<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): NOVEMBER 13, 1996
PHYSICIANS CLINICAL LABORATORY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-20678 68-0280528
(State or other (Commission (IRS Employer
jurisdiction of incorporation File Number) Identification No.)
2495 NATOMAS PARK DRIVE, SACRAMENTO, CALIFORNIA 95833
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916) 648-3500
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
Item 3. Bankruptcy or Receivership.
On November 8, 1996, Physicians Clinical Laboratory Inc., a Delaware
corporation (the "Company"), filed a voluntary petition in the United States
Bankruptcy Court for the Central District of California, Los Angeles Division,
Case Number SV96-23185-GM, assigned to Judge Mund, seeking reorganization under
Chapter 11 of Title 11 of the United States Code (the "Chapter 11 Filing"). The
Company is managing its business as a debtor-in-possession subject to Court
approval for certain actions of the Company. A copy of the press release issued
by the Company on November 11, 1996 reporting the Chapter 11 Filing and related
matters is filed as Exhibit 99.1 hereto and incorporated herein by this
reference.
On November 7, 1996, prior to filing the voluntary petition for Chapter
11 protection, the Company entered into a term sheet (the "Term Sheet") with its
senior secured debt holders and with Nu-Tech Bio-Med, Inc. ("Nu-Tech"), which
provides that, upon Bankruptcy Court approval, the Company's existing senior
secured debt holders will provide a new $9.8 million debtor-in-possession
working capital facility, which loan would be forgiven upon consummation of the
reorganization plan described below, and any unused portion of which would be
contributed to the reorganized Company's capital.
The Term Sheet also provides for the principal terms of a proposed plan
of reorganization, which, if approved by the Bankruptcy Court, would provide as
follows: Nu-Tech would acquire 51% of the reorganized Company's common stock in
exchange for its holdings of approximately $13 million in senior secured debt
and an investment of $5 million in cash. Provided that the holders of the
Company's 7-1/2% Convertible Subordinated Debentures due 2000 and the Company's
other unsecured creditors (other than holders of administrative and priority
claims against the Company) vote to accept the proposed plan of reorganization
(the "Voting Condition"), (i) the remaining senior secured debt holders, which
presently own approximately $80 million of secured debt, would receive $55
million in new senior secured debt and 37% of the reorganized Company's common
stock; (ii) the holders of the Company's Debentures would receive 9% of the
reorganized Company's common stock; (iii) the Company's shareholders would
receive 3% of the reorganized Company's common stock, along with warrants to
purchase an additional 2% of the reorganized Company's common stock for a
period of up to five years, at a purchase price based on an implied enterprise
value for the Company of $115 million; and (iv) the Company's remaining general
unsecured creditors would receive a recovery yet to be determined (the Company
will negotiate with an official unsecured creditors' committee, which is
anticipated to be appointed within approximately one week, to complete this
aspect of the proposed transaction). If the Voting Condition is not satisfied,
neither the Company's general unsecured creditors, the holders of the
Company's Debentures nor the Company's shareholders would be entitled to receive
any recovery under the reorganization plan. The Term Sheet is filed as Exhibit
4.1 hereto and incorporated herein by this reference.
To assist with the management of the Company during the pendency of the
Chapter 11 proceeding and until the plan of reorganization is confirmed by the
Bankruptcy Court, J. Marvin Feigenbaum, Chief Executive Officer of Nu-Tech, has
been appointed as Chief Operating Officer of the Company. The Company and Mr.
Feigenbaum have entered into an employment agreement, dated November 7, 1996,
filed as Exhibit 10.1 hereto and incorporated herein by this reference,
governing the
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terms of Mr. Feigenbaum's employment with the Company as Chief Operating
Officer during this period.
Item 5. Other Events
On November 7, 1996, the Company entered into a term sheet with its
senior secured debt holders and with Nu-Tech Bio-Med, Inc., which provides for
the availability to the Company of a debtor-in-possession credit facility and
for the principal terms of the proposed plan of reorganization of the Company.
See Item 3, above. The Term Sheet is filed as Exhibit 4.1 hereto and
incorporated herein by this reference.
On November 7, the Company entered into an employment agreement with J.
Marvin Feigenbaum, Chief Executive Officer of Nu-Tech, providing for the
employment of Mr. Feigenbaum as Chief Operating Officer of the Company during
the pendency of the Chapter 11 proceeding. See Item 3, above. The employment
agreement is filed as Exhibit 10.1 hereto and incorporated herein by this
reference.
Mr. Dennis H. Tootelian has resigned as a Director of the Company
effective October 8, 1996. A successor has not yet been selected to fill the
vacancy on the Board of Directors created by Mr. Tootelian's resignation.
Item 7. Financial Statements and Exhibits
(C) Exhibits.
4.1 Summary of Terms of Restructuring of Physician's
Clinical Laboratory, Inc. dated November 7, 1996, among
the Company, Oaktree Capital Management, LLC, The
Copernicus Fund, L.P., DDJ Overseas Corp., Belmont Fund,
L.P., Bank of America Illinois, and Nu-Tech Bio-Med,
Inc.
10.1 Employment Agreement, dated November 7, 1996, between
the Company and J. Marvin Feigenbaum.
99.1 Text of Company's press release dated November 11, 1996,
relating to the filing of the Company's petition for
reorganization.
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<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHYSICIANS CLINICAL LABORATORY, INC.
By: /s/ RICHARD M. BROOKS
--------------------------------------
Richard M. Brooks
Senior Vice President and
Chief Financial Officer
Dated: November 13, 1996
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
4.1 Summary of Terms of Restructuring of Physician's Clinical Laboratory,
Inc., dated November 7, 1996, among the Company, Oaktree Capital
Management, LLC, The Copernicus Fund, L.P., DDJ Overseas Corp., Belmont
Fund, L.P., Bank of America Illinois, and Nu-Tech Bio-Med, Inc.
10.1 Employment Agreement, dated November 7, 1996, between the Company and
J. Marvin Feigenbaum.
99.1 Text of Company's press release dated November 11, 1996, relating to
the filing of the Company's petition for reorganization.
</TABLE>
5
<PAGE> 1
EXHIBIT 4.1
SUMMARY OF TERMS OF
RESTRUCTURING OF
PHYSICIAN'S CLINICAL LABORATORY, INC. ("PCL")
A. GENERAL
1. PCL shall file for Chapter 11 bankruptcy reorganization
in the United States Bankruptcy Court, Central District
of California (the "Bankruptcy Court") on or before
November 12, 1996 (the "Petition Date"). No later than
thirty (30) days after the Petition Date, PCL shall file
with the Bankruptcy Court a plan of reorganization as
described herein (the "Plan") and a disclosure statement
(the "Disclosure Statement"), which Plan and Disclosure
Statement shall be in form and substance acceptable to
the Senior Lenders (defined below) and Nu-Tech Bio-Med,
Inc. ("Nu-Tech") (the Senior Lenders and Nu-Tech
hereinafter collectively referred to as the
"Proponents"), pursuant to which the existing creditors
and equity holders of PCL shall receive in exchange for
their existing claims and interests the treatment more
fully described below under "Plan Treatment" and
pursuant to which the Proponents will receive a package
of new common stock and/or new secured notes of the
reorganized PCL (the "Reorganized PCL") as more fully
described below. PCL shall use its best efforts to have
the Plan confirmed on or before April 1, 1997.
2. Also on the Petition Date, PCL, Oaktree Capital
Management, LLC, as general partner and investment
manager on behalf of certain funds (in such capacity,
"Oaktree"), The Copernicus Fund, L.P. ("Copernicus"),
DDJ Overseas Corp. ("Overseas" and, collectively with
Copernicus, "DDJ"), Belmont Fund, L.P. ("Belmont I") and
Belmont Capital Partners, II, L.P. ("Belmont II" and,
collectively with Belmont I, "Fidelity") and Cerberus
Partners L.P. (collectively with Fidelity, Oaktree and
DDJ, the "Senior Lenders") as holders of all of the
existing Senior Secured Notes issued by PCL pursuant to
the Credit Agreement dated as of April 1, 1994 (the
"Senior Indebtedness") shall jointly file a motion
seeking approval of DIP financing in the amount of $9.8
million to be provided to PCL by the Senior Lenders (pro
rata in accordance with their existing interests), as
more fully described herein.
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3. Immediately prior to filing its bankruptcy petition (the
"Petition"), PCL will retain J. Marvin Feigenbaum (the
"Crisis Manager") as the equivalent of President and
Chief Operating Officer or Crisis Manager of PCL
pursuant to a written agreement (the "Employment
Agreement"), which shall become effective immediately
after the filing of PCL's bankruptcy petition, at an
annual salary of $104,000. The Employment Agreement
shall contain terms and conditions mutually agreeable to
PCL and the Proponents, including the following
provisions:
(a) The Crisis Manager shall have the sole authority
to approve all disbursements on behalf of PCL
and sole authority to sign checks on behalf of
PCL;
(b) The Board of Directors (the "Board") of PCL
shall have the authority to terminate the Crisis
Manager "for cause," (which term will be more
negotiated by and between PCL and the Proponents
and more fully reflected in the Employment
Agreement);
(c) The Crisis Manager shall be entitled to attend
all meetings of the Board, except meetings to
discuss or consider any plan of reorganization
submitted by a party other than the Proponents;
(d) The Crisis Manager shall report directly to the
Board and shall only be subject to oversight by
the Board;
(e) Nathan Headley ("Headley") shall report directly
to the Crisis Manager; and
(f) The Crisis Manager may only terminate the
Employment Agreement for "cause" (which term
will also be negotiated by and between PCL and
the Proponents and more fully reflected in the
Employment Agreement).
4. With the approval of the Proponents, the Board of PCL
may provide Headley with a reasonable postpetition
compensation or severance agreement to incentivize Mr.
Headley to provide services to PCL in connection with
its reorganization.
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5. All rights of the Senior Lenders under the General
Continuing Guaranty of Sutter Health (the "Sutter
Guaranty") of the Senior Indebtedness are expressly
reserved by the Senior Lenders. Notwithstanding the
foregoing, the Senior Lenders agree that the enforcement
of the Sutter Guaranty shall not result in an increase
in the aggregate liabilities of either the Debtor or the
Reorganized Debtor and that, to the extent enforcement
of the Sutter Guaranty results in an increase in the
Debtor's or the Reorganized Debtor's aggregate
liabilities, any payments which Reorganized Debtor is
required to make on account of the Sutter Guaranty as a
result of payments actually made to the Senior Lenders
under the Sutter Guaranty shall be credited against the
principal balance of the New Senior Debt.
6. If PCL retains an independent advisor (the "Independent
Advisor") to advise the Board with respect to, inter
alia, offers to acquire the assets or stock of PCL which
compete with the Plan, such Independent Advisor shall be
acceptable to the Proponents.
B. DIP FINANCING
Subject to and upon PCL: (a) filing the Petition; (b) retaining the
Crisis Manager pursuant to the Employment Agreement immediately prior to
filing the Petition; (c) obtaining Court approval to enter into the DIP
Facility on the terms and conditions set forth below; (d) entering into
definitive documents evidencing the DIP Facility in form and substance
satisfactory to the Proponents, which shall include: (i) appropriate
terms and conditions of the Senior Indebtedness; (ii) terms and
conditions customary for DIP Financings of this type; and (iii) the
terms and conditions more fully set forth below (unless such terms and
conditions are waived in writing by the Senior Lenders); and (e)
satisfying any further conditions set forth below in this Section B, the
Senior Lenders will provide to PCL a debtor-in-possession secured credit
facility in the amount of $9.8 million, (the "DIP Facility") the
proceeds of which shall be used (i) for administrative costs incurred in
connection with the bankruptcy (including legal, accounting, investment
banking fees and executory contract cure payments); (ii) for working
capital needs of PCL during the bankruptcy as determined by the Crisis
Manager in accordance with applicable Bankruptcy Court rules; and (iii)
to fund the Plan. The DIP Facility shall bear interest at the prime rate
then in effect plus 2% and provide for a commitment fee on the unfunded
portion of the DIP Facility of 100 basis points per annum. The DIP
Facility, together with the foregoing interest and commitment fees,
shall only become due and payable upon an Event of Default,
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unless such default is waived by the Senior Lenders, or at the end of
the term of the DIP Facility if the Plan has not then been confirmed.
The interest and commitment fees accruing pursuant to the preceding
sentence shall not be credited against, nor shall they reduce the
availability of funds under the DIP Facility. Upon the Effective Date of
the Plan, the DIP Facility and all accrued interest and commitment fees
payable thereunder, together with any unfunded portion thereof, shall be
treated as more fully set forth below under the heading "Plan
Treatment". The DIP Facility shall include the following terms and
conditions (unless such terms or conditions are waived in writing by the
Senior Lenders):
1. As a condition to the effectiveness of the DIP Facility,
immediately prior to the filing of the Petition, PCL
shall have entered into the Employment Agreement.
2. All of the obligations of PCL arising under the DIP
Facility shall be secured by a first priority lien and
security interest on all presently owned and after
acquired property of PCL. PCL shall use its best efforts
to obtain Court approval for the cross-collateralization
of the Senior Lenders' prepetition and postpetition
claims, liens and security interests. PCL shall use its
best efforts to obtain Court approval for the
designation of the obligations of PCL under the DIP
Facility as "superpriority" administrative expenses of
the bankruptcy estate with priority over any and all
other administrative expenses incurred in PCL's
bankruptcy proceedings.
3. PCL shall use its best efforts to obtain Court approval
of provisions in the DIP Facility and order approving
the DIP Facility acknowledging the amount and validity
of the Senior Lenders' prepetition debt and security
interests and the amount and validity of the
Subordinated Indebtedness, and finding that, based upon
a review of the books and records of PCL, such debt and
such security interests are not subject to challenge,
dispute or avoidance in the bankruptcy case.
4. PCL shall use its best efforts to obtain Court approval
of provisions in the DIP Facility and order approving
the DIP Facility waiving and releasing any known or
unknown claims of the bankruptcy estate against the
Senior Lenders.
5. PCL shall use its best efforts to obtain Court approval
of provisions in the DIP Facility and order approving
the DIP Facility waiving
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rights of surcharge under Bankruptcy Code Section 506(c)
and rights of recovery under Bankruptcy Code Section
502(d).
6. The DIP Facility and the Senior Lenders rights
thereunder shall not be subject to modification or
injunction pursuant to an application or motion brought
under Bankruptcy Code Section 105 or Federal Rules of
Civil Procedure 59, 60 or 65 or their Federal Rule of
Bankruptcy Procedure equivalent rules without the
express prior written consent of the Senior Lenders.
7. PCL shall use its best efforts to obtain Court approval
of provisions in the order approving the DIP Facility
that in the event of a default by PCL under the DIP
Facility, all stays, including the automatic stay of
Bankruptcy Code Section 362, shall terminate upon five
(5) days written notice to permit the Senior Lenders to
exercise their rights and remedies under the DIP
Facility as if no bankruptcy stay were in effect.
8. It shall be an Event of Default under the DIP Facility
if the Break-Up/Overbid Protections (more fully
described below) are not approved by an order (the
"Break-Up Fee Order") of the Bankruptcy Court entered no
later than sixty (60) days after the Petition Date or if
such Break-Up Fee Order is stayed, modified, reversed or
vacated and if PCL fails to pay all amounts due under
the DIP within ninety (90) days of such denial, stay,
modification, reversal or vacation.
9. It shall be an Event of Default under the DIP Facility
if the Plan and the Disclosure Statement are not filed
with the Bankruptcy Court within thirty (30) days of the
Petition Date; if any such Plan is withdrawn by PCL
without the written consent of the Proponents; or if, at
any time, PCL files, proposes or supports a plan of
reorganization for PCL that is inconsistent with the
terms of this Term Sheet, except with the written
consent of the Proponents.
10. Upon an Event of Default specified in Paragraph B.9,
above, the Debtor's exclusive right to file and solicit
acceptances with respect to a plan of reorganization
shall be terminated for the benefit of the Proponents,
but only for the benefit of the Proponents.
11. It shall be an Event of Default if the Debtor's
exclusive right to file and solicit acceptances with
respect to a plan of reorganization is
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terminated for the benefit of any party other than the
Proponents and any such termination of exclusivity shall
automatically be deemed for the benefit of the Proponent
as well as said third party.
12. It shall be an Event of Default under the DIP Facility
if the Crisis Manager is removed or terminated by PCL
other than in accordance with the Employment Agreement
or if PCL modifies the Employment Agreement in any way,
except with the written consent of the Proponents,
including, without limitation, any removal, termination
or modification ordered by the Bankruptcy Court.
Additionally, it shall be an Event of Default under the
DIP Facility if the Crisis Manager terminates the
Employment Agreement in accordance with its terms and
conditions.
13. It shall be an Event of Default under the DIP Facility
if PCL is otherwise in breach of the DIP Facility.
14. The DIP Facility shall terminate on the earlier of the
Effective Date of the Plan (as contemplated by Section
E.1, below) or on the first anniversary of the Petition
Date.
15. The Debtor shall use its best efforts to obtain a duly
entered final order of the Court rejecting certain
existing leases (the "Designated Leases") of the Debtor,
which the Debtor determines, in consultation with the
Proponents, are appropriate for rejection.
Alternatively, the Debtor shall have negotiated a
termination of the Designated Leases upon terms and
conditions satisfactory to the Proponents.
PCL shall not take any action inconsistent with the satisfaction of any of the
foregoing terms and conditions.
C. BREAKUP/OVERBID PROTECTIONS
PCL shall use its best efforts to obtain Bankruptcy Court approval for
the following breakup fee and overbid protections (collectively, the
"Breakup/Overbid Protections") by entry of the Break-Up Fee Order no
later than sixty (60) days after the Petition Date. Neither the assets
nor the stock of PCL may be transferred to a third party except as
contemplated in the Plan (or any modification thereof approved by the
Proponents), nor may any plan of reorganization be confirmed for PCL
other than the Plan (or any modification thereto acceptable to the
Proponents) unless: (a) the Court finds that the offer made by the third
party purchaser or plan proponent has an aggregate present value to
creditors and
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shareholders of PCL that is at least $3.75 million higher than the
present value of the Plan to such creditors and shareholders; and (b) on
the effective date of such plan, Nu-Tech shall be paid $1.88 million in
cash (the "Breakup Fee") as compensation for time and expense incurred
in pursuing the Plan and the Breakup Fee shall be entitled to
administrative expense priority.
D. REORGANIZED PCL
All aspects of Reorganized PCL's capital structure and corporate
governance shall be satisfactory to the Proponents. In addition:
1. On the Effective Date, the capitalization of Reorganized
PCL shall consist of $55,000,000 of New Senior Debt (as
defined below under "Plan Treatment") and a single class
of voting common stock. Aside from current, postpetition
trade payables incurred in the ordinary course of
business, Reorganized PCL shall have no other
indebtedness, liabilities, equity interests or claims
on its equity unless approved in writing by the Senior
Lenders, other than the "Working Capital Facility" (as
defined below).
2. On the Effective Date:
(a) In exchange for its $13.333 million principal
amount of the Bank Debt, Nu-Tech will receive 34% of the fully diluted common
shares of Reorganized PCL (the "Shares");
(b) Nu-Tech will purchase from Reorganized PCL an
additional 17% of the Shares for Five million Dollars ($5,000,000) in cash;
(c) The Senior Lenders shall receive 49% of the
Shares unless both the class of General Unsecured Creditors (defined below) and
the class of holders of Subordinated Indebtedness vote to accept the Plan
(determined in accordance with Bankruptcy Code Section 1126) (the foregoing
condition hereinafter referred to as the "Voting Condition"), in which event,
the Senior Lenders shall receive 37% of the Shares;
(d) If the Voting Condition is satisfied, the
holders of Subordinated Indebtedness shall receive 9% of the Shares; and
(e) If the Voting Condition is satisfied, the
existing equity interests in PCL shall receive 3% of the Shares and warrants
(the "Warrants") to purchase up to 2% (on a fully diluted basis) of the Shares
for a period of up to five (5) years from and
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after the Effective Date at a purchase price based upon an implied
enterprise value for PCL of $115 million.
3. Reorganized PCL's Board of Directors will consist of five
(5) directors. Initially, Nu-Tech will appoint three (3) directors
and the Senior Lenders will appoint the remaining two (2) directors.
Notwithstanding the foregoing, the foregoing provisions shall cease
to be effective in the event the Senior Lenders in the aggregate own
less than 20% of the Shares of Reorganized PCL.
4. Reorganized PCL's Board of Directors will not undertake
the following activities without the affirmative vote of at least one
of the directors appointed by the Senior Lenders: (a) merger and
acquisition; (b) assuming non-ordinary course obligations in
excess of $1 million; and (c) making capital expenditures in
excess of $1 million. Notwithstanding the foregoing, the foregoing
provisions shall cease to be effective in the event the Senior
Lenders in the aggregate own less than 20% of the Shares of
Reorganized PCL.
5. J. Marvin Feigenbaum shall be appointed as the Chairman
of the Board and the Chief Executive Officer and President of
Reorganized PCL pursuant to a three-year employment contract which
shall provide for an initial annual salary of $104,000, and stock
options at a market value determined as of the Petition Date and in
an amount to be negotiated with the Board.
6. The Articles of Reorganized PCL shall contain customary
"anti-dilution" provisions.
E. PLAN TREATMENT
1. The DIP Facility
On the Effective Date, the outstanding balance of the
DIP Facility, together with all accrued interest and
commitment fees payable thereunder shall be forgiven and
any unfunded portion of the DIP Facility shall be
contributed to Reorganized PCL as a capital
contribution.
2. Senior Lenders
On the Effective Date, the Senior Lenders shall receive:
(i) 49% of the Shares, unless the Voting Condition is
satisfied, in which event the Senior Lenders shall
receive 37% of the Shares; and (ii) new
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senior secured notes of Reorganized PCL in the principal
amount of $55,000,000 ("New Senior Debt"), which New
Senior Debt shall contain the terms and conditions set
forth below under the heading "New Senior Debt." The
treatment set forth in this Section E.2 and Section E.1,
above, shall be in full and complete satisfaction of any
and all claims which the Senior Lenders have, or may
have, against PCL, and any and all of its subsidiaries,
including, without limitation, Quantum Clinical
Laboratories, Inc., Regional Reference Laboratory
Governing Corporation, California Regional Reference
Laboratory and Diagnostic Laboratories, Inc.
3. Unsecured Creditors
The distribution under the Plan to the class of General
Unsecured Creditors (i.e., the holders of all unsecured
claims against PCL other than administrative and
priority claims and other than the holders of
Subordinated Indebtedness) shall be determined by the
Proponents in consultation with any official committee
(the "Committee") appointed in the Bankruptcy Case to
represent, inter alia, the General Unsecured Creditors.
In the event the Proponents are unable to reach an
agreement with the Committee regarding the treatment of
General Unsecured Creditors under the Plan within the
time frame contemplated herein and/or in the event the
class of General Unsecured Creditors votes to reject the
Plan (determined in accordance with Bankruptcy Code
Section 1126), the Proponents may propose a Plan which
provides for no distribution to the General Unsecured
Creditors and which will be "crammed down" on that class
of creditors pursuant to Bankruptcy Code Section
1129(b).
4. Subordinated Indebtedness
If the Voting Condition is satisfied, the holders of
Subordinated Indebtedness shall receive their pro rata
share of 9% of the Shares. If the Voting Condition is
not satisfied, the holders of Subordinated Indebtedness
shall not be entitled to receive anything under the
Plan.
For the purposes of determining whether the Voting
Condition has been satisfied, the Senior Lenders shall
be deemed to have voted in favor of the Plan all of the
Subordinated Indebtedness held by them, whether or not
they in fact vote such claims in favor of, or against
the Plan.
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5. Equity
If the Voting Condition is satisfied, the holders of
existing equity interests in PCL shall receive 3% of the
Shares and the Warrants. If the Voting Condition is not
satisfied, the holders of existing equity interests
shall not be entitled to receive anything under the Plan
and their interests shall be extinguished as of the
Effective Date.
F. NEW SENIOR DEBT
The New Senior Debt shall be evidenced by documentation acceptable in
form and substance to the Proponents and shall contain terms and
conditions customary for transactions of this type, and shall also
include the following:
1. Issue: Senior Secured Notes.
2. Maturity: 7 years.
3. Coupon: 10% cash or 12% PIK per annum, at the option of
Reorganized PCL for the first two years, payable
semi-annually; thereafter, interest is payable in cash,
semi-annually, at 11% per annum, increasing 100 basis
points per year through maturity.
4. Optional Redemption: Redeemable in whole or in part at
Reorganized PCL's option at anytime at 100% of the
principal amount outstanding, together with accrued and
unpaid interest; provided that partial redemptions shall
be in an aggregate amount of at least $1,000,000 and
multiples of $1,000,000.
5. Mandatory Redemption: None.
6. Security: First priority security interest on all
assets of Reorganized PCL, now owned or hereafter
acquired; provided that, with respect to the receivables
of Reorganized PCL, the Senior Lenders will subordinate
such security interest to a lender providing a working
capital facility to Reorganized PCL, as discussed below.
7. Other Indebtedness (Working Capital Facility):
Reorganized PCL will be permitted to have a working
capital facility of up to $9.8 million (the "Working
Capital Facility"), to be secured solely by receivables
of Reorganized PCL; provided that the terms and
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conditions of such working capital facility, including
intercreditor provisions between the Senior Lenders and such
working capital lender, shall be reasonably satisfactory in form
and substance to the Senior Lenders.
8. Change of Control: Upon a change of control, as defined by
further agreement between the Senior Lenders and Nu-Tech,
Reorganized PCL shall offer to repurchase the notes at 101% of
par plus accrued and unpaid interest.
9. Covenants: Customary covenants, including without limitation,
debt limitations, limitation on restricted payments, lien
limitations, limitation on mergers, and limitations on
transactions with affiliates.
10. Additional Covenants: Until two semi-annual cash interest
payments are made by Reorganized PCL, covenants including
minimum EBITDA, minimum tangible net worth, minimum
EBITDA/Interest Expense Coverage and restrictions on capital
expenditures.
11. Registration Rights: The Senior Lenders shall have the option
("Registration Option") on not less than one hundred twenty
(120) days notice (the "Notice Period") to Reorganized PCL,
which notice may not be served earlier than fifteen (15) months
after the Effective Date of the Plan, to require Reorganized PCL
to publicly register the New Senior Debt, Reorganized PCL may
prepay the New Senior Debt during the Notice Period pursuant to
its rights under Section VI. 4, above. The publicly registered
securities to be issued by Reorganized PCL pursuant to the
Registration Option shall be in form and substance acceptable to
both the Senior Lenders and to Reorganized PCL.
Dated: November 7, 1996. PHYSICIAN'S CLINICAL LABORATORY,
INC., a Delaware corporation
By /s/ RICHARD M. BROOKS
------------------------------------
Its Senior Vice President and
Chief Financial Officer
--------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
NU-TECH BIO-MED, INC.
By
------------------------------------
Its
--------------------------------
OAKTREE CAPITAL MANAGEMENT, LLC,
as general partner or investment manager
on behalf of the funds listed on Annex I
hereto under "Oaktree Funds"
By
------------------------------------
Its
--------------------------------
By
------------------------------------
Its
--------------------------------
DDJ OVERSEAS CORP.
By
------------------------------------
Judy K. Mencher
Its Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE COPERNICUS FUND, L.P.
By DDJ Copernicus, LLC, its General Partner
By
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Its
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BELMONT FUND, L.P.
By [________________], its General Partner
By
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Its
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BELMONT CAPITAL PARTNERS II, L.P.,
By [________________], its General Partner
By
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Its
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CERBERUS PARTNERS, LTD.
By
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Its
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of
this day of November, 1996, to become effective immediately upon the filing
of the Petition (the "Effective Date"), by and between Physician's Clinical
Laboratory, Inc. ("PCL" or the "Employer"), on the one hand, and J. Marvin
Feigenbaum ("Feigenbaum" or the "Employee"), on the other hand, with reference
to the following recitals of fact:
R E C I T A L S
A. PCL is about to file a petition (the "Petition") commencing a case
(the "Bankruptcy Case") under chapter 11 of title 11 of the United States Code
(the "Bankruptcy Code") with the United States Bankruptcy Court, Central
District of California (the "Bankruptcy Court").
B. Employer desires to retain employee as its Chief Operating Officer
during the pendency of the Bankruptcy Case and until a plan of reorganization
(the "Plan") is confirmed for PCL, and Employee desires to serve in such
capacity on behalf of Employer.
C. Concurrently herewith, PCL has entered into a postpetition
financing agreement (the "DIP Facility") with certain lenders (collectively,
the "Senior Lenders"), the effectiveness of which is subject to certain
conditions and to approval of the Bankruptcy Court.
D. It is contemplated that upon confirmation of the Plan, PCL shall
enter into a long-term employment agreement with Feigenbaum, the terms and
conditions of which are reflected in that certain Summary of Terms of
Restructuring of Physician's Clinical Laboratory, Inc. (the "Term Sheet"),
entered into by and between PCL, the Senior Lenders and Nu-Tech Bio-Med, Inc.
("Nu-Tech").
E. Employee is the Chairman of the Board and President of Nu-Tech and
owns approximately sixteen percent (16%) of the presently issued and
outstanding shares of Nu-Tech.
In consideration of the premises and the mutual covenants contained
herein, Employer and Employee agree as follows:
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AGREEMENT
1. Employment And Term: Employer hereby employs Employee upon the
terms and conditions set forth herein from the Effective Date until the earlier
of termination in accordance with Section 5, below or the Effective Date of the
Plan (the "Term"), and Employee hereby accepts such employment.
2. Duties And Obligations Of Employee:
2.1 General Duties: Employee shall serve as the Chief
Operating Officer and Crisis Manager of PCL. In such capacity, subject to
approval of the Bankruptcy Court when and as necessary, or the consent of the
Board of Directors (the "Board") of PCL, when required by the terms of this
Agreement, Employee shall do and perform all services, acts or things reasonably
necessary or advisable to manage and conduct the business of Employer,
including, without limitation, the following:
a. authorizing and approving any and all borrowings,
loans or advances from third parties, including loans and advances made under
the DIP Facility;
b. authorizing and approving all disbursements by PCL
and signing all checks on behalf of PCL; and
c. authorizing and approving the hiring and firing of
all officers and employees of PCL.
Except as expressly provided in Section 2.2, below, Employee shall not require
the consent of the Board of Directors (the "Board") of PCL to take the actions
set forth in subparagraphs a, b and c, above.
2.2 Matters Requiring Consent Of Board Of Directors:
Employee shall not, without specific approval of the Board, do or contract to
do, any of the following:
a. file any plan of reorganization for PCL or withdraw
or materially modify or amend any previously filed plan of reorganization for
PCL;
b. authorize PCL to seek any relief from the
Bankruptcy Court in the Chapter 11 case or take any position before the
Bankruptcy Court on any matter in the Chapter 11 cases unless such relief or
such matter relates to the business or operations of PCL; and
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c. terminate the services of any officer of PCL or
promote an existing employee or hire a new employee to replace any officer whose
services have been terminated.
With respect to action taken pursuant to subparagraph c,
above, the Board shall delegate its authority to a subcommittee (the
"Subcommittee") comprising two members of the Board. The initial members of the
Subcommittee shall be Jack Burgess and Vince Schmitz. The Subcommittee shall
have three (3) days within which to respond to any request for authority made by
the Employee pursuant to Section 2.2 c, above. If the Subcommittee does not
respond within said three-day period and further fails to respond within one (1)
day of written notice of such failure to respond, Employee may take action
pursuant to Section 2.2 c without the approval or authorization of the
Subcommittee.
2.3 Bankruptcy Court Approval: Employee understands and
acknowledges that the Bankruptcy Code and orders entered by the Bankruptcy
Court in the Bankruptcy Case may require PCL to obtain prior approval of the
Bankruptcy Court before entering into certain transactions, in particular,
transactions which are deemed to be out of the ordinary course of PCL's
business. If advised by PCL's insolvency counsel that such approval is
necessary, Employee will obtain such approval from the Bankruptcy Court before
entering into any such transactions.
2.4 Competing Offers: Employee understands and acknowledges
that as a debtor in possession under the Bankruptcy Code, PCL may be required
to entertain higher and better offers (individually, a "Competing Offer";
collectively, "Competing Offers") for its business than the transaction
contemplated by the Term Sheet. Employee may be in a position of conflict with
respect to such Competing Offers. Accordingly, Employee agrees that he shall
have no authority on behalf of PCL to act or take action with respect to any
inquiry as to due diligence for or response to any Competing Offer submitted by
an interested party for the business of PCL and that all such matters shall be
dealt with by the Independent Advisor.
2.5 Devotion To Employee's Business: Employee shall devote
such time and effort as Employee, in his sole reasonable discretion, believes
is necessary to ensure the proper and prudent conduct of Employer's business
during the Term. It is expressly agreed and understood, however, that Employee
does not intend to devote his full-time efforts to Employer's business.
Additionally, Employer agrees and acknowledges that Employee may, during the
Term, invest or engage in other businesses and pursuits, some of which may
compete, either directly or indirectly, with Employer's business.
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3. Obligations Of Employer:
3.1 General Description: Employer shall provide Employee
with the compensation, incentives, benefits and business expense reimbursements
specified elsewhere in this Agreement.
3.2 Office And Staff: Employer shall provide Employee with
a private office, secretarial assistance, office equipment, supplies, and other
facilities and services, suitable to Employee's position and adequate for the
performance of Employee's duties.
3.3 Indemnification Of Losses Of Employee: Employer shall
indemnify Employee for all losses sustained by Employee in direct consequence
of the discharge of his duties on Employer's behalf other than losses arising
from the gross negligence or willful misconduct of Employee.
4. Compensation:
4.1 Salary: As compensation for the services to be rendered
by Employee hereunder, Employer shall pay Employee, in accordance with the
usual payroll practices of Employer, a salary at the rate of $104,000 per
annum, payable not less than bi-monthly during the Term. In the event Employee
is terminated for cause pursuant to Section 5.1, below, or in the event
Employee terminates his obligations under this Agreement other than for cause
pursuant to Section 5.3, below, Employee shall only be entitled to receive such
compensation (including, without limitation, reimbursement for reasonable
out-of-pocket expenses) as shall have accrued through the effective date of
such termination.
4.2 Expenses: The Employer shall reimburse the Employee for
reasonable out-of-pocket expenses incurred by the Employee in connection with
his employment hereunder upon presentation of appropriate receipts or vouchers.
5. Termination Of Employment:
5.1 Termination For Cause By Employer: Employer shall have
the right to terminate this Agreement if Employee willfully breaches the
duties which he is required to perform under the terms of this Agreement or
engages in gross negligence or willful misconduct; or commits such acts of
dishonesty, fraud or misrepresentation as would prevent the effective
performance of his duties. Employer may at its option terminate this Agreement
for the reasons stated in this Section 5.1 by giving written notice of
termination to Employee, which notice shall specify the ground(s) for
termination and shall be supported by a statement of all relevant facts.
Termination under
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this Section 5.1 shall be considered "for cause" for the purposes of this
Agreement.
5.2 Termination By Employer Without Cause: This Agreement
shall be terminated upon the death of Employee and may be terminated by Employer
not less than two months after Employee suffers any physical or mental
disability that would prevent the performance of his duties under this
Agreement. In the case of physical or mental disability of employee, Employer's
termination shall be effected by giving not less than twenty (20) days written
notice of termination to Employee. Termination under this Section 5.2 shall not
be considered "for cause" for the purposes of this Agreement.
5.3 Termination By Employee For Cause: Employee may only
terminate his obligations under this Agreement if Employer fails to cure a
breach of its obligations under this Agreement within ten (10) days of written
notice thereof in the event of a monetary default or within thirty (30) days of
written notice thereof in the event of a non-monetary default.
6. General Provisions:
6.1 Sole Check Signing Authority: During the Term, only
Employee shall have the authority to execute checks on behalf of PCL.
6.2 Attendance At Board Meetings: Employee shall have the
right to attend all meetings of the Board, whether in person or telephonically,
except meetings, or such portions of meetings at which the Board considers or
discusses any Competing Offer.
6.3 Reporting: In the exercise of his duties and
responsibilities hereunder, Employee shall report to and, as required herein,
take direction from the Board. Nathan Headley ("Headley"), whose services may
be retained by PCL after the Effective Date, shall report directly to, and
shall take direction from Employee.
6.4 Notices: All notices, elections or other communications
given pursuant to this Agreement shall be in writing, personally delivered or
sent registered or certified mail, addressed as follows:
If to Employer: Physician's Clinical Laboratory, Inc.
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Attn:
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If to Employee: J. Marvin Feigenbaum
c/o Nu-Tech Bio-Med, Inc.
500 Fifth Avenue
Suite 2424
New York, NY 10036
or such other addresses as shall have been furnished by the parties to this
Agreement. Any notice, election or other communication shall be deemed to have
been given when actually received, except when given by registered, first-class
mail, it shall be deemed to be given when sent.
6.5 Disputes. Any disputes relating to the interpretation, application
or enforcement of this Agreement may only be submitted to the Bankruptcy Court
for resolution and adjudication. If any such action is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which that party may be entitled.
6.6 Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Employee by Employer and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this Agreement acknowledges that no representations,
inducements, promises or other agreements, oral or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise, not contained in
this Agreement shall be valid or binding on either party.
6.7 Modification. This Agreement may not be changed orally, but may
be changed only by a further instrument in writing, signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
6.8 Effective Waiver. The failure of either party to insist on strict
compliance with any of the terms, covenants or conditions of this Agreement
shall not be deemed a waiver of that term, covenant or condition, nor shall any
waiver or relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all or any other
times.
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6.9 Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Executed this 7th day of November, 1996, at Sacramento, California.
"EMPLOYER"
PHYSICIAN'S CLINICAL LABORATORY, INC.
a Delaware corporation
By /s/ RICHARD M. BROOKS
----------------------------------------
Its Senior Vice President and
Chief Financial Officer
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"EMPLOYEE"
By /s/ J. MARVIN FEIGENBAUM
-----------------------------------------
J. Marvin Feigenbaum
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EXHIBIT 99.1
[PHYSICIANS LOGO]
PRESS RELEASE
PHYSICIANS CLINICAL LABORATORY REACHES
ARRANGEMENT WITH SECURED CREDITORS FOR
RESTRUCTURING OF DEBT; RECEIVES COMMITMENT
FOR $9.8 MILLION IN FINANCING
November 8, 1996 Sacramento, California
The Board of Directors of Physicians Clinical Laboratory, Inc. ("PCL")
announced today that it has filed a chapter 11 case in Los Angeles to facilitate
a restructuring of its debt and the acquisition of the Company by an investor
group. The investor group intends to make an immediate $9,800,000 cash infusion
to provide adequate working capital and to assure continuity of operations and
quality of service.
An additional $5,000,000 of capital will be injected into the Company
upon completion of the restructuring, which is anticipated to take five to six
months.
Jack Burgis, Chairman of the Board, said:
"This restructuring is an extremely positive development for the
Company. It will provide the Company with adequate liquidity and
ensure the long-term viability of PCL. This restructuring will
enable us to satisfy our customers and satisfy our creditors on
a forward going basis."
Under the proposed terms of the restructuring, the interests of the
Company's existing stockholders and the interests of the holders of the
Company's debentures would be significantly and substantially diluted and
possibly eliminated.
Physicians Clinical Laboratory is a full service clinical laboratory and
operates in the Sacramento, San Francisco Bay Area, Central Valley, and Los
Angeles markets. Based in Sacramento, the Company maintains one full service
laboratory, two day laboratories, seventeen Stat facilities, and 225 patient
service centers, and employs approximately 1,200 people throughout California.
For further information, please contact J. Marvin Feigenbaum or Richard
Brooks, at telephone number (916) 648-3500.
Corporate Headquarters
2495 Natomas Park Drive
Sacramento, Ca 95833
916 648-3500
