or any of its Subsidiaries
shall fail to observe or perform any covenant, obligation, condition or
agreement set forth in SUBPARAGRAPH 5.01(d), PARAGRAPH 5.02 or
PARAGRAPH 5.03; or
(c) OTHER DEFAULTS. Borrower or any of its Subsidiaries shall
fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Agreement or the other Credit Documents and
such failure shall continue for twenty (20) days after the earlier of
(i) the date a Responsible Officer first knew or should have known of
such failure and (ii) the date Agent delivers to Borrower a notice of
such failure; or
(d) REPRESENTATIONS AND WARRANTIES. Any representation,
warranty, certificate, information or other statement (financial or
otherwise) made or furnished by or on behalf of Borrower or any of its
Subsidiaries to Agent or any Lender in or in connection with this
Agreement or any of the other Credit Documents, or as an inducement to
Agent or any Lender to enter into this Agreement, shall be false,
incorrect, incomplete or misleading in any material respect when made
or furnished; or
(e) CROSS-DEFAULT. (i) Borrower or any of its Subsidiaries
shall fail to make any payment when due on account of any Indebtedness
of such Person (other than the Obligations) and such failure shall
continue beyond any period of grace provided with respect thereto, if
the amount of such Indebtedness exceeds $1,000,000 or the effect of
such failure is to cause, or permit the holder or holders thereof to
cause, Indebtedness of Borrower and its Subsidiaries (other than the
Obligations) in an aggregate amount exceeding $1,000,000 to become due;
(ii) Borrower or any of its Subsidiaries shall otherwise fail to
observe or perform any agreement, term or condition contained in any
agreement or instrument relating to any Indebtedness of such Person
(other than the Obligations), or any other event shall occur or
condition shall exist, if the effect of such failure, event or
condition is to cause, or permit the holder or holders thereof to
cause, (A) Indebtedness of Borrower and its Subsidiaries (other than
the Obligations) in an
<PAGE>
aggregate amount exceeding $1,000,000 to become due (and/or to be
secured by cash collateral) or (B) Indebtedness constituting
Obligations to become due (and/or to be secured by cash collateral); or
(f) INSOLVENCY, VOLUNTARY PROCEEDINGS. Borrower or any of its
Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing
its inability, to pay its debts generally as they mature, (iii) make a
general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated in full or in part, (v) become insolvent (as
such term may be defined or interpreted under any applicable statute),
(vi) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary
case or other proceeding commenced against it, or (vi) take any action
for the purpose of effecting any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS. Proceedings for the appointment
of a receiver, trustee, liquidator or custodian of Borrower or any of
its Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Borrower or
any of its Subsidiaries or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered or such proceeding shall not
be dismissed or discharged within sixty (60) days of commencement; or
(h) JUDGMENTS. (i) One or more judgments, orders, decrees or
arbitration awards requiring Borrower and/or its Subsidiaries to pay an
aggregate amount of $1,000,000 or more (exclusive of amounts covered by
insurance issued by an insurer not an Affiliate of Borrower and
otherwise satisfying the requirements set forth in SUBPARAGRAPH
5.01(d)) shall be rendered against Borrower and/or any of its
Subsidiaries in connection with any single or related series of
transactions, incidents or circumstances and the same shall not be
vacated or stayed for a period of ten (10) consecutive days; (ii) any
judgment, writ, assessment, warrant of attachment, tax lien or
execution or similar process shall be issued or levied against a
substantial part of the property of Borrower or any of its Subsidiaries
and the same shall not be released, stayed, vacated or otherwise
dismissed within ten (10) days after issue or levy; or (iii) any other
judgments, orders, decrees, arbitration awards, writs, assessments,
warrants of attachment, tax liens or executions or similar processes
which, alone or in the aggregate, are reasonably likely to have a
Material Adverse Effect are rendered, issued or levied; or
(i) CREDIT DOCUMENTS. Any Credit Document or any material term
thereof shall cease to be, or be asserted by Borrower or any of its
Subsidiaries not to be, a legal, valid and binding obligation of
Borrower or any of its Subsidiaries enforceable in accordance with its
terms; or
<PAGE>
(j) ERISA. Any Reportable Event which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee by the PBGC to administer any Employee Benefit
Plan shall occur, or any Employee Benefit Plan shall be terminated
within the meaning of Title IV of ERISA or a trustee shall be appointed
by the PBGC to administer any Employee Benefit Plan; or
(k) CHANGE OF CONTROL. Any Change of Control shall occur; or
(l) MATERIAL ADVERSE EFFECT. Any event(s) or condition(s)
which is(are) reasonably likely to have a Material Adverse Effect shall
occur or exist.
6.2. REMEDIES. At any time after the occurrence and during the
continuance of any Event of Default (other than an Event of Default referred
to in SUBPARAGRAPH 6.01(f) or 6.01(g)), Agent may, with the consent of the
Required Lenders, or shall, upon instructions from the Required Lenders, by
written notice to Borrower, (a) terminate the Commitments and the obligations
of the Lenders to make Loans and/or (b) declare all outstanding Obligations
payable by Borrower to be immediately due and payable without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Amended and Restated
Notes to the contrary notwithstanding. Upon the occurrence or existence of
any Event of Default described in SUBPARAGRAPH 6.01(f) or 6.01(g),
immediately and without notice, (1) the Commitments and the obligations of
the Lenders to make Loans shall automatically terminate and (2) all
outstanding Obligations payable by Borrower hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Amended and Restated Notes to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Agent may exercise any other
right, power or remedy available to it under any of the Credit Documents or
otherwise by law, either by suit in equity or by action at law, or both.
SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS.
7.1. APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby appoints
and authorizes Agent to act as its agent hereunder and under the other Credit
Documents with such powers as are expressly delegated to Agent by the terms
of this Agreement and the other Credit Documents, together with such other
powers as are reasonably incidental thereto. Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement or in
any other Credit Document, be a trustee for any Lender or have any fiduciary
duty to any Lender. Notwithstanding anything to the contrary contained herein
Agent shall not be required to take any action which is contrary to this
Agreement or any other Credit Document or any applicable Governmental Rule.
Neither Agent nor any Lender shall be responsible to any other Lender for any
recitals, statements, representations or warranties made by Borrower or any
of its Subsidiaries contained in this Agreement or in any other Credit
Document, for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Credit Document or for any
failure by Borrower or any of its Subsidiaries to perform their respective
obligations hereunder or thereunder. Agent may employ agents and
attorneys-in-fact
<PAGE>
and shall not be responsible to any Lender for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
Neither Agent nor any of its directors, officers, employees, agents or
advisors shall be responsible to any Lender for any action taken or omitted
to be taken by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, except for its or their own gross
negligence or willful misconduct. Except as otherwise provided under this
Agreement, Agent shall take such action with respect to the Credit Documents
as shall be directed by the Required Lenders.
7.2. RELIANCE BY AGENT. Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram,
facsimile or telex) believed by it in good faith to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent with reasonable care. As to
any other matters not expressly provided for by this Agreement, Agent shall
not be required to take any action or exercise any discretion, but shall be
required to act or to refrain from acting upon instructions of the Required
Lenders and shall in all cases be fully protected by the Lenders in acting,
or in refraining from acting, hereunder or under any other Credit Document in
accordance with the instructions of the Required Lenders, and such
instructions of the Required Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.
7.3. DEFAULTS. Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default unless Agent has
received a written notice from a Lender or Borrower, referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "Notice of Default". If Agent receives such a notice of the
occurrence of a Default or Event of Default, Agent shall give prompt notice
thereof to the Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; PROVIDED, HOWEVER, that until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
7.4. INDEMNIFICATION. Without limiting the Obligations of Borrower
hereunder, each Lender agrees to indemnify Agent, ratably in accordance with
their Proportionate Shares, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time be
imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or the
enforcement of any of the terms hereof or thereof; PROVIDED, HOWEVER, that no
Lender shall be liable for any of the foregoing to the extent they arise from
Agent's gross negligence or willful misconduct. Agent shall be fully
justified in refusing to take or in continuing to take any action hereunder
unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The obligations of
each Lender under this PARAGRAPH 7.04 shall survive the payment and
performance of the Obligations, the termination of this Agreement and any
Lender ceasing to be a party to this Agreement (with respect to events
<PAGE>
which occurred prior to the time such Lender ceased to be a Lender hereunder).
7.5. NON-RELIANCE. Each Lender represents that it has, independently
and without reliance on Agent, or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own
appraisal of the business, prospects, management, financial condition and
affairs of Borrower and the Subsidiaries and its own decision to enter into
this Agreement and agrees that it will, independently and without reliance
upon Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own appraisals
and decisions in taking or not taking action under this Agreement. Neither
Agent nor any of its affiliates nor any of their respective directors,
officers, employees, agents or advisors shall (a) be required to keep any
Lender informed as to the performance or observance by Borrower or any of its
Subsidiaries of the obligations under this Agreement or any other document
referred to or provided for herein or to make inquiry of, or to inspect the
properties or books of Borrower or any of its Subsidiaries; (b) have any duty
or responsibility to provide any Lender with any credit or other information
concerning Borrower or any of its Subsidiaries which may come into the
possession of Agent, except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Agent
hereunder; or (c) be responsible to any Lender for (i) any recital,
statement, representation or warranty made by Borrower or any officer,
employee or agent of Borrower in this Agreement or in any of the other Credit
Documents, (ii) the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any Credit Document, or
(iii) any failure by Borrower to perform its obligations under this Agreement
or any other Credit Document.
7.6. RESIGNATION OR REMOVAL OF AGENT. Agent may resign at any time
by giving thirty (30) days prior written notice thereof to Borrower and the
Lenders, and Agent may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Agent, which Agent, if not a
Lender, shall be reasonably acceptable to Borrower; PROVIDED, HOWEVER, that
Borrower shall have no right to approve a successor Agent if a Default or an
Event of Default has occurred and is continuing. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from the duties and obligations thereafter arising hereunder.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this SECTION VII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
7.7. AUTHORIZATION. Agent is hereby authorized by the Lenders to
execute, deliver and perform, each of the Credit Documents to which Agent is
or is intended to be a party and each Lender agrees to be bound by all of the
agreements of Agent contained in the Credit Documents.
7.8. AGENT IN ITS INDIVIDUAL CAPACITY. Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of
banking or other business with Borrower and its Subsidiaries and affiliates
as though Agent were not Agent hereunder. With respect to Loans, if any, made
by Agent in its capacity as a Lender, Agent in its capacity as a Lender shall
have the same rights and powers under this Agreement and the other Credit
Documents as any other
<PAGE>
Lender and may exercise the same as though it were not Agent, and the terms
"Lender" or "Lenders" shall include Agent in its capacity as a Lender.
SECTION VIII. MISCELLANEOUS.
8.1. NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower, any Lender or Agent under this Agreement or the other Credit
Documents shall be in writing and faxed, mailed or delivered, if to Borrower
or Agent, at its respective facsimile number or address set forth below or,
if to any Lender, at the address or facsimile number specified beneath the
heading "Address for Notices" under the name of such Lender in SCHEDULE I (or
to such other facsimile number or address for any party as indicated in any
notice given by that party to the other parties). All such notices and
communications shall be effective (a) when sent by Federal Express or other
overnight service of recognized standing, on the Business Day following the
deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon
receipt; (c) when delivered by hand, upon delivery; and (d) when faxed, upon
confirmation of receipt; PROVIDED, HOWEVER, that any notice delivered to
Agent under SECTION II shall not be effective until received by Agent.
Agent: ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Dianne Barkley
Telephone: (415) 984-3706
Fax No: (415) 362-3524
with a copy to:
ABN AMRO Bank N.V.
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
And
ABN AMRO Bank N.V.
208 S. LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Joseph Coriaci
Credit Administration
Telephone: (312) 992-5118
Fax No.: (312) 992-5111
Borrower: ADAC Laboratories
<PAGE>
540 Alder Drive
Milpitas, CA 95035
Attn: Andre Simone
Telephone: (408) 321-9100
Fax No: (408) 321-9686
Each Notice of Borrowing, Notice of Conversion and Notice of Interest Period
Selection shall be given by Borrower to Agent's office located at the address
referred to above during Agent's normal business hours; PROVIDED, HOWEVER,
that any such notice received by Agent after 10:30 a.m. on any Business Day
shall be deemed received by Agent on the next Business Day. In any case where
this Agreement authorizes notices, requests, demands or other communications
by Borrower to Agent or any Lender to be made by telephone or facsimile,
Agent or any Lender may conclusively presume that anyone purporting to be a
person designated in any incumbency certificate or other similar document
received by Agent or a Lender is such a person.
8.2. EXPENSES. Borrower shall pay on demand, whether or not any Loan
is made hereunder, (a) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Agent in connection with the
preparation, negotiation, execution and delivery of, and the exercise of its
duties under, this Agreement and the other Credit Documents, and the
preparation, negotiation, execution and delivery of amendments and waivers
hereunder and thereunder and (b) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Agent and the Lenders in
the enforcement or attempted enforcement of any of the Obligations or in
preserving any of Agent's or the Lenders' rights and remedies (including,
without limitation, all such fees and expenses incurred in connection with
any "workout" or restructuring affecting the Credit Documents or the
Obligations or any bankruptcy or similar proceeding involving Borrower or any
of its Subsidiaries). As used herein, the term "reasonable attorneys' fees
and expenses" shall include, without limitation, allocable costs and expenses
of Agent's and Lenders' in-house legal counsel and staff. The obligations of
Borrower under this PARAGRAPH 8.02 shall survive the payment and performance
of the Obligations and the termination of this Agreement.
8.3. INDEMNIFICATION. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and hold harmless Agent, the
Lenders and their Affiliates and their respective directors, officers,
employees, agents and advisors ("INDEMNITEES") from and against any and all
liabilities, losses, damages or expenses of any kind or nature and from any
suits, claims or demands (including in respect of or for reasonable
attorney's fees and other expenses) arising on account of or in connection
with any matter or thing or action or failure to act by Indemnitees, or any
of them, arising out of or relating to the Credit Documents or any
transaction contemplated thereby, including without limitation any use by
Borrower of any proceeds of the Loans, except to the extent such liability
arises from the willful misconduct or gross negligence of such Indemnitee.
Upon receiving knowledge of any suit, claim or demand asserted by a third
party that Agent or any Lender believes is covered by this indemnity, Agent
or such Lender shall give Borrower notice of the matter and an opportunity to
defend it, at Borrower's sole cost and expense, with legal counsel
satisfactory to Agent or such Lender, as the case may be. Agent or
<PAGE>
such Lender may also require Borrower to defend the matter. Any failure or
delay of Agent or any Lender to notify Borrower of any such suit, claim or
demand shall not relieve Borrower of its obligations under this PARAGRAPH
8.03 but shall reduce such obligations to the extent of any increase in those
obligations caused solely by any such failure or delay which is unreasonable.
The obligations of Borrower under this PARAGRAPH 8.03 shall survive the
payment and performance of the Obligations and the termination of this
Agreement.
8.4. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
of this Agreement or any other Credit Document may be amended or waived, and
any consent under this Agreement or any other Credit Document may be given,
if such amendment, waiver or consent is in writing and is signed by Borrower
and the Required Lenders (or Agent on behalf of the Required Lenders with the
written approval of the Required Lenders); PROVIDED, HOWEVER that:
(a) Any amendment, waiver or consent which would (i) increase
the Total Commitment, (ii) extend the Maturity Date, (iii) reduce the
principal of or interest on any Loan or any fees or other amounts
payable for the account of the Lenders hereunder, (iv) extend any
scheduled principal, interest or fee payment date, (v) amend this
PARAGRAPH 8.04, (vi) releases the Amended and Restated Guaranty, or
(vii) amends the definition of Required Lenders, must be in writing and
signed or approved in writing by all Lenders;
(b) Any amendment, waiver or consent which increases or
decreases the Proportionate Share of any Lender must be in writing and
signed by such Lender; and
(c) Any amendment, waiver or consent which affects the rights
or obligations of Agent must be in writing and signed by Agent.
No failure or delay by Agent or any Lender in exercising any right under this
Agreement or any other Credit Document shall operate as a waiver thereof or
of any other right hereunder or thereunder nor shall any single or partial
exercise of any such right preclude any other further exercise thereof or of
any other right hereunder or thereunder. Unless otherwise specified in such
waiver or consent, a waiver or consent given hereunder shall be effective
only in the specific instance and for the specific purpose for which given.
8.5. SUCCESSORS AND ASSIGNS.
(a) BINDING EFFECT. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of Borrower,
the Lenders, Agent, all future holders of the Amended and Restated
Notes and their respective successors and permitted assigns, except
that Borrower may not assign or transfer any of its rights or
obligations under any Credit Document without the prior written consent
of Agent and each Lender. All references in this Agreement to any
Person shall be deemed to include all successors and assigns of such
Person.
(b) PARTICIPATIONS. Any Lender may at any time sell to one or
more banks or other financial institutions ("PARTICIPANTS")
participating interests in any Loan owing to such
<PAGE>
Lender, any Amended and Restated Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender
under this Agreement and the other Credit Documents. In the event of
any such sale by a Lender of participating interests, such Lender's
obligations under this Agreement shall remain unchanged, such Lender
shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of its Amended and Restated Notes for
all purposes under this Agreement and Borrower and Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement. Any
agreement pursuant to which any such sale is effected may require
the selling Lender to obtain the consent of the Participant in order
for such Lender to agree in writing to any amendment, waiver or
consent of a type specified in CLAUSE (i), (ii), (iii) OR (iv)
OF SUBPARAGRAPH 8.04(a) but may not otherwise require the selling
Lender to obtain the consent of such Participant to any other
amendment, waiver or consent hereunder. Borrower also agrees that any
Lender which has transferred any participating interest in its
Commitment or Loans shall, notwithstanding any such transfer, be
entitled to the full benefits accorded such Lender under PARAGRAPH
2.09, Paragraph 2.10, and PARAGRAPH 2.11, as if such Lender had not
made such transfer.
(c) ASSIGNMENTS. Any Lender may, at any time, sell and assign
to any Lender or any Eligible Assignee (individually, an "ASSIGNEE
LENDER") all or a portion of its rights and obligations under this
Agreement and the other Credit Documents (such a sale and assignment to
be referred to herein as an "ASSIGNMENT") pursuant to an assignment
agreement in the form of EXHIBIT G (an "ASSIGNMENT AGREEMENT"),
executed by each Assignee Lender and such assignor Lender (an "ASSIGNOR
LENDER") and delivered to Agent for its acceptance and recording in the
Register; PROVIDED, HOWEVER, that:
(i) Without the written consent of Agent and, if no
Default or Event of Default has occurred and is continuing,
Borrower (which consent of Agent and Borrower shall not be
unreasonably withheld), no Lender may make any Assignment to
any Assignee Lender which is not, immediately prior to such
Assignment, a Lender hereunder or an Affiliate thereof; or
(ii) Without the written consent of Agent and, if no
Default or Event of Default has occurred and is continuing,
Borrower (which consent of Agent and Borrower shall not be
unreasonably withheld), no Lender may make any Assignment to
any Assignee Lender if, after giving effect to such
Assignment, the Commitment of such Lender or such Assignee
Lender would be less than Five Million Dollars ($5,000,000)
(except that a Lender may make an Assignment which reduces its
Commitment to zero without the written consent of Borrower and
Agent); or
(iii) Without the written consent of Agent and, if no
Default or Event of Default has occurred and is continuing,
Borrower (which consent of Agent and Borrower shall not be
unreasonably withheld), no Lender may make any Assignment
which does not assign and delegate an equal pro rata interest
in such
<PAGE>
Lender's Loans, Commitment and all other rights, duties and
obligations of such Lender under this Agreement and the
other Credit Documents.
Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective Date
determined pursuant to such Assignment Agreement, (A) each Assignee
Lender thereunder shall be a Lender hereunder with a Proportionate
Share as set forth on ATTACHMENT 1 TO SUCH ASSIGNMENT AGREEMENT (under
the caption "Proportionate Share After Assignment") and shall have the
rights, duties and obligations of such a Lender under this Agreement
and the other Credit Documents, and (B) the Assignor Lender thereunder
shall be a Lender with a Proportionate Share as set forth on ATTACHMENT
1 TO SUCH ASSIGNMENT AGREEMENT (under the caption "Proportionate Share
After Assignment"), or, if the Proportionate Share of the Assignor
Lender has been reduced to 0%, the Assignor Lender shall cease to be a
Lender and to have any obligation to make any Loan; PROVIDED, HOWEVER,
that any such Assignor Lender which ceases to be a Lender shall
continue to be entitled to the benefits of any provision of this
Agreement which by its terms survives the termination of this
Agreement. Each Assignment Agreement shall be deemed to amend SCHEDULE
I to the extent, and only to the extent, necessary to reflect the
addition of each Assignee Lender, the deletion of each Assignor Lender
which reduces its Proportionate Share to 0% and the resulting
adjustment of Proportionate Shares arising from the purchase by each
Assignee Lender of all or a portion of the rights and obligations of an
Assignor Lender under this Agreement and the other Credit Documents. On
or prior to the Assignment Effective Date determined pursuant to each
Assignment Agreement, Borrower, at its own expense, shall execute and
deliver to Agent, in exchange for the surrendered Amended and Restated
Note of the Assignor Lender thereunder, a new Amended and Restated Note
to the order of each Assignee Lender thereunder (with each new Amended
and Restated Note to be in an amount equal to the Commitment assumed by
such Assignee Lender) and, if the Assignor Lender is continuing as a
Lender hereunder, a new Amended and Restated Note to the order of the
Assignor Lender (with the new Amended and Restated Note to be in an
amount equal to the Commitment retained by it). Each such new Amended
and Restated Note shall be dated the Closing Date and each shall
otherwise be in the form of the Amended and Restated Note replaced
thereby. The Amended and Restated Notes surrendered by the Assignor
Lender shall be returned by Agent to Borrower marked "replaced". Each
Assignee Lender which was not previously a Lender hereunder and which
is not incorporated under the laws of the United States of America or a
state thereof shall, within three (3) Business Days of becoming a
Lender, deliver to Borrower and Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 (or successor
applicable form), as the case may be, certifying in each case that such
Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes.
(d) REGISTER. Agent shall maintain at its address referred to
in PARAGRAPH 8.01 a copy of each Assignment Agreement delivered to it
and a register (the "REGISTER") for the recordation of the names and
addresses of the Lenders and the Proportionate Shares of each Lender
from time to time. The entries in the Register shall be conclusive in
<PAGE>
the absence of manifest error, and Borrower, Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner
of the Loans recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) REGISTRATION. Upon its receipt of an Assignment Agreement
executed by an Assignor Lender and an Assignee Lender (and, to the
extent required by SUBPARAGRAPH 8.05(c), by Borrower and Agent)
together with payment to Agent by Assignor Lender of a registration and
processing fee of $4000, Agent shall (i) promptly accept such
Assignment Agreement and (ii) on the Effective Date determined pursuant
thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and
Borrower. Agent may, from time to time at its election, prepare and
deliver to the Lenders and Borrower a revised SCHEDULE I reflecting the
names, addresses and respective Proportionate Shares of all Lenders
then parties hereto.
(f) CONFIDENTIALITY. Agent and the Lenders may disclose the
Credit Documents and any financial or other information relating to
Borrower or any Subsidiary to each other or, with the consent of
Borrower, to any potential Participant or Assignee Lender.
8.6. SETOFF. In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, with the prior consent of
Agent but without prior notice to or consent of Borrower, any such notice and
consent being expressly waived by Borrower to the extent permitted by
applicable law, upon the occurrence and during the continuance of an Event of
Default, to set-off and apply against the Obligations any amount owing from
such Lender to Borrower. The aforesaid right of set-off may be exercised by
such Lender against Borrower or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver or execution,
judgment or attachment creditor of Borrower or against anyone else claiming
through or against Borrower or such trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such right of
set-off may not have been exercised by such Lender at any prior time. Each
Lender agrees promptly to notify Borrower after any such set-off and
application made by such Lender, PROVIDED that the failure to give such
notice shall not affect the validity of such set-off and application.
8.7. NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied
from this Agreement is intended to give, or shall be construed to give, any
Person, other than the parties hereto and their permitted successors and
assigns hereunder, any benefit or legal or equitable right, remedy or claim
under or by virtue of this Agreement or under or by virtue of any provision
herein.
8.8. PARTIAL INVALIDITY. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
8.9. JURY TRIAL. EACH OF BORROWER, THE LENDERS AND AGENT, TO THE
<PAGE>
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.
8.10. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto
shall be deemed to constitute a complete, executed original for all purposes.
8.11. CONFIDENTIALITY. None of the Banks and Agent shall disclose to
any Person any information with respect to Borrower or any of its
Subsidiaries which is furnished pursuant to this Agreement or under the other
Credit Documents, except that any Bank or Agent may disclose any such
information (a) to its own directors, officers, employees, auditors, counsel
and other professional advisors and to its Affiliates if such Bank or Agent
or such Bank's or such Agent's holding or parent company in its sole
discretion determines that any such party should have access to such
information; (b) to another Bank or Agent; (c) if generally available to the
public through no fault of Agent or the Banks; (d) if required or appropriate
in any report, statement or testimony submitted to any Governmental Authority
having or claiming to have jurisdiction over such Bank or Agent; (e) if
required or appropriate in response to any summons or subpoena or in
connection with any litigation, to the extent permitted or deemed advisable
by counsel; (f) to comply with any Requirement of Law applicable to such Bank
or Agent; (g) to any Participant or Assignee Bank or any prospective
Participant or Assignee Bank, provided that such Participant or Assignee or
prospective Participant or Assignee agrees in writing to be bound by this
PARAGRAPH 8.11 prior to disclosure; or (h) otherwise with the prior consent
of Borrower; PROVIDED, HOWEVER, that any disclosure made in violation of this
Agreement shall not affect the obligations of Borrower and its Subsidiaries
under this Agreement and the other Credit Documents.
8.12. EFFECT; TERMINATION OF EXISTING CREDIT AGREEMENT. Borrower,
Agent and the Lenders agree that, on and after the Closing Date, (a) this
Agreement, the Amended and Restated Notes and the Amended and Restated
Guaranty shall amend, restate in their entirety and replace, without
novation, the Existing Credit Agreement, the promissory notes issued by
Borrower in connection with the Existing Credit Agreement (the "Existing
Notes") and the Guaranty dated as of July 31, 1996 issued by the Domestic
Subsidiaries in favor of Agent for the benefit of the Lenders in connection
with the Existing Credit Agreement (the "Existing Guaranty"), respectively,
(b) all obligations of the Lenders to make loans or otherwise extend credit
to Borrower under the Existing Credit Agreement shall be terminated and (c)
the Security Documents and all of the Liens granted to Agent and the Lenders
thereunder shall terminate; PROVIDED, HOWEVER, that such termination shall
not (i) operate as a waiver of any right, power or remedy of Agent or the
Lender hereunder or under the Amended and Restated Notes, the Amended and
Restated Guaranty or any related document, instrument or agreement or (ii)
extinguish or impair any obligations of Borrower under the Existing Credit
Agreement, the Existing Notes, the Existing Guaranty or any related document,
instrument or agreement except to the extent any such obligation is actually
satisfied by Borrower or is covered in this Agreement or the other Credit
Documents; PROVIDED, FURTHER, that all of the Loans
<PAGE>
outstanding under the Existing Credit Agreement shall remain outstanding and
shall be deemed to have been made under this Agreement on a pro rata basis by
the Lenders hereunder in accordance with their respective Proportionate
Shares.
[The first signature page follows.]
<PAGE>
IN WITNESS WHEREOF, Borrower, the Lenders and Agent have
caused this Agreement to be executed as of the day and year first above written.
BORROWER: ADAC LABORATORIES
By:
Name:
Title:
AGENT: ABN AMRO BANK N.V., AS AGENT
By:
Name:
Title:
By:
Name:
Title:
LENDERS: ABN AMRO BANK N.V., AS A LENDER
By:
Name:
Title:
By:
Name:
Title:
SANWA BANK CALIFORNIA, AS A LENDER
By:
Name:
Title:
<PAGE>
BANQUE NATIONALE DE PARIS, AS A LENDER
By:
Name:
Title:
UNION BANK OF CALIFORNIA, N.A, AS A LENDER
By:
Name:
Title:
WELLS FARGO BANK, N.A., AS A LENDER
By:
Name:
Title:
<PAGE>
EXECUTION VERSION
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
ADAC LABORATORIES
AND
THE LENDERS NAMED HEREIN
AND
ABN AMRO BANK N.V.,
AS AGENT FOR THE LENDERS
MARCH 29, 1999
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
PAGE
<S> <C>
SECTION I. INTERPRETATION
1
1.01. Definitions
1
1.02. GAAP
17
1.03. Headings
17
1.04. Plural Terms
17
1.05. Time
17
1.06. Governing Law
17
1.07. Construction
17
1.08. Entire Agreement
17
1.09. Calculation of Interest and Fees
17
1.10. Other Interpretive Provisions
18
SECTION II. CREDIT FACILITY
18
2.01. Revolving Loan Facility
18
2.02. Commitment Reductions, Etc
22
2.03. Fees
22
2.04. Prepayments
23
<PAGE>
<S> <C>
2.05. Other Payment Terms
23
2.06. Notes and Interest Account
24
2.07. Loan Funding
25
2.08. Pro Rata Treatment
26
2.09. Change of Circumstances
27
2.10. Taxes on Payments
29
2.11. Funding Loss Indemnification
30
2.12. Guaranties
31
2.13. Replacement of Lenders
31
SECTION III. CONDITIONS PRECEDENT
32
3.01. Initial Conditions Precedent
32
3.02. Conditions Precedent to Each Credit Event
32
3.03. Covenant to Deliver
32
<PAGE>
<S> <C>
SECTION IV. REPRESENTATIONS AND WARRANTIES
33
4.01. Borrower's Representations and Warranties
33
4.02. Reaffirmation
37
SECTION V. COVENANTS
37
5.01. Affirmative Covenants
37
5.02. Negative Covenants
40
5.03. Financial Covenants
47
SECTION VI. DEFAULT
48
6.01. Events of Default
48
6.02. Remedies
50
SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS
50
7.01. Appointment, Powers and Immunities
50
7.02. Reliance by Agent
51
7.03. Defaults
51
7.04. Indemnification
51
7.05. Non-Reliance
52
<PAGE>
<S> <C>
7.06. Resignation or Removal of Agent
52
7.07. Authorization
52
7.08. Agent in its Individual Capacity
52
SECTION VIII. MISCELLANEOUS
53
8.01. Notices
53
8.02. Expenses
54
8.03. Indemnification
54
8.04. Waivers; Amendments
55
8.05. Successors and Assigns
55
8.06. Setoff
58
8.07. No Third Party Rights
58
8.08. Partial Invalidity
58
8.09. Jury Trial
58
8.10. Counterparts
59
8.11. Confidentiality
59
8.12. Effect; Termination of Existing Credit Agreement
59
<PAGE>
<S> <C>
SCHEDULES
I Lenders
1.01 Pricing Grid
3.01 Initial Conditions Precedent
4.01(q) Subsidiaries
EXHIBITS
A Notice of Borrowing (2.01(b))
B Notice of Conversion (2.01(d))
C Notice of Interest Period Selection (2.01(e))
D Maturity Date Extension Request (2.01(h))
E Amended and Restated Note (2.06(a))
F Amended and Restated Guaranty (2.12(a))
G Assignment Agreement (8.05(c))
</TABLE>
<PAGE>
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>
SCHEDULE I
LENDERS
<TABLE>
<CAPTION>
Proportionate
Lender Share*
------ -------------
<S> <C>
ABN AMRO BANK N.V. 33.33333333%
APPLICABLE LENDING OFFICE:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111-5812
ADDRESS FOR NOTICES:
CREDIT ADMINISTRATION:
ABN AMRO Bank N.V.
208 S. LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Joseph Coriaci
Credit Administration
Telephone: (312) 992-5118
Fax No.: (312) 992-5111
With a copy to:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Dianne Barkley
Vice President
Telephone: (415) 984-3706
Fax No: (415) 362-3524
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<PAGE>
NOTICES OF BORROWING, ETC.:
ABN AMRO Bank N.V.
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
WIRING INSTRUCTIONS:
ABN AMRO Bank N.V.
ABA #: 026009580
F/O ABN AMRO Bank N.V.
Chicago Branch CPU
Account #: 650-001-1789-41
Reference: Adac Laboratories
</TABLE>
* To be expressed as a percentage rounded to the eighth digit to the
right of the decimal point.
I-
<PAGE>
<TABLE>
<CAPTION>
Proportionate
Lender Share*
------ -------------
<S> <C>
SANWA BANK CALIFORNIA 24.00000000%
Applicable Lending Office:
San Jose CBC
220 Almaden Boulevard
San Jose, CA 95113-2003
Address for notices:
220 Almaden Boulevard
San Jose, CA 95113-2003
Attn: Clifford M. Wallace
Telephone No: (408) 297-6500
Telecopier No: (408) 292-4092
Wiring Instructions:
Sanwa Bank California
220 Almaden Boulevard
San Jose, CA 95113
ABA No. 122003516
Account No: 1129-92463
Reference: Commercial Loan No. 00-0491250-5
For Further Credit To: ADAC Laboratories
</TABLE>
* To be expressed as a percentage rounded to the eighth digit to the
right of the decimal point.
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<PAGE>
<TABLE>
<CAPTION>
Proportionate
Lender Share*
------ -------------
<S> <C>
BANQUE NATIONALE DE PARIS 14.66666666%
Applicable Lending Office:
Banque National de Paris,
San Francisco Branch
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Address for Notice:
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attention: Debra Wright, Vice President
Telephone: (415) 956-0707
Telecopier: (415) 296-8954
Telex: RCA 278900 (Answerback: BNPs UR)
Wiring Instructions
Federal Reserve Bank of San Francisco
San Francisco, California
ABA Number: 121027234
Account Name: Banque Nationale de Paris, San Francisco Branch
Reference: ADAC Laboratories
</TABLE>
* To be expressed as a percentage rounded to the eighth digit to the
right of the decimal point.
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<PAGE>
<TABLE>
<CAPTION>
Proportionate
Lender Share*
------ -------------
<S> <C>
UNION BANK OF CALIFORNIA, N.A. 14.66666666%
Applicable Lending Office:
Union Bank of California, N.A.
350 California Street
San Francisco, CA 94104
Address for Notice: CC: NOTIFICATION
Union Bank of California, N.A. Allan Miner
Northern California Commercial Banking Division 99 Almaden Blvd.
350 California Street, 10th Floor Suite 200
San Francisco, CA 94104 San Jose, CA 95113
Attention: Jim Goudy Tel.: 408/279-7742
Telephone: (415) 705-7165 Fax: 408/280-7163
Telecopier: (415) 705-7111
Wiring Instructions:
Union Bank of California, N.A.
1980 Saturn Street
Monterey Park, CA 91755
ABA Number: 122-000-496
Account Number: 070-196431
Account Name: Wire Transfer Clearing
Attention: Commercial Loan Operations
Reference: ADAC Laboratories
(include any additional information needed to process transaction)
</TABLE>
* To be expressed as a percentage rounded to the eighth digit to the
right of the decimal point.
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<PAGE>
<TABLE>
<CAPTION>
Proportionate
Lender Share*
------ -------------
<S> <C>
WELLS FARGO BANK, N.A. 13.33333333%
Applicable Lending Office:
Wells Fargo Bank, N.A.
121 Park Center Plaza, Third Floor
San Jose, CA 95113
Address for Notice:
Wells Fargo Bank, N.A.
Commercial Bank Loan Center
201 Third Street, 8th Floor
San Francisco, CA 94103
Attention: Oscar Enriquez
Telephone: (415) 477-5425
Telecopier: (415) 979-0675
Wiring Instructions:
Wells Fargo Bank, N.A.
San Francisco, CA
ABA Number: 121-000-248
BNF: Member SYN/AC-2712-507201
Reference: ADAC LABORATORIES
</TABLE>
* To be expressed as a percentage rounded to the eighth digit to the
right of the decimal point.
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<PAGE>
SCHEDULE 1.01(a)
PRICING GRID
APPLICABLE MARGINS
<TABLE>
<CAPTION>
DEBT/ QUARTER BASE LIBOR COMMITMENT
EBITDA LEVEL(2)/ RATE LOANS FEE
RATIO(1)/ ----- LOANS ----- PERCENTAGE
----- ----- ----------
<S> <C> <C> <C> <C>
< 0.60 1 0% 0.750% 0.250%
-
> 0.60 2 0% 0.875% 0.250%
< 0.90
-
> 0.90, 3 0% 1.000% 0.275%
< 1.20
-
> 1.20, 4 0% 1.125% 0.325%
< 1.40
-
> 1.40, 5 0% 1.250% 0.375%
< 1.60
-
> 1.60, 6 0% 1.375% 0.425%
< 2.00
-
> 2.00 7 0% 1.500% 0.475%
</TABLE>
--------------------
(1)/ For a consecutive four-quarter period.
(2)/ For the second quarter after the last quarter in the consecutive
four-quarter period.
EXPLANATION
1. The Applicable Margin for each Loan and the Commitment Fee Percentage
will be set for each quarter and will vary depending upon whether such
quarter is a Level 1 Quarter, a Level 2 Quarter, a Level 3 Quarter, a
Level 4 Quarter, a Level 5 Quarter, a Level 6
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<PAGE>
Quarter or a Level 7 Quarter.
2. The Closing Date through the quarter ending on or about June 30, 1999
will be a Level 2 Quarter.
3. Each quarter thereafter will be a Level 1 Quarter, a Level 2 Quarter, a
Level 3 Quarter, a Level 4 Quarter, a Level 5 Quarter, a Level 6
Quarter or a Level 7 Quarter depending upon Borrower's Debt/EBITDA
Ratio for the consecutive four-quarter period which ended with the
second quarter prior to such quarter.
4. Examples:
(a) For the consecutive four-quarter period ending on or about
March 31, 1999, Borrower's Debt/EBITDA Ratio was 1.30. The
quarter ending on or about September 30, 1999 will be a Level
4 Quarter.
(b) For the consecutive four-quarter period ending on or about
June 30, 1999, Borrower's Debt/EBITDA Ratio was 1.10. The
quarter ending on or about December 31, 1999 will be a Level 3
Quarter.
1.01(a)
<PAGE>
SCHEDULE 3.01
INITIAL CONDITIONS PRECEDENT
A. PRINCIPAL CREDIT DOCUMENTS.
(1) The Amended and Restated Credit Agreement, duly executed by
Borrower, each Lender and each Agent; and
(2) An Amended and Restated Note payable to each Lender, each duly
executed by Borrower; and
(3) The Amended and Restated Guaranty, duly executed by each Domestic
Subsidiary of Borrower.
B. BORROWER CORPORATE DOCUMENTS.
(1) The Certificate or Articles of Incorporation of Borrower, certified
as of a recent date prior to the Closing Date by the Secretary of State (or
comparable official) of its jurisdiction of incorporation;
(2) A Certificate of Good Standing (or comparable certificate) for
Borrower, certified as of a recent date prior to the Closing Date by the
Secretary of State (or comparable official) of its jurisdiction of
incorporation;
(3) A certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, certifying (a) that attached thereto is a true
and correct copy of the Bylaws of Borrower as in effect on the Closing Date; (b)
that attached thereto are true and correct copies of resolutions duly adopted by
the Board of Directors of Borrower and continuing in effect, which authorize the
execution, delivery and performance by Borrower of this Agreement and the other
Credit Documents executed or to be executed by Borrower and the consummation of
the transactions contemplated hereby and thereby; and (c) that there are no
proceedings for the dissolution or liquidation of Borrower;
(4) A certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, certifying the incumbency, signatures and
authority of the officers of Borrower authorized to execute, deliver and perform
this Agreement, the other Credit Documents and all other documents, instruments
or agreements related thereto executed or to be executed by Borrower; and
(5) Certificates of Good Standing (or comparable certificates) for
Borrower, certified as of a recent date prior to the Closing Date by the
Secretaries of State (or comparable official) of each state in which Borrower is
qualified to do business.
C. SUBSIDIARY CORPORATE DOCUMENTS.
(1) The Certificate of Incorporation (or comparable certificate) of
each Domestic
I-
<PAGE>
Subsidiary of Borrower, certified as of a recent date prior to the Closing Date
by the Secretary of State (or comparable public official) of its state of
incorporation;
(2) A Certificate of Good Standing (or comparable certificate) for each
Domestic Subsidiary of Borrower, certified as of a recent date prior to the
Closing Date by the Secretary of State (or comparable public official) of its
state of incorporation;
(3) A certificate of the Secretary or an Assistant Secretary of each
Domestic Subsidiary of Borrower, dated the Closing Date, certifying (a) that
attached thereto is a true and correct copy of the Bylaws of such Subsidiary as
in effect on the Closing Date; (b) that attached thereto are true and correct
copies of resolutions duly adopted by the Board of Directors of such Subsidiary
and continuing in effect, which authorize the execution, delivery and
performance by such Subsidiary of the Credit Documents executed or to be
executed by such Subsidiary and the consummation of the transactions
contemplated hereby and thereby; and (c) that there are no proceedings for the
dissolution or liquidation of such Subsidiary; and
(4) A certificate of the Secretary or an Assistant Secretary of each
Domestic Subsidiary of Borrower, dated the Closing Date, certifying the
incumbency, signatures and authority of the officers of such Subsidiary
authorized to execute, deliver and perform the Credit Documents and all other
documents, instruments or agreements related thereto executed or to be executed
by such Subsidiary.
D. FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC.
(1) A copy of the unaudited Financial Statements of Borrower and its
Subsidiaries for the fiscal quarter ended December 31, 1998 and for the fiscal
year to such date (prepared on a consolidated and consolidating basis),
certified by the Chief Financial Officer or Vice President-Finance of Borrower
to present fairly the financial condition, results of operations and other
information reflected therein and to have been prepared in accordance with GAAP
(subject to normal year-end audit adjustments);
(2) A copy of the audited consolidated Financial Statements of Borrower
for the fiscal year ended September 27, 1998, prepared by Coopers & Lybrand and
a copy of the unqualified opinion delivered by such accountants in connection
with such Financial Statements;
(3) A copy of the 10-Q report filed by Borrower with the Securities and
Exchange Commission for the quarter ended December 31, 1998;
(4) A copy of the 10-K report filed by Borrower with the Securities and
Exchange Commission for the fiscal year ended September 27, 1998;
(5) The consolidated plan and forecast of Borrower and its Subsidiaries
for the fiscal year ending in 1999, including quarterly cash flow projections
through the fiscal year ending in 1999 and annual cash flow projections through
the fiscal years ending 2000 and 2001; and
(6) Such other financial, business and other information regarding
Borrower, or any
3.01-
<PAGE>
of its Subsidiaries as Agent or any Lender may reasonably request, including
information as to possible contingent liabilities, tax matters, environmental
matters and obligations for employee benefits and compensation.
E. OPINION.
A favorable written opinion of Wilson Sonsini Goodrich & Rosati,
counsel for Borrower and its Subsidiaries, dated the Closing Date and addressed
to Agent for the benefit of Agent and the Lenders, covering such legal matters
as Agent may reasonably request and otherwise in form and substance satisfactory
to Agent.
G. OTHER ITEMS.
(1) A duly completed and timely delivered Notice of Borrowing;
(2) Certificates of insurance evidencing the insurance Borrower is
required to maintain pursuant to SUBPARAGRAPH 5.01(d);
(3) An organization chart for Borrower and its Subsidiaries, setting
forth the relationship among such Persons, certified by the Chief Financial
Officer or Vice President-Finance of Borrower;
(4) A certificate of the Chief Financial Officer or Vice
President-Finance of Borrower, addressed to Agent and dated the Closing Date,
certifying that:
(a) The representations and warranties set forth in PARAGRAPH 4.01 and
in the other Credit Documents are true and correct in all material respects as
of such date (except for such representations and warranties made as of a
specified date, which shall be true as of such date);
(b) No Event of Default or Default has occurred and is continuing
as of such date;
(c) All of the Credit Documents are in full force and effect;
(5) All fees and expenses payable to Agent and the Lenders on or prior
to the Closing Date (including all fees payable to Agent pursuant to the Agent's
Fee Letter);
(6) All fees and expenses of Agent's counsels through the Closing Date;
and
3.01-
<PAGE>
(7) Such other evidence as Agent or any Lender may reasonably request
to establish the accuracy and completeness of the representations and warranties
and the compliance with the terms and conditions contained in this Agreement and
the other Credit Documents.
3.01-
<PAGE>
SCHEDULE 4.01(q)
SUBSIDIARIES
1. SHARES OWNED DIRECTLY BY BORROWER:
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Shares Owned
---------- ------------ by Borrower2/
-------------
<S> <C> <C>
ADAC Research &
Manufacturing, Inc. California 100%
Community Health Delaware 100%
Computing Corp.
ADAC Medical Delaware 100%
Technologies, Inc.
(formerly known
as J.D. Technical
Services, Inc.)
ADAC Laboratories California 100%
Pacific, Inc.
ADAC Healthcare Delaware 100%
Partners, Inc.
100%
ADAC Laboratories Canada 100%
Canada Ltd.
ADAC Laboratories Netherlands 100%
Europe, BV.
ADAC Foreign
Sales Corporation Virgin Islands 100%
ADAC do Brasil Brazil 100%
</TABLE>
- - - --------------------
1/ All shares common unless otherwise indicated.
2/ An immaterial number of directors' qualifying shares or the
equivalent may be outstanding for some Foreign Subsidiaries.
I-
<PAGE>
2. SHARES OWNED DIRECTLY BY COMMUNITY HEALTH COMPUTING
CORP. ("CHCC"):
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Shares Owned
---------- ------------ by CHCC
------------
<S> <C> <C>
ADAC Healthcare Texas 100%
Information
Systems, Inc.
</TABLE>
3. SHARES OWNED DIRECTLY BY ADAC HEALTHCARE PARTNERS, INC.
("ADAC HCPI"):
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Shares Owned
---------- ------------ by ADAC HCPI
------------
<S> <C> <C>
ADAC Radiology Delaware 100%
Services, Inc.
100%
</TABLE>
- - - --------------------
1/ All shares common unless otherwise indicated.
4. SHARES OWNED DIRECTLY BY ADAC LABORATORIES EUROPE B.V.
("ADAC BV"):
<TABLE>
<CAPTION>
Shares Owned
Subsidiary Jurisdiction By ADAC BV2/
---------- ------------ ------------
<S> <C> <C>
ADAC Laboratories, SARL France 100%
ADAC Laboratories, SRL Italy 100%
ADAC Laboratories, Ltd. UK 100%
ADAC Laboratories, A/S Denmark 100%
ADAC Laboratories, GmbH Germany 100%
--------------------
</TABLE>
2/ An immaterial number of directors' qualifying shares or the
equivalent may be outstanding for some Foreign Subsidiaries.
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated Credit
Agreement, dated as of March 29, 1999 (the "CREDIT AGREEMENT"), among ADAC
Laboratories ("BORROWER"), the financial institutions listed in SCHEDULE I to
the Credit Agreement (the "LENDERS") and ABN AMRO Bank N.V., as agent for the
Lenders (in such capacity, "AGENT"). Unless otherwise indicated, all terms
defined in the Credit Agreement have the same respective meanings when used
herein.
2. Pursuant to SUBPARAGRAPH 2.01(b) of the Credit Agreement,
Borrower hereby irrevocably requests a Borrowing upon the following terms:
(a) The principal amount of the requested Borrowing is to
be $____________;
(b) The requested Borrowing is to consist of ["Base Rate"
or "LIBOR"] Loans;
(c) If the requested Borrowing is to consist of LIBOR
Loans, the initial Interest Period for such Loans
will be ______________ months; and
(d) The date of the requested Borrowing is to be
_______________, ______.
3. Borrower hereby certifies to Agent and the Lenders that, on the
date of this Notice of Borrowing and after giving effect to the requested
Borrowing:
(a) The representations and warranties of Borrower set forth in
PARAGRAPH 4.01 of the Credit Agreement and in the other Credit Documents are
true and correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date);
(b) No Default or Event of Default has occurred and is
continuing; and
(c) All of the Credit Documents are in full force and effect.
4. Please disburse the proceeds of the requested
Borrowing to
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<PAGE>
------------------------------------------------------------------------
------------------------------------------------------------------------
IN WITNESS WHEREOF, Borrower has executed this Notice of
Borrowing on the date set forth above.
ADAC LABORATORIES
By:
Name:
Title:
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated
Credit Agreement, dated as of March 29, 1999 (the "CREDIT AGREEMENT"),
among ADAC Laboratories ("BORROWER"), the financial institutions listed
in SCHEDULE I to the Credit Agreement (the "LENDERS") and ABN AMRO Bank
N.V., as agent for the Lenders (in such capacity, "AGENT"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the
same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(d) of the Credit Agreement,
Borrower hereby irrevocably requests to convert a Borrowing as follows:
(a) The Borrowing to be converted consists of ["Base Rate" or
"LIBOR"] Loans in the aggregate principal amount of $__________ which
were initially advanced to Borrower on __________, ____;
(b) The Loans in the Borrowing are to be converted into ["Base
Rate" or "LIBOR"] Loans;
(c) If such Loans are to be converted into LIBOR Loans, the
initial Interest Period for such Loans commencing upon conversion will
be __________ months; and
(d) The date of the requested conversion is to be __________,
____.
3. Borrower hereby certifies to Agent and the Lenders that,
on the date of this Notice of Conversion, and after giving effect to
the requested conversion:
(a) The representations and warranties of Borrower set forth
in PARAGRAPH 4.01 of the Credit Agreement and in the other Credit
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true as of such date);
(b) No Default or Event of Default has occurred and is
continuing; and
(c) All of the Credit Documents are in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Notice of
Conversion on the date set forth above.
ADAC LABORATORIES
By:
Name:
Title:
B-
<PAGE>
EXHIBIT C
NOTICE OF INTEREST PERIOD SELECTION
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated
Credit Agreement, dated as of March 29, 1999 (the "CREDIT AGREEMENT"),
among ADAC Laboratories ("BORROWER"), the financial institutions listed
in SCHEDULE I to the Credit Agreement (the "LENDERS") and ABN AMRO Bank
N.V., as agent for the Lenders (in such capacity, "AGENT"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the
same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(e) of the Credit Agreement,
Borrower hereby irrevocably selects a new Interest Period for a
Borrowing as follows:
(a) The Borrowing for which a new Interest Period is to be
selected consists of LIBOR Loans in the aggregate principal amount of
$__________ which were initially advanced to Borrower on ___________,
____;
(b) The last day of the current Interest Period for such Loans
is ___________, ____; and
(c) The next Interest Period for such Loans commencing upon
the last day of the current Interest Period is to be _________ months.
3. Borrower hereby certifies to the Agents and the Lenders
that, on the date of this Notice of Interest Period Selection, and
after giving effect to the requested selection:
(a) The representations and warranties of Borrower set forth
in PARAGRAPH 4.01 of the Credit Agreement and in the other Credit
Documents are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as
of a specified date, which shall be true as of such date);
(b) No Default or Event of Default has occurred and is
continuing; and
(c) All of the Credit Documents are in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Notice of
Interest Period Selection on the date set forth above.
ADAC LABORATORIES
By:
Name:
Title:
C-
<PAGE>
EXHIBIT D
MATURITY DATE EXTENSION REQUEST
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated
Credit Agreement, dated as of March 29, 1999 (the "CREDIT AGREEMENT"),
among ADAC Laboratories ("BORROWER"), the financial institutions listed
in SCHEDULE I to the Credit Agreement (the "LENDERS") and ABN AMRO Bank
N.V., as agent for the Lenders (in such capacity, "AGENT"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the
same respective meanings when used herein.
2. Upon the execution of a copy of this letter by each
Lender, the return thereof to Agent and the written notification
thereof by Agent to Borrower and Lenders, the Maturity Date, as defined
in PARAGRAPH 1.01 of the Credit Agreement, shall be amended by changing
the date "December 31, ____" to December 31, 20__."
Except as specifically amended hereby, all terms, covenants
and conditions of the Credit Agreement shall remain in full force and
effect.
Very truly yours,
ADAC LABORATORIES
By:
Name:
Title:
I-
<PAGE>
EXHIBIT E
AMENDED AND RESTATED NOTE
$________________________________________________________,_____________
_________________________________________________________,_____________
FOR VALUE RECEIVED, ADAC LABORATORIES, a California
corporation ("BORROWER"), hereby promises to pay to the order of
____________________, a ____________________ ("LENDER"), the principal
sum of ______________________________ DOLLARS ($__________) or such
lesser amount as shall equal the aggregate outstanding principal
balance of the Loans made by Lender to Borrower pursuant to the Amended
and Restated Credit Agreement referred to below (as amended from time
to time, the "CREDIT AGREEMENT"), on or before the Maturity Date
specified in the Credit Agreement; and to pay interest on said sum, or
such lesser amount, at the rates and on the dates provided in the
Credit Agreement.
Borrower shall make all payments hereunder, for the account of
Lender's Applicable Lending Office, to Agent as indicated in the Credit
Agreement, in lawful money of the United States and in same day or
immediately available funds.
Borrower hereby authorizes Lender to record on the schedule(s)
annexed to this note the date and amount of each Loan and of each
payment or prepayment of principal made by Borrower and agrees that all
such notations shall constitute prima facie evidence of the matters
noted; provided, however, that the failure of Lender to make any such
notation shall not affect Borrower's obligations hereunder.
This note is one of the Notes referred to in the Amended and
Restated Credit Agreement, dated as of March 29, 1999, among Borrower,
Lender and the other financial institutions from time to time parties
thereto (collectively, the "Lenders") and ABN AMRO Bank N.V., as agent
for the Lenders. This note is subject to the terms of the Credit
Agreement, including the rights of prepayment and the rights of
acceleration of maturity set forth therein. Terms used herein have the
meanings assigned to those terms in the Credit Agreement, unless
otherwise defined herein.
The transfer, sale or assignment of any rights under or
interest in this note is subject to certain restrictions contained in
the Credit Agreement, including PARAGRAPH 8.05 thereof.
Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Lender in the enforcement or
attempt to enforce any of Borrower's obligations hereunder not
performed when due. Borrower hereby waives notice of presentment,
demand, protest or notice of any other kind. This note shall be
governed by and construed in accordance with the laws of the State of
California.
ADAC LABORATORIES
I-
<PAGE>
By:
Name:
Title:
E-
<PAGE>
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------
LOANS AND PAYMENTS OF PRINCIPAL
- - - ---------------------------------------------------------------------------------------------------------------
Date Type of Amount of Interest Amount of Unpaid Notation
Loan Loan Period Principal Principal Made By
Paid Balance
or Prepaid
- - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------
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</TABLE>
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<PAGE>
EXHIBIT F
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY (this "GUARANTY"), dated as
of March 29, 1999 is executed by each of the undersigned (each such
entity and each entity which hereafter executes and delivers a
Subsidiary Joinder in substantially the form of Attachment 1 hereto to
be referred to herein as a "GUARANTOR"), in favor of ABN AMRO BANK
N.V., a Netherlands public company acting through its San Francisco
International Branch, acting as agent (in such capacity, "AGENT") for
the financial institutions which are from time to time parties to the
Credit Agreement referred to in Recital A below (collectively, the
"LENDERS").
RECITALS
A. Pursuant to a Credit Agreement dated as of July 31, 1996
(as amended to the date hereof, the "EXISTING CREDIT AGREEMENT"), among
ADAC Laboratories, a California corporation ("BORROWER"), the Lenders
and Agent, the Lenders have agreed to extend certain credit facilities
to Borrower upon the terms and subject to the conditions set forth
therein. The availability of the credit facilities under such Existing
Credit Agreement was subject, among other conditions, to the execution
and delivery of each Guarantor of a Guaranty dated as of July 31, 1996
(the "EXISTING GUARANTY").
B. Borrower has requested Agent and the Lenders to amend the
Existing Credit Agreement in certain respects. Pursuant to an Amended
and Restated Credit Agreement dated the date hereof (the "CREDIT
AGREEMENT"), among Borrower, Agent and the Lenders, Agent and the
Lenders have agreed to amend and restate the Existing Credit Agreement
upon the terms and subject to the conditions set forth therein
including, without limitation, (i) receipt by Agent of this Guaranty,
duly executed by each existing Domestic Subsidiary of Borrower, which
amends, and for convenience of reference, restates the Existing
Guaranty as so amended in its entirety and (ii) the receipt by Agent of
Subsidiary Joinders, duly executed by each future Domestic Subsidiary
of Borrower. Each of the undersigned Guarantors is a Domestic
Subsidiary of Borrower and expects to continue to derive substantial
direct and indirect benefit from the transactions contemplated by the
Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for
other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, each Guarantor hereby agrees with Agent,
for the ratable benefit of the Lenders and Agent, that the Existing
Guaranty shall be amended and restated to read in its entirety as
follows:
1. DEFINITIONS AND INTERPRETATION.
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(a) DEFINITIONS. When used in this Guaranty, the
following terms shall have the following respective meanings:
"ADJUSTED MAXIMUM GUARANTY AMOUNT" shall mean, with
respect to any Guarantor, the maximum liability of such
Guarantor under this Guaranty, limited to the extent provided
in SUBPARAGRAPH 2(d) hereof (except that, for purposes of
calculating the Adjusted Maximum Guaranty Amount of a
Guarantor only, any assets or liabilities of such Guarantor
arising under PARAGRAPH 8 hereof shall be ignored).
"AGENT" shall have the meaning given to that term in
the INTRODUCTORY PARAGRAPH hereof.
"AGGREGATE GUARANTY PAYMENTS" shall mean, with
respect to any Guarantor at any time, the aggregate net amount
of all payments made by such Guarantor under this Guaranty
(including, without limitation, under PARAGRAPH 8 hereof) at
or prior to such time.
"BORROWER" shall have the meaning given to that term
in the RECITAL A hereof.
"CREDIT AGREEMENT" shall have the meaning given to
that term in the RECITAL B hereof.
"DISALLOWED POST-COMMENCEMENT INTEREST AND EXPENSES"
shall mean interest computed at the rate provided in the
Credit Agreement and claims for reimbursement, costs, expenses
or indemnities under the terms of any of the Credit Documents
accruing or claimed at any time after the commencement of any
Insolvency Proceeding, if the claim for such interest,
reimbursement, costs, expenses or indemnities is not
allowable, allowed or enforceable against Borrower in such
Insolvency Proceeding.
"EXISTING CREDIT AGREEMENT" shall have the meaning
given to the term in RECITAL A hereof.
"EXISTING GUARANTY" shall have the meaning given to
the term in RECITAL A hereof.
"FAIR SHARE" shall mean, with respect to any
Guarantor at any time, an amount equal to (i) a fraction, the
numerator of which is the Adjusted Maximum Guaranty Amount of
such Guarantor and the denominator of which is the aggregate
Adjusted Maximum Guaranty Amounts of all Guarantors,
multiplied by (ii) the aggregate amount paid by all Funding
Guarantors under this Guaranty at or prior to such time.
"FAIR SHARE SHORTFALL" shall mean, with respect to
any Guarantor at any
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time, the amount, if any, by which the Fair Share of such
Guarantor at such time exceeds the Aggregate Guaranty
Payments of such Guarantor at such time.
"FUNDING GUARANTOR" shall have the meaning given to
that term in PARAGRAPH 8 hereof.
"GUARANTEED OBLIGATIONS" shall mean all loans,
advances, debts, liabilities and obligations, howsoever
arising, owed by Borrower to Agent or any Lender of every kind
and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money),
direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising pursuant to the terms
of the Credit Agreement or any of the other Credit Documents,
including, without limitation, all principal, interest, rent,
fees, taxes, charges, expenses, attorneys' fees and
accountants' fees chargeable to Borrower or payable by
Borrower thereunder.
"GUARANTOR" shall have the meaning given to that term
in the introductory paragraph hereof.
"INSOLVENCY PROCEEDING" shall mean any case or
proceeding under the United States Bankruptcy Code or any
other similar law, rule or regulation of the United States or
any jurisdiction or any other action or proceeding for the
reorganization, liquidation, appointment of a receiver,
rearrangement of debts, marshalling of assets or similar
action relating to Borrower or any Guarantor, their respective
creditors or any substantial part of their respective assets,
whether or not any such case, proceeding or action is
voluntary or involuntary.
"LENDERS" shall have the meaning given to that term
in the introductory paragraph hereof.
"SUBORDINATED OBLIGATIONS" shall have the meaning
given to that term in Paragraph 6 hereof.
"SUBSIDIARY JOINDER" shall mean an agreement
substantially in the form of ATTACHMENT 1 hereto.
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Credit Agreement shall have the respective
meanings given to those terms in the Credit Agreement.
(b) OTHER INTERPRETIVE PROVISIONS. The rules of
construction set forth in SECTION I OF THE CREDIT AGREEMENT
shall, to the extent not inconsistent with the terms of this
Guaranty, apply to this Guaranty and are hereby incorporated
by reference. Each Guarantor acknowledges receipt of copies of
the Credit Agreement and the other Credit Documents.
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2. GUARANTY.
(a) PAYMENT GUARANTY. Each Guarantor unconditionally
guarantees and promises to pay and perform as and when due,
whether at stated maturity, upon acceleration or otherwise,
any and all of the Guaranteed Obligations. If any Insolvency
Proceeding relating to Borrower is commenced, each Guarantor
further unconditionally guarantees and promises to pay and
perform, upon the demand of Agent, any and all of the
Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses) in accordance with
the terms of the Credit Documents, whether or not such
obligations are then due and payable by Borrower and whether
or not such obligations are modified, reduced or discharged in
such Insolvency Proceeding. This Guaranty is a guaranty of
payment and not of collection.
(b) CONTINUING GUARANTY. This Guaranty is an
irrevocable continuing guaranty of the Guaranteed Obligations
which shall continue in effect until all obligations of the
Lenders to extend credit to Borrower have terminated and all
of the Guaranteed Obligations have been fully, finally and
indefeasibly paid. If any payment on any Guaranteed Obligation
is set aside, avoided or rescinded or otherwise recovered from
Agent or any Lender, such recovered payment shall constitute a
Guaranteed Obligation hereunder and, if this Guaranty was
previously released or terminated, it automatically shall be
fully reinstated, as if such payment was never made.
(c) INDEPENDENT OBLIGATION. The liability of each
Guarantor hereunder is independent of the Guaranteed
Obligations and of the obligations of each other Guarantor
hereunder, and a separate action or actions may be brought and
prosecuted against each Guarantor irrespective of whether
action is brought against Borrower, any other Guarantor or any
other guarantor of the Guaranteed Obligations or whether
Borrower, any other Guarantor or any other guarantor of the
Guaranteed Obligations is joined in any such action or
actions.
(d) FRAUDULENT TRANSFER LIMITATION. If, in any action
to enforce this Guaranty, any court of competent jurisdiction
determines that enforcement against any Guarantor for the full
amount of the Guaranteed Obligations is not lawful under or
would be subject to avoidance under Section 548 of the United
States Bankruptcy Code or any applicable provision of any
comparable law of any state or other jurisdiction, the
liability of such Guarantor under this Guaranty shall be
limited to the maximum amount lawful and not subject to such
avoidance.
(e) TERMINATION. Notwithstanding any termination of
this Guaranty in accordance with PARAGRAPH 6 hereof, this
Guaranty shall continue to be in full force and effect and
applicable to any Guaranteed Obligations arising thereafter
which arise because prior payments of Guaranteed Obligations
are rescinded or otherwise required to be surrendered by Agent
or any Lender after receipt.
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3. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
represents and warrants to Agent and the Lenders as follows:
(a) DUE INCORPORATION, QUALIFICATION, ETC. Such
Guarantor is a duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization
and is duly qualified and in good standing in each
jurisdiction where the nature of its business or properties
requires such qualification, except where the failure to
qualify could not have a Material Adverse Effect.
(b) AUTHORITY. The execution, delivery and
performance by such Guarantor of this Guaranty are within the
power of such Guarantor and have been duly authorized by all
necessary actions on the part of such Guarantor.
(c) ENFORCEABILITY. This Guaranty has been duly
executed and delivered by such Guarantor and constitutes a
legal, valid and binding obligation of such Guarantor,
enforceable against it in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of
creditors' rights generally.
(d) NON-CONTRAVENTION. The execution, delivery and
performance by such Guarantor of this Guaranty do not (i)
violate any Requirement of Law applicable to such Guarantor,
(ii) contravene any material Contractual Obligation of such
Guarantor or (iii) result in the creation or imposition of any
Lien upon any property, asset or revenue of such Guarantor.
(e) APPROVALS. No consent, approval, order or
authorization of, or registration, declaration or filing with,
any Governmental Authority or other Person (including, without
limitation, the shareholders of any Person) is required in
connection with the execution, delivery and performance of
this Guaranty, except such consents, approvals, orders,
authorizations, registrations, declarations and filings that
are so required and which have been obtained and are in full
force and effect.
(f) NO VIOLATION. No Guarantor is in violation of any
Requirement of Law applicable to such Guarantor or any
Contractual Obligation of such Guarantor, where, in either
case, such violation is reasonably likely to have a Material
Adverse Effect.
(g) LITIGATION. No actions (including, without
limitation, derivative actions), suits, proceedings or
investigations are pending or, to the knowledge of such
Guarantor, threatened against such Guarantor in any court or
before any other Governmental Authority which (i) is
reasonably likely (alone or in the aggregate) to have a
Material Adverse Effect or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance
of this Guaranty by such Guarantor;
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(h) FINANCIAL STATEMENTS. The Financial Statements of
such Guarantor, which have been delivered to Agent and the
Lenders fairly present the information reflected therein and
have been prepared in accordance with GAAP.
(i) OTHER REGULATIONS. Such Guarantor is not subject
to regulation under the Investment Company Act of 1940, the
Public Utility Holding Company Act of 1935, the Federal Power
Act, any state public utilities code or to any other
Governmental Rule limiting its ability to incur indebtedness.
(j) TAXES. Such Guarantor has paid all taxes and
other charges imposed by any Governmental Authority due and
payable by such Guarantor other than those which are being
challenged in good faith by appropriate proceedings and for
which adequate reserves have been established.
4. COVENANTS. Until all obligations of Agent or any Lender to
extend credit to Borrower have terminated and all of the Guaranteed
Obligations have been fully, finally and indefeasibly paid, each
Guarantor shall comply with the following covenants:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Such
Guarantor shall furnish to Agent, with sufficient copies for
each Lender, the following, each in such form and such detail
as Agent or the Required Lenders shall reasonably request:
(i) Such Financial Statements of such
Guarantor as Agent or the Required Lenders shall
reasonably request;
(ii) Notice of any Default or Event of
Default known to such Guarantor or of any other event
or condition known to such Guarantor which is
reasonably likely to have a Material Adverse Effect;
and
(iii) Such other certificates, opinions,
statements, documents and information relating to the
operations or condition (financial or otherwise) of
such Guarantor or its Subsidiaries, and compliance by
Borrower and such Guarantor with the terms of the
Credit Documents as Agent or any Lender may from time
to time reasonably request.
(b) BOOKS AND RECORDS. Such Guarantor and its
Subsidiaries shall maintain proper books of record and account
in accordance with good business practices and GAAP.
(c) INSPECTIONS. Such Guarantor and its Subsidiaries
shall permit any Person designated by Agent or any Lender,
upon reasonable notice and during normal business hours, to
visit and inspect any of the properties and offices of such
Guarantor and its Subsidiaries, to examine the books and
records of such Guarantor and its Subsidiaries and make copies
thereof and to discuss the affairs, finances and accounts of
such Guarantor and its Subsidiaries with, and to be advised as
to the same by, their officers, auditors and accountants, all
at such
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times and intervals as Agent or any Lender may reasonably
request.
(d) INSURANCE. Such Guarantor and its Subsidiaries
shall maintain with financially sound and reputable insurance
carriers insurance in such amounts, with such deductibles and
covering such risks as is customary for companies engaged in
similar businesses in the same geographic areas as such
Guarantor and its Subsidiaries.
(e) GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. To
the extent failure to do so could have a Material Adverse
Effect, such Guarantor and its Subsidiaries shall promptly pay
and discharge all taxes and other charges imposed by any
Government Authority upon such Guarantor or its Subsidiaries
or their property as and when they become due.
(f) GENERAL BUSINESS OPERATIONS. To the extent
failure to do so could have a Material Adverse Effect, such
Guarantor and its Subsidiaries shall (i) maintain its
corporate existence and all rights, privileges and franchises
necessary for the conduct of its business and (ii) comply with
all Requirements of Law and Contractual Obligations applicable
to it.
5. AUTHORIZATIONS, WAIVERS, ETC.
(a) AUTHORIZATIONS. Each Guarantor authorizes Agent
and the Lenders, in their discretion, without notice to such
Guarantor, irrespective of any change in the financial
condition of Borrower, such Guarantor, any other Guarantor or
any other guarantor of the Guaranteed Obligations since the
date hereof, and without affecting or impairing in any way the
liability of such Guarantor hereunder, from time to time to:
(i) Create new Guaranteed Obligations and
renew, compromise, extend, accelerate or otherwise
change the time for payment or performance of, or
otherwise amend or modify the Credit Documents or
change the terms of the Guaranteed Obligations or any
part thereof, including increase or decrease of the
rate of interest thereon;
(ii) Take and hold security for the payment
or performance of the Guaranteed Obligations and
exchange, enforce, waive or release any such
security; apply such security and direct the order or
manner of sale thereof; and purchase such security at
public or private sale;
(iii) Otherwise exercise any right or remedy
they may have against Borrower, such Guarantor, any
other Guarantor, any other guarantor of the
Guaranteed Obligations or any security, including,
without limitation, the right to foreclose upon any
such security by judicial or nonjudicial sale;
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(iv) Settle, compromise with, release or
substitute any one or more makers, endorsers or
guarantors of the Guaranteed Obligations; and
(v) Assign the Guaranteed Obligations, this
Guaranty or the other Credit Documents in whole or in
part to the extent provided in the Credit Agreement
and the other Credit Documents.
(b) WAIVERS. Each Guarantor hereby waives:
(i) Any right to require Agent or any Lender
to (A) proceed against Borrower, any other Guarantor
or any other guarantor of the Guaranteed Obligations,
(B) proceed against or exhaust any security received
from Borrower, such Guarantor, any other Guarantor or
any other guarantor of the Guaranteed Obligations or
otherwise marshall the assets of Borrower, such
Guarantor, any other Guarantor or any other guarantor
of the Guaranteed Obligations or (C) pursue any other
remedy in Agent's or any Lender's power whatsoever;
(ii) Any defense arising by reason of the
application by Borrower of the proceeds of any
borrowing;
(iii) Any defense resulting from the
absence, impairment or loss of any right of
reimbursement, subrogation, contribution or other
right or remedy of Guarantor against Borrower, any
other Guarantor, any other guarantor of the
Guaranteed Obligations or any security, whether
resulting from an election by Agent or any Lender to
foreclose upon security by nonjudicial sale, or
otherwise;
(iv) Any setoff or counterclaim of Borrower
or any defense which results from any disability or
other defense of Borrower or the cessation or stay of
enforcement from any cause whatsoever of the
liability of Borrower (including, without limitation,
the lack of validity or enforceability of any of the
Credit Documents);
(v) Any defense based upon any law, rule or
regulation which provides that the obligation of a
surety must not be greater or more burdensome than
the obligation of the principal;
(vi) Until all obligations of Agent or any
Lender to extend credit to Borrower have terminated
and all of the Guaranteed Obligations have been
fully, finally and indefeasibly paid, any right of
subrogation, reimbursement, indemnification or
contribution and other similar right to enforce any
remedy which Agent, the Lenders or any other Person
now has or may hereafter have against Borrower on
account of the Guaranteed Obligations, and any
benefit of, and any right to participate in, any
security now or hereafter received by Agent, any
Lender or any other
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Person on account of the Guaranteed Obligations;
(vii) All presentments, demands for
performance, notices of non-performance, notices
delivered under the Credit Documents, protests,
notice of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation or incurring
of new or additional Guaranteed Obligations and
notices of any public or private foreclosure sale;
(viii) The benefit of any statute of
limitations to the extent permitted by law;
(ix) Any appraisement, valuation, stay,
extension, moratorium redemption or similar law or
similar rights for marshalling;
(x) Any right to be informed by Agent or any
Lender of the financial condition of Borrower, any
other Guarantor or any other guarantor of the
Guaranteed Obligations or any change therein or any
other circumstances bearing upon the risk of
nonpayment or nonperformance of the Guaranteed
Obligations;
(xi) Until all obligations of Agent or any
Lender to extend credit to Borrower have terminated
and all of the Guaranteed Obligations have been
fully, finally and indefeasibly paid, any right to
revoke this Guaranty;
(xii) Any defense arising from an election
for the application of Section 1111(b)(2) of the
United States Bankruptcy Code which applies to the
Guaranteed Obligations;
(xiii) Any defense based upon any borrowing
or grant of a security interest under Section 364 of
the United States Bankruptcy Code;
(xiv) Any right it may have to a fair value
hearing to determine the size of a deficiency
judgment following any foreclosure on any security
for the Guaranteed Obligations;
(xv) All rights and defenses arising out of
an election of remedies by Agent or any Lender, even
though that election of remedies, such as a
nonjudicial foreclosure with respect to security for
a Guaranteed Obligation, has destroyed such
Guarantor's rights of subrogation and reimbursement
against Borrower by the operation of Section 580d of
the Code of Civil Procedure or otherwise; and
(xvi) All other rights and defenses
available to such Guarantor by reason of Sections
2787 to 2855, inclusive, Section 2899 or Section 3433
of the California Civil Code or Section 3605 of the
California Commercial
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Code.
Without limiting the scope of any of the foregoing provisions
of this Paragraph 5, and pursuant to the provisions of
California Civil Code Section 2856, each Guarantor hereby
further waives all rights and defenses that such Guarantor may
have because the Guaranteed Obligations are secured by real
property. This means, among other things:
(A) Agent or any Lender may collect from any
Guarantor without first foreclosing on any real or
personal property collateral pledged by Borrower.
(B) If Agent or any Lender forecloses on any
real property collateral pledged by Borrower:
(1) The amount of the Guaranteed
Obligations may be reduced only by the price
for which that collateral is sold at the
foreclosure sale, even if the collateral is
worth more than the sale price.
(2) Agent or any Lender may collect
from any Guarantor even if Agent or any
Lender, by foreclosing on the real property
collateral, has destroyed any right such
Guarantor or any other Guarantor may have to
collect from Borrower.
This is an unconditional and irrevocable waiver of any rights
and defenses each Guarantor may have because the Guaranteed
Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
(c) FINANCIAL CONDITION OF BORROWER, ETC. Each
Guarantor is fully aware of the financial condition and
affairs of Borrower. Each Guarantor has executed this Guaranty
without reliance upon any representation, warranty, statement
or information concerning Borrower furnished to such Guarantor
by Agent or any Lender and has, independently and without
reliance on Agent or any Lender, and based on such documents
and information as it has deemed appropriate, made its own
appraisal of the financial condition and affairs of Borrower
and of other circumstances affecting the risk of nonpayment or
nonperformance of the Guaranteed Obligations. Each Guarantor
is in a position to obtain, and assumes full responsibility
for obtaining, any additional information about the financial
condition and affairs of Borrower and of other circumstances
affecting the risk of nonpayment or nonperformance of the
Guaranteed Obligations and will, independently and without
reliance upon Agent or any Lender, and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own appraisals and decisions in
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taking or not taking action in connection with this Guaranty.
6. SUBORDINATION. Each Guarantor hereby subordinates any and
all debts, liabilities and obligations owed to such Guarantor by
Borrower or any Subsidiary of Borrower (the "SUBORDINATED OBLIGATIONS")
to the Guaranteed Obligations as provided in this PARAGRAPH 6.
(a) PROHIBITED PAYMENTS, ETC. Until the occurrence of
a Default or an Event of Default or any default by any
Guarantor hereunder, each Guarantor and its Subsidiaries may
receive regularly scheduled payments from Borrower on account
of Subordinated Obligations. After the occurrence and during
the continuance of any Default or Event of Default or any
default by any Guarantor hereunder (including the commencement
and continuation of any Insolvency Proceeding relating to
Borrower, however, unless Agent or Required Lenders otherwise
requests, no Guarantor shall, nor shall it permit any of its
Subsidiaries to, demand, accept or take any action to collect
any payment on account of the Subordinated Obligations.
(b) PRIOR PAYMENT OF GUARANTEED OBLIGATIONS. In any
Insolvency Proceeding relating to Borrower, each Guarantor
agrees that Agent and the Lenders shall be entitled to receive
payment of all Guaranteed Obligations (including any and all
Disallowed Post-Commencement Interest and Expenses) before
such Guarantor or any of its Subsidiaries receives payment of
any Subordinated Obligations.
(c) TURN-OVER. After the occurrence and during the
continuance of any Default or Event of Default (including the
commencement and continuation of any Insolvency Proceeding
relating to Borrower, each Guarantor and its Subsidiaries
shall, if Agent or Required Lenders so requests, collect,
enforce and receive payments on account of the Subordinated
Obligations as trustee for Agent and the Lenders and deliver
such payments to Agent on account of the Guaranteed
Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses), together with any
necessary endorsements or other instruments of transfer, but
without reducing or affecting in any manner the liability of
such Guarantor under the other provisions of this Guaranty.
(d) AGENT AUTHORIZATION. After the occurrence and
during the continuance of any Default or Event of Default or
any default by a Guarantor hereunder (including the
commencement and continuation of any Insolvency Proceeding
relating to Borrower, Agent is authorized and empowered (but
without any obligation to so do), in its discretion, (i) in
the name of each Guarantor and its Subsidiaries, to collect
and enforce, and to submit claims in respect of, Subordinated
Obligations and to apply any amounts received thereon to the
Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses), and (ii) to require
each Guarantor (A) to collect and
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enforce, and to submit claims in respect of, Subordinated
Obligations and (B) to pay any amounts received on such
obligations to Agent for application to the Guaranteed
Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses).
7. GENERAL PLEDGE; SETOFF.
(a) PLEDGE. In addition to all liens upon and rights
of setoff against the property of any Guarantor given to Agent
or any Lender by law or separate agreement to secure the
liabilities of any Guarantor hereunder, to the extent
permitted by law, each Guarantor hereby grants to Agent (for
the ratable benefit of Agent and the Lenders), as security for
such Guarantor's obligations hereunder, a security interest in
all monies, deposit accounts, securities and other property of
such Guarantor now or hereafter in the possession of or on
deposit with Agent or any Lender, whether held in a general or
special account or deposit, or for safekeeping or otherwise;
and Agent shall have all rights and remedies of a secured
party with respect to such property.
(b) SETOFF. In addition to any rights and remedies of
Agent or any Lender provided by law, Agent and the Lenders
(with the prior consent of Agent) shall have the right,
without prior notice to any Guarantor, any such notice being
expressly waived by each Guarantor to the extent permitted by
applicable law, upon the occurrence and during the continuance
of a Default or an Event of Default, to set-off and apply
against the Guaranteed Obligations any amount owing from Agent
or any Lender to such Guarantor, including all deposits,
accounts and moneys of such Guarantor then or thereafter
maintained with Agent or any Lender, at or at any time after,
the happening of any of the above mentioned events.
(c) NONWAIVER. No security interest or right of
setoff shall be deemed to have been waived by any act or
conduct on the part of Agent or any Lender or by any failure
to exercise such right of setoff or to enforce such security
interest, or by any delay in so doing; and every right of
setoff and security interest shall continue in full force and
effect until such right of setoff or security interest is
specifically waived or released by an instrument in writing
executed by Agent.
8. CONTRIBUTION AMONG GUARANTORS. The Guarantors desire to
allocate among themselves, in a fair and equitable manner, their rights
of contribution from each other when any payment is made by any
Guarantor under this Guaranty. Accordingly, if any payment is made by
any Guarantor under this Guaranty (a "FUNDING GUARANTOR") that exceeds
its Fair Share, the Funding Guarantor shall be entitled to a
contribution from each other Guarantor in the amount of such other
Guarantor's Fair Share Shortfall, so that all such contributions shall
cause each Guarantor's Aggregate Guaranty Payments to equal its Fair
Share. The amounts payable as contributions hereunder shall be
determined by the Funding Guarantor as of the date on which the related
payment or distribution is
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made by the Funding Guarantor, and such determination shall be
binding on the other Guarantors absent manifest error. The
allocation and right of contribution among the Guarantors set forth
in this Paragraph 8 shall not be construed to limit in any way the
liability of any Guarantor under this Guaranty or the amount of
the Guaranteed Obligations.
9. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all
notices, requests, demands, consents, instructions or other
communications to or upon any Guarantor, any Lender or Agent
under this Guaranty or the other Credit Documents to which a
Guarantor is a party shall be in writing and faxed, mailed or
delivered, if to a Guarantor or Agent, at its respective
facsimile number or address set forth below or in the
respective Subsidiary Joinder for such Guarantor or, if to any
Lender, at the address or facsimile number specified beneath
the heading "Address for Notices" under the name of such
Lender in Schedule I to the Credit Agreement (or to such other
facsimile number or address for any party as indicated in any
notice given by that party to the other parties). All such
notices and communications shall be effective (i) when sent by
overnight service of recognized standing, on the second
Business Day following the deposit with such service; (ii)
when mailed, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon
receipt; (iii) when delivered by hand, upon delivery; and (iv)
when faxed, upon confirmation of receipt.
Guarantor: ADAC Research and Mfg., Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Healthcare Information
Systems, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Medical Technologies,
Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
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Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Laboratories Pacific,
Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
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Guarantor: ADAC Healthcare Partners,
Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Radiology Services,
Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: Cortet, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: O.N.E.S. Medical Services,
Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: CT Solutions Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Andre' Simone
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Agent: ABN AMRO Bank N.V.
101 California Street,
Suite 4550
San Francisco, CA
94111-5812
Attn: Dianne Barkley
Telephone: (415) 984-3706
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Facsimile: (415) 362-3524
with a copy to:
ABN AMRO Bank N.V.
1325 Avenue of the
Americas, 9th Floor
New York, NY 10017
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
(b) PAYMENTS. Each Guarantor shall make all payments
required hereunder to Agent, or its order, at Agent's office
located at the address set forth in SUBPARAGRAPH 9(a) hereof,
or at such other office as Agent may designate, on demand, in
Dollars. If any amounts required to be paid by a Guarantor
under this Guaranty are not paid when due, such Guarantor
shall pay interest on the aggregate, outstanding balance of
such amounts from the date due until those amounts are paid in
full at a per annum rate equal to the Base Rate plus two
percent (2.00%), such rate to change from time to time as the
Base Rate shall change.
(c) EXPENSES. Each Guarantor shall pay on demand (i)
all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Agent in connection
with the preparation, execution and delivery of, and the
exercise of its duties under, this Guaranty and the
preparation, execution and delivery of amendments and waivers
hereunder and (ii) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Agent and
the Lenders in connection with the enforcement or attempted
enforcement of this Guaranty or any of the Guaranteed
Obligations or in preserving any of Agent's or the Lenders'
rights and remedies (including, without limitation, all such
fees and expenses incurred in connection with any "workout" or
restructuring affecting the Credit Documents or the Guaranteed
Obligations or any bankruptcy or similar proceeding involving
Guarantor, any other Guarantor, Borrower or any of their
affiliates).
(d) WAIVERS; AMENDMENTS. This Guaranty may not be
amended or modified, nor may any of its terms be waived,
except by written instruments signed by each Guarantor and
Agent to the extent permitted pursuant to Section 8.04 of the
Credit Agreement. Each waiver or consent under any provision
hereof shall be effective only in the specific instances for
the purpose for which given. No failure or delay on Agent's or
any Lender's part in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall
any single or partial exercise of any such right preclude any
other further exercise thereof or of any other right.
(e) ASSIGNMENTS. This Guaranty shall be binding upon
and inure to
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the benefit of Agent, the Lenders, the Guarantors and their
respective successors and assigns; PROVIDED, HOWEVER, that
no Guarantor may assign or transfer any of its rights and
obligations under this Guaranty without the prior written
consent of Agent and the Lenders, and, PROVIDED, FURTHER,
that Agent and any Lender may sell, assign and delegate their
respective rights and obligations hereunder only as permitted
by the Credit Agreement. All references in this Guaranty to
any Person shall be deemed to include all permitted
successors and assigns of such Person.
(f) CUMULATIVE RIGHTS, ETC. The rights, powers and
remedies of Agent and the Lenders under this Guaranty shall be
in addition to all rights, powers and remedies given to Agent
and the Lenders by virtue of any applicable law, rule or
regulation of any Governmental Authority, the Credit
Agreement, any other Credit Document or any other agreement,
all of which rights, powers, and remedies shall be cumulative
and may be exercised successively or concurrently without
impairing Agent's or any Lender's rights hereunder. Each
Guarantor waives any right to require Agent or any Lender to
proceed against any Person or to exhaust any Collateral or to
pursue any remedy in Agent's or such Lender's power.
(g) PAYMENTS FREE OF TAXES, ETC. All payments made by
each Guarantor under this Guaranty shall be made by each
Guarantor free and clear of and without deduction for any and
all present and future taxes, levies, charges, deductions and
withholdings. In addition, each Guarantor shall pay upon
demand any stamp or other taxes, levies or charges of any
jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Guaranty. If
any taxes, levies, charges or other amounts are required to be
withheld from any amounts payable to Agent or any Lender
hereunder, the amounts so payable to Agent or such Lender
shall be increased to the extent necessary to yield to Agent
or such Lender (after payment of all such amounts) any such
amounts payable hereunder in the amounts specified in this
Guaranty. Upon request by Agent or any Lender, each Guarantor
shall furnish evidence satisfactory to Agent or such Lender
that all requisite authorizations and approvals by, and
notices to and filings with, governmental authorities and
regulatory bodies have been obtained and made and that all
requisite taxes, levies and charges have been paid.
(h) PARTIAL INVALIDITY. If at any time any provision
of this Guaranty is or becomes illegal, invalid or
unenforceable in any respect under the law or any
jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Guaranty nor the legality,
validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or
impaired thereby.
(i) JOINT AND SEVERAL OBLIGATION. The obligations of
the Guarantors under this Guaranty are joint and several
obligations of each Guarantor and may be freely enforced
against each Guarantor, for the full amount of the Guaranteed
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Obligations, without regard to whether enforcement is sought
or available against any other Guarantor.
(j) GOVERNING LAW. This Guaranty shall be governed by
and construed in accordance with the laws of the State of
California without reference to conflicts of law rules.
(k) JURY TRIAL. EACH GUARANTOR, THE LENDERS AND
AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY
ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY.
(l) LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY
ANY GUARANTOR AGAINST AGENT, ANY LENDER OR THE AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF AGENT
OR ANY LENDER FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM (WHETHER BASED UPON
ANY BREACH OF CONTRACT, TORT, BREACH OF STATUTORY DUTY OR ANY
OTHER THEORY OF LIABILITY) ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS GUARANTY, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND
GUARANTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON
ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT NOW ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
(m) COUNTERPARTS. This Agreement may be executed in
any number of identical counterparts, any set of which signed
by all parties hereto shall be deemed to constitute a
complete, executed original for all purposes.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed as of the day and year first above written.
ADAC RESEARCH AND MFG., INC.
By:
Name:
Title:
ADAC HEALTHCARE INFORMATION
SYSTEMS, INC.
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By:
Name:
Title:
ADAC MEDICAL TECHNOLOGIES, INC.
By:
Name:
Title:
ADAC LABORATORIES PACIFIC, INC.
By:
Name:
Title:
ADAC HEALTHCARE PARTNERS, INC.
By:
Name:
Title:
ADAC RADIOLOGY SERVICES, INC.
By:
Name:
Title:
CORTET, INC.
By:
Name:
Title:
O.N.E.S. MEDICAL SERVICES, INC.
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By:
Name:
Title:
CT SOLUTIONS INC.
By:
Name:
Title:
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ATTACHMENT 1
SUBSIDIARY JOINDER
THIS SUBSIDIARY JOINDER (this "AGREEMENT"), dated as of
____________, ____, is executed by [NEW SUBSIDIARY], a _________
[corporation] [partnership] [etc.] ("NEW SUBSIDIARY"), in favor of ABN
AMRO BANK N.V., a Netherlands public company acting through its San
Francisco International Branch, acting as agent (in such capacity,
"AGENT") for the financial institutions which are from time to time
parties to the Credit Agreement referred to in Recital A below
(collectively, the "LENDERS").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement dated
as of March 29, 1999 (as amended from time to time, the "CREDIT
AGREEMENT"), among ADAC Laboratories, a California corporation
("BORROWER"), the Lenders and Agent, the Lenders have agreed to extend
certain credit facilities to Borrower upon the terms and subject to the
conditions set forth therein.
B. The Lenders' obligations to extend the credit facilities to
Borrower under the Credit Agreement are subject, among other
conditions, to receipt by Agent of (1) an Amended and Restated
Guaranty, dated as of March 29, 1999 (the "GUARANTY"), duly executed by
each existing Domestic Subsidiary of Borrower, and (2) Subsidiary
Joinders, duly executed by each future Domestic Subsidiary of Borrower.
C. New Subsidiary is a new Domestic Subsidiary of Borrower and
expects to derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for
other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, New Subsidiary hereby agrees with Agent,
for the ratable benefit of the Lenders and Agent, as follows:
1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined
herein, all capitalized terms used herein and defined in the Guaranty
shall have the respective meanings given to those terms in the
Guaranty. New Subsidiary acknowledges receipt of copies of the
Guaranty, the Credit Agreement and the other Credit Documents.
2. REPRESENTATIONS AND WARRANTIES. On and as of the date of
this Agreement (the "EFFECTIVE DATE") and for the ratable benefit of
the Agent and the Lenders, New Subsidiary hereby makes each of the
representations and warranties made by each Guarantor in the Guaranty.
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3. AGREEMENT TO BE BOUND. New Subsidiary agrees that, on and
as of the Effective Date, it shall become a Guarantor under the
Guaranty and shall be bound by all the provisions of the Guaranty to
the same extent as if New Subsidiary had executed the Guaranty on the
Closing Date.
4. WAIVER. Without limiting the generality of the waivers in
the Guaranty, New Subsidiary specifically agrees to be bound by the
Guaranty and waives any right to notice of acceptance of its execution
of this Agreement and of its agreement to be bound by the Guaranty.
5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, New Subsidiary has caused this Agreement
to be executed by its duly authorized officer.
[NEW SUBSIDIARY]
By:
Name:
Title:
Address:
[ ]
[ ]
[ ]
Attn: [ ]
Telephone: [(___) ___-____]
Facsimile: [(___) ___-____]
F[1]-
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EXHIBIT G
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at
the top of ATTACHMENT 1 hereto, by and among:
(1) The bank designated under item A of ATTACHMENT I
hereto as the Assignor Lender ("ASSIGNOR LENDER"); and
(2) Each bank designated under item B of ATTACHMENT I
hereto as an Assignee Lender (individually, an "ASSIGNEE
LENDER").
RECITALS
A. Assignor Lender is one of the lenders which is a party to
the Amended and Restated Credit Agreement dated as of March 29, 1999,
by and among ADAC Laboratories ("BORROWER,") Assignor Lender and the
other financial institutions parties thereto (collectively, the
"LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders (in such
capacity, "AGENT"). (Such credit agreement, as amended, supplemented or
otherwise modified in accordance with its terms from time to time to be
referred to herein as the "CREDIT AGREEMENT").
B. Assignor Lender wishes to sell, and Assignee Lender wishes
to purchase, all or a portion of Assignor Lender's rights under the
Credit Agreement pursuant to SUBPARAGRAPH 8.05(c) of the Credit
Agreement.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. DEFINITIONS. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Credit
Agreement have the respective meanings given to those terms in the
Credit Agreement.
2. SALE AND ASSIGNMENT. Subject to the terms and conditions of
this Assignment Agreement, Assignor Lender hereby agrees to sell,
assign and delegate to each Assignee Lender and each Assignee Lender
hereby agrees to purchase, accept and assume the rights, obligations
and duties of a Lender under the Credit Agreement and the other Credit
Documents equal to the Proportionate Share set forth under the caption
"Proportionate Share Transferred" opposite such Assignee Lender's name
on ATTACHMENT I hereto. Such sale, assignment and delegation shall
become effective on the date designated in ATTACHMENT I hereto (the
"ASSIGNMENT EFFECTIVE DATE"), which date shall be at least five (5)
Business Days after the date following the date counterparts of this
Assignment Agreement are delivered to Agent in accordance with
Paragraph 3 hereof.
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3. ASSIGNMENT EFFECTIVE NOTICE. Upon (a) receipt by Agent of
five (5) counterparts of this Assignment Agreement (to each of which is
attached a fully completed ATTACHMENT I), each of which has been
executed by Assignor Lender and each Assignee Lender (and, to the
extent required by SUBPARAGRAPH 8.05(c) OF THE CREDIT AGREEMENT, by
Borrower and Agent) and (b) payment to Agent of the registration and
processing fee specified in SUBPARAGRAPH 8.05(e) OF THE CREDIT
AGREEMENT by Assignor Lender, Agent will transmit to Borrower, Assignor
Lender and each Assignee Lender an Assignment Effective Notice
substantially in the form of ATTACHMENT II hereto, fully completed (an
"ASSIGNMENT EFFECTIVE NOTICE").
4. ASSIGNMENT EFFECTIVE DATE. At or before 12:00 noon (local
time of Assignor Lender) on the Assignment Effective Date, each
Assignee Lender shall pay to Assignor Lender, in immediately available
or same day funds, an amount equal to the purchase price, as agreed
between Assignor Lender and such Assignee Lender (the "PURCHASE
PRICE"), for the Proportionate Share purchased by such Assignee Lender
hereunder. Effective upon receipt by Assignor Lender of the Purchase
Price payable by each Assignee Lender, the sale, assignment and
delegation to such Assignee Lender of such Proportionate Share as
described in Paragraph 2 hereof shall become effective.
5. PAYMENTS AFTER THE ASSIGNMENT EFFECTIVE DATE. Assignor
Lender and each Assignee Lender hereby agree that Agent shall, and
hereby authorize and direct Agent to, allocate amounts payable under
the Credit Agreement and the other Credit Documents as follows:
(a) All principal payments made after the Assignment
Effective Date with respect to each Proportionate Share
assigned to an Assignee Lender pursuant to this Assignment
Agreement shall be payable to such Assignee Lender.
(b) All interest, fees and other amounts accrued
after the Assignment Effective Date with respect to each
Proportionate Share assigned to an Assignee Lender pursuant to
this Assignment Agreement shall be payable to such Assignee
Lender.
Assignor Lender and each Assignee Lender shall make any separate
arrangements between themselves which they deem appropriate with
respect to payments between them of amounts paid under the Credit
Documents on account of the Proportionate Share assigned to such
Assignee Lender, and neither Agent nor Borrower shall have any
responsibility to effect or carry out such separate arrangements.
6. DELIVERY OF NOTES. On or prior to the Assignment Effective
Date, Assignor Lender will deliver to Agent the Notes payable to
Assignor Lender. On or prior to the Assignment Effective Date, Borrower
will deliver to Agent new Notes for each Assignee Lender and Assignor
Lender, in each case in principal amounts reflecting, in accordance
with the Credit Agreement, their respective Commitments (as adjusted
pursuant to this Assignment Agreement). As provided in SUBPARAGRAPH
8.05(c) OF THE CREDIT AGREEMENT, each such new Note shall be dated the
Closing Date. Promptly after
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<PAGE>
the Assignment Effective Date, Agent will send to each of Assignor
Lender and the Assignee Lenders its new Notes and will send to Borrower
the superseded Note payable to Assignor Lender, marked "Replaced."
7. DELIVERY OF COPIES OF CREDIT DOCUMENTS. Concurrently with
the execution and delivery hereof, Assignor Lender will provide to each
Assignee Lender (if it is not already a Lender party to the Credit
Agreement) conformed copies of all documents delivered to Assignor
Lender on or prior to the Closing Date in satisfaction of the
conditions precedent set forth in the Credit Agreement.
8. FURTHER ASSURANCES. Each of the parties to this Assignment
Agreement agrees that at any time and from time to time upon the
written request of any other party, it will execute and deliver such
further documents and do such further acts and things as such other
party may reasonably request in order to effect the purposes of this
Assignment Agreement.
9. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS. Assignor
Lender and each Assignee Lender further represent and warrant to and
covenant with each other, Agent and the Lenders as follows:
(a) Other than the representation and warranty that
it is the legal and beneficial owner of the interest being
assigned hereby free and clear of any adverse claim, Assignor
Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit
Agreement or the other Credit Documents or the execution,
legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or the other Credit Documents
furnished.
(b) Assignor Lender makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of Borrower or any of its obligations
under the Credit Agreement or any other Credit Documents.
(c) Each Assignee Lender confirms that it has
received a copy of the Credit Agreement and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this
Assignment Agreement.
(d) Each Assignee Lender will, independently and
without reliance upon Agent, Assignor Lender or any other
Lender and based upon such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the
Credit Agreement and the other Credit Documents.
(e) Each Assignee Lender appoints and authorizes
Agent to take such action as Agent on its behalf and to
exercise such powers under the Credit
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<PAGE>
Agreement and the other Credit Documents as Agent is
authorized to exercise by the terms thereof, together with
such powers as are reasonably incidental thereto, all in
accordance with SECTION VII OF THE CREDIT AGREEMENT.
(f) Each Assignee Lender agrees that it will perform
in accordance with their terms all of the obligations which by
the terms of the Credit Agreement and the other Credit
Documents are required to be performed by it as a Lender.
(g) ATTACHMENT I hereto sets forth administrative
information with respect to each Assignee Lender.
10. EFFECT OF THIS ASSIGNMENT AGREEMENT. On and after the
Assignment Effective Date, (a) each Assignee Lender shall be a Lender
with a Proportionate Share equal to the Proportionate Share set forth
under the caption "Proportionate Share After Assignment" opposite such
Assignee Lender's name on ATTACHMENT I hereto and shall have the
rights, duties and obligations of such a Lender under the Credit
Agreement and the other Credit Documents and (b) Assignor Lender shall
be a Lender with a Proportionate Share equal to the Proportionate Share
set forth under the caption "Proportionate Share After Assignment"
opposite Assignor Lender's name on ATTACHMENT I hereto and shall have
the rights, duties and obligations of such a Lender under the Credit
Agreement and the other Credit Documents, or, if the Proportionate
Share of Assignor Lender has been reduced to 0%, Assignor Lender shall
cease to be a Lender and shall have no further obligation to make any
Loans.
11. MISCELLANEOUS. This Assignment Agreement shall be governed
by, and construed in accordance with, the laws of the State of
California. Paragraph headings in this Assignment Agreement are for
convenience of reference only and are not part of the substance hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment Agreement to be executed by their respective duly authorized
officers as of the date set forth in ATTACHMENT I hereto.
, as
Assignor Lender
By:
Name:
Title:
, as an
Assignee Lender
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By:
Name:
Title:
, as an
Assignee Lender
By:
Name:
Title:
, as an
Assignee Lender
By:
Name:
Title:
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<PAGE>
CONSENTED TO AND ACKNOWLEDGED BY:
By:
Name:
Title:
________________________________,
As Agent
By:
Name:
Title:
ACCEPTED FOR RECORDATION
IN REGISTER:
,
As Agent
By:
Name:
Title:
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<PAGE>
ATTACHMENT 1
TO ASSIGNMENT AGREEMENT
NAMES, ADDRESSES AND PROPORTIONATE SHARES
OF ASSIGNOR LENDER AND ASSIGNEE LENDERS
AND ASSIGNMENT EFFECTIVE DATE
_____________,____
<TABLE>
<CAPTION>
A. ASSIGNOR LENDER Proportionate Proportionate
--------------- Share Share After
Transferred, Assignment(1)
----------- ----------
<S> <C> <C>
_______________ _________________ % _____________ %
</TABLE>
Applicable Lending Office:
__________________________
__________________________
__________________________
__________________________
Address for notices:
__________________________
__________________________
__________________________
__________________________
Telephone No:_____________
Telecopier No:____________
Wiring Instructions:
__________________________
__________________________
To be expressed by a percentage rounded to the [seventh]-digit to the right
of the decimal point.
Share of Total Commitment sold by Assignor Lender, and share of Total
Commitment purchased by Assignee Lender.
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<TABLE>
<CAPTION>
B. ASSIGNEE LENDERS Proportionate Proportionate
---------------- Share Share After
Transferred, Assignment(1)
----------- ----------
<S> <C> <C>
_______________ _________________ % _____________ %
</TABLE>
Applicable Lending Office:
__________________________
__________________________
__________________________
__________________________
Address for notices:
__________________________
__________________________
__________________________
__________________________
Telephone No:_____________
Telecopier No:____________
Wiring Instructions:
__________________________
__________________________
To be expressed by a percentage rounded to the [seventh]-digit to the right
of the decimal point.
Share of Total Commitment sold by Assignor Lender, and share of Total
Commitment purchased by Assignee Lender.
G[1]-
<PAGE>
<TABLE>
<CAPTION>
B. ASSIGNEE LENDERS Proportionate Proportionate
---------------- Share Share After
Transferred, Assignment(1)
----------- ----------
<S> <C> <C>
(cont'd)
_______________ _________________ % _____________ %
</TABLE>
Applicable Lending Office:
__________________________
__________________________
__________________________
__________________________
Address for notices:
__________________________
__________________________
__________________________
__________________________
Telephone No:_____________
Telecopier No:____________
Wiring Instructions:
__________________________
__________________________
C. ASSIGNMENT EFFECTIVE DATE
______________________, ____
To be expressed by a percentage rounded to the [seventh]-digit to the right
of the decimal point.
Share of Total Commitment sold by Assignor Lender, and share of Total
Commitment purchased by Assignee Lender.
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ATTACHMENT 2
TO ASSIGNMENT AGREEMENT
FORM OF
ASSIGNMENT EFFECTIVE NOTICE
Reference is made to the Amended and Restated Credit
Agreement, dated as of March 29, 1999, among ADAC Laboratories
("BORROWER"), the financial institutions parties thereto (the
"LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders (in such
capacity, "AGENT"). Agent hereby acknowledges receipt of five executed
counterparts of a completed Assignment Agreement, a copy of which is
attached hereto. [Note: Attach copy of Assignment Agreement.] Terms
defined in such Assignment Agreement are used herein as therein
defined.
1. Pursuant to such Assignment Agreement, you are advised that
the Assignment Effective Date will be __________.
2. Pursuant to such Assignment Agreement, Assignor Lender is
required to deliver to Agent on or before the Assignment Effective Date
the Notes payable to Assignor Lender.
3. Pursuant to such Assignment Agreement, Borrower is required
to deliver to Agent on or before the Assignment Effective Date the
following Notes, each dated _________________ [Insert appropriate
date]:
[Describe each new Note for Assignor Lender and each Assignee
Lender as to principal amount.]
4. Pursuant to such Assignment Agreement, each Assignee Lender
is required to pay its Purchase Price to Assignor Lender at or before
12:00 Noon on the Assignment Effective Date in immediately available
funds.
Very truly yours,
ABN AMRO BANK N.V.
as Agent
By:
Name:
Title:
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
March 29, 1999, is entered into by and among:
(1) ADAC LABORATORIES, a California corporation
("BORROWER");
(2) Each of the financial institutions from time to time
listed in SCHEDULE I hereto, as amended from time to time (such
financial institutions to be referred to herein collectively as the
"LENDERS"); and
(3) ABN AMRO BANK N.V., a Netherlands public company acting
through its San Francisco International Branch, as agent for the Lenders
(in such capacity, "AGENT").
RECITALS
A. Borrower, Agent and certain of the Lenders are parties
to that certain Credit Agreement, dated as of July 31, 1996 (as amended, the
"EXISTING CREDIT AGREEMENT"), pursuant to which such Lenders have provided to
Borrower certain credit facilities upon the terms and subject to the conditions
set forth therein.
B. Borrower has requested Agent and such Lenders to amend
the Existing Credit Agreement in certain respects, including without limitation,
to add a new Person as a Lender and to increase the amount available for
borrowing under the Existing Credit Agreement.
C. Agent, such Lenders and the new Lender have agreed to
amend the Existing Credit Agreement upon the terms and subject to the conditions
set forth herein. For convenience of reference, the parties hereto wish to
restate the Existing Credit Agreement as so amended in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the
mutual covenants herein contained, the parties hereto hereby agree that the
Existing Credit Agreement shall be amended and restated as of the date hereof to
read in its entirety as follows
SECTION I. INTERPRETATION.
1.01. DEFINITIONS. Unless otherwise indicated in this Agreement or
any other Credit Document, each term set forth below, when used in this
Agreement or any other Credit Document, shall have the respective meaning given
to that term below or in the provision of this agreement or other document,
instrument or Agreement referenced below.
"ABN" shall mean ABN AMRO Bank N.V., a Netherlands public
company.
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"ACQUISITION IN-PROCESS R&D CHARGES" shall mean non-recurring
charges, not to exceed $50,000,000 (pre-tax) in the aggregate, to be
taken by Borrower as a result of write-offs of in process research and
development expenses and charges incurred in connection with the
consummation of acquisitions by Borrower otherwise permitted pursuant to
SUBPARAGRAPH 5.02(d).
"ADAC Capital" shall mean ADAC Capital, LLC, a Delaware limited
liability company and a wholly-owned Subsidiary of Borrower.
"AFFILIATE" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, five percent
(5%) or more of any class of Equity Securities of such Person, (b) each
Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person or (c) each of such Person's
officers, directors, joint venturers and partners; PROVIDED, HOWEVER,
that in no case shall Agent or any Lender be deemed to be an Affiliate
of Borrower or any of its Subsidiaries for purposes of this Agreement.
For the purpose of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership
of voting securities, by contract or otherwise.
"AGENT" shall have the meaning given to that term in CLAUSE (3)
OF THE INTRODUCTORY PARAGRAPH.
"AGENT'S FEE LETTER" shall mean (a) prior to the First Amendment
Effective Date, the letter agreement dated as of March 29, 1999 between
Borrower and Agent and (b) after the First Amendment Effective Date, the
letter agreement dated as of the First Amendment Effective Date between
Borrower and Agent.
"AGREEMENT" shall mean this Amended and Restated Credit
Agreement.
"AMENDED AND RESTATED GUARANTY" shall have the meaning given to
that term in SUBPARAGRAPH 2.12(a).
"AMENDED AND RESTATED NOTES" shall have the meaning given to
that term in SUBPARAGRAPH 2.06(a).
"APPLICABLE LENDING OFFICE" shall mean, with respect to any
Lender, (a) initially, its office designated as such in SCHEDULE I (or,
in the case of any Lender which becomes a Lender by an assignment
pursuant to SUBPARAGRAPH 8.05(c), its office designated as such in the
applicable Assignment Agreement) and (b) subsequently, such other office
or offices as such Lender may designate to Agent as the office at which
such Lender's Loans will thereafter be maintained and for the account of
which all payments of principal of, and interest on, such Lender's Loans
will thereafter be made.
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"APPLICABLE MARGIN" shall mean, with respect to any Loan at any
time, the per annum margin which is determined pursuant to the Pricing
Grid and added to the Base Rate or LIBO Rate, as the case may be, for
such Loan; PROVIDED, HOWEVER, that each Applicable Margin determined
pursuant to the Pricing Grid shall be increased by two percent (2.00%)
on the date an Event of Default occurs and shall continue at such
increased rate unless and until such Event of Default is waived in
accordance with this Agreement.
"ASSIGNEE LENDER" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(c).
"ASSIGNMENT" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(c).
"ASSIGNMENT AGREEMENT" shall have the meaning given to that term
in SUBPARAGRAPH 8.05(c).
"ASSIGNMENT EFFECTIVE DATE" shall have, with respect to each
Assignment Agreement, the meaning set forth therein.
"ASSIGNOR LENDER" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(c).
"BASE RATE" shall mean, on any day, the greater of (a) the Prime
Rate in effect on such date and (b) the Federal Funds Rate for such day
PLUS one-half percent (0.50%).
"BASE RATE LOAN" shall mean, at any time, a Loan which then
bears interest as provided in CLAUSE (i) OF SUBPARAGRAPH 2.01(c).
"BNP" shall mean Banque National de Paris, acting through its
San Francisco Branch.
"BORROWER" shall have the meaning given to that term in CLAUSE
(1) OF THE INTRODUCTORY PARAGRAPH.
"BORROWER NOTE GUARANTIES" shall mean, collectively, all
guaranties or related forms of Indebtedness executed by Borrower in
favor of ABN, Sanwa, BNP or UBOC in connection with sales by Borrower to
such Person of promissory notes or other instruments of indebtedness
owed to Borrower and all other documents, instruments and agreements
executed by Borrower and delivered to such Person in connection with
such sales.
"BORROWER IP SECURITY AGREEMENT" shall have the meaning given to
that term in Subparagraph 2.12(b).
"BORROWER SECURITY AGREEMENT" shall have the meaning given to
that term in Subparagraph 2.12(b).
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"BORROWING" shall mean a borrowing by Borrower consisting of the
Loans made by each of the Lenders on the same date and of the same Type
pursuant to a single Notice of Borrowing.
"BUSINESS DAY" shall mean any day on which (a) commercial banks
are not authorized or required to close in San Francisco, California or
New York, New York and (b) if such Business Day is related to a LIBOR
Loan, dealings in Dollar deposits are carried out in the London
interbank market.
"CAPITAL ADEQUACY REQUIREMENT" shall have the meaning given to
that term in SUBPARAGRAPH 2.09(d).
"CAPITAL ASSET" shall mean, with respect to any Person, any
tangible fixed or capital asset owned or leased (in the case of a
Capital Lease) by such Person, or any expense incurred by such Person
that is required by GAAP to be reported as a non-current asset on such
Person's balance sheet.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person
and any period, all amounts expended by such Person during such period
for the acquisition of Capital Assets (including all amounts paid or
accrued on Capital Assets and other Indebtedness incurred or assumed to
acquired Capital Assets but excluding Capital Assets acquired as a
result of a consolidation or merger with any other Person or the
acquisition of substantially all of the assets of any other Person).
"CAPITALIZED SPARE PARTS 1999 NON-ORDINARY CHARGES" shall mean
the non-ordinary charges, not to exceed $5,000,000 (pre-tax) in the
aggregate, taken by Borrower in Borrower's fourth fiscal quarter in 1999
as a result of the write-off of certain capitalized spare parts.
"CAPITAL LEASES" shall mean any and all lease obligations that,
in accordance with GAAP, are required to be capitalized on the books of
a lessee.
"CASH EQUIVALENTS" shall mean:
(a) Direct obligations of, or obligations the
principal and interest on which are unconditionally guaranteed
by, the United States of America or obligations of any agency of
the United States of America to the extent such obligations are
backed by the full faith and credit of the United States of
America, in each case maturing within one year from the date of
acquisition thereof;
(b) Certificates of deposit maturing within one year
from the date of acquisition thereof issued by a commercial bank
or trust company organized under the laws of the United States
of America or a state thereof or that is a Lender, provided that
(A) such deposits are denominated in Dollars, (B) such bank or
trust company has capital, surplus and undivided profits of not
less than $100,000,000 and (C) such bank or trust company has
certificates of deposit or
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other debt obligations rated at least A-1 (or its equivalent) by
Standard and Poor's Ratings Group or P-1 (or its equivalent) by
Moody's Investors Service, Inc.;
(c) Open market commercial paper maturing within 270
days from the date of acquisition thereof issued by a
corporation organized under the laws of the United States of
America or a state thereof, provided such commercial paper is
rated at least A-1 (or its equivalent) by Standard and Poor's
Ratings Group or P-1 (or its equivalent) by Moody's Investors
Service, Inc.;
(d) Any repurchase agreement entered into with a
commercial bank or trust company organized under the laws of the
United States of America or a state thereof or that is a Lender,
provided that (A) such bank or trust company has capital,
surplus and undivided profits of not less than $100,000,000, (B)
such bank or trust company has certificates of deposit or other
debt obligations rated at least A-1 (or its equivalent) by
Standard and Poor's Ratings Group or P-1 (or its equivalent) by
Moody's Investors Service, Inc., (C) the repurchase obligations
of such bank or trust company under such repurchase agreement
are fully secured by a perfected security interest in a security
or instrument of the type described in CLAUSE (i), (ii) OR (iii)
above and (D) such security or instrument so securing the
repurchase obligations has a fair market value at the time such
repurchase agreement is entered into of not less than 100% of
such repurchase obligations; and
(e) Other Investments permitted from time to time
under Borrower's corporate investment policy as it exists on the
date of this Agreement and as it may be amended from time to
time with the approval of Agent.
"CHANGE OF CONTROL" shall mean, with respect to Borrower, the
occurrence of any of the following events: (a) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) shall (i) acquire beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended) of forty percent (40%) or more of the outstanding Equity
Securities of Borrower entitled to vote for members of the board of
directors or (ii) acquire all or substantially all of the assets of
Borrower and its Subsidiaries taken as a whole or (b) during any period
of twelve (12) consecutive calendar months, individuals who are
directors of Borrower on the first day of such period ("Initial
Directors") and any directors of Borrower who are specifically approved
by two-thirds of the Initial Directors and previously-approved Directors
shall cease to constitute a majority of the Board of Directors of
Borrower before the end of such period.
"CHANGE OF LAW" shall have the meaning given to that term in
SUBPARAGRAPH 2.09(b).
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"CLOSING DATE" shall mean the Business Day, not later than March
31, 1999, that each of the conditions set forth in PARAGRAPH 3.01 and
SCHEDULE 3.01 has been satisfied by Borrower or waived in writing by
Agent on behalf of the Lenders.
"Collateral" shall mean all property in which Agent or any
Lender has a Lien to secure the Secured Obligations.
"Collateral Certificate" shall mean the Collateral Certificate
dated as of the First Amendment Effective Date executed by Borrower and
delivered to Agent.
"COMMITMENT" shall mean, with respect to any Lender at any time,
such Lender's Proportionate Share at such time of the Total Commitment
at such time.
"COMMITMENT FEE PERCENTAGE" shall mean, with respect to the
Unused Commitment at any time, the per annum rate which is determined
pursuant to the Pricing Grid and used to calculate the Commitment Fees.
"COMMITMENT FEES" shall have the meaning given to that term in
SUBPARAGRAPH 2.03(b).
"CONTINGENT OBLIGATION" shall mean, with respect to any Person,
(a) any Guaranty Obligation of that Person; and (b) any direct or
indirect obligation or liability, contingent or otherwise, of that
Person (i) in respect of any Surety Instrument issued for the account of
that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments, (ii) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or
for such services, shall be made regardless of whether delivery of such
materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered, or (iii) in respect to any Rate
Contract that is not entered into in connection with a bona fide hedging
operation that provides offsetting benefits to such Person. The amount
of any Contingent Obligation shall (subject, in the case of Guaranty
Obligations, to the last sentence of the definition of "Guaranty
Obligation") be deemed equal to the maximum reasonably anticipated
liability in respect thereof, and shall, with respect to ITEM (b)(iii)
of this definition be marked to market on a current basis.
"CONTRACTUAL OBLIGATION" of any Person shall mean, any
indenture, note, lease, loan agreement, security, deed of trust,
mortgage, security agreement, guaranty, instrument, contract, agreement
or other form of contractual obligation or undertaking to which such
Person is a party or by which such Person or any of its property is
bound.
"CREDIT DOCUMENTS" shall mean and include this Agreement, the
Amended and Restated Notes, the Security Documents, the Amended and
Restated Guaranty, all Rate Contracts of Borrower with any Lender
related to any Loan and the Agent's Fee Letter; all other documents,
instruments and agreements delivered to Agent or any Lender pursuant to
PARAGRAPH 3.01; and all other documents, instruments and agreements
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delivered by Borrower or any of its Subsidiaries to Agent or any Lender
in connection with this Agreement on or after the date of this
Agreement.
"CREDIT EVENT" shall mean the making of any Loan, the conversion
of any Loan into a LIBOR Loan or the selection of a new Interest Period
for any LIBOR Loan.
"DEBT/EBITDA RATIO" shall mean, with respect to Borrower and its
Subsidiaries on the last day of any fiscal quarter, the ratio,
determined on a consolidated basis in accordance with GAAP, of (a) the
sum of the Funded Indebtedness of Borrower and its Subsidiaries at such
time to (b) the EBITDA of Borrower and its Subsidiaries for the
consecutive four-quarter period which ended on the last day of such
fiscal quarter.
"DEFAULT" shall mean any event or circumstance not yet
constituting an Event of Default which with the giving of any notice or
the lapse of any period of time or both, would become an Event of
Default.
"Disclosure Letter" shall mean (a) prior to the First Amendment
Effective Date, the letter from Borrower to Agent, dated as of March
29, 1999 which identified itself as the "Disclosure Letter" under this
Agreement and (b) after the First Amendment Effective Date, the letter
from Borrower to Agent, dated the First Amendment Effective Date, which
identifies itself as the amended "Disclosure Letter" under this
Agreement.
"DOLLARS" and "$" shall mean the lawful currency of the United
States of America and, in relation to any payment under this Agreement,
same day or immediately available funds.
"DOMESTIC SUBSIDIARY" shall mean each Subsidiary of Borrower
which is "domestic" within the meaning of Section 7701(a)(4) of the IRC.
"Domestic Subsidiary IP Security Agreement" shall have the
meaning given to that term in Subparagraph 2.12(b).
"Domestic Subsidiary Security Agreement" shall have the meaning
given to that term in Subparagraph 2.12(b).
"EBITDA" shall mean, with respect to Borrower and its
Subsidiaries for any period, the sum of the following, determined on a
consolidated basis in accordance with GAAP:
(a) The net income of Borrower and its Subsidiaries
for such period before provision for income taxes;
PLUS
(b) The sum (to the extent deducted in calculating
such Adjusted Net Income) of (i) all Interest Expenses of
Borrower and its Subsidiaries accrued
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during such period and (ii) all depreciation and amortization
expenses of Borrower and its Subsidiaries accrued during such
period;
PLUS
(c) To the extent deducted in calculating such net
income for such period under CLAUSE (a) above, (i) all
Acquisition In-Process R&D Charges taken by Borrower and its
Subsidiaries during such period, (ii) all 1999 Non-Recurring and
Non-Ordinary Charges taken by Borrower and its Subsidiaries
during such period, (iii) all Capitalized Spare Parts 1999
Non-Ordinary Charges taken by Borrower and its Subsidiaries
during such period and (iv) all Latin American Notes 1999
Non-Ordinary Charges taken by Borrower and its Subsidiaries
during such period.
"EBITDAR" shall mean, with respect to Borrower and its
Subsidiaries for any period, the sum of the following, determined on a
consolidated basis in accordance with GAAP:
(a) EBITDA of Borrower and its Subsidiaries for such
period;
PLUS
(b) The sum of all lease Rental Obligations of
Borrower and its Subsidiaries accrued during such period.
"EBITDAR/FIXED CHARGE COVERAGE RATIO" shall mean, with respect
to Borrower and its Subsidiaries for any period, the ratio, determined
on a consolidated basis in accordance with GAAP, of:
(a) EBITDAR of Borrower and its Subsidiaries for the
consecutive four-quarter period which ended on the last day of
such fiscal quarter;
TO
(b) The sum of (i) to the extent deducted in
calculating such EBITDAR for such period, all Interest Expenses
of Borrower and its Subsidiaries for such period, PLUS (ii) to
the extent deducted in calculating such EBITDAR for such period,
all payments of Rental Obligations made by Borrower and its
Subsidiaries for such period, PLUS (iii) the aggregate principal
amount of all long-term Indebtedness of Borrower and its
Subsidiaries that matures during the consecutive four-quarter
period immediately following such period.
"ELIGIBLE ASSIGNEE" shall mean (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the
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"OECD"), or a political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United
States; or (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a
Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a
Person of which a Lender is a Subsidiary.
"EMPLOYEE BENEFIT PLAN" shall mean any employee benefit plan
within the meaning of section 3(3) of ERISA maintained or contributed to
by Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"ENVIRONMENTAL LAWS" shall mean all Requirements of Law relating
to the protection of human health and the environment, including,
without limitation, all Requirements of Law, pertaining to reporting,
licensing, permitting, transportation, storage, disposal, investigation,
and remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials, chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials or wastes,
whether solid, liquid, or gaseous in nature, into the air, surface
water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling
of chemical substances, pollutants, contaminants, or hazardous or toxic
substances, materials, or wastes, whether solid, liquid, or gaseous in
nature.
"EQUITY SECURITIES" of any Person shall mean (a) all common
stock, preferred stock, participations, shares, partnership interests or
other equity interests in and of such Person (regardless of how
designated and whether or not voting or non-voting) and (b) all
warrants, options and other rights to acquire any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended or supplemented,
including any rules or regulations issued in connection therewith.
"ERISA AFFILIATE" shall mean any Person which is treated as a
single employer with Borrower under Section 414 of the IRC.
"EVENT OF DEFAULT" shall have the meaning given to that term in
PARAGRAPH 6.01.
"EXISTING CREDIT AGREEMENT" shall have the meaning given to that
term in the RECITAL B.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
set forth in the weekly statistical release designated as H.15(519), or
any successor publication, published by the Federal Reserve Board
(including any such successor publication, "H.15 (519)") for such day
opposite the caption "Federal Funds (Effective)". If on any relevant
day, such rate is not yet published in H.15 (519), the rate for such day
shall be the rate set forth in the daily statistical release designated
as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or
any successor publication, published by the Federal
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Reserve Bank of New York (including any such successor publication, the
"Composite 3:30 p.m. Quotations") for such day under the caption
"Federal Funds Effective Rate". If on any relevant day, such rate is
not yet published in either H.15 (519) or the Composite 3:30 p.m.
Quotations, the rate for such day shall be the arithmetic means, as
determined by Agent, of the rates quoted to Agent for such day by
three (3) Federal funds brokers of recognized standing selected by
Agent.
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the
Federal Reserve System.
"FINANCIAL STATEMENTS" shall mean, with respect to any
accounting period for any Person, statements of income, shareholders'
equity and cash flows of such Person for such period, and a balance
sheet of such Person as of the end of such period, setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year if such period is less than a full fiscal year or,
if such period is a full fiscal year, corresponding figures from the
preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"First Amendment Effective Date" shall mean August 17, 1999.
"Foreign Subsidiary" shall mean each Subsidiary of Borrower
which is "foreign" within the meaning of Section 7701(a)(5) of the IRC.
"FUNDED INDEBTEDNESS" of any Person shall mean, without
duplication:
(a) All obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments and all
other obligations of such Person for borrowed money (including
obligations to repurchase receivables and other assets sold with
recourse);
(b) All obligations of such Person for the deferred
purchase price of property or services (including obligations
under letters of credit and other credit facilities which secure
or finance such purchase price and obligations under "synthetic"
leases), but excluding trade accounts payable, provided that
(A) such accounts arise in the ordinary course of business and
are not evidenced by a note or similar instrument and (B) no
material part of any such account is more than ninety (90) days
past due (unless subject to a bona fide dispute and for which
adequate reserves have been established);
(c) All obligations of such Person under conditional
sale or other title retention agreements with respect to
property acquired by such Person (to the extent of the value of
such property if the rights and remedies of the seller or lender
under such agreement in the event of default are limited solely
to repossession or sale of such property);
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(d) All obligations of such Person as lessee under
or with respect to Capital Leases;
(e) All non-contingent payment or reimbursement
obligations of such Person under or with respect to Surety
Instruments;
(f) All Guaranty Obligations of such Person with
respect to the obligations of other Persons of the types
described in CLAUSES (a) - (e) above; and
(g) All obligations of other Persons of the types
described in CLAUSES (a) - (e) above to the extent secured by
(or for which any holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien in
any property (including accounts and contract rights) of such
Person, even though such Person has not assumed or become liable
for the payment of such obligations.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to
time, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof,
any department, agency, authority or bureau of any of the foregoing, or
any other entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, including,
without limitation, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, the Comptroller of the Currency, any central bank
or any comparable authority.
"GOVERNMENTAL CHARGES" shall mean, with respect to any Person,
all levies, assessments, fees, claims or other charges imposed by any
Governmental Authority upon such Person or any of its property or
otherwise payable by such Person.
"GOVERNMENTAL RULE" shall mean any law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive,
guidelines, policy or similar form of decision of any Governmental
Authority.
"GUARANTY OBLIGATION" shall mean, with respect to any Person,
any direct or indirect liability of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation, or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (d) otherwise to
assure or hold harmless the
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holder of any such primary obligation against loss in respect thereof.
(Without limiting the generality of the foregoing definition, the
Guaranty Obligations of Borrower shall include the obligations of
Borrower under the Borrower Note Guaranties.) The amount of any
Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof.
"HAZARDOUS MATERIALS" shall mean all materials, substances and
wastes which are classified or regulated as "hazardous," "toxic" or
similar descriptions under any Environmental Law or which are hazardous,
toxic, harmful or dangerous to human health.
"INDEBTEDNESS" of any Person shall mean, without duplication:
(a) All obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments and all
other obligations of such Person for borrowed money (including
non-contingent obligations to repurchase receivables and other
assets sold with recourse;
(b) All obligations of such Person for the deferred
purchase price of property or services (including obligations
under letters of credit and other credit facilities which secure
or finance such purchase price and obligations under "synthetic"
leases), but excluding trade accounts payable, provided that
(A) such accounts arise in the ordinary course of business and
are not evidenced by a note or similar instrument and (B) no
material part of any such account is more than ninety (90) days
past due (unless subject to a bona fide dispute and for which
adequate reserves have been established);
(c) All obligations of such Person under conditional
sale or other title retention agreements with respect to
property acquired by such Person (to the extent of the value of
such property if the rights and remedies of the seller or lender
under such agreement in the event of default are limited solely
to repossession or sale of such property);
(d) All obligations of such Person as lessee under
or with respect to Capital Leases;
(e) All obligations of such Person, contingent or
otherwise, under or with respect to Surety Instruments;
(f) All obligations of such Person, contingent or
otherwise, under or with respect to Rate Contracts;
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(g) All Guaranty Obligations of such Person with
respect to the obligations of other Persons of the types
described in CLAUSES (a) - (f) above and all other Contingent
Obligations of such Person; and
(h) All obligations of other Persons of the types
described in CLAUSES (a) - (f) above to the extent secured by
(or for which any holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien in
any property (including accounts and contract rights) of such
Person, even though such Person has not assumed or become liable
for the payment of such obligations.
"INTEREST ACCOUNT" shall have the meaning given to that term in
SUBPARAGRAPH 2.06(b).
"INTEREST EXPENSES" shall mean, with respect to any Person for
any period, the sum, determined on a consolidated basis in accordance
with GAAP, of all interest accruing on the Indebtedness of such Person
during such period (including interest attributable to Capital Leases).
"INTEREST PERIOD" shall mean, with respect to any LIBOR Loan,
the time periods selected by Borrower pursuant to SUBPARAGRAPH 2.01(b)
or SUBPARAGRAPH 2.01(d) which commences on the first day of such Loan or
the effective date of any conversion and ends on the last day of such
time period, and thereafter, each subsequent time period selected by
Borrower pursuant to SUBPARAGRAPH 2.01(e) which commences on the last
day of the immediately preceding time period and ends on the last day of
that time period.
"INVESTMENT" of any Person shall mean any loan or advance of
funds by such Person to any other Person (other than advances to
employees of such Person for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business),
any purchase or other acquisition of any Equity Securities or
Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person
(including any Guaranty Obligations of such Person and any indebtedness
of such Person of the type described in CLAUSE (h) of the definition of
"Indebtedness" on behalf of any other Person); PROVIDED, HOWEVER, that
Investments shall not include (a) accounts receivable or other
indebtedness owed by customers of such Person which are current assets
and arose from sales of inventory in the ordinary course of such
Person's business for ordinary terms or (b) prepaid expenses of such
Person incurred and prepaid in the ordinary course of business.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"LATIN AMERICAN NOTES 1999 NON-ORDINARY CHARGES" shall mean the
non-ordinary charges, not to exceed $9,000,000 (pre-tax) in the
aggregate, taken by Borrower in Borrower's third and fourth fiscal
quarters in 1999 as a result of the write-off of certain Latin American
promissory notes and related obligations.
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"LENDERS" shall have the meaning given to that term in CLAUSE
(2) OF THE INTRODUCTORY PARAGRAPH.
"LIBO RATE" shall mean, with respect to any Interest Period for
the LIBOR Loans in any Borrowing consisting of LIBOR Loans, a rate per
annum equal to the quotient of (a) the arithmetic mean (rounded upward
if necessary to the nearest 1/16 of one percent) of the rates per annum
provided to Agent by each of the Reference Banks as the rate at which
Dollar deposits are offered to such Reference Bank in the London
interbank market on the second Business Day prior to the first day of
such Interest Period at or about 11:00 A.M. (London time) (for delivery
on the first day of such Interest Period) in an amount substantially
equal to such Reference Bank's LIBOR Loan in such Borrowing and for a
term comparable to such Interest Period, DIVIDED BY (b) one minus the
Reserve Requirement for such Loans in effect from time to time. If for
any reason any of the Reference Banks fails to provide Agent with a rate
on any day as provided in CLAUSE (a) of the preceding sentence, Agent
shall calculate the LIBO Rate based upon the rate(s) provided by the
remaining Reference Bank(s). The LIBO Rate shall be adjusted
automatically as to all LIBOR Loans then outstanding as of the effective
date of any change in the Reserve Requirement.
"LIBOR LOAN" shall mean, at any time, a Loan which then bears
interest as provided in CLAUSE (ii) OF SUBPARAGRAPH 2.01(c).
"LIEN" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation,
the interest of a vendor or lessor under a conditional sale agreement,
Capital Lease or other title retention agreement, or any agreement to
provide any of the foregoing, and the filing of any financing statement
or similar instrument under the Uniform Commercial Code or comparable
law of any jurisdiction.
"LOAN" shall have the meaning given to that term in SUBPARAGRAPH
2.01(a).
"MARGIN STOCK" shall have the meaning given to that term in
Regulation U issued by the Federal Reserve Board, as amended from time
to time, and any successor regulation thereto.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (a) the business, assets, operations, prospects or financial or other
condition of Borrower and its Subsidiaries on a consolidated basis
(other than occurring as a result of the Capitalized Spare Parts 1999
Non-Ordinary Charges or the Latin American Notes 1999 Non-Ordinary
Charges); (b) the ability of Borrower to pay or perform the Obligations
in accordance with the terms of this Agreement and the other Credit
Documents; (c) the rights and remedies of Agent or any Lender under this
Agreement, the other Credit Documents or any related document,
instrument or agreement; or (d) the value of the Collateral, Agent's or
any Lender's security interest in the Collateral or the perfection or
priority of such security interests.
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"MATURITY" shall mean, with respect to any Loan, interest, fee
or other amount payable by Borrower under this Agreement or the other
Credit Documents, the date such Loan, interest, fee or other amount
becomes due, whether upon the stated maturity or due date, upon
acceleration or otherwise.
"MATURITY DATE" shall mean March 29, 2002 or, if such date is
extended from time to time pursuant to SUBPARAGRAPH 2.01(h), any later
date to which so extended.
"MATURITY DATE EXTENSION REQUEST" shall have the meaning given
to that term in SUBPARAGRAPH 2.01(h).
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within
the meaning of section 3(37) of ERISA maintained or contributed to by
Borrower or any ERISA Affiliate.
"NET PROCEEDS" shall mean, with respect to any sale or issuance
of any Equity Security or the incurrence of any Indebtedness by any
Person, the aggregate consideration received by such Person from such
sale, issuance or incurrence LESS the sum of the actual amount of the
reasonable fees and commissions payable to Persons other than such
Person or any Affiliate of such Person, the reasonable legal expenses
and the other reasonable costs and expenses directly related to such
sale, issuance or incurrence that are to be paid by such Person.
"1999 LITIGATION RESERVE" shall mean the litigation reserve, not
to exceed $1,000,000 (pre-tax) in the aggregate, taken by Borrower in
Borrower's fourth fiscal quarter in 1999.
"1999 NON-RECURRING AND NON-ORDINARY CHARGES" shall mean the
non-recurring and non-ordinary charges, not to exceed $37,000,000
(pre-tax) in the aggregate, taken by Borrower in Borrower's second,
third and fourth fiscal quarters 1999, other than the Latin American
Notes 1999 Non-Ordinary Charges and the Capitalized Spare PartS 1999
Non-Ordinary Charges.
"NOTICE OF BORROWING" shall have the meaning given to that term
in SUBPARAGRAPH 2.01(b).
"NOTICE OF CONVERSION" shall have the meaning given to that term
in SUBPARAGRAPH 2.01(d).
"NOTICE OF INTEREST PERIOD SELECTION" shall have the meaning
given to that term in SUBPARAGRAPH 2.01(e).
"OBLIGATIONS" shall mean and include, with respect to Borrower,
all loans, advances, debts, liabilities, and obligations, howsoever
arising, owed by Borrower to Agent or any Lender of every kind and
description (whether or not evidenced by any note or instrument and
whether or not for the payment of money), direct or indirect, absolute
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or contingent, due or to become due, now existing or hereafter arising
pursuant to the terms of this Agreement or any of the other Credit
Documents, including without limitation all interest, fees, charges,
expenses, attorneys' fees and accountants' fees chargeable to Borrower
or payable by Borrower hereunder or thereunder.
"PARTICIPANT" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"PERMITTED INDEBTEDNESS" shall have the meaning given to that
term in SUBPARAGRAPH 5.02(a).
"PERMITTED LIENS" shall have the meaning given to that term in
SUBPARAGRAPH 5.02(b).
"PERSON" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint
venture, a trust or other entity or a Governmental Authority.
"PLEDGE AGREEMENT" shall have the meaning given to that term in
SUBPARAGRAPH 2.12(b).
"PRICING GRID" shall mean SCHEDULE 1.01(a).
"PRIME RATE" shall mean the per annum rate publicly announced by
ABN from time to time at its Chicago office as its prime commercial
lending rate. The Prime Rate is determined by ABN from time to time as
a means of pricing credit extensions to some customers and is neither
directly tied to any external rate of interest or index nor necessarily
the lowest rate of interest charged by ABN at any given time for any
particular class of customers or credit extensions. Any change in the
Base Rate resulting from a change in the Prime Rate shall become
effective on the Business Day on which each change in the Prime Rate
occurs.
"PRIMARY SECURED OBLIGATIONS" shall mean, collectively, (a) the
Obligations and (b) the obligations of Borrower to ABN (as long as ABN
remains a Lender hereunder) under any Borrower Note Guaranties in favor
of ABN (or any replacement financing thereof) in a principal amount not
exceeding $4,500,000.
"PRIOR SECURITY DOCUMENTS" shall mean and include the "Security
Agreement", the "Pledge Agreement", the "IP Security Agreement" (as each
such term is defined in the Existing Credit Agreement), and all other
instruments, agreements, certificates, opinions and documents (including
Uniform Commercial Code financing statements and fixture filings and
landlord waivers) previously
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delivered to Agent or any Lender in connection with the Existing Credit
Agreement, other than the Guaranties.
"PROPORTIONATE SHARE" shall mean, with respect to each Lender,
the percentage set forth under the caption "Proportionate Share"
opposite such Lender's name on SCHEDULE I, or, if changed, such
percentage as may be set forth for such Lender in the Register.
"RATE CONTRACTS" shall mean swap agreements (as that term is
defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as
amended) and any other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"REFERENCE BANKS" shall mean ABN, Sanwa and BNP.
"REGISTER" shall have the meaning given to that term in
SUBPARAGRAPH 8.05(d).
"RENTAL OBLIGATIONS" shall mean all present and future
obligations of Borrower or any of its Subsidiaries under rental
agreements or leases of real or personal property, other than (a)
obligations that can be terminated by the giving of notice without
liability to Borrower or such Subsidiary in excess of the liability for
rent due as of the date on which such notice is given and under which no
penalty or premium is paid as a result of any such termination, and (b)
current obligations in respect of Capital Leases or "synthetic leases".
"REPORTABLE EVENT" shall have the meaning given to that term in
ERISA and applicable regulations thereunder.
"REQUIRED LENDERS" shall mean (a) at any time Loans are
outstanding, Lenders holding sixty-six and two-thirds percent (66 2/3%)
or more of the aggregate principal amount of such Loans and (b) at any
time no Loans are outstanding, Lenders whose Proportionate Shares equal
or exceed sixty-six and two-thirds percent (66 2/3%).
"REQUIREMENT OF LAW" applicable to any Person shall mean (a) the
Articles or Certificate of Incorporation and By-laws, Partnership
Agreement or other organizational or governing documents of such Person,
(b) any Governmental Rule applicable to such Person, (c) any license,
permit, approval or other authorization granted by any Governmental
Authority to or for the benefit of such Person or (d) any judgment,
decision or determination of any Governmental Authority or arbitrator,
in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESERVE REQUIREMENT" shall mean, with respect to any day in an
Interest Period for a LIBOR Loan, the aggregate of the reserve
requirement rates (expressed as a decimal) in effect on such day for
eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of the Federal Reserve Board) maintained
by a
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member bank of the Federal Reserve System. As used herein, the term
"reserve requirement" shall include, without limitation, any basic,
supplemental or emergency reserve requirements imposed on Lender by any
Governmental Authority.
"RESPONSIBLE OFFICER" shall mean, with respect to Borrower, the
Chairman, Chief Executive Officer, Chief Operating Officer, President,
Chief Financial Officer, Treasurer or General Counsel of Borrower (or,
if the titles are changed, the persons having similar responsibilities
for Borrower).
"SANWA" shall mean Sanwa Bank California, a California banking
corporation.
"SECONDARY SECURED OBLIGATIONS" shall mean, collectively, to the
extent such obligations are not Primary Secured Obligations, (a) the
obligations of Borrower under any Borrower Note Guaranties; (b) the
obligations of Borrower or any of its Subsidiaries to any Lender under,
on account of or otherwise in connection with Rate Contracts; and (c)
the obligations of Borrower or any of its Subsidiaries to any Lender
under, on account of or otherwise in connection with Surety Instruments.
"SECURED OBLIGATIONS" shall mean, collectively, the Primary
Secured Obligations and the Secondary Secured Obligations.
"SECURITY DOCUMENTS" shall mean and include the Borrower
Security Agreement, the Domestic Subsidiary Security Agreements, the
Borrower IP Security Agreement, the Domestic Subsidiary IP Security
Agreements, the Pledge Agreement and all other instruments, agreements,
certificates, opinions and documents (including Uniform Commercial Code
financing statements and fixture filings and landlord waivers)
delivered to Agent or any Lender in connection with any Collateral or
to secure the Secured Obligations.
"SUBSIDIARY" of any Person shall mean (a) any corporation of
which more than 50% of the issued and outstanding Equity Securities
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one or more
of such Person's other Subsidiaries, (b) any partnership, joint venture,
or other association of which more than 50% of the equity interest
having the power to vote, direct or control the management of such
partnership, joint venture or other association is at the time owned and
controlled by such Person, by such Person and one or more of the other
Subsidiaries or by one or more of such Person's other Subsidiaries or
(c) any other Person included in the Financial Statements of such Person
on a consolidated basis.
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"SURETY INSTRUMENTS" shall mean all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside
bonds, surety bonds and similar instruments.
"TANGIBLE NET WORTH" shall mean, with respect to Borrower and
its Subsidiaries at any time, the remainder at such time, determined on
a consolidated basis in accordance with GAAP, of (a) the total assets of
Borrower and its Subsidiaries MINUS (b) the sum (without limitation and
without duplication of deductions) of (i) the total liabilities of
Borrower and its Subsidiaries, (ii) all reserves established by Borrower
and its Subsidiaries for anticipated losses and expenses (to the extent
not deducted in calculating total assets in CLAUSE (a) above), (iii) all
intangible assets of Borrower and its Subsidiaries (to the extent
included in calculating total assets in CLAUSE (a) above), including,
without limitation, goodwill (including any amounts, however designated
on the balance sheet, representing the cost of acquisition of businesses
and investments in excess of underlying tangible assets), trademarks,
trademark rights, trade name rights, copyrights, patents, patent rights,
licenses, unamortized debt discount, marketing expenses, organizational
expenses, non-compete agreements and deferred research and development
and (iv) all loans owed to Borrower and its Subsidiaries by officers,
directors and employees of Borrower and its Subsidiaries.
"TAXES" shall have the meaning given to such term in
SUBPARAGRAPH 2.10(a).
"TOTAL COMMITMENT" shall mean, at any time, Seventy Five Million
Dollars ($75,000,000) or, if such amount is reduced pursuant to
SUBPARAGRAPH 2.02(a), the amount to which so reduced and in effect at
such time.
"TYPE" shall mean, with respect to any Loan or Borrowing at any
time, the classification of such Loan or Borrowing by the type of
interest rate it then bears, whether an interest rate based upon the
Base Rate or the LIBO Rate.
"UBOC" shall mean Union Bank of California, a California banking
corporation.
"UGM ACQUISITION" shall mean the acquisition of substantially
all of the assets and/or stock of UGM Laboratory, a Pennsylvania
corporation and UGM Medical Systems, Inc., a Pennsylvania corporation.
"UNUSED COMMITMENT" shall mean, at any time, the remainder of
(a) the Total Commitment at such time minus (b) the aggregate principal
amount of all Loans outstanding at such time.
1.02. GAAP. Unless otherwise indicated in this Agreement or any other
Credit Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP
changes during the term of this Agreement such that any covenants contained
herein would then be calculated in a different manner or with different
components, Borrower, the Lenders and Agent agree to negotiate in good faith to
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amend this agreement in such respects as are necessary to conform those
covenants as criteria for evaluating borrower's financial condition to
substantially the same criteria as were effective prior to such change in GAAP;
PROVIDED, HOWEVER, that, until Borrower, the Lenders and Agent so amend this
Agreement, all such covenants shall be calculated in accordance with GAAP as in
effect immediately prior to such change.
1.03. HEADINGS. Headings in this Agreement and each of the other
Credit Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.04. PLURAL TERMS. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and VICE VERSA.
1.05. TIME. All references in this Agreement and each of the other Credit
Documents to a time of day shall mean San Francisco, California time, unless
otherwise indicated.
1.06. GOVERNING LAW. This Agreement and each of the other Credit
Documents (unless otherwise provided in such other Credit Documents) shall be
governed by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
1.07. CONSTRUCTION. This Agreement is the result of negotiations
among, and has been reviewed by, Borrower, each Lender, Agent and their
respective counsel. Accordingly, this Agreement shall be deemed to be the
product of all parties hereto, and no ambiguity shall be construed in favor of
or against Borrower, any Lender or Agent.
1.08. ENTIRE AGREEMENT. This Agreement and each of the other Credit
Documents, taken together, constitute and contain the entire agreement of
Borrower, the Lenders and Agent and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, respecting the subject matter hereof.
1.09. CALCULATION OF INTEREST AND FEES. All calculations of interest
and fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 360 days for actual
days elapsed, except that during any period any loan bears interest based upon
the prime rate, such interest shall be calculated on the basis of a year of 365
or 366 days, as appropriate, for actual days elapsed.
1.10. OTHER INTERPRETIVE PROVISIONS. References in this agreement
to "Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits
and schedules herein and hereto unless otherwise indicated. References in
this Agreement and each of the other Credit Documents to any document,
instrument or agreement (a) shall include all exhibits, schedules and other
attachments thereto, (b) shall include all documents, instruments or
agreements issued or executed in replacement thereof, and (c) shall mean such
document, instrument or agreement, or replacement or predecessor thereto, as
amended, modified and supplemented from time to time and in effect at
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any given time. References in this Agreement and each of the other Credit
Documents to any statute or other law (i) shall include any successor statute
or law, (ii) shall include all rules and regulations promulgated under such
statute or law (or any successor statute or law), and (iii) shall mean such
statute or law (or successor statute or law) and such rules and regulations,
as amended, modified, codified or reenacted from time to time and in effect
at any given time. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this agreement or any other credit document shall
refer to this agreement or such other credit document, as the case may be, as
a whole and not to any particular provision of this agreement or such other
credit document, as the case may be. The words "include" and "including" and
words of similar import when used in this agreement or any other credit
document shall not be construed to be limiting or exclusive. In the event of
any inconsistency between the terms of this agreement and the terms of any
other credit document, the terms of this agreement shall govern.
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SECTION II. CREDIT FACILITY.
2.01. REVOLVING LOAN FACILITY.
(a) LOAN AVAILABILITY. Subject to the terms and conditions of
this Agreement (including the amount limitations set forth in PARAGRAPH
2.02 and the conditions set forth in SECTION III), each Lender severally
agrees to advance to Borrower from time to time during the period
beginning on the Closing Date and ending on the Maturity Date such loans
as Borrower may request under this PARAGRAPH 2.01 (individually, a
"LOAN"); PROVIDED, HOWEVER, that (i) the aggregate principal amount of
all Loans made by such Lender at any time outstanding shall not exceed
such Lender's Commitment at such time and (ii) the aggregate principal
amount of all Loans made by all Lenders at any time outstanding shall
not exceed the Total Commitment at such time. All Loans shall be made
on a pro rata basis by the Lenders in accordance with their respective
Proportionate Shares, with each Borrowing to be comprised of a Loan by
each Lender equal to such Lender's Proportionate Share of such
Borrowing. Except as otherwise provided herein, Borrower may borrow,
repay and reborrow Loans until the Maturity Date.
(b) NOTICE OF BORROWING. Borrower shall request each Borrowing
by delivering to Agent an irrevocable written notice in the form of
EXHIBIT A, appropriately completed (a "NOTICE OF BORROWING"), which
specifies, among other things:
(i) The principal amount of the requested Borrowing,
which shall be in the amount of (A) $100,000 or an integral
multiple of $50,000 in excess thereof in the case of a Borrowing
consisting of Base Rate Loans; or (B) $400,000 or an integral
multiple of $100,000 in excess thereof in the case of a
Borrowing consisting of LIBOR Loans;
(ii) Whether the requested Borrowing is to consist of
Base Rate Loans or LIBOR Loans;
(iii) If the requested Borrowing is to consist of
LIBOR Loans, the initial Interest Period selected by Borrower
for such Loans in accordance with SUBPARAGRAPH 2.01(e); and
(iv) The date of the requested Borrowing, which shall
be a Business Day;
Borrower shall give each Notice of Borrowing to Agent at least three (3)
Business Days before the date of the requested Borrowing in the case of
a Borrowing consisting of LIBOR Loans with Interest Periods of one month
or longer and on or before the date of the requested Borrowing in the
case of any other Borrowing. Each Notice of Borrowing shall be
delivered by first-class mail or facsimile to Agent at the office or
facsimile number and during the hours specified in PARAGRAPH 8.01;
PROVIDED, HOWEVER, that Borrower shall promptly deliver to Agent the
original of any Notice of Borrowing initially delivered by facsimile.
Agent shall promptly notify each Lender of the contents
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of each Notice of Borrowing and of the amount and Type of (and, if
applicable, the Interest Period for) each Loan to be made by such Lender
as part of the requested Borrowing.
(c) LOAN INTEREST RATES. Borrower shall pay interest on the
unpaid principal amount of each Loan from the date of such Loan until
the maturity thereof, at one of the following rates per annum:
(i) During such periods as such Loan is a Base Rate
Loan, at a rate per annum equal to the Base Rate PLUS the
Applicable Margin therefor, such rate to change from time to
time as the Applicable Margin or Base Rate shall change; and
(ii) During such periods as such Loan is a LIBOR
Loan, at a rate per annum equal at all times during each
Interest Period for such LIBOR Loan to the LIBO Rate for such
Interest Period PLUS the Applicable Margin therefor, such rate
to change from time to time during such Interest Period as the
Applicable Margin shall change.
All Loans in each Borrowing shall, at any given time prior to maturity,
bear interest at one, and only one, of the above rates. The number of
Borrowings consisting of LIBOR Loans shall not exceed seven (7) at any
time.
(d) CONVERSION OF LOANS. Borrower may convert any Borrowing
from one Type of Borrowing to the other Type; PROVIDED, HOWEVER, that
any conversion of a Borrowing consisting of LIBOR Loans into a Borrowing
consisting of Base Rate Loans shall be made on, and only on, the last
day of an Interest Period for such LIBOR Loans. Borrower shall request
such a conversion by an irrevocable written notice to Agent in the form
of EXHIBIT B, appropriately completed (a "NOTICE OF CONVERSION"), which
specifies, among other things:
(i) The Borrowing which is to be converted;
(ii) The Type of Borrowing into which such Borrowing
is to be converted;
(iii) If such Borrowing is to be converted into a
Borrowing consisting of LIBOR Loans, the initial Interest Period
selected by Borrower for such Loans in accordance with
SUBPARAGRAPH 2.01(e); and
(iv) The date of the requested conversion, which
shall be a Business Day.
Borrower shall give each Notice of Conversion to Agent at least three
(3) Business Days before the date of the requested conversion in the
case of a conversion into a Borrowing consisting of LIBOR Loans with
Interest Periods of one month or more and on or before the date of the
requested conversion in the case of a conversion into any other
Borrowing.
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Each Notice of Conversion shall be delivered by first-class mail or
facsimile to Agent at the office or to the facsimile number and during
the hours specified in PARAGRAPH 8.01; PROVIDED, HOWEVER, that Borrower
shall promptly deliver to Agent the original of any Notice of Conversion
initially delivered by facsimile. Agent shall promptly notify each
Lender of the contents of each Notice of Conversion.
(e) LIBOR LOAN INTEREST PERIODS.
(i) The initial and each subsequent Interest Period
selected by Borrower for a LIBOR Loan shall be one (1) week, two
(2) weeks, one (1) month, two (2) months, three (3) months or
six (6) months; PROVIDED, HOWEVER, that (A) any Interest Period
which would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day unless
such next Business Day falls in another calendar month, in which
case such Interest Period shall end on the immediately preceding
Business Day; (B) any Interest Period (other than a one-week or
two-week Interest Period) which begins on the last Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of a
calendar month; and (C) no such Interest Period shall end after
the Maturity Date.
(ii) Borrower shall notify Agent by an irrevocable
written notice in the form of EXHIBIT C, appropriately completed
(a "NOTICE OF INTEREST PERIOD SELECTION"), at least three (3)
Business Days prior to the last day of each Interest Period for
LIBOR Loans of the Interest Period selected by Borrower for the
next succeeding Interest Period for such Loans. Each Notice of
Interest Period Selection shall be given by first-class mail or
facsimile to the office or the facsimile number and during the
hours specified in PARAGRAPH 8.01; PROVIDED, HOWEVER, that
Borrower shall promptly deliver to Agent the original of any
Notice of Interest Period Selection initially delivered by
facsimile. If Borrower fails to notify Agent of the next
Interest Period for LIBOR Loans in accordance with this
SUBPARAGRAPH 2.01(e), such Loans shall automatically convert to
Base Rate Loans on the last day of the current Interest Period
therefor.
(f) SCHEDULED LOAN PAYMENTS. Borrower shall repay the principal
amount of the Loans on the Maturity Date. Borrower shall pay accrued
interest on the unpaid principal amount of each Loan in arrears (A) in
the case of a Base Rate Loan, on the last day in each March, June,
September and December, (B) in the case of a LIBOR Loan, on the last day
of each Interest Period therefor (and, if any such Interest Period is
longer than three (3) months, every three (3) months); and (C) in the
case of all Loans, upon prepayment (to the extent thereof) and at
maturity.
(g) PURPOSE. Borrower shall use the proceeds of the Loans (i)
first, to repay on the Closing Date all indebtedness outstanding under
the Existing Credit Agreement and
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(ii) thereafter, for Borrower's general corporate needs, including the
consummation of acquisitions otherwise permitted pursuant to the terms
of this Agreement.
(h) MATURITY DATE EXTENSIONS. On or before the last Business
Day of each December beginning on December 31, 2001, Borrower may
request the Lenders to extend the Maturity Date for an additional
one-year period. Borrower shall request each such extension by
appropriately completing, executing and delivering to Agent a written
request in the form of EXHIBIT D (a " MATURITY DATE EXTENSION REQUEST").
Borrower understands that this SUBPARAGRAPH 2.01(h) is included in this
Agreement for Borrower's convenience in requesting extensions and
acknowledges that neither Agent nor any Lender has promised (either
expressly or by implication), and neither Agent nor any Lender has
any obligation or commitment, to extend the Maturity Date at any
time. Agent shall promptly deliver to each Lender three (3) copies
of each Maturity Date Extension Request received by Agent. If a
Lender, in its sole and absolute discretion, consents to any Maturity
Date Extension Request, such Lender shall evidence such consent by
executing and returning two (2) copies of the Maturity Date Extension
Request to Agent not later than the last Business Day which is thirty
(30) days after the date Borrower delivered to Agent the Maturity
Date Extension Request. Any failure by any Lender to execute and
return a Maturity Date Extension Request shall be deemed a denial
thereof. If Borrower shall deliver a Maturity Date Extension Request
to Agent pursuant to the first sentence of this SUBPARAGRAPH 2.01(h),
then not later than the last Business Day which is thirty-five (35)
days after the date Borrower delivered to Agent the Maturity Date
Extension Request, Agent shall notify Borrower in writing whether (i)
Agent has received a copy of the Maturity Date Extension Request
executed by each Lender, in which case the definition of " Maturity
Date" set forth in PARAGRAPH 1.01 shall be deemed amended as provided
in the Maturity Date Extension Request as of the date of such written
notice from Agent to Borrower, or (ii) Agent has not received a copy
of the Maturity Date Extension Request executed by each Lender, in
which case such Maturity Date Extension Request shall be deemed
denied. Agent shall deliver to Borrower, with each written notice
under CLAUSE (i) of the preceding sentence which notifies Borrower
that Agent has received a Maturity Date Extension Request executed by
each Lender, a copy of the Maturity Date Extension Request so
executed by each Lender.
2.02. COMMITMENT REDUCTIONS, ETC.
(a) OPTIONAL REDUCTION OR CANCELLATION OF COMMITMENTS. Borrower
may, upon three (3) Business Days written notice to Agent, permanently
reduce the Total Commitment by the amount of one million Dollars
($1,000,000) or an integral multiple of one million Dollars ($1,000,000)
in excess thereof or cancel the Total Commitment in its entirety;
PROVIDED, HOWEVER, that:
(i) Borrower may not reduce the Total Commitment
prior to the Maturity Date, if, after giving effect to such
reduction, the aggregate principal amount of all Loans then
outstanding would exceed the Total Commitment; and
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(ii) Borrower may not cancel the Total Commitment
prior to the Maturity Date, if, after giving effect to such
cancellation, any Loans would then remain outstanding.
(b) MANDATORY REDUCTION OR CANCELLATION OF COMMITMENTS. If, at
any time, Borrower is required to make any mandatory prepayment of Loans
pursuant to CLAUSE (ii) OF SUBPARAGRAPH 2.04(c), the Total Commitment
shall be automatically and permanently reduced or cancelled by an amount
equal to the full amount of any required prepayment.
(c) EFFECT OF COMMITMENT REDUCTIONS. From the effective date of
any reduction of the Total Commitment, the Commitment Fees payable
pursuant to SUBPARAGRAPH 2.03(b) shall be computed on the basis of the
Total Commitment as so reduced. Once reduced or cancelled, the Total
Commitment may not be increased or reinstated without the prior written
consent of all Lenders. Any reduction of the Total Commitment pursuant
to SUBPARAGRAPH 2.02(a) or SUBPARAGRAPH 2.02(b) shall be applied ratably
to reduce each Lender's Commitment in accordance with CLAUSE (i) OF
SUBPARAGRAPH 2.08(a).
2.03. FEES.
(a) AGENT'S FEE. Borrower shall pay to Agent, for its own
account, agent's fees and other compensation in the amounts and at the
times set forth in the Agent's Fee Letter.
(b) COMMITMENT FEES. Borrower shall pay to Agent, for the
ratable benefit of the Lenders as provided in CLAUSE (iii) OF
SUBPARAGRAPH 2.08(a), nonrefundable commitment fees (the "COMMITMENT
FEES") equal to the Commitment Fee Percentage on the daily average
Unused Commitment for the period beginning on the date of this Agreement
and ending on the Maturity Date. The Commitment Fee Percentage shall be
determined as provided in the Pricing Grid and may change for each
calendar quarter. Borrower shall pay the Commitment Fees in arrears on
the last day in each March, June, September and December and on the
Maturity Date (or if the Total Commitment is cancelled on a date prior
to the Maturity Date, on such prior date).
(c) PARTICIPATION FEE. On the Closing Date, Borrower shall pay
to Agent, for the benefit of the Lenders, a one-time non-refundable
participation fee equal to 0.15% of the Total Commitment to be shared
among the Lenders pro rata in accordance with such Lenders' respective
proportionate share of the Total Commitment.
2.04. PREPAYMENTS.
(a) TERMS OF ALL PREPAYMENTS. Upon the prepayment of any Loan
(whether such prepayment is an optional prepayment under SUBPARAGRAPH
2.04(b), a mandatory prepayment required by SUBPARAGRAPH 2.04(c) or a
mandatory prepayment required by any other provision of this Agreement
or the other Credit Documents, including, without limitation, a
prepayment upon acceleration), Borrower shall pay to the Lender which
made such Loan (i) all accrued interest to the date of such prepayment
on the amount
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prepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan
on a day other than the last day of an Interest Period for such LIBOR
Loan, all amounts payable to such Lender pursuant to PARAGRAPH 2.11.
(b) OPTIONAL PREPAYMENTS. At its option, Borrower may, upon
three (3) Business Days notice to Agent, prepay the Loans in any
Borrowing in part, in an aggregate principal amount of $1,000,000 or
more, or in whole; except that Borrower may prepay the Loans in any
Borrowing consisting of Base Rate Loans on the last Business Day in any
fiscal quarter of Borrower upon same day notice to Agent if Borrower
delivers such notice to Agent not later than 1:00 p.m. on the date of
such prepayment.
(c) MANDATORY PREPAYMENTS. Borrower shall immediately repay
Loans as follows:
(i) If, at any time, the aggregate principal amount
of all Loans then outstanding exceeds the Total Commitment at
such time, Borrower shall immediately prepay Loans in an
aggregate principal amount equal to such excess; and
(ii) Upon the incurrence by Borrower of unsecured
Indebtedness of the type permitted pursuant to CLAUSE (xi) OF
SUBPARAGRAPH 5.02(a), Borrower shall immediately prepay Loans in
an amount equal to the Net Proceeds derived from the
Indebtedness so incurred.
2.05. OTHER PAYMENT TERMS.
(a) PLACE AND MANNER. Borrower shall make all payments due to
each Lender or Agent hereunder by payments to Agent at Agent's office
located at the address specified in PARAGRAPH 8.01, with each payment
due to a Lender to be for the account of such Lender and such Lender's
Applicable Lending Office. Borrower shall make all payments hereunder
in lawful money of the United States and in same day or immediately
available funds not later than 12:00 noon on the date due, except that
Borrower may make prepayments of the Loans in a Borrowing consisting of
Base Rate Loans on the last Business Day of a fiscal quarter as late as
1:00 p.m. Agent shall promptly disburse to each Lender each payment
received by Agent for the account of such Lender.
(b) DATE. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in
the computation of interest or fees, as the case may be.
(c) LATE PAYMENTS. If any amounts required to be paid by
Borrower under this Agreement or the other Credit Documents (including,
without limitation, principal or interest payable on any Loan, any fees
or other amounts) remain unpaid after such amounts are due, Borrower
shall pay interest on the aggregate, outstanding balance of such amounts
from the date due until those amounts are paid in full at a per annum
rate
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equal to the Base Rate PLUS two percent (2.00%), such rate to change
from time to time as the Base Rate shall change.
(d) APPLICATION OF PAYMENTS. All payments hereunder shall be
applied first to unpaid fees, costs and expenses then due and payable
under this Agreement or the other Credit Documents, second to accrued
interest then due and payable under this Agreement or the other Credit
Documents and finally to reduce the principal amount of outstanding
Loans.
(e) FAILURE TO PAY AGENT. Unless Agent shall have received
notice from Borrower at least one (1) Business Day prior to the date on
which any payment is due to the Lenders hereunder that Borrower will not
make such payment in full, Agent shall be entitled to assume that
Borrower has made or will make such payment in full to Agent on such
date and Agent may, in reliance upon such assumption, cause to be paid
to the Lenders on such due date an amount equal to the amount then due
such Lenders. If and to the extent Borrower shall not have so made such
payment in full to Agent, each such Lender shall repay to Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed
to such Lender until the date such Lender repays such amount to Agent,
at (i) the Federal Funds Rate for the first three (3) days and (ii) the
per annum rate applicable to Base Rate Loans thereafter. A certificate
of Agent submitted to any Lender with respect to any amounts owing by
such Lender under this SUBPARAGRAPH 2.05(e) shall be conclusive absent
manifest error.
2.06. NOTES AND INTEREST ACCOUNT.
(a) NOTES. The obligation of Borrower to repay the Loans made
by each Lender and to pay interest thereon at the rates provided herein
shall be evidenced by a promissory note in the form of EXHIBIT E
(individually, an "AMENDED AND RESTATED NOTE") which note shall be
(i) payable to the order of such Lender, (ii) in the amount of such
Lender's Commitment, (iii) dated the Closing Date and (iv) otherwise
appropriately completed. Borrower authorizes each Lender to record on
the schedule annexed to such Lender's Amended and Restated Note the date
and amount of each Loan made by such Lender and of each payment or
prepayment of principal thereon made by Borrower, and agrees that all
such notations shall constitute prima facie evidence of the matters
noted; PROVIDED, HOWEVER, that any failure by a Lender to make any such
notation shall not affect the Obligations. Borrower further authorizes
each Lender to attach to and make a part of such Lender's Amended and
Restated Note continuations of the schedule attached thereto as
necessary.
(b) INTEREST ACCOUNT. Borrower authorizes Agent to record in
an account or accounts maintained by Agent on its books (the "INTEREST
ACCOUNT") (i) the interest rates applicable to all Loans and the
effective dates of all changes thereto, (ii) the Interest Period for
each LIBOR Loan, (iii) the date and amount of each principal and
interest
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payment on each Loan and (iv) such other information as Agent may
determine is necessary for the computation of interest payable by
Borrower hereunder.
2.07. LOAN FUNDING.
(a) LENDER FUNDING AND DISBURSEMENT TO BORROWER. Each Lender
shall, before 12:00 noon on the date of each Borrowing, make available
to Agent at Agent's office specified in PARAGRAPH 8.01, in same day or
immediately available funds, such Lender's Proportionate Share of such
Borrowing. After Agent's receipt of such funds and upon satisfaction of
the applicable conditions set forth in SECTION III, Agent shall promptly
disburse such funds to Borrower in same day or immediately available
funds. Unless otherwise directed by Borrower, Agent shall disburse the
proceeds of each Borrowing by disbursement to the account or accounts
specified in the applicable Notice of Borrowing.
(b) LENDER FAILURE TO FUND. Unless Agent shall have received
notice from a Lender prior to the date of any Borrowing that such Lender
will not make available to Agent such Lender's Proportionate Share of
such Borrowing, Agent shall be entitled to assume that such Lender has
made or will make such portion available to Agent on the date of such
Borrowing in accordance with SUBPARAGRAPH 2.07(a), and Agent may on such
date, in reliance upon such assumption, disburse or otherwise credit to
Borrower a corresponding amount. If any Lender does not make the amount
of its Proportionate Share of any Borrowing available to Agent on or
prior to the date of such Borrowing, such Lender shall pay to Agent, on
demand, interest which shall accrue on such amount from the date of such
Borrowing until such amount is paid to Agent at rates equal to (i) the
daily Federal Funds Rate during the period from the date of such
Borrowing through the third Business Day thereafter and (ii) the rate
applicable to Base Rate Loans thereafter. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this
SUBPARAGRAPH 2.07(b) shall be conclusive absent manifest error. If the
amount of any Lender's Proportionate Share of any Borrowing is not paid
to Agent by such Lender within three (3) Business Days after the date of
such Borrowing, Borrower shall repay such amount to Agent, on demand,
together with interest thereon, for each day from the date such amount
was disbursed to Borrower until the date such amount is repaid to Agent,
at the interest rate applicable at the time to the Loans comprising such
Borrowing.
(c) LENDERS' OBLIGATIONS SEVERAL. The failure of any Lender to
make the Loan to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation hereunder to make its Loan on
the date of such Borrowing, but no Lender shall be obligated in any way
to make any Loan which another Lender has failed or refused to make or
otherwise be in any way responsible for the failure or refusal of any
other Lender to make any Loan required to be made by such other Lender
on the date of any Borrowing.
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2.08. PRO RATA TREATMENT.
(a) BORROWINGS, COMMITMENT REDUCTIONS, ETC. Except as
otherwise provided herein:
(i) Each Borrowing and reduction of the Total
Commitment shall be made or shared among the Lenders pro rata
according to their respective Proportionate Shares;
(ii) Each payment of principal of Loans in any
Borrowing shall be shared among the Lenders which made or funded
the Loans in such Borrowing pro rata according to the respective
unpaid principal amounts of such Loans so made or funded by such
Lenders;
(iii) Each payment of interest on Loans in any
Borrowing shall be shared among the Lenders which made or funded
the Loans in such Borrowing pro rata according to (A) the
respective unpaid principal amounts of such Loans so made or
funded by such Lenders and (B) the dates on which such Lenders
so made or funded such Loans;
(iv) Each payment of Commitment Fees shall be shared
among the Lenders pro rata according to (A) their respective
Proportionate Shares and (B) in the case of each Lender which
becomes a Lender hereunder after the date hereof, the date upon
which such Lender so became a Lender;
(v) Each payment of interest (other than interest on
Loans) shall be shared among the Lenders and Agent owed the
amount upon which such interest accrues pro rata according to
(A) the respective amounts so owed such Lenders and Agent and
(B) the dates on which such amounts became owing to such Lenders
and Agent; and
(vi) All other payments under this Agreement and the
other Credit Documents shall be for the benefit of the Person or
Persons specified.
(b) SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of Loans owed to it in excess
of its ratable share of payments on account of such Loans obtained by
all Lenders entitled to such payments, such Lender shall forthwith
purchase from the other Lenders such participations in the Loans as
shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase shall be rescinded and each other
Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such other
Lender's ratable share (according to the proportion of (i) the amount of
such other Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount
paid or
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payable by the purchasing Lender in respect of the total amount so
recovered. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this SUBPARAGRAPH 2.08(b)
may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of
Borrower in the amount of such participation.
2.09. CHANGE OF CIRCUMSTANCES.
(a) INABILITY TO DETERMINE RATES. If, on or before the first
day of any Interest Period for any LIBOR Loan, (i) any Lender shall
advise Agent that the LIBO Rate for such Interest Period cannot be
adequately and reasonably determined due to the unavailability of funds
in or other circumstances affecting the London interbank market or
(ii) any Lender shall advise Agent that the rate of interest for such
Loan does not adequately and fairly reflect the cost to such Lender of
making or maintaining such LIBOR Loan, Agent shall immediately give
notice of such condition to Borrower and the other Lenders. After the
giving of any such notice and until Agent shall otherwise notify
Borrower that the circumstances giving rise to such condition no longer
exist, Borrower's right to request the making of or conversion to, and
the Lenders' obligations to make or convert to LIBOR Loans shall be
suspended. Any LIBOR Loans outstanding at the commencement of any such
suspension shall be converted at the end of the then current Interest
Period for such LIBOR Loans into a Base Rate Loans unless such
suspension has then ended.
(b) ILLEGALITY. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by any Lender with any request or directive (whether or
not having the force of law) of any Governmental Authority (a "CHANGE OF
LAW") shall make it unlawful or impossible for any Lender to make or
maintain any LIBOR Loan, such Lender shall immediately notify Agent and
Borrower of such Change of Law. Upon receipt of such notice,
(i) Borrower's right to request the making of or conversion to, and such
Lender's obligation to make or convert to LIBOR Loans shall be
terminated, and (ii) Borrower shall, at the request of such Lender,
either (A) pursuant to SUBPARAGRAPH 2.01(d) convert any such then
outstanding LIBOR Loans into Base Rate Loans at the end of the current
Interest Period for such LIBOR Loans or (B) immediately repay or convert
any such LIBOR Loans if such Lender shall notify Borrower that such
Lender may not lawfully continue to fund and maintain such LIBOR Loans.
Any conversion or prepayment of LIBOR Loans made pursuant to the
preceding sentence prior to the last day of an Interest Period for such
LIBOR Loans shall be deemed a prepayment thereof for purposes of
PARAGRAPH 2.11. After any Lender notifies Agent and Borrower of such a
Change of Law and until such Lender notifies Agent and Borrower that it
is no longer unlawful or impossible for such Lender to make or maintain
a LIBOR Loan, all Loans of such Lender shall be Base Rate Loans.
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(c) INCREASED COSTS. If, after the date of this Agreement,
any Change of Law:
(i) Shall subject any Lender to any tax, duty or
other charge with respect to any LIBOR Loan, or shall change the
basis of taxation of payments by Borrower to any Lender on such
a LIBOR Loan or in respect to such a LIBOR Loan under this
Agreement (except for changes in the rate of taxation on the
overall net income of any Lender imposed by its jurisdiction of
incorporation or the jurisdiction in which its principal
executive office is located); or
(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve to
the extent included in the calculation of the LIBO Rate for any
Loans), special deposit or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances or loans by, or any other acquisition of funds by any
Lender for any LIBOR Loan; or
(iii) Shall impose on any Lender any other condition
related to any LIBOR Loan or such Lender's Commitment;
And the effect of any of the foregoing is to increase the cost to such
Lender of making, renewing, or maintaining any such LIBOR Loan or its
Commitment or to reduce any amount receivable by such Lender hereunder;
then Borrower shall from time to time, within five (5) days after demand
by such Lender, pay to such Lender additional amounts sufficient to
reimburse such Lender for such increased costs or to compensate such
Lender for such reduced amounts. A certificate as to the amount of such
increased costs or reduced amounts, submitted by such Lender to Borrower
shall, in the absence of manifest error, be conclusive and binding on
Borrower for all purposes. The obligations of Borrower under this
SUBPARAGRAPH 2.09(c) shall survive the payment and performance of the
Obligations and the termination of this Agreement.
(d) CAPITAL REQUIREMENTS. If, after the date of this
Agreement, any Lender determines that (i) any Change of Law affects the
amount of capital required or expected to be maintained by such Lender
or any Person controlling such Lender (a "CAPITAL ADEQUACY REQUIREMENT")
and (ii) the amount of capital maintained by such Lender or such Person
which is attributable to or based upon the Loans, the Commitments or
this Agreement must be increased as a result of such Capital Adequacy
Requirement (taking into account such Lender's or such Person's policies
with respect to capital adequacy), Borrower shall pay to such Lender or
such Person, within five (5) days after demand of such Lender, such
amounts as such Lender or such Person shall determine are necessary to
compensate such Lender or such Person for the increased costs to such
Lender or such Person of such increased capital. A certificate of any
Lender setting forth in reasonable detail the computation of any such
increased costs, delivered by such Lender to Borrower shall, in the
absence of manifest error, be conclusive and binding on Borrower for all
purposes. The obligations of Borrower under this SUBPARAGRAPH 2.09(d)
shall survive the payment and performance of the Obligations and the
termination of this Agreement.
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(e) MITIGATION. Any Lender which becomes aware of (i) any
Change of Law which will make it unlawful or impossible for such Lender
to make or maintain any LIBOR Loan or (ii) any Change of Law or other
event or condition which will obligate Borrower to pay any amount
pursuant to SUBPARAGRAPH 2.09(c) or SUBPARAGRAPH 2.09(d) shall notify
Borrower and Agent thereof as promptly as practical. If any Lender has
given notice of any such Change of Law or other event or condition and
thereafter becomes aware that such Change of Law or other event or
condition has ceased to exist, such Lender shall notify Borrower and
Agent thereof as promptly as practical. Each Lender affected by any
Change of Law which makes it unlawful or impossible for such Lender to
make or maintain any LIBOR Loan or to which Borrower is obligated to pay
any amount pursuant to SUBPARAGRAPH 2.09(c) or SUBPARAGRAPH 2.09(d)
shall use reasonable commercial efforts (including changing the
jurisdiction of its Applicable Lending Office) to avoid the effect of
such Change of Law or to avoid or materially reduce any amounts which
Borrower is obligated to pay pursuant to SUBPARAGRAPH 2.09(c) or
SUBPARAGRAPH 2.09(d) if, in the reasonable opinion of such Lender, such
efforts would not be disadvantageous to such Lender or contrary to such
Lender's normal banking practices.
2.10. TAXES ON PAYMENTS.
(a) PAYMENTS FREE OF TAXES. All payments made by Borrower
under this Agreement and the other Credit Documents shall be made free
and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority (except net income taxes and franchise taxes in lieu of net
income taxes imposed on Agent or any Lender by its jurisdiction of
incorporation or the jurisdiction in which its Applicable Lending Office
is located) (all such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions and withholdings being hereinafter called
"TAXES"). If any Taxes are required to be withheld from any amounts
payable to Agent or any Lender hereunder or under the other Credit
Documents, the amounts so payable to Agent or such Lender shall be
increased to the extent necessary to yield to Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and
the other Credit Documents. Whenever any Taxes are payable by Borrower,
as promptly as possible thereafter, Borrower shall send to Agent for its
own account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by Borrower
showing payment thereof. If Borrower fails to pay any Taxes when due to
the appropriate taxing authority or fails to remit to Agent the required
receipts or other required documentary evidence, Borrower shall
indemnify Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by Agent or any Lender as a result of
any such failure. The obligations of Borrower under this
SUBPARAGRAPH 2.10(a) shall survive the payment and performance of the
Obligations and the termination of this Agreement.
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(b) WITHHOLDING EXEMPTION CERTIFICATES. On or prior to the
date of the initial Borrowing or, if such date does not occur within
thirty (30) days after the date of this Agreement, by the end of such
30-day period, each Lender which is not organized under the laws of the
United States of America or a state thereof shall deliver to Borrower
and Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 (or successor applicable form), as the case
may be, certifying in each case that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Lender which delivers to
Borrower and Agent a Form 1001 or 4224 pursuant to the immediately
preceding sentence further undertakes to deliver to Borrower and Agent
two further copies of Form 1001 or 4224 (or successor applicable forms),
as the case may be, on or before the date that any such form expires or
becomes obsolete or after the occurrence of any event requiring a change
in the most recent form previously delivered by such Lender to Borrower
and Agent, certifying that such Lender is entitled to receive payments
under this Agreement without deduction or withholding of any United
States federal income taxes. Each Lender which is not organized under
the laws of the United States of America or a state thereof further
agrees (i) promptly to notify Agent and Borrower of any change of
circumstances (including without limitation any change in any treaty,
law or regulation) which would prevent such Lender from receiving
payments hereunder without any deduction or withholding of United States
federal income tax and (ii) to furnish to Agent and Borrower any other
manner of certification as Agent or Borrower may reasonably request to
establish the right of such Lender to receive payments hereunder without
any deduction or withholding of United States federal income tax.
(c) MITIGATION. If Agent or any Lender claims any additional
amounts to be payable to it pursuant to this PARAGRAPH 2.10, such Person
shall use reasonable commercial efforts to file any certificate or
document requested in writing by Borrower (including without limitation
copies of Internal Revenue Service Form 1001 (or successor forms)
reflecting a reduced rate of withholding) or to change the jurisdiction
of its Applicable Lending Office if the making of such a filing or such
change in the jurisdiction of its Applicable Lending Office would avoid
the need for or materially reduce the amount of any such additional
amounts which may thereafter accrue and if, in the reasonable opinion of
such Person, in the case of a change in the jurisdiction of its
Applicable Lending Office, such change would not be disadvantageous to
such Person or contrary to such Person's normal banking practices.
(d) TAX RETURNS. Nothing contained in this PARAGRAPH 2.10
shall require Agent or any Lender to make available any of its tax
returns (or any other information relating to its taxes which it deems
to be confidential).
2.11. FUNDING LOSS INDEMNIFICATION. If borrower shall (a) repay,
prepay or convert any LIBOR loan on any day other than the last day of an
interest period therefor (whether a scheduled payment, an optional prepayment
or conversion, a mandatory prepayment or conversion, a payment upon
acceleration or otherwise), (b) fail to borrow any LIBOR loan for which a
Notice of Borrowing has been delivered to Agent (whether as a result of the
failure to
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satisfy any applicable conditions or otherwise) or (c) fail to convert any
loans into LIBOR loans in accordance with a Notice of Conversion delivered to
Agent (whether as a result of the failure to satisfy any applicable
conditions or otherwise), Borrower shall, upon demand by any Lender,
reimburse such Lender for and hold such Lender harmless from all costs and
losses incurred by such Lender as a result of such repayment, prepayment,
conversion or failure. Borrower understands that such costs and losses may
include, without limitation, losses incurred by a Lender as a result of
funding and other contracts entered into by such Lender to fund a LIBOR loan.
Each lender demanding payment under this PARAGRAPH 2.11 shall deliver to
Borrower, with a copy to Agent, a certificate setting forth the amount of
costs and losses for which demand is made, which certificate shall set forth
in reasonable detail the calculation of the amount demanded. Such a
certificate so delivered to Borrower shall constitute PRIMA FACIE evidence of
such costs and losses. The obligations of Borrower under this PARAGRAPH 2.11
shall survive the payment and performance of the Obligations and the
termination of this Agreement.
2.12. SECURITY.
(a) GUARANTIES. The Secured Obligations shall be Guaranteed
by an Amended and Restated Guaranty in the form of EXHIBIT F, duly
executed by each Domestic Subsidiary of Borrower (the "AMENDED AND
RESTATED GUARANTY").
(b) mortgages, security agreements, etc. on and after the
first amendment effective date, the secured obligations shall be secured
by the following:
(i) a security agreement in the form of exhibit H-1,
duly executed by borrower (the "borrower security agreement");
(ii) a domestic subsidiary security agreement in the
form of exhibit H-2, duly executed by each domestic subsidiary
of borrower (each a "domestic subsidiary security agreement,"
and collectively, the "domestic subsidiary security
agreements");
(iii) a borrower intellectual property security
agreement in the form of exhibit I-1, duly executed by borrower
(the "borrower ip security agreement");
(iv) a domestic subsidiary intellectual property
security agreement in the form of exhibit i-2, duly executed by
each domestic subsidiary of borrower (each a "domestic
subsidiary ip security agreement," and collectively, the
"domestic subsidiary ip security agreements"); and
(v) a pledge agreement in the form of exhibit J,
duly executed by borrower (the "pledge agreement").
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(c) FURTHER ASSURANCES. Except as otherwise provided in
Subparagraph 2.12(e), Borrower shall deliver, or cause its Subsidiaries
to deliver, to Agent such additional mortgages, deeds of trust, security
agreements, pledge agreements, guaranties, lessor consents and estoppels
(containing appropriate mortgagee and lender protection language) and
other instruments, agreements, certificates, opinions and documents
(including Uniform Commercial Code financing statements and fixture
filings and landlord waivers) as Required Lenders may reasonably request
to :
(i) Grant, perfect, maintain, protect and evidence
security interests in favor of Agent, for the benefit of Agent
and the Lenders as security for the Secured Obligations, in any
or all present and future real and personal property of Borrower
and each Domestic Subsidiary of Borrower prior to the Liens or
other interests of any Person, except for Permitted Liens;
(ii) Cause all Domestic Subsidiaries of Borrower to
guarantee the Secured Obligations on the terms set forth in the
Amended and Restated Guaranty; and
(iii) Otherwise establish, maintain, protect and
evidence the rights provided to Agent, for the benefit of Agents
and the Lenders, pursuant to the Security Documents.
Borrower shall fully cooperate with Agent and the Lenders and perform
all additional acts reasonably requested by Agent or any Lender to
effect the purposes of this PARAGRAPH 2.12.
(d) ALLOCATION OF COLLATERAL PROCEEDS. Agent shall apply any
proceeds realized by Agent from the sale, disposition or collection of
Collateral as follows:
(i) Agent first shall apply such proceeds to pay all
reasonable costs and expenses incurred by Agent in realizing
such proceeds.
(ii) If any proceeds then remain, Agent shall apply
such proceeds to the Primary Secured Obligations until all such
obligations are satisfied in full. If such proceeds are
insufficient to satisfy all of the Primary Secured Obligations
in full, Agent shall allocate such proceeds among the Lenders
pro rata according to the Primary Secured Obligations then owed
to each Lender.
(iii) If any proceeds then remain, Agent shall apply
such proceeds to the Secondary Secured Obligations until all
such obligations are satisfied in full. If such proceeds are
insufficient to satisfy all of the Secondary Secured Obligations
in full, Agent shall allocate such proceeds among the
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Lenders pro rata according to the Secondary Secured Obligations
then owed to each Lender.
(e) Release of Collateral.
(i) Each Lender hereby authorizes Agent to execute
and deliver such documents, instruments and agreements as
borrower may reasonably request to release the Lien granted to
Agent by the Security Documents in any Collateral that is sold
by Borrower in accordance with Subparagraph 5.02(c). In
determining whether a sale is in accordance with Subparagraph
5.02(c), Agent may rely upon certificates of Borrower or such
other evidence as Agent may deem appropriate.
(ii) In addition, if during each of any two
consecutive fiscal quarters occurring after the First Amendment
Effective Date Borrower maintains a Debt/EBITDA Ratio of less
than 1.00 to 1.00 (as determined by agent in its reasonable
discretion), Agent shall execute and deliver (and each Lender
hereby authorizes Agent to execute and deliver) such documents,
instruments and agreements as Borrower may reasonably request to
release the Lien granted to Agent by the Security Documents in
the Collateral.
2.13. REPLACEMENT OF LENDERS. IF any Lender shall (a) suspend its
obligation to make or maintain LIBOR Loans pursuant to SUBPARAGRAPH 2.09(b)
for a reason which is not applicable to the Lenders (or a material number of
the Lenders) generally, or (b) demand any payment under SUBPARAGRAPH 2.09(c),
2.09(d) OR 2.10(a) for a reason which is not applicable to the Lenders (or a
material number of the Lenders) generally, then Agent may (or upon the
written request of Borrower so long as no Default or Event of Default shall
have occurred and be continuing, shall) replace such Lender (the "AFFECTED
LENDER"), or cause such affected Lender to be replaced, with another lender
(the "REPLACEMENT LENDER") satisfying the requirements of an Assignee Lender
under SUBPARAGRAPH 8.05(c), by having the affected Lender sell and assign all
of its rights and obligations under this Agreement and the other Credit
Documents to the replacement lender pursuant to SUBPARAGRAPH 8.05(c);
PROVIDED, HOWEVER, that if Borrower seeks to exercise such right, it must do
so within one hundred twenty (120) days after it first knows or should have
known of the occurrence of the event or events giving rise to such right, and
neither Agent nor any Lender shall have any obligation to identify or locate
a replacement lender for Borrower. Upon receipt by any affected Lender of a
written notice from Agent stating that Agent is exercising the replacement
right set forth in this PARAGRAPH 2.1e, such affected Lender shall sell and
assign all of its rights and obligations under this Agreement and the other
Credit Documents to the replacement lender pursuant to an Assignment
Agreement and SUBPARAGRAPH 8.05(c) for a purchase price equal to the sum of
the principal amount of the affected Lender's Loans so sold and assigned, all
accrued and unpaid interest thereon and its ratable share of all fees to
which it is entitled.
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SECTION III. CONDITIONS PRECEDENT.
3.01. INITIAL CONDITIONS PRECEDENT. The obligations of the Lenders to
make the loans comprising the initial borrowing are subject to receipt by agent,
on or prior to the Closing Date, of each item listed in SCHEDULE 3.01, each in
form and substance satisfactory to Agent and each Lender, and with sufficient
copies for, Agent and each Lender.
3.02. CONDITIONS PRECEDENT TO EACH CREDIT EVENT. The occurrence of
each Credit Event (including the initial borrowing) is subject to the further
conditions that:
(a) Borrower shall have delivered to Agent the Notice of
Borrowing, notice of conversion or notice of interest period selection,
as the case may be, for such credit event in accordance with this
agreement; and
(b) On the date such credit event is to occur and after giving
effect to such credit event, the following shall be true and correct:
(i) The representations and warranties of Borrower
and its Subsidiaries set forth in PARAGRAPH 4.01 and in the
other Credit Documents are true and correct in all material
respects as if made on such date (except for representations and
warranties expressly made as of a specified date, which shall be
true as of such date);
(ii) No Default or Event of Default has occurred and
is continuing or will result from such Credit Event; and
(iii) All of the Credit Documents are in full force
and effect.
The submission by Borrower to Agent of each Notice of Borrowing, each
Notice of Conversion (other than a notice for a conversion to a Base
Rate Loan) and each Notice of Interest Period Selection shall be deemed
to be a representation and warranty by Borrower that each of the
statements set forth above in this SUBPARAGRAPH 3.02(b) is true and
correct as of the date of such notice.
3.03. COVENANT TO DELIVER. Borrower agrees (not as a condition but
as a covenant) to deliver to Agent each item required to be delivered to
Agent as a condition to the occurrence of any Credit Event if such credit
event occurs. Borrower expressly agrees that the occurrence of any such
credit event prior to the receipt by agent of any such item shall not
constitute a waiver by Agent or any Lender of Borrower's obligation to
deliver such item.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. BORROWER'S REPRESENTATIONS AND WARRANTIES. In order to
induce Agent and the Lenders to enter into this Agreement, Borrower hereby
represents and warranties to Agent and the Lenders as follows:
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(a) DUE INCORPORATION, QUALIFICATION, ETC. Each of Borrower
and Borrower's Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; (ii) has the power and authority to own, lease and operate
its properties and carry on its business as now conducted; and (iii) is
duly qualified, licensed to do business and in good standing as a
foreign corporation in each jurisdiction where the failure to be so
qualified or licensed is reasonably likely to have a Material Adverse
Effect.
(b) AUTHORITY. The execution, delivery and performance by
Borrower of each Credit Document executed, or to be executed, by
Borrower and the consummation of the transactions contemplated thereby
(i) are within the power of Borrower and (ii) have been duly authorized
by all necessary actions on the part of Borrower.
(c) ENFORCEABILITY. Each Credit Document executed, or to be
executed, by Borrower has been, or will be, duly executed and delivered
by Borrower and constitutes, or will constitute, a legal, valid and
binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except as limited by bankruptcy, insolvency
or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and general principles of
equity.
(d) NON-CONTRAVENTION. The execution and delivery by Borrower
of the Credit Documents executed by Borrower and the performance and
consummation of the transactions contemplated thereby do not (i) violate
any Requirement of Law applicable to Borrower; (ii) violate any
provision of, or result in the breach or the acceleration of, or entitle
any other Person to accelerate (whether after the giving of notice or
lapse of time or both), any Contractual Obligation of Borrower; or
(iii) result in the creation or imposition of any Lien (or the
obligation to create or impose any Lien) upon any property, asset or
revenue of Borrower (except such Liens as may be created in favor of
Agent pursuant to this Agreement or the other Credit Documents).
(e) APPROVALS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the execution
and delivery of the Credit Documents executed by Borrower and the
performance and consummation of the transactions contemplated thereby,
except such as have been made or obtained and are in full force and
effect.
(f) NO VIOLATION OR DEFAULT. Neither Borrower nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if
not in effect, would result in such a violation or default), where, in
each case, such violation or default is reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the
foregoing, neither Borrower nor any of its Subsidiaries (A) has violated
any Environmental Laws, (B) has any liability under any Environmental
Laws or (C) has received notice or other communication of an
investigation or is under
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investigation by any Governmental Authority having authority to enforce
Environmental Laws, where such violation, liability or investigation is
reasonably likely to have a Material Adverse Effect. No Event of
Default or Default has occurred and is continuing.
(g) LITIGATION. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of Borrower, threatened against Borrower or any of
its Subsidiaries at law or in equity in any court or before any other
Governmental Authority which (i) are reasonably likely (alone or in the
aggregate) to have a Material Adverse Effect or (ii) seek to enjoin,
either directly or indirectly, the execution, delivery or performance by
Borrower of the Credit Documents or the transactions contemplated
thereby.
(h) TITLE; POSSESSION UNDER LEASES. Set forth in Schedule 7 to
the Collateral Certificate (as supplemented by Borrower from time to
time in a written notice to Agent pursuant to clause (vii) of
Subparagraph 5.01(a) or otherwise) is a complete list of all real
property owned by Borrower or any of its Domestic Subsidiaries, with the
owner of such property, the location of such property, a brief
description of such property and the use of such property. Set forth in
Schedule 7 to the Collateral Certificate (as supplemented by Borrower
from time to time in a written notice to Agent pursuant to clause (vii)
of Subparagraph 5.01(a) or otherwise) is a complete list of all real
property leased by Borrower or any of its Domestic Subsidiaries as
lessee or sublessee, with the lessee or sublessee of such property, the
location of such property, a brief description of such property, the use
of such property, the owner of such property and the date and title of
and parties to the lease for such property (including all amendments
thereof). Borrower and its Subsidiaries own and have good and
marketable title, or a valid leasehold interest in, all their respective
properties and assets as reflected in the most recent Financial
Statements delivered to Agent (except those assets and properties
disposed of in the ordinary course of business or otherwise in
compliance with this Agreement since the date of such Financial
Statements) and all respective assets and properties acquired by
Borrower and its Subsidiaries since such date (except those disposed of
in the ordinary course of business or otherwise in compliance with this
Agreement). Such assets and properties are subject to no Lien, except
for Permitted Liens. Each of Borrower and its Subsidiaries has complied
with all obligations under all leases to which it is a party and enjoys
peaceful and undisturbed possession under such leases except where the
failure to so comply or enjoy is not reasonably likely to have a
Material Adverse Effect.
(i) FINANCIAL STATEMENTS. The Financial Statements of Borrower
and its Subsidiaries which have been delivered to Agent, (i) are in
accordance with the books and records of Borrower and its Subsidiaries,
which have been maintained in accordance with good business practice;
(ii) have been prepared in conformity with GAAP; and (iii) fairly
present the financial conditions and results of operations of Borrower
and its Subsidiaries as of the date thereof and for the periods covered
thereby. Neither Borrower nor any of its Subsidiaries has any
Contingent Obligations or other outstanding obligations which are
material in the aggregate, except as disclosed in the audited Financial
Statements
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dated September 27, 1998, furnished by Borrower to Agent prior to the
date hereof, or in the Financial Statements delivered to Agent pursuant
to CLAUSE (I) OR (II) OF SUBPARAGRAPH 5.01(A).
(j) NO AGREEMENTS TO SELL ASSETS; ETC. Neither Borrower nor
any of its Subsidiaries has any legal obligation, absolute or
contingent, to any Person to sell all or substantially all of the assets
of Borrower or, except to the extent permitted pursuant to SUBPARAGRAPH
5.02(d) OR 5.02(e), any of its Subsidiaries (other than sales in the
ordinary course of business), or to effect any merger, consolidation or
other reorganization of Borrower or, except to the extent permitted
pursuant to SUBPARAGRAPH 5.02(d) OR 5.02(e), any of its Subsidiaries or
to enter into any agreement with respect thereto.
(k) EMPLOYEE BENEFIT PLANS.
(i) Based on the latest valuation of each Employee
Benefit Plan that either Borrower or any ERISA Affiliate
maintains or contributes to, or has any obligation under (which
occurred within twelve months of the date of this
representation), the aggregate benefit liabilities of such plan
within the meaning of Section 4001 of ERISA did not exceed the
aggregate value of the assets of such plan. Neither Borrower
nor any ERISA Affiliate has any liability with respect to any
post-retirement benefit under any Employee Benefit Plan which is
a welfare plan (as defined in section 3(1) of ERISA), other than
liability for health plan continuation coverage described in
Part 6 of Title I(B) of ERISA, which liability for health plan
contribution coverage is not reasonably likely to have a
Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its terms,
ERISA and the IRC, and no condition exists or event has occurred
with respect to any such plan which would result in the
incurrence by either Borrower or any ERISA Affiliate of any
material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of
Borrower or any ERISA Affiliate is legally valid and binding and
in full force and effect. No Employee Benefit Plan is being
audited or investigated by any government agency or is subject
to any pending or threatened claim or suit. Neither Borrower
nor any ERISA Affiliate nor any fiduciary of any Employee
Benefit Plan has engaged in a prohibited transaction under
section 406 of ERISA or section 4975 of the IRC.
(iii) Neither Borrower nor any ERISA Affiliate
contributes to or has any material contingent obligations to any
Multiemployer Plan. Neither Borrower nor any ERISA Affiliate
has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete
or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets
described in Section 4204 of ERISA. Neither Borrower nor any
ERISA Affiliate has been notified that any Multiemployer Plan is
in
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reorganization or insolvent under and within the meaning of
Section 4241 or Section 4245 of ERISA or that any Multiemployer
Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
(l) OTHER REGULATIONS. Borrower is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, any state public utilities
code or to any other Governmental Rule limiting its ability to incur
indebtedness.
(m) PATENT AND OTHER RIGHTS. Borrower and its Subsidiaries own
or license (or could obtain such ownership or license on terms not
materially adverse to Borrower and its Subsidiaries, taken as a whole)
under validly existing agreements, and have the full right to license in
the ordinary course of business as currently contemplated without the
consent of any other Person, all patents, licenses, trademarks, trade
names, trade secrets, service marks, copyrights and all rights with
respect thereto, which are required to conduct their businesses as now
conducted.
(n) GOVERNMENTAL CHARGES. Borrower and its Subsidiaries have
filed or caused to be filed all tax returns which are required to be
filed by them. Borrower and its Subsidiaries have paid, or made
provision for the payment of, all taxes and other Governmental Charges
which have or may have become due pursuant to said returns or otherwise
and all other indebtedness, except such Governmental Charges or
indebtedness, if any, which are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been
provided or which are not reasonably likely to have a Material Adverse
Effect if unpaid.
(o) MARGIN STOCK. Borrower owns no Margin Stock which would
cause it to be in violation of SUBPARAGRAPH 5.01(f).
(p) SUBSIDIARIES, ETC. Set forth in SCHEDULE 4.01(p) (as
supplemented by Borrower from time to time in a written notice to Agent)
is a complete list of all of Borrower's Subsidiaries; the jurisdiction
of incorporation of each such Subsidiary; for each Domestic Subsidiary
and each direct Foreign Subsidiary, the number of shares of each class
of Equity Security of such Subsidiary outstanding; and the percentage of
each such Subsidiary's outstanding Equity Securities owned directly by
Borrower or another Subsidiary of Borrower. Except for such
Subsidiaries, Borrower has no Subsidiaries, is not a partner in any
partnership or a joint venturer in any joint venture.
(q) CATASTROPHIC EVENTS. Neither Borrower nor any of its
Subsidiaries and none of their properties is or has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty
that is reasonably likely to have a Material Adverse Effect. There are
no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Borrower or
any of its Subsidiaries is a party, and there are no strikes, lockouts,
work stoppages or slowdowns, or, to the best knowledge of Borrower,
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jurisdictional disputes or organizing activities occurring or threatened
which alone or in the aggregate are reasonably likely to have a Material
Adverse Effect.
(r) BURDENSOME CONTRACTUAL OBLIGATIONS, ETC. Neither Borrower
nor any of its Subsidiaries and none of their properties is subject to
any Contractual Obligation or Requirement of Law which is reasonably
likely to have a Material Adverse Effect.
(s) NO MATERIAL ADVERSE EFFECT. No event has occurred and no
condition exists which is reasonably likely to have a Material Adverse
Effect.
(t) ACCURACY OF INFORMATION FURNISHED. None of the Credit
Documents and none of the other certificates, statements or information
furnished to Agent or any Lender by or on behalf of Borrower or any of
its Subsidiaries in connection with the Credit Documents or the
transactions contemplated thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that it is recognized by Agent and the Lenders that projections
and forecasts provided and developed by Borrower, while reflecting
Borrower's good faith projections or forecasts based upon methods and
data Borrower believed to be reasonable and accurate when made, are not
to be viewed as facts and that actual results during the period or
periods covered by any such projections and forecasts may differ from
the projected or forecasted results.
(u) YEAR 2000 COMPATIBILITY. Borrower and its Subsidiaries
have reviewed the areas within their business and operations which could
be adversely affected by, and have developed or are developing a program
to address on a timely basis, the "Year 2000 Problem" (that is, the risk
that computer applications used by Borrower and its Subsidiaries may be
unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date on or after December 31,
1999), and have made related appropriate inquiry of material suppliers
and vendors. Based on such review and program, Borrower believes that
the "Year 2000 Problem" will not have a Material Adverse Effect.
4.02. REAFFIRMATION. Borrower shall be deemed to have reaffirmed,
for the benefit of the Lenders and Agent, each representation and warranty
contained in PARAGRAPH 4.01 and in the other Credit Documents on and as of
the date of each Credit Event (except for representations and warranties
expressly made as of a specified date, which shall be true as of such date).
SECTION V. COVENANTS.
5.01. AFFIRMATIVE COVENANTS. Until the termination of this
Agreement and the satisfaction in full by Borrower of all Obligations,
Borrower will comply, and will cause compliance, with the following
affirmative covenants, unless Required Lenders shall otherwise consent in
writing:
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(a) FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish
to Agent, with sufficient copies for each Lender, the following, each in
such form and such detail as Agent or the Required Lenders shall
reasonably request:
(i) As soon as available and in no event later than
fifty (50) days after the last day of the first three fiscal
quarters of Borrower in each fiscal year, a copy of the
Financial Statements of Borrower and its Subsidiaries (prepared
on a consolidated basis) for such quarter and for the fiscal
year to date, certified by a Responsible Officer of Borrower to
present fairly the financial condition, results of operations
and other information reflected therein and to have been
prepared in accordance with GAAP (subject to normal year-end
audit adjustments);
(ii) As soon as available and in no event later than
one hundred, twenty (120) days after the close of each fiscal
year of Borrower, (A) copies of the audited Financial Statements
of Borrower and its Subsidiaries (prepared on a consolidated
basis) for such year, prepared by independent certified public
accountants of recognized national standing acceptable to Agent
and (B) copies of the unqualified opinions (or qualified
opinions reasonably acceptable to Agent) and management letters
delivered by such accountants in connection with all such
Financial Statements;
(iii) Contemporaneously with the quarterly and
year-end Financial Statements required by the foregoing
CLAUSES (i) AND (ii), a compliance certificate of a Responsible
Officer of Borrower which (A) states that no Event of Default
and no Default has occurred and is continuing, or, if any such
Event of Default or Default has occurred and is continuing, a
statement as to the nature thereof and what action Borrower
proposes to take with respect thereto, (B) sets forth, for the
quarter or year covered by such Financial Statements or as of
the last day of such quarter or year (as the case may be), the
calculation of the financial ratios and tests provided in
PARAGRAPH 5.03, (C) sets forth, as of the last day of such
quarter or year, the amounts at such time of all Guaranty
Obligations and all obligations on account of Rate Contracts
and Surety Instruments of Borrower and its Subsidiaries to
others, (D) states that the year 2000 remediation efforts of
Borrower and its Subsidiaries are proceeding as scheduled,
and (E) indicates whether an auditor, regulator or third party
consultant has issued a management letter or other
communication regarding the year 2000 exposure, program or
progress of Borrower and/or its Subsidiaries;
(iv) As soon as possible and in no event later than
five (5) Business Days after any Responsible Officer of Borrower
(or, in the case of (A) below, any Responsible Officer or any
Vice President of Human Resources) knows of the occurrence or
existence of (A) any Reportable Event under any Employee Benefit
Plan or Multiemployer Plan; (B) any actual or threatened
litigation, suits, claims or disputes against Borrower or any of
its Subsidiaries which could reasonably be expected to result in
monetary damages payable by Borrower or its Subsidiaries of
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$1,000,000 or more (alone or in the aggregate); (C) any other
event or condition which is reasonably likely to have a Material
Adverse Effect; or (D) any Default or Event of Default; the
statement of the President, Chief Financial Officer or Vice
President-Finance of Borrower setting forth details of such
event, condition, Default or Event of Default and the action
which Borrower proposes to take with respect thereto;
(v) As soon as available and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of (A) all registration statements and reports
filed by Borrower or any of its Subsidiaries with any securities
exchange or the Securities and Exchange Commission (including,
without limitation, all 10-Q, 10-K and 8-K reports); (B) all
reports, proxy statements and financial statements sent or made
available by Borrower or any of its Subsidiaries to its security
holders; and (C) all press releases and other similar public
concerning any material developments in the business of Borrower
or any of its Subsidiaries made available by Borrower or any of
its Subsidiaries to the public generally;
(vi) As soon as available and in no event later than
thirty (30) days before the first day of each fiscal year of
Borrower, the consolidated plan and forecast of Borrower and its
Subsidiaries for such fiscal year, including quarterly cash flow
projections;
(vii) As soon as possible and in no event later than
thirty (30) days after the acquisition by Borrower of any
leasehold or ownership interest in real property, a written
supplement to Schedule 7 to the Collateral Certificate;
(viii) As soon as possible and in no event later than
thirty (30) days after the establishment or acquisition by
Borrower or any of its Subsidiaries of any new Subsidiary or any
new Equity Securities of any existing Subsidiary, written notice
thereof;
(ix) As soon as possible and in no event later than
sixty (60) days after the issuance to or acquisition by Borrower
of any new patent, trademark, copyright or mask work, written
notice thereof; and
(x) Such other instruments, agreements,
certificates, opinions, statements, documents and information
relating to the operations or condition (financial or otherwise)
of Borrower or its Subsidiaries, and compliance by Borrower with
the terms of this Agreement and the other Credit Documents as
Agent may from time to time reasonably request.
(b) BOOKS AND RECORDS. Borrower and its Subsidiaries shall at
all times keep proper books of record and account in which full, true
and correct entries will be made of their transactions in accordance
with GAAP.
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(c) INSPECTIONS. Borrower and its Subsidiaries shall permit
any Person designated by any Lender, upon reasonable notice and during
normal business hours, to visit and inspect any of the properties and
offices of Borrower and its Subsidiaries, to conduct audits of any or
all of the Collateral at Borrower's expense, to examine the books and
records of Borrower and its Subsidiaries and make copies thereof and to
discuss the affairs, finances and business of Borrower and its
Subsidiaries with, and to be advised as to the same by, their officers,
auditors and accountants, all at such times and intervals as any Lender
may reasonably request; provided, however, that, so long as no Default
or Event of Default has occurred and is continuing, (i) audits of the
Collateral shall be conducted by Persons designated by Agent at
reasonable cost and shall not be conducted at Borrower's expense more
than once in any twelve (12) month period and (ii) Agent shall use its
best efforts to schedule such audits at times during which Borrower and
its Subsidiaries are conducting their own audits in order to minimize
the expenses incurred by Agent or its designees in performing such
audits.
(d) INSURANCE. Borrower and its Subsidiaries shall:
(i) Carry and maintain insurance of the types and in
the amounts customarily carried from time to time during the
term of this Agreement by others engaged in substantially the
same business as such Person and operating in the same
geographic area as such Person, including, but not limited to,
fire, public liability, property damage and worker's
compensation;
(ii) Carry and maintain each policy for such
insurance with (A) a company which is rated A or better by A.M.
Best and Company at the time such policy is placed and at the
time of each annual renewal thereof or (B) any other insurer
which is reasonably satisfactory to Agent;
(iii) Obtain and maintain endorsements for such
insurance as specified in Exhibit L; and
(iv) Deliver to Agent from time to time, as Agent may
request, schedules setting forth all insurance then in effect.
(e) GOVERNMENTAL CHARGES. Borrower and its Subsidiaries shall
promptly pay and discharge when due all taxes and other Governmental
Charges prior to the date upon which penalties accrue thereon, except
such taxes and other Governmental Charges as may in good faith be
contested or disputed, or for which arrangements for deferred payment
have been made, provided that in each such case appropriate reserves are
maintained to the reasonable satisfaction of Agent.
(f) USE OF PROCEEDS. Borrower shall use the proceeds of the
Loans only for the purposes set forth in SUBPARAGRAPH 2.01(g). Borrower
shall not use any part of the proceeds of any Loan, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock
or for the purpose of purchasing or carrying or trading in any
securities
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under such circumstances as to involve Borrower, any Lender or Agent
in a violation of Regulations T, U or X issued by the Federal
Reserve Board.
(g) GENERAL BUSINESS OPERATIONS. Except to the extent
otherwise permitted pursuant to SUBPARAGRAPH 5.02(d), each of Borrower
and its Subsidiaries shall (i) preserve and maintain its corporate
existence and all of its rights, privileges and franchises reasonably
necessary to the conduct of its business; PROVIDED, HOWEVER, that
Borrower may cause any wholly-owned Subsidiary to be liquidated if
Borrower's board of directors determines that it is in the best
interests of Borrower and its Subsidiaries, taken as a whole and the
assets of such dissolved wholly-owned Subsidiary are placed with
Borrower or any Guarantor hereunder; (ii) conduct its business
activities in compliance with all Requirements of Law and Contractual
Obligations applicable to such Person, the violation of which is
reasonably likely to have a Material Adverse Effect; and (iii) keep all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted, except where any failure to
do so is not reasonably likely to have a Material Adverse Effect.
Borrower shall maintain its chief executive office and principal place
of business in the United States and shall not relocate its chief
executive office or principal place of business outside of California
except upon not less than ninety (90) days prior written notice to
Agent.
(h) YEAR 2000 COMPATIBILITY. Borrower and its Subsidiaries
shall take all acts reasonably necessary to ensure that all software,
hardware, firmware, equipment, goods and systems utilized by or material
to their business operations or financial condition will properly
perform date sensitive functions before, during and after the
year 2000. At the request of Agent, Borrower shall provide to Agent
such certifications or other evidence of compliance with this
SUBPARAGRAPH 5.01(h) as Agent may from time to time require.
(i) SENIOR RANKING. Borrower shall take, or cause to be
taken, all actions necessary to ensure that the Secured Obligations
are and continue to rank senior in right of payment with all other
SECURED OR unsecured Indebtedness of Borrower, other than Permitted
Liens.
5.02. NEGATIVE COVENANTS. Until the termination of this Agreement and
the satisfaction in full by Borrower of all Obligations, borrower will comply,
and will cause compliance, with the following negative covenants, unless
Required Lenders shall otherwise consent in writing:
(a) INDEBTEDNESS. Neither Borrower nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except
for the following ("PERMITTED INDEBTEDNESS"):
(i) The Obligations of Borrower under the Credit
Documents;
(ii) Indebtedness of Borrower and its Subsidiaries
listed in the Disclosure Letter and existing on the date of this
Agreement;
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(iii) Indebtedness of Borrower and its Subsidiaries
arising from the endorsement of instruments for collection in
the ordinary course of Borrower's or a Subsidiary's business;
(iv) Indebtedness of Borrower and its Subsidiaries
under Rate Contracts, provided that (A) all such arrangements
are entered into in connection with bona fide hedging operations
and not for speculation and (B) the aggregate net amount owed by
Borrower and its Subsidiaries under, on account of or otherwise
in connection with such Rate Contracts does not exceed
$5,000,000 (marked to market) at any time;
(v) Indebtedness of Borrower and its Subsidiaries
under purchase money and construction loans and Capital Leases
incurred by Borrower or any of its Subsidiaries to finance the
acquisition by such Person of real property, fixtures or
equipment or the construction of improvements to real property
provided that (A) in each case, (y) such Indebtedness is
incurred by such Person at the time of, or not later than sixty
(60) days after, the acquisition by such Person of the property
so financed or so constructed and (z) such Indebtedness does not
exceed the purchase price or construction price (including
acquisition of fixtures) of the property so financed or so
constructed and (B) the aggregate amount of such Indebtedness
outstanding at any time does not exceed $5,000,000;
(vi) Indebtedness of Borrower and its Subsidiaries
under initial or successive refinancings of any Indebtedness
permitted by CLAUSE (ii) above, provided that (A) the principal
amount of any such refinancing does not exceed the principal
amount of the Indebtedness being refinanced and (B) the material
terms and provisions of any such refinancing (including
maturity, redemption, prepayment, default and subordination
provisions) are no less favorable to the Lenders than the
Indebtedness being refinanced;
(vii) Indebtedness of Borrower and its Subsidiaries
with respect to Surety Instruments in the ordinary course of
business, provided that the aggregate amount of the obligations
secured by such Surety Instruments at any time does not exceed
$8,000,000;
(viii) Guaranty Obligations of Borrower in respect of
Permitted Indebtedness of its Subsidiaries;
(ix) Guaranty Obligations or other related forms of
Indebtedness incurred by borrower in connection with sales by
Borrower of promissory notes, accounts receivable and other
indebtedness owed to Borrower (including, without limitation,
obligations under Borrower Note Guaranties and, if the Borrower
Note Guaranty to ABN is replaced with some other form of
Indebtedness, obligations under such Indebtedness), provided
that the aggregate amount of all such notes, receivables and
other indebtedness outstanding and so guaranteed by Borrower
does not exceed $25,000,000 at any time;
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(x) Indebtedness of Borrower to any of its
Subsidiaries, Indebtedness of any of Borrower's Subsidiaries to
Borrower or Indebtedness of any of Borrower's Subsidiaries to
any of Borrower's other Subsidiaries, provided that any
Indebtedness of Borrower to any of its Subsidiaries and any
Indebtedness of any of Borrower's Subsidiaries to Borrower shall
be subject to Subparagraph 5.02(k);
(xi) Unsecured Indebtedness of Borrower not otherwise
permitted pursuant to clause (xii) below, provided that (A) the
Indebtedness arising under this Agreement shall at all times
rank senior in right of payment with such unsecured
Indebtedness, (B) such unsecured Indebtedness does not contain
material provisions that are more restrictive to Borrower and
its Subsidiaries than the material provisions contained in this
Agreement, (C) no principal payable in connection with such
unsecured Indebtedness is scheduled for payment on or prior to
the Maturity Date, (D) the Net Proceeds of such unsecured
Indebtedness are applied to prepay the Loans pursuant to clause
(ii) of Subparagraph 2.04(c) and reduce the Total Commitment
pursuant to Subparagraph 2.02(b), and (E) the aggregate
principal amount of all such unsecured Indebtedness outstanding
at any time (measured at the time of the incurrence of such
unsecured Indebtedness) does not exceed Fifty Million Dollars
($50,000,000);
(xii) Short-term unsecured indebtedness of ADAC
Capital incurred in connection with the financing of proposed
sales by ADAC Capital of promissory notes, accounts receivable
and other indebtedness owed to ADAC Capital or any of Borrower's
other Subsidiaries arising under transactions the terms and
conditions of which have been approved in advance by the
Required Lenders; and
(xiii) Other Indebtedness of Borrower and its
Subsidiaries, provided that the aggregate principal amount of
all such Indebtedness does not exceed $5,000,000 at any time.
(b) LIENS. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for the following ("PERMITTED LIENS"):
(i) Liens granted to Agent or any Lender pursuant to
the Security Documents or any other Credit Documents to secure
the Secured Obligations;
(ii) Liens listed in the Disclosure Letter and
existing on the date of this Agreement;
(iii) Liens for taxes or other Governmental Charges
not at the time delinquent or thereafter payable without penalty
or being contested in good faith,
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provided that adequate reserves for the payment thereof have
been established in accordance with GAAP;
(iv) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided that
adequate reserves for the payment thereof have been established
in accordance with GAAP;
(v) Deposits under workers' compensation,
unemployment insurance and social security laws or to secure the
performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory
obligations of surety or appeal bonds or to secure indemnity,
performance or other similar bonds in the ordinary course of
business;
(vi) Zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which alone
or in the aggregate are not substantial in amount and do not
materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
of Borrower or any of its Subsidiaries;
(vii) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(viii) Liens on property or assets of any corporation
which becomes a Subsidiary of Borrower after the date of this
Agreement, provided that (A) such Liens exist at the time of
such acquisition and (B) such Liens were not created in
contemplation of such acquisition;
(ix) Judgment Liens, provided that the judgment does
not yet constitute an Event of Default under SUBPARAGRAPH
6.01(h);
(x) Rights of vendors or lessors under conditional
sale agreements, Capital Leases or other title retention
agreements, provided that, in each case, (A) such rights secure
or otherwise relate to Permitted Indebtedness, (B) such rights
do not extend to any property other than property acquired with
the proceeds of such Permitted Indebtedness and (C) such rights
do not secure any Indebtedness other than such Permitted
Indebtedness;
(xi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties and in connection with the importation of goods
in the ordinary course of Borrower's and its Subsidiaries'
businesses;
(xii) Liens securing Indebtedness which constitutes
Permitted Indebtedness under clause (v) of Subparagraph 5.02(a)
provided that, in each case,
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such Lien (A) covers only those assets (together with
accessions thereto, replacements and proceeds, including
insurance proceeds, and substitutions therefor), the
acquisition of which was financed by such Permitted
Indebtedness, and (B) secures only such Permitted Indebtedness;
(xiii) Liens on the property or assets of any
Subsidiary of Borrower in favor of Borrower or any other
Subsidiary of Borrower;
(xiv) Liens incurred in connection with the extension,
renewal or refinancing of the Indebtedness secured by the Liens
described in CLAUSE (ii) OR (xii) above, provided that any
extension, renewal or replacement Lien (A) is limited to the
property covered by the existing Lien and (B) secures
Indebtedness which is no greater in amount and has material
terms no less favorable to the Lenders than the Indebtedness
secured by the existing Lien;
(xv) Liens on insurance proceeds in favor of
insurance companies with respect to the financing of insurance
premiums;
(xvi) Leases and subleases of, and licenses and
sublicenses with respect to, property where Borrower or a
Subsidiary is the lessor or licensor (or sublessor or
sublicensor); provided that such leases, subleases, licenses and
sublicenses do not in the aggregate materially interfere with
the business of Borrower and its Subsidiaries taken as a whole;
(xvii) Liens on property or assets of Borrower or any
Subsidiary of Borrower arising pursuant to transactions of the
type permitted pursuant to Subparagraph 5.02(c)(vi); and
(xviii) Other Liens in an amount not to exceed $100,000.
(c) ASSET DISPOSITIONS. Neither Borrower nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
its assets or property, whether now owned or hereafter acquired, except
for the following:
(i) Sales of inventory by Borrower and its
Subsidiaries in the ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete
equipment or inventory for not less than fair market value;
(iii) Sales or other dispositions of Investments
permitted by CLAUSE (i) OF SUBPARAGRAPH 5.02(e) for not less
than fair market value;
(iv) Sales or assignments of defaulted receivables to
a collection agency in the ordinary course of business;
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(v) Sales or other dispositions of assets and
property by Borrower to any of Borrower's Subsidiaries or by any
of Borrower's Subsidiaries to Borrower or any of its other
Subsidiaries, provided that the terms of any such sales or other
dispositions by or to Borrower are terms which are no less
favorable to Borrower then would prevail in the market for
similar transactions between unaffiliated parties dealing at
arm's length;
(vi) Sales by Borrower and ADAC Capital of promissory
notes, accounts receivable and other indebtedness owed to
Borrower and its Subsidiaries, provided that each such sale is
(A) for cash consideration which is not less than the fair
market value of the promissory notes, accounts receivable or
other indebtedness sold and (B) without any recourse to
Borrower, ADAC Capital or any of Borrower's other Subsidiaries
except to the extent permitted by CLAUSE (ix) of Subparagraph
5.02(a);
(vii) Sales and licenses by Borrower of its
intellectual property, in the ordinary course of its business,
provided that, in each case, the terms of the transaction are
terms which then would prevail in the market for similar
transactions between unaffiliated parties dealing at arm's
length; and
(viii) Other sales, leases, transfers and disposals of
assets and property, provided that the aggregate value of all
such assets and property (based upon the greater of the fair
market or book value of such assets and property) so sold,
leased, transferred or otherwise disposed of in any fiscal year
does not exceed $10,000,000 per year.
(d) MERGERS, ACQUISITIONS, ETC. Neither Borrower nor any of
its Subsidiaries shall consolidate with or merge into any other Person
or permit any other Person to merge into it, establish any Subsidiary or
acquire any Person or all or substantially all of the assets of any
Person, except that:
(i) Any Subsidiary of Borrower may merge into
Borrower or any wholly-owned Subsidiary of Borrower;
(ii) Borrower and its Subsidiaries may acquire any
Person or all or substantially all of the assets of any Person,
provided that (A) such Person or such assets are in a line of
business permitted under SUBPARAGRAPH 5.02(f) and (B)
immediately after giving effect to such acquisition, Borrower is
in compliance with each of the financial covenants contained in
PARAGRAPH 5.03; and
(iii) Borrower and its Subsidiaries may acquire any
other Person or all or substantially all of the assets of any
other Person, provided that the aggregate cost of such
acquisitions does not exceed ten percent (10%) of the Tangible
Net Worth of Borrower and its Subsidiaries. In determining the
aggregate amount of acquisitions permitted under this CLAUSE
(iii) at any time during a fiscal year
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subject to this clause, the Tangible Net Worth of Borrower and
its Subsidiaries as of the last day of the most recently ended
fiscal quarter shall be used.
(e) INVESTMENTS. Neither Borrower nor any of its Subsidiaries
shall make any Investment except for Investments in the following:
(i) Investments of Borrower and its Subsidiaries in
Cash Equivalents;
(ii) Any transaction involving Borrower or any of its
Domestic Subsidiaries permitted by Subparagraph 5.02(a) or
clauses (ii), and (iii) of Subparagraph 5.02(d);
(iii) Investments by Borrower and its Subsidiaries in
each other, provided that with respect to Investments by
Borrower in its Foreign Subsidiaries , such Investments shall be
limited to (A) the Investments listed in the Disclosure Letter
and existing on the First Amendment Effective Date and (b) other
Investments having an aggregate book value of not more than
$10,000,000 at any time;
(iv) Investments consisting of loans to employees,
officers and directors;
(v) Investments arising under Rate Contracts
otherwise permitted pursuant to SUBPARAGRAPH 5.02(a)(iv);
(vi) Investments (other than Investments in Foreign
Subsidiaries otherwise permitted pursuant to clause (iii) above)
listed in the Disclosure Letter and existing on the date of this
Agreement;
(vii) Investments received in the settlement of
delinquent obligations or disputes, including Investments
received in connection with the bankruptcy or reorganization of
third Persons;
(viii) Investments consisting of deposit accounts
maintained in the ordinary course of business;
(ix) Investments accepted in connection with
dispositions of assets otherwise permitted under SUBPARAGRAPH
5.02(c); and
(x) Other Investments not otherwise permitted
pursuant to this SUBPARAGRAPH 5.02(e); provided that the
aggregate amount of such Investments does not exceed $5,000,000
at any time.
(f) CHANGE IN BUSINESS. Neither Borrower nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any business substantially different from businesses
associated or connected with radiology or cardiology
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information systems, radiation planning, or servicing or manufacturing
new or used nuclear medical equipment.
(g) INDEBTEDNESS PAYMENTS, ETC. Neither Borrower nor any of
its Subsidiaries shall (i) prepay, redeem, purchase, defease or
otherwise satisfy in any manner prior to the scheduled payment thereof
any Indebtedness for borrowed money (other than the Obligations or any
Indebtedness owed by any Subsidiary to Borrower) or lease obligations or
(ii) amend, modify or otherwise change the terms of any document,
instrument or agreement evidencing Indebtedness for borrowed money
(other than the Obligations or any Indebtedness owed by any Subsidiary
to Borrower) or lease obligations so as to accelerate the scheduled
payment thereof.
(h) Security Issuances. None of Borrower's Subsidiaries shall
issue, offer or sell any Equity Securities not currently outstanding
except that any of Borrower's Subsidiaries may issue Equity Securities
to Borrower or a wholly-owned Subsidiary of Borrower, provided that such
Equity Securities are pledged to Agent pursuant to the Pledge Agreement
to the extent required by the Pledge Agreement.
(i) Redemptions. Neither Borrower nor any of its Subsidiaries
shall purchase, redeem, retire, defease or otherwise acquire for value
any of its Equity Securities.
(j) ERISA. Neither Borrower nor any ERISA Affiliate shall
(i) adopt or institute any Employee Benefit Plan that is an
employee pension benefit plan within the meaning of Section 3(2) of
ERISA, (ii) take any action which will result in the partial or
complete withdrawal, within the meanings of sections 4203 and 4205 of
ERISA, from a Multiemployer Plan, (iii) engage or permit any Person
to engage in any transaction prohibited by section 406 of ERISA or
section 4975 of the IRC involving any Employee Benefit Plan or
Multiemployer Plan which would subject either Borrower or any ERISA
Affiliate to any tax, penalty or other liability including a
liability to indemnify, (iv) incur or allow to exist any accumulated
funding deficiency (within the meaning of section 412 of the IRC or
section 302 of ERISA), (v) fail to make full payment when due of all
amounts due as contributions to any Employee Benefit Plan or
Multiemployer Plan, (vi) fail to comply with the requirements of
section 4980B of the IRC or Part 6 of Title I(B) of ERISA, or (vii)
adopt any amendment to any Employee Benefit Plan which would require
the posting of security pursuant to section 401(a)(29) of the IRC,
where singly or cumulatively, the above would have a Material Adverse
Effect.
(k) TRANSACTIONS WITH AFFILIATES. Neither Borrower nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate(other than Borrower or any direct or indirect wholly-owned
Subsidiary of Borrower) or engage in any other transaction with any
Affiliate (other than Borrower or any direct or indirect wholly-owned
Subsidiary of Borrower) except upon terms at least as favorable to
Borrower or such Subsidiary as an arms-length transaction with
unaffiliated Persons.
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(l) CAPITAL EXPENDITURES. Borrower and its Subsidiaries shall
not make Capital Expenditures on a consolidated basis in excess of
$20,000,000 in any fiscal year.
(m) ACCOUNTING CHANGES. Neither Borrower nor any of its
Subsidiaries shall change (i) its fiscal year (currently October 1
through September 30) or (ii) its accounting practices except as
required by GAAP.
5.03. FINANCIAL COVENANTS. Until the termination of this agreement
and the satisfaction in full by borrower of all obligations, borrower will
comply, and will cause compliance, with the following financial covenants,
unless required lenders shall otherwise consent in writing:
(a) EBITDAR/FIXED CHARGE COVERAGE RATIO. Borrower shall not
permit the EBITDAR/Fixed Charge Coverage Ratio of Borrower and its
Subsidiaries to be less than the ratios set forth below as of the end
of the four fiscal quarter periods set forth below:
Four fiscal quarter periods ending on the
last day of the third fiscal quarter
in 1999, the fourth fiscal quarter in
1999 and the first fiscal quarter in 2000 1.75 to 1.00
Four fiscal quarter period ending on the
last day of the second fiscal quarter in
2000 2.00 to 1.00
Four fiscal quarter period ending on the
last day of the third fiscal quarter in
2000 2.75 to 1.00
Four fiscal quarter period ending on the
last day of the fourth fiscal quarter in
2000 and the last day of each fiscal quarter
thereafter 3.25 to 1.00
(b) TANGIBLE NET WORTH. Borrower shall not permit the sum of
(1) Tangible Net Worth of Borrower and its Subsidiaries on the last day
of any fiscal quarter (any such date to be referred to herein as a
"determination date") which occurs on or after July 4, 1999 (such date
to be referred to herein as the "base date") plus (2) the after tax
amount (if any) of the Capitalized Spare Parts 1999 Non-Ordinary Charges
and the Latin American Notes 1999 Non-Ordinary Charges of Borrower and
its Subsidiaries for each quarter after the base date through and
including the quarter ending immediately prior to the determination
date, to be less than the sum on such determination date of the
following:
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(i) $64,000,000; provided, however, that if Borrower
has not completed the UGM Acquisition prior to the end of its
first fiscal quarter in 2000, $70,000,000;
PLUS
(ii) Fifty percent (50%) of the sum of the
consolidated quarterly net income (ignoring any quarterly
losses) of Borrower and its Subsidiaries for each quarter after
the base date through and including the quarter ending
immediately prior to the determination date;
PLUS
(iii) Eighty five percent (85%) of the Net Proceeds
realized by Borrower and its Subsidiaries from the issuance
and/or sale of Equity Securities during the period commencing on
the base date and ending on the determination date;
MINUS
(iv) If the determination date is after the date of
any permitted acquisition by Borrower pursuant to SUBPARAGRAPH
5.02(d), an amount equal to the after-tax sum of the Acquisition
In-Process R&D Charges taken by Borrower during any such fiscal
quarter.
(c) Debt/EBITDA Ratio. Borrower shall not permit the
Debt/EBITDA Ratio of borrower and its subsidiaries to be greater than
the ratios set forth below as of the end of the four fiscal quarter
periods set forth below:
Four fiscal quarter periods ending on the
last day of the third fiscal quarter
in 1999, and the fourth fiscal quarter in 1999 3.00 to 1.00
Four fiscal quarter period ending on the
last day of the first fiscal quarter in 2000 3.25 to 1.00
Four fiscal quarter period ending on the
last day of the second fiscal quarter in 2000
and the date day of each fiscal quarter
thereafter 2.50 to 1.00;
Provided, however, that for every four fiscal quarter period ending on
the last day of a fiscal quarter occurring after the date Agent and the
Lenders release their security interest in the Collateral securing the
Secured Obligations pursuant to
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Subparagraph 2.12(e), Borrower shall not permit the Debt/EBITDA Ratio
of Borrower and its Subsidiaries to be greater than 2.00 to 1.00.
(d) PROFITABILITY. Borrower shall not permit the consolidated
net income of Borrower and its Subsidiaries (i) for the third fiscal
quarter in 1999 to be a loss in excess of $9,000,000, (ii) for the
fourth fiscal quarter in 1999 to be less than $1.00 and (iii) for any
other fiscal quarter to be less than $1.00. In calculating the
consolidated net income of Borrower and its Subsidiaries for the third
fiscal quarter in 1999, an amount equal to the after-tax sum of any
Latin American Notes 1999 Non-Ordinary Charges taken by Borrower during
such fiscal quarter shall be ignored. In addition, in calculating the
consolidated net income of Borrower and its Subsidiaries for the fourth
fiscal quarter in 1999, an amount equal to the sum of the 1999
Litigation Reserve, the after-tax sum of any Capitalized Spare Parts
1999 Non-Ordinary Charges and the Latin American Notes 1999 Non-Ordinary
Charges taken by Borrower during such fiscal quarter shall be ignored.
Finally, in calculating the consolidated net income of Borrower and its
Subsidiaries for any quarter for the purposes of this subparagraph, an
amount equal to the after-tax sum of any Acquisition In-Process R&D
Charges taken by Borrower during such fiscal quarter shall be ignored.
SECTION VI. DEFAULT.
6.01. EVENTS OF DEFAULT. The occurrence or existence of any one or
more of the following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) NON-PAYMENT. Borrower shall (i) fail to pay within one (1)
day after the same becomes due any principal of any Loan or (ii) fail to
pay within five (5) days after the same becomes due any interest, fees
or other amount required under the terms of this Agreement or any of the
other Credit Documents; or
(b) SPECIFIC DEFAULTS. Borrower or any of its Subsidiaries
shall fail to observe or perform any covenant, obligation, condition or
agreement set forth in SUBPARAGRAPH 5.01(d), PARAGRAPH 5.02 or PARAGRAPH
5.03; or
(c) OTHER DEFAULTS. Borrower or any of its Subsidiaries shall
fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Agreement or the other Credit Documents and
such failure shall continue for twenty (20) days after the earlier of
(i) the date a Responsible Officer first knew or should have known of
such failure and (ii) the date Agent delivers to Borrower a notice of
such failure; or
(d) REPRESENTATIONS AND WARRANTIES. Any representation,
warranty, certificate, information or other statement (financial or
otherwise) made or furnished by or on behalf of Borrower or any of its
Subsidiaries to Agent or any Lender in or in connection with this
Agreement or any of the other Credit Documents, or as an inducement to
Agent or
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any Lender to enter into this Agreement, shall be false, incorrect,
incomplete or misleading in any material respect when made or
furnished; or
(e) CROSS-DEFAULT. (i) Borrower or any of its Subsidiaries
shall fail to make any payment when due on account of any Indebtedness
of such Person (other than the Obligations) and such failure shall
continue beyond any period of grace provided with respect thereto, if
the amount of such Indebtedness exceeds $1,000,000 or the effect of such
failure is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Borrower and its Subsidiaries (other than the
Obligations) in an aggregate amount exceeding $1,000,000 to become due;
(ii) Borrower or any of its Subsidiaries shall otherwise fail to observe
or perform any agreement, term or condition contained in any agreement
or instrument relating to any Indebtedness of such Person (other than
the Obligations), or any other event shall occur or condition shall
exist, if the effect of such failure, event or condition is to cause, or
permit the holder or holders thereof to cause, (A) Indebtedness of
Borrower and its Subsidiaries (other than the Obligations) in an
aggregate amount exceeding $1,000,000 to become due (and/or to be
secured by cash collateral) or (B) Indebtedness constituting secured
Obligations to become due (and/or to be secured by cash collateral); or
(f) INSOLVENCY, VOLUNTARY PROCEEDINGS. Borrower or any of its
Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing
its inability, to pay its debts generally as they mature, (iii) make a
general assignment for the benefit of its or any of its creditors,
(iv) be dissolved or liquidated in full or in part, (v) become insolvent
(as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment
of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vi) take
any action for the purpose of effecting any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS. Proceedings for the appointment
of a receiver, trustee, liquidator or custodian of Borrower or any of
its Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Borrower or
any of its Subsidiaries or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered or such proceeding shall not
be dismissed or discharged within sixty (60) days of commencement; or
(h) JUDGMENTS. (i) One or more judgments, orders, decrees or
arbitration awards requiring Borrower and/or its Subsidiaries to pay an
aggregate amount of $1,000,000 or more (exclusive of amounts covered by
insurance issued by an insurer not an Affiliate of Borrower and
otherwise satisfying the requirements set forth in SUBPARAGRAPH 5.01(d))
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shall be rendered against Borrower and/or any of its Subsidiaries in
connection with any single or related series of transactions, incidents
or circumstances and the same shall not be vacated or stayed for a
period of ten (10) consecutive days; (ii) any judgment, writ,
assessment, warrant of attachment, tax lien or execution or similar
process shall be issued or levied against a substantial part of the
property of Borrower or any of its Subsidiaries and the same shall not
be released, stayed, vacated or otherwise dismissed within ten (10) days
after issue or levy; or (iii) any other judgments, orders, decrees,
arbitration awards, writs, assessments, warrants of attachment, tax
liens or executions or similar processes which, alone or in the
aggregate, are reasonably likely to have a Material Adverse Effect are
rendered, issued or levied; or
(i) CREDIT DOCUMENTS. Any Credit Document or any material term
thereof shall cease to be, or be asserted by Borrower or any of its
Subsidiaries not to be, a legal, valid and binding obligation of
Borrower or any of its Subsidiaries enforceable in accordance with its
terms; or
(j) ERISA. Any Reportable Event which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee by the PBGC to administer any Employee Benefit
Plan shall occur, or any Employee Benefit Plan shall be terminated
within the meaning of Title IV of ERISA or a trustee shall be appointed
by the PBGC to administer any Employee Benefit Plan; or
(k) CHANGE OF CONTROL. Any Change of Control shall occur; or
(l) MATERIAL ADVERSE EFFECT. Any event(s) or condition(s)
which is(are) reasonably likely to have a Material Adverse Effect shall
occur or exist.
6.02. REMEDIES. At any time after the occurrence and during the
continuance of any event of default (other than an event of default referred to
in SUBPARAGRAPH 6.01(f) or 6.01(g)), Agent may, with the consent of the Required
Lenders, or shall, upon instructions from the Required Lenders, by written
notice to Borrower, (a) terminate the Commitments and the obligations of the
Lenders to make Loans and/or (b) declare all outstanding Obligations payable by
Borrower to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Amended and Restated Notes to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in SUBPARAGRAPH 6.01(f) or 6.01(g), immediately and without notice,
(1) the Commitments and the obligations of the Lenders to make Loans shall
automatically terminate and (2) all outstanding Obligations payable by Borrower
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Amended and
Restated Notes to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, Agent may
exercise any other right, power or remedy available to it under any of the
Credit Documents or otherwise by law, either by suit in equity or by action at
law, or both.
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SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS.
7.01. APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby appoints
and authorizes Agent to act as its agent hereunder and under the other Credit
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Credit Document, be a trustee for any Lender or have any fiduciary duty to
any Lender. Notwithstanding anything to the contrary contained herein Agent
shall not be required to take any action which is contrary to this Agreement or
any other Credit Document or any applicable Governmental Rule. Neither Agent
nor any Lender shall be responsible to any other Lender for any recitals,
statements, representations or warranties made by Borrower or any of its
Subsidiaries contained in this Agreement or in any other Credit Document, for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Credit Document or for any failure by Borrower or
any of its Subsidiaries to perform their respective obligations hereunder or
thereunder. Agent may employ agents and attorneys-in-fact and shall not be
responsible to any Lender for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of
its directors, officers, employees, agents or advisors shall be responsible to
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Credit Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as
otherwise provided under this Agreement, Agent shall take such action with
respect to the Credit Documents as shall be directed by the Required Lenders.
7.02. RELIANCE BY AGENT. Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Agent with reasonable care. As to any other matters not
expressly provided for by this Agreement, Agent shall not be required to take
any action or exercise any discretion, but shall be required to act or to
refrain from acting upon instructions of the Required Lenders and shall in all
cases be fully protected by the Lenders in acting, or in refraining from acting,
hereunder or under any other Credit Document in accordance with the instructions
of the Required Lenders, and such instructions of the Required Lenders and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders.
7.03. DEFAULTS. Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default unless Agent has received a
written notice from a Lender or Borrower, referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"Notice of Default". If Agent receives such a notice of the occurrence of a
Default or Event of Default, Agent shall give prompt notice thereof to the
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; PROVIDED,
HOWEVER, that until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain
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from taking such action, with respect to such Default or Event of Default as
it shall deem advisable in the best interest of the Lenders.
7.04. INDEMNIFICATION. Without limiting the Obligations of
Borrower hereunder, each Lender agrees to indemnify Agent, ratably in
accordance with their Proportionate Shares, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any
time be imposed on, incurred by or asserted against Agent in any way relating
to or arising out of this Agreement or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or the enforcement of any of the terms hereof or thereof; PROVIDED,
HOWEVER, that no Lender shall be liable for any of the foregoing to the
extent they arise from Agent's gross negligence or willful misconduct. Agent
shall be fully justified in refusing to take or in continuing to take any
action hereunder unless it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The
obligations of each Lender under this PARAGRAPH 7.04 shall survive the
payment and performance of the Obligations, the termination of this Agreement
and any Lender ceasing to be a party to this Agreement (with respect to
events which occurred prior to the time such Lender ceased to be a Lender
hereunder).
7.05. NON-RELIANCE. Each Lender represents that it has, independently
and without reliance on Agent, or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
business, prospects, management, financial condition and affairs of Borrower and
the Subsidiaries and its own decision to enter into this Agreement and agrees
that it will, independently and without reliance upon Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own appraisals and decisions in taking or not taking
action under this Agreement. Neither Agent nor any of its affiliates nor any of
their respective directors, officers, employees, agents or advisors shall (a) be
required to keep any Lender informed as to the performance or observance by
Borrower or any of its Subsidiaries of the obligations under this Agreement or
any other document referred to or provided for herein or to make inquiry of, or
to inspect the properties or books of Borrower or any of its Subsidiaries; (b)
have any duty or responsibility to provide any Lender with any credit or other
information concerning Borrower or any of its Subsidiaries which may come into
the possession of Agent, except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Agent
hereunder; or (c) be responsible to any Lender for (i) any recital, statement,
representation or warranty made by Borrower or any officer, employee or agent of
Borrower in this Agreement or in any of the other Credit Documents, (ii) the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any Credit Document, (iii) the value or sufficiency of the
Collateral or the validity or perfection of any of the liens or security
interests intended to be created by the Credit Documents, or (iv) any failure by
Borrower to perform its obligations under this Agreement or any other Credit
Document.
7.06. RESIGNATION OR REMOVAL OF AGENT. Agent may resign at any time
by giving thirty (30) days prior written notice thereof to Borrower and the
Lenders, and Agent may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal,
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the Required Lenders shall have the right to appoint a successor agent, which
agent, if not a lender, shall be reasonably acceptable to borrower; PROVIDED,
HOWEVER, that Borrower shall have no right to approve a successor Agent if a
Default or an Event of Default has occurred and is continuing. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from the duties and obligations thereafter arising
hereunder. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this SECTION VII shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
7.07. AUTHORIZATION. Agent is hereby authorized by the Lenders to
execute, deliver and perform, each of the Credit Documents to which Agent is or
is intended to be a party and each Lender agrees to be bound by all of the
agreements of Agent contained in the Credit Documents.
7.08. AGENT IN ITS INDIVIDUAL CAPACITY. Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of banking
or other business with Borrower and its Subsidiaries and Affiliates as though
Agent were not Agent hereunder. With respect to Loans, if any, made by Agent in
its capacity as a Lender, Agent in its capacity as a Lender shall have the same
rights and powers under this Agreement and the other Credit Documents as any
other Lender and may exercise the same as though it were not Agent, and the
terms "Lender" or "Lenders" shall include Agent in its capacity as a Lender.
SECTION VIII. MISCELLANEOUS.
8.01. NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower, any Lender or Agent under this Agreement or the other Credit Documents
shall be in writing and faxed, mailed or delivered, if to Borrower or Agent, at
its respective facsimile number or address set forth below or, if to any Lender,
at the address or facsimile number specified beneath the heading "Address for
Notices" under the name of such Lender in SCHEDULE I (or to such other facsimile
number or address for any party as indicated in any notice given by that party
to the other parties). All such notices and communications shall be effective
(a) when sent by Federal Express or other overnight service of recognized
standing, on the Business Day following the deposit with such service; (b) when
mailed, first class postage prepaid and addressed as aforesaid through the
United States Postal Service, upon receipt; (c) when delivered by hand, upon
delivery; and (d) when faxed, upon confirmation of receipt; PROVIDED, HOWEVER,
that any notice delivered to Agent under SECTION II shall not be effective until
received by Agent.
Agent: ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Dianne Barkley
Telephone: (415) 984-3706
Fax No: (415) 362-3524
with a copy to:
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ABN AMRO Bank N.V.
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
And
ABN AMRO Bank N.V.
208 S. LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Joseph Coriaci
Credit Administration
Telephone: (312) 992-5118
Fax No.: (312) 992-5111
Borrower: ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Fax No: (408) 321-9686
Each Notice of Borrowing, Notice of Conversion and Notice of Interest Period
Selection shall be given by Borrower to Agent's office located at the address
referred to above during Agent's normal business hours; PROVIDED, HOWEVER, that
any such notice received by Agent after 10:30 a.m. on any Business Day shall be
deemed received by Agent on the next Business Day. In any case where this
Agreement authorizes notices, requests, demands or other communications by
Borrower to Agent or any Lender to be made by telephone or facsimile, Agent or
any Lender may conclusively presume that anyone purporting to be a person
designated in any incumbency certificate or other similar document received by
Agent or a Lender is such a person.
8.02. EXPENSES. Borrower shall pay on demand, whether or not any Loan
is made hereunder, (a) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Agent in connection with the
preparation, negotiation, execution and delivery of, and the exercise of its
duties under, this Agreement and the other Credit Documents, and the
preparation, negotiation, execution and delivery of amendments and waivers
hereunder and thereunder and (b) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Agent and the Lenders in
the enforcement or attempted enforcement of any of the obligations or in
preserving any of Agent's or the Lenders' rights and remedies (including,
without limitation, all such fees and expenses incurred in connection with any
"workout" or restructuring affecting the Credit Documents or the Obligations or
any bankruptcy or similar proceeding involving Borrower or any of its
Subsidiaries). As used herein, the term "reasonable
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attorneys' fees and expenses" shall include, without limitation, allocable
costs and expenses of Agent's and Lenders' in-house legal counsel and staff.
The obligations of Borrower under this PARAGRAPH 8.02 shall survive the
payment and performance of the Obligations and the termination of this
Agreement.
8.03. INDEMNIFICATION. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and hold harmless Agent, the
Lenders and their Affiliates and their respective directors, officers,
employees, agents and advisors ("INDEMNITEES") from and against any and all
liabilities, losses, damages or expenses of any kind or nature and from any
suits, claims or demands (including in respect of or for reasonable attorney's
fees and other expenses) arising on account of or in connection with any matter
or thing or action or failure to act by Indemnitees, or any of them, arising out
of or relating to the Credit Documents or any transaction contemplated thereby,
including without limitation any use by Borrower of any proceeds of the Loans,
except to the extent such liability arises from the willful misconduct or gross
negligence of such Indemnitee. Upon receiving knowledge of any suit, claim or
demand asserted by a third party that Agent or any Lender believes is covered by
this indemnity, Agent or such Lender shall give Borrower notice of the matter
and an opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel satisfactory to Agent or such Lender, as the case may be. Agent or such
Lender may also require Borrower to defend the matter. Any failure or delay of
Agent or any Lender to notify Borrower of any such suit, claim or demand shall
not relieve Borrower of its obligations under this PARAGRAPH 8.03 but shall
reduce such obligations to the extent of any increase in those obligations
caused solely by any such failure or delay which is unreasonable. The
obligations of Borrower under this PARAGRAPH 8.03 shall survive the payment and
performance of the Obligations and the termination of this Agreement.
8.04. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
of this Agreement or any other Credit Document may be amended or waived, and any
consent under this Agreement or any other Credit Document may be given, if such
amendment, waiver or consent is in writing and is signed by Borrower and the
required Lenders (or Agent on behalf of the required Lenders with the written
approval of the Required Lenders); PROVIDED, HOWEVER that:
(a) Any amendment, waiver or consent which would (i) increase
the Total Commitment, (ii) extend the Maturity Date, (iii) reduce the
principal of or interest on any Loan or any fees or other amounts
payable for the account of the Lenders hereunder, (iv) extend any
scheduled principal, interest or fee payment date, (v) amend this
PARAGRAPH 8.04, (vi) releases the Amended and Restated Guaranty, (vii)
amends the definition of Required Lenders, or (viii) release any
substantial and material part of the Collateral (except for any release
permitted by Subparagraph 2.12(e)), must be in writing and signed or
approved in writing by all Lenders;
(b) Any amendment, waiver or consent which increases or
decreases the Proportionate Share of any Lender must be in writing and
signed by such Lender; and
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(c) Any amendment, waiver or consent which affects the rights
or obligations of Agent must be in writing and signed by Agent.
No failure or delay by Agent or any Lender in exercising any right under this
Agreement or any other Credit Document shall operate as a waiver thereof or of
any other right hereunder or thereunder nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of any other
right hereunder or thereunder. Unless otherwise specified in such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
8.05. SUCCESSORS AND ASSIGNS.
(a) BINDING EFFECT. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of Borrower,
the Lenders, Agent, all future holders of the Amended and Restated Notes
and their respective successors and permitted assigns, except that
Borrower may not assign or transfer any of its rights or obligations
under any Credit Document without the prior written consent of Agent and
each Lender. All references in this Agreement to any Person shall be
deemed to include all successors and assigns of such Person.
(b) PARTICIPATIONS. Any Lender may at any time sell to one or
more banks or other financial institutions ("PARTICIPANTS")
participating interests in any Loan owing to such Lender, any Amended
and Restated Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under this Agreement and the other
Credit Documents. In the event of any such sale by a Lender of
participating interests, such Lender's obligations under this Agreement
shall remain unchanged, such Lender shall remain solely responsible for
the performance thereof, such Lender shall remain the holder of its
Amended and Restated Notes for all purposes under this Agreement and
Borrower and Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under
this Agreement. Any agreement pursuant to which any such sale is
effected may require the selling Lender to obtain the consent of the
Participant in order for such Lender to agree in writing to any
amendment, waiver or consent of a type specified in CLAUSE (i), (ii),
(iii) OR (iv) OF SUBPARAGRAPH 8.04(a) but may not otherwise require the
selling Lender to obtain the consent of such Participant to any other
amendment, waiver or consent hereunder. Borrower also agrees that any
Lender which has transferred any participating interest in its
Commitment or Loans shall, notwithstanding any such transfer, be
entitled to the full benefits accorded such Lender under PARAGRAPH 2.09,
PARAGRAPH 2.10, and PARAGRAPH 2.11, as if such Lender had not made such
transfer.
(c) ASSIGNMENTS. Any Lender may, at any time, sell and assign
to any Lender or any Eligible Assignee (individually, an "ASSIGNEE
LENDER") all or a portion of its rights and obligations under this
Agreement and the other Credit Documents (such a sale and assignment to
be referred to herein as an "ASSIGNMENT") pursuant to an assignment
agreement in the form of EXHIBIT G (an "ASSIGNMENT AGREEMENT"), executed
by each
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Assignee Lender and such assignor Lender (an "ASSIGNOR LENDER")
and delivered to Agent for its acceptance and recording in the Register;
PROVIDED, HOWEVER, that:
(i) Without the written consent of Agent and, if no
Default or Event of Default has occurred and is continuing,
Borrower (which consent of Agent and Borrower shall not be
unreasonably withheld), no Lender may make any Assignment to any
Assignee Lender which is not, immediately prior to such
Assignment, a Lender hereunder or an Affiliate thereof; or
(ii) Without the written consent of Agent and, if no
Default or Event of Default has occurred and is continuing,
Borrower (which consent of Agent and Borrower shall not be
unreasonably withheld), no Lender may make any Assignment to any
Assignee Lender if, after giving effect to such Assignment, the
Commitment of such Lender or such Assignee Lender would be less
than Five Million Dollars ($5,000,000) (except that a Lender may
make an Assignment which reduces its Commitment to zero without
the written consent of Borrower and Agent); or
(iii) Without the written consent of Agent and, if no
Default or Event of Default has occurred and is continuing,
Borrower (which consent of Agent and Borrower shall not be
unreasonably withheld), no Lender may make any Assignment which
does not assign and delegate an equal pro rata interest in such
Lender's Loans, Commitment and all other rights, duties and
obligations of such Lender under this Agreement and the other
Credit Documents.
Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective Date
determined pursuant to such Assignment Agreement, (A) each Assignee
Lender thereunder shall be a Lender hereunder with a Proportionate Share
as set forth on ATTACHMENT 1 TO SUCH ASSIGNMENT AGREEMENT (under the
caption "Proportionate Share After Assignment") and shall have the
rights, duties and obligations of such a Lender under this Agreement and
the other Credit Documents, and (B) the Assignor Lender thereunder shall
be a Lender with a Proportionate Share as set forth on ATTACHMENT 1 TO
SUCH ASSIGNMENT AGREEMENT (under the caption "Proportionate Share After
Assignment"), or, if the Proportionate Share of the Assignor Lender has
been reduced to 0%, the Assignor Lender shall cease to be a Lender and
to have any obligation to make any Loan; PROVIDED, HOWEVER, that any
such Assignor Lender which ceases to be a Lender shall continue to be
entitled to the benefits of any provision of this Agreement which by its
terms survives the termination of this Agreement. Each Assignment
Agreement shall be deemed to amend SCHEDULE I to the extent, and only to
the extent, necessary to reflect the addition of each Assignee Lender,
the deletion of each Assignor Lender which reduces its Proportionate
Share to 0% and the resulting adjustment of Proportionate Shares arising
from the purchase by each Assignee Lender of all or a portion of the
rights and obligations of an Assignor Lender under this Agreement and
the other Credit Documents. On or prior to the Assignment Effective
Date determined pursuant to each Assignment Agreement, Borrower, at its
own expense, shall execute and
66
<PAGE>
deliver to Agent, in exchange for the surrendered Amended and
Restated Note of the Assignor Lender thereunder, a new Amended and
Restated Note to the order of each Assignee Lender thereunder (with
each new Amended and Restated Note to be in an amount equal to the
Commitment assumed by such Assignee Lender) and, if the Assignor
Lender is continuing as a Lender hereunder, a new Amended and
Restated Note to the order of the Assignor Lender (with the new
Amended and Restated Note to be in an amount equal to the Commitment
retained by it). Each such new Amended and Restated Note shall be
dated the Closing Date and each shall otherwise be in the form of the
Amended and Restated Note replaced thereby. The Amended and Restated
Notes surrendered by the Assignor Lender shall be returned by Agent
to Borrower marked "replaced". Each Assignee Lender which was not
previously a Lender hereunder and which is not incorporated under the
laws of the United States of America or a state thereof shall, within
three (3) Business Days of becoming a Lender, deliver to Borrower and
Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 (or successor applicable form), as the case
may be, certifying in each case that such Lender is entitled to
receive payments under this Agreement without deduction or
withholding of any United States federal income taxes.
(d) REGISTER. Agent shall maintain at its address referred to
in PARAGRAPH 8.01 a copy of each Assignment Agreement delivered to it
and a register (the "REGISTER") for the recordation of the names and
addresses of the Lenders and the Proportionate Shares of each Lender
from time to time. The entries in the Register shall be conclusive in
the absence of manifest error, and Borrower, Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of
the Loans recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) REGISTRATION. Upon its receipt of an Assignment Agreement
executed by an Assignor Lender and an Assignee Lender (and, to the
extent required by SUBPARAGRAPH 8.05(c), by Borrower and Agent) together
with payment to Agent by Assignor Lender of a registration and
processing fee of $4000, Agent shall (i) promptly accept such Assignment
Agreement and (ii) on the Effective Date determined pursuant thereto
record the information contained therein in the Register and give notice
of such acceptance and recordation to the Lenders and Borrower. Agent
may, from time to time at its election, prepare and deliver to the
Lenders and Borrower a revised SCHEDULE I reflecting the names,
addresses and respective Proportionate Shares of all Lenders then
parties hereto.
(f) CONFIDENTIALITY. Agent and the Lenders may disclose the
Credit Documents and any financial or other information relating to
Borrower or any Subsidiary to each other or, with the consent of
Borrower, to any potential Participant or Assignee Lender.
8.06. SETOFF; SECURITY INTEREST.
(a) SETOFF. In addition to any rights and remedies of the
Lenders provided by law, each Lender shall have the right, with the
prior consent of Agent but without prior notice
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<PAGE>
to or consent of Borrower, any such notice and consent being
expressly waived by Borrower to the extent permitted by applicable
law, upon the occurrence and during the continuance of an Event of
Default, to set-off and apply against the Obligations any amount
owing from such Lender to Borrower. The aforesaid right of set-off
may be exercised by such Lender against Borrower or against any
trustee in bankruptcy, debtor in possession, assignee for the benefit
of creditors, receiver or execution, judgment or attachment creditor
of Borrower or against anyone else claiming through or against
Borrower or such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such
right of set-off may not have been exercised by such Lender at any
prior time. Each Lender agrees promptly to notify Borrower after any
such set-off and application made by such Lender, PROVIDED that the
failure to give such notice shall not affect the validity of such
set-off and application.
(b) SECURITY INTEREST. As security for the Secured
Obligations, Borrower hereby grants to Agent and each Lender, for the
benefit of all Lenders, a continuing security interest in any and all
deposit accounts or moneys of Borrower now or hereafter maintained with
such Lender. Each Lender shall have all of the rights of a secured
party with respect to such security interest.
8.07. NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied
from this Agreement is intended to give, or shall be construed to give, any
Person, other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
8.08. PARTIAL INVALIDITY. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
8.09. JURY TRIAL. EACH OF BORROWER, THE LENDERS AND AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.
8.10. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
8.11. CONFIDENTIALITY. None of the Banks and Agent shall disclose to
any Person any information with respect to Borrower or any of its Subsidiaries
which is furnished pursuant to this Agreement or under the other Credit
Documents, except that any Bank or Agent may disclose any such information (a)
to its own directors, officers, employees, auditors, counsel and
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<PAGE>
other professional advisors and to its Affiliates if such Bank or Agent or
such Bank's or such Agent's holding or parent company in its sole discretion
determines that any such party should have access to such information; (b) to
another Bank or Agent; (c) if generally available to the public through no
fault of Agent or the Banks; (d) if required or appropriate in any report,
statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Bank or Agent; (e) if required or
appropriate in response to any summons or subpoena or in connection with any
litigation, to the extent permitted or deemed advisable by counsel; (f) to
comply with any Requirement of Law applicable to such Bank or Agent; (g) to
any Participant or Assignee Bank or any prospective Participant or Assignee
Bank, provided that such Participant or Assignee or prospective Participant
or assignee agrees in writing to be bound by this PARAGRAPH 8.11 prior to
disclosure; or (h) otherwise with the prior consent of Borrower; PROVIDED,
HOWEVER, that any disclosure made in violation of this agreement shall not
affect the obligations of Borrower and its Subsidiaries under this Agreement
and the other Credit Documents.
8.12. EFFECT; TERMINATION OF EXISTING CREDIT AGREEMENT. Borrower,
Agent and the Lenders agree that, on and after the Closing Date, (a) this
Agreement, the Amended and Restated Notes and the Amended and Restated Guaranty
shall amend, restate in their entirety and replace, without novation, the
Existing Credit Agreement, the promissory notes issued by Borrower in connection
with the Existing Credit Agreement (the "Existing Notes") and the Guaranty dated
as of july 31, 1996 issued by the Domestic Subsidiaries in favor of Agent for
the benefit of the Lenders in connection with the Existing Credit Agreement (the
"Existing Guaranty"), respectively, (b) all obligations of the Lenders to make
loans or otherwise extend credit to Borrower under the Existing Credit Agreement
shall be terminated and (c) the Prior Security Documents and all of the Liens
granted to Agent and the Lenders thereunder shall terminate; PROVIDED, HOWEVER,
that such termination shall not (i) operate as a waiver of any right, power or
remedy of Agent or the Lender hereunder or under the Amended and Restated Notes,
the Amended and Restated Guaranty or any related document, instrument or
agreement or (ii) extinguish or impair any obligations of Borrower under the
Existing Credit Agreement, the Existing Notes, the Existing Guaranty or any
related document, instrument or agreement except to the extent any such
obligation is actually satisfied by Borrower or is covered in this Agreement or
the other Credit Documents; PROVIDED, FURTHER, that all of the Loans outstanding
under the Existing Credit Agreement shall remain outstanding and shall be deemed
to have been made under this Agreement on a pro rata basis by the Lenders
hereunder in accordance with their respective Proportionate Shares.
[the first signature page follows.]
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<PAGE>
IN WITNESS WHEREOF, Borrower, the Lenders and Agent have caused
this Agreement to be executed as of the day and year first above written.
BORROWER: ADAC LABORATORIES
By: ________________________________
Name: ______________________
Title: _____________________
AGENT: ABN AMRO BANK N.V., AS AGENT
By: ________________________________
Name: ______________________
Title: _____________________
By:
By: ________________________________
Name: ______________________
Title: _____________________
LENDERS: ABN AMRO BANK N.V., AS A LENDER
By: ________________________________
Name: ______________________
Title: _____________________
By: ________________________________
Name: ______________________
Title: _____________________
SANWA BANK CALIFORNIA, AS A LENDER
By: ________________________________
Name: ______________________
Title: _____________________
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<PAGE>
BANQUE NATIONALE DE PARIS, AS A LENDER
By: ________________________________
Name: ______________________
Title: _____________________
UNION BANK OF CALIFORNIA, N.A, AS A
LENDER
By: ________________________________
Name: ______________________
Title: _____________________
WELLS FARGO BANK, N.A., AS A LENDER
By: ________________________________
Name: ______________________
Title: _____________________
71
<PAGE>
PROPOSED CONFIRMED COPY
THROUGH FIRST AMENDMENT
- - - --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
ADAC LABORATORIES
AND
THE LENDERS NAMED HEREIN
AND
ABN AMRO BANK N.V.,
AS AGENT FOR THE LENDERS
MARCH 29, 1999
- - - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION I. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.03. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.04. Plural Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.05. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.07. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.08. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.09. Calculation of Interest and Fees. . . . . . . . . . . . . . . . . . 19
1.10. Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . 19
SECTION II. CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.01. Revolving Loan Facility . . . . . . . . . . . . . . . . . . . . . . 20
2.02. Commitment Reductions, Etc. . . . . . . . . . . . . . . . . . . . . 23
2.03. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.04. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.05. Other Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . 25
2.06. Notes and Interest Account. . . . . . . . . . . . . . . . . . . . . 26
2.07. Loan Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.08. Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . . . . 28
2.09. Change of Circumstances . . . . . . . . . . . . . . . . . . . . . . 29
2.10. Taxes on Payments . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.11. Funding Loss Indemnification. . . . . . . . . . . . . . . . . . . . 32
2.12. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.13. Replacement of Lenders. . . . . . . . . . . . . . . . . . . . . . . 35
SECTION III. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . 35
3.01. Initial Conditions Precedent. . . . . . . . . . . . . . . . . . . . 35
3.02. Conditions Precedent to Each Credit Event . . . . . . . . . . . . . 35
3.03. Covenant to Deliver . . . . . . . . . . . . . . . . . . . . . . . . 36
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C> <C>
SECTION IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 36
4.01. Borrower's Representations and Warranties . . . . . . . . . . . . . 36
4.02. Reaffirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . 41
5.02. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 44
5.03. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION VI. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.02. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS . . . . . . . . . . . . . . . 56
7.01. Appointment, Powers and Immunities. . . . . . . . . . . . . . . . . 56
7.02. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.03. Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.05. Non-Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.06. Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . 58
7.07. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.08. Agent in its Individual Capacity. . . . . . . . . . . . . . . . . . 58
SECTION VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.02. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.03. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.04. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . . 60
8.05. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 61
8.06. Setoff; Security Interest . . . . . . . . . . . . . . . . . . . . . 64
8.07. No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . 64
8.08. Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . 64
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C> <C>
8.09. Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.12. Effect; Termination of Existing Credit Agreement. . . . . . . . . . 65
</TABLE>
SCHEDULES
I Lenders
1.01 Pricing Grid
3.01 Initial Conditions Precedent
4.01(q) Subsidiaries
EXHIBITS
A Notice of Borrowing (2.01(b))
B Notice of Conversion (2.01(d))
C Notice of Interest Period Selection (2.01(e))
D Maturity Date Extension Request (2.01(h))
E Amended and Restated Note (2.06(a))
F Amended and Restated Guaranty (2.12(a))
G Assignment Agreement (8.05(c))
H-1 Borrower Security Agreement (2.12(b))
H-2 Domestic Subsidiary Security Agreement (2.12(b))
I-1 Borrower IP Security Agreement (2.12(b))
I-2 Domestic Subsidiary IP Security Agreement (2.12(b))
J Pledge Agreement (2.12(b))
K Collateral Certificate (1.01(a))
L Insurance Endorsements (5.01(d))
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<PAGE>
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>
This redlined draft, generated by CompareRite -TM- - The Instant Redliner, shows
the differences between - original document : 38434.10 and revised document:
382444.3CompareRite found 162 change(s) in the textDeletions appear as
Overstrike text Additions appear as Bold+Dbl Underline text
<PAGE>
SCHEDULE I
LENDERS
Lender Proportionate
- - - ------ Share*
------
ABN AMRO BANK N.V. 33.33333333%
Applicable Lending Office:
ABN AMRO Bank N.V.
San Francisco Representative Office
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Address for Notices:
Credit Administration:
ABN AMRO Bank N.V.
208 S. LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Joseph Coriaci
Credit Administration
Telephone: (312) 992-5118
Fax No.: (312) 992-5111
With a copy to:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Dianne Barkley
Vice President
Telephone: (415) 984-3706
Fax No: (415) 362-3524
I-1
<PAGE>
Notices of Borrowing, Etc.:
ABN AMRO Bank N.V.
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
Wiring Instructions:
ABN AMRO Bank N.V.
ABA #: 026009580
F/O ABN AMRO Bank N.V.
Chicago Branch CPU
Account #: 650-001-1789-41
Reference: Adac Laboratories
* To be expressed as a percentage rounded to the eighth digit to the right
of the decimal point.
I-2
<PAGE>
Lender Proportionate
- - - ------ Share*
------
SANWA BANK CALIFORNIA 24.00000000%
Applicable Lending Office:
San Jose CBC
220 Almaden Boulevard
San Jose, CA 95113-2003
Address for notices:
220 Almaden Boulevard
San Jose, CA 95113-2003
Attn: Clifford M. Wallace
Telephone No: (408) 297-6500
Telecopier No: (408) 292-4092
Wiring Instructions:
Sanwa Bank California
220 Almaden Boulevard
San Jose, CA 95113
ABA No. 122003516
Account No: 1129-92463
Reference: Commercial Loan No. 00-0491250-5
For Further Credit To: ADAC Laboratories
* To be expressed as a percentage rounded to the eighth digit to the right
of the decimal point.
I-3
<PAGE>
Lender Proportionate
- - - ------ Share*
------
BANQUE NATIONALE DE PARIS 14.66666666%
Applicable Lending Office:
Banque National de Paris,
San Francisco Branch
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Address for Notice:
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attention: Debra Wright, Vice President
Telephone: (415) 956-0707
Telecopier: (415) 296-8954
Telex: RCA 278900 (Answerback: BNPs UR)
Wiring Instructions
Federal Reserve Bank of San Francisco
San Francisco, California
ABA Number: 121027234
Account Name: Banque Nationale de Paris, San Francisco Branch
Reference: ADAC Laboratories
* To be expressed as a percentage rounded to the eighth digit to the right
of the decimal point.
I-4
<PAGE>
Lender Proportionate
- - - ------ Share*
------
UNION BANK OF CALIFORNIA, N.A. 14.66666666%
Applicable Lending Office:
Union Bank of California, N.A.
350 California Street
San Francisco, CA 94104
Address for Notice: cc: Notification
----------------
Union Bank of California, N.A. Allan Miner
Northern California Commercial 99 Almaden Blvd.
Banking Division Suite 200
350 California Street, 10th Floor San Jose, CA 95113
San Francisco, CA 94104 Tel.: 408/279-7742
Attention: Jim Goudy Fax: 408/280-7163
Telephone: (415) 705-7165
Telecopier: (415) 705-7111
Wiring Instructions:
Union Bank of California, N.A.
1980 Saturn Street
Monterey Park, CA 91755
ABA Number: 122-000-496
Account Number: 070-196431
Account Name: Wire Transfer Clearing
Attention: Commercial Loan Operations
Reference: ADAC Laboratories
(include any additional information needed to process transaction)
* To be expressed as a percentage rounded to the eighth digit to the right
of the decimal point.
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<PAGE>
Lender Proportionate
- - - ------ Share*
------
WELLS FARGO BANK, N.A. 13.33333333%
Applicable Lending Office:
Wells Fargo Bank, N.A.
121 Park Center Plaza, Third Floor
San Jose, CA 95113
Address for Notice:
Wells Fargo Bank, N.A.
Commercial Bank Loan Center
201 Third Street, 8th Floor
San Francisco, CA 94103
Attention: Oscar Enriquez
Telephone: (415) 477-5425
Telecopier: (415) 979-0675
Wiring Instructions:
Wells Fargo Bank, N.A.
San Francisco, CA
ABA Number: 121-000-248
BNF: Member SYN/AC-2712-507201
Reference: ADAC LABORATORIES
* To be expressed as a percentage rounded to the eighth digit to the right
of the decimal point.
I-6
<PAGE>
SCHEDULE 1.01(a)
PRICING GRID
APPLICABLE MARGINS
<TABLE>
<CAPTION>
DEBT/ QUARTER BASE LIBOR COMMITMENT
EBITDA LEVEL(2) RATE LOANS FEE
RATIO(1) LOANS PERCENTAGE
-------- --------- ----- ----- ----------
<S> <C> <C> <C> <C>
LESS THAN OR
EQUAL TO 0.50 1 0% 1.000% 0.250%
GREATER THAN 0.50 2 0% 1.500% 0.375%
LESS THAN 1.00
GREATER THAN 1.00, 3 0% 2.000% 0.500%
LESS THAN 1.50
GREATER THAN 1.50, 4 0% 2.250% 0.625%
LESS THAN OR
EQUAL TO 2.00
GREATER THAN 2.00 5 0% 2.500% 0.750%
</TABLE>
- - - --------------------
(1) For a consecutive four-quarter period.
(2) For the second quarter after the last quarter in the consecutive
four-quarter period.
1.01(a)-1
<PAGE>
EXPLANATION
1. The Applicable Margin for each Loan and the Commitment Fee Percentage will
be set for each quarter and will vary depending upon whether such quarter
is a Level 1 Quarter, a Level 2 Quarter, a Level 3 Quarter, a Level 4
Quarter, OR a Level 5 Quarter.
2. The Closing Date through the quarter ending on or about June 30, 1999 will
be a Level 2 Quarter.
3. Each quarter thereafter will be a Level 1 Quarter, a Level 2 Quarter, a
Level 3 Quarter, a Level 4 Quarter, OR a Level 5 Quarter depending upon
Borrower's Debt/EBITDA Ratio for the consecutive four-quarter period which
ended with the second quarter prior to such quarter.
4. Examples:
(a) For the consecutive four-quarter period ending on or about September
30, 1999, Borrower's Debt/EBITDA Ratio was 1.30. The quarter ending
on or about March 31, 2000 will be a Level 3 Quarter.
(b) For the consecutive four-quarter period ending on or about June 30,
2000, Borrower's Debt/EBITDA Ratio was 1.60. The quarter ending on
or about December 31, 2000 will be a Level 4 Quarter.
1.01(a)-2
<PAGE>
SCHEDULE 3.01
INITIAL CONDITIONS PRECEDENT
A. PRINCIPAL CREDIT DOCUMENTS.
(1) The Amended and Restated Credit Agreement, duly executed by Borrower,
each Lender and each Agent; and
(2) An Amended and Restated Note payable to each Lender, each duly
executed by Borrower; and
(3) The Amended and Restated Guaranty, duly executed by each Domestic
Subsidiary of Borrower.
B. BORROWER CORPORATE DOCUMENTS.
(1) The Certificate or Articles of Incorporation of Borrower, certified as
of a recent date prior to the Closing Date by the Secretary of State (or
comparable official) of its jurisdiction of incorporation;
(2) A Certificate of Good Standing (or comparable certificate) for
Borrower, certified as of a recent date prior to the Closing Date by the
Secretary of State (or comparable official) of its jurisdiction of
incorporation;
(3) A certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, certifying (a) that attached thereto is a true and
correct copy of the Bylaws of Borrower as in effect on the Closing Date; (b)
that attached thereto are true and correct copies of resolutions duly adopted by
the Board of Directors of Borrower and continuing in effect, which authorize the
execution, delivery and performance by Borrower of this Agreement and the other
Credit Documents executed or to be executed by Borrower and the consummation of
the transactions contemplated hereby and thereby; and (c) that there are no
proceedings for the dissolution or liquidation of Borrower;
(4) A certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, certifying the incumbency, signatures and authority of
the officers of Borrower authorized to execute, deliver and perform this
Agreement, the other Credit Documents and all other documents, instruments or
agreements related thereto executed or to be executed by Borrower; and
(5) Certificates of Good Standing (or comparable certificates) for
Borrower, certified as of a recent date prior to the Closing Date by the
Secretaries of State (or comparable official) of each state in which Borrower is
qualified to do business.
3.01-1
<PAGE>
C. SUBSIDIARY CORPORATE DOCUMENTS.
(1) The Certificate of Incorporation (or comparable certificate) of each
Domestic Subsidiary of Borrower, certified as of a recent date prior to the
Closing Date by the Secretary of State (or comparable public official) of its
state of incorporation;
(2) A Certificate of Good Standing (or comparable certificate) for each
Domestic Subsidiary of Borrower, certified as of a recent date prior to the
Closing Date by the Secretary of State (or comparable public official) of its
state of incorporation;
(3) A certificate of the Secretary or an Assistant Secretary of each
Domestic Subsidiary of Borrower, dated the Closing Date, certifying (a) that
attached thereto is a true and correct copy of the Bylaws of such Subsidiary as
in effect on the Closing Date; (b) that attached thereto are true and correct
copies of resolutions duly adopted by the Board of Directors of such Subsidiary
and continuing in effect, which authorize the execution, delivery and
performance by such Subsidiary of the Credit Documents executed or to be
executed by such Subsidiary and the consummation of the transactions
contemplated hereby and thereby; and (c) that there are no proceedings for the
dissolution or liquidation of such Subsidiary; and
(4) A certificate of the Secretary or an Assistant Secretary of each
Domestic Subsidiary of Borrower, dated the Closing Date, certifying the
incumbency, signatures and authority of the officers of such Subsidiary
authorized to execute, deliver and perform the Credit Documents and all other
documents, instruments or agreements related thereto executed or to be executed
by such Subsidiary.
D. FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC.
(1) A copy of the unaudited Financial Statements of Borrower and its
Subsidiaries for the fiscal quarter ended December 31, 1998 and for the fiscal
year to such date (prepared on a consolidated and consolidating basis),
certified by the Chief Financial Officer or Vice President-Finance of Borrower
to present fairly the financial condition, results of operations and other
information reflected therein and to have been prepared in accordance with GAAP
(subject to normal year-end audit adjustments);
(2) A copy of the audited consolidated Financial Statements of Borrower
for the fiscal year ended September 27, 1998, prepared by Coopers & Lybrand and
a copy of the unqualified opinion delivered by such accountants in connection
with such Financial Statements;
(3) A copy of the 10-Q report filed by Borrower with the Securities and
Exchange Commission for the quarter ended December 31, 1998;
(4) A copy of the 10-K report filed by Borrower with the Securities and
Exchange Commission for the fiscal year ended September 27, 1998;
3.01-2
<PAGE>
(5) The consolidated plan and forecast of Borrower and its Subsidiaries
for the fiscal year ending in 1999, including quarterly cash flow projections
through the fiscal year ending in 1999 and annual cash flow projections through
the fiscal years ending 2000 and 2001; and
(6) Such other financial, business and other information regarding
Borrower, or any of its Subsidiaries as Agent or any Lender may reasonably
request, including information as to possible contingent liabilities, tax
matters, environmental matters and obligations for employee benefits and
compensation.
E. OPINION.
A favorable written opinion of Wilson Sonsini Goodrich & Rosati, counsel
for Borrower and its Subsidiaries, dated the Closing Date and addressed to Agent
for the benefit of Agent and the Lenders, covering such legal matters as Agent
may reasonably request and otherwise in form and substance satisfactory to
Agent.
G. OTHER ITEMS.
(1) A duly completed and timely delivered Notice of Borrowing;
(2) Certificates of insurance evidencing the insurance Borrower is
required to maintain pursuant to SUBPARAGRAPH 5.01(d);
(3) An organization chart for Borrower and its Subsidiaries, setting forth
the relationship among such Persons, certified by the Chief Financial Officer or
Vice President-Finance of Borrower;
(4) A certificate of the Chief Financial Officer or Vice President-Finance
of Borrower, addressed to Agent and dated the Closing Date, certifying that:
(a) The representations and warranties set forth in PARAGRAPH 4.01 and in
the other Credit Documents are true and correct in all material respects as of
such date (except for such representations and warranties made as of a specified
date, which shall be true as of such date);
(b) No Event of Default or Default has occurred and is continuing as of
such date;
(c) All of the Credit Documents are in full force and effect;
(5) All fees and expenses payable to Agent and the Lenders on or prior to
the Closing Date (including all fees payable to Agent pursuant to the Agent's
Fee Letter);
(6) All fees and expenses of Agent's counsels through the Closing Date;
and
3.01-3
<PAGE>
(7) Such other evidence as Agent or any Lender may reasonably request to
establish the accuracy and completeness of the representations and warranties
and the compliance with the terms and conditions contained in this Agreement and
the other Credit Documents.
3.01-4
<PAGE>
SCHEDULE 4.01(q)
SUBSIDIARIES
1. SHARES OWNED DIRECTLY BY BORROWER:
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Shares Owned
---------- ------------ by Borrower(1)
-------------
<S> <C> <C>
ADAC Research & California 100%
Manufacturing,
Inc.
ADAC Healthcare Texas 100%
Information
Systems, Inc.
ADAC Medical Delaware 100%
Technologies, Inc.
(formerly known
as J.D. Technical
Services, Inc.)
ADAC Laboratories California 100%
Pacific, Inc.
ADAC Healthcare Delaware 100%
Partners, Inc.
Cortet, Inc. Florida 100%
O.N.E.S Medical New Hampshire 100%
Services, Inc.
CT Solutions California 100%
ADAC Capital, LLC Delaware 100%
ADAC Laboratories Canada 100%
Canada Ltd.
ADAC Laboratories Netherlands 100%
Europe, BV.
ADAC Foreign Virgin Islands 100%
Sales Corporation
ADAC do Brasil Brazil 100%
</TABLE>
- - - --------------------
4.01(q)-1
<PAGE>
(1) All shares common unless otherwise indicated.
4.01(q)-2
<PAGE>
2. SHARES OWNED DIRECTLY BY ADAC HEALTHCARE PARTNERS, INC. ("ADAC HCPI"):
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Shares Owned
---------- ------------ by ADAC HCPI
------------
<S> <C> <C>
ADAC Radiology Delaware 100%
Services, Inc.
100%
</TABLE>
- - - --------------------
3. SHARES OWNED DIRECTLY BY ADAC LABORATORIES EUROPE B.V. ("ADAC BV"):
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Shares Owned
---------- ------------ by ADAC BV(2)
-------------
<S> <C> <C>
ADAC Laboratories, SARL France 100%
ADAC Laboratories, SRL Italy 100%
ADAC Laboratories, Ltd. UK 100%
ADAC Laboratories, A/S Denmark 100%
ADAC Laboratories, GmbH Germany 100%
</TABLE>
- - - --------------------
(2) An immaterial number of directors' qualifying shares or the equivalent
may be outstanding for some Foreign Subsidiaries.
4.01(q)-3
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated Credit Agreement,
dated as of March 29, 1999 (the "CREDIT AGREEMENT"), among ADAC Laboratories
("BORROWER"), the financial institutions listed in SCHEDULE I to the Credit
Agreement (the "LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders (in
such capacity, "AGENT"). Unless otherwise indicated, all terms defined in the
Credit Agreement have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(b) of the Credit Agreement, Borrower
hereby irrevocably requests a Borrowing upon the following terms:
(a) The principal amount of the requested Borrowing is to be $____________;
(b) The requested Borrowing is to consist of ["Base Rate" or "LIBOR"]
Loans;
(c) If the requested Borrowing is to consist of LIBOR Loans, the initial
Interest Period for such Loans will be ______________ months; and
(d) The date of the requested Borrowing is to be _______________, ______.
3. Borrower hereby certifies to Agent and the Lenders that, on the date of
this Notice of Borrowing and after giving effect to the requested Borrowing:
(a) The representations and warranties of Borrower set forth in PARAGRAPH
4.01 of the Credit Agreement and in the other Credit Documents are true and
correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date);
(b) No Default or Event of Default has occurred and is continuing; and
(c) All of the Credit Documents are in full force and effect.
4. Please disburse the proceeds of the requested Borrowing to
- - - --------------------------------------------------------------------------------
A-1
<PAGE>
- - - --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Borrower has executed this Notice of Borrowing on the
date set forth above.
ADAC LABORATORIES
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
A-2
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated Credit Agreement,
dated as of March 29, 1999 (the "CREDIT AGREEMENT"), among ADAC Laboratories
("BORROWER"), the financial institutions listed in SCHEDULE I to the Credit
Agreement (the "LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders (in
such capacity, "AGENT"). Unless otherwise indicated, all terms defined in the
Credit Agreement have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(d) of the Credit Agreement, Borrower
hereby irrevocably requests to convert a Borrowing as follows:
(a) The Borrowing to be converted consists of ["Base Rate" or "LIBOR"]
Loans in the aggregate principal amount of $__________ which were initially
advanced to Borrower on __________, ____;
(b) The Loans in the Borrowing are to be converted into ["Base Rate" or
"LIBOR"] Loans;
(c) If such Loans are to be converted into LIBOR Loans, the initial
Interest Period for such Loans commencing upon conversion will be __________
months; and
(d) The date of the requested conversion is to be __________, ____.
3. Borrower hereby certifies to Agent and the Lenders that, on the date of
this Notice of Conversion, and after giving effect to the requested conversion:
(a) The representations and warranties of Borrower set forth in PARAGRAPH
4.01 of the Credit Agreement and in the other Credit Documents are true and
correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date);
(b) No Default or Event of Default has occurred and is continuing; and
(c) All of the Credit Documents are in full force and effect.
B-1
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Notice of Conversion on the
date set forth above.
ADAC LABORATORIES
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
B-2
<PAGE>
EXHIBIT C
NOTICE OF INTEREST PERIOD SELECTION
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated Credit Agreement,
dated as of March 29, 1999 (the "CREDIT AGREEMENT"), among ADAC Laboratories
("BORROWER"), the financial institutions listed in SCHEDULE I to the Credit
Agreement (the "LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders (in
such capacity, "AGENT"). Unless otherwise indicated, all terms defined in the
Credit Agreement have the same respective meanings when used herein.
2. Pursuant to SUBPARAGRAPH 2.01(e) of the Credit Agreement, Borrower
hereby irrevocably selects a new Interest Period for a Borrowing as follows:
(a) The Borrowing for which a new Interest Period is to be selected
consists of LIBOR Loans in the aggregate principal amount of $__________ which
were initially advanced to Borrower on __________, ____;
(b) The last day of the current Interest Period for such Loans is
___________, ____; and
(c) The next Interest Period for such Loans commencing upon the last day of
the current Interest Period is to be _________ months.
3. Borrower hereby certifies to the Agents and the Lenders that, on the
date of this Notice of Interest Period Selection, and after giving effect to the
requested selection:
(a) The representations and warranties of Borrower set forth in PARAGRAPH
4.01 of the Credit Agreement and in the other Credit Documents are true and
correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date);
(b) No Default or Event of Default has occurred and is continuing; and
(c) All of the Credit Documents are in full force and effect.
C-1
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Notice of Interest Period
Selection on the date set forth above.
ADAC LABORATORIES
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
C-2
<PAGE>
EXHIBIT D
MATURITY DATE EXTENSION REQUEST
[Date]
ABN AMRO Bank N.V.
as Agent
Capital Markets Syndication Group
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Amended and Restated Credit Agreement,
dated as of March 29, 1999 (the "CREDIT AGREEMENT"), among ADAC Laboratories
("BORROWER"), the financial institutions listed in SCHEDULE I to the Credit
Agreement (the "LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders (in
such capacity, "AGENT"). Unless otherwise indicated, all terms defined in the
Credit Agreement have the same respective meanings when used herein.
2. Upon the execution of a copy of this letter by each Lender, the return
thereof to Agent and the written notification thereof by Agent to Borrower and
Lenders, the Maturity Date, as defined in PARAGRAPH 1.01 of the Credit
Agreement, shall be amended by changing the date "December 31, ____" to December
31, 20__."
Except as specifically amended hereby, all terms, covenants and conditions
of the Credit Agreement shall remain in full force and effect.
Very truly yours,
ADAC LABORATORIES
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
D-1
<PAGE>
EXHIBIT E
AMENDED AND RESTATED NOTE
$______________ ____________________, __________
________________, ____
FOR VALUE RECEIVED, ADAC LABORATORIES, a California corporation
("BORROWER"), hereby promises to pay to the order of ____________________, a
____________________ ("LENDER"), the principal sum of
______________________________ DOLLARS ($__________) or such lesser amount as
shall equal the aggregate outstanding principal balance of the Loans made by
Lender to Borrower pursuant to the Amended and Restated Credit Agreement
referred to below (as amended from time to time, the "CREDIT AGREEMENT"), on or
before the Maturity Date specified in the Credit Agreement; and to pay interest
on said sum, or such lesser amount, at the rates and on the dates provided in
the Credit Agreement.
Borrower shall make all payments hereunder, for the account of Lender's
Applicable Lending Office, to Agent as indicated in the Credit Agreement, in
lawful money of the United States and in same day or immediately available
funds.
Borrower hereby authorizes Lender to record on the schedule(s) annexed to
this note the date and amount of each Loan and of each payment or prepayment of
principal made by Borrower and agrees that all such notations shall constitute
prima facie evidence of the matters noted; provided, however, that the failure
of Lender to make any such notation shall not affect Borrower's obligations
hereunder.
This note is one of the Notes referred to in the Amended and Restated
Credit Agreement, dated as of March 29, 1999, among Borrower, Lender and the
other financial institutions from time to time parties thereto (collectively,
the "Lenders") and ABN AMRO Bank N.V., as agent for the Lenders. This note is
subject to the terms of the Credit Agreement, including the rights of prepayment
and the rights of acceleration of maturity set forth therein. Terms used herein
have the meanings assigned to those terms in the Credit Agreement, unless
otherwise defined herein.
The transfer, sale or assignment of any rights under or interest in this
note is subject to certain restrictions contained in the Credit Agreement,
including PARAGRAPH 8.05 thereof.
Borrower shall pay all reasonable fees and expenses, including reasonable
attorneys' fees, incurred by Lender in the enforcement or attempt to enforce any
of Borrower's obligations hereunder not performed when due. Borrower hereby
waives notice of presentment, demand, protest or notice of any other kind. This
note shall be governed by and construed in accordance with the laws of the State
of California.
E-1
<PAGE>
ADAC LABORATORIES
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
E-2
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------
Date Type of Amount of Interest Amount of Unpaid Notation
Loan Loan Period Principal Principal Made By
Paid Balance
or Prepaid
- - - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
</TABLE>
E-3
<PAGE>
EXHIBIT F
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY (this "Guaranty"), dated as of March 29,
1999 is executed by each of the undersigned (each such entity and each entity
which hereafter executes and delivers a Subsidiary Joinder in substantially the
form of Attachment 1 hereto to be referred to herein as a "Guarantor"), in favor
of ABN AMRO BANK N.V., a Netherlands public company acting through its San
Francisco Representative Office, acting as agent (in such capacity, "Agent") for
the financial institutions which are from time to time parties to the Credit
Agreement referred to in Recital A below (collectively, the "Lenders").
RECITALS
A. Pursuant to a Credit Agreement dated as of July 31, 1996 (as amended to
the date hereof, the "Existing Credit Agreement"), among ADAC Laboratories, a
California corporation ("Borrower"), the Lenders and Agent, the Lenders have
agreed to extend certain credit facilities to Borrower upon the terms and
subject to the conditions set forth therein. The availability of the credit
facilities under such Existing Credit Agreement was subject, among other
conditions, to the execution and delivery of each Guarantor of a Guaranty dated
as of July 31, 1996 (the "Existing Guaranty").
B. Borrower has requested Agent and the Lenders to amend the Existing
Credit Agreement in certain respects. Pursuant to an Amended and Restated Credit
Agreement dated the date hereof (the "Credit Agreement"), among Borrower, Agent
and the Lenders, Agent and the Lenders have agreed to amend and restate the
Existing Credit Agreement upon the terms and subject to the conditions set forth
therein including, without limitation, (i) receipt by Agent of this Guaranty,
duly executed by each existing Domestic Subsidiary of Borrower, which amends,
and for convenience of reference, restates the Existing Guaranty as so amended
in its entirety and (ii) the receipt by Agent of Subsidiary Joinders, duly
executed by each future Domestic Subsidiary of Borrower. Each of the undersigned
Guarantors is a Domestic Subsidiary of Borrower and expects to continue to
derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Guarantor hereby agrees with Agent, for the ratable benefit
of the Lenders and Agent, that the Existing Guaranty shall be amended and
restated to read in its entirety as follows:
F-1
<PAGE>
1. DEFINITIONS AND INTERPRETATION.
(a) DEFINITIONS. When used in this Guaranty, the following terms
shall have the following respective meanings:
"ADJUSTED MAXIMUM GUARANTY AMOUNT" shall mean, with respect to any
Guarantor, the maximum liability of such Guarantor under this Guaranty,
limited to the extent provided in Subparagraph 2(d) hereof (except that,
for purposes of calculating the Adjusted Maximum Guaranty Amount of a
Guarantor only, any assets or liabilities of such Guarantor arising under
Paragraph 8 hereof shall be ignored).
"AGENT" shall have the meaning given to that term in the introductory
paragraph hereof.
"AGGREGATE GUARANTY PAYMENTS" shall mean, with respect to any
Guarantor at any time, the aggregate net amount of all payments made by
such Guarantor under this Guaranty (including, without limitation, under
Paragraph 8 hereof) at or prior to such time.
"BORROWER" shall have the meaning given to that term in the Recital A
hereof.
"CREDIT AGREEMENT" shall have the meaning given to that term in the
Recital B hereof.
"DISALLOWED POST-COMMENCEMENT INTEREST AND EXPENSES" shall mean
interest computed at the rate provided in the Credit Agreement and claims
for reimbursement, costs, expenses or indemnities under the terms of any of
the Credit Documents accruing or claimed at any time after the commencement
of any Insolvency Proceeding, if the claim for such interest,
reimbursement, costs, expenses or indemnities is not allowable, allowed or
enforceable against Borrower in such Insolvency Proceeding.
"EXISTING CREDIT AGREEMENT" shall have the meaning given to the term
in Recital A hereof.
"EXISTING GUARANTY" shall have the meaning given to the term in
Recital A hereof.
"FAIR SHARE" shall mean, with respect to any Guarantor at any time, an
amount equal to (i) a fraction, the numerator of which is the Adjusted
Maximum Guaranty Amount of such Guarantor and the denominator of which is
the aggregate Adjusted Maximum Guaranty Amounts of all Guarantors,
multiplied by (ii) the aggregate amount paid by all Funding Guarantors
under this Guaranty at or prior to such time.
F-2
<PAGE>
"FAIR SHARE SHORTFALL" shall mean, with respect to any Guarantor at
any time, the amount, if any, by which the Fair Share of such Guarantor at
such time exceeds the Aggregate Guaranty Payments of such Guarantor at such
time.
"FUNDING GUARANTOR" shall have the meaning given to that term in
Paragraph 8 hereof.
"GUARANTEED OBLIGATIONS" shall mean all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Borrower to Agent
or any Lender of every kind and description (whether or not evidenced by
any note or instrument and whether or not for the payment of money), direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of the Credit Agreement or any of
the other Credit Documents, including, without limitation, all principal,
interest, rent, fees, taxes, charges, expenses, attorneys' fees and
accountants' fees chargeable to Borrower or payable by Borrower thereunder.
"GUARANTOR" shall have the meaning given to that term in the
introductory paragraph hereof.
"INSOLVENCY PROCEEDING" shall mean any case or proceeding under the
United States Bankruptcy Code or any other similar law, rule or regulation
of the United States or any jurisdiction or any other action or proceeding
for the reorganization, liquidation, appointment of a receiver,
rearrangement of debts, marshalling of assets or similar action relating to
Borrower or any Guarantor, their respective creditors or any substantial
part of their respective assets, whether or not any such case, proceeding
or action is voluntary or involuntary.
"LENDERS" shall have the meaning given to that term in the
introductory paragraph hereof.
"SUBORDINATED OBLIGATIONS" shall have the meaning given to that term
in Paragraph 6 hereof.
"SUBSIDIARY JOINDER" shall mean an agreement substantially in the form
of Attachment 1 hereto.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement.
(b) OTHER INTERPRETIVE PROVISIONS. The rules of construction set
forth in SECTION I OF THE CREDIT AGREEMENT shall, to the extent not
inconsistent with the terms of this Guaranty, apply to this Guaranty and
are hereby incorporated by reference. Each Guarantor acknowledges receipt
of copies of the Credit Agreement and the other Credit Documents.
F-3
<PAGE>
2. GUARANTY.
(a) PAYMENT GUARANTY. Each Guarantor unconditionally guarantees and
promises to pay and perform as and when due, whether at stated maturity,
upon acceleration or otherwise, any and all of the Guaranteed Obligations.
If any Insolvency Proceeding relating to Borrower is commenced, each
Guarantor further unconditionally guarantees and promises to pay and
perform, upon the demand of Agent, any and all of the Guaranteed
Obligations (including any and all Disallowed Post-Commencement Interest
and Expenses) in accordance with the terms of the Credit Documents, whether
or not such obligations are then due and payable by Borrower and whether or
not such obligations are modified, reduced or discharged in such Insolvency
Proceeding. This Guaranty is a guaranty of payment and not of collection.
(b) CONTINUING GUARANTY. This Guaranty is an irrevocable continuing
guaranty of the Guaranteed Obligations which shall continue in effect until
all obligations of the Lenders to extend credit to Borrower have terminated
and all of the Guaranteed Obligations have been fully, finally and
indefeasibly paid. If any payment on any Guaranteed Obligation is set
aside, avoided or rescinded or otherwise recovered from Agent or any
Lender, such recovered payment shall constitute a Guaranteed Obligation
hereunder and, if this Guaranty was previously released or terminated, it
automatically shall be fully reinstated, as if such payment was never made.
(c) INDEPENDENT OBLIGATION. The liability of each Guarantor
hereunder is independent of the Guaranteed Obligations and of the
obligations of each other Guarantor hereunder, and a separate action or
actions may be brought and prosecuted against each Guarantor irrespective
of whether action is brought against Borrower, any other Guarantor or any
other guarantor of the Guaranteed Obligations or whether Borrower, any
other Guarantor or any other guarantor of the Guaranteed Obligations is
joined in any such action or actions.
(d) FRAUDULENT TRANSFER LIMITATION. If, in any action to enforce
this Guaranty, any court of competent jurisdiction determines that
enforcement against any Guarantor for the full amount of the Guaranteed
Obligations is not lawful under or would be subject to avoidance under
Section 548 of the United States Bankruptcy Code or any applicable
provision of any comparable law of any state or other jurisdiction, the
liability of such Guarantor under this Guaranty shall be limited to the
maximum amount lawful and not subject to such avoidance.
(e) TERMINATION. Notwithstanding any termination of this Guaranty in
accordance with PARAGRAPH 6 hereof, this Guaranty shall continue to be in
full force and effect and applicable to any Guaranteed Obligations arising
thereafter which arise because prior payments of Guaranteed Obligations are
rescinded or otherwise required to be surrendered by Agent or any Lender
after receipt.
F-4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents and
warrants to Agent and the Lenders as follows:
(a) DUE INCORPORATION, QUALIFICATION, ETC. Such Guarantor is a duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified and in good standing in
each jurisdiction where the nature of its business or properties requires
such qualification, except where the failure to qualify could not have a
Material Adverse Effect.
(b) AUTHORITY. The execution, delivery and performance by such
Guarantor of this Guaranty are within the power of such Guarantor and have
been duly authorized by all necessary actions on the part of such
Guarantor.
(c) ENFORCEABILITY. This Guaranty has been duly executed and
delivered by such Guarantor and constitutes a legal, valid and binding
obligation of such Guarantor, enforceable against it in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally.
(d) NON-CONTRAVENTION. The execution, delivery and performance by
such Guarantor of this Guaranty do not (i) violate any Requirement of Law
applicable to such Guarantor, (ii) contravene any material Contractual
Obligation of such Guarantor or (iii) result in the creation or imposition
of any Lien upon any property, asset or revenue of such Guarantor.
(e) APPROVALS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or
other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution, delivery and
performance of this Guaranty, except such consents, approvals, orders,
authorizations, registrations, declarations and filings that are so
required and which have been obtained and are in full force and effect.
(f) NO VIOLATION. No Guarantor is in violation of any Requirement of
Law applicable to such Guarantor or any Contractual Obligation of such
Guarantor, where, in either case, such violation is reasonably likely to
have a Material Adverse Effect.
(g) LITIGATION. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending or,
to the knowledge of such Guarantor, threatened against such Guarantor in
any court or before any other Governmental Authority which (i) is
reasonably likely (alone or in the aggregate) to have a Material Adverse
Effect or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance of this Guaranty by such Guarantor;
F-5
<PAGE>
(h) FINANCIAL STATEMENTS. The Financial Statements of such
Guarantor, which have been delivered to Agent and the Lenders fairly
present the information reflected therein and have been prepared in
accordance with GAAP.
(i) OTHER REGULATIONS. Such Guarantor is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, any state public utilities code
or to any other Governmental Rule limiting its ability to incur
indebtedness.
(j) TAXES. Such Guarantor has paid all taxes and other charges
imposed by any Governmental Authority due and payable by such Guarantor
other than those which are being challenged in good faith by appropriate
proceedings and for which adequate reserves have been established.
4. COVENANTS. Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Guaranteed Obligations have
been fully, finally and indefeasibly paid, each Guarantor shall comply with the
following covenants:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Such Guarantor shall furnish
to Agent, with sufficient copies for each Lender, the following, each in
such form and such detail as Agent or the Required Lenders shall reasonably
request:
(i) Such Financial Statements of such Guarantor as Agent or
the Required Lenders shall reasonably request;
(ii) Notice of any Default or Event of Default known to such
Guarantor or of any other event or condition known to such Guarantor
which is reasonably likely to have a Material Adverse Effect; and
(iii) Such other certificates, opinions, statements, documents
and information relating to the operations or condition (financial or
otherwise) of such Guarantor or its Subsidiaries, and compliance by
Borrower and such Guarantor with the terms of the Credit Documents as
Agent or any Lender may from time to time reasonably request.
(b) BOOKS AND RECORDS. Such Guarantor and its Subsidiaries shall
maintain proper books of record and account in accordance with good
business practices and GAAP.
(c) INSPECTIONS. Such Guarantor and its Subsidiaries shall permit
any Person designated by Agent or any Lender, upon reasonable notice and
during normal business hours, to visit and inspect any of the properties
and offices of such Guarantor and its Subsidiaries, to examine the books
and records of such Guarantor and its Subsidiaries and make copies thereof
and to discuss the affairs, finances and accounts of such Guarantor and its
Subsidiaries with, and to be
F-6
<PAGE>
advised as to the same by, their officers, auditors and accountants, all at
such times and intervals as Agent or any Lender may reasonably request.
(d) INSURANCE. Such Guarantor and its Subsidiaries shall maintain
with financially sound and reputable insurance carriers insurance in such
amounts, with such deductibles and covering such risks as is customary for
companies engaged in similar businesses in the same geographic areas as
such Guarantor and its Subsidiaries.
(e) GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. To the extent
failure to do so could have a Material Adverse Effect, such Guarantor and
its Subsidiaries shall promptly pay and discharge all taxes and other
charges imposed by any Government Authority upon such Guarantor or its
Subsidiaries or their property as and when they become due.
(f) GENERAL BUSINESS OPERATIONS. To the extent failure to do so
could have a Material Adverse Effect, such Guarantor and its Subsidiaries
shall (i) maintain its corporate existence and all rights, privileges and
franchises necessary for the conduct of its business and (ii) comply with
all Requirements of Law and Contractual Obligations applicable to it.
5. AUTHORIZATIONS, WAIVERS, ETC.
(a) AUTHORIZATIONS. Each Guarantor authorizes Agent and the Lenders,
in their discretion, without notice to such Guarantor, irrespective of any
change in the financial condition of Borrower, such Guarantor, any other
Guarantor or any other guarantor of the Guaranteed Obligations since the
date hereof, and without affecting or impairing in any way the liability of
such Guarantor hereunder, from time to time to:
(i) Create new Guaranteed Obligations and renew, compromise,
extend, accelerate or otherwise change the time for payment or
performance of, or otherwise amend or modify the Credit Documents or
change the terms of the Guaranteed Obligations or any part thereof,
including increase or decrease of the rate of interest thereon;
(ii) Take and hold security for the payment or performance of
the Guaranteed Obligations and exchange, enforce, waive or release any
such security; apply such security and direct the order or manner of
sale thereof; and purchase such security at public or private sale;
(iii) Otherwise exercise any right or remedy they may have
against Borrower, such Guarantor, any other Guarantor, any other
guarantor of the Guaranteed Obligations or any security, including,
without limitation, the right to foreclose upon any such security by
judicial or nonjudicial sale;
F-7
<PAGE>
(iv) Settle, compromise with, release or substitute any one or
more makers, endorsers or guarantors of the Guaranteed Obligations;
and
(v) Assign the Guaranteed Obligations, this Guaranty or the
other Credit Documents in whole or in part to the extent provided in
the Credit Agreement and the other Credit Documents.
(b) WAIVERS. Each Guarantor hereby waives:
(i) Any right to require Agent or any Lender to (A) proceed
against Borrower, any other Guarantor or any other guarantor of the
Guaranteed Obligations, (B) proceed against or exhaust any security
received from Borrower, such Guarantor, any other Guarantor or any
other guarantor of the Guaranteed Obligations or otherwise marshall
the assets of Borrower, such Guarantor, any other Guarantor or any
other guarantor of the Guaranteed Obligations or (C) pursue any other
remedy in Agent's or any Lender's power whatsoever;
(ii) Any defense arising by reason of the application by
Borrower of the proceeds of any borrowing;
(iii) Any defense resulting from the absence, impairment or loss
of any right of reimbursement, subrogation, contribution or other
right or remedy of Guarantor against Borrower, any other Guarantor,
any other guarantor of the Guaranteed Obligations or any security,
whether resulting from an election by Agent or any Lender to foreclose
upon security by nonjudicial sale, or otherwise;
(iv) Any setoff or counterclaim of Borrower or any defense
which results from any disability or other defense of Borrower or the
cessation or stay of enforcement from any cause whatsoever of the
liability of Borrower (including, without limitation, the lack of
validity or enforceability of any of the Credit Documents);
(v) Any defense based upon any law, rule or regulation which
provides that the obligation of a surety must not be greater or more
burdensome than the obligation of the principal;
(vi) Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Guaranteed
Obligations have been fully, finally and indefeasibly paid, any right
of subrogation, reimbursement, indemnification or contribution and
other similar right to enforce any remedy which Agent, the Lenders or
any other Person now has or may hereafter have against Borrower on
account of the Guaranteed Obligations, and any benefit of, and any
right to participate in, any
F-8
<PAGE>
security now or hereafter received by Agent, any Lender or any other
Person on account of the Guaranteed Obligations;
(vii) All presentments, demands for performance, notices of
non-performance, notices delivered under the Credit Documents,
protests, notice of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation or incurring of new or
additional Guaranteed Obligations and notices of any public or private
foreclosure sale;
(viii) The benefit of any statute of limitations to the extent
permitted by law;
(ix) Any appraisement, valuation, stay, extension, moratorium
redemption or similar law or similar rights for marshalling;
(x) Any right to be informed by Agent or any Lender of the
financial condition of Borrower, any other Guarantor or any other
guarantor of the Guaranteed Obligations or any change therein or any
other circumstances bearing upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations;
(xi) Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Guaranteed
Obligations have been fully, finally and indefeasibly paid, any right
to revoke this Guaranty;
(xii) Any defense arising from an election for the application
of Section 1111(b)(2) of the United States Bankruptcy Code which
applies to the Guaranteed Obligations;
(xiii) Any defense based upon any borrowing or grant of a
security interest under Section 364 of the United States Bankruptcy
Code;
(xiv) Any right it may have to a fair value hearing to determine
the size of a deficiency judgment following any foreclosure on any
security for the Guaranteed Obligations;
(xv) All rights and defenses arising out of an election of
remedies by Agent or any Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for a Guaranteed Obligation, has destroyed such Guarantor's rights of
subrogation and reimbursement against Borrower by the operation of
Section 580d of the Code of Civil Procedure or otherwise; and
(xvi) All other rights and defenses available to such Guarantor
by reason of Sections 2787 to 2855, inclusive, Section 2899 or Section
3433
F-9
<PAGE>
of the California Civil Code or Section 3605 of the California
Commercial Code.
Without limiting the scope of any of the foregoing provisions of this
Paragraph 5, and pursuant to the provisions of California Civil Code
Section 2856, each Guarantor hereby further waives all rights and defenses
that such Guarantor may have because the Guaranteed Obligations are secured
by real property. This means, among other things:
(A) Agent or any Lender may collect from any Guarantor without
first foreclosing on any real or personal property collateral pledged
by Borrower.
(B) If Agent or any Lender forecloses on any real property
collateral pledged by Borrower:
(1) The amount of the Guaranteed Obligations may be
reduced only by the price for which that collateral is sold at
the foreclosure sale, even if the collateral is worth more than
the sale price.
(2) Agent or any Lender may collect from any Guarantor
even if Agent or any Lender, by foreclosing on the real property
collateral, has destroyed any right such Guarantor or any other
Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses
each Guarantor may have because the Guaranteed Obligations are secured by
real property. These rights and defenses include, but are not limited to,
any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
(c) FINANCIAL CONDITION OF BORROWER, ETC. Each Guarantor is fully
aware of the financial condition and affairs of Borrower. Each Guarantor
has executed this Guaranty without reliance upon any representation,
warranty, statement or information concerning Borrower furnished to such
Guarantor by Agent or any Lender and has, independently and without
reliance on Agent or any Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of Borrower and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations. Each Guarantor is in a position to obtain, and assumes full
responsibility for obtaining, any additional information about the
financial condition and affairs of Borrower and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations and will, independently and without reliance upon Agent or any
Lender, and based on such documents and information as it shall deem
F-10
<PAGE>
appropriate at the time, continue to make its own appraisals and decisions
in taking or not taking action in connection with this Guaranty.
6. SUBORDINATION. Each Guarantor hereby subordinates any and all debts,
liabilities and obligations owed to such Guarantor by Borrower or any Subsidiary
of Borrower (the "SUBORDINATED OBLIGATIONS") to the Guaranteed Obligations as
provided in this PARAGRAPH 6.
(a) PROHIBITED PAYMENTS, ETC. Until the occurrence of a Default or
an Event of Default or any default by any Guarantor hereunder, each
Guarantor and its Subsidiaries may receive regularly scheduled payments
from Borrower on account of Subordinated Obligations. After the occurrence
and during the continuance of any Default or Event of Default or any
default by any Guarantor hereunder (including the commencement and
continuation of any Insolvency Proceeding relating to Borrower, however,
unless Agent or Required Lenders otherwise requests, no Guarantor shall,
nor shall it permit any of its Subsidiaries to, demand, accept or take any
action to collect any payment on account of the Subordinated Obligations.
(b) PRIOR PAYMENT OF GUARANTEED OBLIGATIONS. In any Insolvency
Proceeding relating to Borrower, each Guarantor agrees that Agent and the
Lenders shall be entitled to receive payment of all Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and Expenses)
before such Guarantor or any of its Subsidiaries receives payment of any
Subordinated Obligations.
(c) TURN-OVER. After the occurrence and during the continuance of
any Default or Event of Default (including the commencement and
continuation of any Insolvency Proceeding relating to Borrower, each
Guarantor and its Subsidiaries shall, if Agent or Required Lenders so
requests, collect, enforce and receive payments on account of the
Subordinated Obligations as trustee for Agent and the Lenders and deliver
such payments to Agent on account of the Guaranteed Obligations (including
any and all Disallowed Post-Commencement Interest and Expenses), together
with any necessary endorsements or other instruments of transfer, but
without reducing or affecting in any manner the liability of such Guarantor
under the other provisions of this Guaranty.
(d) AGENT AUTHORIZATION. After the occurrence and during the
continuance of any Default or Event of Default or any default by a
Guarantor hereunder (including the commencement and continuation of any
Insolvency Proceeding relating to Borrower, Agent is authorized and
empowered (but without any obligation to so do), in its discretion, (i) in
the name of each Guarantor and its Subsidiaries, to collect and enforce,
and to submit claims in respect of, Subordinated Obligations and to apply
any amounts received thereon to the Guaranteed Obligations (including any
and all Disallowed Post-Commencement
F-11
<PAGE>
Interest and Expenses), and (ii) to require each Guarantor (A) to collect
and enforce, and to submit claims in respect of, Subordinated Obligations
and (B) to pay any amounts received on such obligations to Agent for
application to the Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses).
7. GENERAL PLEDGE; SETOFF.
(a) PLEDGE. In addition to all liens upon and rights of setoff
against the property of any Guarantor given to Agent or any Lender by law
or separate agreement to secure the liabilities of any Guarantor hereunder,
to the extent permitted by law, each Guarantor hereby grants to Agent (for
the ratable benefit of Agent and the Lenders), as security for such
Guarantor's obligations hereunder, a security interest in all monies,
deposit accounts, securities and other property of such Guarantor now or
hereafter in the possession of or on deposit with Agent or any Lender,
whether held in a general or special account or deposit, or for safekeeping
or otherwise; and Agent shall have all rights and remedies of a secured
party with respect to such property.
(b) SETOFF. In addition to any rights and remedies of Agent or any
Lender provided by law, Agent and the Lenders (with the prior consent of
Agent) shall have the right, without prior notice to any Guarantor, any
such notice being expressly waived by each Guarantor to the extent
permitted by applicable law, upon the occurrence and during the continuance
of a Default or an Event of Default, to set-off and apply against the
Guaranteed Obligations any amount owing from Agent or any Lender to such
Guarantor, including all deposits, accounts and moneys of such Guarantor
then or thereafter maintained with Agent or any Lender, at or at any time
after, the happening of any of the above mentioned events.
(c) NONWAIVER. No security interest or right of setoff shall be
deemed to have been waived by any act or conduct on the part of Agent or
any Lender or by any failure to exercise such right of setoff or to enforce
such security interest, or by any delay in so doing; and every right of
setoff and security interest shall continue in full force and effect until
such right of setoff or security interest is specifically waived or
released by an instrument in writing executed by Agent.
8. CONTRIBUTION AMONG GUARANTORS. The Guarantors desire to allocate
among themselves, in a fair and equitable manner, their rights of contribution
from each other when any payment is made by any Guarantor under this Guaranty.
Accordingly, if any payment is made by any Guarantor under this Guaranty (a
"FUNDING GUARANTOR") that exceeds its Fair Share, the Funding Guarantor shall be
entitled to a contribution from each other Guarantor in the amount of such other
Guarantor's Fair Share Shortfall, so that all such contributions shall cause
each Guarantor's Aggregate Guaranty Payments to equal its Fair Share. The
amounts payable as contributions hereunder shall be determined
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<PAGE>
by the Funding Guarantor as of the date on which the related payment or
distribution is made by the Funding Guarantor, and such determination shall be
binding on the other Guarantors absent manifest error. The allocation and right
of contribution among the Guarantors set forth in this Paragraph 8 shall not be
construed to limit in any way the liability of any Guarantor under this Guaranty
or the amount of the Guaranteed Obligations.
9. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon any Guarantor, any Lender or Agent under this Guaranty or the other
Credit Documents to which a Guarantor is a party shall be in writing and
faxed, mailed or delivered, if to a Guarantor or Agent, at its respective
facsimile number or address set forth below or in the respective Subsidiary
Joinder for such Guarantor or, if to any Lender, at the address or
facsimile number specified beneath the heading "Address for Notices" under
the name of such Lender in Schedule I to the Credit Agreement (or to such
other facsimile number or address for any party as indicated in any notice
given by that party to the other parties). All such notices and
communications shall be effective (i) when sent by overnight service of
recognized standing, on the second Business Day following the deposit with
such service; (ii) when mailed, first class postage prepaid and addressed
as aforesaid through the United States Postal Service, upon receipt; (iii)
when delivered by hand, upon delivery; and (iv) when faxed, upon
confirmation of receipt.
Guarantor: ADAC Research and Mfg., Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Healthcare Information Systems, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Medical Technologies, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
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<PAGE>
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
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<PAGE>
Guarantor: ADAC Laboratories Pacific, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Healthcare Partners, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: ADAC Radiology Services, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: Cortet, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: O.N.E.S. Medical Services, Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Guarantor: CT Solutions Inc.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
F-15
<PAGE>
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Agent: ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Dianne Barkley
Telephone: (415) 984-3706
Facsimile: (415) 362-3524
with a copy to:
ABN AMRO Bank N.V.
1325 Avenue of the Americas, 9th Floor
New York, NY 10017
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
(b) PAYMENTS. Each Guarantor shall make all payments required
hereunder to Agent, or its order, at Agent's office located at the address
set forth in SUBPARAGRAPH 9(a) hereof, or at such other office as Agent may
designate, on demand, in Dollars. If any amounts required to be paid by a
Guarantor under this Guaranty are not paid when due, such Guarantor shall
pay interest on the aggregate, outstanding balance of such amounts from the
date due until those amounts are paid in full at a per annum rate equal to
the Base Rate plus two percent (2.00%), such rate to change from time to
time as the Base Rate shall change.
(c) EXPENSES. Each Guarantor shall pay on demand (i) all reasonable
fees and expenses, including reasonable attorneys' fees and expenses,
incurred by Agent in connection with the preparation, execution and
delivery of, and the exercise of its duties under, this Guaranty and the
preparation, execution and delivery of amendments and waivers hereunder and
(ii) all reasonable fees and expenses, including reasonable attorneys' fees
and expenses, incurred by Agent and the Lenders in connection with the
enforcement or attempted enforcement of this Guaranty or any of the
Guaranteed Obligations or in preserving any of Agent's or the Lenders'
rights and remedies (including, without limitation, all such fees and
expenses incurred in connection with any "workout" or restructuring
affecting the Credit Documents or the Guaranteed Obligations or any
bankruptcy or similar proceeding involving Guarantor, any other Guarantor,
Borrower or any of their affiliates).
(d) WAIVERS; AMENDMENTS. This Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by each Guarantor and Agent to the extent permitted pursuant to
Section
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<PAGE>
8.04 of the Credit Agreement. Each waiver or consent under any provision
hereof shall be effective only in the specific instances for the purpose
for which given. No failure or delay on Agent's or any Lender's part in
exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.
(e) ASSIGNMENTS. This Guaranty shall be binding upon and inure to
the benefit of Agent, the Lenders, the Guarantors and their respective
successors and assigns; PROVIDED, HOWEVER, that no Guarantor may assign or
transfer any of its rights and obligations under this Guaranty without the
prior written consent of Agent and the Lenders, and, PROVIDED, FURTHER,
that Agent and any Lender may sell, assign and delegate their respective
rights and obligations hereunder only as permitted by the Credit Agreement.
All references in this Guaranty to any Person shall be deemed to include
all permitted successors and assigns of such Person.
(f) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of Agent
and the Lenders under this Guaranty shall be in addition to all rights,
powers and remedies given to Agent and the Lenders by virtue of any
applicable law, rule or regulation of any Governmental Authority, the
Credit Agreement, any other Credit Document or any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Agent's or any Lender's
rights hereunder. Each Guarantor waives any right to require Agent or any
Lender to proceed against any Person or to exhaust any Collateral or to
pursue any remedy in Agent's or such Lender's power.
(g) PAYMENTS FREE OF TAXES, ETC. All payments made by each Guarantor
under this Guaranty shall be made by each Guarantor free and clear of and
without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings. In addition, each Guarantor shall
pay upon demand any stamp or other taxes, levies or charges of any
jurisdiction with respect to the execution, delivery, registration,
performance and enforcement of this Guaranty. If any taxes, levies,
charges or other amounts are required to be withheld from any amounts
payable to Agent or any Lender hereunder, the amounts so payable to Agent
or such Lender shall be increased to the extent necessary to yield to Agent
or such Lender (after payment of all such amounts) any such amounts payable
hereunder in the amounts specified in this Guaranty. Upon request by Agent
or any Lender, each Guarantor shall furnish evidence satisfactory to Agent
or such Lender that all requisite authorizations and approvals by, and
notices to and filings with, governmental authorities and regulatory bodies
have been obtained and made and that all requisite taxes, levies and
charges have been paid.
(h) PARTIAL INVALIDITY. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any respect
under the law or any
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<PAGE>
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Guaranty nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.
(i) JOINT AND SEVERAL OBLIGATION. The obligations of the Guarantors
under this Guaranty are joint and several obligations of each Guarantor and
may be freely enforced against each Guarantor, for the full amount of the
Guaranteed Obligations, without regard to whether enforcement is sought or
available against any other Guarantor.
(j) GOVERNING LAW. This Guaranty shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
(k) JURY TRIAL. EACH GUARANTOR, THE LENDERS AND AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY.
(l) LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY ANY GUARANTOR
AGAINST AGENT, ANY LENDER OR THE AFFILIATES, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OR AGENTS OF AGENT OR ANY LENDER FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
(WHETHER BASED UPON ANY BREACH OF CONTRACT, TORT, BREACH OF STATUTORY DUTY
OR ANY OTHER THEORY OF LIABILITY) ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS GUARANTY, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, AND GUARANTOR HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
NOW ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
(m) COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
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<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed as of the day and year first above written.
ADAC RESEARCH AND MFG., INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADAC HEALTHCARE INFORMATION
SYSTEMS, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADAC MEDICAL TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADAC LABORATORIES PACIFIC, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADAC HEALTHCARE PARTNERS, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADAC RADIOLOGY SERVICES, INC.
F-19
<PAGE>
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CORTET, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
O.N.E.S. MEDICAL SERVICES, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CT SOLUTIONS INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
F-20
<PAGE>
ATTACHMENT 1
SUBSIDIARY JOINDER
THIS SUBSIDIARY JOINDER (this "AGREEMENT"), dated as of ____________, ____,
is executed by [NEW SUBSIDIARY], a _________ [corporation] [partnership] [etc.]
("NEW SUBSIDIARY"), in favor of ABN AMRO BANK N.V., a Netherlands public company
acting through its San Francisco Representative Office, acting as agent (in such
capacity, "AGENT") for the financial institutions which are from time to time
parties to the Credit Agreement referred to in Recital A below (collectively,
the "LENDERS").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement dated as of March
29, 1999 (as amended from time to time, the "CREDIT AGREEMENT"), among ADAC
Laboratories, a California corporation ("BORROWER"), the Lenders and Agent, the
Lenders have agreed to extend certain credit facilities to Borrower upon the
terms and subject to the conditions set forth therein.
B. The Lenders' obligations to extend the credit facilities to Borrower
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of (1) an Amended and Restated Guaranty, dated as of March 29, 1999 (the
"GUARANTY"), duly executed by each existing Domestic Subsidiary of Borrower, and
(2) Subsidiary Joinders, duly executed by each future Domestic Subsidiary of
Borrower.
C. New Subsidiary is a new Domestic Subsidiary of Borrower and expects to
derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, New Subsidiary hereby agrees with Agent, for the ratable benefit
of the Lenders and Agent, as follows:
1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined herein,
all capitalized terms used herein and defined in the Guaranty shall have the
respective meanings given to those terms in the Guaranty. New Subsidiary
acknowledges receipt of copies of the Guaranty, the Credit Agreement and the
other Credit Documents.
2. REPRESENTATIONS AND WARRANTIES. On and as of the date of this
Agreement (the "Effective Date") and for the ratable benefit of the Agent and
the Lenders, New Subsidiary hereby makes each of the representations and
warranties made by each Guarantor in the Guaranty.
F[1]-1
<PAGE>
3. AGREEMENT TO BE BOUND. New Subsidiary agrees that, on and as of
the Effective Date, it shall become a Guarantor under the Guaranty and shall be
bound by all the provisions of the Guaranty to the same extent as if New
Subsidiary had executed the Guaranty on the Closing Date.
4. WAIVER. Without limiting the generality of the waivers in the
Guaranty, New Subsidiary specifically agrees to be bound by the Guaranty and
waives any right to notice of acceptance of its execution of this Agreement and
of its agreement to be bound by the Guaranty.
5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
F[1]-2
<PAGE>
IN WITNESS WHEREOF, New Subsidiary has caused this Agreement to be
executed by its duly authorized officer.
[NEW SUBSIDIARY]
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address:
[__________________________________]
[__________________________________]
[__________________________________]
Attn: [_______________________]
Telephone: [(___) ___-____]
Facsimile: [(___) ___-____]
F[1]-3
<PAGE>
EXHIBIT G
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of
Attachment 1 hereto, by and among:
(1) The bank designated under item A of ATTACHMENT I hereto as the
Assignor Lender ("ASSIGNOR LENDER"); and
(2) Each bank designated under item B of ATTACHMENT I hereto as an
Assignee Lender (individually, an "ASSIGNEE LENDER").
RECITALS
A. Assignor Lender is one of the lenders which is a party to the Amended
and Restated Credit Agreement dated as of March 29, 1999, by and among ADAC
Laboratories ("BORROWER,") Assignor Lender and the other financial institutions
parties thereto (collectively, the "LENDERS") and ABN AMRO Bank N.V., as agent
for the Lenders (in such capacity, "AGENT"). (Such credit agreement, as
amended, supplemented or otherwise modified in accordance with its terms from
time to time to be referred to herein as the "CREDIT AGREEMENT").
B. Assignor Lender wishes to sell, and Assignee Lender wishes to
purchase, all or a portion of Assignor Lender's rights under the Credit
Agreement pursuant to Subparagraph 8.05(c) of the Credit Agreement.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. DEFINITIONS. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Credit Agreement
have the respective meanings given to those terms in the Credit Agreement.
2. SALE AND ASSIGNMENT. Subject to the terms and conditions of this
Assignment Agreement, Assignor Lender hereby agrees to sell, assign and delegate
to each Assignee Lender and each Assignee Lender hereby agrees to purchase,
accept and assume the rights, obligations and duties of a Lender under the
Credit Agreement and the other Credit Documents equal to the Proportionate Share
set forth under the caption "Proportionate Share Transferred" opposite such
Assignee Lender's name on ATTACHMENT I hereto. Such sale, assignment and
delegation shall become effective on the date designated in ATTACHMENT I hereto
(the "ASSIGNMENT EFFECTIVE DATE"), which date shall be at least five (5)
Business Days after the date following the date counterparts of this Assignment
Agreement are delivered to Agent in accordance with Paragraph 3 hereof.
G-1
<PAGE>
3. ASSIGNMENT EFFECTIVE NOTICE. Upon (a) receipt by Agent of five (5)
counterparts of this Assignment Agreement (to each of which is attached a fully
completed ATTACHMENT I), each of which has been executed by Assignor Lender and
each Assignee Lender (and, to the extent required by SUBPARAGRAPH 8.05(c) OF THE
CREDIT AGREEMENT, by Borrower and Agent) and (b) payment to Agent of the
registration and processing fee specified in SUBPARAGRAPH 8.05(e) OF THE CREDIT
AGREEMENT by Assignor Lender, Agent will transmit to Borrower, Assignor Lender
and each Assignee Lender an Assignment Effective Notice substantially in the
form of ATTACHMENT II hereto, fully completed (an "ASSIGNMENT EFFECTIVE
NOTICE").
4. ASSIGNMENT EFFECTIVE DATE. At or before 12:00 noon (local time of
Assignor Lender) on the Assignment Effective Date, each Assignee Lender shall
pay to Assignor Lender, in immediately available or same day funds, an amount
equal to the purchase price, as agreed between Assignor Lender and such Assignee
Lender (the "PURCHASE PRICE"), for the Proportionate Share purchased by such
Assignee Lender hereunder. Effective upon receipt by Assignor Lender of the
Purchase Price payable by each Assignee Lender, the sale, assignment and
delegation to such Assignee Lender of such Proportionate Share as described in
Paragraph 2 hereof shall become effective.
5. PAYMENTS AFTER THE ASSIGNMENT EFFECTIVE DATE. Assignor Lender and
each Assignee Lender hereby agree that Agent shall, and hereby authorize and
direct Agent to, allocate amounts payable under the Credit Agreement and the
other Credit Documents as follows:
(a) All principal payments made after the Assignment Effective Date
with respect to each Proportionate Share assigned to an Assignee Lender
pursuant to this Assignment Agreement shall be payable to such Assignee
Lender.
(b) All interest, fees and other amounts accrued after the Assignment
Effective Date with respect to each Proportionate Share assigned to an
Assignee Lender pursuant to this Assignment Agreement shall be payable to
such Assignee Lender.
Assignor Lender and each Assignee Lender shall make any separate arrangements
between themselves which they deem appropriate with respect to payments between
them of amounts paid under the Credit Documents on account of the Proportionate
Share assigned to such Assignee Lender, and neither Agent nor Borrower shall
have any responsibility to effect or carry out such separate arrangements.
6. DELIVERY OF NOTES. On or prior to the Assignment Effective Date,
Assignor Lender will deliver to Agent the Notes payable to Assignor Lender. On
or prior to the Assignment Effective Date, Borrower will deliver to Agent new
Notes for each Assignee Lender and Assignor Lender, in each case in principal
amounts reflecting, in accordance with the Credit Agreement, their respective
Commitments (as adjusted pursuant to this Assignment Agreement). As provided in
SUBPARAGRAPH 8.05(c) OF THE CREDIT AGREEMENT, each such new Note shall be dated
the Closing Date. Promptly after
G-2
<PAGE>
the Assignment Effective Date, Agent will send to each of Assignor Lender and
the Assignee Lenders its new Notes and will send to Borrower the superseded Note
payable to Assignor Lender, marked "Replaced."
7. DELIVERY OF COPIES OF CREDIT DOCUMENTS. Concurrently with the
execution and delivery hereof, Assignor Lender will provide to each Assignee
Lender (if it is not already a Lender party to the Credit Agreement) conformed
copies of all documents delivered to Assignor Lender on or prior to the Closing
Date in satisfaction of the conditions precedent set forth in the Credit
Agreement.
8. FURTHER ASSURANCES. Each of the parties to this Assignment Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment Agreement.
9. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS. Assignor Lender
and each Assignee Lender further represent and warrant to and covenant with each
other, Agent and the Lenders as follows:
(a) Other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned hereby free and clear
of any adverse claim, Assignor Lender makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
other Credit Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement
or the other Credit Documents furnished.
(b) Assignor Lender makes no representation or warranty and assumes
no responsibility with respect to the financial condition of Borrower or
any of its obligations under the Credit Agreement or any other Credit
Documents.
(c) Each Assignee Lender confirms that it has received a copy of the
Credit Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment Agreement.
(d) Each Assignee Lender will, independently and without reliance
upon Agent, Assignor Lender or any other Lender and based upon such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement and the other Credit Documents.
(e) Each Assignee Lender appoints and authorizes Agent to take such
action as Agent on its behalf and to exercise such powers under the Credit
G-3
<PAGE>
Agreement and the other Credit Documents as Agent is authorized to exercise
by the terms thereof, together with such powers as are reasonably
incidental thereto, all in accordance with SECTION VII OF THE CREDIT
AGREEMENT.
(f) Each Assignee Lender agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement and the other Credit Documents are required to be performed by it
as a Lender.
(g) ATTACHMENT I hereto sets forth administrative information with
respect to each Assignee Lender.
10. EFFECT OF THIS ASSIGNMENT AGREEMENT. On and after the Assignment
Effective Date, (a) each Assignee Lender shall be a Lender with a Proportionate
Share equal to the Proportionate Share set forth under the caption
"Proportionate Share After Assignment" opposite such Assignee Lender's name on
ATTACHMENT I hereto and shall have the rights, duties and obligations of such a
Lender under the Credit Agreement and the other Credit Documents and (b)
Assignor Lender shall be a Lender with a Proportionate Share equal to the
Proportionate Share set forth under the caption "Proportionate Share After
Assignment" opposite Assignor Lender's name on ATTACHMENT I hereto and shall
have the rights, duties and obligations of such a Lender under the Credit
Agreement and the other Credit Documents, or, if the Proportionate Share of
Assignor Lender has been reduced to 0%, Assignor Lender shall cease to be a
Lender and shall have no further obligation to make any Loans.
11. MISCELLANEOUS. This Assignment Agreement shall be governed by, and
construed in accordance with, the laws of the State of California. Paragraph
headings in this Assignment Agreement are for convenience of reference only and
are not part of the substance hereof.
G-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in ATTACHMENT I hereto.
, as
-----------------------------------------
Assignor Lender
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
, as an
--------------------------------------
Assignee Lender
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
, as an
--------------------------------------
Assignee Lender
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
, as an
--------------------------------------
Assignee Lender
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
G-5
<PAGE>
CONSENTED TO AND ACKNOWLEDGED BY:
- - - -----------------------------------------
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
,
- - - ---------------------------------
As Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ACCEPTED FOR RECORDATION
IN REGISTER:
,
- - - ---------------------------------
As Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
G-6
<PAGE>
ATTACHMENT 1
TO ASSIGNMENT AGREEMENT
NAMES, ADDRESSES AND PROPORTIONATE SHARES
OF ASSIGNOR LENDER AND ASSIGNEE LENDERS
AND ASSIGNMENT EFFECTIVE DATE
______________, ____
A. ASSIGNOR LENDER Proportionate Proportionate
Share Share After
TRANSFERRED(1),(2) ASSIGNMENT(1)
_______________ _________________% _______________%
Applicable Lending Office:
_____________________________
______________________________
______________________________
______________________________
Address for notices:
______________________________
______________________________
______________________________
______________________________
Telephone No:_________________
Telecopier No:________________
Wiring Instructions:
______________________________
______________________________
- - - -------------------
(1) To be expressed by a percentage rounded to the [seventh]-digit to the right
of the decimal point.
(2) Share of Total Commitment sold by Assignor Lender, and share of Total
Commitment purchased by Assignee Lender.
G[1]-1
<PAGE>
B. ASSIGNEE LENDERS Proportionate Proportionate
---------------- Share Share After
Transferred(3),(4) Assignment(1)
------------------ ---------------
_______________ _________________% _______________%
Applicable Lending Office:
_____________________________
______________________________
______________________________
______________________________
Address for notices:
______________________________
______________________________
______________________________
______________________________
Telephone No:_________________
Telecopier No:________________
Wiring Instructions:
______________________________
______________________________
- - - -------------------
(3) To be expressed by a percentage rounded to the [seventh]-digit to the right
of the decimal point.
(4) Share of Total Commitment sold by Assignor Lender, and share of Total
Commitment purchased by Assignee Lender.
G[1]-2
<PAGE>
B. ASSIGNEE LENDERS Proportionate Proportionate
Share Share After
TRANSFERRED(5),(6) ASSIGNMENT(1)
_______________ _________________% _______________%
Applicable Lending Office:
_____________________________
______________________________
______________________________
______________________________
Address for notices:
______________________________
______________________________
______________________________
______________________________
Telephone No:_________________
Telecopier No:________________
Wiring Instructions:
______________________________
______________________________
C. ASSIGNMENT EFFECTIVE DATE
___________________________
__________________, _______
- - - -------------------
(5) To be expressed by a percentage rounded to the [seventh]-digit to the right
of the decimal point.
(6) Share of Total Commitment sold by Assignor Lender, and share of Total
Commitment purchased by Assignee Lender.
G[1]-3
<PAGE>
ATTACHMENT 2
TO ASSIGNMENT AGREEMENT
FORM OF
ASSIGNMENT EFFECTIVE NOTICE
Reference is made to the Amended and Restated Credit Agreement, dated as of
March 29, 1999, among ADAC Laboratories ("BORROWER"), the financial institutions
parties thereto (the "LENDERS") and ABN AMRO Bank N.V., as agent for the Lenders
(in such capacity, "AGENT"). Agent hereby acknowledges receipt of five executed
counterparts of a completed Assignment Agreement, a copy of which is attached
hereto. [Note: Attach copy of Assignment Agreement.] Terms defined in such
Assignment Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________.
2. Pursuant to such Assignment Agreement, Assignor Lender is required to
deliver to Agent on or before the Assignment Effective Date the Notes payable to
Assignor Lender.
3. Pursuant to such Assignment Agreement, Borrower is required to deliver
to Agent on or before the Assignment Effective Date the following Notes, each
dated _________________ [Insert appropriate date]:
[Describe each new Note for Assignor Lender and each Assignee Lender as to
principal amount.]
4. Pursuant to such Assignment Agreement, each Assignee Lender is
required to pay its Purchase Price to Assignor Lender at or before 12:00 Noon on
the Assignment Effective Date in immediately available funds.
Very truly yours,
ABN AMRO BANK N.V.
as Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
G[2]-1
<PAGE>
EXHIBIT H-1
BORROWER SECURITY AGREEMENT
THIS BORROWER SECURITY AGREEMENT, dated as of September [A], 1999 is
executed by ADAC LABORATORIES, a California corporation ("Borrower"), in favor
of ABN AMRO BANK N.V., a Netherlands public company acting through its San
Francisco Representative Office, acting as agent (in such capacity, "Agent") for
the financial institutions which are from time to time parties to the Credit
Agreement referred to in Recital A below (collectively, the "Lenders").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement, dated as of March
29, 1999, as amended by that certain First Amendment to Amended and Restated
Credit Agreement dated as of August 17, 1999 (as amended, and as further amended
from time to time, the "Credit Agreement"), among Borrower, the Lenders and
Agent, the Lenders have agreed to extend certain credit facilities to Borrower
upon the terms and subject to the conditions set forth therein.
B. The Lenders' obligations to continue extend the credit facilities to
Borrower under the Credit Agreement are subject, among other conditions, to
receipt by Agent of this Security Agreement, duly executed by Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Agent, for the ratable benefit of the
Lenders and Agent, as follows:
1. Definitions and Interpretation. When used in this Security Agreement,
the following terms shall have the following respective meanings:
"Account Debtor" shall have the meaning given to that term in
subparagraph 3(g) hereof.
"Agent" shall have the meaning given to that term in the introductory
paragraph hereof.
"Borrower" shall have the meaning given to that term in the
introductory paragraph hereof.
"Collateral" shall have the meaning given to that term in paragraph 2
hereof.
H-1-1
<PAGE>
"Collateral Certificate" shall have the meaning given to that term in
the Credit Agreement.
"Credit Agreement" shall have the meaning given to that term in
Recital A hereof.
"Depositary Bank" shall have the meaning given to that term in
subparagraph 4(e) hereof.
"Equipment" shall have the meaning given to that term in Attachment 1
hereto.
"Intermediary" shall have the meaning given to that term in
subparagraph 4(f) hereof.
"Inventory" shall have the meaning given to that term in Attachment 1
hereto.
"Lenders" shall have the meaning given to that term in the
introductory paragraph hereof.
"Receivables" shall have the meaning given to that term in Attachment
1 hereto.
"Related Contracts" shall have the meaning given to that term in
Attachment 1 hereto.
"Secured Obligations" shall have the meaning given to that term in the
Credit Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement, and all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC. The rules of
construction set forth in Section I of the Credit Agreement shall, to the extent
not inconsistent with the terms of this Security Agreement, apply to this
Security Agreement and are hereby incorporated by reference.
2. Grant of Security Interest. As security for the Secured Obligations,
Borrower hereby pledges and assigns to Agent (for the ratable benefit of the
Lenders and Agent) and grants to Agent (for the ratable benefit of the Lenders
and Agent) a security interest in all right, title and interest of Borrower in
and to the property described in Attachment 1 hereto, whether now owned or
hereafter
H-1-2
<PAGE>
acquired (collectively and severally, the "Collateral"), which Attachment 1 is
incorporated herein by this reference.
3. Representations and Warranties. Borrower represents and warrants to the
Lenders and Agent as follows:
(a) Borrower is the legal and beneficial owner of the Collateral (or,
in the case of after-acquired Collateral, at the time Borrower acquires
rights in the Collateral, will be the legal and beneficial owner thereof).
No other Person has (or, in the case of after-acquired Collateral, at the
time Borrower acquires rights therein, will have) any right, title, claim
or interest (by way of Lien, purchase option or otherwise) in, against or
to the Collateral, other than Permitted Liens.
(b) Agent has (or in the case of after-acquired Collateral, at the
time Borrower acquires rights therein, will have) a first priority
perfected security interest in the Collateral to the extent that a security
interest in such Collateral can be perfected by the filing of a financing
statement, and a security interest in all other Collateral, subject to no
other Liens except for Permitted Liens.
(c) All Equipment and Inventory are (i) located at the locations
indicated in item 8 of the Collateral Certificate, (ii) in transit to such
locations or (iii) in transit to a third party purchaser which will become
obligated on a Receivable to Borrower upon receipt. Except for Equipment
and Inventory referred to in clauses (ii) and (iii) of the preceding
sentence, Borrower has exclusive possession and control of the Inventory
and Equipment.
(d) All Inventory has been (or, in the case of hereafter produced
Inventory, will be) produced in compliance with all applicable Governmental
Rules, including the Fair Labor Standards Act (if applicable).
(e) Borrower keeps all records concerning the Receivables and the
originals of all Related Contracts at its chief executive office located at
the address set forth in item 2 of the Collateral Certificate.
(f) Each Receivable is genuine and enforceable against the party
obligated to pay the same (an "Account Debtor") free from any right of
rescission, defense, setoff or discount.
(g) Each insurance policy maintained by Borrower is validly existing
and is in full force and effect. Borrower is not in default in any material
respect under the provisions of any insurance policy, and there are no
facts which, with the giving of notice or passage of time (or both), would
result in such a default under any provision of any such insurance policy.
H-1-3
<PAGE>
(h) The information set forth in the Collateral Certificate is true,
correct and accurate.
4. Covenants. Borrower hereby agrees as follows:
(a) Borrower, at Borrower's expense, shall promptly procure, execute
and deliver to Agent all documents, instruments and agreements and perform
all acts which are necessary, or which Agent may reasonably request, to
establish, maintain, preserve, protect and perfect the Collateral, the Lien
granted to Agent therein and the first priority of such Lien (subject to
Permitted Liens) or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the preceding sentence, Borrower shall (i) procure, execute
and deliver to Agent all stock powers, endorsements, assignments, financing
statements and other instruments of transfer requested by Agent, (ii)
deliver to Agent promptly upon receipt all originals of Collateral
consisting of instruments, documents and chattel paper in amounts exceeding
$1,000,000 (provided, however that upon the occurrence of a Default, if
requested by Agent, Borrower shall deliver to Agent promptly upon receipt
all originals of Collateral consisting of instruments, documents and
chattel paper in amounts of less than $1,000,000 but exceeding $100,000)
and (iii) take such actions as may be necessary or reasonably requested by
Agent to perfect the Lien of Agent in any Collateral consisting of
investment property (including taking the actions required by Subparagraph
4(f) hereof and, in those jurisdictions where appropriate, causing such
Liens to be recorded or registered in the books of any financial
intermediary or clearing corporation requested by Agent).
(b) Borrower shall not use or permit any Collateral to be used in
violation of (i) any provision of the Credit Agreement, this Security
Agreement or any other Security Document, (ii) any applicable Governmental
Rule where such use might have a Material Adverse Effect, or (iii) any
policy of insurance covering the Collateral.
(c) Borrower shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(d) Without thirty (30) days prior written notice to Agent, Borrower
shall not (i) change Borrower's name or place of business (or, if Borrower
has more than one place of business, its chief executive office), or the
office in which Borrower's records relating to Receivables or the originals
of Related Contracts are kept, (ii) keep Collateral consisting of chattel
paper and documents at any location other than its chief executive office
set forth in item 2 of the Collateral Certificate, or (iii) keep Collateral
H-1-4
<PAGE>
consisting of Equipment, Inventory or other goods at any location other
than the locations set forth in item 8 of the Collateral Certificate.
(e) For each deposit account maintained by Borrower, Borrower shall
(i) execute and deliver to the bank or other depository institution at
which such deposit account is maintained (the "Depositary Bank") a Notice
of Security Interest in the form of Attachment 2 hereto and (ii) use its
best efforts to cause the Depositary Bank to execute and deliver to Agent
an Acknowledgment and Agreement in the form set forth in such Notice of
Security Interest (or in any other form acceptable to Agent in its sole
discretion). Without ten (10) days prior written notice to Agent, Borrower
shall not establish any deposit account not set forth in item 15 of the
Collateral Certificate.
(f) For each securities account and commodity account maintained by
Borrower, Borrower shall (i) complete, execute and deliver to the bank,
broker or other Person at which such account is maintained (the
"Intermediary") a Notice of Security Interest in the form of Attachment 3
hereto and (ii) cause the Intermediary to execute and deliver to Agent an
Acknowledgment and Agreement in the form set forth in such Notice of
Security Interest (or in any other form acceptable to Agent in its sole
discretion). Without thirty (30) days prior written notice to Agent,
Borrower shall not establish any securities account or commodity account
not set forth in item 16 of the Collateral Certificate.
(g) If requested by Agent, Borrower shall deposit, or cause to be
deposited, all remittances, checks and other funds (in whatever form)
received with respect to Receivables to a deposit account for which
Borrower has complied with subparagraph 4(e) above and in which Agent has a
first priority perfected security interest.
(h) Borrower shall appear in and defend any action or proceeding which
may affect its title to or Agent's interest in the Collateral if an adverse
decision is reasonably likely to have a Material Adverse Effect.
(i) If Agent gives value to enable Borrower to acquire rights in or
the use of any Collateral, Borrower shall use such value for such purpose.
(j) Borrower shall keep separate, accurate and complete records of the
Collateral and shall provide Agent with such records and such other reports
and information relating to the Collateral as Agent may reasonably request
from time to time.
(k) Borrower shall not surrender or lose possession of (other than to
Agent), sell, encumber, lease, rent, option, or otherwise dispose of or
transfer any Collateral or right or interest therein except as permitted in
the
H-1-5
<PAGE>
Credit Agreement, and Borrower shall keep the Collateral free of all Liens
except Permitted Liens.
(l) Borrower shall, if requested by Agent, type, print or stamp
conspicuously on the face of all original copies of all Collateral
consisting of chattel paper and documents in excess of $100,000 not in the
possession of Agent a legend satisfactory to Agent indicating that such
chattel paper and documents are subject to the security interest granted
hereby.
(m) Borrower shall collect, enforce and receive delivery of the
Receivables in accordance with past practice until otherwise notified by
Agent.
(n) Borrower shall comply with all material Requirements of Law
applicable to Borrower which relate to the production, possession,
operation, maintenance and control of the Collateral (including, without
limitation, the Fair Labor Standards Act).
(o) Borrower shall (i) carry and maintain insurance on the Collateral
as required pursuant to Subparagraph 5.01(c) of the Credit Agreement, (ii)
deliver to Agent from time to time, as Agent may request, schedules setting
forth all insurance then in effect, and (iii) deliver to Agent copies of
each policy of insurance which replaces, or evidences the renewal of, each
existing policy of insurance at least fifteen (15) days prior to the
expiration of such policy. Agent shall be named as additional insured or
additional loss payee, as appropriate, on all liability and property
insurance of Borrower and such policies shall contain such additional
endorsements as shall be required by Agent. Prior to the occurrence and the
continuance of an Event of Default, all proceeds of any property insurance
paid as a result of any event or occurrence shall be paid to Borrower. All
proceeds of any property insurance paid after the occurrence and during the
continuance of an Event of Default shall be paid to Agent to be held as
Collateral and applied as provided in the Credit Agreement or, at the
election of the Required Lenders, returned to Borrower.
5. Authorized Action by Agent. Borrower hereby irrevocably appoints Agent
as its attorney-in-fact and agrees that Agent may perform (but Agent shall not
be obligated to and shall incur no liability to Borrower or any third party for
failure so to do) any act which Borrower is obligated by this Security Agreement
to perform, and to exercise such rights and powers as Borrower might exercise
with respect to the Collateral, including, without limitation, the right to (a)
collect by legal proceedings or otherwise and endorse, receive and receipt for
all dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (b) enter into any
extension, reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit,
H-1-6
<PAGE>
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process, preserve and enforce the Collateral; (d) make any
compromise or settlement, and take any action it deems advisable, with respect
to the Collateral; (e) pay any Indebtedness of Borrower relating to the
Collateral; and (f) execute UCC financing statements and other documents,
instruments and agreements required hereunder; provided, however, that Agent
shall not act pursuant to this appointment or otherwise hereunder unless an
Event of Default has occurred and is continuing. Borrower agrees to reimburse
Agent upon demand for all reasonable costs and expenses, including attorneys'
fees, Agent may incur while acting as Borrower's attorney-in-fact hereunder, all
of which costs and expenses are included in the Secured Obligations. Borrower
agrees that such care as Agent gives to the safekeeping of its own property of
like kind shall constitute reasonable care of the Collateral when in Agent's
possession; provided, however, that Agent shall not be required to make any
presentment, demand or protest, or give any notice and need not take any action
to preserve any rights against any prior party or any other Person in connection
with the Secured Obligations or with respect to the Collateral.
6. Default and Remedies. Borrower shall be deemed in default under this
Security Agreement upon the occurrence and during the continuance of an Event of
Default, as that term is defined in the Credit Agreement. In addition to all
other rights and remedies granted to Agent by this Security Agreement, the
Credit Agreement, the other Credit Documents, the UCC and other applicable
Governmental Rules, Agent may, upon the occurrence and during the continuance of
any Event of Default, exercise any one or more of the following rights and
remedies: (a) collect, receive, appropriate or realize upon the Collateral or
otherwise foreclose or enforce Agent's security interests in any or all
Collateral in any manner permitted by applicable Governmental Rules or in this
Security Agreement; (b) notify any or all Account Debtors to make payments on
Receivables directly to Agent; (c) direct any Depositary Bank or Intermediary to
liquidate the account(s) maintained by it, pay all amounts payable in connection
therewith to Agent and/or deliver any proceeds thereof to Agent; (d) sell or
otherwise dispose of any or all Collateral at one or more public or private
sales, whether or not such Collateral is present at the place of sale, for cash
or credit or future delivery, on such terms and in such manner as Agent may
determine; (e) require Borrower to assemble the Collateral and make it available
to Agent at a place to be designated by Agent; (f) enter onto any property where
any Collateral is located and take possession thereof with or without judicial
process; and (g) prior to the disposition of the Collateral, store, process,
repair or recondition any Collateral consisting of goods, perform any
obligations and enforce any rights of Borrower under any Related Contracts or
otherwise prepare and preserve Collateral for disposition in any manner and to
the extent Agent deems appropriate. In furtherance of Agent's rights hereunder,
Borrower hereby grants to Agent an irrevocable, non-exclusive license
(exercisable without royalty or other payment by Agent) to use, license or
sublicense any patent, trademark, tradename, copyright or other intellectual
property in which Borrower now or hereafter has any right, title or interest,
together with the right of access to
H-1-7
<PAGE>
all media in which any of the foregoing may be recorded or stored. In any case
where notice of any sale or disposition of any Collateral is required, Borrower
hereby agrees that seven (7) days notice of such sale or disposition is
reasonable.
7. MISCELLANEOUS.
(a) Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or
upon Borrower or Agent under this Security Agreement shall be given as
provided in Paragraph 8.01 of the Credit Agreement.
(b) Waivers; Amendments. Any term, covenant, agreement or condition of
this Security Agreement may be amended or waived only as provided in the
Credit Agreement. No failure or delay by Agent or any Lender in exercising
any right hereunder shall operate as a waiver thereof or of any other right
nor shall any single or partial exercise of any such right preclude any
other further exercise thereof or of any other right. Unless otherwise
specified in any such waiver or consent, a waiver or consent given
hereunder shall be effective only in the specific instance and for the
specific purpose for which given.
(c) Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of Agent, the Lenders and Borrower and their
respective successors and assigns; provided, however, that Agent, the
Lenders and Borrower may sell, assign and delegate their respective rights
and obligations hereunder only as permitted by the Credit Agreement. Agent
and the Lenders may disclose this Security Agreement as provided in the
Credit Agreement.
(d) Partial Invalidity. If at any time any provision of this Security
Agreement is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Security Agreement nor
the legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired thereby.
(e) Cumulative Rights, etc. The rights, powers and remedies of Agent
and the Lenders under this Security Agreement shall be in addition to all
rights, powers and remedies given to Agent and the Lenders by virtue of any
applicable Governmental Rule, the Credit Agreement, any other Credit
Document or any other agreement, all of which rights, powers, and remedies
shall be cumulative and may be exercised successively or concurrently
without impairing Agent's rights hereunder. Borrower waives any right to
require Agent or any Lender to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Agent's or such Lender's power.
H-1-8
<PAGE>
(f) Payments Free of Taxes, Etc. All payments made by Borrower under
this Security Agreement shall be made by Borrower free and clear of and
without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings. In addition, Borrower shall pay upon
demand any stamp or other taxes, levies or charges of any jurisdiction with
respect to the execution, delivery, registration, performance and
enforcement of this Security Agreement. Upon request by Agent, Borrower
shall furnish evidence satisfactory to Agent that all requisite
authorizations and approvals by, and notices to and filings with,
governmental authorities and regulatory bodies have been obtained and made
and that all requisite taxes, levies and charges have been paid.
(g) Borrower's Continuing Liability. Notwithstanding any provision of
this Security Agreement or any other Credit Document or any exercise by
Agent of any of its rights hereunder or thereunder (including, without
limitation, any right to collect or enforce any Collateral), (i) Borrower
shall remain liable to perform its obligations and duties in connection
with the Collateral (including, without limitation, the Related Contracts
and all other agreements relating to the Collateral) and (ii) neither Agent
nor any Lender shall assume any liability to perform such obligations and
duties or to enforce any of Borrower's rights in connection with the
Collateral (including, without limitation, the Related Contracts and all
other agreements relating to the Collateral).
(h) Governing Law. This Security Agreement shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules (except to the extent otherwise
provided in the UCC).
H-1-9
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Security Agreement to be
executed as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-1-10
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of Borrower, whether now owned or hereafter
acquired, in and to the following:
(a) All equipment and fixtures (including, without limitation, all
diagnostic imaging equipment, furniture, vehicles and other machinery and office
equipment), together with all additions and accessions thereto and replacements
therefor (collectively, the "Equipment");
(b) All inventory (including, without limitation, (i) all raw materials,
work in process and finished goods and (ii) all such goods which are returned to
or repossessed by Borrower), together with all additions and accessions thereto,
replacements therefor, products thereof and documents therefor (collectively,
the "Inventory");
(c) All accounts, chattel paper, instruments, deposit accounts and other
rights to the payment of money (including, without limitation, general
intangibles and contract rights) (collectively, the "Receivables") and all
contracts, security agreements, leases, guaranties and other agreements
evidencing, securing or otherwise relating to the Receivables (collectively, the
"Related Contracts");
(d) All certificated and uncertificated securities, security entitlements,
securities accounts, commodity contracts, commodity accounts and other
investment property;
(e) All other general intangibles and contract rights not otherwise
described above (including, without limitation, (i) customer and supplier lists
and contracts, books and records, insurance policies, tax refunds, contracts for
the purchase of real or personal property; (ii) all patents, copyrights,
trademarks, tradenames and service marks, (iii) all licenses to use,
applications for, and other rights to, such patents, copyrights, trademarks,
tradenames and service marks, and (iv) all goodwill of Borrower);
(f) All other property not otherwise described above (including, without
limitation, all money, letters of credit, documents and goods); and
(g) All proceeds of the foregoing (including, without limitation, whatever
is receivable or received when Collateral or proceeds is sold, collected,
exchanged, returned, substituted or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Collateral,
and all rights to payment with respect to any cause of action affecting or
relating to the Collateral).
H-1[1]-1
<PAGE>
ATTACHMENT 2
TO SECURITY AGREEMENT
NOTICE OF SECURITY INTEREST
IN
DEPOSIT ACCOUNT
__________, [19__] [20__]
[Name of Depositary Bank]
[Address of Depositary Bank]
ADAC LABORATORIES, a California corporation ("Borrower") and ABN AMRO
BANK N.V., a Netherlands public company acting through its San Francisco
Representative Office, acting as agent for certain financial institutions
(in such capacity, "Agent"), under that certain Amended and Restated Credit
Agreement dated as of March 29, 1999 (the "Credit Agreement"), hereby
notify you that Borrower has granted to Agent a security interest in all
deposit accounts maintained by Borrower with you including, without
limitation, the deposit accounts described below:
Account Depositor's Account
Number Name Type
Borrower and Agent authorize you to continue to allow Borrower to make
deposits to, draw checks upon and otherwise withdraw funds from such
deposit accounts (the "Deposit Accounts") without the consent of Agent
until Agent shall instruct you otherwise.
Borrower has authorized Agent to inform you when an Event of Default
(as defined in the Credit Agreement) has occurred and is continuing and at
such time instruct you to cease to permit any further payments or
withdrawals from the Deposit Accounts by Borrower and/or to pay any or all
amounts in the Deposit Accounts to Agent. Borrower authorizes and directs
you to comply with all such instructions received by you from Agent without
further inquiry on your part and
H-1[2]-1
<PAGE>
hereby agrees to indemnify and hold harmless you and your officers,
directors and employees from and for any compliance by you with such
instructions.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ABN AMRO BANK N.V.,
as Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-1[2]-2
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT
OF DEPOSITARY BANK
The undersigned depositary bank hereby acknowledges receipt of the above
notice and agrees with Borrower and Agent to comply with any instruction it may
receive from Agent in accordance therewith. The undersigned confirms to Agent
that the information set forth above regarding the Deposit Accounts is accurate,
that such Deposit Accounts are currently open and that the undersigned has no
prior notice of any other security interest, lien or interest in such Deposit
Accounts. The undersigned waives any right of setoff except for its right or
recoupment for returned items.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-1[2]-3
<PAGE>
ATTACHMENT 3
TO SECURITY AGREEMENT
NOTICE OF SECURITY INTEREST
IN
[SECURITIES][COMMODITY] ACCOUNT
__________ __, [19__] [2000]
[Name of Intermediary]
[Address of Intermediary]
ADAC LABORATORIES, a California corporation ("Borrower") and ABN AMRO BANK
N.V., a Netherlands public company acting through its San Francisco
Representative Office, acting as agent for certain financial institutions (in
such capacity, "Agent"), under that certain Amended and Restated Credit
Agreement dated as of March 29, 1999 (the "Credit Agreement"), hereby notify you
that Borrower has granted to Agent a security interest in all
[securities][commodity] accounts maintained by Borrower with you including,
without limitation, the accounts described below:
Account Number Account Holder's Name Account Type
________________ ________________ ________________
________________ ________________ ________________
________________ ________________ ________________
Until Agent shall instruct you otherwise pursuant to the following paragraph,
Borrower and Agent authorize you, without the consent of Agent, to continue to
comply with all directions of Borrower regarding the purchase, sale, transfer or
redemption of all securities, security entitlements, other investment property
and other financial assets for and in such accounts (the "Accounts").
Borrower has authorized Agent to inform you when an Event of Default (as
defined in the Credit Agreement) has occurred and is continuing and at such time
direct you to cease to comply with any further directions of Borrower with
respect to the Accounts. After your receipt of any such notice, Borrower
authorizes and directs you, without the consent of Borrower or further inquiry
on your part, to comply with all directions of Agent
H-1[3]-1
<PAGE>
regarding the Accounts, including, without limitation, any direction to (a)
purchase, sell, transfer or redeem any or of all securities, security
entitlements, other investment property or other financial assets for and in the
Accounts, (b) withdraw any or all funds from the Accounts and pay such funds to
Agent or any person designated by Agent or (c) transfer any or all of the
Accounts to the name of Agent or any person designated by Agent. Borrower hereby
agrees to indemnify and hold harmless you and your officers, directors and
employees from and for any compliance by you with such directions of Agent.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ABN AMRO BANK N.V.,
as Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-1[3]-2
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT
OF INTERMEDIARY
The undersigned institution hereby acknowledges receipt of the above notice
and agrees with Borrower and Agent to comply with any direction it may receive
from Agent in accordance therewith without the consent of Borrower or further
inquiry. The undersigned confirms to Agent that the information set forth above
regarding the Accounts is accurate, that such Accounts are currently open and
that the undersigned has no prior notice of any other security interest, lien or
interest in such Accounts. The undersigned agrees that any lien or right of
setoff it may have in or against the accounts is subordinate to the security
interest of Agent therein.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-1[3]-3
<PAGE>
EXHIBIT H-2
DOMESTIC SUBSIDIARY SECURITY AGREEMENT
THIS DOMESTIC SUBSIDIARY SECURITY AGREEMENT (this "Security Agreement"),
dated as of September [A], 1999 is executed by [_______________], a
[_______________] ("Grantor"), in favor of ABN AMRO BANK N.V., a Netherlands
public company acting through its San Francisco Representative Office, acting as
agent (in such capacity, "Agent") for the financial institutions which are from
time to time parties to the Credit Agreement referred to in Recital A below
(collectively, the "Lenders").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement, dated as of March
29, 1999 as amended by that certain First Amendment to Amended and Restated
Credit Agreement dated as of August 17, 1999 (as amended, and as further amended
from time to time, the "Credit Agreement"), among Adac Laboratories, a
California corporation ("Borrower"), the Lenders and Agent, the Lenders have
agreed to extend certain credit facilities to Borrower upon the terms and
subject to the conditions set forth therein.
B. The Lenders' obligations to continue to extend the credit facilities to
Borrower under the Credit Agreement are subject, among other conditions, to
receipt by Agent of this Security Agreement, duly executed by Grantor. Grantor
expects to derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Agent, for the ratable benefit of the
Lenders and Agent, as follows:
1. Definitions and Interpretation. When used in this Security Agreement,
the following terms shall have the following respective meanings:
"Account Debtor" shall have the meaning given to that term in
subparagraph 3(g) hereof.
"Agent" shall have the meaning given to that term in the introductory
paragraph hereof.
"Borrower" shall have the meaning given to that term in the
introductory paragraph hereof.
H-2-1
<PAGE>
"Collateral" shall have the meaning given to that term in paragraph 2
hereof.
"Collateral Certificate" shall have the meaning given to that term in
the Credit Agreement.
"Credit Agreement" shall have the meaning given to that term in
Recital A hereof.
"Depositary Bank" shall have the meaning given to that term in
subparagraph 4(e) hereof.
"Equipment" shall have the meaning given to that term in Attachment 1
hereto.
"Grantor" shall have the meaning given to that term in the
introductory paragraph hereof.
"Intermediary" shall have the meaning given to that term in
subparagraph 4(f) hereof.
"Inventory" shall have the meaning given to that term in Attachment 1
hereto.
"Lenders" shall have the meaning given to that term in the
introductory paragraph hereof.
"Receivables" shall have the meaning given to that term in Attachment
1 hereto.
"Related Contracts" shall have the meaning given to that term in
Attachment 1 hereto.
"Secured Obligations" shall have the meaning given to that term in the
Credit Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement, and all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC. The rules of
construction set forth in Section I of the Credit Agreement shall, to the extent
not inconsistent with the terms of this Security Agreement, apply to this
Security Agreement and are hereby incorporated by reference.
H-2-2
<PAGE>
2. GRANT OF SECURITY INTEREST. As security for the Secured Obligations,
Grantor hereby pledges and assigns to Agent (for the ratable benefit of the
Lenders and Agent) and grants to Agent (for the ratable benefit of the Lenders
and Agent) a security interest in all right, title and interest of Grantor in
and to the property described in Attachment 1 hereto, whether now owned or
hereafter acquired (collectively and severally, the "Collateral"), which
Attachment 1 is incorporated herein by this reference.
3. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to the
Lenders and Agent as follows:
(a) Grantor is the legal and beneficial owner of the Collateral (or,
in the case of after-acquired Collateral, at the time Grantor acquires
rights in the Collateral, will be the legal and beneficial owner thereof).
No other Person has (or, in the case of after-acquired Collateral, at the
time Grantor acquires rights therein, will have) any right, title, claim or
interest (by way of Lien, purchase option or otherwise) in, against or to
the Collateral, other than Permitted Liens.
(b) Agent has (or in the case of after-acquired Collateral, at the
time Grantor acquires rights therein, will have) a first priority perfected
security interest in the Collateral to the extent that a security interest
in such Collateral can be perfected by the filing of a financing statement,
and a security interest in all other Collateral, subject to no other Liens
except for Permitted Liens.
(c) All Equipment and Inventory are (i) located at the locations
indicated in item 8 of the Collateral Certificate, (ii) in transit to such
locations or (iii) in transit to a third party purchaser which will become
obligated on a Receivable to Grantor upon receipt. Except for Equipment and
Inventory referred to in clauses (ii) and (iii) of the preceding sentence,
Grantor has exclusive possession and control of the Inventory and
Equipment.
(d) All Inventory has been (or, in the case of hereafter produced
Inventory, will be) produced in compliance with all applicable Governmental
Rules, including the Fair Labor Standards Act (if applicable).
(e) Grantor keeps all records concerning the Receivables and the
originals of all Related Contracts at its chief executive office located at
the address set forth in item 2 of the Collateral Certificate.
(f) Each Receivable is genuine and enforceable against the party
obligated to pay the same (an "Account Debtor") free from any right of
rescission, defense, setoff or discount.
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<PAGE>
(g) Each insurance policy maintained by Grantor is validly existing
and is in full force and effect. Grantor is not in default in any material
respect under the provisions of any insurance policy, and there are no
facts which, with the giving of notice or passage of time (or both), would
result in such a default under any provision of any such insurance policy.
(h) The information set forth in the Collateral Certificate is true,
correct and accurate.
4. COVENANTS. Grantor hereby agrees as follows:
(a) Grantor, at Grantor's expense, shall promptly procure, execute and
deliver to Agent all documents, instruments and agreements and perform all
acts which are necessary, or which Agent may reasonably request, to
establish, maintain, preserve, protect and perfect the Collateral, the Lien
granted to Agent therein and the first priority of such Lien (subject to
Permitted Liens) or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the preceding sentence, Grantor shall (i) procure, execute
and deliver to Agent all stock powers, endorsements, assignments, financing
statements and other instruments of transfer requested by Agent, (ii)
[deliver to Agent promptly upon receipt all originals of Collateral
consisting of instruments, documents and chattel paper in amounts exceeding
$1,000,000 (provided, however, that upon the occurrence of a Default, if
requested by Agent, Grantor shall deliver to Agent promptly upon receipt
all originals of Collateral consisting of instruments, documents and
chattel paper in amounts of less than $1,000,000 but exceeding $100,000)]
{for use in all Domestic Subsidiary Security Agreements other than ADAC
Capital, LLC}[upon the occurrence of a Default, if requested by Agent,
deliver to Agent promptly upon receipt all originals of Collateral
consisting of instruments, documents and chattel paper in amounts exceeding
$1,000,000] {for use in ADAC Capital, LLC Domestic Subsidiary Security
Agreement}and (iii) take such actions as may be necessary or reasonably
requested by Agent to perfect the Lien of Agent in any Collateral
consisting of investment property (including taking the actions required by
Subparagraph 4(f) hereof and, in those jurisdictions where appropriate,
causing such Liens to be recorded or registered in the books of any
financial intermediary or clearing corporation requested by Agent).
(b) Grantor shall not use or permit any Collateral to be used in
violation of (i) any provision of the Credit Agreement, this Security
Agreement or any other Security Document, (ii) any applicable Governmental
Rule where such use might have a Material Adverse Effect, or (iii) any
policy of insurance covering the Collateral.
H-2-4
<PAGE>
(c) Grantor shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(d) Without thirty (30) days prior written notice to Agent, Grantor
shall not (i) change Grantor's name or place of business (or, if Grantor
has more than one place of business, its chief executive office), or the
office in which Grantor's records relating to Receivables or the originals
of Related Contracts are kept, (ii) keep Collateral consisting of chattel
paper and documents at any location other than its chief executive office
set forth in item 2 of the Collateral Certificate, or (iii) keep Collateral
consisting of Equipment, Inventory or other goods at any location other
than the locations set forth in item 8 of the Collateral Certificate.
(e) For each deposit account maintained by Grantor, Grantor shall (i)
execute and deliver to the bank or other depository institution at which
such deposit account is maintained (the "Depositary Bank") a Notice of
Security Interest in the form of Attachment 2 hereto and (ii) use its best
efforts to cause the Depositary Bank to execute and deliver to Agent an
Acknowledgment and Agreement in the form set forth in such Notice of
Security Interest (or in any other form acceptable to Agent in its sole
discretion). Without ten (10) days prior written notice to Agent, Grantor
shall not establish any deposit account not set forth in item 15 of the
Collateral Certificate.
(f) For each securities account and commodity account maintained by
Grantor, Grantor shall (i) complete, execute and deliver to the bank,
broker or other Person at which such account is maintained (the
"Intermediary") a Notice of Security Interest in the form of Attachment 3
hereto and (ii) cause the Intermediary to execute and deliver to Agent an
Acknowledgment and Agreement in the form set forth in such Notice of
Security Interest (or in any other form acceptable to Agent in its sole
discretion). Without thirty (30) days prior written notice to Agent,
Grantor shall not establish any securities account or commodity account not
set forth in item 16 of the Collateral Certificate.
(g) If requested by Agent, Grantor shall deposit, or cause to be
deposited, all remittances, checks and other funds (in whatever form)
received with respect to Receivables to a deposit account for which Grantor
has complied with subparagraph 4(e) above and in which Agent has a first
priority perfected security interest.
(h) Grantor shall appear in and defend any action or proceeding which
may affect its title to or Agent's interest in the Collateral if an adverse
decision is reasonably likely to have a Material Adverse Effect.
H-2-5
<PAGE>
(i) If Agent gives value to enable Grantor to acquire rights in or the
use of any Collateral, Grantor shall use such value for such purpose.
(j) Grantor shall keep separate, accurate and complete records of the
Collateral and shall provide Agent with such records and such other reports
and information relating to the Collateral as Agent may reasonably request
from time to time.
(k) Grantor shall not surrender or lose possession of (other than to
Agent), sell, encumber, lease, rent, option, or otherwise dispose of or
transfer any Collateral or right or interest therein except as permitted in
the Credit Agreement, and, notwithstanding any provision of the Credit
Agreement, Grantor shall keep the Collateral free of all Liens except
Permitted Liens.
(l) Grantor shall, if requested by Agent, type, print or stamp
conspicuously on the face of all original copies of all Collateral
consisting of chattel paper and documents in excess of $100,000 not in the
possession of Agent a legend satisfactory to Agent indicating that such
chattel paper and documents are subject to the security interest granted
hereby.
(m) Grantor shall collect, enforce and receive delivery of the
Receivables in accordance with past practice until otherwise notified by
Agent.
(n) Grantor shall comply with all material Requirements of Law
applicable to Grantor which relate to the production, possession,
operation, maintenance and control of the Collateral (including, without
limitation, the Fair Labor Standards Act).
(o) Grantor shall (i) carry and maintain insurance on the Collateral
as required pursuant to Subparagraph 5.02(c) of the Credit Agreement, (ii)
deliver to Agent from time to time, as Agent may request, schedules setting
forth all insurance then in effect, and (iii) deliver to Agent copies of
each policy of insurance which replaces, or evidences the renewal of, each
existing policy of insurance at least fifteen (15) days prior to the
expiration of such policy. Agent shall be named as additional insured or
additional loss payee, as appropriate, on all liability and property
insurance of Grantor and such policies shall contain such additional
endorsements as shall be required by Agent. Prior to the occurrence and the
continuance of an Event of Default, all proceeds of any property insurance
paid as a result of any event or occurrence shall be paid to Grantor. All
proceeds of any property insurance paid after the occurrence and during the
continuance of an Event of Default shall be paid to Agent to be held as
Collateral and applied as provided in the Credit Agreement or, at the
election of the Required Lenders, returned to Grantor.
H-2-6
<PAGE>
5. AUTHORIZED ACTION BY AGENT. Grantor hereby irrevocably appoints Agent as
its attorney-in-fact and agrees that Agent may perform (but Agent shall not be
obligated to and shall incur no liability to Grantor or any third party for
failure so to do) any act which Grantor is obligated by this Security Agreement
to perform, and to exercise such rights and powers as Grantor might exercise
with respect to the Collateral, including, without limitation, the right to (a)
collect by legal proceedings or otherwise and endorse, receive and receipt for
all dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (b) enter into any
extension, reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for the Collateral; (c) insure, process, preserve and enforce the
Collateral; (d) make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral; (e) pay any Indebtedness of Grantor
relating to the Collateral; and (f) execute UCC financing statements and other
documents, instruments and agreements required hereunder; provided, however,
that Agent shall not act pursuant to this appointment or otherwise hereunder
unless an Event of Default has occurred and is continuing. Grantor agrees to
reimburse Agent upon demand for all reasonable costs and expenses, including
attorneys' fees, Agent may incur while acting as Grantor's attorney-in-fact
hereunder, all of which costs and expenses are included in the Secured
Obligations. Grantor agrees that such care as Agent gives to the safekeeping of
its own property of like kind shall constitute reasonable care of the Collateral
when in Agent's possession; provided, however, that Agent shall not be required
to make any presentment, demand or protest, or give any notice and need not take
any action to preserve any rights against any prior party or any other Person in
connection with the Secured Obligations or with respect to the Collateral.
6. DEFAULT AND REMEDIES. Grantor shall be deemed in default under this
Security Agreement upon the occurrence and during the continuance of an Event of
Default, as that term is defined in the Credit Agreement. In addition to all
other rights and remedies granted to Agent by this Security Agreement, the
Credit Agreement, the other Credit Documents, the UCC and other applicable
Governmental Rules, Agent may, upon the occurrence and during the continuance of
any Event of Default, exercise any one or more of the following rights and
remedies: (a) collect, receive, appropriate or realize upon the Collateral or
otherwise foreclose or enforce Agent's security interests in any or all
Collateral in any manner permitted by applicable Governmental Rules or in this
Security Agreement; (b) notify any or all Account Debtors to make payments on
Receivables directly to Agent; (c) direct any Depositary Bank or Intermediary to
liquidate the account(s) maintained by it, pay all amounts payable in connection
therewith to Agent and/or deliver any proceeds thereof to Agent; (d) sell or
otherwise dispose of any or all Collateral at one or more public or private
sales, whether or not such Collateral is present at the place of sale, for cash
or credit or future delivery, on such terms and in such manner as Agent may
determine; (e) require Grantor to assemble the Collateral and make it available
to Agent at a place to be designated by Agent; (f)
H-2-7
<PAGE>
enter onto any property where any Collateral is located and take possession
thereof with or without judicial process; and (g) prior to the disposition of
the Collateral, store, process, repair or recondition any Collateral consisting
of goods, perform any obligations and enforce any rights of Grantor under any
Related Contracts or otherwise prepare and preserve Collateral for disposition
in any manner and to the extent Agent deems appropriate. In furtherance of
Agent's rights hereunder, Grantor hereby grants to Agent an irrevocable,
non-exclusive license (exercisable without royalty or other payment by Agent) to
use, license or sublicense any patent, trademark, tradename, copyright or other
intellectual property in which Grantor now or hereafter has any right, title or
interest, together with the right of access to all media in which any of the
foregoing may be recorded or stored. In any case where notice of any sale or
disposition of any Collateral is required, Grantor hereby agrees that seven (7)
days notice of such sale or disposition is reasonable.
7. AUTHORIZATIONS, WAIVERS, ETC.
(a) Authorizations. Grantor authorizes Agent and the Lenders, in their
discretion, without notice to Grantor, irrespective of any change in the
financial condition of Borrower, Grantor or any other guarantor of the
Secured Obligations since the date hereof, and without affecting or
impairing in any way the liability of Grantor hereunder, from time to time
to:
(i) Create new Secured Obligations and renew, compromise, extend,
accelerate or otherwise change the time for payment or performance of,
or otherwise amend or modify the Credit Documents or change the terms
of the Secured Obligations or any part thereof, including increase or
decrease of the rate of interest thereon;
(ii) Take and hold security for the payment or performance of the
Secured Obligations and exchange, enforce, waive or release any such
security; apply such security and direct the order or manner of sale
thereof; and purchase such security at public or private sale;
(iii) Otherwise exercise any right or remedy they may have
against Borrower, Grantor, any other guarantor of the Secured
Obligations or any security, including, without limitation, the right
to foreclose upon any such security by judicial or nonjudicial sale;
(iv) Settle, compromise with, release or substitute any one or
more makers, endorsers or guarantors of the Secured Obligations; and
(v) Assign the Secured Obligations, this Security Agreement or
the other Credit Documents in whole or in part to the
H-2-8
<PAGE>
extent provided in the Credit Agreement and the other Credit
Documents.
(b) Waivers. Grantor hereby waives:
(i) Any right to require Agent or any Lender to (A) proceed
against Borrower or any other guarantor of the Secured Obligations,
(B) proceed against or exhaust any security received from Borrower,
Grantor, or any other guarantor of the Secured Obligations or
otherwise marshall the assets of Borrower, Grantor, or any other
guarantor of the Secured Obligations or (C) pursue any other remedy in
Agent's or any Lender's power whatsoever;
(ii) Any defense arising by reason of the application by Borrower
of the proceeds of any borrowing;
(iii) Any defense resulting from the absence, impairment or loss
of any right of reimbursement, subrogation, contribution or other
right or remedy of Grantor against Borrower, any other guarantor of
the Secured Obligations or any security, whether resulting from an
election by Agent or any Lender to foreclose upon security by
nonjudicial sale, or otherwise;
(iv) Any setoff or counterclaim of Borrower or any defense which
results from any disability or other defense of Borrower or the
cessation or stay of enforcement from any cause whatsoever of the
liability of Borrower (including, without limitation, the lack of
validity or enforceability of any of the Credit Documents);
(v) Any defense based upon any law, rule or regulation which
provides that the obligation of a surety must not be greater or more
burdensome than the obligation of the principal;
(vi) Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Secured Obligations
have been fully, finally and indefeasibly paid, any right of
subrogation, reimbursement, indemnification or contribution and other
similar right to enforce any remedy which Agent, the Lenders or any
other Person now has or may hereafter have against Borrower on account
of the Secured Obligations, and any benefit of, and any right to
participate in, any security now or hereafter received by Agent, any
Lender or any other Person on account of the Secured Obligations;
(vii) All presentments, demands for performance, notices of
non-performance, notices delivered under the Credit Documents,
H-2-9
<PAGE>
protests, notice of dishonor, and notices of acceptance of this
Security Agreement and of the existence, creation or incurring of new
or additional Secured Obligations and notices of any public or private
foreclosure sale;
(viii) The benefit of any statute of limitations to the extent
permitted by law;
(ix) Any appraisement, valuation, stay, extension, moratorium
redemption or similar law or similar rights for marshalling;
(x) Any right to be informed by Agent or any Lender of the
financial condition of Borrower, any other guarantor of the Secured
Obligations or any change therein or any other circumstances bearing
upon the risk of nonpayment or nonperformance of the Secured
Obligations;
(xi) Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Secured Obligations
have been fully, finally and indefeasibly paid, any right to revoke
this Security Agreement;
(xii) Any defense arising from an election for the application of
Section 1111(b)(2) of the United States Bankruptcy Code which applies
to the Secured Obligations;
(xiii) Any defense based upon any borrowing or grant of a
security interest under Section 364 of the United States Bankruptcy
Code;
(xiv) Any right it may have to a fair value hearing to determine
the size of a deficiency judgment following any foreclosure on any
security for the Secured Obligations;
(xv) All rights and defenses arising out of an election of
remedies by Agent or any Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for a Secured Obligation, has destroyed Grantor's rights of
subrogation and reimbursement against Borrower by the operation of
Section 580d of the Code of Civil Procedure or otherwise; and
(xvi) All other rights and defenses available to Grantor by
reason of Sections 2787 to 2855, inclusive, Section 2899 or Section
3433 of the California Civil Code or Section 3605 of the California
Commercial Code.
H-2-10
<PAGE>
Without limiting the scope of any of the foregoing provisions of this
Paragraph 5, and pursuant to the provisions of California Civil Code
Section 2856, Grantor hereby further waives all rights and defenses
that Grantor may have because the Secured Obligations are secured by
real property. This means, among other things:
(A) Agent or any Lender may collect from Grantor without
first foreclosing on any real or personal property collateral
pledged by Borrower.
(B) If Agent or any Lender forecloses on any real property
collateral pledged by Borrower:
(1) The amount of the Secured Obligations may be
reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth
more than the sale price.
(2) Agent or any Lender may collect from Grantor even
if Agent or any Lender, by foreclosing on the real property
collateral, has destroyed any right Grantor may have to
collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and
defenses Grantor may have because the Secured Obligations are secured
by real property. These rights and defenses include, but are not
limited to, any rights or defenses based upon Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure.
H-2-11
<PAGE>
(c) Financial Condition of Borrower, Etc. Grantor is fully aware of
the financial condition and affairs of Borrower. Grantor has executed this
Security Agreement without reliance upon any representation, warranty,
statement or information concerning Borrower furnished to Grantor by Agent
or any Lender and has, independently and without reliance on Agent or any
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of the financial condition and affairs
of Borrower and of other circumstances affecting the risk of nonpayment or
nonperformance of the Secured Obligations. Grantor is in a position to
obtain, and assumes full responsibility for obtaining, any additional
information about the financial condition and affairs of Borrower and of
other circumstances affecting the risk of nonpayment or nonperformance of
the Secured Obligations and will, independently and without reliance upon
Agent or any Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action in connection with this Security
Agreement.
8. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to
or upon Grantor, any Lender or Agent under this Security Agreement or
the other Credit Documents to which Grantor is a party shall be in
writing and faxed, mailed or delivered, if to Grantor or Agent, at its
respective facsimile number or address set forth below or, if to any
Lender, at the address or facsimile number specified beneath the
heading "Address for Notices" under the name of such Lender in
Schedule I to the Credit Agreement (or to such other facsimile number
or address for any party as indicated in any notice given by that
party to the other parties). All such notices and communications shall
be effective (i) when sent by overnight service of recognized
standing, on the second Business Day following the deposit with such
service; (ii) when mailed, first class postage prepaid and addressed
as aforesaid through the United States Postal Service, upon receipt;
(iii) when delivered by hand, upon delivery; and (iv) when faxed, upon
confirmation of receipt.
Grantor: [__________________________]
c/o ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: Ronald Lindberg
Telephone: (408) 321-9100
Facsimile: (408) 321-9686
Agent: ABN AMRO Bank N.V.
101 California Street, Suite 4550
H-2-12
<PAGE>
San Francisco, CA 94111-5812
Attn: Dianne Barkley
Telephone: (415) 984-3706
Facsimile: (415) 362-3524
with a copy to:
ABN AMRO Bank N.V.
1325 Avenue of the Americas, 9th Floor
New York, NY 10017
Attn: Linda Boardman
Telephone: (212) 314-1724
Fax No: (212) 314-1709
(b) Waivers; Amendments. Any term, covenant, agreement or
condition of this Security Agreement may be amended or waived only as
provided in the Credit Agreement. No failure or delay by Agent or any
Lender in exercising any right hereunder shall operate as a waiver
thereof or of any other right nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of
any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only
in the specific instance and for the specific purpose for which given.
(c) Successors and Assigns. This Security Agreement shall be
binding upon and inure to the benefit of Agent, the Lenders and
Grantor and their respective successors and assigns; provided,
however, that Agent, the Lenders and Grantor may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. Agent and the Lenders may disclose
this Security Agreement as provided in the Credit Agreement.
(d) Partial Invalidity. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law or any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this
Security Agreement nor the legality, validity or enforceability of
such provision under the law of any other jurisdiction shall in any
way be affected or impaired thereby.
(e) Cumulative Rights, etc. The rights, powers and remedies of
Agent and the Lenders under this Security Agreement shall be in
addition to all rights, powers and remedies given to Agent and the
Lenders by virtue of any applicable Governmental Rule, the Credit
Agreement, any other Credit Document or any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Agent's
rights hereunder. Grantor waives any right to
H-2-13
<PAGE>
require Agent or any Lender to proceed against any Person or to
exhaust any Collateral or to pursue any remedy in Agent's or such
Lender's power.
(f) Payments Free of Taxes, Etc. All payments made by Grantor
under this Security Agreement shall be made by Grantor free and clear
of and without deduction for any and all present and future taxes,
levies, charges, deductions and withholdings. In addition, Grantor
shall pay upon demand any stamp or other taxes, levies or charges of
any jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Security Agreement.
Upon request by Agent, Grantor shall furnish evidence satisfactory to
Agent that all requisite authorizations and approvals by, and notices
to and filings with, governmental authorities and regulatory bodies
have been obtained and made and that all requisite taxes, levies and
charges have been paid.
(g) Grantor's Continuing Liability. Notwithstanding any provision
of this Security Agreement or any other Credit Document or any
exercise by Agent of any of its rights hereunder or thereunder
(including, without limitation, any right to collect or enforce any
Collateral), (i) Grantor shall remain liable to perform its
obligations and duties in connection with the Collateral (including,
without limitation, the Related Contracts and all other agreements
relating to the Collateral) and (ii) neither Agent nor any Lender
shall assume any liability to perform such obligations and duties or
to enforce any of Grantor's rights in connection with the Collateral
(including, without limitation, the Related Contracts and all other
agreements relating to the Collateral).
(h) Governing Law. This Security Agreement shall be governed by
and construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
H-2-14
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
executed as of the day and year first above written.
[_____________________________]
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-2-15
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of Grantor, whether now owned or hereafter
acquired, in and to the following:
(a) All equipment and fixtures (including, without limitation, all
diagnostic imaging equipment, furniture, vehicles and other machinery and office
equipment), together with all additions and accessions thereto and replacements
therefor (collectively, the "Equipment");
(b) All inventory (including, without limitation, (i) all raw materials,
work in process and finished goods and (ii) all such goods which are returned to
or repossessed by Grantor), together with all additions and accessions thereto,
replacements therefor, products thereof and documents therefor (collectively,
the "Inventory");
(c) All accounts, chattel paper, instruments, deposit accounts and other
rights to the payment of money (including, without limitation, general
intangibles and contract rights) (collectively, the "Receivables") and all
contracts, security agreements, leases, guaranties and other agreements
evidencing, securing or otherwise relating to the Receivables (collectively, the
"Related Contracts");
(d) All certificated and uncertificated securities, security entitlements,
securities accounts, commodity contracts, commodity accounts and other
investment property;
(e) All other general intangibles and contract rights not otherwise
described above (including, without limitation, (i) customer and supplier lists
and contracts, books and records, insurance policies, tax refunds, contracts for
the purchase of real or personal property; (ii) all patents, copyrights,
trademarks, tradenames and service marks, (iii) all licenses to use,
applications for, and other rights to, such patents, copyrights, trademarks,
tradenames and service marks, and (iv) all goodwill of Grantor);
(f) All other property not otherwise described above (including, without
limitation, all money, letters of credit, documents and goods); and
(g) All proceeds of the foregoing (including, without limitation, whatever
is receivable or received when Collateral or proceeds is sold, collected,
exchanged, returned, substituted or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Collateral,
and all rights to payment with respect to any cause of action affecting or
relating to the Collateral).
H-2[1]-1
<PAGE>
ATTACHMENT 2
TO SECURITY AGREEMENT
NOTICE OF SECURITY INTEREST
IN
DEPOSIT ACCOUNT
__________, [19__] [20__]
[Name of Depositary Bank]
[Address of Depositary Bank]
[________________], a [____________________] ("Grantor") and ABN AMRO
BANK N.V., a Netherlands public company acting through its San Francisco
Representative Office, acting as agent for certain financial institutions
(in such capacity, "Agent"), under that certain Domestic Subsidiary
Security Agreement dated as of September [A], 1999 (the "Security
Agreement"), hereby notify you that Grantor has granted to Agent a security
interest in all deposit accounts maintained by Grantor with you including,
without limitation, the deposit accounts described below:
Account Depositor's Account
Number Name Type
______________ _______________ _________________
______________ _______________ _________________
______________ _______________ _________________
______________ _______________ _________________
Grantor and Agent authorize you to continue to allow Grantor to make
deposits to, draw checks upon and otherwise withdraw funds from such
deposit accounts (the "Deposit Accounts") without the consent of Agent
until Agent shall instruct you otherwise.
Grantor has authorized Agent to inform you when an Event of Default
(as defined in the Credit Agreement) has occurred and is continuing and at
such time instruct you to cease to permit any further payments or
withdrawals from the Deposit Accounts by Grantor and/or to pay any or all
amounts in the Deposit Accounts to Agent. Grantor authorizes and directs
you to comply with all such instructions received by you from Agent without
further inquiry on your part and hereby agrees to indemnify and hold
H-2[2]-1
<PAGE>
harmless you and your officers, directors and employees from and for any
compliance by you with such instructions.
[_______________________]
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ABN AMRO BANK N.V.,
as Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-2[2]-2
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT
OF DEPOSITARY BANK
The undersigned depositary bank hereby acknowledges receipt of the above
notice and agrees with Grantor and Agent to comply with any instruction it may
receive from Agent in accordance therewith. The undersigned confirms to Agent
that the information set forth above regarding the Deposit Accounts is accurate,
that such Deposit Accounts are currently open and that the undersigned has no
prior notice of any other security interest, lien or interest in such Deposit
Accounts. The undersigned waives any right of setoff except for its right or
recoupment for returned items.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-2[2]-3
<PAGE>
ATTACHMENT 3
TO SECURITY AGREEMENT
NOTICE OF SECURITY INTEREST
IN
[SECURITIES][COMMODITY] ACCOUNT
__________ __, [19__] [2000]
[Name of Intermediary]
[Address of Intermediary]
[________________], a [____________________] ("Grantor") and ABN AMRO BANK
N.V., a Netherlands public company acting through its San Francisco
Representative Office, acting as agent for certain financial institutions (in
such capacity, "Agent"), under that certain Domestic Subsidiary Security
Agreement dated as of September [A], 1999 (the "Security Agreement"), hereby
notify you that Grantor has granted to Agent a security interest in all
[securities][commodity] accounts maintained by Grantor with you including,
without limitation, the accounts described below:
Account Number Account Holder's Name Account Type
________________ ________________ ________________
________________ ________________ ________________
________________ ________________ ________________
Until Agent shall instruct you otherwise pursuant to the following paragraph,
Grantor and Agent authorize you, without the consent of Agent, to continue to
comply with all directions of Grantor regarding the purchase, sale, transfer or
redemption of all securities, security entitlements, other investment property
and other financial assets for and in such accounts (the "Accounts").
Grantor has authorized Agent to inform you when an Event of Default (as
defined in the Credit Agreement) has occurred and is continuing and at such time
direct you to cease to comply with any further directions of Grantor with
respect to the Accounts. After your receipt of any such notice, Grantor
authorizes and directs you, without the consent of Grantor or further inquiry on
your part, to comply with all directions of Agent regarding
H-2[3]-1
<PAGE>
the Accounts, including, without limitation, any direction to (a) purchase,
sell, transfer or redeem any or of all securities, security entitlements, other
investment property or other financial assets for and in the Accounts, (b)
withdraw any or all funds from the Accounts and pay such funds to Agent or any
person designated by Agent or (c) transfer any or all of the Accounts to the
name of Agent or any person designated by Agent. Grantor hereby agrees to
indemnify and hold harmless you and your officers, directors and employees from
and for any compliance by you with such directions of Agent.
[___________________________]
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ABN AMRO BANK N.V.,
as Agent
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-2[3]-2
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT
OF INTERMEDIARY
The undersigned institution hereby acknowledges receipt of the above notice
and agrees with Grantor and Agent to comply with any direction it may receive
from Agent in accordance therewith without the consent of Grantor or further
inquiry. The undersigned confirms to Agent that the information set forth above
regarding the Accounts is accurate, that such Accounts are currently open and
that the undersigned has no prior notice of any other security interest, lien or
interest in such Accounts. The undersigned agrees that any lien or right of
setoff it may have in or against the accounts is subordinate to the security
interest of Agent therein.
By:
------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-2[3]-3
<PAGE>
EXHIBIT I-1
BORROWER SECURITY AGREEMENT
(INTELLECTUAL PROPERTY)
THIS BORROWER SECURITY AGREEMENT (INTELLECTUAL PROPERTY),
dated as of September [A], 1999 is executed by ADAC LABORATORIES, a California
corporation ("Borrower") in favor of ABN AMRO BANK N.V., a Netherlands public
company acting through its San Francisco Representative Office, acting as agent
(in such capacity, "Agent") for the financial institutions which are from time
to time parties to the Credit Agreement referred to in Recital A below
(collectively, the "Lenders").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
March 29, 1999 as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 17, 1999 (as amended, and as
further amended from time to time, the "Credit Agreement"), among Borrower,
the Lenders and Agent, the Lenders have agreed to extend certain credit
facilities to Borrower upon the terms and subject to the conditions set forth
therein.
B. The Lenders' obligations to continue to extend the credit
facilities to Borrower under the Credit Agreement are subject, among other
conditions, to receipt by Agent of this Security Agreement duly executed by
Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Agent, for the ratable benefit of
the Lenders and Agent, as follows:
1. DEFINITIONS AND INTERPRETATION. When used in this Security
Agreement, the following terms shall have the following respective meanings:
"Agent" shall have the meaning given to that term in the introductory
paragraph hereof.
"Borrower" shall have the meaning given to that term in the
introductory paragraph hereof.
"Collateral" shall have the meaning given to that term in paragraph 2
hereof.
I-1-1
<PAGE>
"Credit Agreement" shall have the meaning given to that term in Recital
A hereof.
"Copyright Office" shall mean the United States Copyright Office or any
successor office or agency thereto.
"Copyrights" shall have the meaning given to that term in Attachment 1
hereto.
"Lenders" shall have the meaning given to that term in the introductory
paragraph hereof.
"Mask Works" shall have the meaning given to that term in Attachment 1
hereto.
"Patent and Trademark Office" shall mean the United States Patent and
Trademark Office or any successor office or agency thereto.
"Patent Applications" shall mean all applications made by, or on behalf
of, Borrower to the Patent and Trademark Office or to any similar
office or agency of any foreign country or political subdivision
thereof for the registration of Patents.
"Patent Registrations" shall mean all Patents registered with the
Patent and Trademark Office or with any similar office or agency of any
foreign country or political subdivision thereof and all Patent
Applications.
"Patents" shall have the meaning given to that term in Attachment 1
hereto.
"Secured Obligations" shall have the meaning given to that term in the
Credit Agreement.
"Trade Secrets" shall have the meaning given to that term in
Attachment 1 hereto.
"Trademarks" shall have the meaning given to that term in Attachment 1
hereto.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement, and all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC. The rules of
construction set forth in Section I of the Credit Agreement shall, to the extent
not inconsistent with the terms
I-1-2
<PAGE>
of this Security Agreement, apply to this Security Agreement and are hereby
incorporated by reference.
2. GRANT OF SECURITY INTEREST. As security for the Secured
Obligations, Borrower hereby pledges and assigns to Agent (for the ratable
benefit of the Lenders and Agent) and grants to Agent (for the ratable
benefit of the Lenders and Agent) a security interest in all right, title and
interest of Borrower in and to the property described in Attachment 1 hereto,
whether now owned or hereafter acquired (collectively and severally, the
"Collateral"), which Attachment 1 is incorporated herein by this reference.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to the Lenders and Agent as follows:
(a) Borrower is the legal and beneficial owner of the Collateral
(or, in the case of after-acquired Collateral, at the time Borrower
acquires rights in the Collateral, will be the beneficial owner
thereof). No other Person has (or, in the case of after-acquired
Collateral, at the time Borrower acquires rights therein, will have)
any right, title, claim or interest (by way of Lien, purchase option
or otherwise) in, against or to the Collateral, other than Permitted
Liens.
(b) Agent has (or in the case of after-acquired Collateral, at
the time Borrower acquires rights therein, will have) a first
priority perfected security interest in the Collateral, subject to
no other Liens other than Permitted Liens; provided, however, that
(i) the security interest of Agent may be subject to Permitted Liens
and (ii) Agent must make the filings with the Patent and Trademark
Office contemplated by this Security Agreement to perfect its
security interest in Borrower's Patents and Trademarks registered
with that office.
(c) Borrower has the sole, full and unencumbered right, title
and interest in and to (i) each of the Trademarks described in
Schedule A to Attachment 1 hereto for the goods and services covered
by the registrations thereof, (ii) each of the Patents described in
Schedule B to Attachment 1 hereto, (iii) each of the Copyrights
described in Schedule C to Attachment 1 hereto and (iv) each of the
Mask Works described in Schedule D to Attachment 1 hereto. Any
registrations for such Trademarks and Patents are valid and
enforceable and in full force and effect and none of the Patents has
been abandoned or dedicated. According to the records of the
Copyright Office, all registered Copyrights and Mask Works are valid
and enforceable and in full force and effect.
(d) Borrower does not own any Patents, Trademarks, Copyrights
or Mask Works registered in, or the subject of pending applications
in, the
I-1-3
<PAGE>
Patent and Trademark Office or the Copyright Office, other than those
described in Schedules A, B, C and D to Attachment 1 hereto.
(e) To the best of Borrower's knowledge, no claim has been made
by any third party and remains unresolved that any of the Patents,
Trademarks, Copyrights or Mask Works is invalid and unenforceable or
violates or may violate the rights of any Person.
(f) Set forth in Schedule E to Attachment 1 hereto is a
complete list of all material licenses of Patents, Trademarks,
Copyrights, Mask Works and Trade Secrets which Borrower has granted
to any Person.
(g) Set forth in Schedule F to Attachment 1 hereto is a
complete list of all licenses of Patents, Trademarks, Copyrights,
Mask Works and Trade Secrets which any Person has granted to
Borrower.
(h) Borrower has obtained from each employee who may be
considered the inventor of patentable inventions (invented within
the scope of such employee's employment with Borrower) an agreement
to assign to Borrower all rights to such inventions, including
Patents.
(i) Borrower has taken all commercially reasonable steps to
protect the secrecy and the validity under applicable law of all
material Trade Secrets.
4. COVENANTS OF BORROWER. Borrower hereby agrees as follows:
(a) Borrower, at Borrower's expense, shall promptly procure,
execute and deliver to Agent all documents, instruments and
agreements and perform all acts which are necessary, or which Agent
may reasonably request, to establish, maintain, preserve, protect
and perfect the Collateral, the Lien granted to Agent therein and
the first priority of such Lien or to enable Agent to exercise and
enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the preceding
sentence, Borrower shall (i) execute all notices of security
interest for each relevant type of intellectual property in forms
suitable for filing with the Patent and Trademark Office or the
Copyright Office, as applicable, substantially in the forms of
Attachments 2 and 3 hereto or other forms reasonably acceptable to
Agent and (ii) take all commercially reasonable steps in any
proceeding before the Patent and Trademark Office, the Copyright
Office or any similar office or agency in any other country or any
political subdivision thereof, to diligently prosecute or maintain,
as applicable, each application and registration of material
Patents, Trademarks, Copyrights and Mask Works, including filing of
renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings (except to the
extent that dedication,
I-1-4
<PAGE>
abandonment or invalidation is permitted hereunder or would not be
reasonably likely to have a Material Adverse Effect).
(b) Borrower shall not use any Collateral or permit any
Collateral to be used in violation of (i) any provision of the
Credit Agreement, this Security Agreement or any other Credit
Document, (ii) any applicable Governmental Rule or Contractual
Obligation where such use could reasonably be expected to have a
Material Adverse Effect, or (iii) any policy of insurance covering
the Collateral where such use is reasonably likely to have a
Material Adverse Effect.
(c) Borrower shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or
hereafter imposed upon, relating to or affecting any Collateral.
(d) Borrower shall appear in and defend any action or
proceeding which may affect its title to or Agent's security
interest in the Collateral if an adverse decision is reasonably
likely to have a Material Adverse Effect.
(e) Borrower shall keep separate, accurate and complete records
of the Collateral and shall permit Agent to examine and make copies
of such records and provide such reports and information relating to
the Collateral as Agent may reasonably request from time to time.
(f) Borrower shall not surrender or lose possession of (other
than to Agent), sell, encumber, lease, rent, option, license or
otherwise dispose of or transfer any Collateral or right or interest
therein except as permitted in the Credit Agreement, and Borrower
shall keep the Collateral free of all Liens except Permitted Liens.
(g) Borrower (either directly or through licensees) will make
commercially reasonable efforts to continue to use the Trademarks
which are material to Borrower's business or operations in
connection with each and every trademark class of goods or services
applicable to its current line of products or services as reflected
in its current catalogs, brochures, price lists or similar materials
in order to maintain such Trademarks in full force and effect free
from any claim of abandonment for nonuse, and Borrower will not (and
will not permit any licensee thereof to) do any act or knowingly
omit to do any act whereby Borrower's rights in any such material
Trademark is reasonably likely to become invalidated. Borrower will
not do any act, or omit to do any act, whereby the Patents or Patent
Registrations which are material to Borrower's business or
operations may become abandoned or dedicated or the remedies
available against potential infringers weakened if such action or
omission would be reasonably likely to have a Material Adverse
Effect and shall notify Agent immediately if it knows of any reason
or has reason to know that any such Patent Registration may become
I-1-5
<PAGE>
abandoned or dedicated. Borrower will not do any act or omit to do
any act, whereby the Copyrights or Mask Works which are material to
Borrower's business or operations may become abandoned or dedicated
or the remedies available against potential infringers weakened if
such action or omission would be reasonably likely to have a
Material Adverse Effect, and shall notify Agent immediately if it
knows of any reason or has reason to know that any such Copyright or
Mask Work may become abandoned or dedicated.
(h) Borrower will promptly notify Agent upon the filing, either
by Borrower or through any agent, employee, licensee or designee, of
(i) an application for the registration of any Patent, Trademark,
Copyright or Mask Work with the Patent and Trademark Office or the
Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, (ii) any assignment of
any Patent or Trademark, which Borrower may acquire from a third
party, with the Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, or
(iii) any assignment of any Copyright or Mask Work, which Borrower
may acquire from a third party, with the Copyright Office or any
similar office or agency in any other country or any political
subdivision thereof.
(i) Borrower shall (i) make application to the Patent and
Trademark Office to register any material unpatented but patentable
inventions developed by Borrower or its employees (within the scope
of their employment), unless Borrower, in the exercise of its
prudent business judgment, deems any such Patent not to have any
significant commercial value or determines that its rights
thereunder are better preserved as a Trade Secret, (ii) make
application to the Patent and Trademark Office to register any
registerable but unregistered material Trademarks used by Borrower
in connection with its products or services unless Borrower in the
exercise of its prudent business judgment, deems any such Trademark
not to have any significant commercial value, and (iii) make
application to the Copyright Office to register any material
unregistered Copyright or Mask Work to which Borrower has rights
unless Borrower in the exercise of its prudent business judgment,
deems any such Copyright or Mask Work not to have any significant
commercial value or determines that its rights thereunder are better
protectable as a Trade Secret.
(j) Borrower shall (i) use proper statutory notice in connection
with its use of the Trademarks, Copyrights and Mask Works,
(ii) maintain consistent standards of quality in its manufacture of
products sold under the Trademarks or provision of services in
connection with the Trademarks, and (iii) take all commercially
reasonable steps to protect the secrecy and the validity under
applicable law of all material Trade Secrets.
I-1-6
<PAGE>
(k) If any Executive Officer of Borrower learns of any use by
any Person of any term or design likely to cause confusion with any
Trademark, Borrower shall promptly notify Agent of such use and of
all steps taken and to be taken to remedy any infringement of such
Trademark.
(l) Borrower shall maintain with each employee who may have
access to any material Trade Secrets of Borrower an agreement by
which such employee agrees not to disclose such Trade Secrets and
with each employee who may be the inventor of patentable inventions
(invented within the scope of such employee's employment) an
invention assignment agreement requiring such employee to assign all
rights to such inventions, including, patents and patent
applications, to Borrower and further requiring such employee to
cooperate fully with Borrower, its successors in interest, including
Agent, and their counsel, in the prosecution of any patent
application or in any litigation involving the invention, whether
such cooperation is required during such employee's employment with
Borrower or after the termination of such employment.
5. AUTHORIZED ACTION BY AGENT. Borrower hereby irrevocably appoints
Agent as its attorney-in-fact and agrees that Agent may perform (but Agent
shall not be obligated to and shall incur no liability to Borrower or any
third party for failure so to do) any act which Borrower is obligated by this
Security Agreement to perform, and to exercise such rights and powers as
Borrower might exercise with respect to the Collateral, including, without
limitation, the right to (a) collect by legal proceedings or otherwise and
endorse, receive and receipt for all royalties, payments, proceeds and other
sums and property now or hereafter payable on or on account of the Collateral;
(b) enter into any extension, reorganization, deposit, merger, consolidation or
other agreement pertaining to, or deposit, surrender, accept, hold or apply
other property in exchange for the Collateral; (c) insure, process, preserve and
enforce the Collateral; (d) make any compromise or settlement, and take any
action it deems advisable, with respect to the Collateral; (e) pay any
indebtedness of Borrower relating to the Collateral; and (f) execute UCC
financing statements and other documents, instruments and agreements required
hereunder; provided, however, that Agent shall exercise such powers only after
the occurrence and during the continuance of an Event of Default. In furtherance
of the powers granted in this paragraph 5, Borrower shall execute and deliver to
Agent a Special Power of Attorney in the form of Attachment 4 hereto. Borrower
agrees to reimburse Agent upon demand for all reasonable costs and expenses,
including reasonable attorneys' fees, Agent may incur while acting as Borrower's
attorney-in-fact hereunder, all of which costs and expenses are included in the
Secured Obligations. Borrower agrees that such care as Agent gives to the
safekeeping of its own property of like kind shall constitute reasonable care of
the Collateral when in Agent's possession; provided, however, that Agent shall
not be required to make any presentment, demand or protest, or give any notice
and need not take any
I-1-7
<PAGE>
action to preserve any rights against any prior party or any other Person
in connection with the Secured Obligations or with respect to the Collateral.
6. DEFAULT AND REMEDIES. Borrower shall be deemed in default under
this Security Agreement upon the occurrence and during the continuance of an
Event of Default, as that term is defined in the Credit Agreement. In
addition to all other rights and remedies granted to Agent by this Security
Agreement, the Credit Agreement, the other Credit Documents, the UCC and
other applicable Governmental Rules, Agent may, upon the occurrence and
during the continuance of any Event of Default, exercise any one or more of
the following rights and remedies: (a) collect, receive, appropriate or
realize upon the Collateral or otherwise foreclose or enforce Agent's
security interests in any or all Collateral in any manner permitted by
applicable Governmental Rules or in this Security Agreement; (b) notify any
or all licensees to make payments on Receivables directly to Agent; (c) sell
or otherwise dispose of any or all Collateral at one or more public or
private sales, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such commercially reasonable
terms and in such commercially reasonable manner as Agent may determine; (d)
upon ten (10) Business Days' prior notice to Borrower, direct Borrower not to
make any further use of the Patents, the Trademarks (or any mark similar
thereto), the Copyrights (or any work deriving therefrom), or the Mask Works
for any purpose; (e) upon ten (10) Business Days' prior notice to Borrower,
license, whether general, special or otherwise, and whether on an exclusive
or nonexclusive basis, any of the Patents, Trademarks, Copyrights or Mask
Works, throughout the world for such term or terms, on such conditions, and
in such manner, as Agent shall in its sole discretion determine; (f) enforce
(and upon notice to Borrower have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of Borrower in, to and under
any one or more license agreements with respect to the Collateral (without
assuming any obligations or liability thereunder), and take or refrain from
taking any action under any thereof; and (g) in addition to the foregoing, in
order to implement the assignment, sale or other disposal of any of the
Collateral, pursuant to the authority granted in paragraph 5 hereof, execute
and deliver on behalf of Borrower, upon five (5) Business Days' prior notice
to Borrower, one or more instruments of assignment of the Patents,
Trademarks, Copyrights or Mask Works (or any application or registration
thereof), in form suitable for filing, recording or registration in any
country.
7. INDEMNIFICATION AND RELEASE.
(a) Borrower assumes all responsibility and liability arising
from the use of the Patents, Trademarks, Copyrights and Mask Works,
and Borrower hereby indemnifies and holds Agent, each other Agent
and each Lender and their respective directors, officers, employees,
agents and any of their respective Affiliates ("Indemnitees")
harmless from and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees and
I-1-8
<PAGE>
expenses) arising out of or in connection with any alleged
infringement of any patent, trademark, service mark, trade name,
trade secret, copyright or mask work of a third party or alleged
defect in any product manufactured, promoted or sold by Borrower (or
any Affiliate of Borrower) in connection with any Patent, Trademark,
Copyright or Mask Work or out of the manufacture, promotion, labeling,
sale or advertisement of any product or service by Borrower (or any
Affiliate of Borrower); provided, however, that the foregoing indemnity
shall not extend to any use by Agent or any Lender (or any of their
respective Affiliates) of any Patent, Trademark, Copyright or Mask Work
which constitutes gross negligence or willful misconduct. Borrower
agrees that Agent, the Agent and the Lenders do not assume, and shall
have no responsibility for, the payment of any sums due or to become
due under any agreement or contract included in the Collateral or the
performance of any obligations to be performed under or with respect to
any such agreement or contract by Borrower, and Borrower hereby agrees
to indemnify and hold each Indemnitee harmless with respect to any and
all claims by any Person relating thereto.
(b) Borrower agrees to indemnify and hold the Indemnitees
harmless and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees and expenses) arising out of
or in connection with any action taken or omitted to be taken by
Agent hereunder with respect to any license agreement of Borrower,
other than actions taken or omitted to be taken through the gross
negligence or willful misconduct of such Indemnities or any breach
of this Agreement or the other Credit Documents.
(c) Borrower agrees to indemnify and hold the Indemnitees
harmless and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees and expenses) arising out of
or in connection with any claim, suit or proceeding instituted by
Borrower or in which Borrower participates.
(d) Borrower hereby releases the Indemnitees from any claims,
causes of action and demands at any time arising out of or with
respect to any actions taken or omitted to be taken by Agent under
the powers of attorney granted in paragraph 5 hereof, other than
actions taken or omitted to be taken through the gross negligence or
willful misconduct of such Indemnitees or any breach of this
Agreement or the other Credit Documents.
(e) Borrower agrees to cause Agent to be named as an additional
insured with respect to any policy of insurance held by Borrower
from time to time covering product liability or intellectual
property infringement risk.
(f) Nothing contained in this Paragraph 7 shall, however, be
deemed to require Borrower to indemnify or hold harmless any
Indemnitee
I-1-9
<PAGE>
from any losses, costs, claims or damages arising from or relating
to such Indemnitee's gross negligence or willful misconduct.
8. MISCELLANEOUS.
(a) NOTICES. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to
or upon Borrower or Agent under this Security Agreement shall be
given as provided in Paragraph 8.01 of the Credit Agreement.
(b) WAIVERS; AMENDMENTS. Any term, covenant, agreement or
condition of this Security Agreement may be amended or waived only
as provided in the Credit Agreement. No failure or delay by Agent in
exercising any right hereunder shall operate as a waiver thereof or
of any other right nor shall any single or partial exercise of any
such right preclude any other further exercise thereof or of any
other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only
in the specific instance and for the specific purpose for which
given.
(c) SUCCESSORS AND ASSIGNS. This Security Agreement shall be
binding upon and inure to the benefit of Agent, Borrower and the
Lenders and their respective successors and assigns; provided,
however, that Agent, the Lenders and Borrower may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. The Lenders and Agent may
disclose this Security Agreement as provided in the Credit Agreement.
(d) PARTIAL INVALIDITY. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable
in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of
this Security Agreement nor the legality, validity or enforceability
of such provision under the law of any other jurisdiction shall in
any way be affected or impaired thereby.
(e) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Agent under this Security Agreement shall be in addition to all
rights, powers and remedies given to Agent and the Lenders by virtue
of any applicable Governmental Rule, the Credit Agreement, any other
Credit Document or any other agreement, all of which rights, powers,
and remedies shall be cumulative and may be exercised successively
or concurrently without impairing Agent's rights hereunder. Borrower
waives any right to require Agent or any Lender to proceed against
any Person or to exhaust any Collateral or to pursue any remedy in
Agent's or any Lender's power.
I-1-10
<PAGE>
(f) Payments Free of Taxes, Etc. All payments made by Borrower
under this Security Agreement shall be made by Borrower free and
clear of and without deduction for any and all present and future
taxes, levies, charges, deductions and withholdings. In addition,
Borrower shall pay upon demand any stamp or other taxes, levies or
charges of any jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Security
Agreement. Upon request by Agent, Borrower shall furnish evidence
satisfactory to Agent that all requisite authorizations and
approvals by, and notices to and filings with, governmental
authorities and regulatory bodies have been obtained and made and
that all requisite taxes, levies and charges have been paid.
(g) Borrower's Continuing Liability. Notwithstanding any
provision of this Security Agreement or any other Credit Document or
any exercise by Agent of any of its rights hereunder or thereunder
(including, without limitation, any right to collect or enforce any
Collateral), (i) Borrower shall remain liable to perform its
obligations and duties in connection with the Collateral and (ii)
neither Agent nor any Lender shall assume or be considered to have
assumed any liability to perform such obligations and duties or to
enforce any of Borrower's rights in connection with the Collateral.
(h) Governing Law. This Security Agreement shall be governed by
and construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
I-1-11
<PAGE>
IN WITNESS WHEREOF, Borrower and Agent have caused this Security
Agreement to be executed as of the day and year first above written.
ADAC LABORATORIES
By: ____________________________________
Name: __________________________________
Title: _________________________________
I-1-12
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of Borrower, whether now owned or
hereafter acquired, in and to the following property:
(a) All trademarks, trade names, trade styles and service marks, and
all prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, and all designs and general
intangibles of like nature, now existing or hereafter adopted or acquired,
all right, title and interest therein and thereto, all registrations and
recordings thereof, including, (i) all applications, registrations and
recordings in the Patent and Trademark Office or in any similar office or
agency of the United States, any state thereof, or any foreign country or any
political subdivision thereof, all whether now owned or hereafter acquired by
Borrower, including those described in Schedule A to this Attachment 1, which
Schedule A is incorporated herein by this reference, and (ii) all reissues,
extensions or renewals thereof and all licenses thereof (collectively, the
"Trademarks");
(b) All patentable inventions, patent rights, shop rights, letters
patent of the United States or any foreign country, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including (i) all Patent Registrations and recordings in the Patent and
Trademark Office or in any similar office or agency of the United States, any
state thereof or any foreign country or political subdivision thereof, all
whether now owned or hereafter acquired by Borrower, including those
described in Schedule B to this Attachment 1, which Schedule B is
incorporated herein by this reference, and (ii) all reissues, continuations,
continuations-in-part or extensions thereof and all licenses thereof
(collectively, the "Patents");
(c) All copyrights including, without limitation, (i) all original
works of authorship fixed in any tangible medium of expression, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including all applications, registrations and recordings in the
Copyright Office or in any similar office or agency of the United States, any
state thereof, or any foreign country or any political subdivision thereof,
all whether now owned or hereafter acquired by Borrower, including those
described on Schedule C to this Attachment 1, which Schedule C is
incorporated herein by this reference, and (ii) all extensions or renewals
thereof and all licenses thereof (collectively, the "Copyrights");
(d) All mask works including all series of related images, however
fixed or encoded, in final or intermediate form, having or representing the
predetermined, three dimensional pattern of metallic, insulating, or
semiconductor material present or removed from the layers of a semiconductor
chip product, in which series the relation of the images to one another is
that each image has the
I-1[1]-1
<PAGE>
pattern of the surface of one form of the semiconductor chip
product, and all right, title and interest therein and thereto, and
all registrations and recordings thereof, including all
applications, registrations and recordings in the Copyright Office
or in any similar office or agency of the United States, any state
thereof, or any foreign country or any political subdivision
thereof, all whether now owned or hereafter acquired by the
Borrower, including those described on Schedule D to this Attachment
1, which Schedule D is incorporated herein by this reference, and
(ii) all extensions or renewals thereof and all licenses thereof
(collectively, the "Mask Works");
(e) All goodwill of Borrower's business symbolized by the
Trademarks and all customer lists and other records of Borrower
relating to the distribution of products or provision of services
bearing or covered by the Trademarks;
(f) All proprietary information, including formulas, patterns,
compilations, programs, devices, methods, techniques or processes,
that derives independent economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by
proper means by other Persons who can obtain economic value from its
disclosure or use, all whether now owned or hereafter acquired by
the Borrower (collectively, the "Trade Secrets");
(g) All claims by Borrower against any Person for past, present
or future infringement of the Patents, Trademarks, Copyrights, Mask
Works or Trade Secrets; and
(h) All proceeds of the foregoing (including whatever is
receivable or received when Collateral or proceeds is (are) sold,
collected, exchanged, licensed or otherwise disposed of, whether
such disposition is voluntary or involuntary, including rights to
payment and return premiums and insurance proceeds under insurance
with respect to any Collateral, and all rights to payment with
respect to any cause of action affecting or relating to the
Collateral).
I-1[1]-2
<PAGE>
SCHEDULE A
TO ATTACHMENT 1
TO SECURITY AGREEMENT
TRADEMARKS AND TRADEMARK APPLICATIONS
I-1[1]-3
<PAGE>
SCHEDULE B
TO ATTACHMENT 1
TO SECURITY AGREEMENT
PATENTS AND PATENT APPLICATIONS
I-1[1]-4
<PAGE>
SCHEDULE C
TO ATTACHMENT 1
TO SECURITY AGREEMENT
COPYRIGHTS
Registration No. Jurisdiction Date
[NONE]
I-1[1]-5
<PAGE>
SCHEDULE D
TO ATTACHMENT 1
TO SECURITY AGREEMENT
MASK WORKS
Registration No. Jurisdiction Date
[NONE]
I-1[1]-6
<PAGE>
SCHEDULE E
TO ATTACHMENT 1
TO SECURITY AGREEMENT
LICENSES GRANTED BY BORROWER TO THIRD PARTIES
I-1[1]-7
<PAGE>
SCHEDULE F
TO ATTACHMENT 1
TO SECURITY AGREEMENT
LICENSES GRANTED BY THIRD PARTIES TO BORROWER
I-1[1]-8
<PAGE>
ATTACHMENT 2
TO SECURITY AGREEMENT
[SEPARATE INSTRUMENT FOR
EACH FORM OF COLLATERAL]
GRANT OF SECURITY INTEREST
[TRADEMARKS][COPYRIGHTS][MASK WORKS]
THIS GRANT OF SECURITY INTEREST, dated as of September [A], 1999 is
executed by ADAC LABORATORIES, a California corporation ("Borrower"), in
favor of ABN AMRO BANK N.V., a Netherlands public company acting through
its San Francisco Representative Office, acting as agent (in such capacity,
"Agent") for the financial institutions which are from time to time parties
to the Credit Agreement referred to in Recital A below (collectively, the
"Lenders").
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
March 29, 1999 (as amended from time to time, the "Credit Agreement"),
among Borrower, the Lenders and Agent, the Lenders have agreed to extend
certain credit facilities to Borrower upon the terms and subject to the
conditions set forth therein.
[B. Borrower has adopted, used and is using the trademarks, more
particularly described on Schedules 1-A and 1-B annexed hereto and made a
part hereof, which trademarks are registered or subject to an application
for registration in the United States Patent and Trademark Office
(collectively, the "Trademarks").]
[B. Borrower owns the copyrights registered in the United States
Copyright Office, more particularly described on Schedule 1-A annexed
hereto and made a part hereof (collectively, the "Copyrights").]
[B. Borrower owns the mask works registered in the United States
Copyright Office, more particularly described on Schedule 1-A annexed
hereto and made a part hereof (collectively, the "Mask Works").]
C. Borrower has entered into a Security Agreement (Intellectual
Property) dated the date hereof (the "Security Agreement") in favor of
Agent (for the ratable benefit of the Lenders and Agent).
[D. Pursuant to the Security Agreement, Borrower has granted to Agent
(for the ratable benefit of the Lenders and Agent) a security interest in
all right, title and interest of Borrower in and to the Trademarks,
together with the goodwill of the business symbolized by the Trademarks and
the customer lists and records related to the Trademarks and the
applications and registrations thereof, and all proceeds thereof, including
any and all causes of action which may exist by reason
I-1[2]-1
<PAGE>
of infringement thereof (the "Collateral"), to secure the payment,
performance and observance of the Secured Obligations, as defined in the
Security Agreement.]
[D. Pursuant to the Security Agreement, Borrower has granted to Agent
(for the ratable benefit of the Lenders and Agent) a security interest in
all right, title and interest of Borrower in and to the Copyrights and the
registrations thereof, together with any renewals or extensions thereof,
and all proceeds thereof, including any and all causes of action which may
exist by reason of infringement thereof for the full term of the Copyrights
(the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Security
Agreement.]
[D. Pursuant to the Security Agreement, Borrower has granted to Agent
(for the ratable benefit of the Lenders and Agent) a security interest in
all right, title and interest of Borrower in and to the Mask Works and the
registrations thereof, together with any renewals or extensions thereof,
and all proceeds thereof, including any and all causes of action which may
exist by reason of infringement thereof for the full term of the Mask Works
(the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Security
Agreement.]
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Borrower does hereby further grant to Agent a
security interest in the Collateral to secure the prompt payment,
performance and observance of the Secured Obligations.
Borrower does hereby further acknowledge and affirm that the rights
and remedies of Agent with respect to the security interest in the
Collateral granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Agent's address is:
ABN AMRO BANK N.V.
c/o ABN AMRO North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Maria Vickroy Peralta
Telephone: (415) 984-3704
Fax No.: (415) 362-3524
I-1[2]-2
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Agreement to be executed
as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-1[2]-3
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF )
On, ____________ before me, ____________________, personally appeared
_________________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in her/her/their authorized capacity(ies),
and that by his/her/their signature(s) on such instrument the person or
entity on behalf of which the person(s) acted executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
I-1[2]-4
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
TRADEMARKS
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
TRADEMARK APPLICATIONS
Mark Application Date Application No.
I-1[2]-5
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
COPYRIGHTS
Description Registration Date Registration No.
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
MASK WORKS
Description Registration Date Registration No.
I-1[2]-6
<PAGE>
ATTACHMENT 3
TO SECURITY AGREEMENT
GRANT OF SECURITY INTEREST
(PATENTS)
THIS GRANT OF SECURITY INTEREST, dated as of September [A], 1999 is
executed by ADAC LABORATORIES, a California corporation ("Borrower"), in
favor of ABN AMRO BANK N.V., a Netherlands public company acting through
its San Francisco Representative Office, acting as agent (in such capacity,
"Agent") for the financial institutions which are from time to time parties
to the Credit Agreement referred to in Recital A below (collectively, the
"Lenders").
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
August 17, 1999 (as amended from time to time, the "Credit Agreement"),
among Borrower, the Lenders and Agent, the Lenders have agreed to extend
certain credit facilities to Borrower upon the terms and subject to the
conditions set forth therein.
B. Borrower owns the letters patent, and/or applications for letters
patent, of the United States and certain foreign countries, more
particularly described on Schedules 1-A and 1-B annexed hereto and made a
part hereof (collectively, the "Patents").
C. Borrower has entered into a Security Agreement (Intellectual
Property) dated the date hereof (the "Security Agreement") in favor of
Agent (for the ratable benefit of the Lenders and Agent).
D. Pursuant to the Security Agreement, Borrower has assigned and
granted to Agent (for the ratable benefit of the Lenders and Agent) a
security interest in all right, title and interest of Borrower in and to
the Patents, together with any reissue, continuation, continuation-in-part
or extension thereof, and all proceeds thereof, including any and all
causes of action which may exist by reason of infringement thereof (the
"Collateral"), to secure the prompt payment, performance and observance of
the Secured Obligations, as defined in the Security Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Borrower does hereby further assign, transfer and
convey unto Agent and grant to Agent a security interest in the Collateral
to secure the prompt payment, performance and observance of the Secured
Obligations.
Borrower does hereby further acknowledge and affirm that the rights
and remedies of Agent with respect to the assignment of and security
interest in the
I-1[3]-1
<PAGE>
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Agent's address is:
ABN AMRO BANK N.V.
c/o ABN AMRO North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Maria Vickroy Peralta
Telephone: (415) 984-3704
Fax No.: (415) 362-3524
IN WITNESS WHEREOF, Borrower has caused this Agreement to be executed
as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-1[3]-2
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF )
On _________, ___________ before me, ___________________, personally
appeared _____________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in her/her/their authorized
capacity(ies), and that by his/her/their signature(s) on such instrument
the person or entity on behalf of which the person(s) acted executed the
instrument.
WITNESS my hand and official seal.
Signature (Seal)
I-1[3]-3
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
PATENTS
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
PATENT APPLICATIONS
Application No.
I-1[3]-4
<PAGE>
ATTACHMENT 4
TO SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
STATE OF CALIFORNIA )
) ss.:
COUNTY OF )
KNOW ALL PERSONS BY THESE PRESENTS, THAT ADAC LABORATORIES, a
California corporation ("Borrower"), pursuant to a Security Agreement
(Intellectual Property), dated the date hereof (the "Security Agreement"),
between Borrower and ABN AMRO BANK N.V., as agent (for the ratable benefit
of the Lenders and Agent) (jointly in such capacities, "Agent") under that
certain Amended and Restated Credit Agreement dated as of March 29, 1999
(as amended from time to time, the "Credit Agreement") among Borrower, the
Lenders and Agent, hereby appoints and constitutes Agent its true and
lawful attorney in fact, with full power of substitution, and with full
power and authority to perform the following acts on behalf of Borrower
following the occurrence and during the continuation of an Event of Default
(as defined in the Credit Agreement):
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any
letters patent of the United States or any other country or political
subdivision thereof, and all registrations, recordings, reissues,
continuations, continuations-in-part and extensions thereof, and all
pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or advisable
to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals thereof, and
all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or advisable
to effect such purpose;
3. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any
copyrights, and all registrations, recordings, reissues, extensions and
renewals thereof, and all pending
I-1[4]-1
<PAGE>
applications therefor, and for the purpose of the recording, registering
and filing of, or accomplishing any other formality with respect to, the
foregoing, to execute and deliver any and all agreements, documents,
instruments of assignment or other papers necessary or advisable to effect
such purpose;
4. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any mask
works, and all registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose of the
recording, registering and filing of, or accomplishing any other formality
with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary
or advisable to effect such purpose;
5. For the purpose of evidencing and perfecting Agent's interest in
any patent, trademark, copyright or mask work not previously assigned to
Agent as security, or in any patent, trademark, copyright or mask work,
which Borrower may acquire from a third party, and for the purpose of the
recording, registering and filing of, or accomplishing any other formality
with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary
or advisable to effect such purpose.
6. To execute any and all documents, statements, certificates or other
papers necessary or advisable in order to obtain the purposes described
above as Agent may in its reasonable discretion determine.
This power of attorney is made pursuant to the Security Agreement and
takes effect solely for the purposes of thereof and is subject to the
conditions thereof and may not be revoked until termination of the Security
Agreement as provided therein.
Dated: September [A], 1999
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-1[4]-2
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
On __________, ______________ before me, _______________, personally
appeared ________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in her/her/their authorized capacity(ies),
and that by his/her/their signature(s) on such instrument the person or
entity on behalf of which the person(s) acted executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
I-1[4]-3
<PAGE>
EXHIBIT I-2
DOMESTIC SUBSIDIARY SECURITY AGREEMENT
(INTELLECTUAL PROPERTY)
THIS DOMESTIC SUBSIDIARY SECURITY AGREEMENT (INTELLECTUAL PROPERTY),
dated as of September [A], 1999 is executed by [_______________], a
[_______________] ("Grantor"), in favor of ABN AMRO BANK N.V., a
Netherlands public company acting through its San Francisco Representative
Office, acting as agent (in such capacity, "Agent") for the financial
institutions which are from time to time parties to the Credit Agreement
referred to in Recital A below (collectively, the "Lenders").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
March 29, 1999 as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 17, 1999 (as amended, and as
further amended from time to time, the "Credit Agreement"), among Adac
Laboratories, a California corporation ("Borrower"), the Lenders and Agent,
the Lenders have agreed to extend certain credit facilities to Borrower
upon the terms and subject to the conditions set forth therein.
B. The Lenders' obligations to continue to extend the credit
facilities to Borrower under the Credit Agreement are subject, among other
conditions, to receipt by Agent of this Security Agreement duly executed by
Grantor. Grantor expects to derive substantial direct and indirect benefit
from the transactions contemplated by the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Grantor hereby agrees with Agent, for the ratable
benefit of the Lenders and Agent, as follows:
1. Definitions and Interpretation. When used in this Security
Agreement, the following terms shall have the following respective
meanings:
"Agent" shall have the meaning given to that term in the
introductory paragraph hereof.
"Borrower" shall have the meaning given to that term in the
Recital A hereof.
I-2-1
<PAGE>
"Collateral" shall have the meaning given to that term in
paragraph 2 hereof.
"Credit Agreement" shall have the meaning given to that term in
Recital A hereof.
"Copyright Office" shall mean the United States Copyright Office
or any successor office or agency thereto.
"Copyrights" shall have the meaning given to that term in
Attachment 1 hereto.
"Grantor" shall have the meaning given to that term in the
introductory paragraph hereof.
"Lenders" shall have the meaning given to that term in the
introductory paragraph hereof.
"Mask Works" shall have the meaning given to that term in
Attachment 1 hereto.
"Patent and Trademark Office" shall mean the United States Patent
and Trademark Office or any successor office or agency thereto.
"Patent Applications" shall mean all applications made by, or on
behalf of, Grantor to the Patent and Trademark Office or to any
similar office or agency of any foreign country or political
subdivision thereof for the registration of Patents.
"Patent Registrations" shall mean all Patents registered with the
Patent and Trademark Office or with any similar office or agency of
any foreign country or political subdivision thereof and all Patent
Applications.
"Patents" shall have the meaning given to that term in Attachment
1 hereto.
"Secured Obligations" shall have the meaning given to that term
in the Credit Agreement.
"Trade Secrets" shall have the meaning given to that term in
Attachment 1 hereto.
"Trademarks" shall have the meaning given to that term in
Attachment 1 hereto.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of California from time to time.
I-2-2
<PAGE>
Unless otherwise defined herein, all other capitalized terms used herein
and defined in the Credit Agreement shall have the respective meanings
given to those terms in the Credit Agreement, and all terms defined in the
UCC shall have the respective meanings given to those terms in the UCC. The
rules of construction set forth in Section I of the Credit Agreement shall,
to the extent not inconsistent with the terms of this Security Agreement,
apply to this Security Agreement and are hereby incorporated by reference.
2. Grant of Security Interest. As security for the Secured
Obligations, Grantor hereby pledges and assigns to Agent (for the ratable
benefit of the Lenders and Agent) and grants to Agent (for the ratable
benefit of the Lenders and Agent) a security interest in all right, title
and interest of Grantor in and to the property described in Attachment 1
hereto, whether now owned or hereafter acquired (collectively and
severally, the "Collateral"), which Attachment 1 is incorporated herein by
this reference.
3. Representations and Warranties. Grantor represents and warrants to
the Lenders and Agent as follows:
(a) Grantor is the legal and beneficial owner of the Collateral
(or, in the case of after-acquired Collateral, at the time Grantor
acquires rights in the Collateral, will be the beneficial owner
thereof). No other Person has (or, in the case of after-acquired
Collateral, at the time Grantor acquires rights therein, will have)
any right, title, claim or interest (by way of Lien, purchase option
or otherwise) in, against or to the Collateral, other than Permitted
Liens.
(b) Agent has (or in the case of after-acquired Collateral, at
the time Grantor acquires rights therein, will have) a first priority
perfected security interest in the Collateral, subject to no other
Liens other than Permitted Liens; provided, however, that (i) the
security interest of Agent may be subject to Permitted Liens and (ii)
Agent must make the filings with the Patent and Trademark Office
contemplated by this Security Agreement to perfect its security
interest in Grantor's Patents and Trademarks registered with that
office.
(c) Grantor has the sole, full and unencumbered right, title and
interest in and to (i) each of the Trademarks described in Schedule A
to Attachment 1 hereto for the goods and services covered by the
registrations thereof, (ii) each of the Patents described in Schedule
B to Attachment 1 hereto, (iii) each of the Copyrights described in
Schedule C to Attachment 1 hereto and (iv) each of the Mask Works
described in Schedule D to Attachment 1 hereto. Any registrations for
such Trademarks and Patents are valid and enforceable and in full
force and effect and none of the Patents has been abandoned or
dedicated. According to the records of the Copyright
I-2-3
<PAGE>
Office, all registered Copyrights and Mask Works are valid and
enforceable and in full force and effect.
(d) Grantor does not own any Patents, Trademarks, Copyrights or
Mask Works registered in, or the subject of pending applications in,
the Patent and Trademark Office or the Copyright Office, other than
those described in Schedules A, B, C and D to Attachment 1 hereto.
(e) To the best of Grantor's knowledge, no claim has been made by
any third party and remains unresolved that any of the Patents,
Trademarks, Copyrights or Mask Works is invalid and unenforceable or
violates or may violate the rights of any Person.
(f) Set forth in Schedule E to Attachment 1 hereto is a complete
list of all material licenses of Patents, Trademarks, Copyrights, Mask
Works and Trade Secrets which Grantor has granted to any Person.
(g) Set forth in Schedule F to Attachment 1 hereto is a complete
list of all licenses of Patents, Trademarks, Copyrights, Mask Works
and Trade Secrets which any Person has granted to Grantor.
(h) Grantor has obtained from each employee who may be considered
the inventor of patentable inventions (invented within the scope of
such employee's employment with Grantor) an agreement to assign to
Grantor all rights to such inventions, including Patents.
(i) Grantor has taken all commercially reasonable steps to
protect the secrecy and the validity under applicable law of all
material Trade Secrets.
4. Covenants of Grantor. Grantor hereby agrees as follows:
(a) Grantor, at Grantor's expense, shall promptly procure,
execute and deliver to Agent all documents, instruments and agreements
and perform all acts which are necessary, or which Agent may
reasonably request, to establish, maintain, preserve, protect and
perfect the Collateral, the Lien granted to Agent therein and the
first priority of such Lien or to enable Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the preceding sentence, Grantor
shall (i) execute all notices of security interest for each relevant
type of intellectual property in forms suitable for filing with the
Patent and Trademark Office or the Copyright Office, as applicable,
substantially in the forms of Attachments 2 and 3 hereto or other
forms reasonable acceptable to Agent and (ii) take all commercially
reasonable steps in any proceeding before the Patent and Trademark
Office, the Copyright Office or any similar office or agency in any
other country or any
I-2-4
<PAGE>
political subdivision thereof, to diligently prosecute or maintain, as
applicable, each application and registration of material Patents,
Trademarks, Copyrights and Mask Works, including filing of renewals,
affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings (except to the extent that
dedication, abandonment or invalidation is permitted hereunder or
would not be reasonably likely to have a Material Adverse Effect).
(b) Grantor shall not use any Collateral or permit any Collateral
to be used in violation of (i) any provision of the Credit Agreement,
this Security Agreement or any other Credit Document, (ii) any
applicable Governmental Rule or Contractual Obligation where such use
could reasonably be expected to have a Material Adverse Effect, or
(iii) any policy of insurance covering the Collateral where such use
is reasonably likely to have a Material Adverse Effect.
(c) Grantor shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(d) Grantor shall appear in and defend any action or proceeding
which may affect its title to or Agent's security interest in the
Collateral if an adverse decision is reasonably likely to have a
Material Adverse Effect.
(e) Grantor shall keep separate, accurate and complete records of
the Collateral and shall permit Agent to examine and make copies of
such records and provide such reports and information relating to the
Collateral as Agent may reasonably request from time to time.
(f) Grantor shall not surrender or lose possession of (other than
to Agent), sell, encumber, lease, rent, option, license or otherwise
dispose of or transfer any Collateral or right or interest therein
except as permitted in the Credit Agreement, and Grantor shall keep
the Collateral free of all Liens except Permitted Liens.
(g) Grantor (either directly or through licensees) will make
commercially reasonable efforts to continue to use the Trademarks
which are material to Grantor's business or operations in connection
with each and every trademark class of goods or services applicable to
its current line of products or services as reflected in its current
catalogs, brochures, price lists or similar materials in order to
maintain such Trademarks in full force and effect free from any claim
of abandonment for nonuse, and Grantor will not (and will not permit
any licensee thereof to) do any act or knowingly omit to do any act
whereby Grantor's rights in any such material Trademark is reasonably
likely to become invalidated. Grantor will not do any act, or omit to
do any act, whereby the Patents or Patent Registrations which are
I-2-5
<PAGE>
material to Grantor's business or operations may become abandoned or
dedicated or the remedies available against potential infringers
weakened if such action or omission would be reasonably likely to have
a Material Adverse Effect and shall notify Agent immediately if it
knows of any reason or has reason to know that any such Patent
Registration may become abandoned or dedicated. Grantor will not do
any act or omit to do any act, whereby the Copyrights or Mask Works
which are material to Grantor's business or operations may become
abandoned or dedicated or the remedies available against potential
infringers weakened if such action or omission would be reasonably
likely to have a Material Adverse Effect, and shall notify Agent
immediately if it knows of any reason or has reason to know that any
such Copyright or Mask Work may become abandoned or dedicated.
(h) Grantor will promptly notify Agent upon the filing, either by
Grantor or through any agent, employee, licensee or designee, of (i)
an application for the registration of any Patent, Trademark,
Copyright or Mask Work with the Patent and Trademark Office or the
Copyright Office or any similar office or agency in any other country
or any political subdivision thereof, (ii) any assignment of any
Patent or Trademark, which Grantor may acquire from a third party,
with the Patent and Trademark Office or any similar office or agency
in any other country or any political subdivision thereof, or (iii)
any assignment of any Copyright or Mask Work, which Grantor may
acquire from a third party, with the Copyright Office or any similar
office or agency in any other country or any political subdivision
thereof.
(i) Grantor shall (i) make application to the Patent and
Trademark Office to register any material unpatented but patentable
inventions developed by Grantor or its employees (within the scope of
their employment), unless Grantor, in the exercise of its prudent
business judgment, deems any such Patent not to have any significant
commercial value or determines that its rights thereunder are better
preserved as a Trade Secret, (ii) make application to the Patent and
Trademark Office to register any registerable but unregistered
material Trademarks used by Grantor in connection with its products or
services unless Grantor in the exercise of its prudent business
judgment, deems any such Trademark not to have any significant
commercial value, and (iii) make application to the Copyright Office
to register any material unregistered Copyright or Mask Work to which
Grantor has rights unless Grantor in the exercise of its prudent
business judgment, deems any such Copyright or Mask Work not to have
any significant commercial value or determines that its rights
thereunder are better protectable as a Trade Secret.
I-2-6
<PAGE>
(j) Grantor shall (i) use proper statutory notice in connection
with its use of the Trademarks, Copyrights and Mask Works, (ii)
maintain consistent standards of quality in its manufacture of
products sold under the Trademarks or provision of services in
connection with the Trademarks, and (iii) take all commercially
reasonable steps to protect the secrecy and the validity under
applicable law of all material Trade Secrets.
(k) If any Executive Officer of Grantor learns of any use by any
Person of any term or design likely to cause confusion with any
Trademark, Grantor shall promptly notify Agent of such use and of all
steps taken and to be taken to remedy any infringement of such
Trademark.
(l) Grantor shall maintain with each employee who may have access
to any material Trade Secrets of Grantor an agreement by which such
employee agrees not to disclose such Trade Secrets and with each
employee who may be the inventor of patentable inventions (invented
within the scope of such employee's employment) an invention
assignment agreement requiring such employee to assign all rights to
such inventions, including, patents and patent applications, to
Grantor and further requiring such employee to cooperate fully with
Grantor, its successors in interest, including Agent, and their
counsel, in the prosecution of any patent application or in any
litigation involving the invention, whether such cooperation is
required during such employee's employment with Grantor or after the
termination of such employment.
5. Authorized Action by Agent. Grantor hereby irrevocably appoints
Agent as its attorney-in-fact and agrees that Agent may perform (but Agent
shall not be obligated to and shall incur no liability to Grantor or any
third party for failure so to do) any act which Grantor is obligated by
this Security Agreement to perform, and to exercise such rights and powers
as Grantor might exercise with respect to the Collateral, including,
without limitation, the right to (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all royalties, payments,
proceeds and other sums and property now or hereafter payable on or on
account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or
deposit, surrender, accept, hold or apply other property in exchange for
the Collateral; (c) insure, process, preserve and enforce the Collateral;
(d) make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral; (e) pay any indebtedness of
Grantor relating to the Collateral; and (f) execute UCC financing
statements and other documents, instruments and agreements required
hereunder; provided, however, that Agent shall exercise such powers only
after the occurrence and during the continuance of an Event of Default. In
furtherance of the powers granted in this paragraph 5, Grantor shall
execute and deliver to Agent a Special Power of Attorney in the form of
Attachment 4 hereto. Grantor agrees to reimburse Agent upon demand for all
reasonable costs and expenses, including
I-2-7
<PAGE>
reasonable attorneys' fees, Agent may incur while acting as Grantor's
attorney-in-fact hereunder, all of which costs and expenses are included in
the Secured Obligations. Grantor agrees that such care as Agent gives to
the safekeeping of its own property of like kind shall constitute
reasonable care of the Collateral when in Agent's possession; provided,
however, that Agent shall not be required to make any presentment, demand
or protest, or give any notice and need not take any action to preserve any
rights against any prior party or any other Person in connection with the
Secured Obligations or with respect to the Collateral.
6. Default and Remedies. Grantor shall be deemed in default under this
Security Agreement upon the occurrence and during the continuance of an
Event of Default, as that term is defined in the Credit Agreement. In
addition to all other rights and remedies granted to Agent by this Security
Agreement, the Credit Agreement, the other Credit Documents, the UCC and
other applicable Governmental Rules, Agent may, upon the occurrence and
during the continuance of any Event of Default, exercise any one or more of
the following rights and remedies: (a) collect, receive, appropriate or
realize upon the Collateral or otherwise foreclose or enforce Agent's
security interests in any or all Collateral in any manner permitted by
applicable Governmental Rules or in this Security Agreement; (b) notify any
or all licensees to make payments on Receivables directly to Agent; (c)
sell or otherwise dispose of any or all Collateral at one or more public or
private sales, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such commercially
reasonable terms and in such commercially reasonable manner as Agent may
determine; (d) upon ten (10) Business Days' prior notice to Grantor, direct
Grantor not to make any further use of the Patents, the Trademarks (or any
mark similar thereto), the Copyrights (or any work deriving therefrom), or
the Mask Works for any purpose; (e) upon ten (10) Business Days' prior
notice to Grantor, license, whether general, special or otherwise, and
whether on an exclusive or nonexclusive basis, any of the Patents,
Trademarks, Copyrights or Mask Works, throughout the world for such term or
terms, on such conditions, and in such manner, as Agent shall in its sole
discretion determine; (f) enforce (and upon notice to Grantor have the
exclusive right to enforce) against any licensee or sublicensee all rights
and remedies of Grantor in, to and under any one or more license agreements
with respect to the Collateral (without assuming any obligations or
liability thereunder), and take or refrain from taking any action under any
thereof; and (g) in addition to the foregoing, in order to implement the
assignment, sale or other disposal of any of the Collateral, pursuant to
the authority granted in paragraph 5 hereof, execute and deliver on behalf
of Grantor, upon five (5) Business Days' prior notice to Grantor, one or
more instruments of assignment of the Patents, Trademarks, Copyrights or
Mask Works (or any application or registration thereof), in form suitable
for filing, recording or registration in any country.
I-2-8
<PAGE>
7. Indemnification and Release.
(a) Grantor assumes all responsibility and liability arising from the
use of the Patents, Trademarks, Copyrights and Mask Works, and Grantor
hereby indemnifies and holds Agent, each other Agent and each Lender and
their respective directors, officers, employees, agents and any of their
respective Affiliates ("Indemnitees") harmless from and against any claim,
suit, loss, damage or expense (including reasonable attorneys' fees and
expenses) arising out of or in connection with any alleged infringement of
any patent, trademark, service mark, trade name, trade secret, copyright or
mask work of a third party or alleged defect in any product manufactured,
promoted or sold by Grantor (or any Affiliate of Grantor) in connection
with any Patent, Trademark, Copyright or Mask Work or out of the
manufacture, promotion, labeling, sale or advertisement of any product or
service by Grantor (or any Affiliate of Grantor) provided, however, that
the foregoing indemnity shall not extend to any use by Agent or any Lender
(or any of their respective Affiliates) of any Patent, Trademark, Copyright
or Mask Work which constitutes gross negligence or willful misconduct.
Grantor agrees that Agent, the Agent and the Lenders do not assume, and
shall have no responsibility for, the payment of any sums due or to become
due under any agreement or contract included in the Collateral or the
performance of any obligations to be performed under or with respect to any
such agreement or contract by Grantor, and Grantor hereby agrees to
indemnify and hold each Indemnitee harmless with respect to any and all
claims by any Person relating thereto.
(b) Grantor agrees to indemnify and hold the Indemnitees harmless and
against any claim, suit, loss, damage or expense (including reasonable
attorneys' fees and expenses) arising out of or in connection with any
action taken or omitted to be taken by Agent hereunder with respect to any
license agreement of Grantor, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of such
Indemnitees or any breach of this Agreement or the other Credit Documents.
(c) Grantor agrees to indemnify and hold the Indemnitees harmless and
against any claim, suit, loss, damage or expense (including reasonable
attorneys' fees and expenses) arising out of or in connection with any
claim, suit or proceeding instituted by Grantor or in which Grantor
participates.
(d) Grantor hereby releases the Indemnitees from any claims, causes of
action and demands at any time arising out of or with respect to any
actions taken or omitted to be taken by Agent under the powers of attorney
granted in paragraph 5 hereof, other than actions taken or omitted
I-2-9
<PAGE>
to be taken through the gross negligence or willful misconduct of such
Indemnitees or any breach of this Agreement or the other Credit Documents.
(e) Grantor agrees to cause Agent to be named as an additional insured
with respect to any policy of insurance held by Grantor from time to time
covering product liability or intellectual property infringement risk.
(f) Nothing contained in this Paragraph 7 shall, however, be deemed to
require Grantor to indemnify or hold harmless any Indemnitee from any
losses, costs, claims or damages arising from or relating to such
Indemnitee's gross negligence or willful misconduct.
8. Authorizations, Waivers, Etc.
(a) Authorizations. Grantor authorizes Agent and the Lenders, in their
discretion, without notice to Grantor, irrespective of any change in the
financial condition of Borrower, Grantor or any other guarantor of the
Secured Obligations since the date hereof, and without affecting or
impairing in any way the liability of Grantor hereunder, from time to time
to:
(i) Create new Secured Obligations and renew, compromise, extend,
accelerate or otherwise change the time for payment or performance of,
or otherwise amend or modify the Credit Documents or change the terms
of the Secured Obligations or any part thereof, including increase or
decrease of the rate of interest thereon;
(ii) Take and hold security for the payment or performance of the
Secured Obligations and exchange, enforce, waive or release any such
security; apply such security and direct the order or manner of sale
thereof; and purchase such security at public or private sale;
(iii) Otherwise exercise any right or remedy they may have
against Borrower, Grantor, any other guarantor of the Secured
Obligations or any security, including, without limitation, the right
to foreclose upon any such security by judicial or nonjudicial sale;
(iv) Settle, compromise with, release or substitute any one or
more makers, endorsers or guarantors of the Secured Obligations; and
(v) Assign the Secured Obligations, this Security Agreement or
the other Credit Documents in whole or in part to the extent provided
in the Credit Agreement and the other Credit Documents.
I-2-10
<PAGE>
(b) Waivers. Grantor hereby waives:
(i) Any right to require Agent or any Lender to (A) proceed
against Borrower or any other guarantor of the Secured Obligations,
(B) proceed against or exhaust any security received from Borrower,
Grantor, or any other guarantor of the Secured Obligations or
otherwise marshall the assets of Borrower, Grantor, or any other
guarantor of the Secured Obligations or (C) pursue any other remedy in
Agent's or any Lender's power whatsoever;
(ii) Any defense arising by reason of the application by Borrower
of the proceeds of any borrowing;
(iii) Any defense resulting from the absence, impairment or loss
of any right of reimbursement, subrogation, contribution or other
right or remedy of Grantor against Borrower, any other guarantor of
the Secured Obligations or any security, whether resulting from an
election by Agent or any Lender to foreclose upon security by
nonjudicial sale, or otherwise;
(iv) Any setoff or counterclaim of Borrower or any defense which
results from any disability or other defense of Borrower or the
cessation or stay of enforcement from any cause whatsoever of the
liability of Borrower (including, without limitation, the lack of
validity or enforceability of any of the Credit Documents);
(v) Any defense based upon any law, rule or regulation which
provides that the obligation of a surety must not be greater or more
burdensome than the obligation of the principal;
(vi) Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Secured Obligations
have been fully, finally and indefeasibly paid, any right of
subrogation, reimbursement, indemnification or contribution and other
similar right to enforce any remedy which Agent, the Lenders or any
other Person now has or may hereafter have against Borrower on account
of the Secured Obligations, and any benefit of, and any right to
participate in, any security now or hereafter received by Agent, any
Lender or any other Person on account of the Secured Obligations;
(vii) All presentments, demands for performance, notices of
non-performance, notices delivered under the Credit Documents,
protests, notice of dishonor, and notices of acceptance of this
Security Agreement and of the existence, creation or incurring of new
or
I-2-11
<PAGE>
additional Secured Obligations and notices of any public or private
foreclosure sale;
(viii) The benefit of any statute of limitations to the extent
permitted by law;
(ix) Any appraisement, valuation, stay, extension, moratorium
redemption or similar law or similar rights for marshalling;
(x) Any right to be informed by Agent or any Lender of the
financial condition of Borrower, any other guarantor of the Secured
Obligations or any change therein or any other circumstances bearing
upon the risk of nonpayment or nonperformance of the Secured
Obligations;
(xi) Until all obligations of Agent or any Lender to extend
credit to Borrower have terminated and all of the Secured Obligations
have been fully, finally and indefeasibly paid, any right to revoke
this Security Agreement;
(xii) Any defense arising from an election for the application of
Section 1111(b)(2) of the United States Bankruptcy Code which applies
to the Secured Obligations;
(xiii) Any defense based upon any borrowing or grant of a
security interest under Section 364 of the United States Bankruptcy
Code;
(xiv) Any right it may have to a fair value hearing to determine
the size of a deficiency judgment following any foreclosure on any
security for the Secured Obligations;
(xv) All rights and defenses arising out of an election of
remedies by Agent or any Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for a Secured Obligation, has destroyed Grantor's rights of
subrogation and reimbursement against Borrower by the operation of
Section 580d of the Code of Civil Procedure or otherwise; and
(xvi) All other rights and defenses available to Grantor by
reason of Sections 2787 to 2855, inclusive, Section 2899 or Section
3433 of the California Civil Code or Section 3605 of the California
Commercial Code.
I-2-12
<PAGE>
Without limiting the scope of any of the foregoing provisions of this
Paragraph 5, and pursuant to the provisions of California Civil Code
Section 2856, Grantor hereby further waives all rights and defenses that
Grantor may have because the Secured Obligations are secured by real
property. This means, among other things:
(A) Agent or any Lender may collect from Grantor without first
foreclosing on any real or personal property collateral pledged by
Borrower.
(B) If Agent or any Lender forecloses on any real property
collateral pledged by Borrower:
(1) The amount of the Secured Obligations may be reduced
only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the
sale price.
(2) Agent or any Lender may collect from Grantor even if
Agent or any Lender, by foreclosing on the real property
collateral, has destroyed any right Grantor may have to collect
from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses
Grantor may have because the Secured Obligations are secured by real
property. These rights and defenses include, but are not limited to, any
rights or defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
I-2-13
<PAGE>
(c) Financial Condition of Borrower, Etc. Grantor is fully aware of
the financial condition and affairs of Borrower. Grantor has executed this
Security Agreement without reliance upon any representation, warranty,
statement or information concerning Borrower furnished to Grantor by Agent
or any Lender and has, independently and without reliance on Agent or any
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of the financial condition and affairs
of Borrower and of other circumstances affecting the risk of nonpayment or
nonperformance of the Secured Obligations. Grantor is in a position to
obtain, and assumes full responsibility for obtaining, any additional
information about the financial condition and affairs of Borrower and of
other circumstances affecting the risk of nonpayment or nonperformance of
the Secured Obligations and will, independently and without reliance upon
Agent or any Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action in connection with this Security
Agreement.
9. Miscellaneous.
(a) Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to
or upon Grantor or Agent under this Security Agreement shall be given
as provided in Paragraph 8.01 of the Credit Agreement.
(b) Waivers; Amendments. Any term, covenant, agreement or
condition of this Security Agreement may be amended or waived only as
provided in the Credit Agreement. No failure or delay by Agent in
exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such
right preclude any other further exercise thereof or of any other
right. Unless otherwise specified in any such waiver or consent, a
waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
(c) Successors and Assigns. This Security Agreement shall be
binding upon and inure to the benefit of Agent, Grantor and the
Lenders and their respective successors and assigns; provided,
however, that Agent, the Lenders and Grantor may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. The Lenders and Agent may disclose
this Security Agreement as provided in the Credit Agreement.
(d) Partial Invalidity. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this
Security Agreement nor the
I-2-14
<PAGE>
legality, validity or enforceability of such provision under the law
of any other jurisdiction shall in any way be affected or impaired
thereby.
(e) Cumulative Rights, etc. The rights, powers and remedies of
Agent under this Security Agreement shall be in addition to all
rights, powers and remedies given to Agent and the Lenders by virtue
of any applicable Governmental Rule, the Credit Agreement, any other
Credit Document or any other agreement, all of which rights, powers,
and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Agent's rights hereunder. Grantor
waives any right to require Agent or any Lender to proceed against any
Person or to exhaust any Collateral or to pursue any remedy in Agent's
or any Lender's power.
(f) Payments Free of Taxes, Etc. All payments made by Grantor
under this Security Agreement shall be made by Grantor free and clear
of and without deduction for any and all present and future taxes,
levies, charges, deductions and withholdings. In addition, Grantor
shall pay upon demand any stamp or other taxes, levies or charges of
any jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Security Agreement.
Upon request by Agent, Grantor shall furnish evidence satisfactory to
Agent that all requisite authorizations and approvals by, and notices
to and filings with, governmental authorities and regulatory bodies
have been obtained and made and that all requisite taxes, levies and
charges have been paid.
(g) Grantor's Continuing Liability. Notwithstanding any provision
of this Security Agreement or any other Credit Document or any
exercise by Agent of any of its rights hereunder or thereunder
(including, without limitation, any right to collect or enforce any
Collateral), (i) Grantor shall remain liable to perform its
obligations and duties in connection with the Collateral and (ii)
neither Agent nor any Lender shall assume or be considered to have
assumed any liability to perform such obligations and duties or to
enforce any of Grantor's rights in connection with the Collateral.
(h) Governing Law. This Security Agreement shall be governed by
and construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
I-2-15
<PAGE>
IN WITNESS WHEREOF, Grantor and Agent have caused this Security
Agreement to be executed as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-2-16
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of Grantor, whether now owned or
hereafter acquired, in and to the following property:
(a) All trademarks, trade names, trade styles and service marks, and
all prints and labels on which said trademarks, trade names, trade styles
and service marks have appeared or appear, and all designs and general
intangibles of like nature, now existing or hereafter adopted or acquired,
all right, title and interest therein and thereto, all registrations and
recordings thereof, including, (i) all applications, registrations and
recordings in the Patent and Trademark Office or in any similar office or
agency of the United States, any state thereof, or any foreign country or
any political subdivision thereof, all whether now owned or hereafter
acquired by Grantor, including those described in Schedule A to this
Attachment 1, which Schedule A is incorporated herein by this reference,
and (ii) all reissues, extensions or renewals thereof and all licenses
thereof (collectively, the "Trademarks");
(b) All patentable inventions, patent rights, shop rights, letters
patent of the United States or any foreign country, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including (i) all Patent Registrations and recordings in the Patent and
Trademark Office or in any similar office or agency of the United States,
any state thereof or any foreign country or political subdivision thereof,
all whether now owned or hereafter acquired by Grantor, including those
described in Schedule B to this Attachment 1, which Schedule B is
incorporated herein by this reference, and (ii) all reissues,
continuations, continuations-in-part or extensions thereof and all licenses
thereof (collectively, the "Patents");
(c) All copyrights including, without limitation, (i) all original
works of authorship fixed in any tangible medium of expression, all right,
title and interest therein and thereto, and all registrations and
recordings thereof, including all applications, registrations and
recordings in the Copyright Office or in any similar office or agency of
the United States, any state thereof, or any foreign country or any
political subdivision thereof, all whether now owned or hereafter acquired
by Grantor, including those described on Schedule C to this Attachment 1,
which Schedule C is incorporated herein by this reference, and (ii) all
extensions or renewals thereof and all licenses thereof (collectively, the
"Copyrights");
(d) All mask works including all series of related images, however
fixed or encoded, in final or intermediate form, having or representing the
predetermined, three dimensional pattern of metallic, insulating, or
semiconductor material present or removed from the layers of a
semiconductor chip product, in which series the relation of the images to
one another is that each image has the
I-2[1]-1
<PAGE>
pattern of the surface of one form of the semiconductor chip product, and
all right, title and interest therein and thereto, and all registrations
and recordings thereof, including all applications, registrations and
recordings in the Copyright Office or in any similar office or agency of
the United States, any state thereof, or any foreign country or any
political subdivision thereof, all whether now owned or hereafter acquired
by the Grantor, including those described on Schedule D to this Attachment
1, which Schedule D is incorporated herein by this reference, and (ii) all
extensions or renewals thereof and all licenses thereof (collectively, the
"Mask Works");
(e) All goodwill of Grantor's business symbolized by the Trademarks
and all customer lists and other records of Grantor relating to the
distribution of products or provision of services bearing or covered by the
Trademarks;
(f) All proprietary information, including formulas, patterns,
compilations, programs, devices, methods, techniques or processes, that
derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by
other Persons who can obtain economic value from its disclosure or use, all
whether now owned or hereafter acquired by the Grantor (collectively, the
"Trade Secrets");
(g) All claims by Grantor against any Person for past, present or
future infringement of the Patents, Trademarks, Copyrights, Mask Works or
Trade Secrets; and
(h) All proceeds of the foregoing (including whatever is receivable or
received when Collateral or proceeds is (are) sold, collected, exchanged,
licensed or otherwise disposed of, whether such disposition is voluntary or
involuntary, including rights to payment and return premiums and insurance
proceeds under insurance with respect to any Collateral, and all rights to
payment with respect to any cause of action affecting or relating to the
Collateral).
I-2[1]-2
<PAGE>
SCHEDULE A
TO ATTACHMENT 1
TO SECURITY AGREEMENT
TRADEMARKS AND TRADEMARK APPLICATIONS
I-2[1]-3
<PAGE>
SCHEDULE B
TO ATTACHMENT 1
TO SECURITY AGREEMENT
PATENTS AND PATENT APPLICATIONS
I-2[1]-4
<PAGE>
SCHEDULE C
TO ATTACHMENT 1
TO SECURITY AGREEMENT
COPYRIGHTS
Registration No. Jurisdiction Date
[NONE]
I-2[1]-5
<PAGE>
SCHEDULE D
TO ATTACHMENT 1
TO SECURITY AGREEMENT
MASK WORKS
Registration No. Jurisdiction Date
[NONE]
I-2[1]-6
<PAGE>
SCHEDULE E
TO ATTACHMENT 1
TO SECURITY AGREEMENT
LICENSES GRANTED BY GRANTOR TO THIRD PARTIES
I-2[1]-7
<PAGE>
SCHEDULE F
TO ATTACHMENT 1
TO SECURITY AGREEMENT
LICENSES GRANTED BY THIRD PARTIES TO GRANTOR
I-2[1]-8
<PAGE>
ATTACHMENT 2
TO SECURITY AGREEMENT
[SEPARATE INSTRUMENT FOR
EACH FORM OF COLLATERAL]
GRANT OF SECURITY INTEREST
[TRADEMARKS][COPYRIGHTS][MASK WORKS]
THIS GRANT OF SECURITY INTEREST, dated as of September [A], 1999 is
executed by [_______________], a [_______________] ("Grantor"), in favor of
ABN AMRO BANK N.V., a Netherlands public company acting through its San
Francisco Representative Office, acting as agent (in such capacity,
"Agent") for the financial institutions which are from time to time parties
to the Credit Agreement referred to in Recital A below (collectively, the
"Lenders").
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
March 29, 1999 as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 17, 1999 (as amended, and as
further amended from time to time, the "Credit Agreement"), among Adac
Laboratories, a California corporation ("Borrower"), the Lenders and Agent,
the Lenders have agreed to extend certain credit facilities to Borrower
upon the terms and subject to the conditions set forth therein.
[B. Grantor has adopted, used and is using the trademarks, more
particularly described on Schedules 1-A and 1-B annexed hereto and made a
part hereof, which trademarks are registered or subject to an application
for registration in the United States Patent and Trademark Office
(collectively, the "Trademarks").]
[B. Grantor owns the copyrights registered in the United States
Copyright Office, more particularly described on Schedule 1-A annexed
hereto and made a part hereof (collectively, the "Copyrights").]
[B. Grantor owns the mask works registered in the United States
Copyright Office, more particularly described on Schedule 1-A annexed
hereto and made a part hereof (collectively, the "Mask Works").]
C. Grantor has entered into a Security Agreement (Intellectual
Property) dated the date hereof (the "Security Agreement") in favor of
Agent (for the ratable benefit of the Lenders and Agent).
[D. Pursuant to the Security Agreement, Grantor has granted to Agent
(for the ratable benefit of the Lenders and Agent) a security interest in
all right, title and interest of Grantor in and to the Trademarks, together
with the goodwill of the
I-2[2]-1
<PAGE>
business symbolized by the Trademarks and the customer lists and records
related to the Trademarks and the applications and registrations thereof,
and all proceeds thereof, including any and all causes of action which may
exist by reason of infringement thereof (the "Collateral"), to secure the
payment, performance and observance of the Secured Obligations, as defined
in the Security Agreement.]
[D. Pursuant to the Security Agreement, Grantor has granted to Agent
(for the ratable benefit of the Lenders and Agent) a security interest in
all right, title and interest of Grantor in and to the Copyrights and the
registrations thereof, together with any renewals or extensions thereof,
and all proceeds thereof, including any and all causes of action which may
exist by reason of infringement thereof for the full term of the Copyrights
(the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Security
Agreement.]
[D. Pursuant to the Security Agreement, Grantor has granted to Agent
(for the ratable benefit of the Lenders and Agent) a security interest in
all right, title and interest of Grantor in and to the Mask Works and the
registrations thereof, together with any renewals or extensions thereof,
and all proceeds thereof, including any and all causes of action which may
exist by reason of infringement thereof for the full term of the Mask Works
(the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Security
Agreement.]
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Grantor does hereby further grant to Agent a
security interest in the Collateral to secure the prompt payment,
performance and observance of the Secured Obligations.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Agent with respect to the security interest in the Collateral
granted hereby are more fully set forth in the Security Agreement, the
terms and provisions of which are hereby incorporated herein by reference
as if fully set forth herein.
Agent's address is:
ABN AMRO BANK N.V.
c/o ABN AMRO North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Maria Vickroy Peralta
Telephone: (415) 984-3704
Fax No.: (415) 362-3524
I-2[2]-2
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Agreement to be executed
as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-2[2]-3
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF )
On _______________, before me, _________________, personally appeared
___________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in her/her/their authorized
capacity(ies), and that by his/her/their signature(s) on such instrument
the person or entity on behalf of which the person(s) acted executed the
instrument.
WITNESS my hand and official seal.
Signature (Seal)
I-2[2]-4
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
TRADEMARKS
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
TRADEMARK APPLICATIONS
Mark Application Date Application No.
I-2[2]-5
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
COPYRIGHTS
Description Registration Date Registration No.
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
MASK WORKS
Description Registration Date Registration No.
I-2[2]-6
<PAGE>
ATTACHMENT 3
TO SECURITY AGREEMENT
GRANT OF SECURITY INTEREST
(PATENTS)
THIS GRANT OF SECURITY INTEREST, dated as of September [A], 1999 is
executed by [_______________], a [_______________] ("Grantor"), in favor of
ABN AMRO BANK N.V., a Netherlands public company acting through its San
Francisco Representative Office, acting as agent (in such capacity,
"Agent") for the financial institutions which are from time to time parties
to the Credit Agreement referred to in Recital A below (collectively, the
"Lenders").
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
March 29, 1999 as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 17, 1999 (as amended, and as
further amended from time to time, the "Credit Agreement"), among Adac
Laboratories, a California corporation ("Borrower"), the Lenders and Agent,
the Lenders have agreed to extend certain credit facilities to Borrower
upon the terms and subject to the conditions set forth therein.
B. Grantor owns the letters patent, and/or applications for letters
patent, of the United States and certain foreign countries, more
particularly described on Schedules 1-A and 1-B annexed hereto and made a
part hereof (collectively, the "Patents").
C. Grantor has entered into a Security Agreement (Intellectual
Property) dated the date hereof (the "Security Agreement") in favor of
Agent (for the ratable benefit of the Lenders and Agent.
D. Pursuant to the Security Agreement, Grantor has assigned and
granted to Agent (for the ratable benefit of the Lenders and Agent) a
security interest in all right, title and interest of Grantor in and to the
Patents, together with any reissue, continuation, continuation-in-part or
extension thereof, and all proceeds thereof, including any and all causes
of action which may exist by reason of infringement thereof (the
"Collateral"), to secure the prompt payment, performance and observance of
the Secured Obligations, as defined in the Security Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Grantor does hereby further assign, transfer and
convey unto Agent and grant to Agent a security interest in the Collateral
to secure the prompt payment, performance and observance of the Secured
Obligations.
I-2[3]-1
<PAGE>
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Agent with respect to the assignment of and security interest
in the Collateral made and granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Agent's address is:
ABN AMRO BANK N.V.
c/o ABN AMRO North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Maria Vickroy Peralta
Telephone: (415) 984-3704
Fax No.: (415) 362-3524
IN WITNESS WHEREOF, Grantor has caused this Agreement to be executed
as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-2[3]-2
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF )
On ____________, ___ before me, _________________, personally
appeared _________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in her/her/their authorized
capacity(ies), and that by his/her/their signature(s) on such instrument
the person or entity on behalf of which the person(s) acted executed the
instrument.
WITNESS my hand and official seal.
Signature (Seal)
I-2[3]-3
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
PATENTS
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
PATENT APPLICATIONS
Application No.
I-2[3]-4
<PAGE>
ATTACHMENT 4
TO SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
STATE OF CALIFORNIA )
) ss.:
COUNTY OF )
KNOW ALL PERSONS BY THESE PRESENTS, THAT ADAC LABORATORIES, a
California corporation ("Grantor"), pursuant to a Security Agreement
(Intellectual Property), dated the date hereof (the "Security Agreement"),
between Grantor and ABN AMRO BANK N.V., as agent (for the ratable benefit
of the Lenders and Agent) (jointly in such capacities, "Agent") under that
certain Amended and Restated Credit Agreement, dated as of March 29, 1999
as amended by that certain First Amendment to Amended and Restated Credit
Agreement dated as of August 17, 1999 (as amended, and as further amended
from time to time, the "Credit Agreement"), among Adac Laboratories, a
California corporation ("Borrower"), the Lenders and Agent, hereby appoints
and constitutes Agent its true and lawful attorney in fact, with full power
of substitution, and with full power and authority to perform the following
acts on behalf of Grantor following the occurrence and during the
continuation of an Event of Default (as defined in the Credit Agreement):
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Grantor in and to any letters
patent of the United States or any other country or political subdivision
thereof, and all registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending applications
therefor, and for the purpose of the recording, registering and filing of,
or accomplishing any other formality with respect to, the foregoing, to
execute and deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Grantor in and to any
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals thereof, and
all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or advisable
to effect such purpose;
I-2[4]-1
<PAGE>
3. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Grantor in and to any
copyrights, and all registrations, recordings, reissues, extensions and
renewals thereof, and all pending applications therefor, and for the
purpose of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and deliver any
and all agreements, documents, instruments of assignment or other papers
necessary or advisable to effect such purpose;
4. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Grantor in and to any mask
works, and all registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose of the
recording, registering and filing of, or accomplishing any other formality
with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary
or advisable to effect such purpose;
5. For the purpose of evidencing and perfecting Agent's interest in
any patent, trademark, copyright or mask work not previously assigned to
Agent as security, or in any patent, trademark, copyright or mask work,
which Grantor may acquire from a third party, and for the purpose of the
recording, registering and filing of, or accomplishing any other formality
with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary
or advisable to effect such purpose.
6. To execute any and all documents, statements, certificates or other
papers necessary or advisable in order to obtain the purposes described
above as Agent may in its reasonable discretion determine.
This power of attorney is made pursuant to the Security Agreement and
takes effect solely for the purposes of thereof and is subject to the
conditions thereof and may not be revoked until termination of the Security
Agreement as provided therein.
Dated: September [A], 19999
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
I-2[4]-2
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
On ______________, ___ before me, _____________________, personally
appeared ____________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in her/her/their authorized
capacity(ies), and that by his/her/their signature(s) on such instrument
the person or entity on behalf of which the person(s) acted executed the
instrument.
WITNESS my hand and official seal.
Signature (Seal)
I-2[4]-3
<PAGE>
EXHIBIT J
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of September [A], 1999 is executed by
ADAC LABORATORIES, a California corporation ("Borrower"), in favor of ABN
AMRO BANK N.V., a Netherlands public company acting through its San
Francisco Representative Office, acting as agent (in such capacity,
"Agent") for the financial institutions which are from time to time parties
to the Credit Agreement referred to in Recital A below (collectively, the
"Lenders").
RECITALS
A. Pursuant to an Amended and Restated Credit Agreement, dated as of
March 29, 1999, as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 17, 1999 (as amended, and as
further amended from time to time, (the "Credit Agreement"), among
Borrower, the Lenders and Agent, the Lenders have agreed to extend certain
credit facilities to Borrower upon the terms and subject to the conditions
set forth therein.
B. The Lenders' obligations to continue to extend the credit
facilities to Borrower under the Credit Agreement are subject, among other
conditions, to receipt by Agent of this Pledge Agreement, duly executed by
Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Borrower hereby agrees with Agent, for the ratable
benefit of the Lenders and Agent, as follows:
1. Definitions and Interpretation. When used in this Pledge Agreement,
the following terms shall have the following respective meanings:
"Agent" shall have the meaning given to that term in the
introductory paragraph hereof.
"Borrower" shall have the meaning given to that term in the
introductory paragraph hereof.
"Collateral" shall have the meaning given to that term in
paragraph 2 hereof.
"Credit Agreement" shall have the meaning given to that term in
Recital A hereof.
J-1
<PAGE>
"Domestic Subsidiary" shall have the meaning given to that term
in the Credit Agreement and shall include, without limitation, as of
the date hereof each of the Subsidiaries listed in Part A of
Attachment 1 hereto.
"Domestic Subsidiary Shares" shall mean all Subsidiary Shares in
Domestic Subsidiaries.
"Equity Securities" shall have the meaning given to that term in
the Credit Agreement.
"Foreign Subsidiary" shall have the meaning given to that term in
the Credit Agreement and shall include, without limitation as of the
date hereof, each of the Subsidiaries listed in Part B of Attachment 1
hereto.
"Foreign Subsidiary Nonvoting Shares" shall mean all Subsidiary
Shares in Foreign Subsidiaries having no voting power, including
without limitation as of the date hereof, the Subsidiary Shares so
designated in Part B of Attachment 1 hereto.
"Foreign Subsidiary Voting Shares" shall mean all Subsidiary
Shares in Foreign Subsidiaries having voting power, including without
limitation as of the date hereof, the Subsidiary Shares so designated
in Part B of Attachment 1 hereto.
"IRC" shall have the meaning given to that term in the Credit
Agreement.
"Lenders" shall have the meaning given to that term in the
introductory paragraph hereof.
"Maximum Percentage" shall mean, with respect to the Foreign
Subsidiary Voting Shares of any Foreign Subsidiary, the maximum
percentage of such shares that can be pledged to Agent without
increasing the gross income of Borrower pursuant to Sections 951 and
956(c) (or any successor provisions) of the IRC, which percentage as
of the date hereof shall be sixty-six percent (66%).
"Pledged Shares" shall mean the Subsidiary Shares described in
subparagraphs 2(a), 2(b) and 2(c) hereof.
"Secured Obligations" shall have the meaning given to that term
in the Credit Agreement.
"Subsidiary" shall have the meaning given to that term in the
Credit Agreement.
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<PAGE>
"Subsidiary Shares" shall mean, with respect to any Subsidiary of
Borrower, all Equity Securities issued by such Subsidiary.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein
and defined in the Credit Agreement shall have the respective meanings
given to those terms in the Credit Agreement, and all terms defined in the
UCC shall have the respective meanings given to those terms in the UCC. The
rules of construction set forth in Section I of the Credit Agreement shall,
to the extent not inconsistent with the terms of this Pledge Agreement,
apply to this Pledge Agreement and are hereby incorporated by reference.
2. Pledge. As security for the Secured Obligations, Borrower hereby
pledges and assigns to Agent (for the ratable benefit of the Lenders and
Agent) and grants to Agent (for the ratable benefit of the Lenders and
Agent) a security interest in all right, title and interest of Borrower in
and to the property described in subparagraphs (a) - (e) below, whether now
owned or hereafter acquired (collectively and severally, the "Collateral"):
(a) All Domestic Subsidiary Shares;
(b) All Foreign Subsidiary Voting Shares of each Foreign
Subsidiary equal to the Maximum Percentage therefor;
(c) All Foreign Subsidiary Nonvoting Shares;
(d) All dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed or distributable
in respect of or in exchange for any of the Pledged Shares; and
(e) All proceeds of the foregoing.
3. Representations and Warranties. Borrower represents and warrants to
the Lenders and Agent as follows:
(a) Borrower is the record legal and beneficial owner of the
Collateral (or, in the case of after-acquired Collateral, at the time
Borrower acquires rights in the Collateral, will be the record legal
and beneficial owner thereof). No other Person has (or, in the case of
after-acquired Collateral, at the time Borrower acquires rights
therein, will have) any right, title, claim or interest (by way of
Lien, purchase option or otherwise) in, against or to the Collateral
(other than with respect to Collateral other than the Pledged Shares,
Permitted Liens).
J-3
<PAGE>
(b) Agent has (or in the case of after-acquired Collateral, at
the time Borrower acquires rights therein, will have) a first priority
perfected security interest in the Pledged Shares and the other
Collateral.
(c) All Pledged Shares have been (or in the case of
after-acquired Pledged Shares, at the time Borrower acquires rights
therein, will have been) duly authorized, validly issued and fully
paid and are (or in the case of after-acquired Pledged Shares, at the
time Borrower acquires rights therein, will be) non-assessable.
(d) Borrower has (or will have within fourteen (14) days of the
date hereof) delivered to Agent, together with all necessary stock
powers, endorsements, assignments and other necessary instruments of
transfer, the originals of all Pledged Shares, other certificated
securities, other Collateral and all certificates, instruments and
other writings evidencing the same.
(e) Set forth in Attachment 1 hereto is a true, complete and
accurate list of all Subsidiary Shares. All information set forth in
Attachment 1 is true, complete and accurate.
4. Covenants. Borrower hereby agrees as follows:
(a) Borrower, at Borrower's expense, shall promptly procure,
execute and deliver to Agent all documents, instruments and agreements
and perform all acts which are necessary, or which Agent may
reasonably request, to establish, maintain, preserve, protect and
perfect the Collateral, the Lien granted to Agent therein and the
first priority of such Lien or to enable Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the preceding sentence, Borrower
shall (i) procure, execute and deliver to Agent all stock powers,
endorsements, assignments, financing statements and other instruments
of transfer requested by Agent, (ii) deliver to Agent promptly upon
receipt the originals of all Pledged Shares, other certificated
securities, other Collateral and all certificates, instruments and
other writings evidencing the same and (iii) cause the Lien of Agent
to be recorded or registered in the books of any financial
intermediary or clearing corporation requested by Agent.
(b) Borrower shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(c) Upon demand by Agent after the occurrence and during the
continuation of any Event of Default, Borrower shall deposit, or cause
to be deposited, all remittances, checks and other funds (in whatever
form) received with respect to Collateral to a deposit account for
which Borrower
J-4
<PAGE>
has complied with subparagraph 4(e) of the Borrower Security Agreement
and in which Agent has a first priority perfected security interest.
(d) Borrower shall appear in and defend any action or proceeding
which may affect its title to or Agent's security interest in the
Collateral if an adverse decision is reasonably likely to have a
Material Adverse Effect.
(e) Borrower shall not surrender or lose possession of (other
than to Agent), sell, encumber, lease, rent, option, or otherwise
dispose of or transfer any Collateral or right or interest therein
except as permitted in the Credit Agreement, and, notwithstanding any
provision of the Credit Agreement, Borrower shall keep the Collateral
free of all Liens (except with respect to Collateral other than the
Pledged Shares, Permitted Liens.
5. Voting Rights and Dividends Prior to Default. Unless an Event of
Default has occurred and is continuing:
(a) Borrower may exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the Pledged Shares or
any part thereof; provided, however, that Borrower shall not exercise
or refrain from exercising any such rights where the consequence of
such action or inaction would be (i) to impair any Collateral, the
Lien granted to Agent therein, the first priority of such Lien or
Agent's rights and remedies hereunder with respect to any Collateral
or (ii) otherwise inconsistent with the terms of this Pledge Agreement
and the other Credit Documents.
(b) Borrower may receive and retain all dividends and interest
paid in cash in respect of the Pledged Shares, except for any such
dividends and interest paid in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus. Borrower shall promptly
deliver to Agent to hold as Collateral all dividends and interest
which Borrower is not entitled to receive and retain pursuant to the
preceding sentence, in the same form as so received (with any
necessary endorsement), and, until so delivered, shall hold such
dividends and interest in trust for the benefit of Agent, segregated
from the other property or funds of Borrower.
6. Authorized Action by Agent. Borrower hereby irrevocably appoints
Agent as its attorney-in-fact and agrees that Agent may perform (but Agent
shall not be obligated to and shall incur no liability to Borrower or any
third party for failure so to do) any act which Borrower is obligated by
this Pledge Agreement to perform, and to exercise such rights and powers as
Borrower might exercise with respect to the Collateral, including, without
limitation, the right to (a) collect by legal proceedings or otherwise and
endorse, receive and receipt for all dividends, interest, payments,
proceeds and other sums and property now or hereafter payable on or on
account of the Collateral; (b) enter into any extension, reorganization,
J-5
<PAGE>
deposit, merger, consolidation or other agreement pertaining to, or
deposit, surrender, accept, hold or apply other property in exchange for
the Collateral; (c) insure, process, preserve and enforce the Collateral;
(d) make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral; (e) pay any Indebtedness of
Borrower relating to the Collateral; and (f) execute UCC financing
statements and other documents, instruments and agreements required
hereunder; provided, however, that Agent may exercise such powers only
after the occurrence and during the continuance of an Event of Default.
Borrower agrees to reimburse Agent upon demand for all reasonable costs and
expenses, including attorneys' fees, Agent may incur while acting as
Borrower's attorney-in-fact hereunder, all of which costs and expenses are
included in the Secured Obligations. Borrower agrees that such care as
Agent gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in Agent's possession;
provided, however, that Agent shall not be required to make any
presentment, demand or protest, or give any notice and need not take any
action to preserve any rights against any prior party or any other Person
in connection with the Secured Obligations or with respect to the
Collateral.
7. Events of Default.
(a) Event of Default. Borrower shall be deemed in default under
this Pledge Agreement upon the occurrence and during the continuance
of an Event of Default, as that term is defined in the Credit
Agreement.
(b) Voting Rights and Dividends. Upon the occurrence and during
the continuance of an Event of Default:
(i) All rights of Borrower to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to subparagraph 5(b) hereof and to receive the
dividends and interest payments which it would otherwise be
authorized to receive and retain pursuant to subparagraph 5(a)
hereof shall cease and all such rights shall thereupon become
vested in Agent which shall thereupon have the sole right, but
not the obligation, to exercise such voting and other consensual
rights and to receive and hold as Collateral such dividends and
interest payments.
(ii) Borrower shall promptly deliver to Agent to hold as
Collateral all dividends and interest received by Borrower after
the occurrence and during the continuance of any Event of
Default, in the same form as so received (with any necessary
endorsement), and, until so delivered, shall hold such dividends
and interest in trust for the benefit of Agent, segregated from
the other property or funds of Borrower.
J-6
<PAGE>
(c) Other Rights and Remedies. In addition to all other rights
and remedies granted to Agent by this Pledge Agreement, the Credit
Agreement, the other Credit Documents, the UCC and other applicable
Governmental Rules, Agent may, upon the occurrence and during the
continuance of any Event of Default, exercise any one or more of the
following rights and remedies: (i) collect, receive, appropriate or
realize upon the Collateral or otherwise foreclose or enforce Agent's
security interests in any or all Collateral in any manner permitted by
applicable Governmental Rules or in this Pledge Agreement; (ii) notify
any or all issuers of or transfer or paying agents for the Collateral
or any applicable clearing corporation, financial intermediary or
other Person to register the Collateral in the name of Agent or its
nominee and/or to pay all dividends, interest and other amounts
payable in respect of the Collateral directly to Agent; (iii) sell or
otherwise dispose of any or all Collateral at one or more public or
private sales, whether or not such Collateral is present at the place
of sale, for cash or credit or future delivery, on such terms and in
such manner as Agent may determine; and (iv) require Borrower to
assemble all records and information relating to the Collateral and
make it available to Agent at a place to be designated by Agent. In
any case where notice of any sale or disposition of any Collateral is
required, Borrower hereby agrees that seven (7) days notice of such
sale or disposition is reasonable.
(d) Securities Laws.
(i) Borrower acknowledges and recognizes that Agent may be
unable to effect a public sale of all or a part of the Pledged
Shares and may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obligated
to agree, among other things, to acquire the Pledged Shares for
their own account, for investment and not with a view to the
distribution or resale thereof. Borrower acknowledges that any
such private sales may be at prices and on terms less favorable
to Agent than those of public sales, and agrees that such private
sales shall be deemed to have been made in a commercially
reasonable manner and that Agent has no obligation to delay sale
of any Pledged Shares to permit the issuer thereof to register it
for public sale under the Securities Act of 1933, as amended, or
under any state securities law.
(ii) Upon the occurrence and during the continuation of an
Event of Default and at Agent's request, Borrower shall, and
shall cause all issuers of Collateral and all officers and
directors thereof and all other necessary Persons to, execute and
deliver all documents, instruments and agreements and perform all
other acts necessary or, in the opinion of Agent, advisable to
sell the Collateral in any public or private sale, including any
acts requested by Agent to (A) register
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<PAGE>
any Collateral under the Securities Act of 1933, (B) qualify any
Collateral under any state securities or "Blue Sky" laws or (C)
otherwise permit any such sale to be made in full compliance with
all applicable Governmental Rules.
8. Miscellaneous.
(a) Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to
or upon Borrower or Agent under this Pledge Agreement shall be given
as provided in Paragraph 8.01 of the Credit Agreement.
(b) Waivers; Amendments. Any term, covenant, agreement or
condition of this Pledge Agreement may be amended or waived only as
provided in the Credit Agreement. No failure or delay by Agent or any
Lender in exercising any right hereunder shall operate as a waiver
thereof or of any other right nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of
any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only
in the specific instance and for the specific purpose for which given.
(c) Successors and Assigns. This Pledge Agreement shall be
binding upon and inure to the benefit of Agent, the Lenders and
Borrower and their respective successors and assigns; provided,
however, that Agent, the Lenders and Borrower may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. Agent may disclose this Pledge
Agreement as provided in the Credit Agreement.
(d) Partial Invalidity. If at any time any provision of this
Pledge Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this Pledge
Agreement nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
(e) Cumulative Rights, etc. The rights, powers and remedies of
Agent and the Lenders under this Pledge Agreement shall be in addition
to all rights, powers and remedies given to Agent and the Lenders by
virtue of any applicable Governmental Rule, the Credit Agreement, any
other Credit Document or any other agreement, all of which rights,
powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Agent's rights
hereunder. Borrower waives any right to require Agent or any Lender to
proceed against any Person or to exhaust any Collateral or to pursue
any remedy in Agent's or such Lender's power.
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<PAGE>
(f) Payments Free of Taxes, Etc. All payments made by Borrower
under this Pledge Agreement shall be made by Borrower free and clear
of and without deduction for any and all present and future taxes,
levies, charges, deductions and withholdings. In addition, Borrower
shall pay upon demand any stamp or other taxes, levies or charges of
any jurisdiction with respect to the execution, delivery,
registration, performance and enforcement of this Pledge Agreement.
Upon request by Agent, Borrower shall furnish evidence satisfactory to
Agent that all requisite authorizations and approvals by, and notices
to and filings with, governmental authorities and regulatory bodies
have been obtained and made and that all requisite taxes, levies and
charges have been paid.
(g) Borrower's Continuing Liability. Notwithstanding any
provision of this Pledge Agreement or any other Credit Document or any
exercise by Agent of any of its rights hereunder or thereunder
(including, without limitation, any right to collect or enforce any
Collateral), (i) Borrower shall remain liable to perform its
obligations and duties in connection with the Collateral and (ii)
neither Agent nor any Lender shall assume or be considered to have
assumed any liability to perform such obligations and duties or to
enforce any of Borrower's rights in connection with the Collateral.
(h) Governing Law. This Pledge Agreement shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
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<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Pledge Agreement to be
executed as of the day and year first above written.
ADAC LABORATORIES
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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<PAGE>
ATTACHMENT 1
TO PLEDGE AGREEMENT
PART A
DOMESTIC SUBSIDIARY SHARES
<TABLE>
<CAPTION>
Shares Shares Owned
Subsidiary Jurisdiction Outstanding(1) by Borrower
<S> <C> <C> <C>
ADAC Research &
Manufacturing, Inc. California 1,000 100%
ADAC Healthcare Information
Systems, Inc. Texas 100%
ADAC Medical
Technologies, Inc.
(formerly known
as J.D. Technical
Services, Inc.) Delaware 1,000 100%
ADAC Laboratories
Pacific, Inc. California 1,000 100%
ADAC Healthcare
Partners, Inc. Delaware 1 common 100%
1,000,000
preferred 100%
Cortet, Inc. Florida 100%
O.N.E.S. Medical Services, Inc. New Hampshire 100%
CT Solutions California 100%
</TABLE>
- - - --------------------
(1) All shares common unless otherwise indicated.
J-11
<PAGE>
PART B
FOREIGN SUBSIDIARY SHARES
<TABLE>
<CAPTION>
Shares Shares Owned
Subsidiary Jurisdiction Outstanding(1) by Borrower(2)
<S> <C> <C> <C>
ADAC Laboratories
Canada Ltd. Canada 100 100%
ADAC Laboratories
Europe, BV. Netherlands 20,646 100%
ADAC Foreign
Sales Corporation Virgin Islands 1,000 100%
ADAC do Brasil Brazil 85,000 100%
</TABLE>
- - - --------------------
(1) All shares common unless otherwise indicated.
(2) An immaterial number of directors' qualifying shares or the equivalent may
be outstanding for some Foreign Subsidiaries.
J-12
<PAGE>
EXHIBIT K
COLLATERAL CERTIFICATE
I, [_______________], as the Chief Financial Officer of ADAC
Laboratories, a California corporation (the "Company"), pursuant to Section 3.01
of the Amended and Restated Credit Agreement dated as of March 29, 1999 entered
into by and among the Company, the Lenders named therein and ABN AMRO BANK N.V.,
a Netherlands public company acting through its San Francisco Representative
Office, as agent for the Lenders, hereby certify for and on behalf of the
Company and each of the Company's Domestic Subsidiaries that the information set
forth in the Profile attached hereto as Attachment 1 is true, correct and
accurate.
IN WITNESS WHEREOF, the undersigned has executed this Collateral
Certificate on and as of this [A] day of August, 1999.
Name:
Title:
K-1
<PAGE>
ATTACHMENT 1
TO COLLATERAL CERTIFICATE
PROFILE OF BORROWER AND DOMESTIC SUBSIDIARIES
ADAC LABORATORIES ("Borrower"):
1. The current legal name of Borrower is ADAC Laboratories. The current
legal name of each Domestic Subsidiary of Borrower is as follows:
Entity
2. Borrower's chief executive office is located at 540 Alder Drive,
Milpitas, California. Borrower's federal employer I.D. no. is 94-1725806. The
chief executive offices of each Domestic Subsidiary of Borrower are as follows:
Entity Location
3. Borrower was incorporated on October 14, 1970 in the state of
California. Since its incorporation, Borrower has had no other legal name. In
addition, since the respective date of organization of each Domestic Subsidiary
of Borrower, no Domestic Subsidiary of Borrower has any other legal name.
4. Neither Borrower nor any of its Domestic Subsidiaries does business
under any trade name except as follows:
Entity Trade Name
K[1]-1
<PAGE>
5. Since at least January 1, 1996, neither Borrower nor any of its Domestic
Subsidiaries has acquired any of their respective assets in a bulk sale or any
other transaction not in the ordinary course of business of the seller.
6. The following is a complete list of all states and other jurisdictions
in which Borrower and each of its Domestic Subsidiaries is qualified to do
business:
Entity State or Jurisdiction
7. The following is a complete list of all offices and other places of
business at which Borrower and each of its Domestic Subsidiaries currently
conducts or has within the last four months conducted business (provide address,
owner of site and brief description of assets located there):
Entity Address Owner of Site Description of Assets
8. The following is a complete list of all persons and entities (other than
Borrower or any Domestic Subsidiary of Borrower) who at any time have possession
of any assets of Borrower or any Domestic Subsidiary of Borrower (provide name,
address where located and description of assets located there):
Entity Address Owner of Site Description of Assets
K[1]-2
<PAGE>
Of the persons and entities listed above in this item 8;
a. The following persons and entities are warehouses which issue
warehouse receipts:
Person or
Entity Entity
b. The following persons and entities process or finish inventory or
other goods for Borrower or any Domestic Subsidiary of Borrower:
Person or
Entity Entity
c. The following persons and entities hold inventory or other goods on
consignment for Borrower or a Domestic Subsidiary of Borrower:
Person or
Entity Entity
d. The following other persons and entities have possession of assets
of Borrower or a Domestic Subsidiary of Borrower for the purposes
indicated:
Person or
Entity Entity
K[1]-3
<PAGE>
9. The following is a complete list of all motor vehicles owned by Borrower
or any Domestic Subsidiary of Borrower (describe each vehicle by make, model and
year and indicate for each the state in which registered and the state in which
based):
State of State in which
Entity Vehicle Registration Based
10. The following is a complete list of all aircraft and boats and all
other inventory, equipment and other goods of Borrower or its Domestic
Subsidiaries which are subject to any certificate of title or other registration
statute of the United States, any state or any other jurisdiction (provide
description of covered goods and indicate registration system and jurisdiction):
Registration
Entity Goods System Jurisdiction
11. The following is a complete list of all patents, copyrights,
trademarks, tradenames and service marks registered in the name of Borrower:
a. Entity Patents Registration No.
b. Entity Copyrights Registration No.
K[1]-4
<PAGE>
c. Trademarks,
Trade Names and
Entity Service Marks Registration No.
12. The following is a complete list of all subsidiaries of Borrower
(provide name of subsidiary, jurisdiction of incorporation, outstanding shares
and shares owned by Borrower):
Shares Shares Owned
Subsidiary Jurisdiction Outstanding by Borrower
13. The following is a complete list of all other stock (other than the
stock of subsidiaries described in item 13 above), bonds, debentures, notes and
other securities owned by Borrower or any of its Domestic Subsidiaries which
have a value (higher of cost or market value) of $1.00 more (provide name of
issuer, a description of security and value):
Description of
Entity Issuer Security Value
14. The following is a complete list of all notes payable to Borrower or
any of its Domestic Subsidiaries not otherwise listed herein (provide name of
obligor, date, original principal amount and current principal balance):
Original Current
Entity Obligor Date Amount Balance
K[1]-5
<PAGE>
15. The following is a complete list of all bank accounts maintained by
Borrower or any of its Domestic Subsidiaries (provide name and address of
depository bank, type of account and account number):
Depository Bank Type of Account
Entity Bank Address Account Number
16. The following is a complete list of all investment accounts maintained
by Borrower (provide name and address of securities intermediary, type of
account and account number):
Securities Intermediary's Type of Account
Entity Intermediary Address Account Number
17. Does Borrower or any of its Domestic Subsidiaries regularly receive
letters of credit from customers to secure payments of sums owed to such Person?
Yes ____. No ____.
18. Does Borrower or any of its Domestic Subsidiaries regularly have
accounts receivable due from, or contracts with, the United States government or
any agency or department thereof?
Yes ____. No ____.
If yes, indicate the percentage of Borrower's or such Domestic
Subsidiary's total outstanding accounts receivable that are due from the
United States government and agencies and departments thereof: ________%
K[1]-7
<PAGE>
19. Does Borrower or any of its Domestic Subsidiaries regularly receive
advance deposits from customers for goods not yet delivered to such customers?
Yes ____. No ____.
20. Does Borrower or any of its Domestic Subsidiaries regularly import
goods from outside the United States?
Yes ____. No ____.
K[1]-8
<PAGE>
EXHIBIT L
INSURANCE ENDORSEMENTS
1. Property Insurance. Each of the property insurance policies of
Borrower and each of its Subsidiaries (individually, an "Insured Party")
shall contain substantially the following endorsements:
(a) Agent shall be named as additional loss payee.
(b) In respect of the interests of Agent in the policies, the
insurance shall not be invalidated by any action or by inaction of any
Insured Party or by any Person having temporary possession of the
property covered thereby (the "Property") while under contract with
any Insured Party to perform maintenance, repair, alteration or
similar work on the Property, and shall insure the interests of Agent
regardless of any breach or violation of any warranty, declaration or
condition contained in the insurance policy by any Insured Party or
Agent or any other additional insured (other than by such additional
insured, as to such additional insured) or by any Person having
temporary possession of the Property while under contract with
Borrower to perform maintenance, repair, alteration or similar work on
the Property.
(c) If the insurance policy is cancelled for any reason
whatsoever, or substantial change is made in the coverage that affects
the interests of Agent, or if the insurance coverage is allowed to
lapse for non-payment of premium, such cancellation, change or lapse
shall not be effective as to Agent for 30 days (or 10 days in the case
of non-payment of premium) after receipt by Agent of written notice
from the insurers of such cancellation, change or lapse.
(d) Neither Agent nor any Lender shall have any obligation or
liability for premiums, commissions, assessments, or calls in
connection with the insurance.
(e) The insurer shall waive any rights of set-off or counterclaim
or any other deduction, whether by attachment or otherwise, that it
may have against Agent and each Lender.
(f) The insurance shall be primary without right of contribution
from any other insurance that may be carried by Agent or any Lender
with respect to its or their interest in the Property.
(g) The insurer shall waive any right of subrogation against
Agent and each Lender.
L-1
<PAGE>
(h) All provisions of the insurance, except the limits of
liability, shall operate in the same manner as if there were a
separate policy covering each insured party.
2. Liability Insurance. Each of the liability insurance policies of
each Insured Party shall contain substantially the following endorsements:
(a) Agent shall be named as additional insured.
(b) In respect of the interests of Agent in the policies, the
insurance shall not be invalidated by any action or by inaction of any
Insured Party or by any Person having temporary possession of the
property covered thereby (the "Property") while under contract with
any Insured Party to perform maintenance, repair, alteration or
similar work on the Property, and shall insure the interests of Agent
regardless of any breach or violation of any warranty, declaration or
condition contained in the insurance policy by any Insured Party or
Agent or any other additional insured (other than by such additional
insured, as to such additional insured) or by any Person having
temporary possession of the Property while under contract with
Borrower to perform maintenance, repair, alteration or similar work on
the Property; provided, however, that the foregoing shall not be
deemed to (i) cause such insurance policies to cover matters otherwise
excluded from coverage by the terms of such policies or (ii) require
any insurance to remain in force notwithstanding non-payment of
premiums except as provided in clause (c) below.
(c) If the insurance policy is cancelled for any reason
whatsoever, or substantial change is made in the coverage that affects
the interests of Agent, or if the insurance coverage is allowed to
lapse for non-payment of premium, such cancellation, change or lapse
shall not be effective as to Agent for 30 days (or 10 days in the case
of non-payment of premium) after receipt by Agent of written notice
from the insurer of such cancellation, change or lapse.
(d) Neither Agent nor any Lender shall have any obligation or
liability for premiums, commissions, assessments, or calls in
connection with the insurance.
(e) The insurer shall waive any rights of set-off or counterclaim
or any other deduction, whether by attachment or otherwise, that it
may have against Agent and each Lender.
(f) The insurance shall be primary without right of contribution
from any other insurance that may be carried by Agent or any Lender
with respect to their interests in the Property.
L-2
<PAGE>
(g) The insurer shall waive any right of subrogation against
Agent and each Lender.
(h) All provisions of the insurance, except the limits of
liability, shall operate in the same manner as if there were a
separate policy covering each insured party.
L-3
<PAGE>
This redlined draft, generated by CompareRite (TM) - The Instant
Redliner, shows the differences between - original document :
87757.10and revised document: 382903.3CompareRite found 71 change(s)
in the textDeletions appear as Overstrike text Additions appear as
Bold+Dbl Underline text
L-4
<PAGE>
EXECUTION VERSION
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"AMENDMENT"), dated as of August 17, 1999, is entered into by and among:
(1) ADAC LABORATORIES, a California corporation ("BORROWER");
(2) Each of the financial institutions listed in SCHEDULE I TO THE
CREDIT AGREEMENT referred to in RECITAL A below (collectively, the
"LENDERS"); and
(3) ABN AMRO BANK N.V., a Netherlands public company acting through
its San Francisco Representative Office, as agent for the Lenders (in such
capacity, "AGENT").
RECITALS
A. Borrower, the Lenders and Agent are parties to an Amended and Restated
Credit Agreement dated as of March 29, 1999 (the "CREDIT AGREEMENT").
B. Borrower has requested the Lenders and Agent to amend the Credit
Agreement in certain respects.
C. The Lenders and Agent are willing so to amend the Credit Agreement and
to grant such waivers upon the terms and subject to the conditions set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, the Lenders and Agent hereby agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Credit Agreement, as amended by
this Amendment. The rules of construction set forth in SECTION I OF THE CREDIT
AGREEMENT shall, to the extent not inconsistent with the terms of this
Amendment, apply to this Amendment and are hereby incorporated by reference.
2. AMENDMENTS TO CREDIT AGREEMENT. Subject to the satisfaction of the
conditions set forth in Paragraph 4 below, the Credit Agreement is hereby
amended so as to incorporate all of the changes set forth in the marked version
of the Credit Agreement attached hereto as ATTACHMENT A.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants
to Agent and the Lenders that the following are true and correct on the date of
this Amendment and that, after giving effect to the amendments set forth in
PARAGRAPH 2 above, the following will be true and correct on the Effective Date
(as defined below):
(a) The representations and warranties of Borrower and its
Subsidiaries set forth in PARAGRAPH 4.01 OF THE CREDIT AGREEMENT and in the
other Credit Documents are true and correct in all material respects;
(b) No Default or Event of Default has occurred and is continuing; and
(c) Each of the Credit Documents is in full force and effect.
(Without limiting the scope of the term "Credit Documents," Borrower expressly
acknowledges in making the representations and warranties set forth in this
PARAGRAPH 3 that, on and after the date hereof, such term includes this
Amendment.)
4. EFFECTIVE DATE. The amendments effected by PARAGRAPH 2 above shall
become effective on the date on which Agent and the Lenders shall have received
the following, each in form and substance satisfactory to Agent, the Lenders and
their respective counsel (such date, the "EFFECTIVE DATE"):
(a) This Amendment duly executed by Borrower, each Lender and Agent;
(b) A letter in the form of ATTACHMENT B hereto appropriately
completed and duly executed by each Guarantor;
(c) A Subsidiary Joinder, duly executed by ADAC Capital, LLC, a
Delaware limited liability company and a wholly-owned Subsidiary of
Borrower ("ADAC CAPITAL");
(d) The Borrower Security Agreement, duly executed by Borrower;
(e) A Domestic Subsidiary Security Agreement from each Domestic
Subsidiary, duly executed by each such Domestic Subsidiary;
(f) The Borrower IP Security Agreement, duly executed by Borrower;
(g) A Domestic Subsidiary IP Security Agreement from each Domestic
Subsidiary, duly executed by each such Domestic Subsidiary;
(h) The Pledge Agreement, duly executed by Borrower;
(i) A Certificate of the Secretary of Borrower, dated the Effective
Date, certifying that (i) the Articles of Incorporation and Bylaws of
Borrower, in the form delivered to Agent on the Closing Date, are in full
force and effect and have not been amended, supplemented, revoked or
repealed since such date and (ii) that attached thereto
2
<PAGE>
are true and correct copies of resolutions duly adopted by the Board of
Directors of Borrower and continuing in effect, which authorize the
execution, delivery and performance by Borrower of this Amendment and the
consummation of the transactions contemplated hereby, including without
limitation, the grant by Borrower in favor of Agent for the benefit of the
Lenders of a security interest in the Collateral;
(j) A Certificate of the Secretary of each Domestic Subsidiary (other
than ADAC Capital), dated the Effective Date, certifying that (i) the
Articles of Incorporation and Bylaws of such Domestic Subsidiary, in the
form delivered to Agent on the Closing Date, are in full force and effect
and have not been amended, supplemented, revoked or repealed since such
date and (ii) that attached thereto are true and correct copies of
resolutions duly adopted by the Board of Directors of such Domestic
Subsidiary and continuing in effect, which authorize the execution,
delivery and performance by such Domestic Subsidiary of the Credit
Documents executed or to be executed by such Subsidiary in connection with
this Amendment and the consummation of the transactions contemplated hereby
and thereby, including without limitation, the grant by each such Domestic
Subsidiary in favor of Agent for the benefit of the Lenders of a security
interest in such Domestic Subsidiary's Collateral;
(k) A Certificate of the Secretary of ADAC Capital, dated the
Effective Date, certifying that (i) attached thereto are true and correct
copies of the Articles of Organization and Operating Agreement of ADAC
Capital as in effect on the Effective Date and (ii) that attached thereto
are true and correct copies of resolutions duly adopted by the Board of
Directors of ADAC Capital and continuing in effect, which authorize the
execution, delivery and performance by ADAC Capital of the Credit Documents
executed or to be executed by ADAC Capital in connection with this
Amendment and the consummation of the transactions contemplated hereby and
there, including without limitation, the grant by ADAC Capital in favor of
Agent for the benefit of the Lenders of a security interest in ADAC
Capital's Collateral;
(l) The Collateral Certificate, duly executed by Borrower on behalf of
itself and its Domestic Subsidiaries;
(m) Such Uniform Commercial Code financing statements and fixture
filings (appropriately completed and executed) for filing in such
jurisdictions as Agent may request to perfect the Liens granted to Agent in
the Credit Agreement (as amended by this Amendment), the Security Documents
and the other Credit Documents;
(n) Such Uniform Commercial Code termination statements (appropriately
completed and executed) for filing in such jurisdictions as Agent may
request to terminate any financing statement evidencing Liens of other
Persons in the Collateral which are prior to the Liens granted to Agent in
the Credit Agreement (as amended by this Amendment), the Security Documents
and the other Credit Documents, except for any such prior Liens which are
expressly permitted by the Credit Agreement to be prior;
3
<PAGE>
(o) Uniform Commercial Code search certificates from the jurisdictions
in which Uniform Commercial Code financing statements are to be filed
pursuant to ITEM (k) above reflecting no other financing statements or
filings which evidence Liens of other Persons in the Collateral which are
prior to the Liens granted to Agent in the Credit Agreement (as amended by
this Amendment), the Security Documents and the other Credit Documents,
except for any such prior Liens (i) which are expressly permitted by the
Credit Agreement to be prior or (b) for which Agent has received a
termination statement pursuant to ITEM (n) above;
(p) The stock certificates representing all of the outstanding capital
stock of each Subsidiary of Borrower pledged to Agent pursuant to the
Pledge Agreement and existing on the Effective Date, together with undated
stock powers duly executed by Borrower in blank and attached thereto;
(q) To the extent requested by Agent or the Required Lenders, a Notice
of Security Interest in Deposit Account in the form of ATTACHMENT 2 TO THE
BORROWER SECURITY AGREEMENT and ATTACHMENT 2 TO THE DOMESTIC SUBSIDIARY
SECURITY AGREEMENT (as applicable) for each bank at which Borrower or a
Domestic Subsidiary maintains a deposit account, each appropriately
completed, duly executed by Borrower or such Domestic Subsidiary, as
appropriate, and Agent and acknowledged by the depositary bank to which
addressed;
(r) Appropriate documents for filing with the United States Patent and
Trademark Office and all other filings necessary to perfect the security
interests granted to Agent by the Borrower IP Security Agreement and the
Domestic Subsidiary IP Security Agreement (as applicable), all
appropriately completed and duly executed by Borrower or such Domestic
Subsidiary (as applicable) and, where appropriate, notarized;
(s) A Power of Attorney in the form of ATTACHMENT 4 TO THE BORROWER IP
SECURITY AGREEMENT and ATTACHMENT 4 TO THE DOMESTIC SUBSIDIARY IP SECURITY
AGREEMENT (as applicable), dated the Effective Date and otherwise
appropriately completed, duly executed by Borrower and notarized;
(t) Such other documents, instruments and agreements as Agent may
reasonably request to establish and perfect the Liens granted to Agent or
any Lender in the Credit Agreement (as amended by this Amendment), the
Security Documents and the other Credit Documents;
(u) Such other evidence as Agent may request to establish that the
Liens granted to Agent or any Lender in the Credit Agreement (as amended by
this Amendment), the Security Documents and the other Credit Documents are
perfected and prior to the Liens of other Persons in the Collateral, except
for any such Liens which are expressly permitted by the Credit Agreement to
be prior;
(v) A favorable written opinion of legal counsel for the Borrower and
the Domestic Subsidiaries, dated the Effective Date, addressed to Agent for
the benefit of
4
<PAGE>
Agent and the Lenders, covering such legal matters as Agent may reasonably
request and otherwise in form and substance satisfactory to Agent;
(w) Certificates of insurance evidencing the insurance Borrower is
required to maintain pursuant to SUBPARAGRAPH 5.01(d) OF THE CREDIT
AGREEMENT, together with endorsements thereto as required by such
subparagraph and EXHIBIT L TO THE CREDIT AGREEMENT;
(x) The new Agent's Fee Letter, duly executed by Borrower, in form and
substance satisfactory to Agent;
(y) An amended Disclosure Letter, duly executed by Borrower and dated
the Effective Date;
(z) A nonrefundable amendment fee equal to 0.375% of each Lender's
Commitment; and
(aa) Such other evidence as Agent or any Lender may reasonably request
to establish the accuracy and completeness of the representations and
warranties and the compliance with the terms and conditions contained in
this Amendment and the other Credit Documents.
5. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Credit Agreement and the other Credit Documents to the Credit
Agreement shall mean the Credit Agreement as amended hereby. Except as
specifically amended above, (a) the Credit Agreement and the other Credit
Documents shall remain in full force and effect and are hereby ratified and
confirmed and (b) the execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power, or remedy of the Lenders or Agent, nor constitute a waiver of any
provision of the Credit Agreement or any other Credit Document.
6. MISCELLANEOUS.
(a) COUNTERPARTS. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto
shall be deemed to constitute a complete, executed original for all
purposes.
(b) HEADINGS. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
5
<PAGE>
IN WITNESS WHEREOF, Borrower, Agent and the Lenders have caused this
Amendment to be executed as of the day and year first above written.
BORROWER: ADAC LABORATORIES
By:
------------------------------------------
Name: R. Andrew Eckert
Title: Chief Executive Officer
AGENT: ABN AMRO BANK N.V.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
LENDERS: ABN AMRO BANK N.V.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SANWA BANK CALIFORNIA
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
6
<PAGE>
BANQUE NATIONALE DE PARIS
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
WELLS FARGO BANK, N.A.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
7
<PAGE>
ATTACHMENT A
SEE ATTACHED MARKED VERSION OF THE CREDIT AGREEMENT
ATTACHED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE.
A-1
<PAGE>
ATTACHMENT B
GUARANTOR CONSENT LETTER
___________, 1999
TO: ABN AMRO BANK, N.V.,
As Agent for the Lenders under the Credit Agreement referred to below
1. Reference is made to the following:
(a) The Amended and Restated Credit Agreement dated as of March 29,
1999 (the "Credit Agreement") among ADAC Laboratories ("Borrower"), the
financial institutions which are from time to time parties thereto (the
"Lenders"), and ABN AMRO Bank, as agent for the Lenders ("Agent");
(b) The Amended and Restated Guaranty dated as of March 29, 1999 (the
"Guaranty") executed by each of undersigned (each a "Guarantor," and
collectively, the "Guarantors") in favor of the Lenders and Agent; and
(c) The First Amendment to Credit Agreement dated as of August 17,
1999 (the "First Amendment") among Borrower, the Lenders and Agent.
2. Each Guarantor hereby consents to the First Amendment. Each Guarantor
expressly agrees that such amendment shall in no way affect or alter the rights,
duties, or obligations of Guarantor, the Lenders or Agent under the Guaranty.
3. From and after the date hereof, the term "Credit Agreement" as used in
the Guaranty shall mean the Credit Agreement, as amended by the First Amendment.
4. The Guarantors' consent to the First Amendment shall not be construed
(i) to have been required by the terms of the Guaranty or any other document,
instrument or agreement relating thereto or (ii) to require the consent of the
Guarantors in connection with any future amendment of the Credit Agreement or
any other Credit Document.
IN WITNESS WHEREOF, each Guarantor has executed this Guarantor Consent
Letter as of the day and year first written above.
ADAC RESEARCH AND MFG., INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
A-1
<PAGE>
ADAC HEALTHCARE INFORMATION
SYSTEMS, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ADAC MEDICAL TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ADAC LABORATORIES PACIFIC, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ADAC HEALTHCARE PARTNERS, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ADAC RADIOLOGY SERVICES, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
CORTET, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
A-2
<PAGE>
O.N.E.S. MEDICAL SERVICES, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
CT SOLUTIONS INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
A-3
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF ADAC LABORATORIES, INC.
<TABLE>
<CAPTION>
SUBSIDIARY STATE/COUNTRY OF INCORPORATION
- - - ---------- ------------------------------
<S> <C>
WHOLLY OWNED
ADAC Laboratories California
ADAC Foreign Sales Corporation, Inc. Barbados
ADAC do Brasil Ltda. Brazil
ADAC Laboratories, Australia Pty Limited Australia
ADAC Laboratories A/S Denmark
ADAC Laboratories B.V. The Netherlands
ADAC Laboratories Canada Limited Canada
ADAC Laboratories GmbH Germany
ADAC Laboratories Pacific, Inc. California
ADAC Health Care Information Systems, Inc. Texas
ADAC Laboratories, Ltd. United Kingdom
ADAC Research and Manufacturing, Inc. California
ADAC Laboratories SARL France
ADAC Laboratories S.R.L. Italy
UGM Medical Systems, Inc. Pennsylvania
UGM Laboratory, Inc. Pennsylvania
ADAC Capital, L.L.C. Delaware
</TABLE>
64
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-53849, 333-53871, 333-34629 and 333-85891) of
ADAC Laboratories and Subsidiaries of our reports dated November 12, 1999
relating to the consolidated financial statements and financial statement
schedules, which appear in this Form 10-K.
PricewaterhouseCoopers LLP
San Jose, California
December 30, 1999
65
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-03-1999
<PERIOD-START> SEP-28-1998
<PERIOD-END> OCT-03-1999
<CASH> 5,796
<SECURITIES> 0
<RECEIVABLES> 95,100
<ALLOWANCES> 14,707
<INVENTORY> 35,076
<CURRENT-ASSETS> 142,867
<PP&E> 29,894
<DEPRECIATION> 14,339
<TOTAL-ASSETS> 239,662
<CURRENT-LIABILITIES> 128,441
<BONDS> 0
0
0
<COMMON> 154,275
<OTHER-SE> (46,762)
<TOTAL-LIABILITY-AND-EQUITY> 239,662
<SALES> 244,274
<TOTAL-REVENUES> 342,131
<CGS> 171,246
<TOTAL-COSTS> 239,768
<OTHER-EXPENSES> 141,527
<LOSS-PROVISION> 20,005
<INTEREST-EXPENSE> 4,501
<INCOME-PRETAX> (43,665)
<INCOME-TAX> (10,045)
<INCOME-CONTINUING> (33,620)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,620)
<EPS-BASIC> (1.64)
<EPS-DILUTED> (1.64)
</TABLE>
