<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11580
PHARMAKINETICS LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-1067519
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 West Fayette Street
Baltimore, Maryland 21201
(Address of principal executive offices)
(410) 385-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes _X_ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 2,496,129
common shares were outstanding as of November 9, 1998.
</PAGE>
<PAGE>2
PHARMAKINETICS LABORATORIES, INC.
FORM 10-Q
INDEX
Page No.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets at September 30, 3
1998 (unaudited) and June 30, 1998
Consolidated statements of operations for 4
the three months ended September 30, 1998
and 1997 (unaudited)
Consolidated statements of comprehensive income 5
for the three months ended September 30, 1998
and 1997 (unaudited)
Consolidated statements of cash flows for 6
the three months ended September 30, 1998
and 1997 (unaudited)
Notes to consolidated financial statements (unaudited) 7
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures 13
About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 15
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</PAGE>
<PAGE>3 PHARMAKINETICS LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 3,290,616 $ 3,358,506
Accounts receivable, net 1,566,160 1,731,853
Contracts in process 492,635 740,084
Prepaid expenses 283,921 251,023
------------ ------------
Total Current Assets 5,633,332 6,081,466
Property, plant and equipment, net 4,130,050 3,822,373
Other assets 185,502 203,639
------------ ------------
Total Assets $ 9,948,884 $ 10,107,478
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,013,222 $ 916,816
Deposits on contracts in process 1,155,318 1,082,005
------------ ------------
Total Current Liabilities 2,168,540 1,998,821
Other liabilities 210,642 235,074
------------ ------------
Total Liabilities 2,379,182 2,233,895
------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Class A Convertible Preferred stock, no
par value; authorized 1,500,000 shares;
issued and outstanding 833,300 shares 4,937,500 4,937,500
Common stock, $.005 par value; authorized,
10,000,000 shares; issued and
outstanding, 2,496,129 and 2,456,129
shares, respectively 12,481 12,281
Additional paid-in capital 11,929,886 11,867,086
Accumulated deficit (9,313,653) (8,964,909)
Unrealized gain on investment 3,488 21,625
------------ ------------
Total Stockholders' Equity 7,569,702 7,873,583
------------ ------------
Total Liabilities and Stockholders' Equity $ 9,948,884 $ 10,107,478
============ ============
-----------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
</PAGE> -3-
<PAGE>4
PHARMAKINETICS LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues $2,806,132 $3,414,648
Cost of contracts 2,447,473 2,323,760
---------- ----------
Gross profit 358,659 1,090,888
Selling, general and
administrative expenses 607,072 509,540
Research and development expenses 133,557 118,073
---------- ----------
Earnings (loss) from operations (381,970) 463,275
Interest expense (8,205) (45,407)
Interest income 41,431 10,618
---------- ----------
Earnings (loss) before income taxes (348,744) 428,486
Provision for income taxes - -
---------- ----------
Net earnings (loss) $ (348,744) $ 428,486
========== ==========
Basic earnings (loss) per share ($0.14) $0.18
========== ==========
Basic weighted average shares outstanding 2,485,219 2,439,129
========== ==========
Diluted earnings (loss) per share ($0.14) $0.17
========== ==========
Diluted weighted average shares outstanding 2,485,219 2,449,880
========== ==========
- ------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
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</PAGE>
<PAGE>5
PHARMAKINETICS LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net earnings (loss) $ (348,744) $ 428,486
Other comprehensive income:
Unrealized loss on investment (18,137) -
---------- ----------
Comprehensive income (loss) $ (366,881) $ 428,486
========== ==========
- ------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
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</PAGE>
<PAGE>6
PHARMAKINETICS LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (348,744) $ 428,486
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 130,172 143,693
Changes in operating assets and liabilities:
Accounts receivable, net 165,693 (561,926)
Contracts in process 247,449 (42,994)
Prepaid expenses and other assets (32,898) (137,843)
Accounts payable and accrued expenses 98,622 116,537
Deposits on contracts in process 73,313 492,740
------------ -----------
Net cash provided by operating activities 333,607 438,693
------------ -----------
Cash flows from investing activities:
Payment for purchases of property and equipment (437,849) (27,037)
------------ -----------
Net cash used by investing activities (437,849) (27,037)
------------ -----------
Cash flows from financing activities:
Payments for capital lease obligations (26,648) (25,362)
Payments on long-term debt - (36,609)
Proceeds from exercise of stock options 63,000 -
------------ -----------
Net cash provided (used) by financing activities 36,352 (61,971)
------------ -----------
Increase (decrease) in cash and equivalents (67,890) 349,685
Cash and equivalents, beginning of period 3,358,506 556,040
------------ -----------
Cash and equivalents, end of period $ 3,290,616 $ 905,725
============ ===========
Supplemental Cash Flow Information:
Cash Paid for Interest: $ 8,144 $ 44,541
Cash Paid for Income Taxes: $ 3,000 $ -
- ------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
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</PAGE>
<PAGE>7
PHARMAKINETICS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 1998, the
consolidated statements of operations for the three months ended
September 30, 1998 and 1997, the consolidated statements of comprehensive
income (loss) for the three months ended September 30, 1998 and 1997, and
the consolidated statements of cash flows for the three months ended
September 30, 1998 and 1997, have been prepared by the Company without
audit. In the opinion of management, all adjustments necessary to present
fairly the financial position, results of operations and cash flows at
September 30, 1998, and for all periods presented, have been made. The
consolidated balance sheet at June 30, 1998 has been derived from the
audited financial statements as of that date. Prior period financial
information gives retroactive effect to a change in the number of shares of
authorized Common Stock to 10,000,000, an increase in par value to $0.005
per share, and a five-to-one reverse stock split all of which were
effective by the close of business on April 17, 1998.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended June 30, 1998.
The Company operates principally in one industry segment, the
testing of pharmaceutical products and related services. Revenues
include contract revenue and revenue from license fees under special
agreements whereby the Company receives license fees based upon the
clients' actual product sales.
ACCOUNTING 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 amounts could differ from these
estimates.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share ("EPS") is calculated by dividing net
earnings (loss) by the weighted average common shares outstanding
-7-
</PAGE>
<PAGE>8
during the period. Diluted EPS reflects the potential dilution to EPS
that could occur upon conversion or exercise of securities, options or
other such items, to common shares using the treasury stock method based
upon the weighted average fair value of the Company's common stock during
the period. The Company's Class A Convertible Preferred Stock, warrants to
acquire common stock, outstanding stock options granted under the Company's
stock option plans and other options granted outside of the Company's plans
are considered common stock equivalents for the purpose of the diluted
earnings (loss) per share data; however, they are excluded from the
calculations for the three month period ended September 30, 1998, because
the effect of their inclusion would be anti-dilutive. For the period ended
September 30, 1998, dilutive common stock equivalents totaled 1,786,801, of
which 120,201 related to options outstanding. For the period ended
September 30, 1997, the weighted average shares used in computing basic
earnings per share were 2,439,129 and the dilutive common stock equivalents
totaled 10,751, all of which related to outstanding options.
RECENT ACCOUNTING PRONOUNCEMENTS
As of the quarter ended September 30, 1998, the Company has adopted
the Financial Accounting Standards Board's SFAS No. 130, "Reporting
Comprehensive Income", which requires additional disclosures with respect
to certain changes in assets and liabilities that previously were not
required to be reported as part of results of operations. Additionally,
the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures
about Segments of the Enterprise and Related Information", which
establishes standards for the way that public business enterprises report
information in annual statements and interim financial reports regarding
operating segments, products and services, geographic areas and major
customers. SFAS 131 will be effective for the Company beginning with its
annual report on Form 10-K for the fiscal year ending June 30, 1999, and
will apply to both annual and interim financial reporting. The Company is
evaluating the impact of SFAS 131 on its required disclosure. For SFAS 130
disclosure see "Consolidated Statements of Comprehensive Income (Loss)".
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CERTAIN FORWARD-LOOKING INFORMATION
Certain statements in this Management's Discussion and Analysis and
elsewhere in this Form 10-Q are forward-looking statements based on current
expectations, and entail various risks and uncertainties that could cause
actual results to differ materially from those expressed in
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</PAGE>
<PAGE>9
such forward-looking statements. Such risks and uncertainties include the
fluctuation in quarterly operating results which arise from the timing of
orders and the Company's ability to complete projects in a timely manner
once awarded to the Company, dependence of the Company on the product
development cycles of its clients, dependence of the Company on certain
customers, and dependence of the Company on its key personnel, their
ability to continuously develop new methodology for clinical and analytical
applications and the Company's ability to bring its information technology
and non-information technology systems into compliance with standards for
successful operations as of January 1, 2000. Other more general factors
that could cause or contribute to such differences include, but are not
limited to, general economic conditions, conditions affecting the
pharmaceutical industry, and consolidation resulting in increased
competition within the Company's market.
RESULTS OF OPERATIONS
The Company's total revenue, which includes contract revenue and
license fees based upon clients' actual product sales, decreased 17.8%, to
$2,806,132 for the three month period ended September 30, 1998, from
$3,414,648 for the same period in the prior year. The decrease was the
result of lower contract revenue and significantly lower license fee
income.
Contract revenues decreased 12.1% to $2,747,751, for the three month
period ended September 30, 1998, compared to $3,127,466 in the same period
in 1997, primarily as a result of a reduced number of contracts for Phase I
clinical trials by innovator pharmaceutical and biotech companies. Revenues
in this business area decreased by approximately $600,000 compared with the
prior year. The decrease was offset by an increase of approximately
$250,000 in contract revenue from the Clinical Trials Management business.
Revenues from the Company's generic drug industry clients were flat
relative to the prior year. The lack of growth in the generic drug
industry revenue was the result of a backlog of method development projects
in the Company's bioanalytical laboratory and the postponement of certain
studies because of delays in the clients' drug development program,
unrelated to the Company.
License fee income decreased 79.7% to $58,381 for the three month
period ended September 30, 1998, compared to $287,182 for the same period
in the prior year. This decrease was the result of the scheduled
termination of one license agreement in October 1997 and reduced pricing
for one of the generic products which is a major contributor to license fee
revenues. At September 30, 1998, the Company had two license fee
agreements from which it was receiving income. This license fee income,
based on clients' sales of approved drugs, will continue through the
expiration of these agreements. The most significant agreement is set to
expire in fiscal 2004, with the other expected to expire in fiscal 2000.
-9-
</PAGE>
<PAGE>10
The Company believes it is unlikely that clients will wish to make use of
license fee arrangements in the future. As a result, contract revenues,
rather than license fee income, will continue to be the primary source of
revenues.
The Company's gross profit decreased 67.1% to $358,659 for the three
month period ended September 30, 1998, compared to $1,090,888 for the same
period of the prior year. Gross profit as a percentage of revenues
declined to 12.8% for the three month period ended September 30, 1998, from
31.9% for the comparable period. The decrease in gross margin for the
quarter ended September 30, 1998, reflects the fact that in the short term
the Company's costs are relatively fixed and, in keeping with its strategic
plan, investment in personnel and instrumentation has been ongoing to
improve the Company's long term competitive position. As a result,
staffing remained at levels comparable to the prior year despite decreases
in revenue.
Selling, general and administrative expenses of $607,072 for the three
month period ended September 30, 1998, increased 19.1%, compared to
$509,540 for the three month period ended September 30, 1997. As a
percentage of revenues, selling, general and administrative expenses
increased from 14.9% in the three month period ended September 30, 1997, to
21.6% in the three month period ended September 30, 1998. This increase is
due to reduced revenues and the implementation of the Company's plan to
enhance its sales and marketing efforts through the development and
introduction of new marketing materials, the addition of new business
development personnel and the resulting increase in travel expenditures
necessary to have these people visit existing and potential clients in the
U.S. and Europe. The Company continues to focus its business development
efforts on generating revenues from existing and potential clients and upon
the development of new business opportunities with its French strategic
partner, Aster.Cephac S.A.
Research and development expenses increased 13.1% to $133,557 for the
three month period ended September 30, 1998, from $118,073 for the three
month period ended September 30, 1997. This was the result of increased
efforts to develop methods for utilization in current and future studies in
the Company's laboratory research and development group related primarily
to its LC/MS/MS instrumentation. In October 1998, the Company acquired the
fourth of these instruments. The Company believes that these investments
will result in the generation of further new business and improvement in
its competitive position.
No provision for income taxes has been recorded. The Company has
available unused operating loss and business tax credit carryforwards,
the benefit of which is reduced by a full valuation allowance.
-10-
</PAGE>
<PAGE>11
YEAR 2000
As reported in the Company's annual report on Form 10-K for the year
ended June 30, 1998, the Company has initiated its Year 2000 compliance
program, the purpose of which is to identify those systems that are not yet
Year 2000 compliant, and to initiate replacement or other remedial action
to assure that systems will continue to operate in the Year 2000. The
Company expects to complete its assessment by December 31, 1998, which
includes third party confirmations from the Company's key suppliers,
vendors and business partners, with respect to their computers, software
and systems, and their ability to maintain normal operations in the Year
2000, and a listing of all equipment subject to Year 2000 concerns. To the
extent that the Company is not satisfied with the status of a vendor's Year
2000 compliance or remediation plans, the Company expects to develop and
implement appropriate contingency plans. Such contingency plans will
include the development of alternative sources for the product or service
provided by any non-compliant vendor.
The Company has already initiated the removal and exchange of some
non-compliant systems, at a total cost to date of approximately $110,000,
and expects to continue such replacement or other remedial action to ensure
that its computers, software and systems, and other systems will continue
to operate in the Year 2000. These activities are intended to encompass
all major categories of systems used by the Company, including laboratory
instrumentation, clinical systems, building systems, and sales and
financial systems, among others. In some instances, the installation of
new software and hardware in the normal course of business is being
accelerated to also afford a solution to Year 2000 issues. The Company has
planned for the investment of approximately $350,000, of which
approximately $58,000 has been spent to date, in a new Laboratory
Information Management System in fiscal 1999, which it expects will
streamline data collection and reporting ability and allow for customized
report formats, as well as provide the laboratory with a system that is
Year 2000 compliant. As of September 30, 1998, the Company had initiated
the purchase of the Laboratory Information Management System, had deployed
the new hardware to system users, installed the software, and was in the
process of validating the system. User training is expected to take place
in December 1998. Expenses not related to the Laboratory Information
Management System are expected to total less than $150,000, of which the
Company had spent approximately $52,000 as of September 30, 1998. The
total cost estimate is based on the Company's assessment as of September
30, 1998, and is subject to change as the compliance program progresses.
Of the Company's corporate information systems personnel resources (three
full-time individuals), approximately 50% are focused full-time on the Year
2000 issues.
The capital improvements and expenses required for the Year 2000
effort have been included as part of the Company's annual budgets. The
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</PAGE>
<PAGE>12
Company does not expect that the capital spending or period expense
associated with the Year 2000 issues will have a material effect on its
financial position or results of operations. The Company's policy is to
expense all costs related to its Year 2000 compliance program unless the
useful life of the technological asset is extended or increased. It is
expected that assessment, remediation and contingency planning will be on-
going throughout fiscal 1999 with the goals of appropriately resolving all
material internal systems and third party issues. There can be no
assurances, however, that the Company's computer systems and the
applications of other companies on which the Company's operations rely will
be timely converted or that any such failure to convert by another company
will not have a material adverse effect on the Company's operations. If
the Company's Year 2000 issues are not successfully resolved, the Company
could continue its operations by collecting and reporting data manually,
consequently delaying project completion on the affected contracted
studies.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of funds is cash flow from operations,
which decreased by $105,086 in the three months ended September 30, 1998,
compared to the same period of the prior year, principally as a result of
the Company's net loss from operations in the period ended September 30,
1998, and reduced working capital requirements, as compared to the same
period in the prior year.
Decreases in the Company's account balances at September 30, 1998, for
accounts receivable and contracts in process accounts, as compared to June
30, 1998, are primarily attributable to overall decreases in the levels of
business for the quarter ended September 30, 1998. Prepaid expenses have
increased at September 30, 1998, compared to June 30, 1998, due to the
timing of payments on certain expense items related to future periods.
At September 30, 1998, the Company had available $3,290,616 in
cash to meet the needs of its business. In September 1998 the Company
negotiated a new $500,000 credit facility with The First National Bank of
Maryland to replace its existing $500,000 credit facility with NationsBank
N.A., with which the Company was not in technical compliance at September
30, 1998, and which is set to expire November 30, 1998.
In addition, other assets have decreased based on a decline of $18,137
in the market value of the Company's holdings of 44,642 shares of common
stock and warrants to acquire 11,161 shares of common stock, at an exercise
price of $2.40 per share, of Hybridon, Inc. (OTCBB:HYBN). The carrying
value of the stock was determined by the average of the bid and ask prices
of the stock as reported by the National Quotation Bureau on
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</PAGE>
<PAGE>13
September 30, 1998, which was $2.08 per share. The Company received the
stock and warrants in exchange for an account receivable in the amount of
$89,284. The warrants expire on May 5, 2003 and are not subject to a call
provision.
At September 30, 1998, the market value of the Hybridon stock was
greater than the adjusted cost basis of $89,284. The difference of $3,488
was recorded as an Unrealized Gain on Investment (a non-cash transaction)
and was reflected in the Stockholders' Equity section of the balance sheet.
At September 30, 1998, the Company reported a decrease in its
contracts in process account which represents costs incurred for studies
for which revenues have not been recognized and which are currently
underway. Deposits on contracts in process have increased indicating an
increase in prepayments on contracted studies. Changes in these account
balances affect the Company's operating cash flow.
As of September 30, 1998, the Company's stockholders' equity totaled
$7,569,702 compared to $7,873,583 at June 30, 1998. The Company had
working capital of $3,464,792 at September 30, 1998, compared to $4,082,645
at June 30, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10: Material Contracts
(a) Commercial Promissory Note, dated September 30,
1998, between The First National Bank of Maryland
and PharmaKinetics Laboratories, Inc.
(b) Loan Agreement, dated September 30, 1998, between
The First National Bank of Maryland and
PharmaKinetics Laboratories, Inc.
(c) Financial Covenants Addendum, dated September 30,
1998, between The First National Bank of Maryland
and PharmaKinetics Laboratories, Inc.
(d) Negative Pledge Agreement, dated September 30,
1998, between The First National Bank of Maryland
and PharmaKinetics Laboratories, Inc.
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</PAGE>
<PAGE>14
ITEM 6. Exhibits and Reports on Form 8-K (continued)
(a) Exhibits:
Exhibit 10: Material Contracts
(e) Corporate Banking and Borrowing Resolutions, dated
September 30, 1998, between The First National Bank
of Maryland and PharmaKinetics Laboratories, Inc.
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1998.
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</PAGE>
<PAGE>15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMAKINETICS LABORATORIES, INC.
Registrant
November 16, 1998 /s/James K. Leslie
- ----------------- ------------------
Date James K. Leslie
Chief Executive Officer
and President
November 16, 1998 /s/Taryn L. Kunkel
- ----------------- ------------------
Date Taryn L. Kunkel
Vice-President and
Chief Financial Officer
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</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 3,290,616
<SECURITIES> 92,772
<RECEIVABLES> 1,716,160
<ALLOWANCES> 150,000
<INVENTORY> 492,635
<CURRENT-ASSETS> 5,633,332
<PP&E> 6,501,641
<DEPRECIATION> 2,371,591
<TOTAL-ASSETS> 9,948,884
<CURRENT-LIABILITIES> 2,168,540
<BONDS> 0
<COMMON> 12,481
0
4,937,500
<OTHER-SE> 2,619,721
<TOTAL-LIABILITY-AND-EQUITY> 7,569,702
<SALES> 2,806,132
<TOTAL-REVENUES> 2,847,563
<CGS> 2,447,473
<TOTAL-COSTS> 3,188,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,205
<INCOME-PRETAX> (348,744)
<INCOME-TAX> 0
<INCOME-CONTINUING> (348,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,744)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
<PAGE>1
Exhibit 10(a)
COMMERCIAL PROMISSORY NOTE
$500,000.00 25 S. Charles St., Balto., MD 9/30/98
- ----------- ----------------------------- -------
(Amount) (Bank office and location)
Subject to the provisions of this Commercial Promissory Note
(this "Promissory Note"), The First National Bank of Maryland
(the "Bank") may, in its sole and absolute discretion and at any
time and from time to time hereafter, lend to the Undersigned
(the "Maker" whether one or more than one) such sums of money as
may be requested orally or in writing by the Maker (or by any one
or more of the Maker if more than one) up to but not exceeding in
the aggregate at any one time outstanding the principal amount of
Five Hundred Thousand Dollars.
- -----------------------------
The Maker promises (jointly and severally if more than one) to
pay to the order of the Bank the face amount of this Promissory
Note, or so much thereof as may then be advanced and outstanding
hereunder (the total of all such advances outstanding at the time
of determination being herein called the "Principal Amount") on
demand.
The Maker promises (jointly and severally if more than one) to
pay to the order of the Bank whenever demanded by the Bank
interest (calculated on a daily basis) on the Principal Amount
from time to time outstanding hereunder from the date hereof
until the maturity of this Promissory Note (whether by
acceleration, declaration, extension or otherwise) at the per
annum rate of interest indicated below.
Interest Rate Schedule.
The per annum rate of interest on the Principal Amount of this
Promissory Note from the date hereof until maturity of this
Promissory Note (whether by acceleration, declaration, extension
or otherwise) shall be one of the following options elected from
time to time by the Maker: (a) a floating and fluctuating rate
equal to the greater of: (i) that rate announced from time to
time by the Bank as its "prime rate"; or (ii) the average rate,
</PAGE>
<PAGE>2
rounded to the nearest 1/10 of 1% for 90-day maturity dealer
placed commercial paper for the week most recently reported in
the Federal Reserve Statistical Release No. H-15(519), entitled
"Weekly Summary of Banking and Credit Measures", or any
succeeding publication; or (b) a daily adjusting rate of interest
equal to the one (1) month London Interbank Offered Rate as
quoted by the Bank two (2) Business Days (hereinafter defined)
prior to the date such rate is to be effective, adjusted for any
Federal Reserve Board reserve requirements imposed upon the Bank
from time to time, plus two hundred fifteen (215) basis points.
The interest rate option elected by the Maker shall remain in
effect until such time as the other interest rate option is
elected by the Maker. The term "Business Day" shall mean any day
on which commercial banks are open for domestic and international
business, including dealings in Dollar (hereinafter defined)
deposits. The term "Dollar" shall mean lawful money of the
United States of America.
Late Charge.
If the Maker fails to make payment of the Principal Amount or of
interest thereon within fifteen (15) days of the date due and
payable, the Maker shall pay to the Bank on demand a late charge
equal to five percent (5%) of the amount of any such payment.
Additional Provisions.
Within such limits the Maker may borrow, prepay in full at any
time and in part from time to time, and reborrow hereunder from the
date hereof until the maturity of this Promissory Note (whether
by acceleration, declaration, extension or otherwise) provided,
that the Principal Amount outstanding hereunder may be reduced to
zero from time to time and thereafter advances on account of the
Principal Amount may be made by the Bank to the Maker without
affecting the continuing validity of this Promissory Note.
Interest on this Promissory Note shall be calculated on the basis
of a 360 day year applied to the actual number of days the
Principal amount, or any portion thereof, is outstanding.
After maturity of this Promissory Note (whether by acceleration,
declaration, extension or otherwise), the unpaid balance of the
Principal amount outstanding on the date of maturity plus accrued
and unpaid interest earned to maturity shall bear interest at a
</PAGE>
<PAGE>3
per annum rate of interest which is equal to the rate of interest
on the Principal Amount of this Promissory Note until maturity,
as provided above, plus 2% per annum.
Application of Payments.
All payments made pursuant to this Promissory Note shall be
applied first to accrued and unpaid interest, then to unpaid
expenses and charges payable hereunder, and then to principal, or
in such other order or proportion as the holder, in the holder's
sole discretion, may elect from time to time.
Security.
Sums due under this Promissory Note are secured by, and the Maker
grants to the Bank a security interest in, all deposits and
property of the Maker now or at any time hereafter in the
possession of or on deposit with the Bank whether as custodian or
depository or in any other capacity. In addition, this
Promissory Note is secured by any property described as
collateral in any security agreement, mortgage, deed of trust,
pledge agreement or other document previously, simultaneously, or
hereafter entered into by the Maker in connection with any
obligation or liability of the Maker to the Bank or any corporate
affiliate of the Bank.
Default.
Any of the following will be a default under this Promissory
Note: (a) failure to pay any principal, expense, fee, charge or
interest when due, or failure to perform any other obligations
hereunder; (b) a default by any Maker upon any of the existing or
future obligations of any Maker to the Bank; a default by any
guarantor or other person that is now or hereafter liable upon or
in connection with any of the obligations of any Maker to the
Bank or that has granted any lien or security interest to or for
the benefit of the Bank to secure any of the obligations of any
Maker to the Bank ("Other Obligor"), upon any of the existing or
future obligations of any Other Obligor to the Bank; (d) a
default in any other agreement, instrument or document between
any Maker or Other Obligor and the Bank or any corporate
affiliate of Bank, including, without limitation, any security
document referred to above, whether previously, simultaneously,
or hereafter entered into; (e)a material adverse change in the
financial condition of any Maker or Other Obligor from that
</PAGE>
<PAGE>4
expressed in the financial statement most recently submitted to
the Bank prior to the date of this Promissory Note, as determined
in good faith by the Bank in its sole discretion; (f) institution
of bankruptcy, insolvency, reorganization or receivership
proceedings by or against any Maker or Other Obligor in any state
or federal court; (g) the appointment of a receiver, assignee,
custodian, trustee or similar official under any federal or state
insolvency or creditors' rights law for any property of any Maker
or Other Obligor; (h) failure of any Maker or Other Obligor to
furnish to the Bank such collateral or additional collateral as
the Bank may in good faith request; (I) any warranty,
representation, or statement to the Bank by or on behalf of any
Maker or Other Obligor proving to have been incorrect in any
material respect when made or furnished; (j) the occurrence of
any event which is, or would be with the passage of time or the
giving of notice or both a default under any indebtedness of any
Maker or Other Obligor to any person other than the Bank;(k) any
material loss, theft or substantial damage, not fully insured for
the benefit of the Bank, to any of the assets of any Maker or
Other Obligor, or the sale, transfer, lease, encumbrance or other
disposition of all or any material part of the assets of any
Maker or Other Obligor other than in the ordinary course of
business of the Maker or the Obligor; (l) the entry of any final
judgement against any Maker or Other Obligor for the payment of
money in excess of $5,000; (m) the levy or attachment of any
assets of any Maker or Other Obligor; (n) the recordation of any
federal, state or local tax lien against any Maker or Other
Obligor; (o) a change of ownership or dissolution, merger,
consolidation, liquidation or reorganization of any Maker or
Other Obligor which is a corporation, partnership or other legal
entity; (p) the death of any Maker or Other Obligor who is a
natural person; (q) the failure of any Maker or Other Obligor to
furnish to the Bank such financial information as the Bank may
require from time to time; or (r) the determination in good faith
by the Bank, in its sole discretion, that the ability of any
Maker or Other Obligor to pay or perform any of their respective
obligations to the Bank is impaired for any reason.
Remedies.
Upon a default, in addition to all other rights and remedies
available to the holder of this Promissory Note under any other
document or agreement between the Maker and the Bank or under
</PAGE>
<PAGE>5
applicable law, the holder of this Promissory Note, in the
holder's sole discretion and without notice or demand, may
declare the entire unpaid principal balance plus accrued interest
and all other sums due hereunder immediately due and payable.
The Maker agrees that a default under this Promissory Note is a
default by the Maker under all other liabilities and obligations
of the Maker to the holder, and that the holder shall have the
right to declare immediately due and payable all of such other
liabilities and obligations. Upon a default, the Maker
authorizes any attorney admitted to practice before any court of
record in the United States to appear on behalf of the Maker in
any court in one or more proceedings, or before any clerk thereof
or prothonotary or other court official, and to confess judgement
against the Maker, without prior notice or opportunity of the
Maker for prior hearing, in favor of the holder of this
Promissory Note in the full amount due on this Promissory Note
(including principal, accrued interest and any and all charges,
fees and expenses) plus court costs, attorneys' fees equal to
fifteen percent (15%) of the unpaid balance of principal,
interest, charges, and other sums due hereunder. In addition to
all other courts in which judgement may be confessed against the
Maker upon this Promissory Note, the Maker agrees that venue and
jurisdiction shall be proper in the Circuit Court of any County
of the State of Maryland or of Baltimore City, Maryland, or in
the United States District Court for the District of Maryland.
The Maker waives the benefit of any and every statute, ordinance,
or rule of court which may be lawfully waived conferring upon the
Maker any right or privilege of exemption, homestead rights, stay
of execution, or supplementary proceedings, or other relief from
the enforcement or immediate enforcement of a judgement or
related proceedings on a judgement. (Any judgement obtained by
confession shall not constitute a lien on any real property
located in Pennsylvania which is the residence of any Maker if
this Promissory Note is in the original principal amount of
$50,000 or less.) The authority and power to appear for and
enter judgement against the Maker shall not be exhausted by one
or more exercises thereof, or by an imperfect exercise thereof,
and shall not be extinguished by any judgement entered pursuant
thereto; such authority and power may be exercised on one or more
occasions from time to time, in the same or different
jurisdictions, as often as the holder shall deem necessary or
advisable.
</PAGE>
<PAGE>6
Interest Rate After Judgment.
If judgment is entered against the Maker in this Promissory Note,
the amount of the judgement entered (which may include principal,
interest, charges, fees, and expenses) shall bear interest at the
higher of the above-described default interest rate as determined
on the date of the entry of the judgement, or the legal rate of
interest then applicable to judgements in the jurisdiction in
which judgment was entered.
Expenses of Collection.
The Maker shall pay all costs and expenses incurred by the Bank
in collection sums due under this Promissory Note, including
without limitation the costs of any lien, judgement or other
record searches, appraisals, travel expenses and the like. In
addition, if this Promissory Note is referred to an attorney for
collection, whether or not judgment has been confessed or suit
has been filed, the Maker shall pay all of the holder's costs,
fees (including, but not limited to, the holder's attorney's
fees, charges and expenses) and all other expenses resulting from
such referral.
Negotiable Instruments.
The Maker agrees that this Promissory Note shall be deemed to be
a negotiable instrument, even though this Promissory Note may not
qualify under applicable law, absent this paragraph, as a
negotiable instrument.
Waivers.
The Maker, and all parties to this Promissory Note, whether
Maker, indorser, or guarantor, waive presentment, demand, notice
of dishonor and protest.
Extensions of Maturity.
All parties to this Promissory Note, whether Maker, indorser, or
guarantor, agree that the maturity of this Promissory Note, or
any payment due hereunder, may be extended at any time or from
time to time by the Bank without releasing, discharging, or
affecting the liability of such party.
</PAGE>
<PAGE>7
Notices.
Any notice or demand required or permitted by or in connection
with this Promissory Note, without implying the obligation to
provide any notice or demand, shall be in writing at the address
set forth below or to such other address as may be hereafter
specified by written notice to the Bank by the Maker. Any such
notice or demand shall be deemed to be effective as of the date
of hand delivery or facsimile transmission, one (1) day after
dispatch if sent by telegraph, mailgram, or overnight delivery,
express mail or federal express, or three (3) days after mailing
if sent by first class mail with postage prepaid.
Assignability.
This Promissory Note may be assigned by the Bank or any holder at
any time.
Joint and Several Liability.
If more than one person or entity is executing this Promissory
Note as Maker, all liability under this Promissory Note shall be
joint and several with respect to each of such persons or
entities.
Binding Nature
This Promissory Note shall inure to the benefit of and be
enforceable by the Bank and the Bank's successors and assigns and
any other person to whom the Bank may grant an interest in the
Maker's obligations to the Bank, and shall be binding and
enforceable against the Maker and the Maker's personal
representatives, successors and assigns.
Invalidity of any Part.
If any provisions or part of any provision of this Promissory
Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this
Promissory Note, and this Promissory Note shall be construed as
if such invalid, illegal or unenforceable provision or part
thereof had never been contained herein, but only to the extent
of its invalidity, illegality or unenforceability.
</PAGE>
<PAGE>8
Maximum Rate of Interest; Commercial Loan.
Notwithstanding any provision of this Promissory Note to the
contrary, the Maker shall not be obligated to pay interest
hereunder in excess of the maximum rate of interest permitted by
the laws of any state determined to govern this Promissory Note
or the laws of the United States applicable to loans in such
state. If any provision of this Promissory Note shall ever be
construed to require the payment of any amount of interest in
excess of that permitted by applicable law, then the interest to
be paid hereunder shall be held subject to reduction to the
amount allowed under applicable law, and any sums paid in excess
of the interest rate allowed by law shall be applied in reduction
of the principal balance outstanding under this Promissory Note.
The Maker acknowledges that it has been contemplated at all times
by the Maker that the laws of the State of Maryland will govern
the maximum rate of interest that it is permissible for the holder
of this Promissory Note to charge the Maker under this Promissory
Note. The Maker warrants that this Promissory Note evidences a
loan made solely to acquire or carry on a business or commercial
enterprise.
Choice of Law; Consent to Venue and Jurisdiction.
This Promissory Note shall be governed, construed and interpreted
in accordance with the laws of the State of Maryland, even if the
Maryland rules governing conflicts of laws would otherwise
require that the laws of another jurisdiction govern this
Promissory Note. The Maker consents to the jurisdiction and
venue of the courts of any county in the State of Maryland or the
courts of Baltimore City, Maryland and to the jurisdiction and
venue of the United States District Court for the District of
Maryland in any action or judicial proceeding brought to enforce,
construe or interpret this Promissory Note.
Unconditional Obligations.
The Maker's obligations under this Promissory Note shall be the
absolute and unconditional duties and obligations of the Maker
and shall be independent of any rights of set-off, recoupment or
counterclaim which the Maker might otherwise have against the
holder of this Promissory Note, and the Maker shall pay
absolutely the payments of principal, interest, fees, charges and
</PAGE>
<PAGE>9
expenses required hereunder, free of any deductions and without
abatement, diminution or set-off.
Actions Against Bank.
Any action brought by the Maker against the Bank which is based,
directly or indirectly, or in whole or in part, upon this
Promissory Note or any matter related to this Promissory Note
shall be brought only in the courts of the State of Maryland.
Waiver of Jury Trial.
The Maker (by execution of this Promissory Note) and the Bank (by
acceptance of this Promissory Note) agree that any suit, action,
or proceeding, whether claim or counterclaim, brought or
instituted by the Maker or the Bank on or with respect to this
Promissory Note or which in any way relates, directly or
indirectly, to the obligations of the Maker to the Bank under
this Promissory Note, or the dealings of the parties with respect
thereto, shall be tried only by a court and not by a jury. The
Maker and the Bank hereby expressly waive any right to a trial by
jury in any such suit, action, or proceeding. The Maker and the
Bank acknowledge and agree that this provision is a specific and
material aspect of the agreement between the parties and that the
Bank would not enter into the transaction with the Maker if this
provision were not a part of their agreement.
Miscellaneous.
This Promissory Note shall be deemed to be made in, and shall be
governed by the laws of, the State of Maryland, and is made under
the provisions of Section 12-101 and the following of the
Commercial Law Article, Annotated Code of Maryland.
The signature(s) and seal(s) of the Maker are subscribed to this
Promissory Note the day and year written above.
Witness/Attest: PharmaKinetics Laboratories, Inc.
/s/Anne E. Quirk By:/s/James K. Leslie (Seal)
- ---------------- ---------------------
/s/Taryn L. Kunkel
------------------
</PAGE>
<PAGE>1
Exhibit 10(b)
First National Bank of Maryland Loan Agreement
It is hereby agreed as of the 30th day of September, 1998, by and
-------- ---------------
between PharmaKinetics Laboratories, Inc., ("Borrower"), a
---------------------------------
Corporation of the State of Maryland, and THE FIRST NATIONAL BANK
OF MARYLAND ("Bank"), a national banking association, of
Baltimore, Maryland as follows:
I. Definitions
The following terms have the following definitions (each
definition is equally applicable to the singular and plural forms
of the terms used, as the context requires):
A. G.A.A.P. The term "G.A.A.P." means, with respect to any date
of determination, generally accepted accounting principles as
used by the Financial Accounting Standards Board and/or the
American Institute of Certified Public Accounts consistently
applied and maintained throughout the periods indicated.
B. Line of Credit. The term "Line of Credit" means any line of
credit facility extended by Bank to Borrower pursuant to
Paragraph II.A.1. of this Agreement and otherwise in accordance
with the terms of this Agreement.
C. Loan. The term "Loan" means one or more credit facilities,
including any Line of Credit and Term Loan, provided by Bank to
Borrower pursuant to the terms of this Agreement and all
accompanying Loan documents, including, but limited to, one or
more promissory notes of Borrower payable to the order of Bank,
as the same may be amended, modified, extended, renewed,
supplemented, restated or replaced from time to time.
D. Maximum Line of Credit Amount. The term "Maximum Line of
Credit Amount" means $500,000.00.
-----------
E. Obligations. The term "Obligations" means collectively the
obligations of Borrower to pay Bank:(i) any and all sums due
</PAGE>
<PAGE>2
to Bank under or pursuant to the Loan or otherwise under the
terms of this Agreement or any accompanying Loan documents; (ii)
the expenses of any exercise by Bank of Bank's rights in the
event of a default by Borrower, together with Bank's attorneys'
fees, expenses of collection, expenses of taking, holding, or
disposing of any assets of Borrower, and court costs, and (iii)
any other indebtedness or liability of Borrower to Bank, whether
direct or indirect (by way of endorsement, guaranty, pledge or
otherwise), liquidated or unliquidated, joint or several,
absolute or contingent, contemplated or uncontemplated, or
otherwise arising from any loan, note, letter of credit,
guaranty, overdraft, or any other duty owned by Borrower to
Bank, now existing or hereafter arising.
F. Other Obligor. The term "Other Obligor" means any person or
entity other than Borrower that is now or hereafter liable,
directly, contingently or otherwise, upon or in connection with
any of the Obligations or that has granted any lien or security
interest to or for the benefit of Bank to secure any of the
Obligations, including, but not limited to, any guarantor,
surety, endorser, or co-maker of any of the Obligations.
G. Term Loan. The term "Term Loan" means any term loan credit
facility extended by Bank to Borrower pursuant to Paragraph
II.A.2. of this Agreement and otherwise in accordance with the
terms of this Agreement.
H. Term Loan Amount. The term "Term Loan Amount" means
$_______________________________________.
II. Basis Terms of the Loan
_X_ A.1. Line of Credit. Subject to the continued compliance of
Borrower with the terms of this Agreement and all other
accompanying Loan documents and the continued absence of any
default by Borrower or any Other Obligor hereunder and
thereunder, Bank may advance to Borrower, for use by Borrower as
hereafter provided, such sums as Borrower may request, but which
shall not exceed in the aggregate at any one time outstanding the
Maximum Line of Credit Amount. Borrower shall not request any
advance of proceeds of the Line of Credit which exceeds the
Maximum Line of Credit Amount or which would cause the aggregate
amount of advances made and outstanding under the Line of Credit
</PAGE>
<PAGE>3
to exceed the Maximum Line of Credit Amount. Even if the
aggregate amount of advances made and outstanding under the Line
of Credit shall at any time and for any reason exceed the Maximum
Line of Credit Amount, Borrower shall nevertheless be liable for
the entire amount outstanding with interest thereon in accordance
with this Agreement and all accompanying Loan documents, and
Borrower shall be responsible for the observance of, performance
of and compliance with all of the terms, covenants and provisions
hereof and thereof. Each advance shall be in the principal
amount of $5,000.00 or a multiple thereof. Bank shall make all
advances by depositing funds in Borrower's commercial account
number #___________ or such Bank account as may be agreed upon by
Borrower and Bank. Borrower shall use the proceeds of the Line
of Credit only for Short-Term Operating Needs.
--------------------------
_X_ If this box is marked, within such limitations and subject to
all of the terms and conditions set forth herein and in the other
accompanying Loan documents, Borrower may borrow, repay, and
reborrow funds under the Line of Credit in accordance with the
terms and conditions of this Agreement.
___ If this box is marked, each advance under the Line of Credit
shall be evidenced and repaid with interest in accordance with
the provisions of a promissory note of Borrower to the order of
Bank in form and substance satisfactory to Bank and executed and
delivered by Borrower to Bank as a condition precedent to the
making of such advance.
___ A.2. Term Loan. Subject to the compliance of Borrower with
the terms of this Agreement and all other accompanying Loan
documents and the absence of any default by Borrower or any Other
Obligor hereunder and thereunder, Bank shall advance to Borrower,
for use by Borrower as hereafter provided, the principal sum
equal to the Term Loan amount. Borrower shall use the proceeds
of the Term Loan only for ___________________________________.
B. Advance Procedure. With respect to each advance and all
matters and transactions in connection therewith, Borrower hereby
irrevocably authorizes Bank to accept, rely upon, act upon and
comply with any oral or written instructions, requests,
confirmations and orders of any employee or representative of
Borrower who is so authorized or designated as a signer of loan
documents under the provisions of Borrower's most recent Banking
and Borrowing Resolutions or similar document on file with Bank.
</PAGE>
<PAGE>4
Borrower acknowledges that the transmission between Borrower and
Bank of any such instructions, requests, confirmations and orders
involves the possibility of errors, omissions, mistakes and
discrepancies and agrees to adopt such internal measures and
operational procedures as may be necessary to protect its
interest. By reason thereof, Borrower hereby assumes all risk of
loss and responsibility for, releases and discharges Bank from
any and all responsibility or liability for, and agrees to
indemnify, reimburse on demand and hold Bank harmless from, any
and all claims, actions, damages, losses, liability and expenses
by reason of, arising out of, or in any way connected with or
related to: (i) Bank's accepting, relying and acting upon,
complying with or observing any such instruction, request,
confirmation or order, or (ii) any such error, omission, mistake,
or discrepancy, provided such error, omission, mistake or
discrepancy is not the result of negligence on the part of Bank.
C. Evidence of Loan; Terms of Repayment. The interest rates on
the Loan and the method of calculating interest upon the Loan,
the term of the loan, the method and times of repayment, and
other conditions pertaining to the repayment of the Loan shall at
the option of Bank be evidenced by Bank's form of promissory note
or as otherwise set forth in appropriate writings between the
parties as determined by Bank. In the absence of a promissory
note or other applicable writing, the Loan shall be deemed to be
payable upon the demand of Bank and shall be deemed to be
otherwise conclusively evidenced by Bank's record of advances of
proceeds of the Loan and Bank's record of receipt of repayments
and other bookkeeping entries reflecting the payment of principal
and interest, and interest shall be deemed to accrue at the
interest rate reflected on Bank's records.
D. Statement of Account. Bank may at any time or from time to
time render a statement or statements of account to Borrower for
the Obligations or any portion thereof. Each such statement
shall be deemed to be correct and conclusively binding on
Borrower unless Borrower notifies Bank to the contrary in writing
within thirty (30) days from the date of any such statement which
Borrower deems to be incorrect.
III. REPRESENTATIONS AND WARRANTIES
</PAGE>
<PAGE>5
Borrower represents and warrants that:
A. Accuracy. All information, financial statements and data
submitted to Bank by Borrower or any Other Obligor are true,
accurate and complete in all material respects.
B. Authority. Borrower is duly organized and existing in good
standing in the state of its organization, is qualified to do
business and in good standing in all jurisdictions where it
conducts its business, and has all requisite power, authority,
licenses and permits to own its property and carry on its
business, and Borrower shall deliver to Bank a written opinion of
counsel to such effect if requested by Bank. None of the terms
and conditions herein, or of any other agreement executed by
Borrower, are in violation of the charter or by-laws, or other
organizational documents of Borrower, any contractual obligation
Borrower may have with any third party, or any order or decree by
which Borrower is bound, and the execution and delivery of this
Agreement have been duly authorized by appropriate corporate,
company or partnership action, and Borrower shall deliver to Bank
a written opinion of counsel to such effect if requested by Bank.
C. Litigation. No litigation or other proceeding before any
court or administrative agency is pending, or to the knowledge of
Borrower, is threatened against Borrower, the outcome of which
could materially impair Borrower's financial condition or its
ability to carry on its business. Borrower is not the subject of
any pending bankruptcy proceeding nor subject to the continuing
jurisdiction of a bankruptcy court as the result of an approved
plan of reorganization.
D. Addresses. The principal place of business of Borrower and
the books and records relating to Borrower's business and assets
are located at the address(es) set forth in this Agreement.
E. Hazardous Substances. Borrower has never received any
notification, citation, complaint or notice of investigation
relating to the making, storing, handling, generating or
transporting of any materials or substances which under
applicable laws require special handling in collection, storage,
treatment or disposal ("Hazardous Substances"), and Borrower does
not own, make, store, handle, dispose of or transport any
Hazardous Substances in violation of any applicable laws.
</PAGE>
<PAGE>6
F. ERISA. Borrower and each of its affiliates and subsidiaries
("ERISA Affiliates") which are under common control, or are part
of a controlled group, within the meaning of the Employee
Retirement Income Security act of 1974, as amended ("ERISA"), are
in compliance with all applicable provisions of ERISA with regard
to each of its employee benefit plans (as defined in ERISA)
("Employee Benefit Plans"). Neither a reportable event (as
defined in ERISA) nor prohibited transaction (as defined in
ERISA) has occurred with respect to any Employee Benefit Plan of
Borrower or any ERISA Affiliate. Immediately upon the occurrence
of any such reportable event, Borrower shall promptly furnish to
Bank notice thereof, as filed with the Pension Benefit Guaranty
Corporation ("PBGC"). Neither Borrower nor any ERISA Affiliate
has completely or partially withdrawn from any multiemployer plan
and no such multiemployer plan is in reorganization, all as
provided by ERISA. Borrower and each ERISA Affiliate has met its
minimum funding requirements and has no unfulfilled obligations
under ERISA to contribute to any Employee Benefit Plan. Borrower
shall promptly notify Bank of any assertion by PBGC of liability
of Borrower or any ERISA Affiliate under Title IV of ERISA. The
failure of Borrower to pay within 30 days the amount of any
liability under Title IV of ERISA demanded by PBGC shall
constitute a default hereunder.
G. Taxes. There are no unpaid Federal, State, city, county, or
other taxes owed by Borrower, there are no Federal, State, city,
county or other tax liens presently filed against Borrower, and
there are no outstanding personal property taxes of any kind.
IV. COVENANTS
Borrower covenants that:
A. Legal Costs. Borrower shall pay all costs and expenses,
including attorneys' fees (to the extent not prohibited by law),
incident to the making of the Loan.
B. Further Documents. Borrower shall execute and deliver to
Bank from time to time any instruments or documents and do all
things necessary or convenient to carry into effect the
provisions of this Agreement. Borrower designates Bank or any of
its officers as attorney-in-fact to sign Borrower's name on any
such instruments or documents and to file same as may be
appropriate.
</PAGE>
<PAGE>7
C. Taxes. Borrower shall pay and discharge, when due, all
taxes, levies, liens, and other charges on all of its assets, and
shall pay promptly, when due, all other taxes, including
withholding taxes.
D. Laws. Borrower shall comply at all times with all laws,
ordinances, rules and regulations of any Federal, State,
municipal or other public authorities having jurisdiction over
Borrower, or any of Borrower's assets, including but not limited
to, ERISA and all laws relating to Hazardous Substances.
E. Name and Location. Borrower shall immediately advise Bank in
writing of the opening of any new place of business or the
closing of any existing places of business, and of any change in
Borrower's name or the location of the places where Borrower's
assets, or books and records pertaining to Borrower's assets, are
kept.
F. Books and Records. Borrower shall maintain such records with
respect to Borrower's assets and the condition (financial and
otherwise) and operation of Borrower's business as Bank may
request from time to time, and shall furnish to Bank such
information with respect to Borrower's assets, account debtors,
and the condition (financial and otherwise) and operation of
Borrower's business including, but not limited to, balance
sheets, operating statements, and other financial information, as
Bank may request from time to time. Borrower shall furnish Bank
or cause to be furnished to Bank such financial information with
respect to any Other Obligor, including, but not limited to,
balance sheets, operating statements, personal financial
statements and other financial information, as Bank may request
from time to time.
G. Reporting Requirements. In addition to such other
information (financial and otherwise) as Bank may require from
time to time, Borrower shall submit to Bank as soon as available
copies of the Federal, State, and local tax returns of Borrower
and shall also submit the following to Bank:
___Monthly Financial Statements. As soon as available and in any
event within fifteen (15) calendar days after the end of each
calendar month, financial statements of Borrower for the
immediately preceding month, in form and detail satisfactory to
Bank prepared in accordance with G.A.A.P.
</PAGE>
<PAGE>8
_X_Quarterly Financial Statements. As soon as available and in
any event within forty-five (45) calendar days after the end of
each of the first three quarters of each fiscal year of Borrower,
financial statements of Borrower for the immediately preceding
quarter, in form and detail satisfactory to Bank, prepared in
accordance with G.A.A.P. Plus Form 10-Q.
_X_Annual Financial Statements. As soon as available and in any
event within ninety (90) calendar days after the end of each
fiscal year of Borrower, __ compiled __ reviewed _X_ audited
financial statements of Borrower for the immediately preceding
fiscal year, in form and detail satisfactory to Bank, prepared in
accordance with G.A.A.P., by independent certified public
accountants satisfactory to Bank. Plus Form 10-K.
If none of the boxes in this Paragraph IV.G. is marked, Borrower
shall submit to Bank all of the financial statements required
pursuant to this Paragraph, including audited annual financial
statements.
H. Inspection. Bank or any of its representatives may from time
to time inspect, check, make copies of or extracts from the
books, records and files of Borrower, and inspect any of
Borrower's assets wherever located. Borrower shall make same
available at any time for such purposes.
I. Misrepresentation. Borrower shall not make or furnish to
Bank any representation, warranty, or certificate in connection
with or pursuant to this Agreement which is materially false.
J. Insurance. Borrower has and shall maintain insurance on all
of its assets and properties at all times and against hazards,
with companies, in amounts and in form acceptable to Bank.
Borrower shall maintain public liability and property damage
insurance in commercially reasonable amounts, with insurance
companies and upon policy forms acceptable to Bank. Borrower
shall submit to Bank copies of insurance policies and receipts
evidencing payment of the premiums due on same.
K. Further Covenants. Without the prior written consent of
Bank, Borrower shall not: (i) permit or suffer any lien,
security interest, levy or other encumbrance to attach to any
assets of Borrower, except for the liens and encumbrances in
favor of Bank; (ii) make any agreement, compromise, settlement,
</PAGE>
<PAGE>9
bulk sale, lease or transfer of assets other than in the normal
course of business; (iii) create, incur or assume any liability
for borrowed money, except borrowings from Bank; (iv) assume,
guarantee, endorse or otherwise become liable in connection with
the obligations of any person, firm or corporation, except by
endorsement of instruments for deposit or collection or similar
transactions in the ordinary course of business; (v) enter into
any merger or consolidation, or sell or lease substantially all
of its assets; or (vi) purchase or acquire the obligations or
stock of any person, firm or corporation or other enterprises
whatsoever, other than the direct obligations of the United
States or Bank.
V. EVENTS OF DEFAULT
The following shall constitute a default hereunder:
A. Nonperformance. Default by Borrower in the performance of, or
breach of any provision of warranty of, this Agreement, any other
instrument, agreement or document in connection with any of the
Obligations, or any other instrument, agreement or document of
Borrower with Bank, whether such instrument, agreement or
document presently exists or is hereafter executed; or default by
any Other Obligor in the performance of, or breach of any
provision or warranty of, this Agreement, any other instrument,
agreement or document in connection with any of the Obligations,
or any other instrument, agreement or document of any Other
Obligor with Bank or with any other lending institution, whether
such instrument, agreement or document presently exists or is
hereafter executed;
B. Representations and Warranties. Any warranty,
representation, or statement to Bank by or on behalf of Borrower
or any Other Obligor proving to have been incorrect in any
material respect when made or furnished;
C. Financial Condition. A determination by Bank in good faith,
but in its sole discretion, that the financial condition of
Borrower or any Other Obligor is unsatisfactory; insolvency of
Borrower or any Other Obligor; suspension of business, or
commission of an act amounting to business failure by Borrower or
any Other Obligor; or a determination by Bank in good faith, but
in its sole discretion, that the ability of Borrower or any other
Obligor to pay any of the Obligations is impaired for any reason;
</PAGE>
<PAGE>10
D. Assignments. Any assignment made by Borrower or any Other
Obligor for the benefit of creditors;
E. Judgements. The entry of any final judgement against Borrower
or any other Obligor for the payment of money in excess of
$5,000;
F. Bankruptcy. Institution of bankruptcy, insolvency,
reorganization or receivership proceedings by or against Borrower
or any Other Obligor in any State or Federal court or the
appointment of a receiver, assignee, custodian, trustee or
similar official under any Federal or State insolvency or
creditors' rights law for any property of Borrower or any Other
Obligor.
G. Extraordinary Acts. A Change of ownership or the sale,
dissolution, merger, consolidation, liquidation or reorganization
of Borrower or any Other Obligor which is a corporation,
partnership or other legal entity;
H. Attachments. The levy upon or attachment of any property of
Borrower or any Other Obligor, or the recordation of any Federal,
State or local tax lien against Borrower or any Other Obligor;
I. Death. Death of Borrower or any Other Obligor who is a
natural person;
J. Additional Collateral. Failure of Borrower or any Other
Obligor to furnish such collateral or additional collateral as
Bank may in good faith request;
K. Cross-Default. The occurrence of any event which is, or
would be with the passage of time or the giving of notice or
both, a default under any indebtedness of Borrower or any Other
Obligor to any person other than Bank;
L. Loss or Damage; Transfer or Encumbrance. Any material loss,
theft or substantial damage, not fully insured for the benefit of
Bank, to any of the assets of Borrower or any Other Obligor, or
the transfer or encumbrance of any material part of the assets of
Borrower or any Other Obligor other than in the ordinary course
of business of such Borrower or Other Obligor; or
</PAGE>
<PAGE>11
M. Financial Information. The failure of Borrower or any Other
Obligor to furnish Bank such financial information as Bank may
require from time to time.
VI. REMEDIES
A. Specific Rights and Remedies. In addition to all other rights
and remedies provided by law and the Loan documents, Bank, upon
the occurrence of any default, may: (i) accelerate and call due
the unpaid principal balance and any promissory note evidencing
the Loan, and all accrued interest and other sums due as of the
date of default; (ii) impose the default rate of interest
provided in any promissory note evidencing any of the Obligations
with or without acceleration; (iii) file suit against Borrower or
against any Other Obligor; (iv) seek specific performance or
injunctive relief to enforce performance of the Obligations,
whether or not a remedy at law exists or is adequate; (v) cease
making advances or extending credit to Borrower and stop and
retract the making of any advance which may have been requested
by Borrower; and (vi) reduce the Maximum Line of Credit Amount.
B. Costs of Collection. Upon the occurrence of any default,
Bank shall be entitled to recover from Borrower attorney's fees
equal to fifteen percent (15%) of the unpaid balance of the
Obligations at the time of default (to the extent not prohibited
by law), plus court costs and other expenses which may be
incurred by Bank in the enforcement or attempted enforcement of
its rights hereunder, whether against any third party, Borrower,
or any Other Obligor. Expenses recoverable from Borrower shall,
(to the extent not prohibited by law), include costs of
collection including salaries, out-of-pocket travel, living
expenses and the hiring of agents, consultants, accountants, or
otherwise. All sums of money thus expended shall be repayable by
Borrower to Bank on demand.
C. Offset. Upon the occurrence of any default, Bank is
authorized to charge the sum then due to Bank against any and all
monies held by or on deposit with Bank on account of Borrower or
its affiliates, and to offset any amounts against any demand or
depository accounts which Borrower, or its affiliates, may have
with Bank and to enforce such other remedies as may be available
at law or in equity, without necessity of election.
</PAGE>
<PAGE>12
D. Alternative Remedies. Bank may exercise its rights and
remedies hereunder either alternatively or concurrently with its
rights under any and all other agreements among or between Bank
and Borrower or any Other Obligor and shall have the full right
to realize upon any available collateral security for any of the
Obligations, collecting on the same or instituting proceedings in
connection therewith, until Bank receives payment in full of all
amounts owing to Bank under any of its agreements with Borrower,
including principal, interest, costs and expenses, and costs of
enforcement or attempted enforcement of this or any other
agreement among or between Bank and Borrower or any Other
Obligor.
VII. GENERAL PROVISIONS
A. Continuity and Termination. This Agreement shall become
effective immediately and remain in effect so long as any
Obligation of Borrower to Bank is outstanding and unpaid. This
Agreement may be terminated by Borrower upon actual delivery of
written notice to Bank of such intention, and payment in full of
all then existing Obligations; provided, however, that such
notice and payment shall in no way affect, and this Agreement
shall remain fully operative with respect to, any Obligations, or
commitments which may become Obligations, entered into between
Borrower and Bank prior to receipt of such notice or payment,
whichever is later.
B. Other Documents. The Obligations are or shall be evidenced
by notes, security agreements, guaranties, addenda, or other
documents which are separate agreements and may be negotiated by
Bank without releasing Borrower or any Other Obligor. Without
limitation of the foregoing, Borrower may have executed and
delivered to Bank a Commercial Finance Addendum and/or a
Financial Covenants Addendum which modify and supplement this
Agreement and Borrower's obligations hereunder. This Agreement
specifically incorporates by reference all of the language and
provisions of such notes, security agreement, guaranties, addenda
or other documents. Borrower consents to any extension of time
for payment of any Obligations. If there is more than one
Borrower or Other Obligor, the obligation of each of them shall
be primary, joint and several.
C. Remedies Cumulative. All rights, remedies and powers of Bank
hereunder are irrevocable and cumulative, and not alternative or
</PAGE>
<PAGE>13
exclusive, and shall be in addition to all other rights, remedies
and powers of Bank whether in or by any other instruments,
agreements or any laws, including, but not limited to, the
Uniform Commercial Code, now existing or hereafter enacted.
D. Loans and Advances. Nothing contained herein shall be
construed as obligating Bank to make any particular loan or
advance to Borrower, and Borrower is not relying upon Bank to
make or continue to make advances for any purpose whatsoever.
All such loans or advances remain within the discretion of Bank.
E. Non-Waiver. No indulgence or delay on the part of Bank in
exercising any power, privilege or right hereunder or under any
other agreement executed by Borrower to Bank in connection
herewith shall operate as a waiver thereof. No single or partial
exercise of any power, privilege or right shall preclude other or
further exercise thereof, or the exercise of any other power,
privilege or right.
F. Governing Law; Severability. This Agreement shall be
construed and governed by the laws of the State of Maryland. If
any part of this Agreement shall be adjudged invalid or
unenforceable as of any term of court, then such partial
invalidity or unenforceability shall not cause the remainder of
this Agreement to be or become invalid or unenforceable, and if a
provision hereof is held invalid or unenforceable in one or more
of its applications, that provision shall remain in effect in all
valid or enforceable applications that are severable from the
invalid or unenforceable application or applications.
G. Litigation. In the event of any litigation with respect to
this Agreement, the promissory note(s) or other agreements
evidencing and/or securing the Obligations, or any other document
or agreement applicable thereto, Borrower waives all defenses
(including the defense of statue of limitations). Borrower
agrees that any proceeding to enforce or construe this Agreement
may be brought in any State or Federal court in Maryland, agrees
that Borrower is subject to service of process under Section 6-
103 of the Courts and Judicial Proceedings Article of the
Annotated Code of Maryland, and agrees to accept such service as
is authorized by such statute and prescribed in the Maryland
Rules of Procedure.
H. Construction. All accounting terms not otherwise defined in
</PAGE>
<PAGE>14
this Agreement shall be interpreted in accordance with G.A.A.P.
The captions in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit or
describe the scope of this Agreement nor the intent of any
provision hereof. If this Agreement is signed by two or more
parties as Borrowers, the term "Borrower" shall mean each and
every party signing this Agreement as a Borrower. The use of
the singular herein may also refer to the plural, and vice
versa, and the use of the neuter or any gender shall be
applicable to any other gender or the neuter.
I. Assignment. None of the parties shall be bound by any
assignment not expressed in writing. This Agreement shall inure
to and be binding upon the heirs, personal representatives,
successors, and assigns of Borrower and Bank, and the terms
"Borrower" and "Bank" shall include and mean, respectively, the
successors and assigns of Borrower and Bank.
J. Demand. If any of the Obligations are payable on demand,
demand therefore may be made at any time, without notice, and
without regard to whether a default has occurred.
K. Time. Time is of the essence of all Obligations.
VIII. ADDITIONAL COVENANTS
In addition to the other terms and conditions herein, Borrower
represents, warrants and covenants that: (add any additional loan
covenants; if none, so state)
Borrower's
Initials
/s/ JKL, TLK See attached Financial Covenants Addendum
- ------------ -----------------------------------------
WAIVER OF TRIAL BY JURY. Borrower and Bank agree that any suit,
action, or proceeding, whether claim or counterclaim, brought or
instituted by or against either party hereto or any successor or
assign of either party on or with respect to this Agreement or
any other Loan document or which in any relates, directly or
indirectly, to the Obligations or any event, transaction or the
dealings of the parties with respect thereto, shall be tried only
by a court and not by a jury. Borrower and Bank hereby expressly
</PAGE>
<PAGE>15
waive any right to a trial by jury in any such suit, action, or
proceeding. Borrower and Bank acknowledge and agree that this
provision is a specific and material aspect of this Agreement
between the parties and that Bank would not extend the Loan to
Borrower if this waiver of jury trial provision were not a part
of this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Borrower has executed this Agreement under seal as of the day and
year first above written, at Baltimore, Maryland.
-------------------
Witness or Attest*
*Note: Attestation of a corporate officer's capacity to sign by
another corporate officer is required in all corporate
transactions.
/s/ Anne E. Quirk PharmaKinetics Laboratories, Inc.
- ------------- ---------------------------------
(Signature) (Name of Organization)
By: /s/ James K. Leslie (Seal)
-----------------------
(Authorized Signature)
James K. Leslie, President and CEO
----------------------------------
(Print Name and Title)
By:/s/ Taryn L. Kunkel (Seal)
----------------------
(Authorized Signature)
Taryn L. Kunkel, VP and CFO
---------------------------
(Print Name and Title)
302 W. Fayette Street
---------------------
(Street Address)
</PAGE>
<PAGE>16
Baltimore, Maryland 21201
-------------------------
(City-State-Zip)
-------------------------------
(Telephone) (Facsimile)
--------------------------------
(Federal Tax Identification No.)
If Borrower is an individual he or
Witness she should sign below)
________________________ _______________________(Seal)
(Signature) (Signature)
_________________________ ___________________________________
(Print Name) (Print Name)
___________________________________
(Street Address)
___________________________________
(City-State-Zip)
___________________________________
(Telephone) (Facsimile)
___________________________________
(Social Security Number)
Accepted at Baltimore, Maryland as
of the date thereof:
The First National Bank of Maryland
By:/s/ Anne E. Quirk (Seal)
--------------------
Anne E. Quirk, Vice President
-----------------------------
(Print Name and Title)
The undersigned Other Obligors acknowledge and consent to the
</PAGE>
<PAGE>17
terms and provisions of the foregoing Agreement, including the
terms and provisions of the Agreement that provide for multiple
loan advances.
Witness or Attest: _____________________________
(Name of Organization)
___________________________ By:_________________________(Seal)
(Signature) (Authorized Signature)
___________________________ __________________________________
(Print Name) (Print Name)
If Other Obligor is an individual
he or she should sign below:
____________________________ _____________________________(Seal)
(Signature) (Signature)
____________________________ ___________________________________
(Print Name) (Print Name)
</PAGE>
<PAGE>1
Exhibit 10(c)
First National Bank of Maryland Financial Covenants
Addendum
THIS FINANCIAL COVENANTS ADDENDUM ("Addendum") is dated as of the
30th day of September, 1998, by and between PharmaKinetics
Laboratories, Inc. ("Borrower"), a corporation of the State of
Maryland and THE FIRST NATIONAL BANK OF MARYLAND ("Bank"), a
national banking association, of Baltimore, Maryland. This
Addendum is given to supplement one or more of the following
documents between Bank and Borrower: [X] Loan Agreement dated
09/30/98, 1998 ("Loan Agreement") or [ ] Security Agreement dated
________, 1998 ("Security Agreement").
I. DEFINITIONS
The following terms have the following definitions (each
definition is equally applicable to the singular and plural forms
of the terms used, as the context requires):
A. Capital Expenditures. The term "Capital Expenditures" means,
for any period, the aggregate of all expenditures (whether paid
in cash or accrued as liabilities, and including expenditures for
obligations under any lease with respect to which Borrower's
obligations thereunder should, in accordance with G.A.A.P., be
capitalized and reflected as a liability on the balance sheet of
Borrower) by Borrower during such period that are required by
G.A.A.P. to be included in or reflected by the property, plant or
equipment or similar fixed asset accounts on the balance sheet of
Borrower.
B. Cash Flow. The term "Cash Flow" means the sum of (i) the net
income of Borrower after tax, plus (ii) depreciation expense and
amortization, plus (iii) Interest Expense, (iv) plus non-cash
charges, (v) less distributions, all determined in accordance
with G.A.A.P.
C. Cash Flow Coverage. The term "Cash Flow Coverage" means the
ratio of Cash Flow to the sum of (i) the current portion of all
Long Term Debt, plus (ii) Interest Expense, all determined in
accordance with G.A.A.P.
</PAGE>
<PAGE>2
D. Collateral. The term "Collateral" means all of the now owned
and hereafter acquired assets, properties and property rights of
Borrower with respect to which Borrower has at any time granted a
security interest or lien to Bank or has at any time otherwise
assigned or pledged to Bank.
E. Current Assets. The term "Current Assets" means, at any
time, the aggregate amount of all current assets, including, but
not limited to, cash, cash equivalents, marketable securities,
receivables maturing within twelve (12) months from such time,
and inventory (net of LIFO Reserve), but excluding prepaid
expenses and officer, stockholder and employee advances and
receivables, all as determined in accordance with G.A.A.P.
F. Current Liabilities. The term "Current Liabilities" means,
at any time, the aggregate amount of all liabilities and
obligations which are due and payable on demand or within twelve
(12) months from such time, or should be properly reflected as
attributable to such twelve (12) month period in accordance with
G.A.A.P. Current Liabilities shall not include deferred income
tax liabilities.
G. Current Ratio. The term "Current Ratio" means the ratio of
Current Assets to Current Liabilities.
H. G.A.A.P. The Term "G.A.A.P." means, with respect to any date
of determination, generally accepted accounting principles as
used by the Financial Accounting Standards Board and/or the
American Institute of Certified Public Accountants consistently
applied and maintained throughout the periods indicated.
I. Indebtedness. The term "Indebtedness" means: (I) the
Obligations; (ii) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of
which Borrower is liable, contingently or otherwise, as obligor
or otherwise, or any commitment by which Borrower assures a
creditor against loss, including contingent reimbursement
obligations with respect to letters of credit; (iii) indebtedness
guaranteed in any manner by Borrower, including guarantees in the
form of agreements to repurchase or reimburse; (iv) obligations
under leases which shall have been or should be, in accordance
with G.A.A.P., recorded as capital leases, in respect of which
obligations Borrower is liable, contingently or otherwise, as
</PAGE>
<PAGE>3
obligor, guarantor, or otherwise, or in respect of which
obligations Borrower assures a creditor against loss; and (v) any
unfunded obligation of Borrower to any "Employee Benefit Plan,"
as defined in the Employee Retirement Income Security Act of
1974, as amended.
J. Interest Coverage. The term "Interest Coverage" means the
ratio of Cash Flow to Interest Expense.
K. Interest Expense. The term "Interest Expense" means all
finance charges reflected on the income statement as interest
expense for all obligations of Borrower to any person, including,
but not limited to, Bank, as shown on the balance sheet in
accordance with G.A.A.P.
L. LIFO Reserve. The term "LIFO Reserve" means the difference
between the value of inventory at cost and the value of inventory
on a Last In First Out basis, all determined in accordance with
G.A.A.P.
M. Long Term Debt. The term "Long Term Debt" means all
obligations of Borrower to any person, including, but not limited
to, the Obligations, payable more than twelve (12) months from
the date of their creation, which in accordance with G.A.A.P. are
shown on the balance sheet as a liability (excluding reserves for
deferred income taxes).
N. Obligations. The term "Obligations" means the "Obligations,"
as defined in the Loan Agreement or the Security Agreement to
which this Addendum is attached.
O. Quick Ratio. The term "Quick Ratio" means the ratio of
Current Assets less inventory (net of LIFO Reserve), to Current
Liabilities.
P. Tangible Net Worth. The term "Tangible Net Worth" means the
aggregate assets of Borrower excluding all intangible assets,
including, but not limited to, goodwill, licenses, trademarks,
patents, copyrights, organization costs, appraisal surplus,
officer, stockholder, related entity and employee advances or
receivables, mineral rights and the like, less liabilities, all
determined in accordance with G.A.A.P. (except to the extent that
</PAGE>
<PAGE>4
under G.A.A.P. "tangible net worth" excludes leasehold
improvements which are included in "Tangible Net Worth" as
defined herein).
Q. Working Capital. The term "Working Capital" means that
amount which is equal to the excess of Current Assets over
Current Liabilities.
II. FINANCIAL COVENANTS
Borrower shall at all times remain in compliance with each of the
covenants set forth in the Paragraphs below which have been
marked.
Borrower's Initials:
/s/ JKL [X] A. Borrower shall maintain Tangible Net Worth of
TLK not less than $6,500,000.00 as of 06/30/98 with
- ------- annual $200,000.00 increases.
/s/ JKL [X] B. Borrower shall maintain a ratio of Indebtedness
TLK to Tangible Net Worth of not greater than
- ------- 1.00:1.00.
/s/ JKL [X] C. Borrower shall maintain a Current Ratio of not
TLK less than 1.50:1.00.
- -------
/s/ JKL [X] D. Borrower shall maintain a Quick Ratio of not
TLK less than 1.25:1.00.
- -------
[ ] E. Borrower shall maintain Working Capital of not
- ------- less than $______.
[ ] F. Borrower shall maintain Cash Flow Coverage of
- ------- not less than ___:___.
[ ] G. Borrower shall maintain Interest Coverage of not
- ------- less than ___:___.
[ ] H. Without the prior written consent of Bank,
- ------- Borrower shall not make any Capital Expenditures
in excess of $_____ in the aggregate during any
fiscal year of Borrower.
</PAGE>
<PAGE>5
[ ] I. Borrower shall not pay total compensation,
- ------- including salaries, withdrawals, fees, bonuses,
management fees, consulting fees, commissions,
perquisites, loans or other payments, whether
directly or indirectly, in money or otherwise to
_____ in excess of the aggregate annual amount
of $_______during any fiscal year of Borrower,
in addition to any distribution allowed under
Paragraph II.J hereof.
[ ] J. Without the prior written consent of Bank,
- ------- Borrower shall not make distributions, including
loans, dividends or other withdrawals of any
kind to any officers, employees, shareholders or
other persons or entities in excess of:
_____percent ( %) of pre-tax income (if Borrower
is an "S Corporation," as defined in Section
1361 of the Internal Revenue Code of 1986, as
amended); or_____percent ( %) of after-tax
income (if Borrower is a "C Corporation," as
defined in Section 1361 of the Internal Revenue
Code of 1986, as amended).
III. GENERAL PROVISIONS. This Addendum is hereby made a part of
the Loan Agreement or Security Agreement to which it is attached.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Borrower has executed this Addendum under seal as of the day and
year first above written at _____________.
WITNESS OR ATTEST*:
*Note: Attestation of a corporate officer's capacity to sign by
another corporate officer is required in all corporate
transactions.
/s/ Anne E. Quirk PharmaKinetics Laboratories, Inc.
- ------------------- ---------------------------------
Signature (Name of Organization)
By: /s/ James K. Leslie (Seal)
-----------------------
(Authorized Signature)
James K. Leslie, President and CEO
----------------------------------
(Print Name and Title)
</PAGE>
<PAGE>6
By:/s/ Taryn L. Kunkel (Seal)
----------------------
(Authorized Signature)
Taryn L. Kunkel, VP and CFO
---------------------------
(Print Name and Title)
302 West Fayette Street
-----------------------
(Street Address)
Baltimore, Maryland 21201
--------------------------
(City-State-Zip)
410-385-4500 410-385-4675
------------------------------
(Telephone) (Facsimile)
52-1067519
----------
(Federal Tax ID Number)
ACCEPTED AT BALTIMORE, MARYLAND AS
OF THE DATE THEREOF:
THE FIRST NATIONAL BANK OF MARYLAND
By:/s/ Anne E. Quirk (Seal)
--------------------
(Authorized Signature)
Anne E. Quirk, Vice President
-----------------------------
(Print Name and Title)
</PAGE>
<PAGE>1
Exhibit 10(d)
First National Bank of Maryland Negative Pledge Agreement
THIS AGREEMENT is made __________, 19__, by PharmaKinetics
Laboratories, Inc. ("Borrower") with THE FIRST NATIONAL BANK OF
MARYLAND ("Bank").
IN CONSIDERATION of loans currently extended and as may in the
future be extended by the Bank to the Borrower, the Borrower
agrees with the Bank as follows:
(check one or both)
___1. No liens of any kind shall, without the Bank's prior
written consent, be permitted to attach against the following
described real property, or any fixtures attached thereto, nor
shall such property be hereafter granted, conveyed, mortgaged or
otherwise encumbered without the Bank's prior written consent,
except for liens for state and local real property taxes for the
year for which assessed, provided such taxes shall be paid each
year prior to the date after which interest is charged on the
taxes assessed:
(Describe real property)____________________________________
_X_2. No liens, charges or encumbrances of any kind shall be
permitted to attach against the following personal property of
the Borrower, nor shall any of the same be transferred, assigned,
pledged or otherwise encumbered, without the Bank's prior written
consent (check as appropriate):
_X_(a) Equipment (describe) See attached schedule A
____________________________________
_X_(b) Inventory (describe) ____________________________________
_X_(c) Accounts and contract right (describe) __________________
___(d) Securities (describe) ___________________________________
</PAGE>
<PAGE>2
3. At the Bank's request, the Borrower will, at any time while
this Agreement is in effect, as collateral security or additional
collateral security for all obligations of the Borrower to the
Bank, execute and deliver to the Bank a mortgage and/or deed of
trust with respect to the real property designated above, and/or
security agreement(s) and financing statements with respect to
the personal property (and deliver possession of certificates
representing any securities) designated above. All of such
security documents shall be in the form customarily used by the
Bank to secure debt of the amount and character then owned by the
Borrower to the Bank.
4. This Agreement shall remain in effect until all indebtedness,
including interest thereon, of the Borrower to the Bank has been
paid in full.
IN WITNESS WHEREOF the Borrower has caused this Agreement to be
duly signed and sealed.
ATTEST or WITNESS: PHARMAKINETICS LABORATORIES, INC.(Seal)
--------------------------------
/s/ Anne E. Quirk (Print name of organization)
- -----------------
Address: 302 West Fayette Street
--------------------------------
Baltimore, Maryland 21201
--------------------------
By: /s/ James K. Leslie
------------------------
(Authorized Signature)
James K. Leslie, President and CEO
----------------------------------
(Print name and title)
By: /s/ Taryn L. Kunkel
------------------------(Seal)
Taryn L. Kunkel, VP and CFO
---------------------------
(Print name)
</PAGE>
<PAGE>3
Schedule A- To negative pledge agreement
ALL ASSETS
(1) all of the now owned and hereafter acquired machinery,
equipment, furniture, fixtures (whether or not attached to real
property), supplies and other personal property of Debtor,
including any leasehold interests therein and all replacement
parts and annexations thereto (herein called "Equipment"); all of
Debtor's now owned or hereafter acquired and/or created accounts,
instruments, chattel paper, contracts, contract rights, accounts
receivable, tax refunds, notes, notes receivable, drafts,
acceptances, documents, general intangibles, and other choses in
action (not including wages or salary), including but not limited
to proceeds of inventory and returned goods and proceeds from the
sale of goods and services (herein called "Accounts"); all of
Debtor's now owned and hereafter acquired inventory, wherever
located, including but not limited to all raw materials, parts,
containers, work in process, finished goods, wares and
merchandise, and goods returned for credit, repossessed,
reclaimed or otherwise reacquired by Debtor and all products and
proceeds thereof including but not limited to sales proceeds of
any kind (herein called "Inventory"); and all other now owned and
hereafter acquired assets of Borrower, including but not limited
to all leases, rents, chattels, leasehold improvements,
installment purchase and/or sales contracts, bonds, stocks,
certificates, advances, deposits, trademarks, tradenames,
licenses, patents and cash values of life insurance, all of
which, including the above-described Equipment, Accounts and
Inventory, shall herein be called "Assets"; (2) all proceeds
(including insurance proceeds) and products of the above-
described Assets; (3) any of Debtors assets in which Secured Party
has been or is hereafter granted a security interest under any
other security agreements, notes or other obligations or
liabilities between Debtor and Secured Party; (4) any accounts,
property, securities or monies of Debtor which may at any time be
assigned or delivered or come into possession of Secured Party,
as well as all proceeds and products thereof; and (5) all of the
actual books and records pertaining to any of the above-described
items of Collateral.
</PAGE>
<PAGE>1
Exhibit 10(e)
Corporate Banking and Borrowing Resolutions
I, the undersigned, Secretary of PharmaKinetics Laboratories, Inc.
(the "Corporation"), a corporation having its principal place of
business in ______, DO HEREBY CERTIFY that, by action duly taken
(a) by the Board of Directors of the Corporation, or (b) if the
Corporation is a close corporation having no Board of Directors, by
the Stockholder(s) of the Corporation, on _________, the following
resolutions were duly adopted and have not been amended or modified
and are not inconsistent with the Charter and By-Laws of the
Corporation and are now in full force and effect.
BANKING
RESOLVED, that ___________________ (the "Bank") is designated as a
depository for the funds of the Corporation.
RESOLVED, that any __________________ of the following officers:
________________________________________________________________
________________________________________________________________
________________________________________________________________
of the Corporation be authorized on behalf of the Corporation to
make, sign, draw, accept or endorse checks, drafts, notes, bills of
exchange, acceptances or orders or other instruments for the
withdrawal of funds of the Corporation deposited in the Bank (on
the account(s) designated _____________), whether such checks and
orders create or increase an overdraft of said account or not
(payment or nonpayment of any such overdraft to be at the option of
the Bank) and to execute signature cards for such accounts thereby
binding the Corporation to the rules and regulations issued from
time to time by the Bank.
RESOLVED, that any such instruments payable to or held by the
Corporation, when drawn or endorsed as above provided, may be paid
or cashed by the Bank, or received by it for the credit of or in
payment from the payee or any other holder, including any officer
or agent of the Corporation, without limitation of amount and
without inquiry as to the circumstances of their issue, or the
disposition of the proceeds thereof, and whether drawn to the
individual order of any officer or tendered in payment of his or
her obligation.
</PAGE>
<PAGE>2
RESOLVED, that endorsements on behalf of the Corporation on any and
all commercial paper of any kind deposited by or on behalf of the
Corporation with the Bank for credit or for collection or
otherwise, may be made by any one of the foregoing officers, or by
facsimile signature or by rubber stamp endorsement without
signature and any such deposit may be without endorsement.
RESOLVED, that signatures of the foregoing officers as maker on
behalf of the Corporation on any and all checks, drafts or
commercial paper of any kind, may be made by the application of
machine rendered facsimile thereof, and that any of the foregoing
officers of the Corporation be authorized to execute and deliver
agreements with the Bank for, on behalf and in the name of the
Corporation to induce the Bank to permit the use of such facsimile
signatures.
RESOLVED, that signatures of the foregoing officers of the
Corporation be authorized to communicate instructions to the Bank
by telephonic, electronic or other means, to make funds transfers,
wire transfers, automated clearinghouse entries, and payment orders
of any nature, for, on behalf and in the name of the Corporation
directed to the Corporation itself or to third parties; to delegate
such authority from time to time by the appointment and removal of
other persons which may conduct such communication; and to execute
and deliver agreements with the Bank for, on behalf and in the name
of the Corporation providing for such communication upon the terms
and conditions set forth in such agreements.
RESOLVED, that any of the foregoing officers of the Corporation be
authorized to enter into agreements with the Bank for, on behalf
and in the name of the Corporation providing for, among other
things, the Bank's performance of cash management services,
information services, investment services or other financial
services, which agreements may include, without limitation, the
appointment of one or more parties as the Corporation's attorney-
in-fact for the limited purpose of facilitating the Corporation's
use of such services.
BORROWING
RESOLVED, that any two of the following officers:
---
James K. Leslie and Taryn L. Kunkel
- -----------------------------------
of the Corporation be authorized: to borrow money and incur
</PAGE>
<PAGE>3
liabilities for, on behalf and in the name of the Corporation; to
sell, guarantee, or discount its bills and accounts receivable; to
enter into, make, sign and deliver repurchase, revolving credit,
term loan and other agreements, including subordination and similar
agreements; to sign, on behalf of the Corporation, forms and
agreements required by the Bank to enable the Corporation to obtain
letters of credit and to bind the Corporation to the repayment of
the Bank for every draft drawn thereunder; to sign, execute and
deliver acceptances and promissory notes and other obligations of
the Corporation; all for such amounts, and upon such terms,
conditions and provisions (including provisions authorizing
confession of judgement and waiving the right to trial by jury) as
to them shall seem proper.
GUARANTY
RESOLVED, that any _______ of the following officers;
________________of the Corporation be authorized: to absolutely,
irrevocably and unconditionally guarantee the payment and
performance of the obligations of _________________, owed to the
Bank; and to enter into, make, sign and deliver guaranty
agreements, subordination agreements and other agreements on
behalf of the Corporation, upon such terms, conditions and
provisions (including provisions authorizing confession of
judgement and waiving the right to trial by jury) as to them shall
seem proper.
SECURITY
RESOLVED, that any _____ of the following officers:
_________________of the Corporation be authorized to pledge and
grant liens and security interests on any and all property, assets,
or interest therein (including, without limiting the generality of
the foregoing, real property, leases and rents, accounts and other
receivables, chattel paper, equipment, general intangibles, goods,
inventory, warehouse receipts, bills of lading, instruments,
stocks, bonds and other certified and uncertified securities, and
life insurance), from time to time owned by the Corporation, as
security for any moneys borrowed and as security for any liability
incurred or to be incurred by the Corporation in connection with
any acceptance, note, letter of credit, guaranty, trust receipt or
otherwise; and in connection therewith to endorse and deliver any
such property, asset, or interest therein, and to execute and
deliver security agreements and financing statements with respect
thereto.
</PAGE>
<PAGE>4
CERTIFICATION
RESOLVED, that the Secretary, Assistant Secretary or any officer of
the Corporation is authorized to certify to the Bank a copy of
these resolutions and the names and signatures of the Corporation's
officers or employees hereby authorized to act in the premises, and
the Bank is hereby authorized to rely upon such certificate until
five (5) Business Days (hereinafter defined) after it receives a
like certificate advising of any change therein, or written notice
that the authorities herein have been revoked by proper resolution
of (a) by the Board of Directors of the Corporation, or (b) if the
Corporation is a close corporation having no Board of Directors, by
the Stockholder(s) of the Corporation. The term "Business Day" as
used herein means any day other than Saturday, Sunday or other day
on which the Bank is authorized to close.
WITNESS my hand and the seal of the Corporation this
30th day of September, 1998
- -------- ---------------
(Corporate Seal) /s/ Taryn L. Kunkel
-------------------
Secretary of the Corporation
/s/ James K. Leslie
-------------------
Other Officer *
President and CEO
-----------------
Title
*(In case the certifying officer is authorized to sign by the above
resolutions, this certificate must also be signed by a second
officer of the Corporation, preferably one not so authorized.)
INCUMBENCY CERTIFICATE
I, the undersigned, Secretary or Assistant Secretary or other
indicated officer of PharmaKinetics Laboratories, Inc. (the
---------------------------------
"Corporation"), a corporation having its principal place of
business in Baltimore, Maryland, HEREBY CERTIFIES that the
following persons have been duly elected and hold the respective
titles indicated after their names, as of September 30, 1998:
</PAGE>
<PAGE>5
(Please type or print)
(Name) (Title)
James K. Leslie President and CEO
- ----------------------- -------------------
Taryn L. Kunkel VP and CFO
- ----------------------- -------------------
WITNESS my hand and the seal of the Corporation this
30th day of September, 1998.
- -------- ---------------
(Corporate Seal)
/s/ Taryn L. Kunkel
- -------------------
Secretary of the Corporation
/s/ James K. Leslie
- -------------------
Other Officer *
President and CEO
- -----------------------------
Title
*(Note: In case the Secretary or other recording officer is listed
as an incumbent above, this certificate must also be
signed by a second officer of the Corporation, preferably one not
so authorized).
</PAGE>
