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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from __________ to __________
Commission file number 0-12992
SYNTHETECH, INC.
(Name of small business issuer in its charter)
Oregon 84-0845771
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1290 Industrial Way, Albany, Oregon 97321
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number: 541/967-6575
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Exchange Act:
Common Stock, $.001 Par Value
(Title of class)
Check whether issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $12,797,132
As of May 23, 1997, the aggregate market value of the voting stock
held by nonaffiliates of the registrant was $92,411,546 based upon
$8.06 per share.
The number of the shares of the Company's Common Stock outstanding
on May 23, 1997 was 13,859,771.
Transitional Small Business Disclosure Format (check one): YES__ NO X
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PART I
ITEM 1. BUSINESS
Synthetech, Inc., an Oregon corporation (the "Company" or
"Synthetech"), produces Peptide Building Blocks and other fine
chemicals using a combination of organic chemistry and
biocatalysis.
PRODUCT OVERVIEW
Peptide Building Blocks. Peptides are short chains of generally
less than 50 amino acids and are used primarily in
pharmaceuticals. The production of peptides requires amino acids
which have been chemically modified to enable them to more easily
link with other amino acids in a particular sequence to form the
desired peptide. The Company refers to these chemically modified
amino acids as "Peptide Building Blocks" or "PBBs." The amino
acids which are transformed into PBBs may be either natural amino
acids (that is, amino acids which occur in nature) or synthetic
amino acids (that is, amino acids which have a side chain that
does not occur in nature).
Synthetech chemically modifies natural amino acids (which it
purchases from multiple suppliers) to produce PBBs. The Company
also manufactures synthetic amino acids, and chemically modifies
these synthetic amino acids to produce PBBs.
The Company has developed and scaled up process technology to
produce a wide range of PBB products at the multi-kilogram to
multi-ton scale.
The Company currently offers over 300 different PBB products.
For the fiscal years ended March 31, 1997, 1996, and 1995, the
Company's sales of PBBs represented 100% ($12,797,000), 99%
($8,412,000), and 89% ($4,759,000), respectively, of the
Company's total revenues. For the fiscal years ended March 31,
1997, 1996, and 1995, sales to overseas customers accounted for
approximately 32%, 21%, and 19%, respectively, of the Company's
total revenues. These sales were principally to Europe and
Japan.
Other Fine Chemicals. The Company is capable of producing other
fine chemical compounds. These compounds have included grignard
reagents and other fine chemicals conforming to the customer's
confidential specifications. As the Company's core business in
PBBs expanded over the past three years, the Company stopped
actively marketing these products. For the fiscal years ended
March 31, 1997, 1996, and 1995, the Company's sales of other fine
chemicals represented 0% ($0), 1% ($60,000), and 10% ($513,000),
respectively, of the Company's total revenues. With the
completion of the additional processing facility expected in the
Summer of 1997, the Company may again explore other fine chemical
compounds and custom manufacturing opportunities.
_____________________
The Company continues to produce most bulk orders on an as-
ordered basis, although it does carry an inventory of over 300
PBB products. At May 23, 1997, the dollar amount of backlog
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orders which the Company believed to be firm was approximately
$2.2 million (May 31, 1996 backlog was $5.5 million, which
included one large order of $2 million, portions of which were
subject to certain cancellation provisions). The variation
in backlog between May 1997 and May 1996 underscores the
continued variability in the demand for the Company's PBBs at
any given time (See Item 6, "Management's Discussion and Analysis
or Plan of Operations").
In January 1990, the Company entered into supply and technology
agreements with Biomeasure Incorporated, a Boston area
biotechnology company and a subsidiary of Groupe Pharmaceutique
Beaufour-Ipsen of France with several synthetic peptide products
under development. Under the supply agreement, the Company has
agreed to supply all of Biomeasure's requirements for a
particular synthetic PBB. This agreement continues from year to
year unless terminated in writing by one of the parties. The
Company and Biomeasure are also parties to a license agreement
giving Biomeasure the option to receive a license to produce for
its own use the PBB which is the subject of the supply agreement
between the parties. Under this license agreement, Biomeasure
must pay certain royalty amounts based on the amount produced.
MARKET OVERVIEW
The market for Peptide Building Blocks is driven by the market
for the peptides in which they are incorporated. The size of
this market is a function of the number of peptides which are
initially screened for use in pharmaceuticals, the number of
these pharmaceuticals which progress down the path toward
registration and, ultimately, the number which are found to be
therapeutically useful. The size of the market is also a
function of the quantities and varieties of PBBs necessary to
produce these pharmaceuticals. Based on an analysis of fiscal
1997 PBB sales and information to the extent available from
customers, the Company estimates that approximately 11% of the
Company's PBB sales went into marketed or "approved" drugs,
approximately 83% went into drugs in clinical or late pre-
clinical trials and approximately 6% went into drugs at the R&D
or discovery stage of development.
MARKETING
The Company markets its products through attendance at trade
shows, listings in biotechnology and chemical industry
directories, advertisements in chemical trade periodicals and by
contacting pharmaceutical and other companies which it believes
might have a need for its products.
CUSTOMERS
Although the Company has over 200 customers, the Company expects
that a few customers will continue to account for a significant
portion of revenues each year. During fiscal 1997, the Company
had three customers which accounted for 66% of the Company's
revenues, and two of these customers accounted for 59% of the
Company's revenues and separately accounted for 30% and 29%,
respectively, of the revenues.
COMPETITION
Because peptide-based pharmaceuticals are relatively new, the
market in the past for Peptide Building Blocks has been quite
small -- with most sales in the hundreds of kilos or smaller
size.
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As a result, the PBB market has not attracted a
significant amount of direct competition. As the market
continues to grow with multi-ton order sizes becoming more
prevalent, the Company has begun to see more competition.
Current competition in multi-kilo or smaller quantities of
natural amino acid based PBBs comes primarily from several
European fine chemical companies. Multi-ton order sizes of these
natural PBBs have begun to attract a wider group of domestic and
international chemical companies. In the area of synthetic amino
acid based PBBs, the Company has competition on a selective
product basis from fine chemical producers in Europe and Japan.
Competition also increases for supplying PBBs for drug
development programs that reach late clinical trials and move
into approved status as a result of the increased quantities
typically required at these stages and pharmaceutical company
requirements to have second sources of material available. Many
of the Company's competitors have technical, financial, selling
and other resources available to them which are significantly
greater than those available to the Company.
The principal methods of competition in the market for PBBs and
other fine chemicals are quality, customer service and price.
The Company believes that it competes effectively in each of
these areas. The Company also believes that its production of a
wide range of products and quantities gives it a competitive
advantage in the marketplace. In addition, the Company believes
that pharmaceutical companies view internal production of PBBs as
a misallocation of resources and, given a reliable source of a
quality product, would rather obtain them from an outside
supplier.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts have focused
principally on process development. During the fiscal years ended
March 31, 1997, 1996, and 1995, the Company's research and
development expenses were $211,000, $217,000, and $169,000,
respectively. These figures, however, do not completely reflect
the Company's research and development activity since substantial
process development efforts have been associated with initial
orders for new products and, accordingly, have been expensed as
cost of sales associated with the product revenue rather than as
a research and development expense. The Company estimates that
its combined research and development effort (including effort
directly associated with the sale of product) was approximately
$346,000, $364,000 and $293,000 during the fiscal years ended
March 31, 1997, 1996 and 1995, respectively.
EMPLOYEES
As of May 23, 1997, the Company employed thirty-four individuals,
two of whom were part-time.
REGULATORY MATTERS
As the Company's products are intermediates sold to final
producers, the Company has been generally unaffected by FDA
regulation which is directed at final products sold to the
public. The Company's customers do, however, typically impose
inspection and quality assurance programs on the Company. These
programs involve materials handling, recordkeeping and other
requirements. As some customers have begun to request the Company
to provide additional processing steps, these programs often
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include more extensive requirements. The Company anticipates
that the expenses of complying with such programs will increase
in the future.
The Company's business is also subject to substantial
regulation in the areas of safety, environmental release and hazardous
waste disposal. Although the Company believes that it is in compliance
with these laws, rules and regulations in all material respects,
the failure to comply with present or future regulations could
result in fines being imposed on the Company, suspension of
production or cessation of operations. As additional and more
extensive regulations are being added in these areas at the
federal, state and local levels, the compliance costs will
inevitably continue to increase. The operation of chemical
manufacturing plants entails the inherent risk of environmental
damage or personal injury due to the handling of potentially
harmful substances, and there can be no assurance that material
costs and liabilities will not be incurred in the future because
of an accident or other event resulting in personal injury or an
unauthorized release of such substances to the environment.
Also, the Company generates hazardous and other wastes which are
disposed of at various off-site facilities. The Company may be
liable, irrespective of fault, for material cleanup costs or
other liabilities incurred at these disposal facilities due to
releases of such substances into the environment.
The Company maintains property damage insurance, liability
insurance, environmental risk insurance, and product liability
insurance.
PRODUCT LIABILITY
Use of the Company's products in pharmaceuticals and the
subsequent testing, marketing and sale of such pharmaceuticals
involves an inherent risk of product liability. In addition,
research and development activities in amino acid technology, and
the production of fine chemicals (including organic chemicals)
may expose workers engaged in performing duties related to such
activities to health hazards. There can be no assurance that
claims for product liability will not be asserted against the
Company or that the Company would be able to successfully defend
any claim that may be asserted. A product liability claim could
have a material adverse effect on the business and/or financial
condition of the Company.
COMPANY BACKGROUND
The Company was formed in 1981 to develop novel chemical process
technology by combining classical organic chemistry with enzyme-
based biocatalysis. For the first several years, it operated
mainly as a research and development group focused on the
production of pharmaceuticals and other fine chemicals. After
its initial public offering in 1984, the Company's research
efforts were concentrated on the development of a proprietary
process for aspartame and L-phenylalanine. Although the Company
had entered into one license for this technology, the Company
does not expect additional licensing revenue.
Throughout its development during the 1980s, the Company also
offered contract research services. These research services were
typically provided to pharmaceutical clients and generally
involved the development of biocatalytic processes (that is,
chemical processes which are affected by the use of enzymes or
microorganisms). Since the end of fiscal 1990, the Company has
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phased out contract research services and does not anticipate
receiving any significant revenue from research services in the
future. By the end of the 1980s, the Company, building on it
prior experience, began to focus on the production of PBBs and
other fine chemicals for customers. During the 1990s, the Company
has emerged as a leading producer of PBBs in gram, multi-kilo and
ton quantities.
FORWARD-LOOKING STATEMENTS
This Form 10-KSB includes "forward-looking" information (as
defined in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934) that involve risks
and uncertainties, including, but not limited to, potential
quarterly revenue fluctuations, uncertain market for products,
technological change, customer concentration, impact of
competitive products and pricing and other risks detailed in this
Form 10-KSB and other Securities and Exchange Commission Filings
made by the Company.
ITEM 2. PROPERTIES
Synthetech's headquarters and production facility is located in
Albany, Oregon. The Company purchased this facility in 1987.
This approximately 23,000 square foot facility includes
production, pilot plant, laboratory, warehouse and office space.
The Company also is constructing an additional 20,000 square
foot, two-story production facility at its Albany, Oregon
location. The new plant will substantially increase the
Company's capacity to produce PBBs and other fine chemicals.
This facility will have six production bays, of which two will be
outfitted immediately with manufacturing equipment and four will
be available for future expansion. Synthetech has contracted
with various third party providers relating to its new plant.
The Company has issued purchase orders to such providers with
detailed specifications, services to be provided and the prices
to be paid. The Company has received either limited or no
written warranties by such third party providers and, therefore,
may be limited in its ability to pursue remedies in the event
that the new building has problems or other defects in the
future. However, the building is being inspected by the City of
Albany to verify that, as constructed, it meets all applicable
building codes, including ADA, electrical, seismic, fire and
hazardous occupancy. All specifications were reviewed by an
independent third-party engineering firm selected by the City of
Albany prior to approval of various construction permits. The
Company estimates that the cost of the building shell and
infrastructure plus the equipment to be used in the first two
bays will be approximately $7 million and is expected to be
completed during the Summer of 1997. The Company has and expects
to continue to finance this capital expansion from working
capital.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Commencing on September 11, 1996, the Company's Common Stock
began trading on the Nasdaq National Market. Prior to that time,
the Common Stock was traded on the Nasdaq SmallCap Market. The
Company's common stock trading symbol is "NZYM." The following
table sets forth the range of high and low sales prices for the
Common Stock for the period on and after September 11, 1996 and
the high and low bid quotations for the Common Stock prior to
September 11, 1996, all as reported by Nasdaq. The bid
quotations reflect inter-dealer prices, without retail markup,
markdown or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
1997 1996
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $10.75 $5.81 $3.06 $2.06
Second Quarter 8.25(1) 6.38(1) 4.75 3.06
Third Quarter 13.88 6.75 5.25 3.81
Fourth Quarter 13.63 6.88 5.88 4.06
</TABLE>
___________________________
(1)bid quotation
No dividends on the Company's Common Stock have been paid since
inception and the Company does not anticipate that dividends will
be paid in the foreseeable future. The number of record holders
of Common Stock as of May 23, 1997 was approximately 740.
RECENT SALES OF UNREGISTERED SECURITIES
On March 27, 1996, the Company issued 1,000,000 shares of Common
Stock to JB Partners pursuant to the exercise of a warrant for an
aggregate cash consideration of $1 million. JB Partners
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represented to the Company that it was an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act of
1933 (the "Securities Act"). The issuance of these securities
were exempt from registration pursuant to Rule 506 and Section
4(2) of the Securities Act.
The Company issued 50,000 shares of Common Stock to Eric D.
Emanuel on September 17, 1996 and to Sheldon Kraft on
September 19, 1996 pursuant to the exercise of warrants for an
aggregate cash consideration of $222,000. Messrs. Emanuel and
Kraft each represented to the Company that he was an "accredited
investor" within the meaning of Rule 501(a) under the Securities
Act. The issuance of these securities were exempt from
registration pursuant to Rule 506 and Section 4(2) of the
Securities Act.
On December 19, 1996, the Company issued 25,000 shares of Common
Stock to Page E. Golsan III pursuant to the exercise of a warrant
for an aggregate cash consideration of $45,250. Mr. Golsan
represented to the Company that he was an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act. The
issuance of these securities were exempt from registration
pursuant to Rule 506 and Section 4(2) of the Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of revenues represented by each item included in the
Statements of Income.
<TABLE>
<CAPTION>
Percentage of Revenues
Fiscal Year Ended March 31,
1997 1996 1995
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of Sales 39.9 43.5 48.5
----- ----- -----
Gross Profit 60.1 56.5 51.5
Research and Development 1.6 2.6 3.2
Selling, General and
Administrative 9.7 9.8 14.4
---- ---- ----
Operating Income 48.8 44.1 33.9
Other Income 3.0 3.4 1.3
Interest Expense - - 0.5
---- ---- ----
Income Before Income Taxes 51.8 47.5 34.7
Provision for Income Taxes 19.7 17.1 8.3
---- ---- ----
Net Income 32.1 30.4 26.4
==== ==== ====
</TABLE>
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Revenues
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Synthetech revenues were $12.80 million, $8.47 million, and $5.36
million in fiscal 1997, 1996 and 1995, respectively. This
reflects a 51% increase in revenues from fiscal 1996 to fiscal
1997 and a 58% increase in revenues from fiscal 1995 to fiscal
1996. The growth in revenues during the past two years has been
attributable to increased product sales reflecting continued
market development of the product line of Peptide Building Blocks
(PBBs). As a result of new products and increased volume of
existing products, sales of PBBs, the Company's primary product
line, were $12.80 million in fiscal 1997, up 52% over fiscal 1996
and $8.41 million in fiscal 1996, up 77% over fiscal 1995.
In fiscal 1997, based on an analysis of the Company's sales and
information to the extent available from customers, the Company
estimates that approximately 11% of the Company's PBB sales went
into marketed or "approved" drugs, approximately 83% went into
drugs in clinical or late pre-clinical trials and approximately
6% went into drugs at the R&D or discovery stage. In fiscal
1996, the Company estimates that approximately 12% of the
Company's PBB sales went into marketed or "approved" drugs,
approximately 80% went into drugs in clinical or late pre-
clinical trials and approximately 8% went into drugs at the R&D
or discovery stage. In fiscal 1995, the Company estimates that
approximately one-sixth of the Company's PBB sales went into
marketed or "approved" drugs, approximately two-thirds went into
drugs in clinical or late pre-clinical trials, and approximately
one-sixth went into drugs at the R&D discovery stage.
PBB orders associated with two customers represented 59% of
revenues for fiscal 1997. Revenues from these customers in
fiscal 1997 were $3.89 million and $3.65 million, respectively,
and in fiscal 1996 were only $309,000 and $1.97 million,
respectively. Sales of this magnitude, relative to the Company's
aggregate revenues, demonstrate the continuing potential for
fluctuations in revenues from period to period. Furthermore,
the customer with purchases of $3.65 million in fiscal 1997, and
a total of nearly $5.67 million from February 1995 through
October 1996, advised the Company in September 1996 that it was
pursuing an alternative, lower-cost manufacturing process and
discontinuing additional purchases. While the customer with
purchases of $3.89 million in fiscal 1997 continues to be an
important customer, this customer has indicated that its future
requirements will be based on the project moving to the next
phase of clinical development.
Looking ahead to fiscal 1998, the Company expects that it will
continue to be subject to the same market dynamics which can
cause substantial quarter to quarter revenue fluctuations as in
fiscal 1997 where the highest revenue quarter was over 2 1/2 times
the lowest revenue quarter. Although during the early part of
fiscal 1998 the Company does not foresee working on any PBB
orders similar in size to the two major orders last year, the
Company continues to believe strongly in the long-term
opportunities available in this market niche. For example,
during the fourth quarter of fiscal 1997, one customer advised
the Company that Synthetech is a named supplier for a peptide raw
material in their New Drug Application (NDA) filed with the Food
and Drug Administration ("FDA"). However, even with favorable
progress of this NDA, it is difficult to predict the timing,
magnitude and continuity of revenue from this customer.
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The Company has not yet established a stable baseload of demand
for its products. The Company's products are part of a new and
emerging market with sizable fluctuations in orders between
periods. In most instances, order or reorder cycles for products
are not predictable. Demand for PBBs is extremely variable
since the bulk of Synthetech's sales involve clinical trial
programs which are always subject to significant risk of suspension
or early cancellation. Further, only a small percentage of
drugs in clinical trial programs are ultimately approved for market
use. As a result, Synthetech expects to continue to see similar
or even greater fluctuations in its revenue from period to period.
(See "Industry Factors" below.)
There were no sales of other fine chemicals or grignard reagents
in fiscal 1997. Sales of grignard reagents and other fine
chemicals were $60,000 in fiscal 1996 and $513,000 in fiscal
1995. With the growth of PBB sales as the core business focus,
the Company no longer actively markets grignard and other fine
chemical products. However, with the completion of its new
facility expected in the Summer of 1997, the Company may again
explore other fine chemical and custom manufacturing
opportunities.
Gross Profit
- ------------
Gross profit was $7.70 million, $4.79 million and $2.76 million
in fiscal 1997, 1996 and 1995, respectively. This reflects a
60.8% increase in gross profit from fiscal 1996 to fiscal 1997
and a 73.5% increase in gross profit from fiscal 1995 to fiscal
1996. As a percent of revenues, gross profits were 60.1%, 56.5%
and 51.5% in fiscal 1997, 1996 and 1995, respectively. Increased
revenues positively affect gross profit margins since a portion
of the Company's manufacturing overhead costs are relatively
fixed. The mix of products sold during any period can also
significantly affect gross profit margins either positively or
negatively. The increase in the gross profit margins for fiscal
1997 over fiscal 1996 resulted primarily from the increased level
of revenues. The increase in gross profit margins for fiscal
1996 and fiscal 1995 resulted from the increased level of
revenues combined with the mix of products. The Company expects
revenues and product mix to continue to fluctuate from period to
period and cause variation in gross profit margins.
Operating Expenses
- ------------------
Research and development ("R&D") expense decreased to $211,000 or
1.6% of sales in fiscal 1997, from $217,000 or 2.6% of sales in
fiscal 1996. R&D expense was $169,000 or 3.2% in fiscal 1995.
The decrease from fiscal 1996 to fiscal 1997 primarily reflected
a temporary reduction of one technical employee. These figures,
however, do not completely reflect the Company's research and
development activity since substantial process development
efforts have been associated with initial orders for new products
and, accordingly, have been expensed as cost of sales associated
with the product revenue rather than as a research and
development expense. The Company estimates that its combined
research and development effort (including effort directly
associated with the sale of product) was approximately $346,000,
$364,000 and $293,000 during the fiscal years ended March 31,
1997, 1996 and 1995, respectively.
Selling, general and administrative ("SG&A") expense was $1.24
million, $833,000 and $774,000 in fiscal 1997, 1996 and 1995,
respectively. The increase in SG&A in fiscal 1997 from fiscal
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1996 principally reflected the addition of one staff employee,
base salary and bonus increases, and increases in marketing,
director and officer insurance and expenses related to the
Company's move to the Nasdaq National Market. SG&A expense in
fiscal 1996 and fiscal 1995 were relatively stable with the modest
increase in fiscal 1996 resulting from a one-time property
assessment which the Company expensed and slight increases in
other expenses resulting from the significant increase in sales.
SG&A as a percentage of sales was 9.7%, 9.8% and 14.4% for fiscal
1997, 1996 and 1995, respectively.
Operating Income
- ----------------
Operating income was $6.25 million in fiscal 1997, $3.74 million
in fiscal 1996 and $1.82 million in fiscal 1995. In fiscal 1997
labor costs (including bonus) increased nearly 23.9% reflecting
compensation increases and employee additions during the fiscal
year. In fiscal 1996, labor costs (including bonus) increased
28.9%, over half of such increase was attributable to
compensation increases and the remainder resulted from an
increase in employee hiring beginning in the second half of
fiscal 1995. As a percentage of revenues, operating income
increased to 48.8% in fiscal 1997 compared to 44.1% in fiscal
1996 and to 33.9% in fiscal 1995. The increase in operating
margin reflected the ability of the Company to significantly
increase its revenues and product volume without corresponding
increases in operating costs.
Other Income
- ------------
The $385,000 net other income in fiscal 1997 primarily resulted
from $376,000 of interest earnings. The $285,000 net other income
in fiscal 1996 primarily resulted from $242,000 of interest
earnings and $43,000 of recognized gain on the sale of securities
available for sale. The $70,000 net other income in fiscal 1995
primarily included $162,000 of interest earnings, reduced by
$38,000 in realized losses from the sale of marketable trading
securities, and a $56,000 write down of the Company's holdings of
marketable trading securities. In January 1995, the Company
discontinued its active trading policy with respect to its
marketable securities (see Note B to the Financial Statements for
a more detailed discussion).
Interest expense was $1,000 in fiscal 1997, $0 in fiscal 1996 and
$27,000 in fiscal 1995. Near the end of fiscal 1997, the Company
incurred $194,000 in wastewater system development charges
assessed by the City of Albany in connection with the Company's
plant expansion. This fee plus interest on the unpaid portion is
payable over the next ten years. Interest expense for fiscal 1995
was principally attributable to interest payments on the
Company's SBA loan which was repaid in full in February 1995.
Net Income
- ----------
In fiscal 1997, the Company earned $6.63 million before income
taxes. A provision for income taxes of $2.52 million resulted in
net income of $4.11 million. In fiscal 1996, the Company earned
$4.02 million before income taxes. A provision for income taxes
of $1.45 million resulted in net income of $2.57 million. The
provision for income taxes in fiscal 1996 was lower than fiscal
1997 primarily because it included a one-time credit of $132,000
from the State of Oregon. In fiscal 1995, the Company earned
$1.86 million before income taxes. A provision for income taxes
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of $444,000 resulted in net income of $1.42 million. The
provision for income taxes for fiscal 1995 included utilization
of all remaining federal net operating loss carryforwards.
INDUSTRY FACTORS
- ----------------
The market for PBBs is driven by the market for the peptide-based
drugs in which they are incorporated. The drug development
process is dictated by the marketplace, drug companies and the
regulatory environment. The Company has no control over the pace
of peptide-based drug development, which drugs get selected for
clinical trials, which drugs are approved by the FDA and, even if
approved, the ultimate potential of such drugs. Since there are
only a handful of approved peptide-based drugs on the market
today, this market is still very early in development and a
substantial amount of the activity is occurring at the earlier
stages of research and development and clinical trials.
Developments of new biological information, based on rational
drug design and combinatorial chemistry, are creating additional
peptide-based drug candidates. Cost pressures in the
pharmaceutical industry, however, have tightened the criteria
used to assess drug prospects at all phases of drug development
programs. Cost pressures in the pharmaceutical industry can also
cause pharmaceutical companies to investigate alternative drug
manufacturing processes which may not include the Company's
products as an intermediate.
As a supplier of building blocks for peptide-based drugs, the
Company's revenue will be affected by these industry factors.
Development cycles typically are quite prolonged. For instance,
in 1993 Synthetech began supplying a PBB for clinical trials to
one customer which recently filed a new drug application with the
FDA. Similarly, Synthetech began supplying PBBs at the early
development stages in 1990 for a peptide containing product which
Synthetech's customer recently commenced initial marketing
efforts. Also, the high cancellation rate for drug development
programs results in a significant likelihood that there will be
no subsequent or "follow-on" PBB sales for any particular drug
development program. Since the Company's revenue comes
predominantly from PBBs used in drug development programs, the
overall impact on the Company's business from the cancellation
rate will depend, to a large extent, on the rate of new drug
development efforts being commenced.
The advancement of a drug for which Synthetech is providing PBBs
from a drug development program into an "approved" status by the
FDA could also significantly affect the Company's business if
Synthetech is able to continue to supply the PBBs for the
approved drug. With the increased volume typically associated
with "approved" drugs, the Company, however, expects to face
increased competition for this business.
Due to the wide range of drugs under development at various
stages, sizable fluctuations in orders, and the unpredictability
of order or reorder cycles for products and the other factors
discussed herein, the Company does not have a stable baseload of
demand for its products and cannot estimate the potential market
for its products. Moreover, the Company's customers vary
substantially from year to year and the Company currently cannot
rely on any one customer as a constant source of revenue. For
the foregoing reasons, the Company has experienced in the past,
and is likely to experience in the future, significant
fluctuations in its quarterly results.
11
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1997, the Company had working capital of
$9.24 million compared to $8.16 million at March 31, 1996 and
$3.57 million at March 31, 1995. The Company's cash, cash
equivalents and short-term securities available for sale at
March 31, 1997 totaled $6.92 million. In addition, the Company
has a $1,000,000 bank line of credit. This line of credit is
secured by the Company's chattel paper, accounts, contract rights
and general intangibles. As of March 31, 1997 there was no
amount outstanding under the bank line.
The decrease in accounts receivable to $695,000 at March 31, 1997
from $1.36 million at March 31, 1996 and from $840,000 at
March 31, 1995 reflects the lower level of revenues in the fourth
quarter of fiscal 1997 compared to prior years. The increase in
income tax receivable to $798,000 at March 31, 1997 from $152,000
at March 31, 1996 reflects the income tax benefit to the Company
associated with certain sales of stock by employees and others
within one year of their exercising stock options and warrants.
Inventory at March 31, 1997 decreased to $1.89 million from
$1.92 million at March 31, 1996. Inventory was $1.58 million at
March 31, 1995.
In September 1995, in response to approaching manufacturing
capacity constraints in its existing facility, the Company
announced plans to construct a new plant to increase its capacity
to produce PBBs and other fine chemicals. The Company is
currently in the later stages of plant construction and expects
completion of the expansion project during the Summer of 1997-a
delay of a few months past the original target date resulting
from weather and permit delays. The overall engineering,
construction and equipment costs will be approximately
$7 million. The Company is currently operating three production
shifts, five days a week at its present facility. See Item 2,
"Properties."
The Company's capital costs were approximately $5.29 million
during fiscal 1997, $4.55 million of which were for the plant
expansion and $740,000 for the existing plant and equipment. In
addition to the completion of the new plant which the Company
expects will cost an additional amount of approximately
$2.2 million in fiscal 1998, the Company currently anticipates
acquiring up to $500,000 of additional equipment and upgrades for
the existing plant and equipment during fiscal 1998. The
Company expects to finance a majority of these capital
expenditures from internal cash flow.
The Company owns its facility and all of its equipment. See
Note D of the Notes to Financial Statements for a description of
the Company's property, plant and equipment.
12
<PAGE> 14
ITEM 7. FINANCIAL STATEMENTS
Index Page
Report of Independent Public Accountants for the years ended
March 31, 1997, 1996 and 1995............................... 14
Financial Statements:
Balance Sheets as of March 31, 1997 and 1996.............. 15
Statements of Income for the years ended March 31, 1997,
1996 and 1995............................................ 17
Statements of Shareholders' Equity for the years ended
March 31, 1997, 1996 and 1995............................ 18
Statements of Cash Flows for the years ended March 31,
1997, 1996, and 1995..................................... 19
Notes to Financial Statements:
Note A - General and Business............................. 20
Note B - Summary of Significant Accounting Policies....... 20
Note C - Inventories...................................... 21
Note D - Property, Plant and Equipment.................... 21
Note E - Income Taxes..................................... 22
Note F - Line of Credit................................... 22
Note G - Note Payable..................................... 23
Note H - Shareholders' Equity............................. 23
Note I - 401(k) Profit Sharing Plan....................... 25
Note J - Segment Information.............................. 26
Note K - New Accounting Pronouncement..................... 26
13
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Synthetech, Inc.:
We have audited the accompanying balance sheets of Synthetech,
Inc. (an Oregon corporation) as of March 31, 1997 and 1996, and
the related statements of income, shareholders' equity and cash
flows for each of the three years in the period ended March 31,
1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Synthetech, Inc. as of March 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the
three years in the period ended March 31, 1997 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Portland, Oregon,
May 16, 1997
14
<PAGE> 16
<TABLE>
<CAPTION>
SYNTHETECH, INC.
BALANCE SHEETS
------------------
At March 31, 1997 1996
- ------------------ ---- ----
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 6,740,000 $ 5,049,000
Securities available for sale 176,000 395,000
Accounts receivable, less allowance
for doubtful accounts of $15,000 for
1997 and 1996 695,000 1,355,000
Inventories 1,887,000 1,924,000
Prepaid expenses 164,000 71,000
Income tax receivable 798,000 152,000
Deferred income taxes 56,000 59,000
Other current assets 4,000 1,000
---------- ----------
TOTAL CURRENT ASSETS 10,520,000 9,006,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net 6,339,000 1,311,000
SECURITIES AVAILABLE FOR SALE 450,000 626,000
OTHER ASSETS 14,000 16,000
---------- ----------
TOTAL ASSETS $ 17,323,000 $ 10,959,000
============= =============
</TABLE>
See notes to financial statements.
15
<PAGE> 17
<TABLE>
<CAPTION>
SYNTHETECH, INC.
BALANCE SHEETS
-------------------
(continued)
At March 31, 1997 1996
- ------------ ---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of note payable $ 13,000 $ -
Accounts payable 543,000 271,000
Accrued compensation 674,000 479,000
Deferred revenue 44,000 98,000
Other accrued liabilities 4,000 1,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,278,000 849,000
DEFERRED INCOME TAXES 68,000 10,000
NOTE PAYABLE, net of current portion 180,000 -
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding,
13,860,000 and 13,475,000 shares 14,000 13,000
Paid-in capital 8,296,000 6,589,000
Employee notes receivable and deferred
compensation (239,000) (130,000)
Unrealized gain on securities available for sale 16,000 30,000
Retained earnings 7,710,000 3,598,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 15,797,000 10,100,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,323,000 $ 10,959,000
============= =============
</TABLE>
See notes to financial statements.
16
<PAGE> 18
<TABLE>
<CAPTION>
SYNTHETECH, INC.
STATEMENTS OF INCOME
--------------------
For The Years Ended March 31, 1997 1996 1995
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
REVENUES $12,797,000 $8,472,000 $5,357,000
COST OF SALES 5,103,000 3,685,000 2,598,000
---------- ---------- ----------
GROSS PROFIT 7,694,000 4,787,000 2,759,000
---------- --------- ----------
Research and development 211,000 217,000 169,000
Selling, general and administrative 1,235,000 833,000 774,000
--------- --------- -------
OPERATING EXPENSE 1,446,000 1,050,000 943,000
--------- --------- ---------
OPERATING INCOME 6,248,000 3,737,000 1,816,000
OTHER INCOME 385,000 285,000 70,000
INTEREST EXPENSE 1,000 - 27,000
--------- -------- -------
INCOME BEFORE INCOME TAXES 6,632,000 4,022,000 1,859,000
PROVISION FOR INCOME TAXES 2,520,000 1,448,000 444,000
--------- --------- ---------
NET INCOME $ 4,112,000 $ 2,574,000 $ 1,415,000
========== ========== ==========
NET INCOME PER COMMON SHARE $0.29 $0.19 $0.11
===== ===== =====
SHARES USED IN PER SHARE
CALCULATION 14,117,041 13,727,960 12,969,701
========== ========== ==========
</TABLE>
See notes to financial statements.
17
<PAGE> 19
<TABLE>
<CAPTION>
SYNTHETECH,INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
----------------------------------
For the Years Ended March 31,
- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
EMPLOYEE UNREALIZED
NOTES GAIN ON RETAINED
RECEIVABLE SECURITIES EARNINGS
---COMMON STOCK--- PAID-IN & DEFERRED AVAILABLE (ACCUMULATED)
SHARES AMOUNT CAPITAL COMPENSATION FOR SALE DEFICIT)
---------- ------- ---------- ----------- ------- ----------
BALANCE, March 31, 1994 12,011,000 $12,000 $5,152,000 $ - $ - ($391,000)
Issuance of stock for the
exercise of stock options 43,000 - 37,000 - - -
Income tax benefit of
disqualifying dispositions - - 7,000 - - -
Unrealized gain on securities
available for sale - - - - 27,000 -
Net income - - - - - 1,415,000
---------- ------ --------- -------- ------ ---------
BALANCE, March 31, 1995 12,054,000 12,000 5,196,000 - 27,000 1,024,000
Issuance of stock for the
exercise of stock options 421,000 - 255,000 - - -
Issuance of stock for the
exercise of stock warrant 1,000,000 1,000 992,000 - - -
Issuance of below market
stock options - - 70,000 (70,000) - -
Amortization of deferred
compensation - - - 20,000 - -
Employee notes receivable - - - (80,000) - -
Income tax benefit of
disqualifying dispositions - - 76,000 - - -
Unrealized gain on securities
available for sale - - - - 3,000 -
Net income - - - - - 2,574,000
---------- ------ --------- --------- ------ ---------
BALANCE, March 31, 1996 13,475,000 13,000 6,589,000 (130,000) 30,000 3,598,000
Issuance of stock for the
exercise of stock options 260,000 1,000 322,000 - - -
Issuance of stock for the
exercise of stock warrants 125,000 - 228,000 - - -
Issuance of below market stock
options - - 284,000 (284,000) - -
Amortization of deferred
compensation - - - 125,000 - -
Payment on employee note
receivable - - - 50,000 - - - -
Income tax benefit of
exercise of stock warrants - - 216,000 - - -
Income tax benefit of
disqualifying dispositions - - 657,000 - - -
Unrealized loss on securities
available for sale - - - - (14,000) -
Net income - - - - - 4,112,000
---------- ------- ---------- ---------- ------- ----------
BALANCE, March 31, 1997 13,860,000 $14,000 $8,296,000 ($239,000) $16,000 $7,710,000
========== ======= ========== ========== ======= ==========
</TABLE> 18
See notes to financial statements.
<PAGE> 20
<TABLE>
<CAPTION>
SYNTHETECH, INC.
STATEMENTS OF CASH FLOWS
------------------------
For The Years Ended March 31, 1997 1996 1995
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,112,000 $2,574,000 $1,415,000
Adjustments to reconcile net income to
net cash provided by operating
activities-
Depreciation, amortization and
other 268,000 205,000 165,000
Amortization of deferred
compensation 105,000 20,000 -
Gain on sales of property, plant
and equipment - - (18,000)
Loss on marketable trading
securities - - 95,000
Purchases of marketable trading
securities - - (944,000)
Proceeds from sale of marketable
trading securities - - 906,000
Accrued interest on securities
available for sale 9,000 13,000 -
Realized gain on securities
available for sale (10,000) (43,000) -
Deferred income taxes 61,000 (16,000) (22,000)
(Increase) decrease in assets:
Accounts receivable, net 660,000 (515,000) (328,000)
Inventories 37,000 (343,000) (84,000)
Prepaid expenses (93,000) (17,000) 2,000
Income tax receivable (646,000) (152,000) -
Other assets (1,000) 6,000 (6,000)
Increase (decrease) in liabilities:
Accounts payable and accrued
liabilities 470,000 355,000 (6,000)
Deferred revenue (54,000) 98,000 -
---------- ---------- ----------
Net cash provided by operating
activities 4,918,000 2,185,000 1,175,000
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment
purchases (5,079,000) (461,000) (218,000)
Proceeds from sale of securities
available for sale - - 18,000
Proceeds from redemption of
securities available for sale 380,000 882,000 -
Employee notes receivable 50,000 (80,000) -
---------- ---------- ----------
Net cash provided by (used by)
investing activities (4,649,000) 341,000 (200,000)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term
debt obligations (1,000) - (399,000)
Proceeds from stock option exercises
and disqualifying dispositions 979,000 331,000 44,000
Proceeds from stock warrant
exercises, including tax benefit 444,000 993,000 -
---------- ---------- ----------
Net cash provided by (used by)
financing activities 1,422,000 1,324,000 (355,000)
---------- ---------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,691,000 3,850,000 620,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 5,049,000 1,199,000 579,000
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR $6,740,000 $5,049,000 $1,199,000
=========== =========== ===========
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Unrealized gain (loss) on securities
available for sale ($14,000) $3,000 $27,000
Issuance of stock options at below
fair value $284,000 $70,000 -
Issuance of note payable for capital
improvement $194,000 - -
</TABLE>
See notes to financial statements.
19
<PAGE> 21
SYNTHETECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A. GENERAL AND BUSINESS
Synthetech, Inc., an Oregon corporation, produces specialty
amino acids and other fine chemicals using a combination of
organic chemistry and biocatalysis. The Company's primary
product emphasis is on specialty amino acids referred to as
Peptide Building Blocks which are sold domestically and
internationally to companies developing peptide-based
pharmaceuticals.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents
include demand cash and all investments purchased with an
original maturity of three months or less.
Securities Available For Sale: In January, 1995, the
Company discontinued its active trading policy with respect
to its marketable securities, due to current market
conditions. The Company no longer intends to actively trade
these marketable securities. The securities may be held
until maturity depending upon the Company's cash flow needs
or until changes in the investment markets dictate
otherwise. Accordingly, all investments as of March 31,
1997 and 1996 have been reflected as securities available
for sale and any unrealized gain or loss reflected as a
separate component of shareholders' equity in accordance
with SFAS 115.
Securities available for sale consist mostly of government
obligations which mature during 1998 and 1999. The Company
determines cost basis in its investments using the specific
identification method. As of March 31, 1997 and 1996, the
difference between the fair market value and cost of the
Company's investments were insignificant.
Property, Plant and Equipment: Property, plant and
equipment are recorded at cost. Depreciation and
amortization are provided on the straight-line method over
seven to forty years for buildings and land improvements, and
five to seven years on all other property. When property
is sold or retired, the cost and accumulated depreciation
reserves are removed from the accounts and the resulting gain
or loss is included in income.
Revenue Recognition: Sales of products are recognized when
products are shipped.
Research and Development Costs: Research and development
costs are expensed as incurred.
Other Assets: Other assets primarily represent patent
costs, which are amortized over the useful life of the
patent.
Earnings Per Share: Net income per common and common
equivalent share, as presented on the accompanying
Statements of Income is calculated by dividing net income by
the weighted average number of common stock and common stock
equivalents outstanding during the period,
20
<PAGE> 22
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
calculated using the treasury stock method in accordance
with APB Opinion 15, "Earnings per Share." The Company's
common stock equivalents consist of dilutive shares issuable
upon the exercise of outstanding common stock options and
warrants. The shares used in the basic earnings per share
calculation for 1997, 1996 and 1995 were 13,659,927,
12,255,635 and 12,029,908, respectively, while the shares
used in the earnings per share calculation for 1997, 1996
and 1995 were 14,117,041, 13,727,960 and 12,969,701,
respectively.
Supplemental cash flow disclosures are as follows:
Cash Paid During The Year For:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
Income Taxes $ 2,232,000 $ 1,586,000 $ 430,000
Interest $ 1,000 $ - $ 29,000
</TABLE>
NOTE C. INVENTORIES
Inventories are stated at the lower of cost or market,
determined on the first-in, first-out (FIFO) basis. Cost
utilized for inventory purposes include labor, material, and
manufacturing overhead.
The major components of inventories are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31,
1997 1996
Finished products $ 779,000 $ 685,000
Work-in-process 440,000 414,000
Raw materials 668,000 825,000
---------- ----------
$1,887,000 $1,924,000
========== ==========
</TABLE>
NOTE D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31,
1997 1996
Land $ 91,000 $ 91,000
Buildings 658,000 594,000
Machinery and equipment 1,561,000 1,115,000
Laboratory equipment 286,000 276,000
Furniture and fixtures 161,000 106,000
Vehicles 26,000 26,000
Construction in progress 4,977,000 259,000
---------- ----------
7,760,000 2,467,000
Less:
Accumulated depreciation 1,421,000 1,156,000
---------- ---------
$6,339,000 $1,311,000
========== ==========
</TABLE>
21
<PAGE> 23
NOTE E. INCOME TAXES
The Company accounts for income taxes under the asset and
liability method as defined by the provisions of Statement
of Financial Accounting Standards No. 109 (SFAS 109),
Accounting for Income Taxes. Under this method, deferred
income taxes are recognized for the future tax consequences
attributable to temporary differences between the financial
statement carrying amounts and tax balances of existing
assets and liabilities. Deferred tax assets and liabilities
are measured using the enacted rates expected to apply to
taxable income in the years which those temporary
differences are expected to be recovered or settled.
The provision for income taxes in fiscal 1997 includes a
deferred tax provision of $61,000. The provision for income
taxes in fiscal 1996 and fiscal 1995 includes deferred tax
benefits of $16,000 and $22,000, respectively.
Total deferred tax assets and liabilities at March 31, 1997
were $56,000 and $68,000, respectively. Total deferred tax
assets and liabilities at March 31, 1996, were $59,000 and
$10,000, respectively. There were no individually
significant temporary differences at March 31, 1997 or 1996.
The reconciliation between the effective tax rate and the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
Statutory federal tax rate 34.0% 34.0% 34.0%
Federal net operating
loss utilized - - (5.9)%
Federal general business
credit utilized - - (6.9)%
Federal alternative
minimum tax (credit) - - (1.7)%
State taxes 4.4% 2.0% 4.4%
Foreign sales
corporation benefit (1.5)% - -
Other 1.1% - -
----- ----- -----
Effective tax rate 38.0% 36.0% 23.9%
===== ===== =====
</TABLE>
NOTE F. LINE OF CREDIT
The Company has a line of credit available with a bank in
the amount of $1 million with an applicable interest rate of
8.5% at March 31, 1997. There were no amounts outstanding
under this loan at the end of the fiscal year. This line of
credit is renewable on an annual basis.
22
<PAGE> 24
NOTE G. NOTE PAYABLE
The Company entered into a note payable with the City of
Albany for payment of wastewater system development charges
assessed in connection with the Company's plant expansion.
The note bears interest of 9.0% and is due on monthly
installments of $2,459 through February 2007. The note is
secured by the building under construction.
NOTE H. SHAREHOLDERS' EQUITY
On March 27, 1996, JB Partners exercised the warrant
purchased as part of a stock and warrant sale in 1991. The
exercise price of the 5-year, nontransferable warrant was
$1.00 per share and the net proceeds to the Company were
$993,000.
On September 17 and 19, 1996 the Emanuel and Company warrant
authorized by the Board of Directors on February 5, 1992 was
exercised. The exercise price of the 5-year warrant for
100,000 shares was $2.22 per share. On December 19, 1996
Mr. Page Golsan, III exercised the warrant authorized by the
Board of Directors on January 7, 1992. The exercise price
of the 5-year warrant for 25,000 shares was $1.81 per share.
The net proceeds of these warrant exercises was $228,000.
As of March 31, 1997, there were no stock warrants
outstanding.
During 1995, the Financial Accounting Standards Board issued
SFAS No. 123 which defines a fair value based method of
accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method
of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the method
of accounting prescribed in APB 25. Entities electing to
remain with the accounting in APB 25 must make pro forma
disclosures of net income and, if presented, earnings per
share, as if the fair value based method of accounting
defined in the Statement had been applied.
The Company has elected to account for its stock-based
compensation plan under APB 25. However, the Company has
computed, for pro forma disclosure purposes, the value of
all options granted during fiscal 1997 and fiscal 1996 using
the Black-Scholes option-pricing model as prescribed by SFAS
No. 123, using the following weighted average assumptions
for grants in fiscal 1997 and fiscal 1996:
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year
1997 1996
---- ----
Risk-free interest rate 6.49% 6.26%
Expected dividend yield 0% 0%
Expected life 3.89 years 3.89 years
Expected volatility 49-50% 49-67%
</TABLE>
23
<PAGE> 25
NOTE H. SHAREHOLDERS' EQUITY (CONTINUED)
The total value of options granted during fiscal 1997 and
fiscal 1996 would be amortized on a pro forma basis over the
vesting period of the options. Options generally vest
equally over two years. If the Company had accounted for
these options in accordance with SFAS No. 123, the Company's
net income and net income per share would have decreased as
reflected in the following pro forma amounts:
<TABLE>
<CAPTION>
<S> <C> <C>
Years ended March 31,
1997 1996
---- ----
Net income:
As reported $4,112,000 $2,574,000
Pro forma $3,461,000 $2,390,000
Net income per share:
As reported $ 0.29 $ 0.19
Pro forma $ 0.25 $ 0.18
</TABLE>
Under the Amended and Restated 1990 Stock Option Plan
1,600,000 shares were authorized for issuance. A total of
1,491,160 options were granted under this plan. A total of
864,240 options have been exercised and 55,110 options have
been cancelled as of March 31, 1997 under the plan since its
inception. The options granted under this plan vest over a
two year period from the beginning of the fiscal year in
which the options are granted and a maximum term of 5 years.
The 1995 Incentive Compensation Plan authorized 902,000
shares of the Company's stock to be issued. This Plan is
the successor to the Amended and Restated 1990 Stock Option
Plan. No further grants will be made under the original
Plan. A total of 349,000 options have been granted under
this plan. A total of 3,000 options have been exercised and
4,000 options have been cancelled as of March 31, 1997 under
the plan since its inception. The options granted under
this plan generally vest from 50% after one year of
employment and 100% after 2 years of employment, however, to
a lesser extent, some options vest in less than a year and
others up to five years. Options granted under this Plan
have a maximum term of 10 years. The 1995 Incentive
Compensation Plan was amended in November 1996 to permit
granting of non-qualified options to directors who are not
employees of the Company.
24
<PAGE> 26
NOTE H. SHAREHOLDERS' EQUITY (CONTINUED)
Activity under the Amended and Restated 1990 Stock Option
Plan and 1995 Incentive Compensation Plans over the last two
fiscal years is summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years ended March 31, 1997 1996
---- ----
Wtd. Wtd.
Avg. Avg.
Ex. Ex.
Shares Price Shares Price
_______ _____ _______ _____
Options outstanding at
beginning of year 871,960 $2.02 1,059,499 $1.36
Granted 330,000 $7.40 269,000 $2.67
Exercised (275,950) $1.58 (450,789) $0.85
Cancelled (12,200) $4.70 (5,750) $2.61
-------- ----- -------- -----
Options outstanding at
end of year 913,810 $4.06 871,960 $2.02
======= ===== ======= =====
Exercisable at end of year 484,010 $2.08 512,710 $1.64
Weighted average fair value
of options granted at
market value - $3.78 - $1.57
Weighted average fair value
of options granted at below
market value - $5.86 - $2.68
</TABLE>
The following table sets forth the exercise price range, number of
shares outstanding at March 31, 1997, weighted average remaining
contractual life, weighted average exercise price, number of
exercisable shares and weighted average exercise price of exercisable
options by groups of similar price and grant date:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding Options exercisable
----------------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Exercise Outstanding Remaining Average Average
Price Shares Contractual Exercise Exerciseable Exercise
Range at 3/31/97 Life(years) Price Options Price
---------- ------- ----- ----- -------- -----
$0.30-$0.51 16,000 8.68 $0.44 10,500 $0.41
$1.72-$1.81 257,460 2.73 $1.74 223,960 $1.73
$2.22-$2.84 364,350 2.71 $2.59 249,550 $2.47
$7.50-$8.50 276,000 9.21 $8.39 - -
</TABLE>
NOTE I. 401(k) PROFIT SHARING PLAN
The Company established a 401(k) Profit Sharing Plan on
April 1, 1992. This plan is offered to eligible employees,
who may elect to contribute up to 15% of compensation and
includes a Company matching contribution. Beginning in
April 1996, the Company amended the Plan to change the
matching contribution to $.50, $.75 and $1.00 for each $1.00
contributed up to 10% of compensation corresponding to
length of service with the Company. Prior to this amendment
the Company matching contribution was $.50 for each $1.00
contributed by each employee up to 10% of compensation. The
Company contribution becomes fully vested for each employee
after 5 years of employment. The Company matching
contribution for fiscal years 1997, 1996, and 1995 was
$77,000, $42,000 and $37,000, respectively.
25
<PAGE> 27
NOTE J. SEGMENT INFORMATION
Significant Customers: During fiscal year 1997, two
customers accounted for 30% and 29% of revenues. During
fiscal year 1996, two customers accounted for 23% and 11% of
revenues. During fiscal year 1995, two customers accounted
for 27% and 11% of revenues.
The following table reflects foreign sales and percent of
total sales by country:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
---- ---- ----
Europe $ 1,262,000 9.9% $ 1,252,000 14.8% $ 762,000 14.2%
Japan $ 2,880,000 22.5% $ 528,000 6.2% $ 258,000 4.8%
</TABLE>
NOTE K. NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings per Share", superseding
Opinion 15. SFAS No. 128 requires the calculation and
disclosure of Basic Earnings per Share and Diluted Earnings
per Share, effective for both interim and annual periods
ending after December 15, 1997. Basic earnings per share
are computed by dividing net income by the weighted average
number of shares of common stock outstanding during the
period. Diluted earnings per share are computed by dividing
net income by the weighted average number of shares of
common stock and common stock equivalents outstanding during
the period, calculated using the treasury stock method as
defined in SFAS No. 128. In accordance with the provisions
of SFAS No. 128, the Company is providing pro forma
disclosure of the effects of this accounting change on
reported earnings per share (EPS) data as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Primary EPS as reported $0.29 $0.19 $0.11
Effect of SFAS No. 128 $0.01 $0.02 $0.01
----- ----- -----
Basic EPS as restated $0.30 $0.21 $0.12
===== ===== =====
Primary EPS as reported $0.29 $0.19 $0.11
Effect of SFAS No. 128 - - -
----- ----- -----
Diluted EPS as restated $0.29 $0.19 $0.11
===== ===== =====
Weighted average shares
outstanding for Basic EPS 13,659,927 12,255,635 12,029,908
Common stock options and
warrants issuable under
treasury stock method 457,114 1,472,325 939,793
---------- ---------- ----------
Weighted average common and
common equivalent shares
outstanding for Diluted EPS 14,117,041 13,727,960 12,969,701
========== ========== ==========
</TABLE>
26
<PAGE> 28
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information concerning the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Position
---- --- --------
M. ("Sreeni") 48 President, Chief Executive
Sreenivasan Officer and Director
Philip L. Knutson 47 Vice President of Research
and Development
Charles B. Williams 50 Vice President of
Administration and
Finance, Chief Financial
Officer, Secretary and
Treasurer
Jay A. Bouwens 51 Vice President of
Manufacturing
Paul C. Ahrens 45 Chairman of the Board
Howard L. Farkas 73 Director
Page E. Golsan, III 59 Director
</TABLE>
The following is a brief account of the business experience of each
executive officer and director of the Company.
M. "Sreeni" Sreenivasan. Mr. Sreenivasan has served as President
and Chief Executive Officer since March 31, 1995 and as Chief
Operating Officer from 1990 through March 31, 1995. Mr. Sreenivasan
has also served as a director since 1995. From 1988 to 1990 he was
Executive Vice President and General Manager and from 1987 to 1988 he
was director of Manufacturing. Previously, he worked for Ruetgers-
Nease Chemical Co. (bulk pharmaceuticals and other fine chemicals) for
13 years in various technical and manufacturing management capacities,
including 7 years as Plant Manager of their Augusta, Georgia plant.
Mr. Sreenivasan received his M.S. in Chemical Engineering from
Bucknell University and his M.B.A. from Penn State University.
27
<PAGE> 29
Philip L. Knutson, Ph.D. Dr. Knutson has served as Vice President of
Research and Development since 1988. Dr. Knutson is responsible for
process development, "kilo lab" production and production support.
From 1986 to 1988, he was a Senior Research Chemist with the Company.
Prior thereto, Dr. Knutson was a Senior Research Chemist at Ash
Stevens, Inc. in Detroit, Michigan for 7 years. He received his B.A.
degree from Luther College, Decorah, Iowa and his M.A. and Ph.D. in
Organic Chemistry from the University of Missouri - Columbia.
Charles B. Williams. Mr. Williams has served as Vice President of
Finance and Administration and Treasurer since 1990. In 1995, he
became the Secretary of the Company and in July 1995, he also became
Chief Financial Officer. Mr. Williams is responsible for accounting,
administration, finance, personnel and information systems. From 1988
to 1990, Mr. Williams served as the Controller. Prior thereto, he was
Controller for White's Electronics, Inc. of Sweet Home, Oregon for 5
years. His responsibilities at White's Electronics included
accounting, data processing, personnel and finance. From 1976 to 1983,
he held several accounting and financial positions with Teledyne Wah
Chang, a metals producer in Albany, Oregon. Mr. Williams earned his
B.S. in Economics and M.B.A. from Oregon State University.
Jay A. Bouwens. Mr. Bouwens has served as Vice President of
Manufacturing since 1996. From 1994 to 1996, he was director of
Manufacturing with the Company. From 1992 to 1994, Mr. Bouwens was
the Pilot Plant Manager at Ash Stevens, Inc. in Detroit, Michigan.
From 1990 to 1992 he was Production Manager for Poly Organix in
Newburyport, Massachusetts. From 1967 to 1990 he held various
chemical manufacturing positions, including Process Manager for Wyeth-
Ayerst laboratories in Rouses Point, New York. Mr. Bouwens received
his B.S. in Chemistry from the University of Michigan.
Paul C. Ahrens. Mr. Ahrens has been a director of the Company since
its inception in 1981 and became Chairman of the Board effective March
31, 1995. Since 1996, he has been the founder and President of
Groovie Moovies, Ltd., a film production company. Mr. Ahrens, a
founder of the Company, served as President and Chief Executive
Officer of Synthetech from 1989 through March 1995. From 1981 through
1989 he was the Vice President of Technology. He also served as
Secretary of the Company from 1981 through 1995. From 1979 to 1980,
Mr. Ahrens served as Vice President of Engineering of Colorado Organic
Chemical Company, an organic chemical manufacturing company located in
Commerce City, Colorado. Prior thereto, Mr. Ahrens spent five years
with Allied Chemical and CIBA-Geigy in various engineering and
research capacities. Mr. Ahrens holds B.S. and M.S. degrees in
Chemical Engineering from M.I.T.
Howard L. Farkas. Mr. Farkas has served as a director of the Company
since 1985. Since 1981, he has been the President of Farkas Group,
Inc., and since 1992 he has been President of Windsor Gardens Realty,
Inc., both of which are engaged in general real estate brokerage and
management activities. From 1984 to 1996, he was also the managing
director in Manistee Gas Limited Liability Company, which is in the
gas production and processing business. Since 1986, Mr. Farkas has
also served as Secretary and a director of Acquisition Industries,
Inc., a publicly owned acquisition and merger company. Mr. Farkas
serves as the Chairman of the Board of Logic Devices, Inc., a
Sunnyvale, California company specializing in CMOS digital signal
process semiconductor and SRAM chips, and as a director in various natural
resource and other commercial companies. Since May 1988, Mr. Farkas
has also been a vice president of G.A.S. Corp., which is a general
28
<PAGE> 30
partner of an Oklahoma limited partnership, Gas Acquisition Services,
which filed for bankruptcy under Chapter 11. Though not presently in
public or private practice, he has been a certified public accountant
since 1951. Mr. Farkas received a B.S. (B.A.) from the University of
Denver.
Page E. Golsan, III. Mr. Golsan has served as a director of the
Company since 1991. Since 1986, he has been a principal of P.E.
Golsan & Co. (formerly Golsan Management Company), a private capital
management firm. From 1990 to 1992, Mr. Golsan was a senior advisor
with Bane Barham & Holloway, registered investment advisors under the
Investment Advisor Act of 1940. Since 1990 Mr. Golsan has been
President and Chief Executive Officer of Bridgetown Capital, Inc., an
investment company. From 1987 to 1989 he was the Executive Vice
President of Calumet Industries, Inc., Chicago, Illinois (manufacturer
and marketer of petro-chemicals and other fine chemicals). Prior to
1987, he was the President and Chief Operating Officer of the K&W
Products Division (specialty chemical manufacturing) of Berkshire
Hathaway, Inc. Mr. Golsan holds an M.A. in Finance from Claremont
Graduate School of Business and a Doctorate in Pharmacy and a B.A. in
Chemistry and Zoology, both from the University of Southern
California.
In connection with the issuance of common stock and a warrant to JB
Partners, an investment partnership affiliated with Peter B. Cannell &
Co. Inc., a New York investment management firm, the directors and
officers of Synthetech (other than Mr. Golsan who was not a director
at the time) have entered into an agreement to vote shares of
Synthetech owned by them for the election of a nominee to the Board of
Directors selected by JB Partners. Unless terminated earlier under
certain circumstances, this agreement will continue until 1998. JB
Partners has advised Synthetech that it will not select a nominee for
election at the upcoming Annual Meeting of Shareholders.
Schedule 16(a) Beneficial Ownership Reporting Compliance
- --------------------------------------------------------
Messrs. Farkas and Golsan, each a director of the Company, failed to
report one and two transactions, respectively, on a timely basis in
compliance with Section 16(a) of the Securities Exchange Act of 1934
("Section 16(a)"). In addition, JB Partners, a 10% shareholder,
during Fiscal 1997, failed to report one transaction on a timely basis
in compliance with Section 16(a). The Company has now adopted
procedures to assist its directors and officers in complying with
Section 16(a), which includes assisting them in preparing the forms
for filing.
29
<PAGE> 31
ITEM 10. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
- ----------------------------------------------
The following table provides certain summary information concerning
compensation paid by the Company to those persons who were at
March 31, 1997, the Company's Chief Executive Officer, the three other
executive officers of the Company and one other Company employee whose
salary and bonus exceeded $100,000 during the last fiscal year (the
"Named Persons ") for the fiscal years ended March 31, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Summary Compensation Table
--------------------------
Long-Term All Other
Annual Compensation Compensation Compensation($)(2)
Name and ---------------------- ------------ ------------------
Principal Year Salary Bonus Stock
Position (1) ($) ($) Options (#)
- -------- ---- ------ ------ ----------- ------------------
M. ("Sreeni") 1997 150,000 95,000 50,000 7,125
Sreenivasan 1996 132,000 60,000 66,000 3,203
President & 1995 113,400 28,000 52,000 4,688
Chief Executive
Officer
Philip L. 1997 108,000 63,000 40,000 9,500
Knutson 1996 95,000 43,000 50,000 3,531
Vice President 1995 87,150 24,000 40,000 4,672
of Research and
Development
Charles B. 1997 88,000 57,000 32,000 6,544
Williams 1996 75,000 35,000 34,000 3,122
Vice President 1995 67,200 20,000 25,000 3,130
of Finance and
Administration
Jay A. Bouwens 1997 87,000 55,000 28,000 4,356
Vice President 1996 74,000 35,000 15,000 1,863
of 1995 34,149(3) 8,750(3) - -
Manufacturing
Mitchell A. 1997 74,250 30,000 - -
McVay 1996 10,000(4) 1,200(4) 8,000 -
Plant Engineer
</TABLE>
_______________________
(1)Fiscal year ended March 31.
(2)Represents Company contributions to the account of the Named
Persons under the Company's 401(k) plan.
(3)Mr. Bouwens was hired in September 1994.
(4)Mr. McVay was hired in February 1996.
30
<PAGE> 32
Stock Option Grants in Last Fiscal Year
- ---------------------------------------
The following table provides information, with respect to the Named
Persons, concerning the grant of stock options during fiscal year
1997.
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C>
Stock Options Grants in the Last Fiscal Year(1)
-----------------------------------------------
% of
Total Fair
Options Options Exercise Market
Granted Granted or Value Expiration
(#) to Base at Date Date
Employees Price of
in ($/Sh) Grant(3)
Fiscal ($)
Name Year(2)
- ------------- -------- ------- ----- ----- ------
M. ("Sreeni") 50,000 20% $8.50 $8.50 May 2006
Sreenivasan
Philip L. 40,000 16% $8.50 $8.50 May 2006
Knutson
Charles B. 32,000 13% $8.50 $8.50 May 2006
Williams
Jay A. Bouwens 28,000 11% $8.50 $8.50 May 2006
Mitchell A. - - - - -
McVay
</TABLE>
(1) The Company has not granted any stock appreciation rights
(SARs).
(2) Based on an aggregate of 250,000 options being granted to all
employees during the fiscal year ended March 31, 1997.
(3) The average of closing bid and asked prices on the date of
grant.
Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Stock
- ----------------------------------------------------------------------
Option Values
-------------
The following table provides information, with respect to the Named
Persons, concerning the options granted to them during the last fiscal
year and the options held by them at March 31, 1997.
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C> <C>
Fiscal Year End Stock Option Value
----------------------------------
Shares Value of Unexercised In-
Acquired Number of Unexercised the-Money Options at
on Value Options at Fiscal Fiscal Year End
Exercise Realized Year End ($)(1)
-------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($)
- ----------- ------- -------- ----------- ------------ ---------- ---------
M.("Sreeni") 61,000 $350,750 158,000 83,000 $1,205,540 $251,790
Sreenivasan
Philip L. 47,000 $340,750 121,240 65,000 $925,061 $190,750
Knutson
Charles B. 29,000 $166,750 76,720 49,000 $585,374 $129,710
Williams
Jay A. Bouwens - - 10,000 33,000 $76,300 $38,150
Mitchell A. - - 4,000 4,000 $20,520 $30,520
McVay
</TABLE>
(1) The closing price of the Common Stock on March 31, 1997 was $7.63.
31
<PAGE> 33
Compensation of Directors
- -------------------------
In fiscal 1997, the Company established a policy to grant all current
directors who are not employees (other than Mr. Ahrens, who is a
founder of the Company) a nonqualified stock option for 15,000 shares
vesting at the rate of 3,000 shares at the next and each of the
subsequent four annual shareholder meetings. This option is intended
to provide the outside director with the equivalent of an annual grant
of 3,000 shares and the Company does not anticipate granting any
additional options until the end of the fifth year. The exercise
price of these options will be set at the fair market value of the
Common Stock on the date of the grant. Under this policy, in fiscal
1997, Messrs. Golsan and Farkas each received 15,000 share options.
In recognition for over 11 years of service as a director to the
Company without compensation, the Company granted a cash payment of
$20,000 and an additional nonqualified stock option for 50,000 shares
to Mr. Farkas. This option vests over three years and the exercise
price was set at $1.81 per share, a discount from the $7.50 fair
market value of the Common Stock on the date of grant.
Commencing in fiscal 1998, the Company will provide directors who are
not employees of the Company an annual fee of $4,000. The Company
also established a policy to grant all new directors who are not
employees a one-time nonqualified stock option for 10,000 shares
which vests immediately. Thus, new directors who are not employees
of the Company will receive this 10,000 share option in addition
to the ongoing 15,000 share option described above. Like the
15,000 share option, the exercise price of the options will be set
at the fair market value of the Common Stock on the date of grant.
32
<PAGE> 34
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
PRINCIPAL OWNERS OF COMMON STOCK
The following table sets forth the number of shares of Common Stock
and percentage of outstanding shares of Common Stock of the Company
owned as of April 1, 1997, by persons who hold of record or are known
to beneficially own 5% or more of the outstanding common stock of the
Company, each nominee and director of the Company, the named executive
officers and all officers and directors as a group.
<TABLE>
<CAPTION>
<S><C> <C> <C>
Name and Address of Amount and Percent
Beneficial Owner Nature of of
Beneficial Class
Ownership
- ------------------- ------------ ------
Paul C. Ahrens 1,500,491(1) 10.8%
1290 Industrial Way
Albany, OR
Michael A. Mitton 701,087 5.1%
Suite 22
6300 Estate Frydenhoj
416-1
St. Thomas, U.S.V.I.
M. ("Sreeni") 624,210(2) 4.4%(3)
Sreenivasan
1290 Industrial Way
Albany, OR
Howard L. Farkas 69,292(4) *
5460 South Quebec
Street
Suite 300
Englewood, CO
Page E. Golsan, III 38,000(5) *
3205 Canterbury Drive,
South
Salem, OR
JB Partners 1,000,000 7.2%
919 Third Avenue
New York, NY
Philip L. Knutson,Ph.D. 397,240(6) 2.8%(3)
1290 Industrial Way
Albany, OR
Charles B. Williams 257,120(7) 1.8%(3)
1290 Industrial Way
Albany, OR
Jay A. Bouwens 29,000(8) *
1290 Industrial Way
Albany, OR
33
<PAGE> 35
Name and Address of Amount and Percent
Beneficial Owner Nature of of
Beneficial Class
Ownership
- ---------------- ------------ --------
Mitchell A. McVay 4,000(9) *
1290 Industrial Way
Albany, OR
All Officers and 2,915,353(1)(2)(4)(5)(6)(7)(8) 20.2%(3)
Directors as
a Group (7 persons)
</TABLE>
______________________
*less than 1%.
(1) Includes 29,000 shares of common stock which are owned of
record by a private foundation of which Mr. Ahrens is the President.
Mr. Ahrens disclaims beneficial ownership of these shares.
(2) Includes 216,000 shares of common stock which Mr. Sreenivasan
has the right to acquire immediately or within sixty (60) days
pursuant to employee stock options. Excludes 25,000 shares of
common stock issuable pursuant to stock options held by Mr.
Sreenivasan which are not exercisable now or within sixty (60) days.
(3) The denominator used in calculating the percentage is equal to
the number of shares outstanding plus the number of shares the
beneficial owner (or group of beneficial owners) has a right to
acquire immediately or within sixty days pursuant to warrants or
options.
(4) Includes 19,292 shares of common stock which Mr. Farkas has the
right to acquire immediately or within sixty (60) days pursuant to
employee stock options. Mr. Farkas disclaims ownership over 50,000
shares of common stock held in his name which have been pledged as
security for a loan and over which Mr. Farkas has no voting control.
Excludes 45,708 shares of common stock issuable pursuant to stock
options held by Mr. Farkas which are not exercisable now or within
sixty (60) days.
(5) Excludes 15,000 shares of common stock issuable pursuant to
stock options held by Mr. Golsan which are not exercisable now or
within sixty (60) days.
(6) Includes 166,240 shares of common stock which Dr. Knutson has
the right to acquire immediately or within sixty (60) days pursuant
to employee stock options. Excludes 20,000 shares of common stock
issuable pursuant to stock options held by Dr. Knutson which are not
exercisable now or within sixty (60) days.
(7) Includes 109,720 shares of common stock which Mr. Williams has
the right to acquire immediately or within sixty (60) days pursuant
to employee stock options. Excludes 16,000 shares of common stock
issuable pursuant to stock options held by Mr. Williams which are
not exercisable now or within sixty (60) days.
(8) Includes 29,000 shares of common stock which Mr. Bouwens has
the right to acquire immediately or within sixty (60) days pursuant
to employee stock options. Excludes 14,000 shares of common stock
issuable pursuant to stock options held by Mr. Bouwens which are not
exercisable now or within sixty (60) days.
(9) Includes 4,000 shares of common stock which Mr. McVay has the
right to acquire immediately or within sixty (60) days pursuant to
employee stock options. Excludes 4,000 shares of common stock
issuable pursuant to stock options held by Mr. McVay which are not
exercisable now or within sixty (60) days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1995, Mr. Ahrens resigned his positions as President and
Chief Executive Officer of the Company and became Chairman of the
Board. At that time, Mr. Ahrens established an independent research
and development effort to investigate new applications of novel amino
acids and peptides. In connection with this transition, the Company
and Mr. Ahrens entered into an agreement (the "Agreement") pursuant to
which Mr. Ahrens agreed to provide consulting services to the Company
and to provide the Company with licensing rights for any invention he
34
<PAGE> 36
might develop during the year which involved amino acids and/or
peptide-based materials (the "Amino Acid Technology"). In March 1996,
at the conclusion of the consulting services and research period,
Mr. Ahrens advised the Company that he did not intend to continue
further laboratory research. At that time, the Company requested, and
Mr. Ahrens agreed to, an Addendum to the Agreement to expand the
Company's licensing rights to any Amino Acid Technology that he may
discover at any time in the future. The Company also agreed to
reimburse Mr. Ahrens for his expenses associated with his attendance
on behalf of the Company at technical research symposiums.
Certain directors and officers of the Company have entered into an
agreement to vote shares of Synthetech Common Stock owned by them for
the election of a nominee to the Board of Directors selected by JB
Partners, an investor in the Company. See Item 9.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following documents are filed as part of this
Annual Report on Form 10-KSB:
3(i)(1) Articles of Incorporation of Synthetech, Inc., as amended
3(ii) Bylaws of Synthetech, Inc., as amended
10.1(2),(3) License Agreement dated March 16, 1990 between Synthetech,
Inc. and Miwon Co. Ltd.
10.2(2),(4) Supply Agreement dated January 3, 1989 between Synthetech,
Inc. and Biomeasure, Incorporated
10.3(2),(4) License Agreement dated January 3, 1989 between Synthetech,
Inc. and Biomeasure, Incorporated
10.4(2)+ Synthetech, Inc. Amended and Restated 1984 Stock Option and
Bonus Plan
10.5(5)+ Synthetech, Inc. 1990 Stock Option Plan
10.6(8) Amendment No. 1 to Stock and Warrant Purchase Agreement
between the Company and JB dated as of March 26, 1996
10.7(6) Agreement dated September 30, 1991 Among Certain Shareholders
of the Company
10.8(7) Agreement and Release dated as of March 31, 1995 between
Synthetech, Inc. and Paul C. Ahrens (the "Ahrens Agreement")
10.9(8) Addendum to Ahrens Agreement dated as of April 1, 1996
35
<PAGE> 37
10.10 1995 Incentive Compensation Plan, as amended
10.11 Promissory Note dated September 8, 1995 from Synthetech, Inc.
to United States National Bank of Oregon.
10.12 Commercial Security Agreement dated September 8, 1995 between
Synthetech, Inc. and United States National Bank of Oregon
10.13 Change in Terms Agreement dated September 12, 1996 between
Synthetech, Inc. and United States National Bank of Oregon
10.14 Nonqualified Stock Option dated as of November 7, 1996 to
purchase 50,000 shares of Common Stock issued to Howard L.
Farkas.
10.15 Nonqualified Stock Option dated as of November 7, 1996 to
purchase 15,000 shares of Common Stock issued to Howard L.
Farkas.
10.16 Nonqualified Stock Option dated as of November 7, 1996 to
purchase 15,000 shares of Common Stock issued to Page E.
Golsan III.
10.17 Synthetech, Inc. Purchase Order dated June 17, 1996 to R.L.
Reimers Construction in the amount of $250,000.
10.18 Synthetech, Inc. Purchase Order dated August 23, 1996 to
CE/Western in the amount of $240,000.
10.19 Synthetech, Inc. Purchase Order dated September 4, 1996 to
R.L. Reimers Construction in the amount of $189,000.
10.20 Synthetech, Inc. Purchase Order dated November 7, 1996 to R.L.
Reimers Construction in the amount of $1,870,700.
10.21 Synthetech, Inc. Purchase Order dated February 20, 1997 to
Olsson Industrial Electric in the amount of $335,864.
10.22 Synthetech, Inc. Purchase Order dated May 2, 1997 to Oregon
Industrial Contractors, Inc. in the amount of $626,276.
23 Consent of Arthur Andersen LLP
__________________________
+ Management contract or compensatory plan.
(1) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1991.
36
<PAGE> 38
(2) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1990.
(3) Confidential treatment of certain portions of this document was
granted by the Commission on May 7, 1990 (File No. 33-27566).
(4) Confidential treatment of certain portions of this document was
granted by the Commission on January 10, 1990 (File No. 33-27566).
(5) Incorporated by reference to Exhibit A to the definitive copy of
registrant's Proxy Statement (dated October 23, 1990) for the 1990
Annual Meeting of Shareholders.
(6) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1992.
(7) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1995.
(8) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996.
(b) Reports on Form 8-K
None.
37
<PAGE> 39
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: June 18, 1997 SYNTHETECH, INC.
(Registrant)
By /s/ M. Sreenivasan
M. ("Sreeni") Sreenivasan
President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ M. Sreenivasan President, Chief June 18, 1997
M. ("Sreeni") Executive Officer
Sreenivasan (Principal Executive
Officer) and Director
/s/ Charles B. Vice President of Finance June 18, 1997
Williams and Administration, Chief
Charles B. Williams Financial Officer,
Secretary and Treasurer
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ Paul C. Ahrens Chairman of the Board June 18, 1997
Paul C. Ahrens
June 18, 1997
/s/ Howard L. Director
Farkas
Howard L. Farkas
June 18, 1997
/s/ Page E. Director
Golsan, III
Page E. Golsan, III
38
<PAGE> 40
INDEX TO EXHIBITS
Sequential Page No.
3(i)(1)1 Articles of Incorporation of Synthetech, Inc.,
as amended
3(ii) Bylaws of Synthetech, Inc., as amended 42
10.1(2),(3) License Agreement dated March 16, 1990 between
Synthetech, Inc. and Miwon Co. Ltd.
10.2(2),(4) Supply Agreement dated January 3, 1989 between
Synthetech, Inc. and Biomeasure, Incorporated
10.3(2),(4) License Agreement dated January 3, 1989 between
Synthetech, Inc. and Biomeasure, Incorporated
10.4(2)+ Synthetech, Inc. Amended and Restated 1984
Stock Option and Bonus Plan
10.5(5)+ Synthetech, Inc. 1990 Stock Option Plan
10.6(8) Amendment No. 1 to Stock and Warrant Purchase
Agreement between the Company and JB dated as
of March 26, 1996
10.7(6) Agreement dated September 30, 1991 Among
Certain Shareholders of the Company
10.8(7) Agreement and Release dated as of March 31,
1995 between Synthetech, Inc. and Paul C.
Ahrens (the "Ahrens Agreement")
10.9(8) Addendum to Ahrens Agreement dated as of
April 1, 1996
10.10 1995 Incentive Compensation Plan, as amended 72
10.11 Promissory Note dated September 8, 1995 from
Synthetech, Inc. to United States National Bank
of Oregon. 89
10.12 Commercial Security Agreement dated September
8, 1995 between Synthetech, Inc. and United
States National Bank of Oregon 93
10.13 Change in Terms Agreement dated September 12,
1996 between Synthetech, Inc. and United States
National Bank of Oregon 102
10.14 Nonqualified Stock Option dated as of November
7, 1996 to purchase 50,000 shares of Common
Stock issued to Howard L. Farkas 107
10.15 Nonqualified Stock Option dated as of November
7, 1996 to purchase 15,000 shares of Common
Stock issued to Howard L. Farkas 110
39
<PAGE> 41
10.16 Nonqualified Stock Option dated as of November
7, 1996 to purchase 15,000 shares of Common
Stock issued to Page E. Golsan III 113
10.17 Synthetech, Inc. Purchase Order dated June 17,
1996 to R.L. Reimers Construction in the amount
of $250,000 116
10.18 Synthetech, Inc. Purchase Order dated August
23, 1996 to CE/Western in the amount of
$240,000 119
10.19 Synthetech, Inc. Purchase Order dated September
4, 1996 to R.L. Reimers Construction in the
amount of $189,000 125
10.20 Synthetech, Inc. Purchase Order dated November
7, 1996 to R.L. Reimers Construction in the
amount of $1,870,700 127
10.21 Synthetech, Inc. Purchase Order dated February
20, 1997 to Olsson Industrial Electric in the
amount of $335,864 129
10.22 Synthetech, Inc. Purchase Order dated May 2,
1997 to Oregon Industrial Contractors, Inc. in
the amount of $626,276 130
23 Consent of Arthur Andersen LLP 131
__________________________
+ Management contract or compensatory plan.
(1) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1991.
(2) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1990.
(3) Confidential treatment of certain portions of this document was
granted by the Commission on May 7, 1990 (File No. 33-27566).
(4) Confidential treatment of certain portions of this document was
granted by the Commission on January 10, 1990 (File No. 33-27566).
(5) Incorporated by reference to Exhibit A to the definitive copy of
registrant's Proxy Statement (dated October 23, 1990) for the 1990
Annual Meeting of Shareholders.
(6) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1992.
(7) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1995.
(8) Incorporated by reference to the exhibits filed with registrant's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996.
40
<PAGE> 42 Exhibit 3(ii)
of Form 10KSB
BYLAWS
OF
SYNTHETECH, INC.
AMENDMENTS
<PAGE> 43
Date of
Section Effect of Amendment Amendment
2.1 Changed date of annual meeting of June 10, 1994
shareholders and deleted mechanics (Board)
of setting annual meeting date
3.2 Changed number, tenure and June 6, 1997
qualifications section (Board)
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<PAGE> 44
CONTENTS
SECTION 1. OFFICES 1
SECTION 2. SHAREHOLDERS 1
2.1 Annual Meeting 1
2.2 Special Meetings 1
2.3 Place of Meeting 1
2.4 Notice of Meeting 2
2.5 Waiver of Notice 2
2.6 Fixing of Record Date for Determining
Shareholders 2
2.7 Shareholders' List 3
2.8 Quorum 3
2.9 Manner of Acting 4
2.10 Proxies 4
2.11 Voting of Shares 4
2.12 Voting for Directors 4
2.13 Action by Shareholders Without a Meeting 5
2.14 Voting of Shares by Corporations 5
2.14.1 Shares Held by Another Corporation 5
2.14.2 Shares Held by the Corporation 5
2.15 Acceptance or Rejection of Shareholder Votes,
Consents, Waivers and Proxy Appointments 5
2.15.1 Documents Bearing Name of Shareholders 5
2.15.2 Documents Bearing Name of Third Parties 6
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<PAGE> 45
2.15.3 Rejection of Documents 6
SECTION 3. BOARD OF DIRECTORS 6
3.1 General Powers 6
3.2 Number, Tenure and Qualifications 7
3.3 Annual and Regular Meetings 7
3.4 Special Meetings 7
3.5 Meetings by Telecommunications 7
3.6 Notice of Special Meetings 8
3.6.1 Personal Delivery 8
3.6.2 Delivery by Mail 8
3.6.3 Delivery by Telegraph 8
3.6.4 Oral Notice 8
3.6.5 Notice by Facsimile Transmission 8
3.6.6 Notice by Private Courier 9
3.7 Waiver of Notice 9
3.7.1 Written Waiver 9
3.7.2 Waiver by Attendance 9
3.8 Quorum 9
3.9 Manner of Acting 9
3.10 Presumption of Assent 9
3.11 Action by Board or Committees Without a Meeting 10
3.12 Resignation 10
3.13 Removal 10
iii
<PAGE> 46
3.14 Vacancies 10
3.15 Minutes 11
3.16 Executive and Other Committees 11
3.16.1 Creation of Committees 11
3.16.2 Authority of Committees 11
3.16.3 Quorum and Manner of Acting 12
3.16.4 Minutes of Meetings 12
3.16.5 Resignation 12
3.16.6 Removal 12
3.17 Compensation 12
SECTION 4. OFFICERS 13
4.1 Number 13
4.2 Appointment and Term of Office 13
4.3 Resignation 13
4.4 Removal 13
4.5 Vacancies 14
4.6 Chair of the Board 14
4.7 President 14
4.8 Vice President 14
4.9 Secretary 15
4.10 Treasurer 15
4.11 Salaries 15
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<PAGE> 47
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS 15
5.1 Contracts 15
5.2 Loans to the Corporation 16
5.3 Loans to Directors 16
5.4 Checks, Drafts, Etc. 16
5.5 Deposits 16
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER 16
6.1 Issuance of Shares 16
6.2 Escrow for Shares 17
6.3 Certificates for Shares 17
6.4 Stock Records 17
6.5 Restriction on Transfer 17
6.5.1 Securities Laws 17
6.5.2 Other Restrictions 18
6.6 Transfer of Shares 18
6.7 Lost or Destroyed Certificates 18
6.8 Transfer Agent and Registrar 18
6.9 Officer Ceasing to Act 18
6.10 Fractional Shares 18
v
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SECTION 7. BOOKS AND RECORDS 19
SECTION 8. FISCAL YEAR 19
SECTION 9. SEAL 19
SECTION 10.INDEMNIFICATION 19
10.1 Directors and Officers 19
10.2 Officers, Employees and Other Agents 19
10.3 No Presumption of Bad Faith 19
10.4 Advances of Expenses 19
10.5 Enforcement 20
10.6 Nonexclusivity of Rights 21
10.7 Survival of Rights 21
10.8 Insurance 21
10.9 Amendments to Law 21
10.10 Savings Clause 21
10.11 Certain Definitions 21
SECTION 11.AMENDMENTS 22
SECTION 12.CONTROL SHARE ACQUISITION STATUTE 23
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BYLAWS
OF
SYNTHETECH, INC.
SECTION 1. OFFICES
The principal office of the Corporation shall be located at the
principal place of business or such other place as the Board of
Directors (the "Board") may designate. The Corporation may have such
other offices, either within or without the State of Oregon, as the
Board may designate or as the business of the Corporation may require
from time to time.
SECTION 2. SHAREHOLDERS
2.1 Annual Meeting
The annual meeting of the shareholders shall be held the 15th day
of July in each year, or on such other day as shall be fixed by
resolution of the Board, at the principal office of the Corporation or
such other place as fixed by the Board, for the purpose of electing
Directors and transaction such other business as may properly come
before the meeting. If the day fixed for the annual meeting is a
legal holiday at the place of the meeting, the meeting shall be held
on the next succeeding business day.
2.2 Special Meetings
The Board, the President or the Chair of the Board may call
special meetings of the shareholders for any purpose. The holders of
not less than one-tenth of all the outstanding shares of the
Corporation entitled to vote on any issue proposed to be considered at
the proposed special meeting, if they date, sign and deliver to the
Corporation's Secretary a written demand for a special meeting
describing the purpose(s) for which it is to be held, may call a
special meeting of the shareholders for such stated purpose.
2.3 Place of Meeting
All meetings shall be held at the principal office of the
Corporation or at such other place as designated by the Board, by any
persons entitled to call a meeting hereunder, or in a waiver of notice
signed by all of the shareholders entitled to vote at the meeting.
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<PAGE> 50
2.4 Notice of Meeting
2.4.1 The Corporation shall cause to be delivered to each
shareholder entitled to notice of or to vote at an annual or special
meeting of shareholders, either personally or by mail, not less than
ten (10) nor more than sixty (60) days before the meeting, written
notice stating the date, time and place of the meeting and, in the
case of a special meeting, the purpose(s) for which the meeting is
called.
2.4.2 Notice to a shareholder of an annual or special
shareholder meeting shall be in writing. Such notice, if in
comprehensible form, is effective (a) when mailed, if it is mailed
postpaid and is correctly addressed to the shareholder's address shown
in the Corporation's current record of shareholders; or (b) when
received by the shareholder, if it is delivered by telegraph,
facsimile transmission or private courier.
2.4.3 If an annual or special shareholders' meeting is
adjourned to a different date, time or place, notice need not be given
of the new date, time or place if the new date, time or place is
announced at the meeting before adjournment, unless a new record date
for the adjourned meeting is or must be fixed under Section 2.6.1 of
these bylaws or the Oregon Business Corporation Act.
2.5 Waiver of Notice
2.5.1 Whenever any notice is required to be given to any
shareholder under the provisions of these Bylaws, the Articles of
Incorporation or the Oregon Business Corporation Act, a waiver thereof
in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, and delivered to the
Corporation for inclusion in the minutes for filing with the corporate
records, shall be deemed equivalent to the giving of such notice.
2.5.2 The attendance of a shareholder at a meeting waives
objection to lack of, or defect in, notice of such meeting or of
consideration of a particular matter at the meeting, unless the
shareholder, at the beginning of the meeting or prior to consideration
of such matter, objects to holding the meeting, transacting business
at the meeting, or considering the matter when presented at the
meeting.
2.6 Fixing of Record Date for Determining Shareholders
2.6.1 For the purpose of determining shareholders entitled
to notice of, or to vote at, any meeting of shareholders or any
adjournment thereof, or shareholders entitled to receive payment of
any dividend, or in order to make a determination of shareholders for
any other purpose, the Board may fix in advance a date as the record
date for any such determination. Such record date shall be not more
than seventy (70) days, and in case of a meeting of shareholders, not
2
<PAGE> 51
less than ten (10) days, prior to the date on which the particular
action requiring such determination is to be taken. If no record date
is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting, or to receive payment of a dividend, the date
on which the notice of meeting is mailed or on which the resolution of
the Board declaring such dividend is adopted, as the case may be,
shall be the record date for such determination. Such determination
shall apply to any adjournment of the meeting, provided such
adjournment is not set for a date more than 120 days after the date
fixed for the original meeting.
2.6.2 The record date for the determination of shareholders
entitled to demand a special shareholder meeting shall be the date the
first shareholder signs the demand.
2.7 Shareholders' List
2.7.1 Beginning two (2) business days after notice of a
meeting of shareholders is given, a complete alphabetical list of the
shareholders entitled to notice of such meeting shall be made,
arranged by voting group, and within each voting group by class or
series, with the address of and number of shares held by each
shareholder. This record shall be kept on file at the Corporation's
principal office or at a place identified in the meeting notice in the
city where the meeting will be held. On written demand, this record
shall be subject to inspection by any shareholder at any time during
normal business hours. Such record shall also be kept open at such
meeting for inspection by any shareholder.
2.7.2 A shareholder may, on written demand, copy the
shareholders' list at such shareholder's expense during regular
business hours, provided that:
a. Such shareholder's demand is made in good faith and for
a proper purpose;
b. Such shareholder has described with reasonable
particularity his/her/its purpose in the written demand; and
c. The shareholders' list is directly connected with such
shareholder's purpose.
2.8 Quorum
A majority of the votes entitled to be cast on a matter at a
meeting by a voting group, represented in person or by proxy, shall
constitute a quorum of that voting group for action on that matter at
a meeting of the shareholders. If a quorum is not present for a
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<PAGE> 52
matter to be acted upon, a majority of the shares represented at the
meeting may adjourn the meeting from time to time without further
notice. If the necessary quorum is present or represented at a
reconvened meeting following such an adjournment, any business may be
transacted that might have been transacted at the meeting as
originally called. The shareholders present at a duly organized
meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
2.9 Manner of Acting
2.9.1 If a quorum exists, action on a matter (other than
the election of Directors) by a voting group is approved if the votes
cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the affirmative vote of a greater number
is required by these Bylaws, the Articles of Incorporation or the
Oregon Business Corporation Act.
2.9.2 If a matter is to be voted on by a single group,
action on that matter is taken when voted upon by that voting group.
If a matter is to be voted on by two or more voting groups, action on
that matter is taken only when voted upon by each of those voting
groups counted separately. Action may be taken by one voting group on
a matter even though no action is taken by another voting group
entitled to vote on such matter.
2.10 Proxies
A shareholder may vote by proxy executed in writing by the
shareholder or by his or her attorney-in-fact. Such proxy shall be
effective when received by the Secretary or other officer or agent
authorized to tabulate votes at the meeting. A proxy shall become
invalid eleven (11) months after the date of its execution, unless
otherwise expressly provided in the proxy. A proxy for a specified
meeting shall entitle the holder thereof to vote at any adjournment of
such meeting but shall not be valid after the final adjournment
thereof.
2.11 Voting of Shares
Each outstanding share entitled to vote shall be entitled to one
vote upon each matter submitted to a vote at a meeting of
shareholders.
2.12 Voting for Directors
Each shareholder may vote, in person or by proxy, the number of
shares owned by such shareholder that are entitled to vote at an
election of Directors, for as many persons as there are Directors to
be elected and for whose election such shares have a right to vote.
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<PAGE> 53
Unless otherwise provided in the Articles of Incorporation, Directors
are elected by a plurality of the votes cast by shares entitled to
vote in the election at a meeting at which a quorum is present.
2.13 Action by Shareholders Without a Meeting
Any action which could be taken at a meeting of the shareholders
may be taken without a meeting if a written consent setting forth the
action so taken is signed by all shareholders entitled to vote with
respect to the subject matter thereof. The action shall be effective
on the date on which the last signature is placed on the consent, or
at such earlier or later time as is set forth therein. Such written
consent, which shall have the same force and effect as a unanimous
vote of the shareholders, shall be inserted in the minute book as if
it were the minutes of a meeting of the shareholders.
2.14 Voting of Shares by Corporations
2.14.1 Shares Held by Another Corporation
Shares standing in the name of another corporation may be voted
by such officer, agent or proxy as the bylaws of such other
corporation may prescribe, or, in the absence of such provision, as
the board of directors of such corporation may determine; provided,
however, such shares are not entitled to vote if the Corporation owns,
directly or indirectly, a majority of the shares entitled to vote for
directors of such other corporation.
2.14.2 Shares Held by the Corporation
Authorized but unissued shares shall not be voted or counted for
determining whether a quorum exists at any meeting or counted in
determining the total number of outstanding shares at any given time.
Notwithstanding the foregoing, shares of its own stock held by the
Corporation in a fiduciary capacity may be counted for purposes of
determining whether a quorum exists, and may be voted by the
Corporation.
2.15 Acceptance or Rejection of Shareholder Votes, Consents,
Waivers and Proxy Appointments
2.15.1 Documents Bearing Name of Shareholders
If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the Secretary or
other agent authorized to tabulate votes at the meeting may, if acting
in good faith, accept such vote, consent, waiver or proxy appointment
and give it effect as the act of the shareholder.
5
<PAGE> 54
2.15.2 Documents Bearing Name of Third Parties
If the name signed on a vote, consent, waiver or proxy
appointment does not correspond to the name of its shareholder, the
Secretary or other agent authorized to tabulate votes at the meeting
may nevertheless, if acting in good faith, accept such vote, consent,
waiver or proxy appointment and give it effect as the act of the
shareholder if:
a. The shareholder is an entity and the name signed
purports to be that of an officer or an agent of the entity;
b. The name signed purports to be that of an
administrator, executor, guardian or conservator representing the
shareholder and, if the Secretary or other agent requests, acceptable
evidence of fiduciary status has been presented;
c. The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder, and, if the Secretary or
other agent requests, acceptable evidence of this status has been
presented;
d. The name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the
Secretary or other agent requests, acceptable evidence of the
signatory's authority to sign has been presented; or
e. Two or more persons are the shareholder as cotenants or
fiduciaries and the name signed purports to be the name of at least
one of the co-owners and the person signing appears to be acting on
behalf of all co-owners.
2.15.3 Rejection of Documents
The Secretary or other agent authorized to tabulate votes at the
meeting is entitled to reject a vote, consent, waiver or proxy
appointment if such agent, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
SECTION 3. BOARD OF DIRECTORS
3.1 General Powers
The business and affairs of the Corporation shall be managed by
the Board, except as may be otherwise provided in these Bylaws, the
Articles of Incorporation or the Oregon Business Corporation Act.
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<PAGE> 55
3.2 Number, Tenure and Qualifications
The Board shall consist of no less than three (3) and no more
than seven (7) Directors, the specific number to be set by resolution
of the Board. The number of Directors may be changed from time to
time by amendment to these Bylaws, but no decrease in the number of
Directors shall shorten the term of any incumbent Director. The Board
shall be divided into three classes, with each class to contain at
least two members and to be as nearly equal in number as possible, but
no decrease in the number of such classes shall the effect of
shortening the term of any incumbent Director. At the 1997 annual
meeting of shareholders, the Directors of Class 1 shall be elected for
a term expiring at the 1998 annual meeting of shareholders, and the
Directors of Class 2 shall be elected for a term expiring at the 1999
annual meeting of shareholders and the Directors of Class 3 shall be
elected for a term expiring at the 2000 annual meeting of
shareholders. Commencing in 1998, and at each annual meeting of
shareholders thereafter, the successors to the class of Directors
whose terms expire at that meeting shall be elected to hold office for
a term of three (3) years, and each Director shall serve for the term
he or she was elected or until his or her successor shall have been
elected and qualified or until his or her death, resignation, or
removal from office. Directors need not be shareholders of the
corporation or residents of the State of Oregon.
3.3 Annual and Regular Meetings
An annual Board meeting shall be held without further notice
immediately after and at the same place as the annual meeting of
shareholders.
By resolution the Board, or any committee thereof, may specify
the time and place for holding regular meetings thereof without other
notice than such resolution.
3.4 Special Meetings
Special meetings of the Board or any committee designated by the
Board may be called by or at the request of the President or any
member of the Board of Directors and, in the case of any special
meeting of any committee designated by the Board, or by the Chair
thereof. The person or persons authorized to call special meetings
may fix any place either within or without the State of Oregon as the
place for holding any special Board or committee meeting called by
them.
3.5 Meetings by Telecommunications
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by use of any
means of communication by which all persons participating may
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<PAGE> 56
simultaneously hear each other during the meeting. Participation by
such means shall be deemed presence in person at the meeting.
3.6 Notice of Special Meetings
Notice of a special Board or committee meeting stating the date,
time and place of the meeting shall be given to a Director in writing
or orally by telephone or in person as set forth below. Neither the
business to be transacted at, nor the purpose of, any special meeting
need be specified in the notice of such meeting.
3.6.1 Personal Delivery
If delivery is by personal service, the notice shall be effective
if delivered at such address at least one day before the meeting.
3.6.2 Delivery by Mail
If notice is delivered by mail, the notice shall be deemed
effective if deposited in the official government mail at least five
days before the meeting properly addressed to a Director at his or her
address shown on the records of the Corporation with postage prepaid.
3.6.3 Delivery by Telegraph
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company
by such time that the telegraph company guarantees delivery at least
one day before the meeting.
3.6.4 Oral Notice
If notice is delivered orally, by telephone or in person, the
notice shall be effective if personally given to a Director at least
one day before the meeting.
3.6.5 Notice by Facsimile Transmission
If notice is delivered by facsimile transmission, the notice
shall be deemed effective if the content thereof is transmitted to the
office of a Director, at the facsimile number shown on the records of
the Corporation, at least one day before the meeting, and receipt is
either confirmed by confirming transmission equipment or acknowledged
by the receiving office.
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<PAGE> 57
3.6.6 Notice by Private Courier
If notice is delivered by private courier, the notice shall be
deemed effective if delivered to the courier, properly addressed and
prepaid, by such time that the courier guarantees delivery at least
one day before the meeting.
3.7 Waiver of Notice
3.7.1 Written Waiver
Whenever any notice is required to be given to any Director under
the provisions of these Bylaws, the Articles of Incorporation or the
Oregon Business Corporation Act, a waiver thereof in writing, executed
at any time, specifying the meeting for which notice is waived, signed
by the person or persons entitled to such notice, and filed with the
minutes or corporate records, shall be deemed equivalent to the giving
of such notice.
3.7.2 Waiver by Attendance
The attendance of a Director at a Board or committee meeting
shall constitute a waiver of notice of such meeting, unless the
Director, at the beginning of the meeting, or promptly upon such
Director's arrival, objects to holding the meeting or transacting any
business thereat and does not thereafter vote for or assent to action
taken at the meeting.
3.8 Quorum
A majority of the number of Directors fixed by or in the manner
provided by these Bylaws shall constitute a quorum for the transaction
of business at any Board meeting.
3.9 Manner of Acting
The act of the majority of the Directors present at a Board or
committee meeting at which there is a quorum shall be the act of the
Board or committee, unless the vote of a greater number is required by
these Bylaws, the Articles of Incorporation or the Oregon Business
Corporation Act.
3.10 Presumption of Assent
A Director of the Corporation present at a Board or committee
meeting at which action on any corporate matter is taken shall be
deemed to have assented to the action taken unless such Director
objects at the beginning of the meeting, or promptly upon such
Director's arrival, to holding the meeting or transacting business at
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<PAGE> 58
the meeting; or such Director's dissent is entered in the minutes of
the meeting; or such Director delivers a written notice of dissent or
abstention to such action with the presiding officer of the meeting
before the adjournment thereof; or such Director forwards such notice
by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. A Director who voted in favor
of such action may not thereafter dissent or abstain.
3.11 Action by Board or Committees Without a Meeting
Any action which could be taken at a meeting of the Board or of
any committee appointed by the Board may be taken without a meeting if
a written consent setting forth the action so taken is signed by each
Director or by each committee member. The action shall be effective
when the last signature is placed on the consent, unless the consent
specifies an earlier or later date. Such written consent, which shall
have the same effect as a unanimous vote of the Directors or such
committee, shall be inserted in the minute book as if it were the
minutes of a Board or committee meeting.
3.12 Resignation
Any Director may resign at any time by delivering written notice
to the Chair of the Board, the Board, or to the registered office of
the Corporation. Such resignation shall take effect at the time
specified in the notice, or if no time is specified, upon delivery.
Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. Once delivered, a notice
of resignation is irrevocable unless revocation is permitted by the
Board.
3.13 Removal
One or more members of the Board (including the entire Board) may
be removed at a meeting of shareholders called expressly for that
purpose, provided that the notice of such meeting states that the
purpose, or one of the purposes, of the meeting is such removal. A
member of the Board may be removed with or without cause, unless the
Articles of Incorporation permit removal for cause only, by a vote of
the holders of a majority of the shares then entitled to vote on the
election of the Director(s). A Director may be removed only if the
number of votes cast to remove the Director exceeds the number of
votes cast to not remove the Director. If a Director is elected by a
voting group of shareholders, only the shareholders of that voting
group may participate in the vote to remove such Director.
3.14 Vacancies
Any vacancy occurring on the Board, including a vacancy resulting
from an increase in the number of Directors, may be filled by the
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shareholders, by the Board, by the affirmative vote of a majority of
the remaining Directors though less than a quorum of the Board, or by
a sole remaining Director. A Director elected to fill a vacancy shall
be elected for the unexpired term of his or her predecessor in office;
except that the term of a Director elected by the Board to fill a
vacancy expires at the next shareholders' meeting at which Directors
are elected. Any Directorship to be filled by reason of an increase
in the number of Directors may be filled by the affirmative vote of a
majority of the number of Directors fixed by the Bylaws prior to such
increase for a term of office continuing only until the next election
of Directors by the shareholders. Any Directorship not so filled by
the Directors shall be filled by election at the next annual meeting
of shareholders or at a special meeting of shareholders called for
that purpose. If the vacant Directorship is filled by the
shareholders and was held by a Director elected by a voting group of
shareholders, then only the holders of shares of that voting group are
entitled to vote to fill such vacancy. A vacancy that will occur at a
specific later date by reason of a resignation effective at such later
date or otherwise may be filled before the vacancy occurs, but the new
Director may not take office until the vacancy occurs.
3.15 Minutes
The Board shall keep minutes of its meetings and shall cause them
to be recorded in books kept for that purpose.
3.16 Executive and Other Committees
3.16.1 Creation of Committees
The Board, by resolution adopted by a majority of the number of
Directors fixed in the manner provided by these Bylaws, may appoint
standing or temporary committees, including an Executive Committee,
from its own number and consisting of no less than two (2) Directors.
The Board may invest such committee(s) with such powers as it may see
fit, subject to such conditions as may be prescribed by the Board,
these Bylaws, the Articles of Incorporation and the Oregon Business
Corporation Act.
3.16.2 Authority of Committees
Each committee shall have and may exercise all of the authority
of the Board to the extent provided in the resolution of the Board
designating the committee and any subsequent resolutions pertaining
thereto and adopted in like manner, except that no such committee
shall have the authority to: (a) authorize distributions, except as
may be permitted by Section 3.16.2(g) of these Bylaws; (b) approve or
propose to shareholders actions required by the Oregon Business
Corporation Act to be approved by shareholders; (c) fill vacancies on
the Board or any committee thereof; (d) adopt, amend or repeal these
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Bylaws; (e) amend the Articles of Incorporation pursuant to the Oregon
Business Corporation Act; (f) approve a plan of merger not requiring
shareholder approval; (g) authorize or approve reacquisition of
shares, except within limits prescribed by the Board; or (h) authorize
or approve the issuance or sale or contract for sale of shares, or
determine the designation of relative rights, preferences and
limitations of a class or series of shares, except that Board may
authorize a committee or an officer of the Corporation to do so within
limits prescribed by the Board.
3.16.3 Quorum and Manner of Acting
A majority of the number of Directors composing any committee of
the Board, as established and fixed by resolution of the Board, shall
constitute a quorum for the transaction of business at any meeting of
such committee.
3.16.4 Minutes of Meetings
All committees so appointed shall keep regular minutes of their
meetings and shall cause them to be recorded in books kept for that
purpose.
3.16.5 Resignation
Any member of any committee may resign at any time by delivering
written notice thereof to the Board, the Chair of the Board or the
Corporation. Any such resignation shall take effect at the time
specified in the notice, or if no time is specified, upon delivery.
Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. Once delivered, a notice
of resignation is irrevocable unless revocation is permitted by the
Board.
3.16.6 Removal
The Board may remove from office any member of any committee
elected or appointed by it, but only by the affirmative vote of not
less than a majority of the number of Directors fixed by or in the
manner provided by these Bylaws.
3.17 Compensation
By Board resolution, Directors and committee members may be paid
their expenses, if any, of attendance at each Board or committee
meeting, or a fixed sum for attendance at each Board or committee
meeting, or a stated salary as Director or a committee member, or a
combination of the foregoing. No such payment shall preclude any
Director or committee member from serving the Corporation in any other
capacity and receiving compensation therefor.
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SECTION 4. OFFICERS
4.1 Number
The Officers of the Corporation shall be a President and a
Secretary, each of whom shall be appointed by the Board. One or more
Vice Presidents, a Treasurer and such other Officers and assistant
Officers, including a Chair of the Board, may be appointed by the
Board; such Officers and assistant Officers to hold office for such
period, have such authority and perform such duties as are provided in
these Bylaws or as may be provided by resolution of the Board. Any
Officer may be assigned by the Board any additional title that the
Board deems appropriate. The Board may delegate to any Officer or
agent the power to appoint any such subordinate Officers or agents and
to prescribe their respective terms of office, authority and duties.
Any two or more offices may be held by the same person.
4.2 Appointment and Term of Office
The Officers of the Corporation shall be appointed annually by
the Board at the Board meeting held after the annual meeting of the
shareholders. If the appointment of Officers is not made at such
meeting, such appointment shall be made as soon thereafter as a Board
meeting conveniently may be held. Unless an Officer dies, resigns, or
is removed from office, he or she shall hold office until the next
annual meeting of the Board or until his or her successor is
appointed.
4.3 Resignation
Any Officer may resign at any time by delivering written notice
to the Corporation. Any such resignation shall take effect at the
time specified in the notice, or if no time is specified, upon
delivery. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Once
delivered, a notice of resignation is irrevocable unless revocation is
permitted by the Board.
4.4 Removal
Any Officer or agent appointed by the Board may be removed by the
Board, with or without cause, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Appointment of an Officer or agent shall not of itself create contract
rights.
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4.5 Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be
filled by the Board for the unexpired portion of the term, or for a
new term established by the Board. If a resignation is made effective
at a later date, and the Corporation accepts such future effective
date, the Board may fill the pending vacancy before the effective
date, if the Board provides that the successor does not take office
until the effective date.
4.6 Chair of the Board
If appointed, the Chair of the Board shall perform such duties as
shall be assigned to him or her by the Board from time to time and
shall preside over meetings of the Board and shareholders unless
another Officer is appointed or designated by the Board as Chair of
such meeting.
4.7 President
The President shall be the chief executive Officer of the
Corporation unless some other Officer is so designated by the Board,
shall preside over meetings of the Board and shareholders in the
absence of a Chair of the Board and, subject to the Board's control,
shall supervise and control all of the assets, business and affairs of
the Corporation. The President shall have authority to sign deeds,
mortgages, bonds, contracts, or other instruments, except when the
signing and execution thereof have been expressly delegated by the
Board or by these Bylaws to some other Officer or agent of the
Corporation, or are required by law to be otherwise signed or executed
by some other Officer or in some other manner. In general, the
President shall perform all duties incident to the office of President
and such other duties as are prescribed by the Board from time to
time.
4.8 Vice President
In the event of the death of the President or his or her
inability to act, the Vice President (or if there is more than one
Vice President, the Vice President who was designated by the Board as
the successor to the President, or if no Vice President is so
designated, the Vice President first appointed to such office) shall
perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Vice Presidents shall have, to the
extent authorized by the President or the Board, the same powers as
the President to sign deeds, mortgages, bonds, contracts or other
instruments. Vice Presidents shall perform such other duties as from
time to time may be assigned to them by the President or by the Board.
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4.9 Secretary
The Secretary shall: (a) prepare and keep the minutes of
meetings of the shareholders and the Board in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law;
(c) be responsible for custody of the corporate records and seal of
the corporation; (d) keep registers of the post office address of each
shareholder and Director; (e) have general charge of the stock
transfer books of the Corporation; (f) sign, with the President or
other Officer authorized by the President or the Board, deeds,
mortgages, bonds, contracts or other instruments; and (g) in general
perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him or her by the
President or by the Board. In the absence of the Secretary, an
Assistant Secretary may perform the duties of the Secretary.
4.10 Treasurer
If required by the Board, the Treasurer shall give a bond for the
faithful discharge of his or her duties in such amount and with such
surety or sureties as the Board shall determine. The Treasurer shall
have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys
due and payable to the Corporation from any source whatsoever, and
deposit all such moneys in the name of the Corporation in banks, trust
companies or other depositories selected in accordance with the
provisions of these Bylaws; and in general perform all of the duties
incident to the office of Treasurer and such other duties as from time
to time may be assigned to him or her by the President or by the
Board. In the absence of the Treasurer, an Assistant Treasurer may
perform the duties of the Treasurer.
4.11 Salaries
The salaries of the Officers shall be fixed from time to time by
the Board or by any person or persons to whom the Board has delegated
such authority. No Officer shall be prevented from receiving such
salary by reason of the fact that he or she is also a Director of the
Corporation.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 Contracts
The Board may authorize any Officer or Officers, or agent or
agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
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5.2 Loans to the Corporation
No loans shall be contracted on behalf of the Corporation and no
evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board. Such authority may be
general or confined to specific instances.
5.3 Loans to Directors
The Corporation shall not lend money to or guarantee the
obligation of a Director unless: (a) the particular loan or guarantee
is approved by a majority of the votes represented by the outstanding
voting shares of all classes, voting as a single voting group,
excluding the votes of the shares owned by or voted under the control
of the benefited Director; or (b) the Board determines that the loan
or guarantee benefits the Corporation and either approves the specific
loan or guarantee or a general plan authorizing the loans and
guarantees. The fact that a loan or guarantee is made in violation of
this provision shall not affect the borrower's liability on the loan.
5.4 Checks, Drafts, Etc.
All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such Officer or Officers, or agent or
agents, of the Corporation and in such manner as is from time to time
determined by resolution of the Board.
5.5 Deposits
All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Issuance of Shares
No shares of the Corporation shall be issued unless authorized by
the Board, which authorization shall include the maximum number of
shares to be issued and the consideration to be received for each
share. Before the Corporation issues shares, the Board shall
determine that the consideration received or to be received for such
shares is adequate. Such determination by the Board shall be
conclusive insofar as the adequacy of consideration for the issuance
of shares relates to whether the shares are validly issued, fully paid
and nonassessable.
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6.2 Escrow for Shares
The Board may authorize the placement in escrow of shares issued
for a contract for future services or benefits or a promissory note,
or may authorize other arrangements to restrict the transfer of
shares, and may authorize the crediting of distributions in respect of
such shares against their purchase price, until the services are
performed, the note is paid or the benefits received. If the services
are not performed, the note is not paid, or the benefits are not
received, the Board may cancel, in whole or in part, such shares
placed in escrow or restricted and such distributions credited.
6.3 Certificates for Shares
Certificates representing shares of the Corporation shall be in
such form as shall be determined by the Board. Such certificates
shall be signed by any two of the following officers: the Chair of
the Board, the President, any Vice President, the Treasurer, the
Secretary or any Assistant Secretary. Any or all of the signatures on
a certificate may be facsimiles if the certificate is manually signed
on behalf of a transfer agent or a registrar other than the
Corporation itself or an employee of the Corporation. All
certificates shall be consecutively numbered or otherwise identified.
6.4 Stock Records
The stock transfer books shall be kept at the registered office
or principal place of business of the Corporation or at the office of
the Corporation's transfer agent or registrar. The name and address
of each person to whom certificates for shares are issued, together
with the class and number of shares represented by each such
certificate and the date of issue thereof, shall be entered on the
stock transfer books of the Corporation. The person in whose name
shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
6.5 Restriction on Transfer
6.5.1 Securities Laws
Except to the extent that the Corporation has obtained an opinion
of counsel acceptable to the Corporation that transfer restrictions
are not required under applicable securities laws, or has otherwise
satisfied itself that such transfer restrictions are not required, all
certificates representing shares of the Corporation shall bear
conspicuously on the front or back of the certificate a legend or
legends describing the restriction or restrictions.
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6.5.2 Other Restrictions
In addition, the front or back of all certificates shall include
conspicuous written notice of any further restrictions which may be
imposed on the transferability of such shares.
6.6 Transfer of Shares
Transfer of shares of the Corporation shall be made only on the
stock transfer books of the Corporation pursuant to authorization or
document of transfer made by the holder of record thereof or by his or
her legal representative, who shall furnish proper evidence of
authority to transfer, or by his or her attorney-in-fact authorized by
power of attorney duly executed and filed with the Secretary of the
Corporation. All certificates surrendered to the Corporation for
transfer shall be cancelled and no new certificate shall be issued
until the former certificates for a like number of shares shall have
been surrendered and cancelled.
6.7 Lost or Destroyed Certificates
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to
the Corporation as the Board may prescribe.
6.8 Transfer Agent and Registrar
The Board may from time to time appoint one or more Transfer
Agents and one or more Registrars for the shares of the Corporation,
with such powers and duties as the Board shall determine by
resolution.
6.9 Officer Ceasing to Act
In case any officer who has signed or whose facsimile signature
has been placed upon a stock certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if the signer were such officer at
the date of its issuance.
6.10 Fractional Shares
The Corporation shall not issue certificates for fractional
shares.
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SECTION 7. BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records
of account, stock transfer books, minutes of the proceedings of its
shareholders and Board and such other records as may be necessary or
advisable.
SECTION 8. FISCAL YEAR
The fiscal year of the Corporation shall be the twelve month
period ending on March 31 of each year, provided that if a different
fiscal year is at any time selected for purposes of federal income
taxes, the fiscal year shall be the year so selected.
SECTION 9. SEAL
The seal of the Corporation shall consist of the name of the
Corporation, the year of its incorporation and the state of its
incorporation.
SECTION 10. INDEMNIFICATION
10.1 Directors and Officers
The Corporation shall indemnify its directors and officers to the
fullest extent not prohibited by law.
10.2 Officers, Employees and Other Agents
The Corporation shall have the power to indemnify its officers,
employees and other agents to the fullest extent not prohibited by
law.
10.3 No Presumption of Bad Faith
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in
good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of this Corporation, or, with
respect to any criminal proceeding, that the person had reasonable
cause to believe that the conduct was unlawful.
10.4 Advances of Expenses
The expenses incurred by a director or officer in any proceeding
shall be paid by the Corporation in advance at the written request of
the director or officer, if the director or officer:
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10.4.1 Furnishes the Corporation a written affirmation of such
person's good faith belief that such person is entitled to be
indemnified by the Corporation; and
10.4.2 Furnishes the Corporation a written undertaking to repay
such advance to the extent that it is ultimately determined by a court
that such person is not entitled to be indemnified by the Corporation.
Such advances shall be made without regard to the person's ability to
repay such expenses and without regard to the person's ultimate
entitlement to indemnification under this Bylaw or otherwise.
10.5 Enforcement
Without the necessity of entering into an express contract, all
rights to indemnification and advances under this Bylaw shall be
deemed to be contractual rights and be effective to the same extent
and as if provided for in a contract between the Corporation and the
director or officer who serves in such capacity at any time while this
Bylaw and any other applicable law, if any, are in effect. Any right
to indemnification or advances granted by this Bylaw to a director or
officer shall be enforceable by or on behalf of the person holding
such right in any court of competent jurisdiction if (a) the claim for
indemnification or advances is denied, in whole or in part, or (b) no
disposition of such claim is made within ninety (90) days of request
thereof. The claimant in such enforcement action, if successful in
whole or in part, shall be entitled to be also paid the expense of
prosecuting the claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred
in connection with any proceeding in advance of its final disposition
when the required affirmation and undertaking have been tendered to
the Corporation) that the claimant has not met the standards of
conduct which makes it permissible under the law for the Corporation
to indemnify the claimant, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or its
shareholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because the claimant has met the applicable standard of
conduct, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its shareholders)
that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
10.6 Nonexclusivity of Rights
The rights conferred on any person by this Bylaw shall not be
exclusive of any other right which such person may have or hereafter
acquire under any statute, provision of articles of incorporation,
bylaws, agreement, vote of shareholders or disinterested directors or
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otherwise, both as to action in the person's official capacity and as
to action in another capacity while holding office. The Corporation
is specifically authorized to enter into individual contracts with any
or all of its directors, officers, employees or agents respecting
indemnification and advances to the fullest extent not prohibited by
law.
10.7 Survival of Rights
The rights conferred on any person by this Bylaw shall continue
as to a person who has ceased to be a director, officer, employee or
other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
10.8 Insurance
To the fullest extent not prohibited by law, the Corporation,
upon approval by the Board of Directors, may purchase insurance on
behalf of any person required or permitted to be indemnified pursuant
to this Bylaw.
10.9 Amendments to Law
For purposes of this Bylaw, the meaning of "law" within the
phrase "to the fullest extent not prohibited by law" shall include,
but not be limited to, the Oregon Business Corporation Act, as the
same exists on the date hereof or as it may be amended; provided,
however, that in the case of any such amendment, such amendment shall
apply only to the extent that it permits the Corporation to provide
broader indemnification rights than the Act permitted the Corporation
to provide prior to such amendment.
10.10 Savings Clause
If this Bylaw or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, the Corporation shall
indemnify each director, officer or other agent to the fullest extent
permitted by any applicable portion of this Bylaw that shall not have
been invalidated, or by any other applicable law.
10.11 Certain Definitions
For the purposes of this Section, the following definitions shall
apply:
10.11.1 The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement and appeal of any threatened, pending
or completed action, suit or proceeding, whether brought in the right
of the Corporation or otherwise and whether civil, criminal,
administrative or investigative, in which the director or officer may
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be or may have been involved as a party or otherwise by reason of the
fact that the director or officer is or was a director or officer of
the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
10.11.2 The term "expenses" shall be broadly construed and
shall include, without limitation, all costs, charges and expenses
(including fees and disbursements of attorneys, accountants and other
experts) actually and reasonably incurred by a director or officer in
connection with any proceeding, all expenses of investigations,
judicial or administrative proceedings or appeals, and any expenses of
establishing a right to indemnification under these Bylaws, but shall
not include amounts paid in settlement, judgments or fines.
10.11.3 "Corporation" shall mean Synthetech, Inc., and any
successor corporation thereof.
10.11.4 Reference to a "director," "officer," "employee" or
"agent" of the Corporation shall include, without limitation,
situations where such person is serving at the request of the
Corporation as a director, officer, employee, trustee or agent of
another corporation, partnership, joint venture, trust or other
enterprise.
10.11.5 References to "other enterprises" shall include
employee benefit plans. References to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan. References to "serving at the request of the Corporation" shall
include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee
benefit plan, its participants, or beneficiaries. A person who acted
in good faith and in a manner the person reasonably believed to be in
the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation" as referred to in this Bylaw.
SECTION 11. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board at any regular or special meeting of the
Board; provided, however, that the shareholders, in amending or
repealing a particular Bylaw, may provide expressly that the Board may
not amend or repeal that Bylaw. The shareholders may also make,
alter, amend and repeal the Bylaws of the Corporation at any annual
meeting or at a special meeting called for that purpose. All Bylaws
made by the Board may be amended, repealed, altered or modified by the
shareholders at any regular or special meeting called for that
purpose.
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SECTION 12. CONTROL SHARE ACQUISITION STATUTE
The provisions of ORS 60.801-60.816 shall apply fully to the
acquisition of shares of the Corporation.
The foregoing Bylaws were adopted by the Incorporator of the
Corporation on November 8, 1990.
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Exhibit 10.10
of Form 10KSB
SYNTHETECH, INC.
1995 INCENTIVE COMPENSATION PLAN
As Amended and Restated on November 7, 1996
SECTION 1. PURPOSE
The purpose of the Synthetech, Inc. 1995 Incentive Compensation
Plan (the "Plan") is to enhance the long-term profitability and
stockholder value of Synthetech, Inc., an Oregon corporation (the
"Company"), by offering incentives and rewards to those
employees, directors, consultants and agents of the Company and its
Subsidiaries, if any (as defined in Section 2 below), who are key to
the Company's growth and success, and to encourage them to remain in
the service of the Company and its Subsidiaries and to acquire and
maintain stock ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as
set forth below:
2.1 Award
"Award" means an award or grant made to a Participant pursuant to
the Plan, including, without limitation, awards or grants of Options,
Stock Awards, or any combination of the foregoing.
2.2 Board
"Board" means the Board of Directors of the Company.
2.3 Cause
"Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction
or confession of a crime punishable by law (except minor violations),
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in each case as determined by the Plan Administrator, and its
determination shall be conclusive and binding.
2.4 Code
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 Common Stock
"Common Stock" means the common stock, par value $.001 per share,
of the Company.
2.6 Corporate Transaction
"Corporate Transaction" means any of the following events:
(a) Approval by the holders of the Common Stock of any
merger or consolidation of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Common Stock are converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Common
Stock immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger;
(b) Approval by the holders of the Common Stock of any
sale, lease, exchange or other transfer in one transaction or a series
of related transactions of all or substantially all of the Company's
assets other than a transfer of the Company's assets to a majority-
owned subsidiary (as the term "subsidiary" is defined in Section 8.3
of the Plan) of the Company; or
(c) Approval by the holders of the Common Stock of any plan
or proposal for the liquidation or dissolution of the Company.
2.7 Disability
"Disability" means "disability" as that term is defined for
purposes of the Company's Long Term Disability Plan or other similar
successor plan applicable to salaried employees.
2.8 Early Retirement
"Early Retirement" means retirement as that term is defined by
the Plan Administrator from time to time for purposes of the Plan.
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2.9 Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.10 Fair Market Value
"Fair Market Value" shall be as established in good faith by the
Plan Administrator or (a) if the Common Stock is listed on the Nasdaq
National Market, the closing selling price for the Common Stock as
reported by the Nasdaq National Market for a single trading day or
(b) if the Common Stock is listed on the New York Stock Exchange or
the American Stock Exchange, the closing selling price for the Common
Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If there is
no such reported price for the Common Stock for the date in question,
then such price on the last preceding date for which such price exists
shall be determinative of Fair Market Value.
2.11 Good Reason
"Good Reason" means the occurrence of any of the following events
or conditions:
(a) a change in the Holder's status, title, position or
responsibilities (including reporting responsibilities) that, in the
Holder's reasonable judgment, represents a substantial reduction of
the status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Holder of any duties
or responsibilities that, in the Holder's reasonable judgment, are
inconsistent with such status, title, position or responsibilities; or
any removal of the Holder from or failure to reappoint or reelect the
Holder to any of such positions, except in connection with the
termination of the Holder's employment for Cause, for Disability or as
a result of his or her death, or by the Holder other than for Good
Reason;
(b) a reduction in the Holder's annual base salary;
(c) the Company's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of
his or her place of employment prior to a Corporate Transaction,
except for reasonably required travel on the Company's business that
is not materially greater than such travel requirements prior to the
Corporate Transaction;
(d) the Company's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent
thereof) in which the Holder was participating at the time of a
Corporate Transaction, including, but not limited to, the Plan, or
(ii) provide the Holder with compensation and benefits at least equal
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(in terms of benefit levels and/or reward opportunities) to those
provided for under each employee benefit plan, program and practice as
in effect immediately prior to the Corporate Transaction (or as in
effect following the Corporate Transaction, if greater);
(e) any material breach by the Company of any provision of
the Plan; or
(f) any purported termination of the Holder's employment or
service for Cause by the Company that does not comply with the terms
of the Plan.
2.12 Grant Date
"Grant Date" means the date designated in a resolution of the
Plan Administrator as the date an Award is granted. If the Plan
Administrator does not designate a Grant Date in the resolution, the
Grant Date shall be the date the Plan Administrator adopted the
resolution.
2.13 Holder
"Holder" means the Participant to whom an Award is granted, or
the personal representative of a Holder who has died.
2.14 Incentive Stock Option
"Incentive Stock Option" means an option to purchase Common Stock
granted under Section 7 of the Plan with the intention that it qualify
as an "incentive stock option" as that term is defined in Section 422
of the Code.
2.15 Nonqualified Stock Option
"Nonqualified Stock Option" means an option to purchase Common
Stock granted under Section 7 of the Plan other than an Incentive
Stock Option.
2.16 Option
"Option" means the right to purchase Common Stock granted under
Section 7 of the Plan.
2.17 Participant
"Participant" means an individual who is a Holder of an Award or,
as the context may require, any employee, director, consultant or
agent of the Company or a Subsidiary who has been designated by the
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Plan Administrator as eligible to participate in the Plan.
2.18 Plan Administrator
"Plan Administrator" means the Board and/or any committee of the
Board designated to administer the Plan under Section 3.1 of the Plan.
2.19 Restricted Stock
"Restricted Stock" means shares of Common Stock granted under
Section 9 of the Plan the rights of ownership of which are subject to
restrictions prescribed by the Plan Administrator.
2.20 Retirement
"Retirement" means retirement as that term is defined by the Plan
Administrator from time to time for purposes of the Plan.
2.21 Stock Award
"Stock Award" means an Award granted under Section 9 of the Plan.
2.22 Subsidiary
"Subsidiary," except as expressly provided otherwise, means any
entity that is directly or indirectly controlled by the Company or in
which the Company has a significant ownership interest, as determined
by the Plan Administrator, and any entity that may become a direct or
indirect parent of the Company.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board and/or a committee or
committees (which term includes subcommittees) appointed by, and
consisting of two or more members of, the Board. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible Participants to different committees,
subject to such limitations as the Board deems appropriate. Committee
members shall serve for such term as the Board may determine, subject
to removal by the Board at any time. The composition of any committee
responsible for administering the Plan with respect to officers and
directors of the Company who are subject to Section 16 of the Exchange
Act with respect to securities of the Company shall comply with the
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requirements of Rule 16b-3 under Section 16(b) of the Exchange Act.
3.2 Administration and Interpretation by the Plan
Administrator
Except for the terms and conditions explicitly set forth in the
Plan, the Plan Administrator shall have exclusive authority, in its
discretion, to determine all matters relating to Awards under the
Plan, including the selection of individuals to be granted Awards, the
type of Awards, the number of shares of Common Stock subject to an
Award, all terms, conditions, restrictions and limitations, if any, of
an Award and the terms of any instrument that evidences the Award.
The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules
and regulations of general application for the Plan's administration.
The Plan Administrator's interpretation of the Plan and its rules and
regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on
all parties involved or affected. The Plan Administrator may delegate
administrative duties to such of the Company's officers as it so
determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in
Section 12.1 of the Plan, a maximum of Seven Hundred Fifty Thousand
(750,000) shares of Common Stock shall be available for issuance under
the Plan, except that any shares of Common Stock that, as of the date
the Plan is approved by the Company's stockholders, are available for
issuance under the Company's Amended and Restated 1990 Stock Option
Plan, as amended (or that thereafter become available for issuance
under that plan in accordance with its terms as in effect on such
date) and that are not issued under that plan shall be added to the
aggregate number of shares available for issuance under the Plan.
Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares now held or subsequently acquired by the
Company as treasury shares.
4.2 Limitations
Subject to adjustment from time to time as provided in
Section 12.1 of the Plan, not more than 350,000 shares of Common Stock
may be made subject to Awards under the Plan to any individual
Participant in the aggregate over the term of the Plan, such
limitation to be applied in a manner consistent with the requirements
of, and only to the extent required for compliance with, the exclusion
from the limitation on deductibility of compensation under Section
162(m) of the Code.
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4.3 Reuse of Shares
Any shares of Common Stock that have been made subject to an
Award that cease to be subject to the Award (other than by reason of
exercise or payment of the Award to the extent it is exercised for or
settled in shares), including, without limitation, in connection with
the cancellation of an Award and the grant of a replacement Award,
shall again be available for issuance in connection with future grants
of Awards under the Plan. Shares that are subject to tandem Awards
shall be counted only once.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, key
employees and directors of the Company and its Subsidiaries as the
Plan Administrator from time to time selects. Awards may also be made
to consultants and agents who provide services to the Company and its
Subsidiaries, if any.
SECTION 6. AWARDS
6.1 Form and Grant of Awards
The Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made under
the Plan. Such Awards may include Incentive Stock Options,
Nonqualified Stock Options and Stock Awards. Awards may be granted
singly, in combination or in tandem so that the settlement or payment
of one automatically reduces or cancels the other. Awards may also be
made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment form for, grants or rights under
any other employee or compensation plan of the Company.
6.2 Acquired Company Awards
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for
awards issued under other plans, or assume under the Plan awards
issued under other plans, if the other plans are or were plans of
other entities ("Acquired Entities") (or the parent of the Acquired
Entity) and the new Award is substituted, or the old award is assumed,
by reason of a merger, consolidation, acquisition of property or of
stock, reorganization or liquidation (the "Acquisition Transaction").
In the event that a written agreement pursuant to which the
Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for
or assumption of outstanding awards of the Acquired Entity, said terms
and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator,
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except as may be required for compliance with Rule 16b-3 under the
Exchange Act, and the persons holding such Awards shall be deemed to
be Participants and Holders.
SECTION 7. AWARDS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as
Nonqualified Stock Options, which shall be appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be
as determined by the Plan Administrator, but shall not be less than
100% of the Fair Market Value of the Common Stock on the Grant Date
with respect to Incentive Stock Options and not less than 10% of the
Fair Market Value of the Common Stock on the Grant Date with respect
to Nonqualified Stock Options.
7.3 Term of Options
The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be ten years from the
Grant Date.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each
instrument that evidences an Option the time at which or the
installments in which the Option shall become exercisable, which
provisions may be waived or modified by the Plan Administrator at any
time.
To the extent that the right to purchase shares has accrued
thereunder, an Option may be exercised from time to time by written
notice to the Company, in accordance with procedures established by
the Plan Administrator, setting forth the number of shares with
respect to which the Option is being exercised and accompanied by
payment in full as described in Section 7.5 of the Plan. In no case
may an Option be exercised as to less than 100 shares at any one time
(or the lesser number of remaining shares covered by the Option).
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be
paid in full to the Company by delivery of consideration equal to the
product of the Option exercise price and the number of shares
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purchased. Such consideration must be paid in cash, except that the
Plan Administrator may, either at the time the Option is granted or at
any time before it is exercised and subject to such limitations as the
Plan Administrator may determine, authorize payment in cash and/or one
or more of the following alternative forms: (i) Common Stock already
owned by the Holder for at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial
reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price; (ii) a
promissory note authorized pursuant to Section 11 of the Plan;
(iii) delivery of a properly executed exercise notice, together with
irrevocable instructions, to (a) a brokerage firm designated by the
Company to deliver promptly to the Company the aggregate amount of
sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the
exercise and (b) the Company to deliver the certificates for such
purchased shares directly to such brokerage firm, all in accordance
with the regulations of the Federal Reserve Board; or (iv) such other
consideration as the Plan Administrator may permit.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each
instrument that evidences an Option whether the Option will continue
to be exercisable, and the terms and conditions of such exercise, if a
Holder ceases to be employed by, or to provide services to, the
Company or its Subsidiaries, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established
in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time. In case
of termination of the Holder's employment or services other than by
reason of death or Cause, the Option shall be exercisable, to the
extent of the number of shares purchasable by the Holder at the date
of such termination, only: (i) within three years if the termination
of the Holder's employment or services are coincident with Retirement,
Early Retirement at the Company's request or Disability or (ii) within
three months after the date the Holder ceases to be an employee,
director, consultant or agent of the Company or a Subsidiary if
termination of the Holder's employment or services is for any reason
other than Retirement, Early Retirement at the Company's request or
Disability, but in no event later than the remaining term of the
Option. Any Option exercisable at the time of the Holder's death may
be exercised, to the extent of the number of shares purchasable by the
Holder at the date of the Holder's death, by the personal
representative of the Holder's estate entitled thereto at any time or
from time to time within three years after the date of death, but in
no event later than the remaining term of the Option. In case of
termination of the Holder's employment or services for Cause, the
Option shall automatically terminate upon first notification to the
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Holder of such termination, unless the Plan Administrator determines
otherwise. If a Holder's employment or services with the Company are
suspended pending an investigation of whether the Holder shall be
terminated for Cause, all the Holder's rights under any Option
likewise shall be suspended during the period of investigation. A
transfer of employment or services between or among the Company and
its Subsidiaries shall not be considered a termination of employment
or services. Unless the Plan Administrator determines otherwise, a
leave of absence approved in accordance with Company procedures shall
not be considered a termination of employment or services, except that
with respect to Incentive Stock Options such leave of absence shall be
subject to any requirements of Section 422 of the Code.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive
Stock Options shall be subject to the following additional terms and
conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of
the Grant Date) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time during any calendar year
(under the Plan and all other stock option plans of the Company)
exceeds $100,000, such portion in excess of $100,000 shall be treated
as a Nonqualified Stock Option. In the event the Participant holds
two or more such Options that become exercisable for the first time in
the same calendar year, such limitation shall be applied on the basis
of the order in which such Options are granted.
8.2 10% Stockholders
If a Participant owns 10% or more of the total voting power of
all classes of the Company's stock, then the exercise price per share
of an Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option term
shall not exceed five years.
8.3 Eligible Employees
Individuals who are not employees of the Company or one of its
parent corporations or subsidiary corporations may not be granted
Incentive Stock Options. For purposes of this Section 8.3 of the
Plan, "parent corporation" and "subsidiary corporation" shall have the
meanings attributed to those terms for purposes of Section 422 of the
Code.
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8.4 Term
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 Exercisability
An Option designated as an Incentive Stock Option must be
exercised within three months after termination of employment for
reasons other than death to qualify for Incentive Stock Option tax
treatment, except that in the case of termination of employment due to
Disability, such Option must be exercised within one year after such
termination.
SECTION 9. STOCK AWARDS
9.1 Grant of Stock Awards
The Plan Administrator is authorized to make Awards of Common
Stock to Participants on such terms and conditions and subject to such
restrictions, if any (whether based on performance standards, periods
of service or otherwise), as the Plan Administrator shall determine,
which terms, conditions and restrictions shall be set forth in the
instrument evidencing the Award. The terms, conditions and
restrictions that the Plan Administrator shall have the power to
determine shall include, without limitation, the manner in which
shares subject to Stock Awards are held during the periods they are
subject to restrictions and the circumstances under which forfeiture
of Restricted Stock shall occur by reason of termination of the
Holder's services.
9.2 Issuance of Shares
Upon the satisfaction of any terms, conditions and restrictions
prescribed in respect to a Stock Award, or upon the Holder's release
from any terms, conditions and restrictions of a Stock Award, as
determined by the Plan Administrator, the Company shall deliver, as
soon as practicable, to the Holder or, in the case of the Holder's
death, to the personal representative of the Holder's estate or as the
appropriate court directs, a stock certificate for the appropriate
number of shares of Common Stock.
9.3 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the Plan
Administrator may, in its sole discretion, waive the forfeiture period
and any other terms, conditions or restrictions on any Restricted
Stock under such circumstances and subject to such terms and
conditions as the Plan Administrator shall deem appropriate.
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SECTION 10. LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS
To assist a Holder (including a Holder who is an officer or
director of the Company) in acquiring shares of Common Stock pursuant
to an Award granted under the Plan, the Plan Administrator may
authorize, either at the Grant Date or at any time before the
acquisition of Common Stock pursuant to the Award, (i) the extension
of a loan to the Holder by the Company, (ii) the payment by the Holder
of the purchase price, if any, of the Common Stock in installments, or
(iii) the guarantee by the Company of a loan obtained by the grantee
from a third party. The terms of any loans, installment payments or
guarantees, including the interest rate and terms of repayment, will
be subject to the Plan Administrator's discretion. Loans, installment
payments and guarantees may be granted with or without security. The
maximum credit available is the purchase price, if any, of the Common
Stock acquired plus the maximum federal and state income and
employment tax liability that may be incurred in connection with the
acquisition.
SECTION 11. ASSIGNABILITY
No Option granted under the Plan may be assigned or transferred
by the Holder other than by will or by the laws of descent and
distribution, and during the Holder's lifetime, such Awards may be
exercised only by the Holder. Notwithstanding the foregoing, and to
the extent permitted by Rule 16b-3 under the Exchange Act and
Section 422 of the Code, the Plan Administrator, in its sole
discretion, may permit such assignment, transfer and exercisability
and may permit a Holder of such Awards to designate a beneficiary who
may exercise the Award or receive compensation under the Award after
the Holder's death.
SECTION 12. ADJUSTMENTS
12.1 Adjustment of Shares
In the event that at any time or from time to time a stock
dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to stockholders
other than a normal cash dividend, or other change in the Company's
corporate or capital structure results in (i) the outstanding shares,
or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of securities of the Company
or of any other corporation or (ii) new, different or additional
securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator, in its sole discretion, shall make such equitable
adjustments as it shall deem appropriate in the circumstances in
(a) the maximum number of and class of securities subject to the Plan
as set forth in Section 4.1 of the Plan, (b) the maximum number and
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class of securities that may be made subject to Awards to any
individual Participant as set forth in Section 4.2 of the Plan, and
(c) the number and class of securities that are subject to any
outstanding Award and the per share price of such securities, without
any change in the aggregate price to be paid therefor. The
determination by the Plan Administrator as to the terms of any of the
foregoing adjustments shall be conclusive and binding.
12.2 Corporate Transaction
Except as otherwise provided in the instrument that evidences the
Award, in the event of any Corporate Transaction, each Option or Stock
Award that is at the time outstanding shall automatically accelerate
so that each such Award shall, immediately prior to the specified
effective date for the Corporate Transaction, become 100% vested,
except that such acceleration will not occur if in the opinion of the
Company's accountants it would render unavailable "pooling of
interest" accounting for a Corporate Transaction that would otherwise
qualify for such accounting treatment. Such Award shall not so
accelerate, however, if and to the extent: (i) such Award is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation or parent thereof or to be replaced with a
comparable award for the purchase of shares of the capital stock of
the successor corporation or its parent corporation, (ii) such Award
is to be replaced with a cash incentive program of the successor
corporation that preserves the spread existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance
with the same vesting schedule applicable to such Award, or (iii) the
acceleration of such Award is subject to other limitations imposed by
the instrument evidencing the Award. The determination of Award
comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be conclusive and binding.
All such Awards shall terminate and cease to remain outstanding
immediately following the consummation of the Corporate Transaction,
except to the extent assumed by the successor corporation or its
parent corporation. Any such Awards that are assumed or replaced in
the Corporate Transaction and do not otherwise accelerate at that time
shall be accelerated in the event the Holder's employment or services
should subsequently terminate within two years following such
Corporate Transaction, unless such employment or services are
terminated by the Company for Cause or by the Holder voluntarily
without Good Reason. Notwithstanding the foregoing, no Incentive
Stock Option shall become exercisable pursuant to this Section 12.2
without the Holder's consent, if the result would be to cause such
Option not to be treated as an Incentive Stock Option (whether by
reason of the annual limitation described in Section 8.1 of the Plan
or otherwise).
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12.3 Further Adjustment of Awards
Without limiting the preceding Section 12.2 of the Plan, the Plan
Administrator shall have the discretion, exercisable at any time
before a sale, merger, consolidation, reorganization, liquidation or
change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to Participants, with
respect to Awards. Such authorized action may include (but shall not
be limited to) establishing, amending or waiving the type, terms,
conditions or duration of, or restrictions on, Awards so as to provide
for earlier, later, extended or additional time for exercise, payment
or settlement or lifting restrictions, differing methods for
calculating payments or settlements, alternate forms and amounts of
payments and settlements and other modifications, and the Plan
Administrator may take such actions with respect to all Participants,
to certain categories of Participants or only to individual
Participants. The Plan Administrator may take such actions before or
after granting Awards to which the action relates and before or after
any public announcement with respect to such sale, merger,
consolidation, reorganization, liquidation or change in control that
is the reason for such action.
12.4 Limitations
The grant of Awards will in no way affect the Company's right to
adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
SECTION 13. WITHHOLDING OF TAXES
The Company may require the Holder to pay to the Company the
amount of any withholding taxes that the Company is required to
withhold with respect to the grant, exercise, payment or settlement of
any Award. In such instances, the Plan Administrator may, in its
discretion and subject to the Plan and applicable law, permit the
Holder to satisfy withholding obligations, in whole or in part, by
paying cash, by electing to have the Company withhold shares of Common
Stock or by transferring shares of Common Stock to the Company, in
such amounts as are equivalent to the Fair Market Value of the
withholding obligation.
SECTION 14. AMENDMENT AND TERMINATION OF PLAN
14.1 Amendment of Plan
The Plan may be amended by the stockholders of the Company. The
Board may also amend the Plan in such respects as it shall deem
advisable; however, to the extent required for compliance with Rule
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16b-3 under the Exchange Act, Section 422 of the Code or any
applicable law or regulation, stockholder approval will be required
for any amendment that will (i) increase the total number of shares as
to which Options may be granted or that may be issued as Restricted
Stock, (ii) materially modify the class of persons eligible to receive
Awards, (iii) materially increase the benefits accruing to
Participants under the Plan, or (iv) otherwise require stockholder
approval under any applicable law or regulation.
14.2 Termination of Plan
The Company's stockholders or the Board may suspend or terminate
the Plan at any time. The Plan will have no fixed expiration date;
provided, however, that no Incentive Stock Options may be granted more
than 10 years after the Plan's effective date.
14.3 Consent of Holder
The amendment or termination of the Plan shall not, without the
consent of the Holder of any Award under the Plan, alter or impair any
rights or obligations under any Award theretofore granted under the
Plan.
SECTION 15. GENERAL
15.1 Notification
The Plan Administrator shall promptly notify a Participant of an
Award, and a written grant shall promptly be executed and delivered by
or on behalf of the Company.
15.2 Continued Employment or Services; Rights in Awards
Neither the Plan, participation in the Plan as a Participant nor
any action of the Plan Administrator taken under the Plan shall be
construed as giving any Participant or employee of the Company any
right to be retained in the employ of the Company or limit the
Company's right to terminate the employment or services of the
Participant.
15.3 Registration; Certificates for Shares
The Company shall be under no obligation to any Participant to
register for offering or resale under the Securities Act of 1933, as
amended, or register or qualify under state securities laws, any
shares of Common Stock, security or interest in a security paid or
issued under, or created by, the Plan. The Company may issue
certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for
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the Company deems necessary or desirable for compliance by the Company
with federal and state securities laws.
15.4 No Rights as a Stockholder
No Option shall entitle the Holder to any dividend, voting or
other right of a stockholder unless and until the date of issuance
under the Plan of the shares that are the subject of such Awards, free
of all applicable restrictions.
15.5 Compliance With Laws and Regulations
It is the Company's intention that, so long as any of the
Company's equity securities are registered pursuant to Section 12(b)
or 12(g) of the Exchange Act, the Plan shall comply in all respects
with Rule 16b-3 under the Exchange Act and, if any Plan provision is
later found not to be in compliance with such Rule, the provision
shall be deemed null and void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Board, in
its sole discretion, may bifurcate the Plan so as to restrict, limit
or condition the use of any provision of the Plan to Participants who
are officers or directors subject to Section 16 of the Exchange Act
without so restricting, limiting or conditioning the Plan with respect
to other Participants. Additionally, in interpreting and applying the
provisions of the Plan, any Option granted as an Incentive Stock
Option pursuant to the Plan shall, to the extent permitted by law, be
construed as an "incentive stock option" within the meaning of
Section 422 of the Code.
15.6 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing
contained herein shall require the Company to segregate any monies or
other property, or shares of Common Stock, or to create any trusts, or
to make any special deposits for any immediate or deferred amounts
payable to any Participant, and no Participant shall have any rights
that are greater than those of a general unsecured creditor of the
Company.
15.7 Severability
If any provision of the Plan or any Award is determined to be
invalid, illegal or unenforceable in any jurisdiction, or as to any
person, or would disqualify the Plan or any Award under any law deemed
applicable by the Plan Administrator, such provision shall be
construed or deemed amended to conform to applicable laws, or, if it
cannot be so construed or deemed amended without, in the Plan
Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such
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jurisdiction, person or Award, and the remainder of the Plan and any
such Award shall remain in full force and effect.
SECTION 16. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by
the Board, so long as it is approved by the Company's stockholders at
any time within 12 months of such adoption or, if earlier, and to the
extent required for compliance with Rule 16b-3 under the Exchange Act,
at the next annual meeting of the Company's stockholders after
adoption of the Plan by the Board.
Adopted by the Board on May 15, 1995 and approved by the
Company's stockholders on July 18, 1995. Plan amended and restated by
the Board as of November 7, 1996.
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Exhibit 10.11
of Form 10KSB
PROMISSORY NOTE
PrincipalLoan DateMaturityLoan No. Call CollateralAccount
Officer Initials
$1,000,00009-08-1995 19 0380 8741855333 21728
Borrower: SYNTHETECH, INC. Lender: United
States National Bank Of Oregon
1290 INDUSTRIAL WAY Mid-Willamette Commercial Banking
Center
ALBANY, OR 97321 PL-7 Oregon Corporate Loan
Servicing
555 S. W. Oak
Portland, OR 97204
Principal Amount: $1,000,000.00 Initial Rate: 9.500% Date of
Note: September 8, 1995
PROMISE TO PAY. SYNTHETECH, INC. ("Borrower") promises to pay to
United States National Bank of Oregon ("Lender"), or order, in lawful
money of the United States of America, on demand, the principal amount
of One Million & 00/100 Dollars ($1,000,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from
the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan immediately upon Lender's
demand. In addition, Borrower will pay regular monthly payments of
all accrued unpaid interest due as of each payment date, beginning
October 5, 1995, with all subsequent interest payments to be due on
the same day of each month after that. Interest on this Note is
computed on a 365/360 simple interest basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied
by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed or required
by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an index which is the
Lender's Prime Rate. This is the rate of interest which Lender from
time to time establishes as its Prime Rate and is not, for example,
the lowest rate of interest which Lender collects from any borrower or
class of borrowers (the "Index'). The interest rate shall be adjusted
without notice effective on the day Bank's prime rate changes. Lender
will tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates
as well. The interest rate change will not occur more often than each
Day. The Index currently is 8.750% per annum. The interest rate to
be applied to the unpaid principal balance of this Note will be at a
rate of 0.750 percentage points over the Index, resulting in an
initial rate of 9.500% per annum.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as of the date of the loan and will
not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. Except for
the foregoing, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower falls to make any payment when due. (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to perform
promptly at the time and strictly in the manner provided in this Note
or any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender. (c) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is
false or misleading in any material respect. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors,
or any proceeding is commenced either by Borrower or against Borrower
under any bankruptcy or insolvency laws. (e) Any creditor tries to
<PAGE> 90
take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (f) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (g) Lender
in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if
Borrower has not been given a notice of a breach of the same provision
of this Note within the preceding twelve (12) months, it may be cured
(and no event of default will have occurred) if Borrower, after
receiving written notice from Lender demanding cure of such default:
(a) cures the default within fifteen (15) days; or (b) if the cure
requires more than fifteen (15) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to
cure the default and thereafter continues and completes all reasonable
and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that
amount. Upon default, including failure to pay upon final maturity,
Lender, at its option, may also, if permitted under applicable law, do
one or both of the following: (a) increase the variable interest rate
on this Note to 5.750 percentage points over the Index, and (b) add
any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note
(including any increased rate). The interest rate will not exceed the
maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject to
any limits under applicable law, Lender's attorneys' fees and Lender's
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. If not prohibited
by applicable law, Borrower also will pay any court costs, in addition
to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Oregon. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Multnomah County, the State of Oregon.
Subject to the provisions on arbitration, this Note shall be governed
by and construed in accordance with the laws of the State of Oregon.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, convoys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in
and to, Borrower's accounts with Lender (whether checking, savings, or
some other account), including without limitation all accounts held
jointly with someone else and all accounts Borrower may open in the
future, excluding however all IRA, Keogh, and trust accounts.
Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all
such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by Borrower
or by an authorized person. Lender may, but need not, require that
all oral requests be confirmed in writing. Borrower agrees to be
liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender, regardless of the fact that persons
other than those authorized to borrow have authority to draw against
the accounts. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower
or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b)
Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note
for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other
agreement between Lender and Borrower.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in
nature, arising from this Note or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to
the Rules of the American Arbitration Association, upon request of
<PAGE> 91
either party. No act to take or dispose of any collateral securing
this Note shall constitute a waiver of this arbitration agreement or
be prohibited by this arbitration agreement. This includes, without
limitation, obtaining injunctive relief or a temporary restraining
order; foreclosing by notice and sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver;
or exercising any rights relating to personal property, including
taking or disposing of such property with or without judicial process
pursuant to Article 9 of the Uniform Commercial Code. Any disputes,
claims, or controversies concerning the lawfulness or reasonableness
of any act, or exercise of any right, concerning any collateral
securing this Note, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral securing
this Note, shall also be arbitrated, provided however that no
arbitrator shall have the right or the power to enjoin or restrain any
act of any party. Judgment upon any award rendered by any arbitrator
may be entered in any court having jurisdiction. Nothing in this Note
shall preclude any party from seeking equitable relief from a court of
competent jurisdiction. The statute of limitations, estoppel, waiver,
laches, and similar doctrines which would otherwise be applicable in
an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
LATE CHARGE. If a payment is 19 days or more past due, Borrower will
be charged a late charge of 5% of the delinquent payment.
CREDIT ACT - CHECKING ACCOUNT NUMBER 022-0016-224 LOCATED AT THE
ALBANY COMMUNITY BRANCH. Borrower has requested and been granted
Lender's Commercial Line of Credit Automatic Cash Transfer Service
("Credit ACT"). So long as this Note is in place, Borrower authorizes
Lender to draw from Borrower's available line of credit and transfer
funds automatically to Borrower's commercial checking account
described in the heading of this paragraph ("Checking Account") in
accordance with this section. So long as this agreement is in place,
Lender agrees to make an automatic cash transfer from Borrower's line
of credit to its Checking Account in increments of $500.00, to pay
checks that would otherwise overdraw Borrower's Checking Account by
$100.00 or more, up to Borrower's available credit limit. The amount
of each Credit ACT transfer will be an advance under the terms of this
Note. There is no charge for using Credit ACT. Borrower agrees to
pay prevailing overdraft or other applicable checking account charges
then in effect if an overdraft may not be paid because an ACT in the
required increment of $500.00 to pay the full amount of the overdraft
would exceed Borrower's credit limit. If Borrower's credit limit has
been exceeded, and no other ACT privileges are available to Borrower,
any check presented for payment from Checking Account will, at the
sole option of Lender, either be paid, thus overdrawing Checking
Account, or dishonored. Lender may change the terms of Credit ACT at
any time by giving Borrower written notice, sent to the Borrower's
address as shown in Lender's records, prior to the effective date of
the change.
Lender reserves the right to discontinue this service upon giving
written notice to the Borrower, at Borrower's address shown in
Lender's records, under the following circumstances: (1) Lender
reasonably believes that Borrower will be unable to fulfill its
repayment obligations because of a material adverse change in
Borrower's financial circumstances. (2) Borrower fails to promptly
provide financial information that Lender has requested. (3) Borrower
is in default of a material provision of any promissory note or loan
agreement with Lender.
If Lender discontinues further Credit ACT services due to any of these
circumstances, Lender will mail Borrower written notice of the
discontinuation and the reasons therefor. After such notice is given,
Borrower must request in writing that its Credit ACT be reinstated.
Before Credit ACT privileges are reinstated, Lender may ask Borrower
to provide new information, at Borrower's expense. If Borrower shows
Lender that the circumstances that caused cancellation of Credit ACT
services have ceased to exist, Credit ACT will be reinstated at
Lender's sole option and discretion upon written notice to Borrower.
PERIODIC REVIEW. Lender will review the loan periodically. At the
time of the review, Borrower will furnish Lender with any additional
information regarding Borrower's financial condition and business
operations that Lender requests. This information may include, but is
not limited to, financial statements, tax returns, lists of assets and
liabilities, agings of receivables and payables, inventory schedules,
budgets and forecasts. If upon review, Lender, in its sole
<PAGE> 92
discretion, determines that there has been a material adverse change
in Borrower's financial condition, Borrower will be in default. Upon
default, Lender shall have all rights specified herein.
DEMAND NOTE. BORROWER ACKNOWLEDGES AND AGREES THAT (A) THIS NOTE IS A
DEMAND NOTE, AND LENDER IS ENTITLED TO DEMAND BORROWER'S IMMEDIATE
PAYMENT IN FULL OF ALL AMOUNTS OWING HEREUNDER, (B) NEITHER ANYTHING
TO THE CONTRARY CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENTS
(INCLUDING BUT NOT LIMITED TO, PROVISIONS RELATING TO DEFAULTS, RIGHTS
OF CURE, DEFAULT RATE OF INTEREST, INSTALLMENT PAYMENTS, LATE CHARGES,
PERIODIC REVIEW OF BORROWER'S FINANCIAL CONDITION, AND COVENANTS) NOR
ANY ACT OF LENDER PURSUANT TO ANY SUCH PROVISIONS SHALL LIMIT OR
IMPAIR LENDER'S RIGHT OR ABILITY TO REQUIRE BORROWER'S PAYMENT IN FULL
OF ALL AMOUNTS OWING HEREUNDER IMMEDIATELY UPON LENDER'S DEMAND, AND
(C) UPON LENDER MAKING ANY SUCH DEMAND, LENDER SHALL HAVE NO
OBLIGATION TO MAKE ANY ADVANCE UNDER THIS NOTE OR UNDER THE LOAN
DOCUMENTS.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude
Lender's right to declare payment of this Note on its demand. Lender
may delay or forgo enforcing any of its rights or remedies under this
Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon
any change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any
other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify
this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US
(LENDER) AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
SYNTHETECH, INC.
X \s\ Charles B. Williams, VP X \s\
Philip Knutson, VP
Authorized Officer Authorized Officer
LENDER:
United States National Bank of Oregon
By \s\
Authorized Officer
<PAGE> 93
Exhibit 10.12
of Form 10KSB
COMMERCIAL SECURITY AGREEMENT
PrincipalLoan DateMaturityLoan No. Call CollateralAccount
Officer Initials
$1,000,00009-08-1995 19 0380 8741855333 21728
Borrower: SYNTHETECH, INC. Lender: United States National
Bank of Oregon
1290 INDUSTRIAL WAY Mid-Willamette Commercial Banking
Center
ALBANY, OR 97321 PL-7 Oregon Corporate Loan
Servicing
555 S. W. Oak
Portland, OR 97204
THIS COMMERCIAL SECURITY AGREEMENT is entered into between SYNTHETECH,
INC. (referred to below as "Grantor"); and United States National Bank
of Oregon (referred to below as "Lender"). For valuable
consideration, Grantor grants to Lender a security interest in the
Collateral to secure the Indebtedness and agrees that Lender shall
have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by
law.
DEFINITIONS. The following words shall have the following meanings
when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the
Uniform Commercial Code. All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended
or modified from time to time, together with all exhibits and
schedules attached to this Commercial Security Agreement from
time to time.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located:
All chattel paper, accounts, contract rights and general
intangibles
In addition, the word "Collateral" includes all the following,
whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
(a) All accessions, accessories, increases, and additions to and
all replacements of and substitutions for any property described
above.
(b) All products and produce of any of the property described in
this Collateral section.
(c) All accounts, contract rights, general intangibles,
instruments, rents, monies, payments, and all other rights,
arising out of a sale, lease, or other disposition of any of the
property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic media,
together with all of Grantor's right, title, and interest in and
<PAGE> 94
to all computer software required to utilize, create, maintain,
and process any such records or data on electronic media.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below
in the section titled "Events of Default."
Grantor. The word "Grantor" means SYNTHETECH, INC., its
successors and assigns
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest,
together with all other indebtedness and costs and expenses for
which Grantor is responsible under this Agreement or under any of
the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them, to
Lender, as well as all claims by Lender against Grantor, or any
one or more of them, whether existing now or later; whether they
are voluntary or involuntary, due or not due, direct or indirect,
absolute or contingent, liquidated or unliquidated; whether
Grantor may be liable individually or jointly with others;
whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute
of limitations; and whether such indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means United States National Bank of
Oregon, its successors and assigns.
Note. The word "Note" means the note or credit agreement dated
September 8, 1995, in the principal amount of $1,000,000.00 from
Grantor to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and
substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, and
all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual
possessory security interest in and hereby assigns, conveys, delivers,
pledges, and transfers all of Grantor's right, title and interest in
and to Grantor's accounts with Lender (whether checking, savings, or
some other account), including all accounts held jointly with someone
else and all accounts Grantor may open in the future, excluding
however all IRA, Keogh, and trust accounts. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff
all Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as
follows:
Organization. Grantor is a corporation which is duly organized,
validly existing, and in good standing under the laws of the
state of Grantor's incorporation. Grantor has its chief
executive office at 1290 INDUSTRIAL WAY, ALBANY, OR 97321.
Grantor will notify Lender of any change in the location of
Grantor's chief executive office.
Authorization. The execution, delivery, and performance of this
Agreement by Grantor have been duly authorized by all necessary
action by Grantor and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its
articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Grantor or (b) any
law, governmental regulation, court decree, or order applicable
to Grantor.
<PAGE> 95
Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's security
interest in the Collateral. Upon request of Lender, Grantor will
deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's
interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. Grantor hereby appoints Lender
as its irrevocable attorney-in-fact for the purpose of executing
any documents necessary to perfect or to continue the security
interest granted in this Agreement. Lender may at any time, and
without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or
of this Agreement for use as a financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in
the Collateral. Grantor promptly will notify Lender before any
change in Grantor's name including any change to the assumed
business names of Grantor. This is a continuing Security
Agreement and will continue in effect even though all or any part
of the Indebtedness is paid in full and even though for a period
of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will
not violate any law or agreement governing Grantor or to which
Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or condition of
this Agreement.
Enforceability of Collateral. To the extent the Collateral
consists of accounts, contract rights, chattel paper, or general
intangibles, the Collateral is enforceable in accordance with its
terms, is genuine, and complies with applicable laws concerning
form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any account
becomes subject to a security interest in favor of Lender, the
account shall be a good and valid account representing an
undisputed, bona fide indebtedness incurred by the account
debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale,
or for services theretofore performed by Grantor with or for the
account debtor; there shall be no setoffs or counterclaims
against any such account; and no agreement under which any
deductions or discounts may be claimed shall have been made with
the account debtor except those disclosed to Lender in writing.
Removal of Collateral. Grantor shall keep the Collateral (or to
the extent the Collateral consists of intangible property such as
accounts, the records concerning the Collateral) at Grantor's
address shown above, or at such other locations as are acceptable
to Lender. Except in the ordinary course of its business,
including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or
permit any action which would require application for
certificates of title for the vehicles outside the State of
Oregon, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or
dispose of the Collateral. Grantor shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be subject to any
lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the
prior written consent of Lender. This includes security
interests even if junior in right to the security interests
granted under this Agreement. Unless waived by Lender, all
proceeds from any disposition of the Collateral (for whatever
reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this
requirement shall not constitute consent by Lender to any sale or
other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds
good and marketable title to the Collateral, free and clear of
all liens and encumbrances except for the lien of this Agreement.
<PAGE> 96
No financing statement covering any of the Collateral is on file
in any public office other than those which reflect the security
interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in
the Collateral against the claims and demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall
require, and insofar as the Collateral consists of accounts and
general intangibles, Grantor shall deliver to Lender schedules of
such Collateral, including such information as Lender may
require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles.
Such information shall be submitted for Grantor and each of its
subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain
all tangible Collateral in good condition and repair. Grantor
will not commit or permit damage to or destruction of the
Collateral or any part of the Collateral. Lender and its
designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral
wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or
damage of or to any Collateral; of any request for credit or
adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting
the Collateral or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Related
Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, Grantor shall
deposit with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any
surety bond furnished in the contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable
to the ownership, production, disposition, or use of the
Collateral. Grantor may contest in good faith any such law,
ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not
jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this
Agreement remains a lien on the Collateral, used for the
generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L.
No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). The terms
"hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations and
warranties contained herein are based on Grantor's due diligence
in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future
claims against Lender for indemnity or contribution in the event
Grantor becomes liable for cleanup or other costs under any
Environmental Laws, and (b) agrees to indemnify and hold harmless
<PAGE> 97
Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement, or as a result of a
violation of any Environmental Laws. This obligation to
indemnify shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and
maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance
as Lender may require with respect to the Collateral, in form,
amounts, coverages and basis reasonably acceptable to Lender and
issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time
to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10)
days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a
notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any
other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements
as Lender may require. If Grantor at any time fails to obtain or
maintain any insurance as required under this Agreement, Lender
may (but shall not be obligated to) obtain such insurance as
Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in
the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make
proof of loss if Grantor fails to do so within fifteen (15) days
of the casualty. All proceeds of any insurance on the
Collateral, including accrued proceeds thereon, shall be held by
Lender as part of the Collateral. If Lender consents to repair
or replacement of the damaged or destroyed Collateral, Lender
shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement
of the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has
not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves
shall be created by monthly payments from Grantor of a sum
estimated by Lender to be sufficient to produce, at least fifteen
(15) days before the premium due date, amounts at least equal to
the insurance premiums to be paid. If fifteen (15) days before
payment is due, the reserve funds are insufficient, Grantor shall
upon demand pay any deficiency to Lender. The reserve funds
shall be held by Lender as a general deposit and shall constitute
a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor
as they become due. Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for
payment of the insurance premiums required to be paid by Grantor.
The responsibility for the payment of premiums shall remain
Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of insurance
showing such information as Lender may reasonably request
including the following: (a) the name of the insurer; (b) the
risks insured; (c) the amount of the policy; (d) the property
insured; (e) the then current value on the basis of which
insurance has been obtained and the manner of determining that
value; and (f) the expiration date of the policy. In addition,
Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of
the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default
and except as otherwise provided below with respect to accounts and
above in the paragraph titled "Transactions Involving Collateral",
Grantor may have possession of the tangible personal property and
<PAGE> 98
beneficial use of all the Collateral and may use it in any lawful
manner not inconsistent with this Agreement or the Related Documents,
provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by
Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may
collect any of the Collateral consisting of accounts. At any time and
even though no Event of Default exists, Lender may exercise its rights
to collect the accounts and to notify account debtors to make payments
directly to Lender for application to the Indebtedness. If Lender at
any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral if Lender takes
such action for that purpose as Grantor shall request or as Lender, in
Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not
of itself be deemed to be a failure to exercise reasonable care.
Lender shall not be required to take any steps necessary to preserve
any rights in the Collateral against prior parties, nor to protect,
preserve or maintain any security interest given to secure the
Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender
may (but shall not be obligated to) discharge or pay any amounts
required to be discharged or paid by Grantor under this Agreement,
including without limitation all taxes, liens, security interests,
encumbrances, and other claims, at any time levied or placed on the
Collateral. Lender also may (but shall not be obligated to) pay all
costs for insuring, maintaining and preserving the Collateral. All
such expenditures incurred or paid by Lender for such purposes will
then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All
such expenses shall become a part of the Indebtedness and, at Lender's
option, will (a) be payable on demand, (b) be added to the balance of
the Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any applicable
insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the
Note's maturity. This Agreement also will secure payment of these
amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an
Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment
when due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform
any other term, obligation, covenant or condition contained in
this Agreement or in any of the Related Documents or in any other
agreement between Lender and Grantor.
Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor, the
appointment of a receiver for any part of Grantor's property, any
assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure
or forfeiture proceedings, whether by judicial proceeding, self-
help, repossession or any other method, by any creditor of
Grantor or by any governmental agency against the Collateral or
any other collateral securing the Indebtedness. This includes a
garnishment of any of Grantor's deposit accounts with Lender.
However, this Event of Default shall not apply if there is a good
faith dispute by Grantor as to the validity or reasonableness of
the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs
with respect to any Guarantor of any of the Indebtedness or such
Guarantor dies or becomes incompetent. Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate
to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so,
cure the Event of Default.
<PAGE> 99
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under
this Agreement, at any time thereafter, Lender shall have all the
rights of a secured party under the Oregon Uniform Commercial Code.
In addition and without limitation, Lender may exercise any one or
more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire
Indebtedness, including any prepayment penalty which Grantor
would be required to pay, immediately due and payable, without
notice.
Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all
certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter
upon the property of Grantor to take possession of and remove the
Collateral. If the Collateral contains other goods not covered
by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in its own name or that of Grantor. Lender may
sell the Collateral at public auction or private sale. Unless
the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give
Grantor reasonable notice of the time after which any private
sale or any other intended disposition of the Collateral is to be
made unless Grantor has signed, after an Event of Default occurs,
a statement renouncing or modifying Grantor's right to
notification of sale. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days
before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing
for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure
until repaid.
Appoint Receiver. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding the
appointment of a receiver: (a) Lender may have a receiver
appointed as a matter of right, (b) the receiver may be an
employee of Lender and may serve without bond, and (c) all fees
of the receiver and his or her attorney shall become pad of the
Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure
until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or
through a receiver, may collect the payments, rents, income, and
revenues from the Collateral. Lender may at any time in its
discretion transfer any Collateral into its own name or that of
its nominee and receive the payments, rents, income, and revenues
therefrom and hold the same as security for the Indebtedness or
apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral
consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the
Collateral as Lender may determine, whether or not indebtedness
or Collateral is then due. For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts,
money orders, documents of title, instruments and items
pertaining to payment, shipment, or storage of any Collateral.
To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
<PAGE> 100
application of all amounts received from the exercise of the
rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the
Uniform Commercial Code, as may be amended from time to time. In
addition, Lender shall have and may exercise any or all other
rights and remedies it may have available at law, in equity, or
otherwise.
Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents or
by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's
failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are
a part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of
or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of Oregon. If there is a
lawsuit, Grantor agrees upon Lender's request to submit to the
jurisdiction of the courts of Multnomah County, State of Oregon.
Subject to the provisions on arbitration, this Agreement shall be
governed by and construed in accordance with the laws of the
State of Oregon.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all
of Lender's costs and expenses, including attorneys' fees and
Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include
Lender's attorneys' fees and legal expenses whether or not there
is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all
court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of
Grantor under this Agreement shall be joint and several, and all
references to Grantor shall mean each and every Grantor. This
means that each of the persons signing below is responsible for
all obligations in this Agreement.
Notices. All notices required to be given under this Agreement
shall be given in writing and shall be effective when actually
delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice
is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Grantor,
notice to any Grantor will constitute notice to all Grantors.
For notice purposes, Grantor agrees to keep Lender informed at
all times of Grantor's current address(es).
<PAGE> 101
Power of Attorney. Grantor hereby appoints Lender as its true
and lawful attorney-in-fact, irrevocably, with full power of
substitution to do the following: (a) to demand, collect,
receive, receipt for, sue and recover all sums of money or other
property which may now or hereafter become due, owing or payable
from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued
in payment for the Collateral; (c) to settle or compromise any
and all claims arising under the Collateral, and, in the place
and stead of Grantor, to execute and deliver its release and
settlement for the claim; and (d) to file any claim or claims or
to take any action or institute or take part in any proceedings,
either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the Indebtedness,
and the authority hereby conferred is and shall be irrevocable
and shall remain in full force and effect until renounced by
Lender.
Preference Payments. Any monies Lender pays because of an
asserted preference claim in Borrower's bankruptcy will become a
part of the Indebtedness and, at Lender's option, shall be
payable by Borrower as provided above in the "EXPENDITURES BY
LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall
be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain
valid and enforceable.
Successor Interests. Subject to the limitations set forth above
on transfer of the Collateral, this Agreement shall be binding
upon and inure to the benefit of the parties, their successors
and assigns.
Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or
any other right. A waiver by Lender of a provision of this
Agreement shall not prejudice or constitute a waiver of Lender's
right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor,
shall constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.
<PAGE> 102
Exhibit 10.13
of Form 10KSB
CHANGE IN TERMS AGREEMENT
PrincipalLoan DateMaturityLoan No. Call CollateralAccount
Officer Initials
$1,000,000 26 019 355 874185533311267
Borrower: SYNTHETECH, INC. Lender: United
States National Bank Of Oregon
1290 INDUSTRIAL WAY Salem Business Banking Center
ALBANY, OR 97321 PL-7 Oregon Corporate Loan
Servicing
555 S. W. Oak
Portland, OR 97204
Principal Amount: $1,000,000.00 Date of Agreement:
September 12, 1996
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE IN THE
ORIGINAL AMOUNT OF $1,000,000.00 DATED SEPTEMBER 8, 1995, WITH
INTEREST AT THE RATE OF THE LENDER'S PRIME PLUS .750 PERCENTAGE
POINTS, DUE ON DEMAND.
DESCRIPTION OF CHANGE IN TERMS. FOR VALUABLE CONSIDERATION, THE
BORROWER AND LENDER HEREBY AGREE THAT THE TERMS OF THE NOTE ARE
CHANGED AS FOLLOWS: EFFECTIVE SEPTEMBER 12, 1996 THE INTEREST RATE IS
CHANGED IN ACCORDANCE WITH THE TERMS AS SHOWN BELOW IN THE "VARIABLE
INTERST RATE" SECTION OF THIS NOTE.
PROMISE TO PAY. SYNTHETECH, INC. ("Borrower") promises to pay to
UNITED STATES NATIONAL BANK OF OREGON ("Lender"), or order, in lawful
money of the United States of America, on demand, the principal amount
of One Million & 00/100 Dollars ($1,000,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from
the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan immediately upon Lender's
demand. In addition, Borrower will pay regular monthly payments of
all accrued unpaid interest due as of each payment date, beginning
September 30, 1996, with all subsequent interest payments to be due on
the last day of each month after that. Interest on this Agreement is
computed on a 365/360 simple interest basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied
by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed or required
by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is
subject to change from time to time based on changes in an index which
is the Lender's Prime Rate. This is the rate of interest which Lender
from time to time establishes as its Prime Rate and is not, for
example, the lowest rate of interest which Lender collects from any
borrower or class of borrowers (the "Index'). The interest rate shall
be adjusted without notice effective on the day Bank's prime rate
changes. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans
based on other rates as well. The interest rate change will not occur
more often than each Day. The Index currently is 8.250% per annum.
The interest rate to be applied to the unpaid principal balance of
this Agreement will be at a rate equal to the Index, resulting in an
initial rate of 8.250% per annum.
<PAGE> 103
PREPAYMENT. Except for the foregoing, Borrower may pay without penalty
all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of
accrued unpaid interest. Rather, they will reduce the principal
balance due.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower falls to make any payment when due. (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to comply
with or to perform when due any other term, obligation, covenant, or
condition contained in this Agreement or any agreement related to this
Agreement, or in any other agreement or loan Borrower has with Lender.
(c) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (e) Any
creditor tries to take any of Borrower's property on or in which
Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (f) Any guarantor dies or
any of the other events described in this default section occurs with
respect to any guarantor of this Agreement. (g) A material adverse
change in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired.
(h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if
Borrower has not been given a notice of a breach of the same provision
of this Agreement within the preceding twelve (12) months, it may be
cured (and no event of default will have occurred) if Borrower, after
receiving written notice from Lender demanding cure of such default:
(a) cures the default within fifteen (15) days; or (b) if the cure
requires more than fifteen (15) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to
cure the default and thereafter continues and completes all reasonable
and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Agreement and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that
amount. Upon default, including failure to pay upon final maturity,
Lender, at its option, may also, if permitted under applicable law,
increase the variable interest rate on this Agreement to 5.000
percentage points over the Index. The interest rate will not exceed
the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Agreement if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject to
any limits under applicable law, Lender's attorneys' fees and Lender's
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. If not prohibited
by applicable law, Borrower also will pay any court costs, in addition
to all other sums provided by law. This Agreement has been delivered
to Lender and accepted by Lender in the State of Oregon. If there is
a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Multnomah County, the State of Oregon.
Subject to the provisions on arbitration, this Agreement shall be
governed by and construed in accordance with the laws of the State of
Oregon.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, convoys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in
and to, Borrower's accounts with Lender (whether checking, savings, or
some other account), including without limitation all accounts held
jointly with someone else and all accounts Borrower may open in the
future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on
this Agreement against any and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit.
Advances under this Agreement, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by Borrower
or by an authorized person. Lender may, but need not, require that
all oral requests be confirmed in writing. Borrower agrees to be
<PAGE> 104
liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender, regardless of the fact that persons
other than those authorized to borrow have authority to draw against
the accounts. The unpaid principal balance owing on this Agreement at
any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Agreement
if: (a) Borrower or any guarantor is in default under the terms of
this Agreement or any agreement that Borrower or any guarantor has
with Lender, including any agreement made in connection with the
signing of this Agreement; (b) Borrower or any guarantor ceases doing
business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Agreement for purposes other than
those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Agreement or any other agreement between Lender
and Borrower.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in
nature, arising from this Agreement or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to
the Rules of the American Arbitration Association, upon request of
either party. No act to take or dispose of any collateral securing
this Agreement shall constitute a waiver of this arbitration agreement
or be prohibited by this arbitration agreement. This includes,
without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of
trust or mortgage; obtaining a writ of attachment or imposition of a
receiver; or exercising any rights relating to personal property,
including taking or disposing of such property with or without
judicial process pursuant to Article 9 of the Uniform Commercial Code.
Any disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any
collateral securing this Agreement, including any claim to rescind,
reform, or otherwise modify any agreement relating to the collateral
securing this Agreement, shall also be arbitrated, provided however
that no arbitrator shall have the right or the power to enjoin or
restrain any act of any party. Judgment upon any award rendered by
any arbitrator may be entered in any court having jurisdiction.
Nothing in this Agreement shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute
of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action
for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation, and enforcement of this arbitration
provision.
CONTINUING VALIDITY. Except as expressly changed by this Agreement,
the terms of the original obligation or obligations, including all
agreements evidenced or securing the obligation(s), remain unchanged
and in full force and effect. Consent by Lender to this Agreement
does not waive Lender's right to strict performance of the
obligation(s) as changed, nor obligate Lender to make any future
change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to
retain as liable parties all makers and endorsers of the original
obligation(s), including accommodation parties. Unless a party is
expressly released by Lender in writing. Any maker or endorser,
including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not
sign this Agreement below, then all parties signing below acknowledge
that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the
changes and provisions of this Agreement or otherwise will not be
released by it. This waiver applies not only to any initial
extension, modification or release, but also to all such subsequent
actions.
LATE CHARGE. If a payment is 19 days or more past due, Borrower will
be charged a late charge of 5% of the delinquent payment.
PERIODIC REVIEW. Lender will review the loan periodically. At the
time of the review, Borrower will furnish Lender with any additional
information regarding Borrower's financial condition and business
operations that Lender requests. This information may include, but is
not limited to, financial statements, tax returns, lists of assets and
<PAGE> 105
liabilities, agings of receivables and payables, inventory schedules,
budgets and forecasts. If upon review, Lender, in its sole
discretion, determines that there has been a material adverse change
in Borrower's financial condition, Borrower will be in default. Upon
default, Lender shall have all rights specified herein.
DEMAND NOTE. BORROWER ACKNOWLEDGES AND AGREES THAT (A) THIS NOTE IS A
DEMAND NOTE, AND LENDER IS ENTITLED TO DEMAND BORROWER'S IMMEDIATE
PAYMENT IN FULL OF ALL AMOUNTS OWING HEREUNDER, (B) NEITHER ANYTHING
TO THE CONTRARY CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENTS
(INCLUDING BUT NOT LIMITED TO, PROVISIONS RELATING TO DEFAULTS, RIGHTS
OF CURE, DEFAULT RATE OF INTEREST, INSTALLMENT PAYMENTS, LATE CHARGES,
PERIODIC REVIEW OF BORROWER'S FINANCIAL CONDITION, AND COVENANTS) NOR
ANY ACT OF LENDER PURSUANT TO ANY SUCH PROVISIONS SHALL LIMIT OR
IMPAIR LENDER'S RIGHT OR ABILITY TO REQUIRE BORROWER'S PAYMENT IN FULL
OF ALL AMOUNTS OWING HEREUNDER IMMEDIATELY UPON LENDER'S DEMAND, AND
(C) UPON LENDER MAKING ANY SUCH DEMAND, LENDER SHALL HAVE NO
OBLIGATION TO MAKE ANY ADVANCE UNDER THIS NOTE OR UNDER THE LOAN
DOCUMENTS.
CREDIT ACT - CHECKING ACCOUNT NUMBER 022-0016-224 LOCATED AT THE
ALBANY COMMUNITY BRANCH. Borrower has requested and been granted
Lender's Commercial Line of Credit Automatic Cash Transfer Service
("Credit ACT"). So long as this Note is in place, Borrower authorizes
Lender to draw from Borrower's available line of credit and transfer
funds automatically to Borrower's commercial checking account
described in the heading of this paragraph ("Checking Account") in
accordance with this section. So long as this agreement is in place,
Lender agrees to make an automatic cash transfer from Borrower's line
of credit to its Checking Account in increments of $500.00, to pay
checks that would otherwise overdraw Borrower's Checking Account by
$100.00 or more, up to Borrower's available credit limit. The amount
of each Credit ACT transfer will be an advance under the terms of this
Note. There is no charge for using Credit ACT. Borrower agrees to
pay prevailing overdraft or other applicable checking account charges
then in effect if an overdraft may not be paid because an ACT in the
required increment of $500.00 to pay the full amount of the overdraft
would exceed Borrower's credit limit. If Borrower's credit limit has
been exceeded, and no other ACT privileges are available to Borrower,
any check presented for payment from Checking Account will, at the
sole option of Lender, either be paid, thus overdrawing Checking
Account, or dishonored. Lender may change the terms of Credit ACT at
any time by giving Borrower written notice, sent to the Borrower's
address as shown in Lender's records, prior to the effective date of
the change.
Lender reserves the right to discontinue this service upon giving
written notice to the Borrower, at Borrower's address shown in
Lender's records, under the following circumstances: (1) Lender
reasonably believes that Borrower will be unable to fulfill its
repayment obligations because of a material adverse change in
Borrower's financial circumstances. (2) Borrower fails to promptly
provide financial information that Lender has requested. (3) Borrower
is in default of a material provision of any promissory Agreement or
loan agreement with Lender.
If Lender discontinues further Credit ACT services due to any of these
circumstances, Lender will mail Borrower written notice of the
discontinuation and the reasons therefor. After such notice is given,
Borrower must request in writing that its Credit ACT be reinstated.
Before Credit ACT privileges are reinstated, Lender may ask Borrower
to provide new information, at Borrower's expense. If Borrower shows
Lender that the circumstances that caused cancellation of Credit ACT
services have ceased to exist, Credit ACT will be reinstated at
Lender's sole option and discretion upon written notice to Borrower.
MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The
inclusion of specific default provisions or rights of Lender shall not
preclude Lender's right to declare payment of this Agreement on its
demand. Lender may delay or forgo enforcing any of its rights or
remedies under this Agreement without losing them. Borrower and any
other person who signs, guarantees or endorses this Agreement, to the
extent allowed by law, waive presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this
Agreement, and unless otherwise expressly stated in writing, no party
who signs this Agreement, whether as maker, guarantor, accommodation
maker or endorser, shall be released from liability. All such parties
agree that Lender may re-new or extend (repeatedly and for any length
<PAGE> 106
of time) this loan, or release any party or guarantor or collateral;
or impair, fail to realize upon or perfect Lender's security interest
in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is
made.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US
(LENDER) AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
SYNTHETECH, INC.
X \s\ M. Sreenivasan, President/CEO X \s\
Charles B. Williams, VP
Authorized Officer Authorized Officer
LENDER:
United States National Bank of Oregon
By \s\
Authorized Officer
<PAGE> 107
Exhibit 10.14
of Form 10KSB
SYNTHETECH, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO: Howard L. Farkas
We are pleased to inform you that you have been selected by the
Plan Administrator of Synthetech, Inc.'s (the "Company") 1995
Incentive Compensation Plan, as amended and restated (the "Plan"), to
receive a nonqualified option for the purchase of 50,000 shares of the
Company's Common Stock at an exercise price of $1.81 per share. A
copy of the Plan is attached and incorporated into this Agreement by
reference.
The terms of the option are as set forth in the Plan and in this
Agreement. The most important of the terms set forth in the Plan are
summarized as follows:
Term: The term of the option is ten years from date of grant,
unless sooner terminated.
Exercise: During your lifetime only you can exercise the option.
The Plan also provides for exercise of the option by the personal
representative of your estate, by the beneficiary you have designated
on forms prescribed by and filed with the Company (a "Designated
Beneficiary"), or the beneficiary of your estate following your death.
You may use the Notice of Exercise of Nonqualified Stock Option in the
form attached to this Agreement when you exercise the option. Please
note that a different Notice of Exercise form will be required if, at
the time of exercise, the Company does not have an effective
registration statement for the shares to be issued pursuant to the
exercise.
Payment for Shares: The option may be exercised by the delivery
of:
(a) Cash, personal check (unless, at the time of exercise, the
Plan Administrator determines otherwise), bank certified or cashier's
check;
(b) Unless the Plan Administrator in its sole discretion
determines otherwise, shares of the capital stock of the Company held
by you for a period of at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial
reporting purposes) having a fair market value at the time of
exercise, as determined in good faith by the Plan Administrator, equal
to the exercise price.
Withholding Taxes: As a condition to the exercise of a
nonqualified stock option, you shall make such arrangements as the
Company may require for the satisfaction of any federal, state or
local withholding tax obligations that may arise in connection with
1
<PAGE> 108
such exercise. The Company shall have the right to retain without
notice sufficient shares of stock to satisfy the withholding
obligation. To the extent permitted or required by the Company, you
may satisfy the withholding obligation by electing to have the Company
or related corporation withhold from the shares to be issued upon
exercise that number of shares having a fair market value equal to the
amount required to be withheld. Individuals subject to Section 16 of
the Exchange Act must comply with certain requirements in order to
make such election.
Termination: Unless otherwise determined at any time by the Plan
Administrator, the option will terminate immediately upon termination
for cause, as defined in the Plan, or three years after termination of
service as a result of retirement, early retirement at the Company's
request, disability, or death or three months after all other
terminations, but in each case not later than the remaining term of
the option.
Transfer of Option: The option is not transferable except by
will, to a Designated Beneficiary, or by the applicable laws of
descent and distribution.
Vesting: The option shall vest and become exercisable according
to the following schedule:
Date On and After Which Portion of Total
Option is Exercisable Option Which is
Exercisable
Date of Grant 0%
March 31, 1997 33%
Each full month thereafter 2.77777%
March 31, 1999 100%
In addition, the vesting of the option shall accelerate to 100% in the
event of your death during the time you are serving on the Board of
Directors. If your position as a member of the Board of Directors of
the Company ceases for any reason, and unless by its terms the option
sooner terminates or expires, then you may exercise, for a five-year
period after such cessation, that portion of your option which is
exercisable at the time of cessation, but your option shall terminate
at the end of such five-year period following such cessation as to all
shares for which it has not theretofore been exercised.
Holding Period: If an individual subject to Section 16 of the
Exchange Act sells shares of Common Stock obtained upon the exercise
of a stock option within six months after the date the option was
granted, such sale may result in short-swing profit recovery under
Section 16(b) of the Exchange Act.
2
<PAGE> 109
Date of Grant: The date of grant of the option is November 7,
1996.
AT THE PRESENT TIME, THE COMPANY HAS AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT TO THE SHARES THAT WILL BE ISSUED UPON THE
EXERCISE OF THIS OPTION. THE COMPANY INTENDS TO MAINTAIN THIS
REGISTRATION BUT HAS NO OBLIGATION TO DO SO. IN THE EVENT THAT SUCH
REGISTRATION IS NO LONGER EFFECTIVE, YOU WILL NOT BE ABLE TO EXERCISE
THE OPTION UNLESS EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE
SECURITIES LAWS ARE AVAILABLE; SUCH EXEMPTIONS FROM REGISTRATION ARE
VERY LIMITED AND MIGHT BE UNAVAILABLE.
Please execute the Acceptance and Acknowledgment set forth below
on the enclosed copy of this Agreement and return it to the
undersigned.
Very truly yours,
SYNTHETECH, INC.
By___________________________________
Its __________________________________
3
<PAGE> 110
Exhibit 10.15
of Form 10KSB
SYNTHETECH, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO: Howard L. Farkas
We are pleased to inform you that you have been selected by the
Plan Administrator of Synthetech, Inc.'s (the "Company") 1995
Incentive Compensation Plan, as amended and restated (the "Plan"), to
receive a nonqualified option for the purchase of 15,000 shares of the
Company's Common Stock at an exercise price of $7.50 per share. A
copy of the Plan is attached and incorporated into this Agreement by
reference.
The terms of the option are as set forth in the Plan and in this
Agreement. The most important of the terms set forth in the Plan are
summarized as follows:
Term: The term of the option is ten years from date of grant,
unless sooner terminated.
Exercise: During your lifetime only you can exercise the option.
The Plan also provides for exercise of the option by the personal
representative of your estate, by the beneficiary you have designated
on forms prescribed by and filed with the Company (a "Designated
Beneficiary"), or the beneficiary of your estate following your death.
You may use the Notice of Exercise of Nonqualified Stock Option in the
form attached to this Agreement when you exercise the option. Please
note that a different Notice of Exercise form will be required if, at
the time of exercise, the Company does not have an effective
registration statement for the shares to be issued pursuant to the
exercise.
Payment for Shares: The option may be exercised by the delivery
of:
(a) Cash, personal check (unless, at the time of exercise, the
Plan Administrator determines otherwise), bank certified or cashier's
check;
(b) Unless the Plan Administrator in its sole discretion
determines otherwise, shares of the capital stock of the Company held
by you for a period of at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial
reporting purposes) having a fair market value at the time of
exercise, as determined in good faith by the Plan Administrator, equal
to the exercise price.
Withholding Taxes: As a condition to the exercise of a
nonqualified stock option, you shall make such arrangements as the
Company may require for the satisfaction of any federal, state or
1
<PAGE> 111
local withholding tax obligations that may arise in connection with
such exercise. The Company shall have the right to retain without
notice sufficient shares of stock to satisfy the withholding
obligation. To the extent permitted or required by the Company, you
may satisfy the withholding obligation by electing to have the Company
or related corporation withhold from the shares to be issued upon
exercise that number of shares having a fair market value equal to the
amount required to be withheld. Individuals subject to Section 16 of
the Exchange Act must comply with certain requirements in order to
make such election.
Termination: Unless otherwise determined at any time by the Plan
Administrator, the option will terminate immediately upon termination
for cause, as defined in the Plan, or three years after termination of
service as a result of retirement, early retirement at the Company's
request, disability, or death or three months after all other
terminations, but in each case not later than the remaining term of
the option.
Transfer of Option: The option is not transferable except by
will, to a Designated Beneficiary, or by the applicable laws of
descent and distribution.
Vesting: The option shall vest and become exercisable according
to the following schedule:
Date On and After Which Portion of Total
Option is Exercisable Option Which is
Exercisable
Date of Grant 0%
On the first Annual Meeting 20%
of Shareholders after Date of
Grant
On the second Annual Meeting 40%
of Shareholders after Date of
Grant
On the third Annual Meeting 60%
of Shareholders after Date of
Grant
On the fourth Annual Meeting 80%
of Shareholders after Date of
Grant
On the fifth Annual Meeting 100%
of Shareholders after Date of
Grant
In addition, if your position as a member of the Board of Directors of
the Company ceases for any reason, and unless by its terms the option
2
<PAGE> 112
sooner terminates or expires, then you may exercise, for a three-year
period after such cessation, that portion of your option which is
exercisable at the time of cessation, but your option shall terminate
at the end of such three-year period following such cessation as to
all shares for which it has not theretofore been exercised.
Holding Period: If an individual subject to Section 16 of the
Exchange Act sells shares of Common Stock obtained upon the exercise
of a stock option within six months after the date the option was
granted, such sale may result in short-swing profit recovery under
Section 16(b) of the Exchange Act.
Date of Grant: The date of grant of the option is November 7,
1996.
AT THE PRESENT TIME, THE COMPANY HAS AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT TO THE SHARES THAT WILL BE ISSUED UPON THE
EXERCISE OF THIS OPTION. THE COMPANY INTENDS TO MAINTAIN THIS
REGISTRATION BUT HAS NO OBLIGATION TO DO SO. IN THE EVENT THAT SUCH
REGISTRATION IS NO LONGER EFFECTIVE, YOU WILL NOT BE ABLE TO EXERCISE
THE OPTION UNLESS EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE
SECURITIES LAWS ARE AVAILABLE; SUCH EXEMPTIONS FROM REGISTRATION ARE
VERY LIMITED AND MIGHT BE UNAVAILABLE.
Please execute the Acceptance and Acknowledgment set forth below
on the enclosed copy of this Agreement and return it to the
undersigned.
Very truly yours,
SYNTHETECH, INC.
By___________________________________
Its _______________________________
3
<PAGE> 113
Exhibit 10.16
of Form 10KSB
SYNTHETECH, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO: Page E. Golsan III
We are pleased to inform you that you have been selected by the
Plan Administrator of Synthetech, Inc.'s (the "Company") 1995
Incentive Compensation Plan, as amended and restated (the "Plan"), to
receive a nonqualified option for the purchase of 15,000 shares of the
Company's Common Stock at an exercise price of $7.50 per share. A
copy of the Plan is attached and incorporated into this Agreement by
reference.
The terms of the option are as set forth in the Plan and in this
Agreement. The most important of the terms set forth in the Plan are
summarized as follows:
Term: The term of the option is ten years from date of grant,
unless sooner terminated.
Exercise: During your lifetime only you can exercise the option.
The Plan also provides for exercise of the option by the personal
representative of your estate, by the beneficiary you have designated
on forms prescribed by and filed with the Company (a "Designated
Beneficiary"), or the beneficiary of your estate following your death.
You may use the Notice of Exercise of Nonqualified Stock Option in the
form attached to this Agreement when you exercise the option. Please
note that a different Notice of Exercise form will be required if, at
the time of exercise, the Company does not have an effective
registration statement for the shares to be issued pursuant to the
exercise.
Payment for Shares: The option may be exercised by the delivery
of:
(a) Cash, personal check (unless, at the time of exercise, the
Plan Administrator determines otherwise), bank certified or cashier's
check;
(b) Unless the Plan Administrator in its sole discretion
determines otherwise, shares of the capital stock of the Company held
by you for a period of at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial
reporting purposes) having a fair market value at the time of
exercise, as determined in good faith by the Plan Administrator, equal
to the exercise price.
Withholding Taxes: As a condition to the exercise of a
nonqualified stock option, you shall make such arrangements as the
Company may require for the satisfaction of any federal, state or
1
<PAGE> 114
local withholding tax obligations that may arise in connection with
such exercise. The Company shall have the right to retain without
notice sufficient shares of stock to satisfy the withholding
obligation. To the extent permitted or required by the Company, you
may satisfy the withholding obligation by electing to have the Company
or related corporation withhold from the shares to be issued upon
exercise that number of shares having a fair market value equal to the
amount required to be withheld. Individuals subject to Section 16 of
the Exchange Act must comply with certain requirements in order to
make such election.
Termination: Unless otherwise determined at any time by the Plan
Administrator, the option will terminate immediately upon termination
for cause, as defined in the Plan, or three years after termination of
service as a result of retirement, early retirement at the Company's
request, disability, or death or three months after all other
terminations, but in each case not later than the remaining term of
the option.
Transfer of Option: The option is not transferable except by
will, to a Designated Beneficiary, or by the applicable laws of
descent and distribution.
Vesting: The option shall vest and become exercisable according
to the following schedule:
Date On and After Which Portion of Total
Option is Exercisable Option Which is
Exercisable
Date of Grant 0%
On the first Annual Meeting 20%
of Shareholders after Date of
Grant
On the second Annual Meeting 40%
of Shareholders after Date of
Grant
On the third Annual Meeting 60%
of Shareholders after Date of
Grant
On the fourth Annual Meeting 80%
of Shareholders after Date of
Grant
On the fifth Annual Meeting 100%
of Shareholders after Date of
Grant
In addition, if your position as a member of the Board of Directors of
the Company ceases for any reason, and unless by its terms the option
sooner terminates or expires, then you may exercise, for a three-year
2
<PAGE> 115
period after such cessation, that portion of your option which is
exercisable at the time of cessation, but your option shall terminate
at the end of such three-year period following such cessation as to
all shares for which it has not theretofore been exercised.
Holding Period: If an individual subject to Section 16 of the
Exchange Act sells shares of Common Stock obtained upon the exercise
of a stock option within six months after the date the option was
granted, such sale may result in short-swing profit recovery under
Section 16(b) of the Exchange Act.
Date of Grant: The date of grant of the option is November 7,
1996.
AT THE PRESENT TIME, THE COMPANY HAS AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT TO THE SHARES THAT WILL BE ISSUED UPON THE
EXERCISE OF THIS OPTION. THE COMPANY INTENDS TO MAINTAIN THIS
REGISTRATION BUT HAS NO OBLIGATION TO DO SO. IN THE EVENT THAT SUCH
REGISTRATION IS NO LONGER EFFECTIVE, YOU WILL NOT BE ABLE TO EXERCISE
THE OPTION UNLESS EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE
SECURITIES LAWS ARE AVAILABLE; SUCH EXEMPTIONS FROM REGISTRATION ARE
VERY LIMITED AND MIGHT BE UNAVAILABLE.
Please execute the Acceptance and Acknowledgment set forth below
on the enclosed copy of this Agreement and return it to the
undersigned.
Very truly yours,
SYNTHETECH, INC.
By___________________________________
Its __________________________________
3
<PAGE> 116
Exhibit 10.17
of Form 10KSB
SYNTHETECH, INC. PURCHASE
ORDER
1290 Industrial Way PO Box 646
Albany, Oregon 97321
Ph: 541-967-6575
FAX: 541-967-9424
The following number must appear on all related
correspondence, shipping papers, and invoices:
P.O. NUMBER: 72412
To: Ship To:
R.L. Reimers Construction Not Applicable
3514 Conser Road, N.E.
Albany, Oregon 97321
Ph: 926-7766 FAX: 926-2908
P.O. DATE REQUISITIONER SHIP VIA F.O.B. POINT TERMS
June 17, 1996 M.R. McVay N.A. N.A. TO BE DEFINED
QTY UNIT DESCRIPTION UNIT PRICE TOTAL
1 1 Contractor shall provide the labor, equipment and $250000 $250000
materials to perform sitework mobilization for the
Synthetech Inc. new facility at 1290 Industrial Way.
The purchase order will cover the initial phases of
the project and work completed against P.O. 72412
will apply to the overall contract to be negotiated by
July 3, 1996.
SUBTOTAL $250000
SALES TAX $0.00
SHIPPING AND HANDLING $0.00
OTHER $0.00
TOTAL $250000
1. Please send two copies of your invoice.
\s\ Mitchell R. McVay
X
Authorized by
Date: June 17, 1996
<PAGE> 117
R.L. REIMERS COMPANY
GENERAL CONTRACTORS
May 21, 1996
Synthetech
Production Plant
1290 Industrial Way
Albany, OR 97321
Dear Mitch McVay,
The following is a list of R.L. Reimers Company rental and labor
rates:
Labor
Ronald Reimers $40.00 per hour
Project Manager $38.00 per hour
Foreman $36.00 per hour
Carpenter $32.00 per hour
Laborer $28.50 per hour
Day Week Month Operated/hour
Laser Level $ 25.00 $ 100.00 $ 250.00
Beam Saw $ 25.00 $ 100.00 $ 250.00
Demo Saw $ 35.00 $ 100.00 $ 300.00
Uniloader $120.00 $ 400.00 $ 900.00
Job Trailer $ 200.00
Generator 4-5 K $ 40.00 $ 135.00 $ 500.00
Generator 6 KW $ 50.00 $ 150.00 $ 550.00
580K Backhoe $220.00 $ 700.00 $2,000.00 $ 60.00
Dump Truck $ 50.00
Dump Truck & Trailer $ 60.00
Scissor Lift $ 90.00 $ 250.00 $ 800.00
Gator Cart $ 50.00 $ 200.00 $ 600.00
Compactor $ 35.00 $ 100.00 $ 300.00
Trash Pump $ 35.00 $ 100.00 $ 300.00
D5 Dozer $350.00 $1,350.00 $4,100.00 $ 65.00
E120 Trackhoe $400.00 $1,400.00 $4,300.00 $ 85.00
Materials and Subcontractors are cost plus 8%.
Terms Net 10 Days
/s/ Ron Reimers
<PAGE> 118
R.L. REIMERS COMPANY
GENERAL CONTRACTORS
Synthetech project control outline
I. Budgets
II. Billings
A. Monthly billings
B. Invoice copies
C. Discounts
E. Lien releases
III. Budget Variance analysis and cost to complete
IV. Standard AGC Contract
<PAGE> 119
Exhibit 10.18
of Form 10KSB
SYNTHETECH, INC. PURCHASE
ORDER
1290 Industrial Way PO Box 646
Albany, Oregon 97321
Ph: 541-967-6575
FAX: 541-967-9424
The following number must appear on all related
correspondence, shipping papers, and invoices:
P.O. NUMBER: 72409 ADDENDUM
To: Ship To:
CE/Western NA
1025 Bain SE
Albany, Oregon
97321
P.O. DATE REQUISITIONER SHIP VIA F.O.B. POINT TERMS
8/23/96 MRM NA NA
QTY UNIT DESCRIPTION UNIT PRICE TOTAL
Contractor shall provide the engineering design for
the chemical production facility, complete the city
building permit requirements and complete the ODEQ construction
permit requirements per the attached work scope. The
work includes Civil, Architectural, Structural, Mechanical,
HVAC and Electrical.
1 PRICE PER ATTACHED
QUOTATION $240,000 $240,000
SUBTOTAL $240,000
SALES TAX
SHIPPING AND HANDLING
OTHER
TOTAL $240,000
1. Please send two copies of your invoice.
\s\ Mitchell R. McVay
8/23/96
X
Authorized by
Date
<PAGE> 120
Proposal to Provide Professional Engineering
Services and Construction Management
Submitted to
SYNTHETECH, INC.
Albany, Oregon
Submitted by
CE/WESTERN ENGINEERING, INC.
May 24, 1996
<PAGE> 121
Synthetech, Inc. Proposal
Project No. 2091
SCOPE OF WORK
Listed below is the Scope of Work from CE/Western
Engineering for this project:
TASK 1 - Structural and Value Engineering
Perform a redesign of building based on H3 Occupancy Rating with
input from contractor, owner and suppliers.
Provide required structural drawings for permitting and field
construction of building
TASK 2 - On-Site Construction Coordination and Management
Provide coordination of contractors, required inspections, and
project status for owner.
TASK 3 - Mechanical and Electrical Design
Provide engineering services and coordination as requested by
owner.
<PAGE> 122
Synthetech, Inc. Proposal
Project No. 2091
FEE BASIS AND SCHEDULE
We propose to furnish the described work on an
engineering service and reimbursable expense basis.
The estimated cost for our services follows:
SCOPE TASK 1 $ 135,000
SCOPE TASK 2 See attached rates
SCOPE TASK 3 See attached rates
In addition, all expenses related to this work will be
invoiced at the actual cost incurred and will include,
but not be limited to, automobile mileage, copies,
telephone, living expenses, all travel costs and any
other direct expenses (please see next page).
Progressive Payments
Project progressive billings are to be made at the end
of each month. Each monthly invoice will be based upon
the services provided for that month, in accordance
with the enclosed Billing Rate Schedule. Payments are
due within thirty days following the billing date. All
invoiced amounts not paid within forty-five (45) days
of issue shall be subject to late charges at the rate
of one and one-half percent (1.5%) per month.
Project Duration and Schedule
Upon receipt of an authorized approval signature, the
work will be scheduled to begin as soon as possible and
will be coordinated with the requirements of both
parties.
<PAGE> 123
Synthetech, Inc. Proposal
Project No. 2091
STANDARD BILLING RATE SCHEDULE (Revised May 01,
1995)
Labor:
Principals
Merel Jones $85/Hr
Brian Downs $75/Hr
Structural Engineer $65/Hr
Civil Engineer $65/Hr
Mechanical Engineer $60/Hr
Environmental Specialist $55/Hr
Project Coordinator $60/Hr
Control Consultant $45/Hr
Electrical Engineer $65/Hr
CAD Drafter $25-$35/Hr
CAD Designer $35-$45/Hr
Computer Specialists $65/Hr
Accounting $35/Hr
Administrative/Clerical $25/Hr
CAD/Computer Time $8.50/Hr
Expenses:
Travel and Living Expenses At Cost
Phone, Fax, Postage, Fed Ex At Cost
Drawing Plots $4.00/ea.
Blueprints $3.50/ea.
Mileage $0.30/mile
Photocopies $0.15/ea.
<PAGE> 124
Synthetech, Inc. Proposal
Project No. 2091
APPROVALS
Scope Changes
Any scope changes from this proposal will be
reviewed and agreed to by both parties.
Additional work entered into as a result of such
changes will be authorized through the use of a
written change order signed by the client's
representative and by Merel Jones for CE/Western
Engineering. Any additional fees resulting from
the change order will be itemized on monthly
invoices.
Engineer's Responsibilities
CE/Western Engineering will be responsible for the
professional quality and technical accuracy of all
designs, drawings, specifications, and other
services furnished by CE/Western Engineering under
this agreement. We shall, at our own cost,
correct or revise any errors or deficiencies in
the designs, drawings, and specifications.
CE/Western Engineering warrants that its services
are performed under the general direction of
Registered Professional Engineers and with the
usual thoroughness and competence of the
engineering standards. No other warranty or
representation, either express or implied, is
included or intended in its proposals, contract or
repairs, either written or oral.
Cancellation Clause
In the event of cancellation of the project,
CE/Western Engineering will be paid for work up to
the time of cancellation any balance due. Also,
CE/Western Engineering will be paid a 15%
cancellation fee on work not completed at the time
of cancellation.
Default
In the event either party fails to perform its
obligation under this agreement, the other parties
shall have remedies provided by the law.
Approvals
This proposal must be signed and returned to
CE/Western Engineering within forty-five (45) days
to be valid.
CE/WESTERN ENGINEERING, INC.
/s/ Merel A. Jones by BUD /s/ Scott
A. Wright
____________________________
____________________________
Merel A. Jones, P.E. Scott A.
Wright
President Project Coordinator
SYNTHETECH, INC.
/s/ Mitchell R. McVay
____________________________
Authorized Representative
<PAGE> 125
Exhibit 10.19
of Form 10KSB
SYNTHETECH, INC. PURCHASE
ORDER
1290 Industrial Way PO Box 646
Albany, Oregon 97321
Ph: 541-967-6575
FAX: 541-967-9424
The following number must appear on all related
correspondence, shipping papers, and invoices:
P.O. NUMBER: 72430
To: R.L. Reimers Co. Ship To:
3514 Conser Road, N.E.
Albany, Oregon 97321
Ph: 926-7766 FAX: 926-2908
P.O. DATE REQUISITIONER SHIP VIA F.O.B. POINT TERMS
September 4, 1996 MRM NA Net 10 Days
QTY DESCRIPTION UNIT PRICE TOTAL
August, 1996 progression billing for plant expansion project
work by R.L. Reimers Company. Payment to be applied to
total project cost. $189,000
SUBTOTAL $189,000
SALES TAX
SHIPPING AND HANDLING
OTHER
TOTAL $189,000
1. Please send two copies of your invoice.
2. Reference the P.O. number on the invoice.
\s\ Mitchell R. McVay
X
Authorized by
Date: 9/4/96
<PAGE> 126
R.L. REIMERS COMPANY
GENERAL CONTRACTORS
Synthetech project control outline
I. Budgets
II. Billings
A. Monthly billings
B. Invoice copies
C. Discounts
E. Lien releases
III. Budget Variance analysis and cost to complete
IV. Standard AGC Contract
<PAGE> 127
Exhibit 10.20
of Form 10KSB
SYNTHETECH, INC. PURCHASE
ORDER
1290 Industrial Way PO Box 646
Albany, Oregon 97321
Ph: 541-967-6575
FAX: 541-967-9424
The following number must appear on all related
correspondence, shipping papers, and invoices:
P.O. NUMBER: 72436
To: R.L. Reimers Construction Co. Ship To:
3514 Conser Road, N.E. Synthetech Inc.
Albany, Oregon 97321 1290 Industrial Way
926-7766 Albany, Oregon
P.O. DATE REQUISITIONER SHIP VIA F.O.B. POINT TERMS
November 7, 1996 MRM NA NA
QTY DESCRIPTION UNIT PRICE TOTAL
Completion of Synthetech building per attached breakdown
starting in the month of September 1996. $1,730,200
Utility Building Area-Includes waste berm, pumphouse (15ft
by 30ft)
glycol building (30ft by 45ft), cooling tower basin, spill
containment
berm, 25ft by 30ft slab and extension of existing waste
storage. $140,500
SUBTOTAL $1,870,000
SALES TAX
SHIPPING AND HANDLING
OTHER
TOTAL $1,870,000
1. Please send two copies of your invoice.
2. Reference the P.O. number on the invoice.
\s\ Mitchell R. McVay
X
Authorized by
Date: 11/7/96
<PAGE> 128
R.L. REIMERS COMPANY
GENERAL CONTRACTORS
Synthetech project control outline
I. Budgets
II. Billings
A. Monthly billings
B. Invoice copies
C. Discounts
E. Lien releases
III. Budget Variance analysis and cost to complete
IV. Standard AGC Contract
<PAGE> 129
Exhibit 10.21
of Form 10KSB
SYNTHETECH, INC. PURCHASE
ORDER
1290 Industrial Way PO Box 646
Albany, Oregon 97321
Ph: 541-967-6575
FAX: 541-967-9424
The following number must appear on all related
correspondence, shipping papers, and invoices:
P.O. NUMBER: 72459
To: Olsson Industrial Electric Ship To:
P.O. Box 70413 Synthetech Inc.
Eugene, Oregon 97401 1290 Industrial Way
1919 Laura- Springfield Albany, Oregon
Phone: 541-747-8460
FAX: 541-747-4846
P.O. DATE REQUISITIONER SHIP VIA F.O.B. POINT TERMS
February 20, 1997 MRM
QTY DESCRIPTION UNIT PRICE TOTAL
Contractor shall install the plant electrical system as
specified by the Synthetech Electrical Bid Specifications
dated 1/30/97, Bid Meeting Minutes issued 1/31/97 and
Specification and Clarification Memorandum issued 2/7/97.
LUMP SUM BID PER OLLSON INDUSTRIAL ELECTRIC 2/11/97$333,040
Addendum 2/20/97: 600 Amp Service-- Two 3" rigid conduit w/
four 350 MCM cable & one #1 wire per conduit to existing service.
$2,824
SUBTOTAL $335,864
SALES TAX
SHIPPING AND HANDLING
OTHER
TOTAL $335,864
1. Please send two copies of your invoice.
2. Reference the P.O. number on the invoice.
\s\ Mitchell R. McVay
X
Authorized by
Date: 2/20/97
<PAGE> 130
Exhibit 10.22
of Form 10KSB
SYNTHETECH, INC. PURCHASE
ORDER
1290 Industrial Way PO Box 646
Albany, Oregon 97321
Ph: 541-967-6575
FAX: 541-967-9424
The following number must appear on all related
correspondence, shipping papers, and invoices:
P.O. NUMBER: 42472
To: Oregon Industrial Contractors, Inc. Ship To:
Synthetech, Inc.
P.O. Box B 1290 Industrial Way
Albany, Oregon 97321 Albany, Oregon
Ph: 541-928-2901 Ph: 541-967-6575
Fax: 541-928-7759
P.O. DATE REQUISITIONER SHIP VIA F.O.B. POINT TERMS
May 7, 1997 MRM NA NA See Quotation
QTY DESCRIPTION UNIT PRICE TOTAL
Contractor shall provide the labor, tools, equipment and
material specified for the piping, equipment installation and work
platforms as specified by drawings and written specifications
supplied by Synthetech.Price per Oregon Industrial Contractors,
Inc. Quotation Dated
April 30, 1997 T&M NOT TO EXCEED $626,276
SUBTOTAL $626,276
SALES TAX
SHIPPING AND HANDLING
OTHER
TOTAL $626,276
1. Please send two copies of your invoice.
2. Reference the P.O. number on the invoice.
\s\ Mitchell R. McVay
X
Authorized by
Date: May 2, 1997
<PAGE> 131
Exhibit 23
to Form 10KSB
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated May 16, 1997 included in this Form
10-KSB for the year ended March 31, 1997, into Synthetech, Inc.'s
previously filed Registration Statement Nos. 33-45913, 33-64621 and
333-8203.
Arthur Andersen LLP
Portland, Oregon,
June 18, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the March 31, 1997 10KSB Balance Sheets, Income Statements, and Cash
Flow Statements, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 6740000
<SECURITIES> 176000
<RECEIVABLES> 695000
<ALLOWANCES> 0
<INVENTORY> 1887000
<CURRENT-ASSETS> 10520000
<PP&E> 6339000
<DEPRECIATION> 0
<TOTAL-ASSETS> 17323000
<CURRENT-LIABILITIES> 1278000
<BONDS> 0
<COMMON> 14000
0
0
<OTHER-SE> 15797000
<TOTAL-LIABILITY-AND-EQUITY> 173230000
<SALES> 12797000
<TOTAL-REVENUES> 12797000
<CGS> 5103000
<TOTAL-COSTS> 6549000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1000
<INCOME-PRETAX> 6632000
<INCOME-TAX> 2520000
<INCOME-CONTINUING> 4112000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4112000
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
