SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 0-15443
December 31, 1995
THERAGENICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1528626
(State of incorporation) (I.R.S. Employer Identification Number)
5325 Oakbrook Parkway
Norcross, Georgia 30093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(770) 381-8338
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
As of March 20, 1996, the aggregate market value of the common
stock of the registrant held by non-affiliates of the registrant,
as determined by reference to the average of the closing price of
the common stock as reported by the National Association of
Securities Dealers Automated Quotation National Market system,
was $90,601,512.75.
As of March 20, 1996, the number of shares of common stock,
$.01 par value, outstanding was 11,504,954.<PAGE>
<PAGE>
Part I
Item 1. Business
Theragenics Corporation ("Theragenics" or the "Company") was
incorporated in November 1981 to commercially engage in the
development, manufacture, and marketing of therapeutic
radiological pharmaceuticals and devices for use primarily in the
treatment of cancer. The Company's products are intended to
permit a physician to introduce short-range, short-lived
radioactive material directly into cancerous tissue, thereby
concentrating the impact of the radiation on the cancerous tissue
to be destroyed while minimizing the effect on surrounding
healthy tissue. To date the Company has internally developed two
products - TheraSeed, a radioactive implant designed for the
treatment of localized tumors, and TheraSphere, radioactive
microspheres for the treatment of liver cancer. TheraSeed is
being commercially distributed in the United States while
TheraSphere is being commercially distributed in Canada.
General
The conventional treatments for cancer to date have been
surgery, radiation and chemotherapy. The treatments which have
been most successful are those which remove or kill all of the
cancerous tissue while avoiding excessive damage to the
surrounding healthy, normal tissue. When the cancerous tissue
cannot be completely removed or killed, the cancer usually
returns to the primary site often with metastases to other areas.
The Company's products are intended to permit a physician to
place short-range, short-lived radioactive material near or into
a cancerous tumor, thereby concentrating the impact of the
radiation on the cancerous tissue to be destroyed. The Company's
products are most effective on encapsulated, confined tumors.
Each of the Company's products is based on established physical
principles and has the simple objective of delivering sufficient
radiation to the target cancer to kill it while minimizing the
radiation to surrounding tissue.
Products
TheraSeed, radioactive "seeds" approximately the size of a
grain of rice which are implanted directly into a tumor, is
presently marketed in the United States.
TheraSphere, microscopic radioactive glass spheres used to
treat liver cancer, is presently marketed in Canada by Nordion
International Inc. ("Nordion") under sublicense from Theragenics.
Additionally, Theragenics has granted to Nordion an exclusive
worldwide sublicense to manufacture, distribute and sell
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TheraSphere for any application.
Palladium-103 ("Palladium" or "Pd-103") is the radioactive
isotope providing the therapeutic benefit in the Company's
TheraSeed product. The Company will be exploring and
investigating opportunities to use this isotope in other
potential products as they are identified.
TheraSeed Implants
Prostate cancer is expected to strike 317,100 men in the
United States in 1996. The National Cancer Institute estimates
that one in three men over 50 years of age have microscopic
cancer of the prostate. This ratio is greater than the odds (one
in eight, as estimated by the American Cancer Society) for a
woman getting breast cancer. A projected 41,400 men in the United
States will die of this disease in 1996. Not including
experimental treatment options, treatments for prostate cancer
include prostatectomy (surgical removal of the prostate gland),
external beam radiation, radioactive implants, watchful waiting,
hormone manipulation and castration. Not all of these treatments
are for early stage disease. The Company's TheraSeed product is
usually classified as a treatment for early stage disease.
TheraSeed is best suited for solid localized tumors. To date
the most prevalent use of TheraSeed has been in the treatment of
prostate cancer, although it has been used to treat cancers of
the pancreas, lung, head and neck, oral cavity, base of the
skull, brain and eye.
Treatment of early stage prostate cancer with TheraSeed is a
one-time, minimally-invasive technique, usually performed under
local anesthesia in an outpatient setting. The seeds are loaded
into long hollow needles which are inserted through the perineum
and into the prostate gland. This procedure is facilitated by the
recent developments of imaging equipment such as CT scanning or
transrectal ultrasound. While visualizing the gland, the
physician can facilitate placement of the seeds allowing for a
homogeneous distribution of the radiation.
While providing equivalent success rates to external beam
radiation and surgery, TheraSeed offers the advantage of a much
lower incidence of impotence and incontinence. Because no major
surgery is involved, many TheraSeed patients are up and around
within 48 to 72 hours, compared to recovery periods as long as
four to six weeks for radical surgery. TheraSeed treatment also
offers a cost advantage to the patient (or insurance company)
over both surgery and external beam radiation. Cost of the
TheraSeed procedure is about one-half of the cost of surgical
removal and two-thirds that of external radiation.
TheraSeed does not represent the only currently available
radioactive isotope for cancer treatment, but does offer a much
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shorter half-life and a significantly greater dose rate when
compared to other isotopes.
It is an objective of the Company to explore and develop
other potential uses for TheraSeed in addition to the treatment
of prostate cancer whether oncological or non-oncological in
application. Theragenics hopes to identify and pursue
opportunities for TheraSeed use either through internal resources
or partnering where significant synergies can be exploited.
TheraSphere
Liver cancer, either primary or secondary to colorectal
cancer, incidence has changed very little from 1995 when it was
expected to afflict approximately 5,200 Canadians and
approximately ten times as many Americans. Associated deaths were
estimated at approximately 4,200 Canadians and 43,000 Americans
in 1995. Management estimates these North American statistics
represent about one-third of the world wide incidence of primary
liver cancer and liver cancer secondary to colorectal cancer in
areas which would present marketing opportunities to the Company.
From the point of diagnosis the average survival time for a liver
cancer patient using conventional therapies is one year.
TheraSphere is used to treat both primary liver cancer and
secondary liver cancer in cases where the primary cancer has been
or can be arrested.
Before the Canadian approval of TheraSphere, treatments for
liver cancer were primarily limited to surgery, external
radiation, and chemotherapy. Unfortunately surgery is indicated
for only 25% of the cases mentioned above and only 25% of that
number live for five years or more. External beam radiation has
the drawback that the amount of radiation deliverable to the
liver tumor is limited by the damage that can be done to healthy
liver tissue as radiation passes from outside of the body to the
tumor. Finally, chemotherapy, which is the indicated treatment
for the majority of liver cancer patients, offers life extension
(usually measured in months) but not without the nausea and other
side effects commonly associated with it. Also, chemotherapy must
be administered in a number of treatments over an extended period
of time.
A TheraSphere treatment dose (less than one-tenth of a
teaspoonful of material) contains approximately five million
yttrium-90 glass spheres which are each about half the diameter
of a human hair. Here again as in the TheraSeed treatment, the
key to effectiveness lies in the ability to get the radiation
dose in closest proximity to the tumor in order to sufficiently
irradiate the cancerous tissue while leaving healthy tissue
unaffected. This is done by inserting a catheter into the hepatic
artery which carries arterial blood to the liver and injecting
the TheraSphere microspheres into this bloodstream. Because of
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greater blood flow to tumors compared to healthy liver tissue,
the microspheres concentrate in the capillaries feeding the
tumor. The concentration of microspheres in healthy tissue is
much lower. Because of the ability to place the radiation source
in such close proximity to the tumor, TheraSphere can deliver a
radiation dose to the tumor cells five-times as strong as that
which can be delivered via external beam radiation.
Although it is impossible to predict the number of liver
cancer patients who might benefit from treatment with
TheraSphere, the Company estimates that approximately 50% of the
liver cancer patients identified above could be candidates for
treatment with TheraSphere. Based on clinical data, TheraSphere
offers life extension similar to the data for chemotherapy while
producing less severe side effects. TheraSphere has the
additional advantage of requiring only a single treatment. A
series of chemotherapy treatments equivalent to a single
TheraSphere treatment would cost $8,000 to $12,000 per patient.
Production
TheraSeed Implants
The Company's TheraSeed devices have substantially the same
external envelopes as other seeds in use today and thus supplies
of the external envelope are readily available. The production of
TheraSeed is dependent upon the availability of Pd-103. In
January 1993, Theragenics completed construction of a
manufacturing facility to house its first cyclotron. This
cyclotron produces Pd-103 and ended the Company's dependence on
unreliable outside vendors. In February 1995, a second cyclotron
and a facility addition to house the cyclotron were completed. As
reported in Theragenics' Form 8-K dated June 29, 1995, the
Company entered into two agreements dated June 29 ,1995, each for
the purchase of one cyclotron. These third and fourth cyclotrons
are expected to be put into service in the late third quarter of
1996 and the mid to late first quarter of 1997, respectively.
Cyclotron operations constitute only one component of the
TheraSeed manufacturing processes performed at the Buford and
Norcross facilities. Significant attention and effort are being
focused on improving all aspects of the Company's manufacturing
processes with the goal to improve efficiency and provide
additional capacity for TheraSeed. Long lead-times (in excess of
18 months) associated with the purchase of a cyclotron and the
specially designed facilities to house the equipment creates
suboptimal conditions requiring order of this equipment long in
advance of its need. This lead-time factor naturally places
additional burden on the Company's ability to accurately forecast
sales growth. Also at issue is the fact that very rapid sales
growth may necessitate multiple purchases of equipment which
would then place strain on the Company's ability to finance this
type of growth. It is anticipated that if TheraSeed demand
continues to expand rapidly, additional cyclotrons will be
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ordered.
TheraSphere
Production of TheraSphere requires the services of a number
of outside vendors - all of which provide services which can be
provided through alternative sources. Theragenics, through its
exclusive worldwide sublicense of the TheraSphere product to
Nordion, has given Nordion worldwide manufacturing responsibility
for the product.
Marketing
TheraSeed Implants
Increased awareness of the TheraSeed product is the primary
focus of Theragenics' Marketing program. In June of 1994, results
of a five-year clinical study conducted by Dr. John Blasko,
Director of the Northwest Tumor Institute in Seattle, Washington,
showed seed therapy to be comparable if not superior to surgery
or external beam radiation for early stage prostate cancer. In
1995 Theragenics continued its work to see that this data was
available to the medical and lay communities. Theragenics
continues to support the expansion of this study.
The Company continues to distribute patient information
booklets to physician customers, patient support groups and any
person calling the Company's Cancer Information Center.
In 1995, marketing efforts increased dramatically. A higher
volume of advertising placements aimed at men over the age of 50
and retirement communities yielded significant benefits as
indicated by increased sales and increased calls to the Company's
Cancer Information Center.
Theragenics continues to support the writing of scholarly
articles by doctors using TheraSeed and the placement of these
articles in prestigious medical journals. Attendance at small and
large meetings of medical clinicians remains a top priority as
physician acceptance continues to grow.
The Company is pleased that it was able to play a part in
providing more equitable Medicare reimbursement for urologists
and radiation oncologists who perform the seed implant procedure.
TheraSphere
The Company does not directly market its TheraSphere
product. Under a manufacturing and marketing licensing agreement
with Nordion International, Inc. ("Nordion"), a Canadian company,
Nordion has the right to produce and market the TheraSphere
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product worldwide for all applications. Also under the agreement,
Nordion has substantially all responsibility for seeking
regulatory approval of the product in the United States and other
countries as it chooses. Nordion is a leading worldwide producer,
marketer and supplier of radioisotope products and related
equipment. Under a prior licensing agreement, Nordion has
distributed the TheraSphere product in Canada since 1991.
Patents and Licenses
TheraSeed Implants
Theragenics holds patents for certain TheraSeed
technologies in the United States, Canada, South Africa, Japan
and the ten countries of the European patent convention.
Theragenics also holds patents in the United States and South
Africa for additional TheraSeed technologies and has a PCT patent
application on file for Japan, Australia, New Zealand, Canada,
and Europe (representing 16 European countries) as well as a
direct filing in Mexico.
TheraSphere
The Company holds a worldwide exclusive license from the
University of Missouri for the use of technology required for
producing TheraSphere. Theragenics also holds the rights to all
improvements developed by the University of Missouri on this
technology. The Company, in turn, sublicenses exclusive worldwide
rights to this technology and all improvements to Nordion
International. The University of Missouri holds patents for the
TheraSphere technology in several countries including the United
States, Canada, Australia, South Africa, Japan and the ten
countries of the European patent convention. Pursuant to its
license agreement with the University of Missouri, the Company is
obligated to pay the University the greater of a fixed annual
amount or a percentage of the gross sales amount derived from the
sale of TheraSphere.
Theragenics holds patents for technology concerning methods
for delivery of the product in several countries including the
United States, Canada, Australia, Argentina, South Africa and the
ten countries of the European patent convention and has patent
applications on file in other countries including Japan. The
Company licenses this technology to Nordion for worldwide use.
Other
Theragenics holds patents related to another product used in
the treatment of brain cancer. Because of the significant
investment required and the uncertain return, this product is not
being commercially developed by Theragenics. Therefore, the
Company is unable to determine the value of these patents, if
any.
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The Company may file additional patent applications from
time-to-time and considers the ownership of patents important,
but not necessarily essential, to its operations. In general,
the Company will rely upon its personnel, trade secrets, and its
products' current position in a highly regulated industry, as
well as patent protection, to establish barriers-to-entry and to
maintain its industry position. It is possible that others may
independently develop similar technology or otherwise obtain
access to the Company's know-how. It is not certain that any
patents which may be granted to the Company will be valid and
enforceable or will withstand a challenge by litigation.
Competition
In general, competition to TheraSeed stems from conventional
methods of treating localized cancer such as surgery,
chemotherapy, and external beam radiation. Presently, surgery and
external beam radiation comprise the vast majority of the
prostate cancer treatment market, and those methods are viewed as
Theragenics' main competition. In addition, Iodine (I-125)
("Iodine") is commercially available as a permanent implant and
also competes with TheraSeed. However, TheraSeed utilizes
Palladium-103 (Pd-103) ("Palladium") as the isotope for its
permanent implant whose properties are very different from
Iodine. Iodine's dose rate is one-third that of Palladium and its
half-life is three times longer than Palladium's. Such properties
represent competitive advantages for Palladium in treating
certain kinds of cancer. The Company is aware of no other similar
radioactive products competing directly with TheraSeed.
Theragenics is the only company in the world, known to
management, that commercially produces Pd-103.
Liver Cancer, which TheraSphere treats, can also be treated
by surgery, external beam radiation, and chemotherapy.
TheraSphere does not represent a cure for liver cancer but has
been shown to prolong life expectancy of the patient and enhance
the quality of life during that period. Theragenics is not aware
of any other implant available for this type treatment.
There are many companies, both public and private, engaged
in research on new and innovative methods of treating cancer.
Also, there are many companies both public and private, including
many large, well-known pharmaceutical, medical and chemical
companies, engaged in radiological pharmaceutical and device
research. Significant developments by any of these companies
could lessen or eliminate the demand for any or all of the
Company's products.
Governmental Regulation
The Company's present and intended future activities in the
development, manufacture and sale of cancer therapy products are
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subject to various laws and regulations, regulatory approvals and
guidelines. Within the U.S., the Company's therapeutic
radiological devices must comply with the United States Federal
Food, Drug and Cosmetic Act which is enforced by the Food and
Drug Administration (FDA). The Company's handling of radioactive
materials is governed by the state of Georgia in agreement with
the Nuclear Regulatory Commission of the United States
Government. TheraSeed has regulatory approval for commercial
distribution in the United States and Canada, while TheraSphere
has regulatory approval for commercial distribution only in
Canada. The Company to the best of its knowledge is in compliance
with all its licenses for handling radioactive material.
The effect of various governments' regulations can delay the
marketing of products for a considerable period of time or impose
costly procedures upon the Company's activities.
The Company is not currently conducting any clinical trial
of TheraSphere; but under the terms of the current licensing
agreement with Theragenics, Nordion will attempt to obtain
regulatory approvals in the United States, Europe, and other
areas of the world at its expense and discretion. Regulatory
approval of the TheraSphere product has been granted in Canada
and the product is presently being marketed in that jurisdiction
by Nordion.
Most countries require approval for the sale of
pharmaceuticals and medical devices. These approvals are
time-consuming and expensive and can delay or discourage the
marketing and development of a company's products in those areas.
Employees
As of March 20, 1996, the Company had 44 full-time employees
(including executive personnel). Of this total, twenty-eight are
engaged in development and/or production of the Company's
products. The balance of the Company's employees is engaged in
marketing and general corporate activities.
The Company's ability to market its products and services,
to develop marketable products and to establish and then maintain
its competitive position in light of technological developments
will depend, to a significant extent, upon its ability to attract
and retain qualified personnel. In recognition of this, the
Company has granted many of its employees stock options which are
contingent on their continued employment. Competition for such
personnel is, and should continue to be, intense.
Item 2. Properties
The Company owns a 10,500 square foot, single story,
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prefabricated building in Buford, Georgia, leases a 10,752 square
foot, single story, brick building in Norcross, Georgia and
leases a 2,692 square foot, suite of offices in a four-story
office building in Norcross, Georgia. The 10,752 square foot
Norcross facility houses the Company's assembly, shipping,
marketing and administrative operations. The 2,692 square foot
Norcross facility provides executive office space while the
Buford facility houses the Company's two cyclotrons and its raw
material processing operations. The Buford facility is currently
being expanded to house two additional cyclotrons. It is
anticipated that the Buford facility and neighboring land will
provide the core for expansion as manufacturing expands to meet
increasing sales demand and will eventually be expanded to
include all functions currently housed in the leased Norcross
facility.
Item 3. Legal Proceedings
There are currently no material legal proceedings pending
or, to the knowledge of the Company, threatened against the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of its
security holders during the fourth quarter of calendar 1995.
Page 10<PAGE>
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PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock is traded over the counter and
reported on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System. The
trading symbol for the Company's Common Stock is "THRX." The high
and low prices as reported by NASDAQ for the Company's Common
Stock for each quarterly period in 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 High Low
<S> <C> <C>
1st Quarter ................ 4 3/8 3 1/4
2nd Quarter ................ 4 3/4 3 1/2
3rd Quarter ................ 4 5/8 3 3/8
4th Quarter ................ 3 7/8 2 1/4
1995
1st Quarter ................ 3 3/4 2 1/4
2nd Quarter ................ 6 1/2 3 1/8
3rd Quarter ................ 6 3/8 4 7/8
4th Quarter ................ 12 1/2 4 7/8
</TABLE>
As of March 20, 1996, the closing price of the Company's
Common Stock was $7-7/8 per share. Also, as of that date, there
were approximately 681 holders of record of the Company's Common
Stock. The number of record holders does not reflect the number
of beneficial owners of the Company's Common Stock for whom
shares are held by depositary trust companies, brokerage firms
and others.
Dividend Policy
The Company has not paid cash dividends in the past and does
not currently plan to do so. It is the present policy of the
Company's Board of Directors to retain future earnings to finance
the growth and development of the Company's business. Any change
in current policy will depend upon the financial condition,
capital requirements and earnings of the Company as well as other
factors which the Board of Directors may deem relevant.
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Item 6. Selected Financial Data
Set forth below are selected financial data derived from the
statements of operations of the Company for the years ended
December 31, 1991, 1992, 1993, 1994 and 1995 and the balance
sheets of the Company at December 31, 1991, 1992, 1993, 1994 and
1995.
<TABLE>
<CAPTION>
For the Fiscal Years Ended
December 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Net sales $2,469,413 $4,379,300 $4,090,803 $4,723,107 $7,781,962
Licensing Fee 300,000 - - - 85,431
Costs and expenses:
Cost of sales 818,184 1,227,154 1,677,631 1,790,450 2,645,730
Selling, general
and administrative 1,254,821 1,639,334 1,607,288 1,844,239 2,395,846
Research and
development 84,903 62,632 36,181 15,268 17,954
Other income
(expense) 113,865 67,831 (85,959) 110,215 64,462
Taxes 280,000 582,000 254,000 453,000 1,100,000
Net profit/(loss)
before extraordinary
credit and change in
accounting method 445,370 936,011 429,744 730,365 1,772,325
Extraordinary credit 270,000 556,000 - - -
Change in accounting
method - - 2,860,000 - -
Net profit/(loss) 715,370 1,492,011 3,289,744 730,365 1,772,325
Net profit/(loss)
per common share
before extraordinary
credit and change in
accounting method .04 .08 .04 .06 .15
Net profit/(loss)
per common share .07 .13 .28 .06 .15
Weighted average
number of common
shares outstanding 10,759,230 11,431,149 11,709,218 11,582,793 11,759,178
Total assets $3,299,375 $7,851,056 $12,618,869 $14,168,658 $16,878,182
Page 12<PAGE>
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Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion of the Company's financial
condition, results of operations and liquidity is intended to
clarify and highlight the Company's operating trends, liquidity
and capital resources. It should be read in conjunction with the
financial statements and related notes contained in the financial
section of this Report.
RESULTS OF OPERATIONS
1995 Compared to 1994
1995 Revenues - With increased production capacity,
consistent supply of product, enhanced marketing programs and
favorable clinical data, 1995 revenues increased substantially
(66.6%) to $7.9 million versus $4.7 million in 1994. Along with
the factors already noted, increased acceptance of its prostate
cancer treatment in the medical community and increased public
awareness of the medical advantages of the TheraSeed treatment
method versus other existing methods of treating prostate cancer
were major factors in driving the substantial sales increase.
Additionally, the Company believes sales were positively affected
in 1995 by further publication of supportive data from the
clinical study of patients treated with TheraSeed. This study had
shown no local recurrence of prostate cancer and low rates of
incontinence and impotence within the study group.
1995 Costs and Expenses - As a result of the increase in
sales, cost of sales rose. However, cost of sales as a percent of
sales fell to 34% versus 38% in 1994. This percentage improvement
was primarily attributable to increased utilization of production
capacity and economics of scale partially offset by increased
depreciation. Although management believes that cost of sales as
a percentage of revenue may continue to decline should sales in
future periods exceed those achieved in 1995, no assurances can
be given with respect to the operating margins in future periods.
In particular, continued improvements in manufacturing operations
and optimization of the production process may cause smaller
improvements in net margin.
Selling, General and Administrative ("SG&A") expenses
also increased in dollar amount but declined as a percent to
sales in 1995 to 30% versus 39% in 1994. In particular,
advertising and public relations expenses increased significantly
from 1994 to 1995 to support activities associated with increased
sales. Also, headcount expenses increased in response to the
additional workload created by the higher sales.
The addition of a cyclotron and facilities caused
depreciation and amortization to increase 45$ or $828,000 from
1994 to 1995.
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Operating margins increased to 36% in 1995 versus 23% in
1994 due to increased sales and a reduction in SG&A expenses as a
percent of sales reflecting efficiency gains from increased
volumes.
Other income and expense was slightly higher in 1995
versus 1994 due to a lower level of construction in progress in
1995 that, in turn, limited the amount of interest expense
capitalizable.
1995 Earnings - Earnings increased more than 142% to
$1,772,000 or $.15 per share in 1995 from 1994's earnings of
$730,000 or $.06 per share. Such increase again was primarily due
to increased sales and a reduction in SG&A expenses as a percent
of sales reflecting efficiency gains from increased volumes.
At December 31, 1995, the Company's deferred tax asset
balance was $1,810,000. Since emerging from its development stage
in 1989, the Company has utilized approximately $3,900,000 of
operating loss carryforwards through December 31, 1995 and has
achieved twenty consecutive profitable quarters since 1991. To
realize income benefit from its remaining operating loss
carryforwards at December 31, 1995, it will be necessary for the
Company to generate future taxable income of approximately
$5,900,000, prior to the expiration of the operating loss
carryforward periods. Based on the Company's results of
operations subsequent to receiving FDA clearance in 1986 for its
product, and on expected future results of operations, management
currently strongly believes these net operating loss
carryforwards will be fully utilized prior to their statutory
expiration.
Historical Comparison
1994 Revenues - 1994 revenues increased more than 15% to
$4.7 million versus $4.1 million for 1993. In 1994, Theragenics
emerged from a two year manufacturing changeover that distanced
the Company from unreliable outside vendors. As the Company's
experience with cyclotron operations and subsequent radioactive
processes grew, the realities of these operations became clear.
No single cyclotron can be expected to run at full power for 52
weeks a year. In addition to the need for regular maintenance,
these operations require a "cool down" period before maintenance
can be performed. These "cool down" periods are imperative as
safety of the Company's employees (i.e., minimizing radiation
exposure) is among the Company's highest priorities.
During the first part of 1994, production dependability
of the #1 cyclotron dictated the pace of sales growth. Once
consistent supply was demonstrated, the Company began reclaiming
marketing momentum. Fueling this momentum were favorable
five-year clinical data (July 1994) and the dedication of
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additional financial resources to marketing.
1994 Costs and Expenses - As a result of the increase in
sales, cost of sales rose. However, cost of sales as a percent of
sales fell from 41% in 1993 to 38% in 1994. This decrease in
percent of cost of sales to sales reflected the economies of
scale associated with the large fixed cost component of the
Company's expense base.
Selling, General and Administrative ("SG&A") expenses
increased more than would have been expected if operations had
continued under the same structure as existed in 1993. Changes
were made in the advertising, public relations and investor
relations areas in 1994 which increased SG&A costs. These changes
proved to have significant success in increasing sales and
investor awareness.
Other income and expense improved by $196,000 due to
reduced interest expense. Both the higher level of construction
in progress in 1994 that increased the amount of interest expense
capitalizable and the replacement of an existing loan at 10.25%
interest with a new loan at 8.47% were the causes of this reduced
interest expense.
1994 Earnings - In 1994, the Company recorded a net
profit of $730,000 or $.06 per share. In 1993, the Company
recorded a net profit of $3,290,000, or $.28 per share. Included
in the 1993 profit number is a one-time positive earnings
adjustment of $2,860,000, or $.24 per share due to the mandated
implementation of FASB-109, "Accounting for Income Taxes." This
booking which appears on the balance sheet as an asset titled
"Deferred Income Tax Asset" primarily represents the tax benefit
which arises from the carryforward of prior years' operating
losses. Because of the differing accounting principles applied
between years, to accurately compare results of 1994 and 1993
requires that "Net Earnings Before Cumulative Effect of Change in
Accounting Principle" be the basis for comparison. Using this
method, 1994's earnings were $730,000, or $.06 per share and
1993's $430,000, or $.04 per share.
LIQUIDITY AND CAPITAL RESOURCES
Theragenics had cash, cash equivalents, short-term
investments and marketable securities of $3.3 million at December
31, 1995, compared to $2.4 million at year end 1994 and $3.4
million at year end 1993. Cash flows from operating activities
were $3.4 million in 1995 compared to $1.6 million in 1994 and
$1.1 million in 1993.
Capital spending was $2.4 million in 1995, $3.4 million
in 1994 and $2.7 million in 1993. Spending in each of these
years relates to construction of Theragenics' cyclotron facility.
Page 15
<PAGE>
Spending in 1993 primarily represented a continuation of payments
began in 1992 for initial construction of the facility and the
installation of the first cyclotron. Spending in 1994 primarily
represented progress payments on a project to add a second
cyclotron to the facility. This project began in 1993 and was
completed in 1995. Spending in 1995 represents the beginning of a
project to add cyclotrons three and four to the facility. The
expansion project for addition of cyclotrons three and four which
began in 1995 is estimated to cost approximately $9,000,000 when
completed. As of February 15, 1996, approximately $3,000,000 has
already been expended on this project with the remainder
scheduled for expenditure before the second quarter of 1997.
Management believes that funding for the remainder of this
project should be available from current cash balances, cash from
future operations and Theragenics' credit facility.
In the last three years, the Company's working capital
has been obtained from internally generated funds and borrowings
from banks. Working capital totaled $3.7 million at December 31,
1995, including $500,000 representing the current portion of an
outstanding long-term obligation. This compares to $2.5 million
at year end 1994 which also included $500,000 representing the
current portion of outstanding long-term obligations. In the
first quarter of 1993, Theragenics received funding on a $1.9
million loan secured by the Company's cyclotron facility (the
"1993 Term Loan"). The 1993 Term Loan was to mature in 1995 and
bore interest at 10.25% per annum. In the third quarter of 1994,
Theragenics received funding on a $2.1 million loan secured by
the Company's cyclotron facility including a second cyclotron
(the "1994 Term Loan"). The 1994 Term Loan matures in 1998 and
bears interest at 8.47% per annum. Of the $2.1 million loan, $1.4
million was used to pay off the outstanding balance under the
existing long-term financing while the remainder was used to
provide partial financing for the purchase of the second
cyclotron and the facility expansion to house it. As of December
31, 1995, $1,500,000 remained outstanding on the 1994 Term Loan.
In December 1995, the Company amended and restated its other
existing bank credit facility (the "Bank Credit Facility"). The
Bank Credit Facility, as amended and restated, initially
consisted of a $1 million receivables credit facility and an
additional $2 million revolving credit facility. Based on the
Company meeting specified financial thresholds, the Bank Credit
Facility will be increased to $5,000,000 upon receipt by the bank
of the Company's Form 10-K for the year ended December 31, 1995.
Borrowings under the Bank Credit Facility are secured by
substantially all of the Company's assets. The Bank Credit
Facility contains certain covenants all of which the Company was
in compliance with at year end. Borrowings under the Bank Credit
Facility may be made, at the Company's option, at an interest
rate equal to the London Interbank Offered Rate ("LIBOR") plus 2%
or the lender's prime rate as defined. At year-end, $3,000,000 of
the Bank Credit Facility was available but unused. Although
internal forecasts had indicated that there would be a need to
access the credit facility in the fourth quarter of 1995, strong
Page 16
<PAGE>
fourth quarter results did not require the Company to do so.
Management believes that cash flow from operations, the
availability of funds under its bank credit agreements and the
availability of other forms of financing should permit the
Company to meet its anticipated capital expenditures and working
capital needs as well as to service its debt and fund future
growth as new business opportunities arise.
INFLATION AND CHANGING PRICES
Management does not believe that inflation has had an
abnormal or unanticipated effect on the Company's operations.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements (page F-1) and
following pages.
Item 9. Disagreements on Accounting and Financial Disclosure
Not Applicable
PAge 17<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
a) The following documents are filed as part of this Report.
1. Financial Statements
See index to financial statements on page F-1
2. Financial Schedules
See the index to financial schedules on page G-1
3. Exhibits
3.1 - Certificate of Incorporation (1)
3.2 - Certificate of Amendment to Certificate
of Incorporation (1)
3.3 - Certificate of Amendment to Certificate
of Incorporation (1)
3.4 - By-Laws (1)
4.1 - See Exhibits 3.1 - 3.4 for provisions in
the Company's Certificate of Incorporation
and By-Laws defining the rights of holders
of the Company's Common Stock.
4.2 - Form of Warrant issued to the
Representatives of the Underwriters of the
Company's Public Offering (1)
4.3 - Warrant Agreements dated May 1, 1989 between
the Company and James Devas (4)
4.4 - Warrant Agreement dated May 8, 1993 between
the Company and James Devas
10.1 - License Agreement with University of
Missouri, as amended (1)
10.2 - Agreement with Atomic Energy of Canada, Ltd.
(1)
10.3 - Reassignment and Release Agreement among the
Company, John L. Russell, Jr., and Georgia
Tech Research Institute (1)
10.4 - 1986 Incentive and Non-Incentive Stock
Option Plan (1)
10.5 - Letter of Agreement between the Company and
Yale-New Haven Hospital (2)
10.6 - Lease between the Company and T. Rowe Price
Realty Income Fund II dated July 14, 1988(2)
10.7 - Form of Purchase Agreement between the
Company and ten institutional investors (3)
10.8 - Form of Custody Agreement between the
Company and IBJ Schroder Bank & Trust
Company (3)
10.9 - 1990 Incentive and Non-Incentive Stock
Option Plan (5)
10.10 - Employment Agreement of John V. Herndon
dated June 4, 1990 (5)
Page 18
<PAGE>
10.11 - Employment Agreement of Bruce W. Smith (5)
10.12 - Purchase Agreement between Theragenics
Corporation and Production Equipment
Manufacturer (6)
10.13 - Term Loan and Security Agreement between
Theragenics Corporation and Heller
Financial, Inc. (7)
10.14 - Purchase Agreement between Theragenics
Corporation and Production Equipment
Manufacturer (8)
10.15 - Amendment to Purchase Agreement between
Theragenics Corporation and Production
Equipment Manufacturer (9)
10.16 - Employment Agreement of John V. Herndon
dated August 1, 1993 (9)
10.17 - Employment Agreement of M. Christine Jacobs
(9)
10.18 - Lease between the Company and T. Rowe Price
Realty Income Fund II dated January 1, 1994
(9)
10.19 - Term Loan and Security Agreement between
Theragenics Corporation and Bank South, N.A.
(10)
10.20 - Agreement with Nordion International Inc.
(11)
10.21 - Purchase Agreements between Theragenics
Corporation and Production Equipment
Manufacturer (12)
10.22 - Line of Credit Facility and Revolving Credit
Facility between Theragenics Corporation and
Bank South, N.A.
24.1 - Consent of Independent Public Accountants
for Incorporation by Reference of Audit
Statement into Registration Statement
(1) Incorporated by reference to the exhibits filed with the
Company's registration statement on Form S-1, File No.
33-7097, and post-effective amendments thereto.
(2) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1988.
(3) Incorporated by reference to the exhibits to the report on
Form 10-Q for the period ended June 30, 1989.
(4) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1989.
(5) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1990.
(6) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1991.
(7) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1992.
(8) Incorporated by reference to the exhibits to the report on
Form 10-Q for the period ended June 30, 1993.
Page 19
<PAGE>
(9) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1993.
(10) Incorporated by reference to the exhibits to the report on
Form 10-K for the period ended December 31, 1994.
(11) Incorporated by reference to the exhibits to the report on
Form 8-K dated March 23, 1995.
(12) Incorporated by reference to the exhibits to the report on
Form 8-K dated June 29, 1995.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated December
13, 1995, reporting the signing of an agreement for a
Line of Credit Facility and Revolving Credit Facility
between Theragenics Corporation and Bank South, N.A.
Page 20<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THERAGENICS CORPORATION
(Registrant)
By:/s/ M. Christine Jacobs
M. Christine Jacobs
Chief Executive Officer
Dated: March 27, 1996
Norcross, Georgia
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ M. Christine Jacobs Chief Executive Officer 3/27/96
M. Christine Jacobs (Principal Executive Officer);
Director
/s/ Bruce W. Smith Chief Financial Officer, 3/27/96
Bruce W. Smith Treasurer (Principal
Financial Officer) and
Secretary
/s/ Charles Klimkowski Director, Chairman 3/27/96
Charles Klimkowski
/s/ John V. Herndon Director 3/27/96
John V. Herndon
/s/ Orwin L. Carter Director 3/27/96
Orwin L. Carter
/s/ Peter A.A. Saunders Director 3/27/96
Peter A.A. Saunders
/s/ Otis W. Brawley Director 3/27/96
Otis W. Brawley
Page 21<PAGE>
<PAGE>
THERAGENICS CORPORATION
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ................23
(For the periods ended December 31, 1993, 1994 and 1995)
FINANCIAL STATEMENTS
Balance Sheets - December 31, 1994 and 1995 .............24
Statements of Earnings for the Three Years Ended
December 31, 1995 .......................................26
Statement of Shareholders' Equity for
the Three Years Ended December 31, 1995 .................28
Statements of Cash Flows for the Three Years Ended
December 31, 1995 .......................................29
NOTES TO FINANCIAL STATEMENTS ...........................32
Page 22<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Theragenics Corporation
We have audited the balance sheets of Theragenics Corporation
(a Delaware corporation) as of December 31, 1994 and 1995, and
the related statements of earnings, shareholders' equity, and
cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the 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 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 Theragenics Corporation as of December 31, 1994 and 1995, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As described in Note E, the Company changed its method of
accounting for income taxes in 1993, as required by Statement of
Financial Accounting Standards No. 109.
GRANT THORNTON LLP
Atlanta, Georgia
January 17, 1996
Page 23<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
BALANCE SHEETS
DECEMBER 31
ASSETS
1994 1995
<S> <C> <C>
CURRENT ASSETS
Cash and short-term
investments (Note B-8) $ 2,317,463 $3,266,338
Marketable securities
(Note B-9) 50,000 -
Trade accounts receivable
(Note B-2) 732,424 1,335,645
Inventories (Notes B-3 and C) 192,161 166,955
Prepaid expenses and
other current assets 91,801 67,521
Total current assets 3,383,849 4,836,459
PROPERTY AND EQUIPMENT
(Notes B-4 and F)
Building and improvements 899,760 1,690,045
Leasehold improvement 138,978 138,978
Machinery and equipment 5,167,815 8,203,256
Office furniture and equipment 44,721 44,721
6,251,274 10,077,000
Less accumulated depreciation
and amortization (1,445,206) (2,194,164)
4,806,068 7,882,836
Land 49,485 49,485
Construction in progress (Note D) 3,602,825 2,140,894
8,458,378 10,073,215
OTHER ASSETS
Deferred tax asset (Note E) 2,179,000 1,810,000
Patent costs (Note B-5) 94,982 90,704
Other 52,449 67,804
2,326,431 1,968,508
$14,168,658 $16,878,182
</TABLE>
Page 24<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
BALANCE SHEETS
(Continued)
DECEMBER 31
LIABILITIES AND SHAREHOLDERS' EQUITY
1994 1995
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of
long-term debt (Note F) $ 469,765 $ 511,362
Trade accounts payable 226,209 348,191
Accrued salaries, wages,
and payroll taxes 110,132 225,138
Income taxes payable (Note E) 113 3,255
Other current liabilities 33,036 12,680
Total current liabilities 839,255 1,100,626
LONG-TERM DEBT: (Note F) 1,519,354 1,008,135
COMMITMENTS AND CONTINGENCIES:
(Note G)
SHAREHOLDERS' EQUITY: (Note I)
Common stock, authorized
50,000,000 shares of $.01
par value; issued and
outstanding 10,961,887 in
1994 and 11,394,785 in 1995. 109,618 113,948
Additional paid-in capital 15,207,453 16,390,170
Accumulated deficit (3,507,022) (1,734,697)
Total shareholders' equity 11,810,049 14,769,421
$14,168,658 $16,878,182
</TABLE>
The accompanying notes are an integral part of these statements.
Page 25<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENTS OF EARNINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Year Ended December 31,
1993 1994 1995
<S> <C> <C> <C>
REVENUES (Notes G and J)
Product sales $ 4,090,803 $ 4,723,107 $ 7,781,962
Licensing fees - - 85,431
4,090,803 4,723,107 7,867,393
COSTS & EXPENSES:
Cost of sales 1,677,631 1,790,450 2,645,730
Selling, general,
and administrative 1,607,288 1,844,239 2,395,846
Research and
development 36,181 15,268 17,954
3,321,100 3,649,957 5,059,530
OTHER INCOME (EXPENSE):
Interest income 114,905 135,888 143,424
Interest expense
(Note F) (195,035) - (51,967)
Other (5,829) (25,673) (26,995)
(85,959) 110,215 64,462
NET EARNINGS BEFORE
INCOME TAXES,
AND CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING PRINCIPLE $ 683,744 $ 1,183,365 $ 2,872,325
Income tax expense
(Note E) 254,000 453,000 1,100,000
NET EARNINGS BEFORE
CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING PRINCIPLE $ 429,744 $ 730,365 $1,772,325
Cumulative effect on
prior years of change
in accounting for
income taxes (Note E) 2,860,000 - -
NET EARNINGS $ 3,289,744 $ 730,365 $ 1,772,325
</TABLE>
Page 26
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENTS OF EARNINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Year Ended December 31,
1993 1994 1995
<S> <C> <C> <C>
NET EARNINGS PER COMMON
SHARE (Note B-7)
NET EARNINGS BEFORE
CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING PRINCIPLE $ .04 $ .06 $ .15
Cumulative effect on
prior years of change
in method of accounting
for income taxes .24 - -
NET EARNINGS PER
COMMON SHARE $ .28 $ .06 $ .15
WEIGHTED AVERAGE SHARES 11,709,218 11,582,793 11,759,178
</TABLE>
The accompanying notes are an integral part of these statements.
Page 27<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Common Stock Additional
Number of Par value paid-in Accumulated
shares $.01 capital deficit
Total
<S> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1992 10,583,635 $105,836 $14,866,040 $(7,527,131) $ 7,444,745
Exercise of
warrants 200,000 2,000 173,000 - 175,000
Exercise of stock
options, net 129,302 1,293 122,902 - 124,195
Net earnings
for the year - - - 3,289,744 3,289,744
BALANCE,
December 31, 1993 10,912,937 $109,129 $15,161,942 $(4,237,387) $11,033,684
Exercise of stock
options, net 48,950 489 45,511 - 46,000
Net earnings
for the year - - - 730,365 730,365
BALANCE,
December 31, 1994 10,961,887 $109,618 $15,207,453 $(3,507,022) $11,810,049
Exercise of stock
options, net 432,898 4,330 469,717 - 474,047
Income tax benefit
from stock options
exercised - - 713,000 - 713,000
Net earnings
for the year - - - 1,772,325 1,772,325
BALANCE,
December 31, 1995 11,394,785 $113,948 $16,390,170 $(1,734,697) $14,769,421
</TABLE>
The accompanying notes are an integral part of these statements.
Page 28<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDING DECEMBER 31,
1993 1994 1995
<S> <C> <C> <C> <S>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings $3,289,744 $ 730,365 $ 1,772,325
Adjustments to
reconcile net earnings
to net cash provided
by operating activities:
Cumulative effect of
change in accounting
for income taxes (2,860,000) - -
Deferred income tax
expense 248,000 433,000 1,082,000
Depreciation and
amortization 515,831 571,615 828,072
Loss on disposal of
property and equipment 3,458 1,571 1,677
Change in assets and
liabilities:
Accounts receivable (18,347) (197,133) (603,221)
Inventories 84,737 (32,834) 25,206
Prepaid expenses and
other current assets (17,228) 22,448 24,280
Other assets 17,526 (200) -
Trade accounts payable (102,239) 78,402 121,982
Accrued salaries,
wages and payroll
taxes (7,938) 21,400 115,006
Income tax payable (20,387) (1,500) 3,142
Other current
liabilities (21,001) 16,442 (20,356)
Total adjustments (2,177,588) 913,211 1,577,788
Net cash provided
by operating
activities 1,112,156 1,643,576 3,350,113
Page 29<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
THERAGENICS CORPORATION
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE THREE YEARS ENDING DECEMBER 31,
1993 1994 1995
<S> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase and
construction
of property
and equipment (2,740,263) (3,376,967) (2,426,961)
Maturities of
marketable securities 205,127 309,765 50,000
Patent costs (51,346) (587) (3,632)
Net cash used
by investing
activities (2,586,482) (3,067,789) (2,380,593)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
long-term debt 1,900,000 2,100,000 -
Repayment of
long-term debt (569,561) (1,441,320) (469,622)
Proceeds from exercise
of stock options and
warrants, net 299,195 46,000 474,047
Other assets - (46,025) (25,070)
Net cash (used)
provided by
financing
activities 1,629,634 658,655 (20,645)
NET INCREASE (DECREASE)IN
CASH AND SHORT-TERM
INVESTMENTS 155,308 (765,558) 948,875
CASH AND SHORT-TERM
INVESTMENTS AT
BEGINNING OF YEAR 2,927,713 3,083,021 2,317,463
CASH AND SHORT-TERM
INVESTMENTS AT
END OF YEAR $ 3,083,021 $ 2,317,463 $ 3,266,338
</TABLE>
Page 30<PAGE>
<PAGE>
THERAGENICS CORPORATION
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE THREE YEARS ENDING DECEMBER 31,
Supplemental Schedule of Non Cash Financing Activities
During 1995, the Company realized an income tax benefit from the
exercise and early disposition of certain stock options,
resulting in an increase in the deferred tax asset and additional
paid in capital of $713,000.
Supplementary Cash Flow Disclosure:
<TABLE>
<CAPTION>
1992 1993 1994
<S> <C> <C> <C>
Interest paid, net of
amounts capitalized $ 195,035 $ - $ 53,843
Interest received $ 120,032 $ 144,452 $ 139,693
Income taxes paid $ 26,387 $ 21,500 $ 14,858
</TABLE>
The accompanying notes are an integral part of these statements.
Page 31<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 and 1995
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Theragenics Corporation (the "Company") was organized in November
1981 to develop, manufacture, and market radiological
pharmaceuticals and devices used in the treatment of cancer.
The Company manufactures and markets primarily one product, which
is used in the treatment of cancer. Use of the Company's product
is regulated by the U.S. Food and Drug Administration (FDA). The
Company sells its product primarily to hospitals, physicians and
other health service providers in the United States. The Company
therefore is directly affected by FDA regulations and the well
being of the health care industry.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently
applied in the preparation of the accompanying financial
statements follows:
1. Use of Estimates in Preparation of Financial Statements
In preparing financial statements in conformity with Generally
Accepted Accounting Principles ("GAAP"), management is required
to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Accounts Receivable
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required. If amounts become uncollectible, they will be charged
to operations when that determination is made.
3. Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the specific identification method. Inventory
costs consist primarily of costs incurred in the extraction,
purification and irradiation processes of an isotope which is the
basic component of the Company's primary product.
Page 32<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
4. Depreciation
Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated
service lives on a straight-line basis. Estimated service lives
are as follows:
Building 30 years
Machinery, leasehold improvements,
furniture and equipment 5-10 years
A significant portion of the Company's depreciable assets are
utilized in the production of its product. Management
periodically evaluates the realizability of its depreciable
assets in light of its current industry environment. Management
believes that no impairment of depreciable assets exists at
December 31, 1995. It is possible, however, that management's
estimates concerning the realizability of the Company's
depreciable assets could change in the near term due to changes
in the Company's technological and regulatory environment.
5. Patent Costs
The Company capitalizes the costs of patent applications for its
products. Amortization is computed on a straight line basis over
the estimated economic lives of the patents, commencing at the
date of grant of the related patent. Patent costs are net of
accumulated amortization of $29,366 and $37,276 at December 31,
1994 and 1995, respectively.
6. Research and Development Costs
The costs of research and development and consumable supplies and
materials to be used for the development of the Company's
intended products are expensed when incurred.
7. Net Earnings Per Common Share
The net earnings per common share is based on the weighted
average number of common shares and common equivalent shares
outstanding during each period (11,709,218 in 1993, 11,582,793 in
1994 and 11,759,178 in 1995).
Page 33<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Fully diluted information is not presented, as fully diluted
earnings per share is not materially different from the primary
earnings per share presented.
8. Statements of Cash Flows
For purposes of reporting cash flows, cash and short-term
investments include cash on hand, cash in banks and commercial
paper with original maturities of less than 90 days.
9. Marketable Securities
The Company adopted Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115), effective January 1, 1994. The adoption of
SFAS 115 had no effect upon prior periods.
At December 31, 1994, marketable securities are categorized as
available for sale and as a result are stated at fair value,
which approximated cost. The Company held no marketable
securities at December 31, 1995.
10. Stock Based Compensation
The Company stock option plans are accounted for under APB
Opinion 25, Accounting for Stock Issued to Employees, and related
interpretations.
NOTE C - INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Raw material $ 17,361 $ 17,361
Work in process 79,820 92,887
Finished goods 33,361 56,707
Raw material to be recovered 61,619 -
$192,161 $166,955
</TABLE>
Page 34
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE C - INVENTORIES - CONTINUED
"Raw material to be recovered" includes finished products which
cannot be sold due to loss of radiation. The irradiated isotope
contained in these products can be recovered and reused through a
purification process.
NOTE D - CONSTRUCTION IN PROGRESS
At December 31, 1995, construction in progress represented
payments made for the construction of manufacturing equipment and
facility expansion. Total cost of this project is expected to be
approximately $9,000,000, and is expected to be completed in
February 1997.
At December 31, 1994, construction in progress represented
payments made for the construction of manufacturing equipment
which was completed and placed in service during 1995.
NOTE E - INCOME TAXES
The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS" and "FASB")
No. 109, Accounting for Income Taxes, which requires a change
from the deferred method to the asset and liability method of
accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted
statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax
bases of existing assets and liabilities.
The Company implemented SFAS 109 as of January 1, 1993. The
deferred tax asset recorded is primarily a result of the
recognition of the Company's net operating loss carryforward. The
cumulative effect on prior years of the change in accounting
principle increased net earnings by $2,860,000 ($.24 per share)
and is included in earnings for 1993. The effect of the change on
1993 was to decrease net earnings before cumulative effect of a
change in accounting principle by $248,000 ($.02 per share) and
increase net earnings by $2,612,000 ($.22 per share).
Page 35<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE E - INCOME TAXES - Continued
The provision for income tax is summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Current tax expense $ 6,000 $ 20,000 $ 18,000
Deferred tax expense 248,000 433,000 1,082,000
$ 254,000 $ 453,000 $1,100,000
</TABLE>
Significant components of the deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Loss carryforwards $2,455,000 $2,240,000
Depreciation (370,000) (565,000)
Other 94,000 135,000
$2,179,000 $1,810,000
</TABLE>
The significant portions of the operating loss carryforwards were
incurred while the Company was in the development stage. Upon
receiving clearance to market its "TheraSeed " product from the
U.S. Food and Drug Administration (FDA) in 1986, the Company
commenced manufacturing and distribution of its product in 1987.
Since emerging from the development stage in 1989, the Company
has utilized approximately $3,900,000 of these operating loss
carryforwards through December 31, 1995 by generating taxable
income. In order to realize income benefit from the remaining
operating loss carryforwards at December 31, 1995, it will be
necessary for the Company to generate future taxable income of
approximately $5,900,000, prior to the expiration of the
operating loss carryforward periods. Based on the Company's
results of operations subsequent to receiving FDA clearance to
market for its product, and on expected future results of
operations, management believes that currently it is more likely
than not that the income tax benefits of the operating loss
carryforwards will be realized within the carryforward period.
The amount of deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.
Page 36
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1993 and 1994
NOTE E - INCOME TAXES - Continued
The provision for income taxes differs from the amount of income
tax determined by applying the applicable federal rates due to
the following:
<TABLE>
1993 1994 1995
<S> <C> <C> <C>
Tax at applicable
federal rate of 34% $ 232,000 $ 402,000 $ 977,000
State tax, net 22,000 47,000 115,000
Other - 4,000 8,000
$ 254,000 $ 453,000 $1,100,000
</TABLE>
For income tax purposes only, the Tax Reform Act of 1986 enacted
an alternative minimum tax system for corporations (the "AMT").
AMT is imposed at a 20% rate on the Company's AMT income which is
determined by making statutory adjustments to regular taxable
income. A company pays the greater of the taxes computed under
the "regular" tax system or the AMT system. Because AMT net
operating loss carryforwards may only be utilized to offset 90%
of the AMT income, the Company was subject to the AMT in 1993,
1994 and 1995, resulting in an alternative minimum tax of $6,000,
$20,000 and $18,000, respectively. These amounts will be allowed
as a credit carryover to reduce the regular tax liability in
future years, but not below the AMT of such years.
At December 31, 1995, the Company had approximate net federal
operating loss carryforwards for regular tax and AMT purposes as
follows:
<TABLE>
<CAPTION>
Net operating Net operating
loss (regular) loss (AMT)
Year of expiration
<S> <C> <C>
2002 $1,013,000 $ -
2003 2,485,000 2,254,000
2004 1,806,000 1,765,000
2005 590,000 555,000
$5,894,000 $4,574,000
</TABLE>
Page 37<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE F - NOTES PAYABLE
In December 1995, the Company entered into an amended and
restated loan and security agreement (the "loan agreement") with
a financial institution. This loan agreement incorporated and
restated the Company's existing term loan and line of credit
facility. A summary of the applicable terms follows.
Term Loan
The term loan is payable in monthly installments of $51,862,
including interest at 8.47%. $1,989,119 and $1,519,497 were
outstanding under the term loan at December 31, 1994 and 1995,
respectively. Interest expense of approximately $140,000 and
$106,000 was capitalized with expansion of the manufacturing
facility and construction of certain manufacturing equipment
during 1994 and 1995, respectively.
Line of Credit
The loan agreement provides for a line of credit of up to
$1,000,000. Interest on outstanding borrowings is payable monthly
at the prime rate or, at the Company's option, may be payable at
the LIBOR rate plus 2%. There was no outstanding borrowings under
the line of credit at December 31, 1994 or 1995.
Revolving Credit Facility
The loan agreement also provides for a revolving credit facility
of up to $2,000,000. The maximum borrowings under the revolving
credit facility can be increased to $4,000,000 under certain
conditions. These conditions include, among other things, that
the Company achieve certain minimum earnings levels, as defined,
for four consecutive quarters. The Company has met the minimum
earnings requirements as of December 31, 1995, and management
expects that the revolving credit facility will be increased to
$4,000,000 during 1996. Interest on outstanding borrowings is
payable monthly at the prime rate or, at the Company's option,
may be payable at the LIBOR plus 2%. No amounts were outstanding
under the revolving credit facility at December 31, 1995.
All outstanding borrowings under the revolving credit facility
are due in April 1997. However, the outstanding borrowings can be
repaid in sixty equal and consecutive monthly installments
commencing in May 1997 if the Company meets certain minimum
earnings levels, as defined, and certain other financial ratios
Page 38<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE F - NOTES PAYABLE - Continued
for the year ending December 31, 1996. Additionally, certain
mandatory repayments based on "excess cash flow", as defined,
would be required commencing in May 1998 and annually thereafter.
All outstanding borrowings under the loan agreement are
collateralized by substantially all of the Company's assets.
Provisions of the loan agreement limit the amount of annual
capital expenditures, the incurrence of additional debt and,
among other things, require the maintenance of certain minimum
financial ratios. As of December 31, 1995, the Company was in
compliance with the provisions of the loan agreement.
NOTE G - COMMITMENTS AND CONTINGENCIES
Licensing Agreement
The Company holds a worldwide exclusive license from the
University of Missouri for the use of technology, patented by the
University, used in the Company's "TheraSphere" product. The
licensing agreement provides for the payment of royalties based
on the level of sales and on lump sum payments received pursuant
to a licensing agreement with Nordion International, Inc. (see
below).
The Company has granted certain of its geographical rights under
the licensing agreement with the University of Missouri to
Nordion International, Inc., a Canadian company which is a
producer, marketer and supplier of radioisotope products and
related equipment. Under the Nordion agreement, the Company will
receive a licensing fee for each geographic area in which Nordion
receives new drug approval. The Company will also be entitled to
a percentage of future revenues earned by Nordion as royalties
under he agreement. Royalties from this agreement for each of the
three years in the period ended December 31, 1995 were not
significant.
In March 1995, the Company received approximately $85,000 from
Nordion for the right to use certain patents and to manufacture,
distribute, and sell TheraSphere for all applications worldwide.
Letter of Credit
The Company has a letter of credit outstanding for approximately
$315,000 relating to regulatory requirements.
Page 39<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE G - COMMITMENTS AND CONTINGENCIES - Continued
Lease Commitment
The Company leases office space under a noncancelable lease which
expires in December 1998. Approximate minimum lease payments
under the lease are as follows: 1996, $64,000; 1997, $67,000;
1998, $69,000.
Rent expense was approximately $70,000, $61,000 and $61,500 for
the years ended December 31, 1993, 1994 and 1995, respectively
NOTE H - TRANSACTIONS WITH RELATED PARTIES
Certain shareholders and directors provide consulting
services to the Company. Total consulting fees paid to
shareholders and directors were approximately $77,500, $5,500 and
$1,000 during the years ended December 31, 1993, 1994 and 1995,
respectively.
NOTE I - STOCK OPTIONS AND WARRANTS
The Company's board of directors has approved three stock option
plans which in aggregate cover up to 2,200,000 shares of common
stock. The plans provide for the expiration of options ten years
from the date of grant and requires the exercise price of the
options granted to be at least equal to 100% of market value on
the date granted. Stock option transactions for the three years
ended December 31, 1995 are summarized below:
<TABLE>
<CAPTION>
Option Shares
1993 1994 1995
<S> <C> <C> <C>
Outstanding,
beginning of year 1,188,316 1,258,116 1,226,716
Granted 200,000 40,000 221,000
Exercised (130,200) (49,900) (450,000)
Canceled - (21,500) -
Outstanding,
end of year 1,258,116 1,226,716 997,716
Option Price $1.00-$6.38 $1.00-$6.38 $1.00-$6.38
</TABLE>
As of December 31, 1995, options covering approximately 773,000
Page 40<PAGE>
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE I - STOCK OPTIONS AND WARRANTS - Continued
shares were exercisable. Expiration dates for these options range
from 1996-2005.
Two hundred thousand warrants (200,000) were exercised during
1993, resulting in proceeds to the Company of $175,000. The
Company also has warrants outstanding at December 31, 1995,
covering 100,000 shares of common stock. The warrants are
exercisable at a price of $7.50 per share and expire in May 1999.
The Company follows the practice of recording amounts received
upon the exercise of options by crediting common stock and
additional capital. No changes are reflected in the statements of
operations as a result of the grant or exercise of options. The
Company realizes an income tax benefit from the exercise or early
disposition of certain stock options. This benefit results in an
increase to the deferred tax asset and an increase in additional
paid-in capital.
NOTE J - MAJOR CUSTOMERS
During 1994, there were sales to one major customer that equaled
approximately ten percent of sales. During 1993 and 1995, there
were no customers which individually comprised ten percent of
sales.
NOTE K - EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution 401(k) Plan covering
all employees with at least six months of service and at least 21
years of age. The Plan permits participants to defer a portion of
their compensation through payroll deductions. The Company may,
at its discretion, contribute to the Plan on behalf of
participating employees. No such Company discretionary
contributions have been made during any of the three years ended
December 31, 1995.
Note L - RECENTLY ISSUED ACCOUNTING STANDARD
The Company currently accounts for the issuance of stock options
to employees in accordance with Accounting Principles Board
Opinion ("APB") Number 25, "Accounting for Stock Issued to
Employees." In October 1995, the FASB issued SFAS Number 123
("SFAS 123"), "Accounting for Stock Based Compensation." SFAS 123
allows for the continued use of the method prescribed by APB 25,
referred to as intrinsic value method. SFAS 123 also provides an
Page 41
<PAGE>
THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994 and 1995
NOTE L - RECENTLY ISSUED ACCOUNTING STANDARD - Continued
alternative method, referred to as the fair value method. If the
intrinsic value method of accounting for the issuance of stock
options is used, then SFAS 123 requires disclosure of pro forma
net income and earnings per share, as if the fair value method
had been used.
Management anticipates that the Company will continue to account
for the issuance of stock options to employees in accordance with
APB 25. Therefore, the only effect of adopting SFAS 123 will be
the new disclosure requirements. These disclosure requirements
are effective for the year ending December 31, 1996.
Page 42<PAGE>
<PAGE>
File No. 0-15443
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS FILED WITH
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995
under
The Securities Exchange Act of 1934
THERAGENICS CORPORATION
(Exact Name of Registrant as specified in its charter)
Page 43<PAGE>
<PAGE>
THERAGENICS CORPORATION
INDEX TO EXHIBITS
Page No.
10.22 Line of Credit Facility and Revolving Credit 45
Facility between Theragenics Corporation and
Bank South, N.A.
24.1 Consent of Independent Certified Public 89
Accountant for Incorporation by Reference
of Audit Statement into Registration
Statement
Page 44<PAGE>
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
THERAGENICS CORPORATION
and
BANK SOUTH
dated as of
December 13, 1995
Page 45<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . .1(48)
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . .1(48)
1.2. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 10(57)
1.3. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . 11(58)
1.4. Certain Matters of Construction. . . . . . . . . . . . . . . 11(58)
SECTION 2. LINE OF CREDIT FACILITY; TERM LOAN . . . . . . . . . . . . 11(58)
2.1. Line of Credit Loans.. . . . . . . . . . . . . . . . . . . . 11(58)
2.2. Manner of Borrowing Line of Credit Loans . . . . . . . . . . 12(59)
2.3. Loan Account . . . . . . . . . . . . . . . . . . . . . . . . 12(59)
2.4. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 12(59)
2.5 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . 13(60)
SECTION 3. REVOLVING CREDIT FACILITY. . . . . . . . . . . . . . . . . 13(60)
3.1. Revolving Credit Loans.. . . . . . . . . . . . . . . . . . . 13(60)
3.2. Manner of Borrowing Revolving Credit Loans . . . . . . . . . 15(62)
3.3. Loan Account . . . . . . . . . . . . . . . . . . . . . . . . 15(62)
3.4. Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . 15(62)
SECTION 4. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . 16(63)
4.1. Amounts, Terms and Issuance of Letters of Credit.. . . . . . 16(63)
4.2 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16(63)
SECTION 5. TERMINATION; PAYMENTS; FEES AND COSTS. . . . . . . . . . . 16(63)
5.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . 16(63)
5.2. Costs, Fees and Expenses . . . . . . . . . . . . . . . . . . 17(64)
5.3. Application of Payments and Collections. . . . . . . . . . . 17(64)
5.4 Statements of Account. . . . . . . . . . . . . . . . . . . . 17(64)
5.5. All Loans and Obligations to Constitute One Obligation . . . 18(65)
SECTION 6. COLLATERAL: GENERAL TERMS . . . . . . . . . . . . . . . . 18(65)
6.1. Security Interest in Collateral. . . . . . . . . . . . . . . 18(65)
6.2. Representations, Warranties and Covenants -- Collateral. . . 19(66)
6.3. Financing Statements . . . . . . . . . . . . . . . . . . . . 19(66)
6.4. Cash Collateral Account. . . . . . . . . . . . . . . . . . . 20(67)
6.5. Additional Collateral. . . . . . . . . . . . . . . . . . . . 20(67)
SECTION 7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 20(67)
Page 46<PAGE>
<PAGE>
7.1. General Representations and Warranties . . . . . . . . . . . 21(68)
7.2. Reaffirmation. . . . . . . . . . . . . . . . . . . . . . . . 25(72)
7.3. Survival of Representations and Warranties . . . . . . . . . 25(72)
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS. . . . . . . . . . . . 25(72)
8.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . 25(72)
8.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 29(76)
SECTION 9. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 32(79)
9.1. Documentation. . . . . . . . . . . . . . . . . . . . . . . . 32(79)
9.2. Other Conditions . . . . . . . . . . . . . . . . . . . . . . 33(80)
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT . . . . 34(81)
10.1. Events of Default . . . . . . . . . . . . . . . . . . . . . 34(81)
10.2. Acceleration of the Obligations . . . . . . . . . . . . . . 36(83)
10.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 36(83)
10.4. Remedies Cumulative; No Waiver. . . . . . . . . . . . . . . 37(84)
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 37(84)
11.1. Power of Attorney . . . . . . . . . . . . . . . . . . . . . 37(84)
11.2. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 38(85)
11.3. Modification of Agreement; Sale of Interest . . . . . . . . 38(85)
11.4. Reimbursement of Expenses . . . . . . . . . . . . . . . . . 39(86)
11.5. Indulgences Not Waivers . . . . . . . . . . . . . . . . . . 39(86)
11.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . 40(87)
11.7. Successors and Assigns. . . . . . . . . . . . . . . . . . . 40(87)
11.8. Cumulative Effect; Conflict of Terms. . . . . . . . . . . . 40(87)
11.9. Execution in Counterparts . . . . . . . . . . . . . . . . . 40(87)
11.10. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 40(87)
11.11. Lender's Consent . . . . . . . . . . . . . . . . . . . . . 41(88)
11.12. Demand Obligations . . . . . . . . . . . . . . . . . . . . 41(88)
11.13. Time of Essence. . . . . . . . . . . . . . . . . . . . . . 41(88)
11.14. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 41(88)
11.15. Reliance on Telecopies . . . . . . . . . . . . . . . . . . 42(89)
11.16. Governing Law; Consent To Forum. . . . . . . . . . . . . . 42(89)
11.17. Waivers By Borrower. . . . . . . . . . . . . . . . . . . . 42(89)
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42(89)
Page 47<PAGE>
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT is made as of this 13th day of December, 1995, by and
between BANK SOUTH, formerly known as Bank South, N.A. ("Lender"), a
Georgia banking corporation having its main office at 55 Marietta Street,
N.W., Atlanta, Fulton County, Georgia 30303, and THERAGENICS CORPORATION
("Borrower"), a Delaware corporation having its chief executive office and
principal place of business at 5325 Oakbrook Parkway, Norcross, Gwinnett
County, Georgia 30093.
Statement of Facts
Lender and Borrower are parties to that certain Loan and Security
Agreement dated as of June 29, 1992, pursuant to which Lender provides to
Borrower on the terms and conditions stated therein a $500,000 receivables
credit facility, and they are also parties to that certain Loan and
Security Agreement dated as of September 14, 1994, pursuant to which Lender
provided to Borrower a term loan facility in the amount of $2,100,000 for,
inter alia, the purchase of equipment and the construction of a facility
located at 4875 Newton Terrace, Buford, Gwinnett County, Georgia, to house
such equipment (such loan and security agreements are collectively called
the "Prior Loan Agreements").
Borrower desires that Lender increase the amount of credit available
to Borrower under the $500,000 receivables credit facility to $1,000,000
and to provide to Borrower an additional revolving credit facility of up to
$4,000,000, and Lender is willing to do so, all in accordance with and
subject to the terms and conditions of this Agreement.
Lender and Borrower hereby desire to amend and restate in their
entireties the Prior Loan Agreements.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants herein set forth, the sum of $10.00 in hand paid by each party
hereto to the other, and in order to induce Lender to continue to make
loans from time to time to Borrower, as well as for other good and valuable
consideration, the receipt and adequacy of all of the foregoing as legally
sufficient consideration being hereby acknowledged, Borrower and Lender do
hereby agree to amend and restate the Prior Loan Agreements as follows:
Statement of Terms
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms. When used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning
when used in the plural and vice versa):
Page 48<PAGE>
<PAGE>
Account Debtor - any Person who is or may become obligated under or
on account of an Account.
Accounts - all accounts, contract rights, chattel paper, instruments
and documents, whether now owned or hereafter created or acquired by
Borrower or in which Borrower now has or hereafter acquires any interest.
Affiliate - a Person: (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common
control with, Borrower; (ii) which beneficially owns or holds 5% or more of
any class of the Voting Stock of Borrower; or (iii) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held,
directly or indirectly, by Borrower. For purposes hereof, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
Agreement - this Amended and Restated Loan and Security Agreement,
as the same may be modified or amended from time to time.
Business Day - a day on which the Federal Reserve Bank of Atlanta is
open for business in Atlanta, Georgia.
Capital Expenditures - in respect of any Person, expenditures for
the purchase of assets of long-term use which are capitalized in accordance
with GAAP.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such
Indebtedness shall be the capitalized amount of such obligations determined
in accordance with GAAP.
Cash Collateral Account - the investment account no. 018522219
established by Borrower with Lender together with any and all monies now or
hereafter on deposit therein or credited thereto as well as all
certificates of deposit, saving certificates, commercial paper, government
obligations, money market fund shares, repurchase agreement, and other
investments or securities in which any such monies or funds may be now or
hereafter invested from time to time, together with any and all
certificates or other instruments representing said investments or
securities, and all interest, distributions and dividends (whether in cash,
stock, warrants, options or other securities), and all other property from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any and all of said investments or securities, and all cash
and non-cash proceeds of any of the foregoing.
Page 49<PAGE>
<PAGE>
Cash Collateral Account Agreement - the Cash Collateral Account
Agreement dated as of June 29, 1992 entered into between Borrower and
Lender in connection with the Letter of Credit Agreement, and any
amendment, modification or replacement thereof.
Cash-Secured Letters of Credit - any letter of credit which Borrower
has requested to be a "Cash-Secured Letter of Credit" and which has been
issued by Lender for the account of the Borrower pursuant to a Letter of
Credit Agreement and which shall not be counted against Borrower's maximum
availability under the Line of Credit Facility or the Revolving Credit
Facility.
CERCLA - the meaning ascribed thereto in the definition of
Environmental Laws.
Closing Date - the date on which all of the conditions precedent in
Section 9 are satisfied and the initial Loan is made hereunder.
Code - the Uniform Commercial Code as adopted and in force in the
State of Georgia, as from time to time in effect.
Collateral - all of the Property and interests in Property described
in Section 6 hereof, and all other Property and interests in Property that
now or hereafter secure the payment and performance of any of the
Obligations.
Deed to Secure Debt - the Deed to Secure Debt, Assignment of Rents
and Leases and Security Agreement dated as of September 14, 1992 between
Borrower and Lender, and any amendment, modification or replacement
thereof.
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
EBITDA - for any period, the Net Income of the Borrower for such
period, plus, without duplication and to the extent reflected as charges in
the statement of Net Income for such period, the sum of (i) taxes measured
by income, (ii) Interest Expense and (iii) depreciation and amortization
expense.
Environmental Claims - any written notice of any Governmental
Authority alleging potential liability for damage to the environment or by
any Person alleging potential liability for personal injury (including
sickness, disease or death), in either case resulting from or based upon
(a) the presence or Release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental, leaks or spills) of any Hazardous Substance at, in or from
the property, whether or not owned or leased by Borrower or (b) any other
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Laws.
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Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent
decrees relating to health, safety and environmental matters, including,
but not limited to, the Resource Conservation and Recovery Act, as amended;
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"); the Toxic Substances Control Act, as amended;
the Clean Water Act, as amended; the Clean Air Act, as amended; the
Superfund Amendments and Reauthorization Act of 1986, as amended; state and
federal superlien and environmental cleanup programs and laws; and U.S.
Department of Transportation regulations.
Equipment - equipment, cyclotrons, machinery, computers and computer
hardware, vehicles, tools, dies and jigs, furniture, trade fixtures and
fixtures, all attachments, accessories and property now or hereafter
affixed thereto or used in connection therewith, substitutions and
replacements thereof wherever located, whether now owned or hereafter
acquired by Borrower.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
Event of Default - as defined in Section 10.1 of this Agreement.
Excess Cash Flow -for any fiscal year of Borrower, Borrower's EBITDA
for such period minus the Borrower's Unbudgeted Capital Expenditures for
such fiscal year minus Borrower's income tax expense for such fiscal year
minus Borrower's Interest Expense for such fiscal year and minus the
Borrower's scheduled principal debt service payments for such fiscal year
for its Indebtedness for Money Borrowed.
GAAP - generally accepted accounting principles in the United States
of America in effect from time to time.
Governmental Authority - any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.
Hazardous Substances - any toxic, radioactive, caustic or otherwise
hazardous substance, material or waste, including petroleum, its
derivatives, by-products and other hydrocarbons, or any substance having
any constituent elements displaying any of the foregoing characteristics,
including without limitation, polychlorinated biphenyls ("PCBs"), asbestos
or asbestos-containing material, and any substance, waste or material
regulated under Environmental Laws.
Indebtedness - as applied to a Person means, without duplication (i)
all items which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as at the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease Obligations, (ii) all
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obligations of other Persons which such Person has guaranteed and (iii) in
the case of Borrower (without duplication), the Obligations.
Interest Expense - for any period, interest payments accrued in
respect to Indebtedness for Money Borrowed, together with fees associated
therewith (other than fees payable on or prior to the Closing Date), and
shall include the interest payments for such period in respect of
Capitalized Lease Obligations, all as determined in accordance with GAAP.
Inventory - raw materials, work in process, finished goods, and all
other inventory of whatsoever kind or nature, wherever located, whether now
owned or hereafter existing or acquired by Borrower, including, without
limitation, all wrapping, packaging, advertising, shipping materials, and
all of Borrower's right, title and interest therein and thereto.
Letter of Credit - any standby letter of credit issued by Lender on
the account of Borrower pursuant to a Letter of Credit Agreement for the
purpose of guaranteeing cyclotron payments and decommissioning costs, for
capital expenditures as outlined on Schedule 1.1 hereto, and for general
corporate purposes.
Letter of Credit Agreement - any letter of credit agreement between
Borrower and Lender with respect to the issuance of the Letters of Credit,
including without limitation, the Application and Agreement for Irrevocable
Standby Letter of Credit dated June 29, 1992 between Borrower and Lender
and any amendments, modifications or replacements of any of the foregoing.
Leverage Ratio -as of the applicable calculation date, the ratio of
Borrower's Indebtedness, excluding any obligations of other Persons which
Borrower has guaranteed, to its Tangible Net Worth.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including,
but not limited to, the security interest, security title or lien arising
from a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of this Agreement,
Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
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Line of Credit Facility- the facility established pursuant to
Section 2 of this Agreement pursuant to which Lender shall make Line of
Credit Loans to Borrower.
Line of Credit Loan - a Loan made by Lender as provided in Section
2.1 of this Agreement.
Line of Credit Facility Expiration Date - April 15, 1997.
Line of Credit Maximum Availability -$1,000,000.
Line of Credit Note - the Line of Credit Note to be executed by
Borrower on or about the Closing Date in favor of Lender to evidence the
Line of Credit Loans, which shall be in the form of Exhibit A attached
hereto, as the same may be modified, amended or replaced from time to time
after execution and delivery thereof.
Line of Credit Loan Account - the loan account established on the
books of Lender pursuant to Section 2.3 hereof and in which Lender will
record all Loans, payments made on such Loans and other appropriate debits
and credits as provided by this Agreement.
Loan Documents - this Agreement and the Other Agreements.
Loans - all loans and advances made by Lender which are evidenced by
the Term Note, and all loans and advances made by Lender pursuant to this
Agreement, including, without limitation, all Revolving Credit Loans, Line
of Credit Loans.
Maturity Date - with respect to Indebtedness evidenced by the Term
Note, September 15, 1998.
Money Borrowed - as applied to Indebtedness, means (i) Indebtedness
for borrowed money; (ii) Indebtedness, whether or not in any such case the
same was for borrowed money, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments,
or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment
for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; and (iv) Indebtedness under any guaranty of obligations that
would constitute Indebtedness for Money Borrowed under clauses (i) through
(iii) hereof.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
of ERISA.
Net Income - for any period, net income determined in accordance
with GAAP.
Notes - the Line of Credit Note, the Revolving Credit Note and the
Term Note.
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Obligations - all loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under
this Agreement or any of the other Loan Documents or otherwise, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorney's fees and any
other sums chargeable to Borrower under any of the Loan Documents.
OSHA - the Occupational Safety and Health Act, as amended from time
to time, and all rules and regulations from time to time promulgated
thereunder.
Other Agreements - the Notes, the Deed to Secure Debt, any Letter of
Credit Agreement, the Cash Collateral Account Agreement and any and all
agreements, instruments and documents (other than this Agreement),
heretofore, now or hereafter executed by Borrower or delivered to Lender in
respect of the transactions contemplated by this Agreement or the Letter of
Credit Agreement.
Permitted Liens - any other Lien of a kind specified in
subparagraphs (i) through (viii) of Section 8.2(E) of this Agreement.
Person - an individual, partnership, corporation, joint stock
company, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Prime Rate - the rate of interest announced or quoted by Lender from
time to time as its Prime Rate, whether or not such rate is the lowest rate
charged by Lender to its most preferred borrowers; and, if the Prime Rate
is discontinued by Lender as a standard, a comparable reference rate
designated by Lender as a substitute therefor shall be the Prime Rate.
After the date hereof, such rate shall be increased or decreased, as the
case may be, by an amount equal to any increase or decrease in the Prime
Rate, with such adjustments to be effective as of the opening of business
on the day that any such change in the Prime Rate becomes effective. The
Prime Rate in effect on the date hereof shall be the Prime Rate effective
as of the opening of business on the date hereof, but if this Agreement is
executed on a day that is not a Business Day, the Prime Rate in effect on
the date hereof shall be the Prime Rate effective as of the opening of
business on the last Business Day immediately preceding the date hereof.
Prohibited Transaction - any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time.
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Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
for the payment of all or any part of the purchase price of any fixed
assets, (ii) any Indebtedness incurred at the time of or within ten (10)
days prior to or after the acquisition of any fixed assets for the purpose
of financing all or any part of the purchase price thereof, and (iii) any
renewals, extensions or refinancings thereof, but not any increases in the
principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secure Purchase
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
Release - Any discharge, emission, release, or threat thereof,
including a "Release" as defined in CERCLA at 42 U.S.C. Section 9601(22);
and the term "Released" has a meaning correlative thereto.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Restricted Investment - any investment in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following: (i) Property to be
used in the ordinary course of business; (ii) Current Assets arising from
the sale of goods and services in the ordinary course of business of
Borrower; (iii) investments in the capital stock of the Borrower, not to
exceed $10,000 in aggregate fair market value at any one time; (iv)
investments in direct obligations of the United States of America, or any
agency thereof or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof; (v) investments in certificates of deposit or other
time deposits maturing within one year from the date of acquisition issued
by a bank or trust company organized under the laws of the United States or
any state thereof having capital surplus and undivided profits aggregating
at least $100,000,000; (vi) investments in commercial paper given the
highest rating by a national credit rating agency and maturing not more
than two hundred seventy (270) days from the date of creation thereof; and
(vii) other investments made through the Cash Collateral Account.
Revolving Credit Facility Expiration Date - April 15, 1997.
Revolving Credit Facility - the facility established pursuant to
Section 3 of this Agreement pursuant to which Lender shall make Revolving
Credit Loans to Borrower.
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Revolving Credit Loan - a Loan made by Lender as provided in Section
3 of this Agreement.
Revolving Credit Loan Account - the loan account established on the
books of Lender pursuant to Section 3.3 hereof and in which Lender will
record all Revolving Credit Loans, payments made on such Loans and other
appropriate debits and credits as provided by this Agreement.
Revolving Credit Note - the Revolving Credit Note to be executed by
Borrower on or about the Closing Date in favor of Lender to evidence the
Revolving Credit Loans, which shall be in the form of Exhibit B attached
hereto, as the same may be modified or amended from time to time after
execution and delivery thereof.
Revolving Credit Maximum Availability - $2,000.000 (as such amount
may be adjusted from time to time pursuant to Section 3.1(B) of this
Agreement).
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Step-Up Event - the date (if any) on or prior to the Revolving
Credit Facility Expiration Date on which Lender receives from Borrower
financial statements for Borrower's fiscal year ending on December 31, 1995
or December 31, 1996 or any fiscal quarter during such fiscal years
prepared in accordance with Section 8.1 (I) hereof, which financial
statements show that Borrower's EBITDA is not less than $1,800,000 for the
immediately preceding four quarters.
Tangible Net Worth - with respect to the Borrower, (i) the aggregate
book value of assets (after deduction therefrom of all applicable reserves
and allowances), minus (ii) net book value of goodwill, patents,
franchises, trademarks and tradename, research and development expenses and
all other intangibles, minus (iii) total liabilities, all as determined in
accordance with GAAP.
Term Note - the $2,100,000 Term Note dated September 14, 1994
executed by Borrower in favor of Lender, as the same may be modified,
amended or replaced from time to time after execution and delivery thereof.
Term-Out Requirements - (i) Borrower's EBITDA shall be not less than
$1,800,000 for Borrower's fiscal year ending December 31, 1996; (ii)
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Borrower's EBITDA from its fiscal year ending December 31, 1996 divided by
the total principal and interest payable on Indebtedness for Money borrowed
during such fiscal year shall be at least 1.50 to 1.0; (iii) Lender
receives from Borrower on or prior to the Revolving Credit Facility
Expiration Date financial statements for Borrower's fiscal year ending on
December 31, 1996 prepared in accordance with Section 8.1(I) hereof and
demonstrating Borrower's compliance with the first two Term-Out
Requirements set forth above and (iv) no Default or Event of Default shall
exist or be continuing on the Revolving Credit Facility Expiration Date.
Unbudgeted Capital Expenditures - for any fiscal year of Borrower,
all capital expenditures of the Borrower for such period which are not
listed on Schedule 1.1 hereof, but excluding capitalized interest expense
and any portion of capital expenditures funded by new equity capital
invested in Borrower other than retained earnings.
Voluntary Principal Prepayments - as of any date of determination,
the amount by which the outstanding principal balance of the Revolving
Credit Note immediately prior to the mandatory prepayment date set forth
below is less than the applicable threshold amount set forth below next to
such mandatory prepayment date:
If the Revolving Credit If the Revolving Credit
Facility has Stepped-Up Facility has not Stepped-
to $4,000,000 prior to Up to $4,000,000 prior to
the Revolving Credit the Revolving Credit
Facility Expiration Date, Facility Expiration Date,
Mandatory Pre- then the Threshold Amount then the Threshold Amount
Payment Date Shall Be: Shall Be:
May 15, 1998 $3,200,000 $1,600,000
May 15, 1999 $2,400,000 $1,200,000
May 15, 2000 $1,600,000 $ 800,000
May 15, 2001 $ 800,000 $ 400,000
By way of example only, if the outstanding principal balance of the
Revolving Credit Note is $3,000,000 immediately prior to May 15, 1998 and
if the Revolving Credit Facility has stepped-up to $4,000,000 pursuant to
the terms of this Agreement prior to the Revolving Credit Facility
Expiration Date, then the Voluntary Principal Prepayment as of May 15, 1998
would be $200,000.
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that
applied in preparation of the financial statements referred to in Section
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7.1(K), and all financial data pursuant to the Agreement shall be prepared
in accordance with such principles.
1.3. Other Terms. All other terms contained in this Agreement shall
have, when the context so indicates, the meanings provided for by the Code
to the extent the same are used or defined therein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section titles,
table of contents and list of exhibits appear as a matter of convenience
only and shall not affect the interpretation of this Agreement.
SECTION 2. LINE OF CREDIT FACILITY; TERM LOAN
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender shall make a line of credit facility of up the Line of
Credit Maximum Availability available upon Borrower's request therefor, as
follows:
2.1. Line of Credit Loans.
(A) Subject to the terms and conditions of this Agreement, Lender
shall make Line of Credit Loans to Borrower from time to time prior to the
Line of Credit Facility Expiration Date, as requested by Borrower in
accordance with the terms of Section 2.2 hereof, up to a maximum principal
amount at any time outstanding equal to the Line of Credit Maximum
Availability. The Line of Credit Loans shall be evidenced by the Line of
Credit Note. If the unpaid balance of the Line of Credit Loans should
exceed the Line of Credit Maximum Availability or any other limitation set
forth in this Agreement, such Line of Credit Loans shall nevertheless
constitute Obligations that are secured by the Collateral and entitled to
all benefits thereof. In no event shall Borrower be authorized to request
a Line of Credit Loan at any time that there exists a Default or an Event
of Default or at any time on or after the Line of Credit Facility
Expiration Date. Nothwithstanding anything herein to the contrary, the sum
of the aggregate outstanding principal balance of the Line of Credit Loans
and the Revolving Credit Loans at any one time plus the aggregate stated
amount of all Letters of Credit (other than Cash-Secured Letters of Credit)
then outstanding may not exceed the sum of the Line of Credit Maximum
Availability plus the Revolving Credit Maximum Availability as then in
effect
(B) Insofar as Borrower may request and Lender may be willing in
its sole and absolute discretion to make Line of Credit Loans to Borrower
at a time when the unpaid balance of Line of Credit Loans exceeds, or would
exceed with the making of such Line of Credit Loan, the Line of Credit
Maximum Availability (any such Loan or Loans being herein referred to
individually as a "Line of Credit Overadvance" and collectively as "Line of
Credit Overadvances"), Lender shall enter such Line of Credit Overadvances
as debits in the Loan Account. All Line of Credit Overadvances shall be
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repaid on demand and shall be evidenced by the Line of Credit Note.
(C) The Line of Credit Loans shall be used solely for Borrower's
general corporate needs, for capital expenditures as outlined on Schedule
1.1, all to the extent not inconsistent with the provisions of this
Agreement.
2.2. Manner of Borrowing Line of Credit Loans. Borrowings under the Line
of Credit Facility established pursuant to Section 2.1 shall be as follows:
(A) A request for a Line of Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower may give Lender
notice of its intention to borrow, in which notice Borrower shall specify
the amount of the proposed borrowing, the proposed borrowing date and that
such borrowing is to be a Line of Credit Loan; (ii) the becoming due of any
other Obligation shall be deemed irrevocably, at Lender's discretion, to
be a request for a Line of Credit Loan on the due date in the amount then
so due and (iii) pursuant to the terms of Borrower's FOCUS account
agreement or similar account agreement with Lender;
(B) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Line of Credit Loan requested, or deemed to be requested,
pursuant to this Section 2.2 as follows: (i) the proceeds of each Line of
Credit Loan requested under Section 2.2(A)(i) shall be disbursed by Lender
in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms
of the written disbursement letter from Borrower, and in the case of each
subsequent borrowing, by wire transfer to such bank account as may be
agreed upon by Borrower and Lender from time to time; and (ii) the proceeds
of each Line of Credit Loan requested under Section 2.2(A)(ii) shall be
disbursed by Lender by way of direct payment of the relevant Obligation.
2.3. Loan Account. Lender shall enter all Line of Credit Loans as debits
to the Line of Credit Loan Account and shall also record in the Line of
Credit Loan Account all payments made by Borrower on Line of Credit Loans
and all proceeds of Collateral which are finally paid to Lender, and may
record therein, in accordance with customary accounting practice, all
charges and expenses properly chargeable to Borrower hereunder.
2.4. Interest. (A) Interest shall accrue on the principal amount of the
Line of Credit Loans in accordance with the terms of the Line of Credit
Note.
(B) Borrower may prepay the Line of Credit Note in whole or in part
in accordance with the terms and conditions of the Line of Credit Note.
(C) In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder or under the Line of Credit Note and
charged or collected pursuant to the terms of this Agreement or pursuant to
the Line of Credit Note exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination,
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deem applicable hereto. In the event that such a court determines that
Lender has charged or received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to
Borrower and such rate shall automatically be reduced to the maximum rate
permitted by such law.
2.5 Term Loan. Lender has made a term loan to Borrower in the original
principal amount of Two Million One Hundred Thousand and No/100 Dollars
($2,100,000). Such term loan is evidenced by the Term Note. The principal
and interest on the Term Note shall be payable in accordance with the terms
of the Term Note.
SECTION 3. REVOLVING CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender shall make a revolving credit facility of up to the
Revolving Credit Maximum Availability available to Borrower upon Borrower's
request therefor, as follows:
3.1. Revolving Credit Loans.
(A) Subject to the terms and conditions of this Agreement, Lender
shall make Revolving Credit Loans to Borrower from time to time prior to
the Revolving Credit Facility Expiration Date in accordance with the terms
of Section 3.2 hereof, up to a maximum principal amount at any time
outstanding equal to the Revolving Credit Maximum Availability. The
Revolving Credit Loans shall be evidenced by the Revolving Credit Note. It
is expressly understood and agreed that the Revolving Credit Maximum
Availability shall be the maximum ceiling on Revolving Credit Loans
outstanding to Borrower at any time. No Revolving Credit Loans shall be
requested by Borrower at any time that there exists a Default or an Event
of Default or at any time on or after the Revolving Credit Facility
Expiration Date. Nothwithstanding anything herein to the contrary, the sum
of the aggregate outstanding principal balance of the Line of Credit Loans
and the Revolving Credit Loans at any one time plus the aggregate stated
amount of all Letters of Credit (other than Cash-Secured Letters of Credit)
then outstanding may not exceed the sum of the Line of Credit Maximum
Availability plus the Revolving Credit Maximum Availability as then in
effect
(B) Upon the occurrence on or prior to the Revolving Credit
Facility Expiration Date of a Step-Up Event and provided that no Default or
Event of Default shall have occurred and be continuing at the time of such
occurrence, the Revolving Credit Maximum Availability shall increase from
$2,000,000 to $4,000,000. In no event shall the Revolving Credit Maximum
Availability exceed $4,000,000.
(C) On the Revolving Credit Facility Expiration Date, the entire
unpaid balance of the Revolving Credit Note shall be due and payable;
provided, however, that if Borrower meets all of the Term-Out Requirements
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on the Revolving Credit Facility Expiration Date, as of its fiscal year
ending December 31, 1996, the outstanding principal balance of the
Revolving Credit Note automatically shall term-out on the Revolving Credit
Facility Expiration Date without any further action by Borrower or Lender
and the outstanding principal balance of the Revolving Credit Note shall be
payable (and interest shall accrue and be payable thereon) as follows:
(i) Interest shall continue to accrue at the rates per annum
set forth in the Revolving Credit Note;
(ii) The outstanding principal balance on the Revolving Credit
Facility Expiration Date shall be payable in sixty (60) equal consecutive
installments, commencing on May 15, 1997 and continuing to be due on the
same day of each succeeding month thereafter until the April 15, 2002, at
which time all unpaid principal and accrued interest shall be due and
payable in full;
(iii) Accrued interest on the Revolving Credit Note shall be
due and payable on the same dates indicated in clause (ii) above on which
installments or other payments of principal are due hereunder.
(iv) A mandatory principal prepayment on the Revolving Credit
Note shall be made by Borrower, without penalty or premium, on May 15 of
each year, commencing on May 15, 1998, in an amount equal to twenty-five
percent (25%) of Borrower's Excess Cash Flow for its fiscal year ending
December 31, 1997 minus one hundred percent (100%) of all Voluntary
Principal Prepayments.
(v) A mandatory principal payment shall be made by Borrower
without penalty or premium on May 15, 1999 and each May 15 thereafter
through and including May 15, 2001, in an amount equal to twenty-five
percent (25%) of Borrower's Excess Cash Flow for its immediately preceding
fiscal year minus one hundred percent (100%) of all Voluntary Principal
Prepayments.
(D) Borrower may prepay the Revolving Credit Note in whole or in
part in accordance with the terms and conditions of the Revolving Credit
Note.
(E) If the unpaid balance of the Revolving Credit Loans should
exceed the Revolving Credit Maximum Availability, or any other limitation
set forth in this Agreement, such Revolving Credit Loans shall nevertheless
constitute Obligations that are secured by the Collateral and entitled to
all benefits thereof. In no event shall Borrower be authorized to request
a Revolving Credit Loan at any time that there exists a Default or an Event
of Default.
(F) Insofar as Borrower may request and Lender may be willing in
its sole and absolute discretion to make Revolving Credit Loans to Borrower
at a time when the unpaid balance of Revolving Credit Loans exceeds, or
would exceed with the making of such Revolving Credit Loan, the Revolving
Credit Maximum Availability (any such Loan or Loans being herein referred
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to individually as a "Revolving Credit Overadvance" and collectively as
"Revolving Credit Overadvances"), Lender shall enter such Revolving Credit
Overadvances as debits in the Loan Account. All Revolving Credit
Overadvances shall be repaid on demand and shall be evidenced by the
Revolving Credit Note.
(G) The Revolving Credit Loans shall be used solely for Borrower's
general corporate needs and for the capital expenditures as outlined in
Schedule 1.1 hereto, all to the extent not inconsistent with the provisions
of this Agreement.
3.2. Manner of Borrowing Revolving Credit Loans. Borrowings under the
Revolving Credit Facility established pursuant to Section 3.1 shall be as
follows:
(A) A request for a Revolving Credit Loan shall be made, or shall
be deemed to be made, in the following manner: (i) Borrower may give
Lender notice of its intention to borrow, in which notice Borrower shall
specify the amount of the proposed borrowing, the proposed borrowing date
and that such borrowing is to be a Revolving Credit Loan; (ii) the becoming
due of any other Obligation shall be deemed, at Lender's discretion,
irrevocably to be a request for a Revolving Credit Loan on the due date in
the amount then so due and (iii) pursuant to the terms of Borrower's FOCUS
account or similar account with Lender;
(B) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this Section 3.2 as follows: (i) the proceeds of
each Revolving Credit Loan requested under Section 3.2(A)(i) shall be
disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrower,
and in the case of each subsequent borrowing, by wire transfer to such bank
account as may be agreed upon by Borrower and Lender from time to time; and
(ii) the proceeds of each Revolving Credit Loan requested under Section
3.2(A)(ii) shall be disbursed by Lender by way of direct payment of the
relevant Obligation.
3.3. Loan Account. Lender shall enter all Revolving Credit Loans as
debits to the Revolving Credit Loan Account and shall also record in the
Revolving Credit Loan Account all payments made by Borrower on Revolving
Credit Loans and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, all charges and expenses properly chargeable to Borrower
hereunder.
3.4. Interest.
(A) Interest shall accrue and be payable on the principal amount of
the Revolving Credit Loans in accordance with the terms of the Revolving
Credit Note.
(B) In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder or under the Revolving Credit Note
and charged or collected pursuant to the terms of this Agreement or
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pursuant to the Revolving Credit Note exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court
determines that Lender has charged or received interest hereunder in excess
of the highest applicable rate, Lender shall promptly refund such excess
interest to Borrower and such rate shall automatically be reduced to the
maximum rate permitted by such law.
SECTION 4. LETTERS OF CREDIT
4.1. Amounts, Terms and Issuance of Letters of Credit.
If requested to do so by Borrower, Lender may, in its discretion,
issue one or more Letters of Credit for the account of Borrower; provided,
however that the sum of the aggregate outstanding principal balance of the
Line of Credit Loans and the Revolving Credit Loans at any one time plus
the aggregate stated amount of all Letters of Credit (other than
Cash-Secured Letters of Credit) then outstanding may not exceed the sum of
the Line of Credit Maximum Availability plus the Revolving Credit Maximum
Availability as then in effect and any amounts paid by Lender with respect
to any draw under any such Letter of Credit shall be deemed to be, at
Lender's election, a Line of Credit Loan or a Revolving Credit Loan and
shall bear interest and shall be repayable in accordance with the terms
hereof and of the Line of Credit Note or the Revolving Credit Note (as the
case may be) unless such amount is immediately reimbursed by Borrower on
demand therefor by Lender. If requested to do so by Borrower, Lender may,
in its discretion, issue one or more Cash-Secured Letters of Credit for the
account of Borrower.
4.2 Fees.
Borrower shall pay to Lender for the issuance of each Letter of
Credit on or after the date hereof a fee in the amount of one percent
(1.0%) per annum of the face amount of such Letter of Credit, which fee
shall be payable in full on the issuance of such Letter of Credit.
SECTION 5. TERMINATION; PAYMENTS; FEES AND COSTS
5.1. Termination.
(A) Upon at least thirty (30) days prior written notice to Lender,
Borrower may, at its option, terminate this Agreement; provided, however,
no such termination shall be effective until Borrower has paid all of the
Obligations in immediately available funds and there are no Letters of
Credit still issued and outstanding.
(B) Lender may terminate this Agreement at any time upon written
notice to Borrower upon the occurrence and during the continuation of an
Event of Default.
(C) All of the Obligations arising hereunder or evidenced by the
Notes shall be forthwith due and payable upon any termination of this
Agreement. Except as otherwise expressly provided for in this Agreement or
the other Loan Documents, no termination or cancellation (regardless of
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cause or procedure) of this Agreement or any of the other Loan Documents
shall in any way affect or impair the powers, obligations, duties, rights,
and liabilities of Borrower or Lender in any way relating to (i) any
transaction or event occurring prior to such termination or cancellation,
including without limitation any Letters of Credit which may be still
outstanding, or (ii) any of the undertakings, agreements, covenants,
warranties or representations of Borrower contained in this Agreement, or
any of the other Loan Documents. All such undertakings, agreements,
covenants, warranties and representations shall survive such termination or
cancellation and Lender shall retain its Liens in the Collateral, and all
of its rights and remedies under this Agreement and the other Loan
Documents notwithstanding such termination or cancellation until Borrower
has paid the Obligations to Lender, in full, in immediately available
funds.
(D) It is understood that Borrower may elect to terminate this
Agreement in its entirety only; no section or lending facility may be
terminated singly.
5.2. Costs, Fees and Expenses.
(A) On the date of this Agreement, Borrower shall pay Lender a
non-refundable closing fee for the Revolving Credit Facility and the Line
of Credit Facility in the amount of $20,000, which closing fee shall be
deemed fully earned upon the parties' execution and delivery of this
Agreement.
(B) Costs, fees and expenses payable pursuant to this Agreement
shall be payable by Borrower, on demand, to Lender or to any other Person
designated by Lender in writing.
5.3. Application of Payments and Collections. Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Lender from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Lender
shall have the continuing exclusive right to apply and reapply any and all
such payments and collections received at any time or times hereafter by
Lender or its agent against the Obligations, in such manner as Lender may
deem advisable, notwithstanding any entry by Lender upon any of its books
and records. If as the result of collections of Accounts as authorized by
this Agreement a credit balance exists in the Loan Account, such credit
balance shall not accrue interest in favor of Borrower, but shall be
available to Borrower at any time or times for so long as no Default or
Event of Default exists. Lender may offset such credit balance upon or
after the occurrence of an Event of Default.
5.4 Statements of Account. Lender will account to Borrower monthly with
a statement of Loans, Letters of Credit, charges and payments made pursuant
to this Agreement, and such account rendered by Lender shall (absent
manifest error) be deemed final, binding and conclusive upon Borrower
unless Lender is notified by Borrower in writing to the contrary within
thirty (30) days of the date each account was sent to Borrower at its
address set forth herein for notices. Such notice shall only be deemed an
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objection to those items specifically objected to therein.
5.5.All Loans and Obligations to Constitute One Obligation. The Loans
(including without limitation any and all Line of Credit Overadvances and
Revolving Credit Overadvances) shall constitute one general obligation of
Borrower, and shall be secured by Lender's security interest in and Lien
upon all of the Collateral, and by all other security interests and Liens
heretofore, now or at any time or times hereafter granted by Borrower to
Lender.
5.6 Capital Adequacy. Without limiting any other provisions of this
Agreement, in the event that the Lender determines after the date hereof
that the introduction or change after the date of this Agreement of any
law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, or any change therein or in
the interpretation or application thereof after the date of this Agreement,
or compliance by the Lender with any request or directive regarding capital
adequacy (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from a central bank or governmental
authority or body having jurisdiction which is introduced or changed after
the date of this Agreement, does or shall have the effect of reducing the
rate of return on the Lender's capital as a consequence of its obligations
hereunder to a level below that which the Lender could have achieved but
for such law, treaty, rule, regulation, guideline or order or such change
or compliance (taking into consideration the Lender's policies with respect
to capital adequacy and assuming the full utilization of the Lender's
capital immediately before such adoption, change or compliance) by an
amount reasonably deemed by the Lender to be material, then the Lender
shall promptly after its determination of such occurrence notify the
Borrower thereof. The Borrower agrees to pay to the Lender as an
additional fee from time to time, within ten (10) days after written notice
and demand by the Lender, such amount as the Lender certifies to be the
amount that will compensate it for such reduction in connection with its
obligations hereunder. A certificate of the Lender claiming compensation
under this Section shall be conclusive in the absence of manifest error or
fraud and shall set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid to it hereunder
and the method by which such amounts were determined. In determining such
amount, the Lender may use reasonable averaging and attribution methods.
SECTION 6. COLLATERAL: GENERAL TERMS
6.1. Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender
a continuing security interest in and Lien upon all the following Property
and interests in Property of Borrower, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(A) All Accounts;
(B) All monies and other Property of any kind, now or at any time
or times hereafter, in the possession or under the control of Lender or a
bailee of Lender, including, without limitation the Cash Collateral
Account;
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(C) All Equipment, including, without limitation, the Equipment
described on Schedule 6.1(C) attached hereto;
(D) All Inventory including, without limitation, the Inventory
described on Schedule 6.1(D) attached hereto;
(E) All of the real property, including, without limitation, all
easements, tenements, all buildings, structures and improvements now or
hereafter placed on the real property, and all fixtures now or hereafter
installed, located therein, and all appurtenances thereto, thereon or
therein described on Schedule 6.1(E) attached hereto;
(F) All substitutions for and all replacements, products and cash
and non-cash proceeds of any of the Collateral described in (A), (B), (C),
(D) or (E) above, including, without limitation, proceeds of any of such
Collateral; and
(G) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of the Collateral
described in (A), (B), (C), (D), (E) or (F) above.
6.2. Representations, Warranties and Covenants -- Collateral. To induce
Lender to enter into this Agreement, Borrower represents, warrants, and
covenants to Lender:
(A) The Collateral is now, and will be and so long as the
Obligations are outstanding, owned solely by Borrower. No other Person has
or will have any right, title, interest, claim, or Lien therein, thereon or
thereto other than a Permitted Lien.
(B) The Liens granted to Lender shall be first and prior on the
Collateral and as to the Accounts and proceeds, including insurance
proceeds, resulting from the sale, disposition, or loss thereof. Except
for the filing of appropriate financing statements, no further action need
be taken to perfect the Liens granted to Lender, other than the filing of
continuation statements under the Code or other applicable law at
appropriate times and continued possession by Lender of that portion of the
Collateral constituting instruments or documents.
(C) Borrower shall pay and discharge when due or within any period
when payment may be made without penalty all taxes, levies, and other
charges upon said Collateral and upon the goods evidenced by any documents
constituting Collateral and shall defend Lender against and save it
harmless from all claims of any Person with respect to the Collateral
except that Borrower's failure to pay any such taxes shall not be deemed an
Event of Default so long as Borrower's failure to pay any such taxes has
not given rise to a Lien other than a Permitted Lien. This indemnity shall
include reasonable attorneys' fees and legal expenses.
6.3. Financing Statements. Borrower agrees to execute the financing
statements provided for by the Code together with any and all other
instruments, assignments or documents and shall take such other action as
may be required to perfect or to continue the perfection of Lender's
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security interest in the Collateral. Unless prohibited by applicable law,
Borrower hereby authorizes Lender to execute and file any such financing
statement on Borrower's behalf. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as
a financing statement and may be filed in any appropriate office in lieu
thereof.
6.4. Cash Collateral Account. The Obligations also shall be secured by
the Cash Collateral Account pursuant to the Cash Collateral Account
Agreement.
6.5 Additional Collateral Prior to Lender making any Revolving Credit
Loan or Line of Credit Loan to Borrower to finance Borrower's acquisition
of any real estate which is not described on Schedule 6.1(E) hereof,
Borrower shall (i) execute and deliver any and all other documents,
instruments and agreements as Lender may from time to time request in order
to perfect and maintain the perfection of Lender's Lien in such real
estate, (ii) deliver or cause to be delivered to Lender, at Borrower's
expense, a mortgagee title insurance policy issued by a title insurance
company acceptable to Lender, and insuring Lender's Lien in such real
estate, which policy shall be in form and substance satisfactory to Lender
and shall insure a valid first priority Lien in favor of Lender in such
real estate (subject only to such exceptions as may be acceptable to Lender
and its counsel) and (iii) deliver, or cause to be delivered such opinion
letters, appraisals, surveys, record examination reports and environmental
audit reports as Lender may request, all at Borrower's expense.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties. To induce Lender to enter
into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
(A) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Borrower has duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each state or
jurisdiction listed on Schedule 7.1(A) attached hereto and made a part
hereof and in all other states and jurisdictions where the character of its
Properties or the nature of its activities make such qualification
necessary and in which the failure to be so qualified would have a material
adverse affect on Borrower's business operations or financial condition.
(B) Corporate Names. During the preceding five (5) years, Borrower
has not been known as or used any corporate, fictitious or trade names
except as disclosed on Schedule 7.1(B) attached hereto and made a part
hereof. Except as set forth on Schedule 7.1(B), Borrower has not, during
the preceding five (5) years, been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any
Person.
(C) Corporate Power and Authority. Borrower has the right and
power and is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it
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is a party. The execution, delivery and performance of this Agreement and
each of the other Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or
approval of the shareholders of Borrower; (ii) contravene Borrower's
charter, articles of incorporation or by-laws; (iii) violate, or cause
Borrower to be in default under, any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award in effect having applicability to Borrower; (iv) result in a breach
of or constitute a default under any material indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower is
a party or by which it or its Properties may be bound or affected; or (v)
result in, or require, the creation or imposition of any Lien (other than
Permitted Liens) upon or with respect to any of the Properties now owned or
hereafter acquired by Borrower.
(D) Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of Borrower enforceable against it in
accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally or by principles of
equity pertaining to the availability of equitable remedies.
(E) Use of Proceeds. Borrower's uses of the proceeds of any
advances made by Lender to Borrower pursuant to this Agreement are, and
will continue to be, legal and proper corporate uses, duly authorized by
its Board of Directors, and such uses are consistent with all applicable
laws and statutes, as in effect as of the date hereof.
(F) Margin Stock. Borrower is not engaged principally, or as one
of its important activities, in the business of purchasing or carrying
"margin stock" (within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of
any Loans to Borrower will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying any
margin stock or be used for any purpose which violates or is inconsistent
with the provisions of Regulation G, T, U or X of said Board of Governors.
(G) Governmental Consents. Borrower has, and is in good standing
with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it and to
own or lease and operate its Properties as now owned or leased by it.
(H) Solvent Financial Condition. Borrower is now and, after giving
effect to the initial Loans to be made hereunder, at all times will be,
Solvent.
(I) Litigation. Except as set forth on Schedule 7.1(I) attached
hereto and made a part hereof, there are no actions, suits, proceedings or
investigations pending, or to the knowledge of Borrower, threatened,
against or affecting Borrower, or the business, operations, Properties,
prospects, profits or condition of Borrower, in any court or before any
governmental authority or arbitration board or tribunal, and no action,
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suit, proceeding or investigation shown on Schedule 7.1(I) involves the
possibility of materially and adversely affecting the Properties, business,
profits or condition (financial or otherwise) of Borrower or the ability of
Borrower to perform this Agreement. Borrower is not in default with
respect to any order, writ, injunction, judgment, decree or rule of any
court, governmental authority or arbitration board or tribunal which might
materially and adversely affect the Properties, business, profits or
condition (financial or otherwise) of Borrower.
(J) Title to Properties. Borrower has good, indefeasible and
marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its real Property, and good title to all of
its other Property, including, without limitation, the Accounts, Inventory
and Equipment, in each case, free and clear of all Liens except Permitted
Liens.
(K) Financial Statements. The balance sheet of Borrower as of
September 30, 1995, and the related statements of income, changes in
stockholder's equity, and changes in financial position for the periods
ended on such dates, have been prepared in accordance with GAAP (except for
changes in application in which Borrower's independent certified public
accountants concur), and present fairly the financial position of Borrower
at such dates and the results of Borrower's operations for such periods.
Since September 30, 1995, there has been no material adverse change in the
condition, financial or otherwise, of Borrower, except changes in the
ordinary course of business, which individually or in the aggregate has
been materially adverse.
(L) Full Disclosure. The financial statements referred to in
Section 7.1(K) above, do not, nor does this Agreement or any other written
statement of Borrower to Lender (including, without limitation, Borrower's
filings, if any, with the Securities and Exchange Commission), contain any
untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not misleading. There is
no fact which Borrower has failed to disclose to Lender in writing which
materially affects adversely or, so far as Borrower can now foresee, will
materially affect adversely the Properties, business, profits, or condition
(financial or otherwise) of Borrower or the ability of Borrower to perform
this Agreement.
(M) Pension Plans. Except as disclosed on Schedule 7.1(M) attached
hereto and made a part hereof, Borrower has no Plan. Borrower has not
received any notice to the effect that it is not in full compliance with
any of the requirements of ERISA and the regulations promulgated
thereunder. No fact or situation, including, but not limited to, any
Reportable Event, or Prohibited Transaction exists in connection with any
Plan which would create a liability of the Borrower. Borrower does not
have any withdrawal liability in connection with a Multiemployer Plan.
(N) Taxes. Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid, or
made provision for the payment of, all taxes, assessments, fees and other
governmental charges that are due and payable, except such taxes, if any,
as are being actively contested in good faith and as to which adequate
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reserves have been provided. The provision for taxes on the books of
Borrower is adequate for all years not closed by applicable statutes, and
for its current fiscal year.
(O) Compliance With Laws. Except with respect to Environmental
Laws, which are covered in Section 7.1(P) below, Borrower has duly complied
with, and its Properties, business operations and leaseholds are in
compliance with, in all material respects, the provisions of all federal,
state and local laws, rules and regulations applicable to Borrower, its
Properties or the conduct of its business, including, without limitation,
OSHA and all Environmental Laws, and there have been no citations, notices
or orders of noncompliance issued to Borrower under any such law, rule or
regulation.
(P) Environmental Laws.
(i) Borrower is in compliance with all Environmental Laws,
with the exceptions of instances that will not in the aggregate result in
any material liability on the part of Borrower.
(ii) Except as described in Schedule 7.1(P), Borrower has not
received notice of any failure to comply with, nor has any such notice been
issued that has not been satisfied so as to bring any property of Borrower
into compliance with, all Environmental Laws. All licenses, permits or
registrations (or any extensions thereof) required under any Environmental
Laws for the business of Borrower as proposed to be conducted have been
obtained, and Borrower is in compliance therewith. Borrower is in
compliance with, and is not in breach of or default under applicable order
of any Governmental Authority and no event has occurred and is continuing
that, with the passage of time or the giving of notice or both, would
constitute compliance, breach or default thereunder.
(iii) Except as described in Schedule 7.1(P), (a) no Hazardous
Substance has been Released (and no oral or written notification of such
Release has been filed) or is present (whether or not in a reportable or
threshold planning quantity) at, on or under any property owned or leased
by Borrower during the period of Borrower's ownership or lease, under
conditions that required substantial remedial action under applicable
Environmental Laws, and (b) no property now or previously owned or leased
by Borrower has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances to any site listed, or proposed
for listing, on the National Priorities List promulgated pursuant to
CERCLA, on CERCLIS (as defined in CERCLA) or on any similar Federal, state
or foreign list of sites requiring investigation or cleanup. Borrower is
not aware of any event, condition or circumstances involving environmental
pollution or contamination, or employee safety or health relating to the
use or handling of, or exposure to, Hazardous Substances, that could
reasonably be expected to materially adversely effect the operations,
Properties, business, prospects, profits or financial condition of
Borrower. Borrower and Lender acknowledge and agree that certain Inventory
consists of radioactive isotopes, which shall be handled in compliance with
all Environmental Laws.
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(Q) No Defaults. No event has occurred and no condition exists
which would, upon the execution and delivery of this Agreement or
Borrower's performance hereunder, constitute a Default or an Event of
Default. Borrower is not in default, and no event has occurred and no
condition exists which constitutes, or which with the passage of time or
the giving of notice or both would constitute, a default in the payment of
any Indebtedness of Borrower to any Person for Money Borrowed.
(R) Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement.
(S) Investment Company Act. Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
7.2. Reaffirmation Each request for a Loan made by Borrower pursuant to
this Agreement or any of the other Loan Documents shall constitute (i) an
automatic representation and warranty by Borrower to Lender that there does
not then exist any Default or Event of Default and (ii) a reaffirmation as
of the date of said request of all of the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents except as
to those changes otherwise consented to by Lender or contemplated herein.
7.3. Survival of Representations and Warranties. Borrower covenants,
warrants and represents to Lender that all representations and warranties
of Borrower contained in this Agreement or any of the other Loan Documents
shall be true at the time of Borrower's execution of this Agreement and the
other Loan Documents in all material respects, and shall survive the
execution, delivery and acceptance thereof by Lender and the parties
thereto and the closing of the transactions described therein or related
thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it
shall:
(A) Taxes and Liens. Pay and discharge all taxes, assessments and
governmental charges upon it, its income and Properties as and when such
taxes, assessments and charges are due and payable, or within any period
prior to the imposition of penalties, except and to the extent only that
such taxes, assessments and charges are being actively contested in good
faith and by appropriate proceedings, Borrower maintains adequate reserves
on its books therefor and the nonpayment of such taxes, assessments and
charges does not result in a Lien upon any Properties or Borrower other
than a Permitted Lien. Borrower shall also pay and discharge any lawful
claims which, if unpaid, might become a Lien against any of Borrower's
Properties except for Permitted Liens.
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(B) Tax Returns. File all federal, state and local tax returns and
other reports Borrower is required by law to file, and maintain adequate
reserves for the payment of all taxes, assessments, governmental charges,
and levies imposed upon it, its income, or its profits, or upon any
Property belonging to it.
(C) Business and Existence. Preserve and maintain its separate
corporate existence and all rights, privileges, and franchises in
connection therewith, and maintain its qualification and good standing in
all states in which such qualification is necessary and in which the
failure to so qualify would materially and adversely affect its business
operations or financial condition.
(D) Maintain Properties. Maintain its Properties in good condition
and make all necessary renewals, repairs, replacements, additions and
improvements thereto to the extent permitted hereby and except as caused by
ordinary wear and tear, obsolescence, loss or damage.
(E) Compliance with Laws. Comply with all laws, ordinances,
governmental rules and regulations, in all material respects, to which it
is subject, and obtain and keep in force any and all governmental licenses,
permits, franchises, or other governmental authorizations necessary to the
ownership of its Properties or to the conduct of its business.
(F) ERISA Compliance. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in
ERISA with respect to each Plan; (ii) promptly after the filing thereof,
furnish to Lender copies of any annual report required to be filed pursuant
to ERISA in connection with each Plan and any other employee benefit plan
of it and its Affiliates; (iii) notify Lender as soon as practicable of any
Reportable Event and of any additional act or condition arising in
connection with any Plan which Borrower believes might constitute grounds
for the termination thereof by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate United States district court of a
trustee to administer the Plan; and (iv) furnish to Lender, promptly upon
Lender's request therefor, such additional information concerning any Plan
or any other such employee benefit plan as may be reasonably requested.
(G) Business Records. Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions.
(H) Visits and Inspections. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during
normal business hours, to visit and inspect the Properties of Borrower,
inspect and make extracts from its books and records, and discuss with its
officers, its employees and its independent accountants, Borrower's
business, assets, liabilities, financial condition, business prospects and
results of operations. Provided there shall be no ongoing and uncured
Event of Default, (i) Lender shall give Borrower at least one Business
Day's notice of any such inspection and (ii) Borrower may impose reasonable
limitations on Lender's inspection of Borrower's business operations
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involving Hazardous Substances to ensure compliance with Environmental Laws
and the safe handling of such Hazardous Substances.
(I) Financial Statements. Cause to be prepared and furnished to
Lender the following:
(i) as soon as possible, but not later than ninety (90) days after
the close of each fiscal year of Borrower audited financial statements
(accompanied by an unqualified report from Borrower's certified public
accountants) of Borrower as of the end of such year prepared in accordance
with GAAP applied on a consistent basis, unless Borrower's certified public
accountants concur in any change therein and such change is disclosed to
Lender and is consistent with GAAP, certified by a firm of independent
certified public accountants of recognized standing selected by Borrower
but acceptable to Lender, which acceptance shall not be unreasonably
withheld;
(ii) as soon as possible, but not later than forty-five (45) days
after the end of each fiscal quarter, unaudited interim financial
statements of Borrower as of the end of such quarter and of the portion of
Borrower's fiscal year then elapsed, certified by the chief financial
officer of Borrower as prepared in accordance with GAAP consistently
applied and fairly presenting the financial position and results of
operations of Borrower for such quarter and period (subject to normal
recurring year end adjustments);
(iii) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which Borrower has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(iv) such other data and information (financial and otherwise) as
Lender, from time to time, may reasonably request, bearing upon or related
to the Collateral, Borrower's financial condition or results of operations,
including, without limitation, federal income tax returns of Borrower,
accounts payable ledgers, and bank statements.
Concurrently with the delivery of the financial statements described in
clauses (i) and (ii) of this Section 8.1(I), Borrower shall cause to be
prepared and furnished to Lender a certificate of the chief financial
officer of Borrower in the form of Exhibit D attached hereto duly
completed.
(J) Notices to Lender. Notify Lender in writing: (i) promptly
after Borrower's learning thereof, of the commencement of any litigation
affecting Borrower or any of its Properties, whether or not the claim is
considered by Borrower to be covered by insurance, and of the institution
of any administrative proceeding which may materially and adversely affect
Borrower's operations, financial condition, Properties or business or
Lender's Lien upon any of the Collateral; (ii) at least thirty (30) days
prior thereto, of Borrower's opening of any new office or place of business
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or Borrower's closing of any existing office or place of business; (iii)
promptly after Borrower's learning thereof, of any labor dispute to which
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to
which it is a party or by which it is bound; (iv) promptly after Borrower's
learning thereof, of any material default by Borrower under any note,
indenture, loan agreement, mortgage, lease, deed, guaranty or other similar
agreement relating to any Indebtedness of Borrower exceeding $25,000; (v)
promptly after Borrower's learning thereof, of any Default or Event of
Default; (vi) promptly after the occurrence thereof, of any default by any
obligor under any note or other evidence of Indebtedness payable to
Borrower in excess of $25,000; (vii) promptly after the rendition thereof,
of any judgment rendered against Borrower in excess of $25,000 and (viii)
promptly after the occurrence thereof, any resignation, retirement,
termination, appointment or substitution, whether permanent or temporary,
of the chief executive officer, chief operating officer or chief financial
officer of Borrower.
(K) Environmental Laws. Borrower will:
(i) comply with any and all licenses, approvals,
registrations or permits required by Environmental Laws;
(ii) conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions, required
under Environmental Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities respecting Environmental Laws,
except to the extent that the same are being contested in good faith by
appropriate proceedings; and
(iii) promptly notify Lender of any of the following:
(a) any Environmental Claim that Borrower receives,
including one to take or pay for any remedial, removal,
response or cleanup or other action with respect to any
Hazardous Substance contained on any property owned or
leased by Borrower;
(b) any notice of any alleged violation of or knowledge by
Borrower of Environmental Law; and
(c) any commencement or threatened commencement of any
judicial or administrative proceeding or investigation
alleging a violation or potential violation of any
requirement of any Environmental Law by Borrower.
Borrower agrees to indemnify Lender and its directors, officers,
employees, agents and Affiliates (each such person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses (including attorneys' fees, charges and disbursements) of whatever
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kind or nature arising out of , or in any way relating to, the violation
of, noncompliance with or liability under any Environmental Laws applicable
to the operations of Borrower or to the Collateral, or any orders,
requirements or demands of Governmental Authorities related thereto,
including, without limitation, attorneys' and consultants' fees,
investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing are
found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful
misconduct of the Indemnitee seeking indemnification therefor. The
obligations of Borrower under this Section shall survive the termination of
this Agreement indefinitely.
(L) Further Assurances. At Lender's request, promptly execute or
cause to be executed and deliver to Lender any and all documents,
instruments and agreements deemed reasonably necessary by Lender to give
effect to or carry out the terms or intent of this Agreement or any of the
other Loan Documents. Without limiting the generality of the foregoing, if
any of the Accounts, the face value of which exceeds $5,000, arises out of
a contract with the United States of America, or any department, agency,
subdivision or instrumentality thereof, Borrower shall promptly notify
Lender thereof in writing and shall execute any instruments and take any
other action required or requested by Lender to comply with the provisions
of the Federal Assignment of Claims Act.
(M) Insurance. Borrower will maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
and against such casualties, liabilities and contingencies of such type
(including, without limitation, public liability, product liability,
larceny, embezzlement or other criminal misappropriation) and in such
amounts as is customary for similarly situated Persons engaged in
businesses similar to those of Borrower.
(N) Primary Banking Relationships. To the maximum extent permitted
by applicable law, Borrower shall maintain its primary banking
relationships with Lender.
(P) Title Policy Endorsement. Within thirty (30) days after the
date hereof, Borrower agrees to deliver or cause to be delivered to Lender,
at Borrower's expense, a title insurance endorsement to Lender's existing
title insurance policy in form and substance satisfactory to Lender.
8.2. Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it
will not:
(A) Mergers; Consolidations; Acquisitions. Merge or consolidate
with any Person or acquire all or any substantial part of the Properties of
any Person.
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(B) Loans. Make any loans or other advances of money (other than
for salary, travel advances, advances against commissions and other similar
advances in the ordinary course of business) to any Person, including,
without limitation, any of Borrower's Affiliates, officers or employees,
except that Borrower may have loans or other advances of money outstanding
to its employees so long as the aggregate outstanding principal balance
thereof does not exceed $150,000 at any one time.
(C) Affiliate Transactions. Enter into, or be a party to any
transaction with any Affiliate or stockholder, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms which are fully disclosed to
Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower.
(D) Guaranties. Guarantee, assume, endorse or otherwise, in any
way, become directly or contingently liable with respect to the
Indebtedness of any Person except by endorsement of instruments or items of
payment for deposit or collection in the ordinary course of business.
(E) Limitation on Liens. Create or suffer to exist any Lien upon
any of its Property, income or profits, whether now owned or hereafter
acquired, except: (i) Liens at any time granted in favor of Lender; (ii)
Liens for taxes (excluding any Lien imposed pursuant to any of the
provisions of ERISA) not yet due or being contested as permitted by Section
8.1(A) hereof, but only if in Lender's judgment such Lien does not affect
adversely Lender's rights or the priority of Lender's Lien in the
Collateral; (iii) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons for
labor, materials, supplies or rentals incurred in the ordinary course of
Borrower's business, but only if the payment thereof is not at the time
required (or if payment is required, only if and for so long as the
execution or other enforcement of such Liens is and continues to be
effectively stayed and bonded in a manner satisfactory to Lender for the
full amount thereof, the validity and amount of the claims secured thereby
are being actively contested in good faith and by appropriate lawful
proceedings and such Liens do not, in the aggregate, materially detract
from the value of the Property of Borrower or materially impair the use
thereof in the operation of Borrower's business) and only if such Liens are
junior to the Liens in favor of Lender; (iv) liens incurred or deposits
made in the ordinary course of business in connection with workmen's
compensation, unemployment insurance, social security and other like laws;
(v) attachment, judgment and other similar non-tax Liens arising in
connection with court proceedings, but only if and for so long as the
execution or other enforcement of such Liens is and continues to be
effectively stayed and bonded on appeal in a manner satisfactory to Lender
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate
lawful proceedings and such Liens do not, in the aggregate, materially
detract from the value of the Property of Borrower or materially impair the
use thereof in the operation of Borrower's business; (vi) Purchase Money
Liens not otherwise inconsistent with the terms of this Agreement; (vii)
reservations, exceptions, easements, rights of way, and other similar
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encumbrances affecting real Property, provided that, in Lender's sole
judgment, they do not in the aggregate materially detract from the value of
said Properties or materially interfere with their use in the ordinary
conduct of Borrower's business and, if said real Property constitutes
Collateral, Lender has consented thereto; and (viii) such other Liens as
may be expressly disclosed on Schedule 8.2(E) attached hereto.
(F) Subsidiaries. Hereafter create or acquire any subsidiary.
(G) Business Locations. Transfer its principal place of business
or chief executive office or maintain records with respect to its Accounts
at any locations other than those at which the same are presently kept or
maintained except upon at least thirty (30) days prior written notice to
Lender and after the delivery to Lender of financing statements, if
required by Lender, in form satisfactory to Lender to perfect or continue
the perfection of Lender's Lien and security interest hereunder.
(H) Change of Business. Enter into any new business or make any
material change in any of Borrower's business objectives and purposes.
(I) Disposition of Assets. Sell, lease or otherwise dispose of any
of its Properties except for sales in the ordinary course of its business.
(J) Restricted Investment. Make or have any Restricted Investment.
(K) Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except: (i) Indebtedness evidenced by or arising
under this Agreement, the Letter of Credit Agreement or any of the other
Loan Documents; (ii) unsecured current liabilities (other than those for
Money Borrowed) incurred in the ordinary course of business for current
purposes and which are not represented by a promissory note or other
evidence of indebtedness and are not more than thirty (30) days past due;
(iii) Indebtedness described on Schedule 8.2(K) hereto; (iv) Purchase Money
Indebtedness not otherwise inconsistent with the terms of this Agreement;
and (v) renewals or extensions of any of the Indebtedness described in
items (i) through (iv) above (but only so long as any indebtedness
described in items (ii), (iii) or (iv) above is not increased after the
date hereof).
(L) Minimum Tangible Net Worth. Borrower's Tangible Net Worth
shall not be less than $9,200,000 at any time during the period from the
date hereof through the end of its fiscal year ending on December 31, 1995,
and Borrower shall maintain a Tangible Net Worth at all times during each
fiscal year ending after December 31, 1995 which is not less than the sum
of the minimum Tangible Net Worth of Borrower required hereunder for the
immediately preceding fiscal year plus fifty percent (50%) of Borrower's
Net Income after taxes for such prior year (rounded up to the nearest one
hundred thousand dollars but such sum shall not be reduced if Borrower
suffers a net loss in any one year).
(M) Leverage Ratio. Borrower's Leverage Ratio shall not be more
than .5 to 1.0 as of the end of any fiscal quarter or fiscal year ending on
or after the date hereof.
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(N) Debt Service Coverage Ratio. As of the end of each fiscal
quarter, Borrower shall not permit (a) Borrower's EBITDA for the Borrower's
most recently completed four (4) quarters, divided by (b) total principal
and interest payable on Indebtedness for Money Borrowed during such four
(4) quarters, to be less than 1.25 to 1.0.
(O) Unbudgeted Capital Expenditures. Borrower's Unbudgeted Capital
Expenditures shall not exceed $500,000 during any fiscal year ending on or
after December 31, 1995.
(P) Dividends, Distributions, Etc. Borrower shall not declare or
pay any dividend on its capital stock (other than stock dividends) or make
any payment to purchase, redeem, retire or acquire any of its capital stock
or any option, warrant or other right to acquire such capital stock if such
declaration or payment would cause a Default or Event of Default under any
of the financial covenants set forth in this Section 8.2.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender
under the other Sections of this Agreement, it is understood and agreed
that Lender will not be obligated to make any Loan under Section 2 or
Section 3 of this Agreement unless and until each of the following
conditions has been and continues to be satisfied, all in form and
substance satisfactory to Lender and its counsel:
9.1. Documentation. Lender shall have received the following documents,
each to be in form and substance satisfactory to Lender and its counsel:
(A) The Loan Documents duly executed, completed and delivered by
Borrower, including the First Modification of Deed to Secure Debt,
Assignment of Rents and Security Agreement in the form of Exhibit C
attached hereto;
(B) Certified copies of Borrower's liability insurance policies,
together with endorsements naming Lender as a co-insured;
(C) Copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence in a form
acceptable to Lender that such Liens constitute valid and perfected
security interests and Liens, having the Lien priority specified in Section
6.2(B) hereof;
(D) A copy of the Certificate of Incorporation of Borrower, and all
amendments thereto, certified as of a recent date by the Secretary of State
of Delaware;
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(E) Current good standing certificates (or certificates of
existence) for Borrower, issued by the Secretary of State of each of
Delaware and Georgia;
(F) A closing certificate signed by the Chief Financial Officer and
the Assistant Secretary of Borrower dated as of the date hereof, and in the
form of Exhibit E attached hereto, duly completed;
(G) An opinion of Borrower's counsel in the form of Exhibit F
attached hereto and a written report of a recent examination under
Borrower's name of the Uniform Commercial Code financing statement, federal
and state tax lien and judgment lien records of Gwinnett County, Georgia;
(H) Lien Subordination Agreements executed by all contractors
listed on Exhibit C to the Borrower's Affidavit dated as of the date hereof
executed by Bruce W. Smith; and
(I) A First Modification of Cash Collateral Account Agreement dated
as of the date hereof from Borrower; and
(J) Such other documents, instruments and agreements as Lender
shall reasonably request in connection with the foregoing matters.
9.2. Other Conditions. The following conditions have been and shall
continue to be satisfied, in the sole judgment of Lender as of the date of
and after giving effect to such Loan or the issuance of such Letter of
Credit:
(A) No Default or Event of Default shall exist;
(B) Each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied;
(C) Since September 30, 1995, there shall not have occurred any
material adverse change in the business, financial condition or results of
operations of Borrower, or the existence or value of any Collateral, or any
event, condition or state of facts which would reasonably be expected
materially and adversely to affect the business, financial condition or
results of operations of Borrower; and
(D) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or
to obtain damages in respect of, or which is related to or arises out of
this Agreement or the consummation of the transactions contemplated hereby
or which, in Lender's sole discretion, would make it inadvisable to
consummate the transactions contemplated by this Agreement or any of the
other Loan Documents; and
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SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) Payment of Obligations. Borrower shall fail to pay any of the
Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
(B) Misrepresentations. Any warranty, representation, or other
statement made or furnished to Lender by or on behalf of Borrower or in any
instrument, certificate or financial statement furnished in compliance with
or in reference to this Agreement or any of the other Loan Documents proves
to have been false or misleading in any material respect when made or
furnished.
(C) Breach of Covenants. Borrower shall fail or neglect to
perform, keep or observe (i) any covenant contained in Sections 6.2, 6.3 or
8.2 of this Agreement or (ii) any other covenant contained in this
Agreement (other than a covenant a default in the performance or observance
of which is dealt with specifically elsewhere in this Section 10.1) and the
breach of such other covenant is not cured to Lender's satisfaction within
thirty (30) days after the sooner to occur of Borrower's receipt of notice
of such breach from Lender or the date on which such failure or neglect
becomes known to any officer of Borrower.
(D) Default Under Other Loan Documents. Any event of default shall
occur under, or Borrower shall default in the performance or observance of
any term, covenant, condition or agreement contained in, any of the other
Loan Documents and such default shall continue beyond any applicable period
of grace.
(E) Other Defaults. There shall occur any default or event of
default on the part of Borrower (including specifically, but without
limitation, due to non-payment) under any agreement, document or instrument
to which Borrower is a party or by which Borrower or any of its Property is
bound, creating or relating to any Indebtedness if the payment or maturity
of such Indebtedness is accelerated in consequence of such event of default
or demand for payment of such Indebtedness is made and the amount at issue
exceeds $25,000.
(F) [Intentionally omitted].
(G) Adverse Changes. There shall occur any material adverse change
in the financial condition of Borrower or the ability of Borrower to pay or
perform its Obligations.
(H) Insolvency, etc. Borrower shall cease to be Solvent or shall
suffer the appointment of a receiver, trustee, custodian or similar
fiduciary, or shall make an assignment for the benefit of creditors, or any
petition for an order for relief shall be filed by or against Borrower
under the Bankruptcy Code (if against Borrower, the continuation of such
proceeding for more than thirty (30) days), or Borrower shall make any
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offer of settlement, extension or composition to its unsecured creditors
generally.
(I) Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower for a period
which significantly affects Borrower's capacity to continue its business,
on a profitable basis; or Borrower shall suffer the loss or revocation of
any governmental license or permit now held or hereafter acquired by
Borrower which is necessary to the continued or lawful operation of its
business; or Borrower shall be enjoined, restrained or in any way prevented
by court, governmental or administrative order from conducting all or any
material part of its business affairs; or any material lease or agreement
pursuant to which Borrower leases, uses or occupies any Property shall be
cancelled or terminated prior to the expiration of its stated term; or any
material part of the Collateral shall be taken through condemnation or the
value of such Property shall be impaired through condemnation unless said
proceeds are remitted to Lender.
(J) ERISA. A Reportable Event shall occur which Lender, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a
trustee for any Plan, or if any Plan shall be terminated or any such
trustee shall be requested or appointed, or if Borrower is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from Borrower's complete or partial withdrawal
from such Plan.
(K) Litigation. Borrower shall challenge or contest in any action,
suit or proceeding the validity or enforceability of this Agreement or any
of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
(L) Change in Control. The acquisition after the date of this
Agreement by any Person or, by any two or more Persons, acting in concert,
of beneficial ownership (within the meaning of Rule 13-d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of either (a) twenty percent (20%) or more of the outstanding voting
stock of the Borrower or (b) the power to direct or cause the direction of
the management and policies of the Borrower whether through the ownership
of voting securities, by contract or otherwise.
(M) Change in Management. Any material change in the executive
management of the Borrower unless such person is replaced by a person
possessing executive, financial, managerial, scientific and technical
knowledge reasonably comparable to such person.
(N) Lender Insecurity. Lender shall in good faith deem itself
insecure as to the prospect of Borrower's ability to pay or perform its
Obligations.
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10.2. Acceleration of the Obligations. Without in any way limiting
the right of Lender to demand payment of any portion of the Obligations
payable on demand in accordance with this Agreement, upon and after the
occurrence of an Event of Default as above provided, all or any portion of
the Obligations due or to become due from Borrower to Lender, whether under
this Agreement, or any of the other Loan Documents or otherwise, shall, at
the option of Lender and without notice or demand by Lender, become at once
due and payable and Borrower shall forthwith pay to Lender, in addition to
any and all sums and charges due, the entire principal of and interest
accrued on the Obligations.
10.3. Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, Lender shall have and may exercise from
time to time the following rights and remedies:
(A) By written notice to the Borrower, terminate the Lender's
remaining commitment hereunder to make any further loans to Borrower
whereupon any such commitment shall terminate immediately.
(B) All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, and shall be in
addition to any other rights or remedies contained in this Agreement or any
of the other Loan Documents.
(C) The right to take immediate possession of the Collateral, and
(i) to require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, and (ii) to enter any of the
premises of Borrower or wherever any of the Collateral shall be located,
and to keep and store the same on said premises until sold (and if said
premises be the Property of Borrower, Borrower agrees not to charge Lender
for storage thereof).
(D) The right to sell or otherwise dispose of all or any Inventory
in its then condition, or after any further manufacturing or processing
thereof, at public or private sale or sales, with such notice as may be
required by law, in lots or in bulk, for cash or in credit, all as Lender
in its sole discretion, may deem advisable. Borrower agrees that ten (10)
days' prior written notice to Borrower of any public or private sale or
other disposition of such Collateral shall be reasonable notice thereof and
such sale shall be at such location as Lender may designate in said notice.
Lender shall have the right to conduct such sales on Borrower's premises,
without charge therefor, and such sales may be adjourned from time to time
in accordance with applicable law. Lender shall have the right to sell,
lease or otherwise dispose of such Collateral, or any part thereof, for
cash, credit or any combination thereof, and Lender may purchase all or any
part of such collateral at public or, if permitted by applicable law,
private sale and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the obligations.
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(E) Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks and advertising matter or
any Property of a similar nature as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to Lender's benefit.
(F) The proceeds realized from the sale of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
reasonable costs, expenses and attorneys' fees and expenses incurred by
Lender for collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the Collateral; secondly, to interest due
upon any of the Obligations; and thirdly, to the principal of the
Obligations. If any deficiency shall arise, Borrower and the Guarantor
shall remain liable to Lender therefor; and any surplus shall be paid to
Borrower.
10.4. Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in
any document referred to herein or contained in any agreement supplementary
hereto or in any schedule given to Lender or contained in any other
agreement between Lender and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation
or substitution of any of the terms, covenants, conditions, or agreements
of Borrower herein contained. The failure or delay of Lender to exercise
or enforce any rights, Liens, powers, or remedies hereunder or under any of
the aforesaid agreements or other documents or security or Collateral shall
not operate as a waiver of such Liens, rights, powers and remedies, but all
such Liens, rights, powers, and remedies shall continue in full force and
effect until all Loans and all other Obligations owing or to become owing
from Borrower to Lender shall have been fully satisfied, and all Liens,
rights, powers, and remedies herein provided for are cumulative and none
are exclusive.
SECTION 11. MISCELLANEOUS
11.1. Power of Attorney. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by
Lender) as Borrower's true and lawful attorney (and agent-in-fact) and
Lender, or Lender's agent, may, without notice to Borrower and in either
Borrower's or Lender's name, but at the cost and expense of Borrower:
(A) At such time or times hereafter as Lender or said agent, in its
sole discretion, may determine, endorse Borrower's name on any checks,
notes, acceptances, drafts, money orders or any other evidence of payment
or proceeds of the Collateral which come into the possession of Lender or
under Lender's control; and
(B) At such time or times upon or after the occurrence of an Event
of Default as Lender or its agent in its sole discretion may determine: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all
of Borrower's rights and remedies with respect to the collection of the
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Accounts; (ii) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral or any legal proceedings brought to collect
any of the Accounts or other Collateral; (iii) sell or assign any of the
Accounts and other Collateral upon such terms, for such amounts and at such
time or times as Lender deems advisable; (iv) take control, in any manner,
of any item of payment or proceeds relating to any Collateral; (v) prepare,
file and sign Borrower's name to a proof of claim in bankruptcy or similar
document against any Account Debtor or to any notice of lien, assignment or
satisfaction of lien or similar document in connection with any of the
Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for
delivery thereof to such address as Lender may designate; (vii) endorse the
name of Borrower upon any of the items of payment or proceeds relating to
any Collateral and deposit the same to the account of Lender on account of
the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or
similar document or agreement relating to the Accounts, Inventory and any
other Collateral; (ix) use Borrower's stationery and sign the name of
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory and any other Collateral and to which Borrower has
access; (xi) make and adjust claims under policies of insurance; and (xii)
do all other acts and things necessary, in Lender's determination, to
fulfill Borrower's obligations under this Agreement.
11.2. Indemnity. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action
or proceeding ever suffered or incurred by Lender as the result of
Borrower's failure to observe, perform or discharge Borrower's duties
hereunder. Without limiting the generality of the foregoing, this
indemnity shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances.
11.3. Modification of Agreement; Sale of Interest. This Agreement
may not be modified, altered or amended, except by an agreement in writing
signed by Borrower and Lender. Borrower may not sell, assign or transfer
any interest in this Agreement or any of the other Loan Documents, or any
portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower
hereby consents to Lender's participation, sale, assignment, transfer or
other disposition, at any time or times hereafter, of this Agreement and
any of the other Loan Documents, or of any portion hereof or thereof,
including, without limitation, Lender's rights, title, interests, remedies,
powers, and duties hereunder or thereunder.
11.4. Reimbursement of Expenses. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of
Default then exists or any of the transactions contemplated hereunder are
concluded, Lender employs counsel for advice or other representation, or
incurs legal expenses or other costs or out-of-pocket expenses in
connection with: (A) the negotiation and preparation of this Agreement or
Page 84<PAGE>
<PAGE>
any of the other Loan Documents, any amendment of or modification of this
Agreement or any of the other Loan Documents; or (B) the administration of
this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (C) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Lender, Borrower or any
other Person) in any way relating to the Collateral, this Agreement or any
of the other Loan Documents or Borrower's affairs; (D) any attempt to
enforce any rights of Lender against Borrower or any other Person which may
be obligated to Lender by virtue of this Agreement or any of the other Loan
Documents, including, without limitation, the Account Debtors; or (E) any
attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then, in
any such event, the attorneys' fees arising from such services and all
expenses, costs, charges and other fees of such counsel or of Lender or
relating to any of the events or actions described in this Section shall be
payable, on demand, by Borrower to Lender, and shall be additional
Obligations hereunder secured by the Collateral. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may
include accountant' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; secretarial over-time charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal
services. Additionally, if any taxes (excluding taxes imposed upon or
measured by the net income of Lender) shall be payable on account of the
execution or delivery of this Agreement, or the execution, delivery,
issuance or recording of any of the other Loan Documents, or the creation
of any of the Obligations hereunder, by reason of any existing or hereafter
enacted federal or state statute, Borrower will pay all such taxes,
including, but not limited to, any interest and penalties thereon, and will
indemnify and hold Lender harmless from and against liability in connection
therewith.
11.5. Indulgences Not Waivers. Lender's failure, at any time or
times hereafter, to require strict performance by Borrower of any provision
of this Agreement shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default by Borrower under
this Agreement or any of the other Loan Documents shall not suspend, waive
or affect any other Event of Default by Borrower under this Agreement or
any of the other Loan Documents, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other Loan Documents and
no Event of Default by Borrower under this Agreement or any of the other
Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing specifying
such suspension or waiver and is signed by a duly authorized representative
of Lender and directed to Borrower.
11.6. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
Page 85<PAGE>
<PAGE>
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
11.7. Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of the successors
and assigns of Borrower and Lender. This provision, however, shall not be
deemed to modify Section 11.3 hereof.
11.8. Cumulative Effect; Conflict of Terms. The provisions of the
other Loan Documents are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in any of the other Loan Documents
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.9. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
11.10. Notice. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto to be effective shall be in
writing (and, if sent by mail, shall be sent by certified or registered
mail, return receipt requested) or by telegraph or telex or telecopy and,
unless otherwise expressly provided herein, shall be deemed to have been
validly served, given or delivered when delivered against receipt or one
Business Day after deposit in the mail, postage prepaid, or, in the case of
telegraphic notice, when delivered to the telegraph company, or, in the
case of telex notice, when sent, answer back received, or, in the case of
telecopy notice, when telecopied, addressed as follows:
(A) If to Lender: Bank South
55 Marietta Street, N.W.
Atlanta, Georgia 30303
Attn: Regional Corporate Banking
Telecopy: (404) 529-4698
(B) If to Borrower: Theragenics Corporation
5325 Oakbrook Parkway
Norcross, Georgia 30093
Attn: Bruce Smith
Telecopy: (770) 381-8447
With a copy to: Smith, Gambrell & Russell
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: David J. Harris
Telecopy: (404) 815-3509
Page 86<PAGE>
<PAGE>
or to such other address as each party may designate for itself by like
notice given in accordance with this Section 11.10; provided, however, that
any notice, request or demand to or upon Lender pursuant to Sections 2.2 or
3.2 shall not be effective until received by Lender.
11.11. Lender's Consent. Whenever Lender's consent is required to be
obtained under this Agreement or any of the other Loan Documents as a
condition to any action, inaction, condition or event, Lender shall be
authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
11.12. Demand Obligations. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or
securing same, and the occurrence of an Event of Default shall not be a
prerequisite for Lender's requiring payment of such Obligations.
11.13. Time of Essence. Time is of the essence of this Agreement and
the other Loan Documents.
11.14. Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed
by the parties in connection therewith or with reference thereto, embody
the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede
the Prior Loan Agreements and all other prior agreements, understandings
and inducements, whether express or implied, oral or written. Nothing
contained herein is intended (or shall be construed) to be a novation of
any indebtedness evidenced by the Prior Loan Agreements or to affect or
modify the perfection or priority of Lender's security interests in,
security titles to or other liens on any Collateral.
11.15. Reliance on Telecopies. Each of Borrower and Lender may
transmit to the other any and all notices, reports or other communications
required or permitted to be given under this Agreement by way of telecopy
to such other party at its telecopy number shown in Section 11.10 above (or
at such other telecopy number as such other party may designate by written
notice given pursuant to Section 11.10 above), and in that case the party
to whom any such telecopy is transmitted shall be entitled to rely on any
such telecopied notice, report or other communication as an original
thereof unless and until such party receives an executed original thereof.
11.16. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE
IN ATLANTA, GEORGIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA; PROVIDED, HOWEVER, THAT
IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN
GEORGIA, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND
PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE
Page 84<PAGE>
<PAGE>
ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR
INCONSISTENT WITH THE LAWS OF GEORGIA. AS PART OF THE CONSIDERATION FOR
NEW VALUE THIS DAY RECEIVED, BORROWER HEREBY CONSENTS TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN FULTON COUNTY OF THE STATE OF
GEORGIA AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR
REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED IN SECTION 11.10
HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT THEREOF. BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE
OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE.
11.17. WAIVERS BY BORROWER. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT, BORROWER WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW (i) THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL;
(ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION
OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY
LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND
CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY
WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE
ANY OF LENDER'S REMEDIES, INCLUDING THE ISSUANCE OF AN IMMEDIATE WRIT OF
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 88<PAGE>
<PAGE>
POSSESSION; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (v) ANY RIGHT BORROWER MAY HAVE UPON PAYMENT IN FULL OF THE
OBLIGATIONS TO REQUIRE LENDER TO TERMINATE ITS SECURITY INTEREST IN THE
COLLATERAL OR IN ANY OTHER PROPERTY OF BORROWER UNTIL TERMINATION OF THIS
AGREEMENT IN ACCORDANCE WITH ITS TERMS AND THE EXECUTION BY BORROWER, AND
BY ANY PERSON WHOSE LOANS TO BORROWER ARE USED IN WHOLE OR IN PART TO
SATISFY THE OBLIGATIONS, OF AN AGREEMENT INDEMNIFYING LENDER FROM ANY LOSS
OR DAMAGE LENDER MAY INCUR AS THE RESULT OF DISHONORED CHECKS OR OTHER
ITEMS OF PAYMENT RECEIVED BY LENDER FROM BORROWER OR ANY ACCOUNT DEBTOR AND
APPLIED TO THE OBLIGATIONS.
IN WITNESS WHEREOF, this Agreement has been duly executed in Atlanta,
Georgia, on the day and year specified at the beginning hereof.
ATTEST: THERAGENICS CORPORATION
/s/ Lynn M. Rogers By:/s/ Bruce W. Smith
Title: Assistant Secretary Title: Chief Financial Officer
(CORPORATE SEAL)
BANK SOUTH
By:/s/ W. Brad Davis
Title: Corporate Banking Officer
Page 89
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Theragenics Corporation
We hereby consent to the incorporation by reference of our
report dated January 17, 1996, appearing in your Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, in your
Registration Statement on Form S-8.
Grant Thornton LLP
March 28,1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from SEC Form 10-K and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,266,338
<SECURITIES> 0
<RECEIVABLES> 1,335,645
<ALLOWANCES> 0
<INVENTORY> 166,955
<CURRENT-ASSETS> 4,836,459
<PP&E> 12,267,379
<DEPRECIATION> 2,194,164
<TOTAL-ASSETS> 16,878,182
<CURRENT-LIABILITIES> 1,100,626
<BONDS> 1,008,135
0
0
<COMMON> 16,504,118
<OTHER-SE> (1,734,697)
<TOTAL-LIABILITY-AND-EQUITY> 16,878,182
<SALES> 7,781,962
<TOTAL-REVENUES> 8,010,817
<CGS> 2,645,730
<TOTAL-COSTS> 5,059,530
<OTHER-EXPENSES> 26,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,967
<INCOME-PRETAX> 2,872,325
<INCOME-TAX> 1,100,000
<INCOME-CONTINUING> 1,772,325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,772,325
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
