Syncor Form 10k 2001

0000202763-02-000071.txt : 20020415 0000202763-02-000071.hdr.sgml : 20020415 ACCESSION NUMBER: 0000202763-02-000071 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNCOR INTERNATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000202763 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 850229124 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08640 FILM NUMBER: 02597262 BUSINESS ADDRESS: STREET 1: SYNCOR INTERNATIONAL CORP STREET 2: 6464 CANOGA AVENUE CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 818.737.4000 MAIL ADDRESS: STREET 1: SYNCOR INTERNATIONAL CORP STREET 2: 6464 CANOGA AVENUE CITY: WOODLAND HILLS STATE: CA ZIP: 91367 FORMER COMPANY: FORMER CONFORMED NAME: NUCLEAR PHARMACY INC DATE OF NAME CHANGE: 19860309 10-K 1 form10k2001.htm SYNCOR FORM 10K 2001 Syncor Form 10k 2001

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

______________________________________________________

For the Fiscal Year Ended December 31, 2001

Commission File Number 0-8640

SYNCOR INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		85-0229124
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

6464 Canoga Avenue, Woodland Hills, California		91367-2407
(Address of principal executive offices)		(Zip Code)

(818) 737-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK $.05 PAR VALUE
(Title of Class)

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 Ö No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the average closing bid and asked prices of such stock on March 25, 2002, was $613,263,495. For purposes of the foregoing calculation, each executive officer and director of Registrant was deemed an “affiliate” of Registrant. The number of shares outstanding (excluding treasury shares) of the Registrant’s $0.05 par value common stock as of March 25, 2002 was 24,756,517 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement for Registrant’s Annual Meeting of Stockholders to be held on June 17, 2002, are incorporated by reference into Part III of this report.

SYNCOR INTERNATIONAL CORPORATION

TABLE OF CONTENTS

FORM 10-K ANNUAL REPORT

December 31, 2001

PART I

Item 1.	BUSINESS	1

Item 2.	PROPERTIES	19

Item 3.	LEGAL PROCEEDINGS	19

Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	N/A

PART II

Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
	STOCKHOLDER MATTERS	20

Item 6.	SELECTED FINANCIAL DATA	20

Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS	22

Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31

Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	32

Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
	ACCOUNTING AND FINANCIAL DISCLOSURE	N/A

PART III

Item 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	33

Item 11.	EXECUTIVE COMPENSATION	33

Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
	MANAGEMENT	33

Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	33

PART IV

Item 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
	ON FORM 8-K	34

PART I

Item 1. BUSINESS.

Overview

We are a provider of specialty services and products used in the diagnosis, treatment and management of heart disease, cancer and other disorders. We are the nation’s leading provider of radiopharmacy services and a leading provider of outpatient medical imaging services.

Radiopharmacy Business

Our 130 domestic radiopharmacies serve hospitals, medical clinics and medical imaging centers in 48 states and supply more than 50% of the U.S. market for these specialized services. We also own or operate 19 radiopharmacies in 13 foreign countries and in Puerto Rico. Our radiopharmacies compound, dispense and distribute patient-specific radiopharmaceutical prescriptions, or unit doses, used in nuclear diagnostic imaging procedures. We also distribute radiopharmaceuticals in bulk for manufacturers.

A radiopharmaceutical is a radioactive compound formed by combining precise amounts of radioactive materials with targeting compounds that concentrate in specific human organs or tissues. Radiopharmaceuticals, like other pharmaceuticals, are prescribed by physicians based on their patients’ specific needs. When administered to the patient, the radiopharmaceutical can be detected with the use of specialized medical imaging equipment. Radiopharmaceutical nuclear imaging procedures are used by physicians primarily to detect irregularities in organ tissue or function in order to diagnose heart disease, cancer and other disorders. Radiopharmaceuticals are also used in some cases to treat, manage and monitor disease.

The most common use of nuclear imaging procedures is for the diagnosis of heart disease. We distribute Cardiolite®, made by Bristol-Myers Squibb, through a long-standing agreement that we originally had with DuPont Pharmaceuticals until it was acquired by Bristol-Myers. We have been instrumental in making Cardiolite® the best-selling cardiology imaging agent in the U.S. We distribute Cardiolite® on an exclusive basis within specified geographic areas under our agreement with Bristol-Myers.

In addition, we have recently undertaken new initiatives to produce and distribute other complex pharmaceuticals and products used in diagnosing and treating disease and other health problems. Complex pharmaceuticals are products that have challenging storage or handling requirements, may require patient specific compounding or ultra-precise dispensing accuracy, may require rapid response to critical conditions or, due to its cost or limited availability, may require a stockless approach to inventory management. These products include F-18 Fluorodeoxyglucose, or FDG, and Xigris™, which is manufactured by Eli Lilly and Company. We produce and distribute FDG, the most commonly used radiopharmaceutical in positron emission tomography (PET), a highly sensitive imaging technology used to diagnose cancer and manage cancer therapies. We have a strategic partnership with Eli Lilly to be their exclusive rapid response provider of Xigris, a biotechnology compound used to treat severe sepsis, a life-threatening condition if not treated immediately.

Medical Imaging Business

We also are a leading independent provider of outpatient medical imaging services. Our 65 outpatient medical imaging centers are organized in clusters located primarily in Arizona, California, Florida and Texas. We also own or operate 19 medical imaging centers in five foreign countries and Puerto Rico. Medical imaging services are principally noninvasive procedures that generate representations of internal anatomy and convert them to film or digital media to aid in the detection and diagnosis of diseases and other disorders. By concentrating centers in targeted markets, we offer managed care organizations and other third-party payors a full complement of medical imaging services, including magnetic resonance imaging, or MRI, computed tomography, or CT, traditional X-ray, mammography, ultrasound and fluoroscopy imaging, as well as PET imaging services.

Industries

Radiopharmacy Services Industry

Radiopharmaceuticals have a short shelf-life, because they utilize radioactive materials that continuously decay. Through the late 1970s, hospitals typically operated their own on-site radiopharmacies that compounded radiopharmaceuticals as needed for each hospital's imaging needs, which was believed to be the only viable means of having these time-sensitive products available for procedures when needed. In 1974, we pioneered the concept of outsourcing unit-dose radiopharmacy services. Our outsourcing approach has been widely adopted because it lowers hospital inventory and other costs and expenses and enhances physician service and support. Today, nearly 90% of radiopharmaceutical unit doses are compounded off-site.

As the U.S. population has increased and life expectancies have continued to increase, the demand for radiopharmacy services also has increased, particularly in the areas of cardiology and oncology. Although used for many imaging procedures, the most common use for radiopharmaceuticals is for cardiology imaging procedures. These procedures are very effective in revealing the size, shape and other structural characteristics of the heart and other human tissues and have gained widespread clinical acceptance as important tools in detecting and diagnosing certain heart problems. As the benefits of preventative medicine are becoming more widespread, we believe that cancer-related radiopharmaceutical imaging procedures and therapies also are gaining wider acceptance.

Approximately 12 million radiopharmaceutical imaging procedures were performed in the U.S. in 2001, including more than 150,000 PET imaging procedures. In 2001, the U.S. market for all radiopharmacy services was approximately $1.12 billion, of which about 66% related to heart imaging procedures and 11.5% related to cancer imaging procedures. From 1994 through 2001, radiopharmacy services expenditures have grown at an estimated compounded annual growth rate of 10%, and we anticipate that the U.S. market for radiopharmacy services will continue to grow due, in part, to aging population demographics and demand for less invasive methods of diagnosis and treatment.

We believe that advances in medical imaging technology and new applications for nuclear imaging procedures also will contribute to increased demand for radiopharmacy services. For example, PET imaging can reveal function, or metabolism, at the cellular level, which differentiates it from other imaging procedures such as MRI and CT imaging, which primarily demonstrate structure, or anatomy. PET is a clinically proven, safe method for the imaging of an increasing number of diseases and disorders, including colon cancer, lung cancer, breast cancer, lymphoma, brain cancer, heart disease and neurological disorders such as Alzheimer’s Disease. PET imaging can be used to visualize rapidly growing tumors, to determine tumor response to radiation or chemotherapy, to diagnose recurrence of tumor growth after surgical removal, to decide the best location for a biopsy of a suspected tumor and to differentiate harmless scarring, or radiation necrosis, from new tumor growth. PET imaging also is a useful tool for determining whether exploratory surgery, radiation therapy, organ transplantation or other procedures may be necessary.

Medical Imaging Services Industry

Medical imaging services are principally non-invasive procedures that generate representations of internal anatomy and convert them to film or digital media for viewing. Film is transmitted by computer. Medical imaging facilitates the early detection and diagnosis of diseases and other disorders, helping to minimize the cost and amount of care required and reducing the need for more costly, invasive diagnostic procedures

There are several types of medical imaging services, or modalities, including:

	Magnetic resonance imaging (MRI)– MRI uses high-strength magnetic fields to produce computer-processed images of the body. MRI offers excellent image quality, and in many cases is the preferred means of imaging tissues and organs such as the brain, spinal cord and other internal anatomy.

	Computed tomography (CT) imaging – CT imaging uses computer analysis of information generated by an X-ray beam to produce multiple images of a particular organ or area of the body. CT imaging is used to detect tumors and other conditions affecting bones and internal organs.

	Nuclear Imaging– Nuclear imaging uses special equipment, most commonly a gamma camera, to detect gamma rays that concentrate in a particular organ or part of the body. Nuclear imaging is an effective tool for the early diagnosis of heart disease, thyroid disease tumors, bone changes and other conditions.

	Positron emission tomography (PET) imaging – PET is a nuclear medicine imaging technique that uses radiopharmaceuticals with shelf-lives that are extremely short. FDG is the most commonly used PET isotope. PET imaging demonstrates function, or metabolism, at the cellular level, which differentiates it from other medical imaging procedures such as MRI or CT imaging, which primarily demonstrates structure, or anatomy.

	X-ray –X-ray uses electromagnetic radiation to penetrate the body to form an image on film. Conventional X-ray is used to study soft tissue and bone.

	Mammography –Mammography uses a low-dose X-ray of the breast tissue that allows detection of tumors and cysts.

	Ultrasound – Ultrasound uses high frequency sound waves that are sent out into the body. The reflected "echoes" create an image from inside the body. Ultrasound is used on internal organs and, most commonly, fetuses.

	Fluoroscopy –Fluoroscopy uses an enhanced X-ray to study organs, typically in the digestive tract. Fluoroscopy differs from conventional X-ray in that it enables the radiologist to see "live" images of body functions, such as the digestive system at work on a monitor rather than on a still film.

Total annual spending for medical imaging services in the U.S. for 2001 was estimated at $66 billion. Demand for all medical imaging services in the U.S. has increased approximately 8% per year over the past five years primarily due to:

* aging of the general population;

* more active lifestyles, resulting in an increase in incidence of injuries;

* advances in medical imaging equipment and technology;

* physician acceptance of advanced medical imaging procedures;

* development of new applications for existing medical imaging technologies;

* expanded reimbursement for advanced medical imaging procedures; and

* a wider acceptance of the benefits of preventative medicine.

Medical imaging procedures typically are performed in hospitals, medical clinics, free-standing outpatient medical imaging centers and mobile medical imaging centers. Most hospitals and medical clinics own and operate their own medical imaging systems within their facilities to serve their own patients. These hospitals or clinics bill their patients’ third-party payors, such as health insurers, Medicare or Medicaid, for the imaging services.

Free-standing outpatient medical imaging centers, like the imaging centers we own and operate, are located in permanent facilities outside of hospitals or medical clinics. Free-standing centers depend primarily on physician referrals for patients. They generally do not contract with hospitals or medical clinics, and may compete with local hospitals and medical clinics in the provision of medical imaging services. Like hospitals and medical clinics, independently owned and operated outpatient medical imaging centers bill their patients or third-party payors for their services. The ownership of outpatient medical imaging centers in the U.S. is highly fragmented, with more than 4,100 independent outpatient centers nationwide.

Competitive Strengths

We believe the competitive strengths of our business include:

Market Leadership

We own and operate 130 radiopharmacies nationwide, or more radiopharmacies than our three largest competitors combined. Our radiopharmacies can deliver radiopharmaceuticals within 90 minutes to hospitals, medical clinics and medical imaging centers that perform more than 90% of all radiopharmaceutical imaging procedures performed in the U.S. in 2002. Radiopharmaceuticals are time-sensitive, with half-lives ranging from 110 minutes to eight days, with the majority of the radiopharmaceuticals we dispense having a half life of six hours. Accordingly, our proximity to our customers is one of our principal strengths.

Our established national distribution channels have enabled us to establish exclusive relationships with leading companies who seek a national distribution channel. We are the exclusive distributor of Bristol-Myers' Cardiolite® in specified geographic areas surrounding most of our U.S. radiopharmacies. Cardiolite® has become the best-selling cardiac imaging agent in the U.S. since we began distributing it. We also recently entered into an exclusive arrangement with Eli Lilly to distribute its Xigris product on an emergency basis nationwide. Xigris is a complex biotechnology compound for treating severe sepsis, a life-threatening condition if not treated immediately. We offer Eli Lilly the unique ability to distribute Xigris within three hours to most hospitals nationwide.

Our medical imaging centers are organized in local clusters within targeted regions. Regional critical mass results in cost efficiencies from higher equipment utilization and lower overhead costs and staffing expenses. Our significant regional presence also allows us to attract and contract with leading radiologists and negotiate favorable relationships with third-party payors in the region.

Superior Service

Our radiopharmacies operate under a single set of business processes and information systems that enable us to provide prompt, reliable service, rapidly implement new services and products and provide valuable information on product usage to manufacturers and other suppliers. We can receive and process customer orders and deliver patient-specific unit doses 24 hours a day, 7 days a week. This enables our customers to obtain the correct doses at the right time in order to effectively schedule radiopharmaceutical imaging procedures. In 2001, we compounded and dispensed more than approximately 7 million unit doses with a reported dispensing error rate of approximately 1/100,000. We also remove and dispose of the contaminated syringes containing radioactive materials from our customer sites. Our tracking systems allow our customers to meet governmental reporting requirements.

The local clustering of our medical imaging centers allows us to offer a range of medical imaging modalities and services, greater flexibility of scheduling, timely and accurate diagnoses, and the ability to establish and maintain relationships with referring physicians.

Broad Range of Services and Products

We offer more than 50 brand name and generic radiopharmaceuticals. We are applying our strengths developed in the marketing and distribution of Cardiolite® to position ourselves to become a major provider of PET radiopharmaceuticals, brachytherapy seeds and other time-sensitive, complex pharmaceutical products, such as Xigris, where we believe there are other marketing opportunities. In February 2002, we entered into an agreement with IDEC Pharmaceuticals Corporation to distribute Zevalin, a novel radioimmunotherapy recently approved by the US Food and Drug Administration for the treatment of certain Non-Hodgkin's Lymphomas. We believe that our leading market share and proven ability to enhance product brands will help to assure our access to new radiopharmaceuticals and other products suitable for rapid distribution through our nationwide radiopharmacy network.

Local clustering of our medical imaging centers allows us to provide convenient scheduling and a full range of medical imaging services within a localized market in a cost-effective manner, because each center is not required to offer each type of imaging service. Further, local clusters of imaging centers facilitate our relationships with referring physicians because we can serve their patients more quickly and efficiently.

Innovation and Product Safety

We have a long history of providing innovative solutions to our customers’ needs with services and products that enhance the safety and performance of the products we distribute. We pioneered the concept of outsourcing radiopharmacy services in 1974. Our radiopharmacy innovations also include our patented tungsten radiopharmaceutical delivery systems, commonly known as “Pigs,” and our SECURE® Safety Insert Systems, which set new standards for the safe handling and delivery of radiopharmaceuticals and ease of use in compliance with rigorous regulations governing our industry.

Integrated Information Technology and Customer Support

We have developed a number of proprietary information system technologies, including SYNtrac™, Unit Dose Manager™ and NucLink™, to assist our customers in the management of their nuclear medicine departments and radiopharmaceutical inventories, to make the calculation of patient-specific radiopharmaceutical prescriptions easier, and to facilitate electronic communication with our local radiopharmacies. These systems are used by more than 1,600 of our radiopharmacy customers to meet the extensive record-keeping and other regulatory requirements applicable to their businesses. We believe that gaining access to SYNtrac and other systems and our logistics management skills is an important factor in many customers’ decisions to enter into multi-year primary supplier agreements with us.

Radiopharmacy Business

Our radiopharmacies primarily compound, dispense and distribute patient-specific radiopharmaceutical prescriptions, or unit doses, used in nuclear diagnostic imaging procedures. Our radiopharmacy customers typically order individual patient prescriptions for radiopharmaceutical unit doses by telephone or via a direct computer link-up with our radiopharmacies. As we receive prescriptions, we schedule them for compounding, dispensing and delivery to the customer. Compounding of unit doses involves mixing a radioactive isotope, which is constantly

decaying, with the appropriate pharmaceutical. Our radiopharmacists calculate the precise amount of radioisotope that will deliver the correct dosage at the scheduled time of use, taking into account the rate of decay. Unit doses are typically drawn from a vial into a syringe for transportation and administration. Because the radioisotopes used in radiopharmaceuticals emit radiation, they must be stored and delivered in specialized containers. We have developed proprietary, OSHA-compliant, radiopharmaceutical delivery systems, including our SECURE® Safety Insert Systems and our line of tungsten containers, commonly known as "Pigs," that allow for the safe transport and handling of radioactive substances and reduced radiation exposure to our radiopharmacy personnel and customers.

Once the radiopharmaceutical unit dose is prepared, we coordinate the delivery of the unit dose directly to the customer’s point of use through our staff of 862 customer service assistants and fleet of more than 800 delivery vehicles nationwide. Most deliveries are made next-day, within one to six hours before the scheduled imaging procedure. Because the radioisotope is constantly decaying, reliable and timely delivery is essential. Our 130 radiopharmacies nationwide can deliver radiopharmaceuticals within 90 minutes to hospitals, medical centers and medical imaging centers that performed more than 90% of all radiopharmaceutical imaging procedures performed in the U.S. in 2001. This enables us to process prescription orders for scheduled radiopharmaceutical patient imaging procedures in a timely and cost effective manner and to provide unscheduled emergency services.

After the radiopharmaceutical has been administered to the patient, the syringe is placed back into the same container in which we delivered it to be picked up and returned to our radiopharmacy by our customer service assistants. We take responsibility for disposing of the used syringe and maintaining appropriate records that the product was compounded, delivered and disposed of in accordance with the myriad of regulations covering the use, handling and disposal of radioactive materials.

Services and Products

We compound, dispense and distribute unit-dose radiopharmaceuticals made by a number of manufacturers. We also distribute radiopharmaceuticals in bulk to hospitals and other customers that compound and dispense the product themselves.

Our primary products are cardiology imaging agents used in diagnosing heart problems. In 2001, sales of Cardiolite® represented an estimated 58% of sales of all cardiac imaging agents in the U.S. and 41.2% of our total sales.

We act as the primary distributor of Cardiolite, as well as a distributor of Bristol-Myers' other radiopharmaceutical products, under the terms of a supply and distribution agreement with Bristol-Myers. Under the terms of the agreement, we have exclusive rights to distribute Cardiolite within specified geographic areas surrounding most of our existing U.S. radiopharmacies. Our exclusive rights to distribute Cardiolite also extend to new radiopharmacies that we may develop or acquire in local markets where Bristol-Myers has no preexisting distribution arrangement. In other markets, and in areas outside of the specified areas surrounding our radiopharmacies, our rights to distribute Cardiolite are nonexclusive. Our rights to distribute other Bristol-Myers products, including Thallium, also are nonexclusive.

Our other principal radiopharmacy products include Thallium, a generic cardiac imaging agent, which accounted for 6.3% of our net sales in 2001. No other product constitutes more than 1.4% of our net sales.

We also produce FDG, which we distribute through our network of radiopharmacies. FDG is the most commonly used radioisotope in PET radiopharmaceuticals. When administered intravenously, FDG can reveal how certain organs and tissues are functioning by measuring glucose metabolism. It is widely used to study organ and tissue functions in neurology, cardiology and oncology. FDG is produced in cyclotrons and has a half-life of only 110 minutes. In order to effectively provide PET radiopharmaceuticals, it is essential to have adequate supplies of FDG in proximity to the radiopharmacy where the PET radiopharmaceutical is to be compounded and dispensed. To ensure an adequate supply of FDG, we have built or acquired 8 cyclotron facilities in key markets and have entered into arrangements with several local universities and other cyclotron owners and operators to supply us with this critical component of PET radiopharmaceuticals in other markets.

We also produce and distribute Iodine-123 capsules. Iodine-123 is a radiopharmaceutical used to diagnose and treat thyroid disorders. We manufacture Iodine-123 capsules at our Golden, Colorado facility. Our radiopharmacies also distribute Iodine-125 brachytherapy seeds, which are used to treat prostate cancer. We manufactured our own line of Iodine-125 brachytherapy seeds until February 2002, when we discontinued production of the seeds. We are currently evaluating whether or not to re-start the manufacture of seeds.

We have other businesses that complement our radiopharmacy services business. We provide radiology technical staff on a temporary or full-time basis to hospitals, radiology clinics, nuclear cardiology clinics and physician offices in over thirty markets nationwide. On August 1, 2001, we acquired Inovision Radiation Measurements, LLC and its affiliate, Victoreen, LLC, both of which now operate as Syncor Radiation Management, LLC. As a result of the acquisition, we now manufacture and supply radiation measurement equipment and related accessories used by nuclear medicine departments, radiopharmacies and other businesses that handle radioactive materials. On August 31, 2001, we acquired InteCardia, Inc., a provider of cardiovascular services through the operation of a state-of-the-art cardiac diagnostic facility that offers outpatient cardiac catheterization, nuclear cardiology and echocardiography. InteCardia also offers nuclear cardiology groups with full turnkey services, including the provision of imaging and cardiac stress equipment and nuclear medicine technologists.

Proprietary Systems and Technologies

In 1994, we introduced the SECURE® Safety Insert System, which is designed to eliminate the potential for contamination of lead-lined or tungsten radiopharmaceutical containers with radioactive material or the blood from used radiopharmaceutical syringes. With our system, the risk of needle sticks also is reduced significantly. We believe that our patented SECURE® Safety Insert System is the only system currently available that meets new, more stringent OSHA industry standards that went into effect in July 2001. We also have patent rights to a family of tungsten radiopharmaceutical delivery systems that we refer to as the “Pigs.” The Pigs are radiopharmaceutical containers that are smaller and weigh considerably less than traditional containers used to transport radiopharmaceuticals and set new industry standards for the safe transport and handling of radiopharmaceuticals, including FDG. Our tungsten containers also provide enhanced radiation shielding compared to lead-lined delivery systems typically used by our competitors, resulting in a reduction in radiation exposure to our pharmacy personnel and customers.

We also license to our customers our proprietary Windows-based SYNtrac, Unit Dose Manager and NucLink integrated software and hardware systems to assist them in the management of their nuclear medicine departments and to facilitate electronic communication with our radiopharmacies. As of December 31, 2001, we licensed our software systems to more than 1,600 of our radiopharmacy customers.

Customers

We provide radiopharmacy services and products to hospitals, medical centers and medical imaging clinics in 48 states in the U.S., Puerto Rico and 13 foreign countries. Our principal radiopharmacy service customers are:

* corporate account customers such as group purchasing organizations, or GPOs;

* local independent hospitals and medical clinics; and

* community-based, multiple-facility integrated healthcare networks, or IHNs.

Corporate account customers, either GPOs or proprietary multi-hospital groups, negotiate contracts on behalf of IHNs, independent hospitals, and clinics. These contracts are multi-year contracts, although certain contracts have clauses that permit the GPO or multi-hospital group to cancel the contract if certain conditions occur. We estimated that we have 1,165 customers committed under a national or regional contract. Sales to members or affiliates of our corporate account customers were approximately $225 million in 2001, representing nearly 29% of our net sales, compared to approximately $187 million, or nearly 30% of our net sales in 2000. Our largest corporate account customers include AmeriNet Inc. and Health Trust Purchasing Group (formerly Columbia/HCA). In 2001, sales to AmeriNet and Health Trust represented 10% and 6%, respectively, of our net sales. No other corporate account customer accounts for as much as 5% of our net sales.

We also have customers that are affiliated with GPOs that do not have contracts with us. Sales to these customers were approximately $191 million in 2001, representing nearly 25% of our net sales, compared to approximately $168 million, or 26.8% of our net sales in 2000. No customers in this sales category accounted for as much as 5% of our net sales.

Despite the fact that the majority of IHN’s and hospitals hold membership or are affiliated with a GPO or proprietary multi-hospital group, some IHN’s and local independent hospitals choose not to participate in a national agreement. Our sales to these customers were approximately $133 million in 2001, representing nearly 17.2% of our net sales. This compares to $104 million, representing 16.5% of our net sales, in 2000. No local independent hospital or clinic accounted for as much as 5% of our net sales.

Sales and Marketing

We market and sell our radiopharmacy services and products and services in the U.S. directly through a dedicated sales force of more than 100 national and regional sales and marketing personnel. Our sales and marketing personnel are responsible for developing and managing customer relationships and for communicating the benefits of working with Syncor. To maintain a highly effective local presence, our field sales force works closely with local radiopharmacy managers to ensure that our customers’ expectations are met on a daily basis. We also have individuals dedicated to targeting and managing contracts with multi-hospital groups, including GPOs, proprietary hospital systems, and multi-hospital alliances. In addition, we have a specialty sales team designed to increase our sales in new areas separate from traditional nuclear medicine, such as brachytherapy and PET.

We also rely indirectly on the sales and marketing efforts by manufacturers of the radiopharmaceuticals we distribute. For example, our sales and marketing force works closely with Bristol-Myers’ sales and marketing personnel to make joint sales calls, prepare marketing and sales materials and educate customers regarding the Bristol-Myers products we distribute.

Distribution

We have a nationwide distribution network consisting of a national distribution center in Toledo, Ohio, and three regional distribution centers. Our national distribution center maintains a central warehouse of critical supplies in order to facilitate bulk-purchasing and minimize warehousing and inventory requirements at our radiopharmacies.

Competition

Our radiopharmacies in the U.S. compete for both unit-dose sales, which account for 90% of the U.S. market, and sales of bulk products, which account for the remaining 10%. We compete on a national level with radiopharmaceutical manufacturers that operate their own radiopharmacies, including Amersham, PLC and Mallinckrodt Inc. We also compete with Central Pharmacy Services, Inc., a nationwide owner and operator of radiopharmacies. We also compete in local markets across the U.S. with independent radiopharmacies and universities that own and operate their own radiopharmacies.

The key competitive factors affecting our radiopharmacy services business are:

* speed and reliability of radiopharmacy services;

* safety of radiopharmaceutical delivery systems;

* geographic scope of operations;

* range of radiopharmaceuticals and other products offered;

* integration of order and delivery functions with customers’ operations; and

* record keeping and regulatory compliance.

Our PET radiopharmaceuticals compete with PET radiopharmaceuticals produced and distributed by PETNet Radiopharmaceutical Services, Inc., Mobile P.E.T. Systems, Inc. and Eastern Isotopes.

Medical Imaging Business

We own or operate 65 free-standing outpatient medical imaging centers organized in clusters located primarily in Arizona, California, Florida and Texas. Each cluster offers a full complement of medical imaging services, including MRI, CT imaging, X-ray, ultrasound, mammography, fluoroscopy. We also own or operate 19 medical imaging centers in four foreign countries and Puerto Rico. Our foreign medical imaging centers include 2 catheterization labs.

Thirty-four of our centers offer only MRI, and the remaining 31 centers offer one or more of the different types of imaging services, including 4 centers that offer PET imaging. At each of our centers, we schedule patient imaging procedures specified by the referring physician and record all patient insurance and billing information. The scheduled imaging procedures are performed by our medical technologists under the supervision of licensed radiologists who perform their services on an independent contractor basis. The radiologists consult with referring physicians regarding the nature of the medical imaging procedures that are performed by our medical technologists and interpret the medical images.

Customers, Contracts and Payors

We depend primarily on physician referrals for patients at our medical imaging centers. We focus on developing a strong physician referral network and relationships with leading radiologists. We believe that our regional differentiation, combined with our full complement of medical imaging services, makes us attractive to managed care organizations and other payors, who increasingly prefer to work with fewer healthcare services providers, including medical imaging services providers.

Our medical imaging net sales depend to a large extent upon the acceptance of outpatient diagnostic imaging procedures as covered benefits under various third-party payor programs. In order to be reimbursed for these services, payment must be approved by private insurers or Medicare and Medicaid programs. In 2001, Medicare and Medicaid accounted for approximately 15.5% of our total net sales, while managed care organizations accounted for approximately 65.8%, and conventional indemnity insurance companies and workers’ compensation each accounted for approximately 8.0%. Other plans, including self-pay, account for the remainder.

Billing and Collection

Billing and collection and other administrative functions for most of our medical imaging centers are performed at regional billing offices located in Westlake Village, California, Plantation, Florida and Jacksonville, Florida. Our regional offices generally bill and collect both for technical services we provide at our centers and for professional services performed by radiologists affiliated with our centers. We believe that our ability to provide a single bill for all medical imaging services centers, instead of separate billing for technical, professional and other services, is preferred by third-party payors.

Accurate billing is crucial to reimbursement from third-party payors. In July 2001, we began implementing an enterprise-wide integrated medical imaging services information management and billing system. This new system will allow us to standardize and implement best operating practices and further consolidate billing and collection functions for all our medical imaging centers. Some of our recently acquired centers currently bill and collect on individual systems, but will be converted to consolidated billing and collection functions in our regional offices in the near future.

Imaging Systems Equipment

We operate a variety of medical imaging systems. As of December 31, 2001, we operated 69 MRI systems, 22 CT systems, 6 PET systems (including 2 systems in sites we managed but did not own) and 60 other systems, substantially all of which are owned by us. We have made significant investments in purchasing, updating and maintaining our systems in an effort to offer the latest, most advanced imaging systems available. As of December 31, 2001, approximately 44% of our systems were less than three years old. We have the ability to upgrade most of our current MRI and CT systems, which we believe reduces the potential for technological obsolescence. We continually evaluate our capital needs and periodically purchase new equipment or update or enhance existing equipment. We purchase our imaging systems from major medical equipment manufacturers, including General Electric Medical Systems, Hitachi Medical Systems, Siemens Medical Systems, and Phillips Medical Systems. As a major purchaser of medical imaging systems, we believe we receive relatively attractive pricing for equipment and service contracts from equipment manufacturers.

Sales and Marketing

We depend primarily on physician referrals for patients at our medical imaging centers. We market and sell our medical imaging services through local and regional marketing personnel and with the help of local radiologists affiliated with our centers. We focus our marketing and sales activities on attracting referrals from physicians representing various medical specialties and, to a lesser extent, on contracting with managed care organizations and others.

Competition

The market for diagnostic imaging services is highly fragmented and competitive. There are few national medical imaging service providers and more than 4,100 independent outpatient medical imaging centers nationwide. We compete with independent regional or local owners and operators of medical imaging centers, including hospitals and private medical clinics and radiology physician groups that own their own medical imaging equipment. We generally do not compete with the national imaging services providers, who tend not to have a significant presence in the markets we serve.

We believe that the key competitive factors affecting our medical imaging business are, in order of importance:

* range of medical imaging modalities and services offered;

* proximity of imaging center locations and flexibility of scheduling;

* timeliness and accuracy of diagnosis by our affiliated radiologists;

* ability to attract and retain qualified affiliated radiologists and technologists;

* quality and type of equipment used;

* price;

* relationships with referring physicians;

* participation in healthcare plans; and

* access to capital.

Government Regulation

Radiopharmacy Business

Each of our radiopharmacies in the U.S. is licensed by and must comply with the regulations of the U.S. Nuclear Regulatory Commission, or NRC, or corresponding state agencies. In addition, each radiopharmacy is licensed and regulated by the Board of Pharmacy in the state where it is located. Our manufacturing facility in Colorado and our FDG production facilities in Florida, California, Massachusetts, Missouri, Ohio, Pennsylvania, Texas and Washington, are licensed by the respective states to handle radioactive materials and are registered with the Food and Drug Administration, or FDA, as manufacturing facilities. As FDA-registered manufacturing facilities, they must comply with the FDA’s “current good manufacturing practices” standards.

Periodic inspections of our radiopharmacies and manufacturing facilities are conducted by the NRC, FDA and various other Federal and state agencies. Unsatisfactory inspection results could lead to escalated enforcement action, the imposition of fines or the suspension, revocation or denial of renewal of the licenses for the location inspected. We devote substantial human and financial resources to ensure continued regulatory compliance by our radiopharmacies and manufacturing facilities.

We are subject to various Federal, state and local regulations relating to occupational safety and health and the use and disposal of bio-hazardous materials. In addition, the products we dispense and distribute through our U.S. radiopharmacies are subject to Federal, state and local regulations relating to drugs and medical devices.

Our transport of radioactive materials is regulated by the U.S. Department of Transportation, or DOT. We audit our own radiopharmacies for DOT compliance. The DOT, and corresponding state regulators, also conduct periodic and unannounced inspections of our radiopharmacies for compliance with applicable regulations. Although we believe that our safety practices and procedures for storing, handling, transporting, and disposing of radioactive, bio-hazardous, and other hazardous and non-hazardous materials comply with applicable laws, regulations, and standards, we cannot eliminate completely the risk of accidental contamination or injury from such materials. In the event of a spill or release, we could be held liable for damages that result, and any liability could exceed the limits or fall outside our insurance coverage. We also could incur business interruption or other loss of business as a result of such an event. Furthermore, there can be no assurance that there will not be future changes to the regulatory programs applicable to us, and those changes could force us to make significant changes to our processes, procedures, or materials or to make investments in capital improvements to our facilities.

The need to comply with applicable environmental laws and regulations, such as those regulating the use and disposal of radioactive materials, is inherent in our industry and the normal operations of our radiopharmacies and our manufacturing facilities. Historically, compliance with such laws and regulations has not had a material adverse effect on our capital expenditures, earnings or competitive position.

The Centers for Medicare and Medicaid Services, or CMS (formerly the Health Care Financing Administrations, or HCFA), the U.S. agency that establishes Medicare reimbursement policies, regularly re-evaluates reimbursement rates for all health care provider services and has reduced such rates in the past. Starting August 1, 2000, CMS began using prices submitted by manufacturers to set reimbursements for many hospital outpatient drugs, including radiopharmaceuticals, instead of reimbursing these products as a direct cost pass-through. Since our sales of radiopharmaceuticals are made to hospitals and clinics, we get paid by them, not reimbursed by CMS. The introduction of set reimbursement rates nevertheless could have an impact on the prices that customers will be willing to pay for the radiopharmaceuticals that they purchase from us, and that impact, in turn, could affect our revenues. We are not able to predict the long-term impact of this change in the reimbursement system upon our business.

We are also subject to the Federal fraud and abuse laws governing provider and supplier relationships with Federal healthcare programs, including Medicare and Medicaid. One such law, the Federal Anti-Kickback Statute, prohibits payments made in exchange for referral of items or services covered by Federal health care programs, including Medicare and Medicaid. This law is extremely broad. It prohibits fraudulent claims, kickbacks, rebates and bribes, as well as payment of any form of remuneration, in cash or in kind, in return for referrals of business paid for by Federal health care programs. Also prohibited are any payments made to those in a position to recommendpurchasing, leasing, or ordering any goods, services, or items for which payment may be made under Federal health care programs. Failure to comply with the Anti-Kickback Statute can result in a felony conviction, imprisonment, significant fines, and exclusion from the Medicare and Medicaid programs.

Recognizing that the law is broad and may technically prohibit beneficial arrangements, the Office of the Inspector General ("OIG") of the Department of Health and Human Services developed regulations addressing those types of business arrangements that will not be subject to scrutiny under the law. These "Safe Harbors" describe activities that may technically violate the act, but which are not to be considered illegal when carried on in conformance with the regulations. For example, the Safe Harbors cover activities such as offering discounts to health care providers and contracting with physicians or other individuals that have the potential to refer business to us that would ultimately be billed to Medicare or Medicaid.

The OIG periodically issues Fraud Alerts identifying practices it believes may violate Federal fraud and abuse laws. One Fraud Alert addressed joint venture and contractual arrangements between healthcare providers. Another concerns prescription-drug marketing practices. Drug marketing activities may implicate the Federal fraud and abuse laws because the cost of drugs is often reimbursed by Medicare and Medicaid. According to the Fraud Alert, questionable practices may include payments to pharmacists to recommend a particular drug or product. We try to structure our business arrangements to comply with Federal fraud and abuse laws. However, if we are found to have violated any of these laws, we could suffer penalties, fines or possible exclusion from Medicare, Medicaid or other governmental programs. For example, our business arrangements may not fully meet the stringent criteria specified in the Safe Harbors. Failure to qualify for Safe

Harbor protection does not mean that an arrangement is illegal. Rather, the arrangement must be analyzed under the Anti-Kickback Statute to determine whether there is an intent to pay or receive remuneration in return for referrals. Even though we continuously strive to comply with the requirements of the Anti-Kickback Statute, liability under the Anti-Kickback Statute may still arise because of the intentions of the parties with whom we do business. Conduct and business arrangements that do not fully satisfy one of the Safe Harbors may result in increased scrutiny by government enforcement authorities such as the OIG.

Many states have adopted laws similar to the Federal Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for health care services reimbursed by any source, not just government health care programs. Although we believe that we comply with both Federal and state anti-kickback statutes, any finding of a violation of these laws could subject us to criminal and civil penalties or possible exclusion from Federal or state health care programs. Such penalties would adversely affect our financial performance and our ability to operate our business.

The Federal False Claims Act and similar state statutes prohibit presenting, or causing to be presented, a claim for payment under Medicare, Medicaid, and other Federally funded programs containing false or misleading information. Although our radiopharmacy services segment for the most part does not submit claims for payment directly to Federally funded programs, the costs of our products are included in the claims submitted by our customers to Federally funded programs. Thus, liability could accrue to us if a finding were made that we “caused” a false claim to be presented to the government. Violations of the False Claims Act can result in significant penalties and exclusion from participation in the Medicare and Medicaid programs. Liability under the False Claims Act arises primarily when an entity knowingly submits a false claim for reimbursement to the Federal government. Simple negligence should not give rise to liability, but submitting a claim with reckless disregard of its truth or falsity could result in substantial civil liability. In addition to the civil provisions of the False Claims Act, the Federal government can use several other criminal statutes to prosecute persons who submit false or fraudulent claims for payment to the Federal government. The costs of defending claims under the False Claims Act, and, if a violation is found, the cost of sanctions imposed under the Act, would adversely affect our financial performance.

Our foreign radiopharmacies are subject to the regulations of the countries in which they operate.

Medical Imaging Services

The Federal government and all states in which we operate or plan to operate medical imaging centers regulate various aspects of our medical imaging services business.

Reimbursement for medical imaging services is undergoing change as third-party payors, such as Medicare and Medicaid, health maintenance organizations and other health insurance carriers, increase effortsto control the cost, utilization and delivery of healthcare services. Legislation has been proposed or enacted at both the Federal and state levels to regulate healthcare delivery in general and medical imaging services in particular. CMS, the U.S. agency that establishes Medicare reimbursement policies, regularly re-evaluates reimbursement rates for all health care provider services, including medical imaging services, and has reduced such rates in the past. CMS' latest published figures applicable to reimbursement for medical imaging services reflect reductions in rates of up to 4 percent for 2002. We are not able to predict the long-term impact of changes in the reimbursement system upon our business.

The medical imaging services business also is subject to state insurance laws governing the presentation and payment of insurance claims for medical imaging services to patients with health insurance.

The establishment and operation of outpatient diagnostic imaging centers are subject to various licensing requirements. Some states require a Certificate of Need, or CON, in some circumstances to establish, construct, acquire or expand healthcare facilities and services. We may also have to comply with Federal certification requirements, such as the Federal certification requirement to provide mammography examinations and the Medicare certification requirement for our centers to be qualified as Independent Diagnostic Testing Facilities. Certificate of need regulations may limit or preclude us from providing our services in certain jurisdictions. In practice, certificate of need laws have prevented hospitals and other providers who have been unable to obtain a certificate of need from acquiring new machines or offering new services. A significant increase in the number of states regulating our business through certificate of need or similar programs could adversely impact us. Our medical imaging centers also are subject to Federal and state regulations relating to testing standards, personnel accreditation and compliance with government reimbursement programs.

Our centers are also subject to the Federal fraud and abuse laws described above for the radiopharmacy business. See “Government Regulation-Radiopharmacy Business” above. Among the types of relationships covered by the Safe Harbors developed by the OIG are personal service arrangements, such as the arrangements between radiologists and our medical imaging centers. In addition to the Safe Harbors, the OIG has issued Advisory Opinions, indicating whether the OIG would be likely to view a particular arrangement as violative of the Federal Anti-Kickback Statute. With respect to payments for marketing services, the OIG has indicated that if an arrangement contains certain characteristics, the arrangement may be more likely to be investigated by the OIG or found to violate the Federal Anti-Kickback Statute. Among the characteristics listed by the OIG are compensation arrangements based on a percentage of sales and the use of sales agents who are health professionals to exert undue influence on purchasers or patients. Our arrangements with physicians and other persons or entities who may be in a position to refer patients may not fully meet the stringent criteria specified in the Safe Harbors. Failure to qualify for Safe Harbor protection does not mean that an arrangement is illegal. Rather, the arrangement must be analyzed under the Anti-Kickback Statute to determine whether there is an intent to pay or receive remuneration in return for referrals. Even though we continuously strive to comply with the requirements of the Anti-Kickback Statute, liability under the Anti-Kickback Statute may still arise because of the intentions of the parties with whom we do business. Conduct and business arrangements that do not fully satisfy one of the Safe Harbors may result in increased scrutiny by government enforcement authorities such as the OIG. Our centers are also subject to the Federal False Claims Act described above for the radiopharmacy business. See “Government Regulation-Radiopharmacy Business” above.

The “Stark II” statute, enacted under the Omnibus Budget Reconciliation Act of 1993, prohibits a physician from making a referral to an entity for the furnishing of designated health services (including diagnostic imaging services) for which payment may be made under a Federal health care program, if the physician has a financial relationship with that entity. The term financial relationship includes both ownership interests and compensation arrangements. Any person who presents or causes to be presented a claim to the Medicare or Medicaid programs pursuant to a prohibited referral is also subject to significant penalties and possible exclusion from participation in Federal health care programs. In addition, a number of states (including California and Florida) have enacted their own versions of self-referral laws which may require physicians to disclose any financial interest they may have with a healthcare provider to their patients when referring patients to that provider. Any sanctions imposed on us under Stark or companion state laws could adversely affect our financial results and our business. Our medical imaging services business also may be subject to state laws that prohibit the practice of medicine by non-physicians or the splitting of fees between physicians and non-physicians.

The Federal Health Insurance Portability and Accountability Act of 1996 provides that it is a felony to knowingly and willfully execute any scheme to defraud any healthcare benefit program. This Act also imposes new requirements relating to the privacy of medical information. The government published regulations to implement these requirements in December 2000, with which health care providers are expected to comply by April 2003. A violation of these provisions may result in criminal or civil penalties, which would adversely affect our financial performance or our ability to operate our business. We have begun to address compliance with the Act and applicable regulations and expect the new requirements to have significant effect on the manner in which we handle health data and communicate with payors. The cost of compliance with this act could be significant and could adversely affect our financial performance and business.

We are also subject to licensing and regulation under Federal, state and local laws relating to the handling and disposal of medical specimens, infectious and hazardous waste and radioactive materials as well as to the safety and health of laboratory employees. The sanctions for failure to comply with these regulations may include denial of the right to conduct business, significant fines and criminal penalties.

Our foreign medical imaging centers are subject to the regulations of the countries in which they operate.

Patents, Trademarks, and Licenses

We own a number of trademarks and patents, including patent rights to our SECURE® Safety Insert System and our family of radiopharmaceutical delivery systems known as “Pigs.” SECURE^® Safety Inserts is a registered trademark, and CMI-Net™, NeRD™, NucLink™, PETPig™, Piglet™, Piglet2™, PharmaSeed™, SYNtrac™ and UDM™ are trademarks of the Company.

We license our SYNtrac, UDM and NucLink systems to our customers to assist in the management of their nuclear medicine departments and to facilitate electronic communication between our radiopharmacies and customers.

We believe that our trademarks, patents and licenses are important contributors to our ability to differentiate our radiopharmacy services from those of our competitors and build mutually beneficial long-term customer relationships.

Employees

As of December 31, 2001, we employed more than 4,200 people in the U.S., of whom approximately 3,000 were full-time employees. Of our full-time employees, approximately 1,580 are employed in our U.S. radiopharmacy business, 800 are employed in our U.S. medical imaging business, 400 are employed in our international operations, and the rest are in our corporate headquarters. Four hundred twenty of our U.S. radiopharmacy business employees are licensed nuclear pharmacists. With limited exceptions in foreign countries, none of our employees is covered by a collective bargaining agreement. We consider our employee relations to be good.

Environmental Matters

In operating our facilities, historically we have not encountered any major difficulties in effecting compliance with applicable pollution control laws. No material capital expenditures for environmental control facilities are expected. While we cannot predict the effect which any future legislation, regulations, or interpretations may have upon our operations, we do not anticipate any changes that would have a material adverse impact on our operations.

Risk Factors

Except for the historical information and discussions, statements contained in this Form 10-K may constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by such statements due to a number of factors, including the risk factors below.

Sales of Cardiolite® account for a significant portion of our net sales and net income, and a reduction in our Cardiolite sales as a result of the expiration of our current exclusive distribution rights in December 2003 and the expiration of the key patents for Cardiolite, could have a material adverse impact on our business and operating results.

Sales of Cardiolite accounted for 41.2% of our net sales in 2001. Under the terms of our supply and distribution agreement with Bristol-Myers, we have the exclusive right to distribute Cardiolite within specified geographic areas surrounding most of our U.S. radiopharmacies. These rights expire December 31, 2003, and we cannot assure you that they will be renewed or extended on similar terms, or at all.

Bristol-Myers' key U.S. patents for Cardiolite expire between 2005 and 2008. Once the patents expire, other manufacturers may begin producing and distributing generic versions of Cardiolite which could compete with Cardiolite. It is also possible that new cardiology imaging agents may be developed in the future that are superior to Cardiolite. Our Cardiolite sales could decline significantly in the future if our current distribution rights are not renewed or extended after the end of 2003, and thereafter when generic versions of Cardiolite become available after Bristol-Myers’ key U.S. patents expire or the introduction of new cardiology imaging agents. If we are unable to respond appropriately to the occurrence of any of these events, they could have a material adverse impact on our business, operating results and financial condition.

We depend on Bristol-Myers for our principal products and raw materials, and any loss or interruption in the supply of Bristol-Myers' products or raw materials would have a material adverse impact on our business and operating results.

Our radiopharmacies dispense more than 50 different radiopharmaceutical products with more than 100 medical indications, which we obtain primarily from six suppliers. Our principal supplier in the U.S. is Bristol-Myers, from which we obtain Cardiolite, as well as Thallium, a generic cardiology imaging agent that accounted for 6.3% of our net sales in 2001. In the aggregate, products supplied by Bristol-Myers, including Cardiolite and Thallium, accounted for 53.5% of our net sales in 2001. Our business, results of operations and financial condition would be materially adversely affected if our supply of products from Bristol-Myers is interrupted for any reason. In addition, our business, results of operations and financial condition would be materially adversely affected if we encounter delays in obtaining alternative products from other suppliers, or if alternate products available to us are inferior in quality to Bristol-Myers’ products and are not readily accepted by our customers.

Technetium is a radioactive isotope used to compound radiopharmaceuticals, which are then dispensed to our customers, generally in unit-dose form. Sales of technetium-based products (such as Cardiolite) accounted for 50.9% of our net sales in 2001. We obtain most of our U.S. supply of technetium from technetium generators supplied by Bristol-Myers. We do not have a long-term contract with Bristol-Myers for the supply of technetium generators. Although we believe technetium generators are available in sufficient quantity from other suppliers, we have periodically experienced minor disruptions in our supply. Any significant disruption in our supply of technetium generators could have a material adverse effect on our business, results of operations and financial condition, unless and until we obtain alternative sources of supply.

We depend on a few large customers for sales of our radiopharmaceutical services and products, and the loss of one or more of these customers could have a material adverse impact on our operating results.

Corporate account customers representing multiple-facility integrated healthcare networks, or IHN’s, or local independent hospitals, and that purchase exclusively through a GPO, accounted for 29% of our net sales in 2001. Sales to AmeriNet Inc.and Health Trust Purchasing Group (formerly Columbia/HCA) constituted 16% of our net sales in 2001. Although most of these contracts are multi-year contracts, certain contracts permit the customers to cancel their contracts on 30 to 90 days notice. In addition, all of our contracts may be cancelled for a variety of reasons, including our inability to provide the level of quality of service and products required by the contract. Although the loss of any particular corporate account does not necessarily result in our losing each of the individual hospitals or clinics within a purchasing group as customers because they may continue to purchase from us outside of the corporate account contracts, often we do lose customers following the termination of corporate contracts. The trend toward further consolidation of hospital and clinic groups and the use of large purchasing groups may put further pressure on our future profit margins, and the loss of any significant corporate account customers or a material part of such customers’ business (whether as a result of a cancellation of our contract, an acquisition of our customer by another company that is served by another provider, a material deterioration in the financial condition of our customer or otherwise) may have an adverse short-term or long-term impact on our radiopharmacy net sales, which could have a material adverse impact on our business, operating results or financial condition.

We depend on reimbursements from third-party payors, and therefore changes in the mix of payors or in their reimbursement policies could have a material adverse impact on our business and operating results.

We depend in significant part on reimbursements from governmental and non-governmental third-party payors. This reimbursement directly affects our medical imaging net sales because we receive direct payments from third-party payors for services we provide, and also indirectly affects our radiopharmacy services net sales, because it affects the amounts our customers are reimbursed for payments they make to us for our radiopharmaceuticals and the amount of these reimbursements impacts the amount our customers are willing to pay us. Third-party payors are implementing a variety of approaches to reduce costs, which could have a material adverse effect on us. The increasing prevalence of managed care, centralized purchasing decisions by hospitals, consolidation among and integration of healthcare providers and competition for patients is continuing to affect pricing, purchasing, usage patterns and particular drug treatment decisions based on cost considerations. The level of reimbursement we are able to obtain for our services increasingly will depend on our ability to properly itemize and bill for these items. Cost-reduction measures implemented by third-party payors, decisions by third parties limiting the use of diagnostic tests or drug treatments we provide, the inability of any third-party payors to satisfy their payment obligations to us, or a shift in the mix of our private payors to managed care organizations which tends to reduce the amount reimbursed for tests and treatments, could have a material adverse impact on our business, operating results or financial condition.

We derive a significant portion of our revenue from governmental programs such as Medicare and Medicaid. In 2001, 15.5% of our net sales were attributable to direct reimbursements from these programs. In recent years, changes in these highly regulated programs have limited and reduced reimbursements to providers and these trends may continue. For example, the Centers for Medicare and Medicaid Services, or CMS, the Federal agency that establishes Medicare reimbursement policies, has considered making significant reductions in reimbursement rates for medical imaging services and radiopharmaceuticals in the past and has indicated that it is continuing to evaluate these rates. We believe new initiatives by CMS to lower these reimbursement rates can be expected in the future. For example, on August 1, 2000, CMS began setting reimbursement rates for radiopharmaceuticals based on the prices submitted by manufacturers, which tend to be lower than the previous prices based on the pass-through rate. Further, CMS recently approved reductions in reimbursement rates for PET studies for hospital outpatients effective April 1, 2002. We are not able to predict the effects of this change in Medicare reimbursement policies, nor can we predict whether CMS will also make reductions in reimbursement rates for PET studies conducted at independent diagnostic testing facilities such as our medical imaging centers. In addition, the Medicare and Medicaid programs are subject to statutory and regulatory changes, retroactive and

prospective rate adjustments, administrative rulings, executive orders, and freezes and funding reductions, any of which may adversely affect our business. For example, for purposes of Medicare reimbursement, recently promulgated Federal regulations affect the ability of a Medicare provider such as a hospital to include a service or facility as provider-based, as opposed to treating the service as if it were offered offsite from the hospital. Historically, provider-based status has allowed a provider to obtain more favorable Medicare reimbursement for services like the ones we provide. While the Medicare, Medicaid and SCHIP Benefits and Improvement Act of 2000 offers some relief for facilities recognized as provider-based on October 1, 2000, under these new regulations, some of our customers may have difficulty qualifying our services for provider-based status. If a client cannot obtain provider-based status for our services, then the provider might decide not to contract with us, which would result in a decline in our revenues.

We also may be subject to rate reductions as a result of Federal budgetary or other legislation related to the Medicare and Medicaid programs. Various state Medicaid programs periodically experience budget shortfalls, which may result in Medicaid payment reductions and delays in payment to us.

The application or repeal of state certificate of need regulations could harm our business.

Some states require a certificate of need or other similar regulatory approval prior to the acquisition of high-cost capital items such as some of the equipment we purchase and use to render our services. In many cases, a limited number of certificates of need are available in a given jurisdiction, and if we are unable to obtain the applicable certificate of need or other approval, these regulations may limit or preclude our options in the relevant jurisdiction. On the other hand, states in which we have obtained a certificate of need or other required approval may repeal certificate of need or other relevant regulations or liberalize exemptions from such regulations, actions which would lower the barrier to entry in those states and could adversely affect our business.

Complying with Federal and state health care payment requirements is an expensive and time-consuming process, and any failure to comply, even if inadvertent, could result in substantial refund obligations and/or penalties.

Because we derive a significant portion of our revenue from governmental programs such as Medicare and Medicaid, we are directly subject to extensive and technical billing and operations requirements by both the Federal government and the states in which we do business. In the areas in which we do not directly bill the government for services, we are nevertheless indirectly subject to such requirements through our customers. We believe that our billing practices materially comply with applicable state and Federal requirements. However, there can be no assurance that such requirements will not be interpreted in the future in a manner inconsistent with our interpretation and application.

The rules that directly or indirectly affect us include, but are not limited to, the following:

* Federal and state billing, claims submission, and documentation laws and regulations;

* the Federal Medicare and Medicaid Anti-kickback Law, and similar state laws;

* the Federal False Claims Act, and similar Federal criminal laws;the Federal Physician Anti-Self-Referral law (“Stark II”), and similar state laws;

The failure to comply, even if inadvertent, with any of these requirements could require us to refund payments to the government. Such refunds could be significant and could also lead to the imposition of significant penalties. Even if we successfully defend against any action against us for violation of these laws or regulations, we would likely be forced to incur significant legal expenses and divert our management’s attention from the operation of our business. Any of these actions, individually or in the aggregate, could adversely affect our ability to operate our business and our financial results.

We depend upon highly trained personnel in the operation of our radiopharmaceutical and medical imaging businesses, and our inability to recruit and/or retain a sufficient number of these personnel could restrict our ability to meet the needs of our customers and could have a material adverse impact on our business, operating results and financial condition.

Each of our radiopharmacies employs one or more nuclear pharmacists who require highly specialized training and must be specially licensed. There is a shortage nationwide of nuclear pharmacists, and we may not be able to attract or retain sufficient qualified pharmacists in some geographic areas we serve. Our loss of our pharmacists, or our inability to attract a significant number of new pharmacists could have a material adverse impact on our business, operating results or financial condition.

In addition, each of our medical imaging center employs a number of technologists who require specialized training to operate our diagnostic equipment. There is a shortage of qualified technologists. It is impossible to predict the availability of technologists or the compensation levels that will be required to hire and retain them. We may not be able to hire and retain a sufficient number of technologists, and we may be required to increase our compensation costs to do so.

A reduction in the number of medical imaging procedures we perform could have a material adverse impact on our business and operating results.

The principal operating costs in our medical imaging services business are depreciation, fees paid to radiologists, compensation paid to technologists, rent, annual system maintenance costs, and insurance costs. Because most of these costs are relatively fixed, a significant reduction in the number of procedures we perform for any reason (including as a result of increased competition, changes in third-party payor reimbursement policies, equipment down-time for scheduled or unanticipated maintenance or otherwise) could result in significantly lower operating margins.

Changes in radiopharmaceutical and medical imaging technologies or the introduction of new services and products in the markets we serve could have an adverse impact on our radiopharmacy and medical imaging businesses.

Radiopharmaceutical and medical imaging technologies are subject to constant and often rapid changes. New and more effective radiopharmaceutical services and products may be developed for the diagnosis or treatment of diseases, particularly in the cardiovascular or oncology areas, and we may be unable to obtain marketing rights to these products or have to pay substantial amounts to acquire them. In addition, new diagnostic or treatment modalities that are not based on nuclear medicine may be developed for diseases currently addressed by our products. These developments could adversely affect our radiopharmacy net sales, which could have a material adverse impact on our business, operating results or financial condition.

The emergence of new types of equipment or significant improvements to the existing types of equipment for medical imaging could render our existing medical imaging equipment obsolete or noncompetitive and require us to significantly modify or abandon our existing imaging equipment. New types of equipment may also render the use of radiopharmaceuticals as imaging agents unnecessary. These developments could have a material adverse impact on our business, operating results or financial condition.

Our business and our industry are highly regulated, and if government laws or regulations are enforced in a manner adverse to us we may be subject to significant penalties and sanctions.

The healthcare services industry is extensively regulated by Federal, state and local governmental agencies. We are subject to regulation by the Food and Drug Administration, the Nuclear Regulatory Commission, the Department of Transportation, state nuclear regulatory agencies, state boards of pharmacy, state health departments and various other Federal and state agencies, and similar governmental agencies in other

countries in which we operate. If we do not comply with the laws and regulations applicable to us we may be subject to a variety of penalties and sanctions, including substantial civil and criminal penalties, damages and fines and the curtailment of our operations. Any penalties, damages, fines or curtailment of our operations, individually or in the aggregate, could have a material adverse impact on our business, operating results or financial condition. The risk of our being found in violation of applicable laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws or regulations, even if ultimately we are successful in defending against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our businesses.

We are subject to economic, political and other risks and uncertainties inherent in doing business internationally.

Our international operations accounted for 6.4% of our net sales in 2001. Our international operations are subject to various risks and uncertainties of doing business in foreign markets, and these risks and uncertainties may be heightened as a result of our strategy of targeting emerging market countries. The risks and uncertainties relating to our international operations include:

	*	fluctuations in currency rates, which may affect our reported earnings;

	*	compliance with foreign regulatory requirements which often are subject to frequent change and not as well defined and developed as in the U.S.;

	*	operations through joint ventures with local partners over whom we have limited control;

	*	political and economic instability in the countries where we operate; and

	*	restrictions on remittances of cash from our international operations.

If we become subject to product liability and malpractice claims that are not adequately covered by our insurance, we may have to pay significant damages and other expenses.

Our businesses are subject to the risks of various claims from customers and patients, including claims arising from the distribution and manufacture of radiopharmaceuticals and medical devices and malpractice claims arising from the provision of medical imaging services. We may not be able to maintain product liability or malpractice insurance in the future on acceptable terms or with adequate coverage against potential liabilities. A successful claim not covered by our insurance, or in excess of our insurance coverage, could have a material adverse impact on our business, operating results or financial condition.

Our business depends in part upon our ability to protect our intellectual property and avoid violating the intellectual property of others.

We rely to a significant extent on various intellectual property rights, including patents, tradenames, trademarks and trade secrets. We own U.S. patents covering our proprietary radiopharmaceuticals delivery system, including our SECURE® Safety Insert System and our family of tungsten radiopharmaceutical delivery systems more commonly known as “Pigs.” We also license our proprietary SYNtrac and Unit Dose Manager software systems to many of our customers for the management of their nuclear medicine departments and to facilitate electronic communication with our radiopharmacies. In addition, we rely on certain other trade secrets and other proprietary know-how that are either not patentable or that we choose not to patent. If any of our competitors successfully challenges or circumvents our patents or trade secrets, our business, operating results or financial condition could be materially and adversely impacted. If we violate the intellectual property rights of others, we could be subjected to costly litigation and be required to pay significant damages to these parties and to discontinue or substantially modify our business activities that are in violation of these rights, any of which could also have a material adverse impact on our business, operating results or financial condition.

Our stock price may be volatile.

During 2001, the closing price of our Common Stock ranged from $26.03 to $42.29 per share. The market price can be affected by many factors, including reports dealing with our suppliers and customers, our operating results, announcements by our competitors, changes in government regulations that affect our businesses, general market conditions, volume of shares traded on any given day, and statements by analysts. We also have 7,646,654 stock option shares outstanding as of March 8, 2002, of which 3,027,606 are vested. Of the unvested option shares, 2,691,957 option shares granted under our Universal Performance Equity Participation Plan with exercise prices ranging from $8.34 to $36.38 could vest at any time on or after June 30, 2002 if certain stock price targets are met. If a significant number of employees exercise and sell their vested stock options at any one time, this could have an adverse impact on our stock price.

Unsuccessful system implementation could have an adverse financial impact on our Company.

We have made significant investments in information systems technology to help us efficiently conduct our business on a day-to-day basis, and the failure of these systems could have a material adverse impact on our business and our financial condition.

We are highly automated and dependent upon the use of sophisticated hardware and software to conduct day-to-day business transactions. While we believe that we have adequate technical support in-house as well as from external resources and that we have sufficient backup and recovery plans, there can be no assurance that prolonged interruptions in the functioning of our information systems technology would not have an adverse impact on our ability to conduct day-to-day business. In addition, we have invested substantial resources in the development and implementation of proprietary software for our pharmacy services business and in customizing third-party software for our medical imaging business that will allow standardized information collection and distribution throughout our network of pharmacies and medical imaging centers. These systems are complex, and despite extensive testing and quality control, will require successful integration with third-party software, as well as continuing updates to correct errors or defects, to keep current with advances in technology, or to make enhancements requested by users. There can be no assurance that either system will be successfully integrated and produce the expected benefits during the next several years. If the integrations on either of the two systems are not successful or if the systems cannot be properly maintained or upgraded during the next several years, we will need to re-evaluate our investments in these systems. This re-evaluation could mean additional financial investment to correct deficiencies or upgrade the systems, or result in a decision to abandon one or both systems, any of which could result in an adverse financial impact, especially if the systems needed to be abandoned prior to the systems being fully depreciated.

Item 2. PROPERTIES.

Our corporate headquarters is located in Woodland Hills, California. We lease approximately 61,000 square feet at that location. Our current lease is for a term of ten years, which commenced on March 1, 1997, with one five-year renewal option. In October 2000, we entered into an agreement to lease an additional 36,000 square feet of office space in a building adjacent to our corporate headquarters. The lease is for a term of six years, with one five-year renewal option. We also lease approximately 24,530 square feet of administrative office space in Duluth, Georgia. The lease, which commenced in June 2001, is for a term of 10 years. In connection with our acquisition of InteCardia, Inc., we assumed an agreement to lease 29,943 square feet of space that will house a cardiac diagnostic facility that will offer outpatient cardiac catheterization and nuclear cardiology services. The lease begins on November 1, 2002 and has a term of 15 years. We lease all of our 130 radiopharmacy sites in the U.S. The lease terms range from less than one year to approximately ten years.

We own five of our 65 medical imaging center sites in the U.S. The remaining medical imaging center sites are leased for terms ranging from three to five years.

Outside of the U.S., we operate our radiopharmacies, medical imaging centers, and other businesses from 16 owned sites and 21 leased sites.

We believe our facilities are sufficient for our current needs and that additional facilities will be available as needed to accommodate our future growth.

Item 3. LEGAL PROCEEDINGS.

We are party to a number of lawsuits and legal proceedings involving claims arising in the normal course of our business. We believe that these claims, in the aggregate, will not have a material adverse effect on our business, financial condition or results of operations.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Common Stock of the Company is traded on the Nasdaq National Market under the symbol “SCOR.” The following table sets forth the range of high and low sales prices on the National Market of the Common Stock for the periods indicated, as reported by Nasdaq. Such quotations represent inter-dealer prices without retail market, markdown or commission and may not necessarily represent actual transactions.

		HIGH ($)	LOW ($)

2000
	First Quarter	16.50	11.02
	Second Quarter	36.00	13.00
	Third Quarter	43.94	32.75
	Fourth Quarter	39.06	23.75

2001
	First Quarter	38.81	27.25
	Second Quarter	42.29	26.64
	Third Quarter	38.74	26.63
	Fourth Quarter	33.31	26.03

As of December 31, 2001, there were 689 holders of record of the Common Stock. On December 31, 2001, the last sale price reported on the Nasdaq National Market for the Common Stock was $28.64 per share. The Company has never paid cash dividends on its Common Stock and has no present intention to do so.

On July 11, 2000, the Company’s Board of Directors declared a two-for-one stock split of the Company’s Common Stock in the form of a stock dividend. The stock dividend was distributed on August 9, 2000 to stockholders of record on July 26, 2000.

All references to per share amounts have been restated to reflect this stock split.

Item 6. SELECTED FINANCIAL DATA.

The following balance sheet data and income statement data for the five years ended December 31, 2001 has been derived from the Company’s audited consolidated financial statements. Consolidated balance sheets at December 31, 2001 and 2000 and the related consolidated statements of income and of cash flows for each of the three years in the period ended December 31, 2001 and notes thereto appear elsewhere herein. The data should be read in conjunction with the annual consolidated financial statements, related notes and other financial information appearing elsewhere herein.

SELECTED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)	2001	2000	1999	1998	1997


Net sales	$774,718	$629,394	$520,309	$449,023	$380,563

Gross profit	294,983	224,846	169,321	131,950	90,165

Income:
Continuing operations	37,869	29,538	19,221	13,931	10,032

Discontinued operations, net of taxes	—	—	—	—	1,063

Net income	$37,869	$29,538	$19,221	$13,931	$11,095


Earnings per basic share:
Continuing operations	$1.54	$1.23	$0.82	$0.65	$0.50

Discontinued operations, net of taxes	—	—	—	—	0.05

Net income	$1.54	$1.23	$0.82	$0.65	$0.55


Earnings per diluted share:
Continuing operations	$1.40	$1.11	$0.75	$0.61	$0.49

Discontinued operations, net of taxes	—	—	—	—	0.05

Net income	$1.40	$1.11	$0.75	$0.61	$0.54


Cash, cash equivalents and marketable securities	$30,548	$29,676	$23,073	$19,722	$29,301

Working capital	$115,728	$80,353	$56,326	$44,024	$34,685

Total assets	$587,841	$470,571	$312,642	$256,567	$164,563

Long-term debt	$210,649	$137,886	$76,326	$70,322	$17,332

Stockholders’ equity	$234,828	$185,880	$140,337	$111,373	$87,367

Weighted average shares outstanding:
Basic	24,570	23,948	23,340	21,452	19,996

Diluted	27,029	26,657	25,478	22,678	20,564

Current ratio	1.88	1.56	1.61	1.59	1.60


Number of domestic radiopharmacies	130	125	123	120	119

Number of domestic imaging centers	65	58	42	37	—

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD LOOKING STATEMENTS

Except for the historical information and discussions contained herein, statements contained in this Annual Report on Form 10-K may constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including: changes in the regulation of the healthcare industry at either or both of the Federal and state levels; changes or delays in the Company's reimbursement for services by governmental or private payers; the Company's failure to continue to develop and market new products and services and to keep pace with technological change; competitive pressures; failure to obtain or protect intellectual property rights; quarterly fluctuations in revenues and volatility of the Company's stock price; the Company's ability to attract and retain key personnel; currency risks; dependence on certain suppliers; the Company's ability to successfully manage acquisitions and alliances; legal, political and economic changes; and other risks, uncertainties and factors discussed in the "Risk Factors" section above and elsewhere herein, in the Company's other filings with the SEC or in materials incorporated by reference. Given these uncertainties, undue reliance should not be placed on such forward looking statements.

2001 VS. 2000

Management has identified three business segments for separate reporting: our U.S. Pharmacy Services business, our U.S. Medical Imaging business and our International business. Our U.S. Pharmacy Services business primarily compounds, dispenses and distributes radiopharmeceuticals and distributes complex pharmaceuticals in the United States. This segment depends heavily on one product, Cardiolite, for a high percentage of its sales. We are currently in discussions with Bristol-Myers Squibb, our supplier of Cardiolite, to extend our supply agreement beyond 2003 upon mutually agreeable terms. To lessen our dependence on Cardiolite, we have undertaken several strategic initiatives, such as the production and distribution of FDG and the distribution of new complex pharmaceuticals. Also, this segment made several acquisitions in 2001 and anticipates further acquisitions in 2002. From a financial reporting standpoint, this segment has had to integrate these new entities into its organization. Our U.S. Medical Imaging business provides medical diagnostic imaging services in the United States. This business segment has grown rapidly as a result of acquisitions. From a financial accounting standpoint, integration of these acquisitions has been a challenge for us due to multiple accounting, billing and collection systems. We have had to rely on manual processes and controls during the transition from these multiple systems to one common platform. We are still in the process of implementing one billing and collections system for our imaging network. During 2002, we do not plan to make any acquisitions in the Imaging segment. Managements’ focus will be to improve overall profitability and cash flows of our imaging centers, and to ensure the successful implementation of the new billing and collections system. Our International business provides both pharmacy and imaging services outside of the United States. This segment has also made several acquisitions in 2001, but is not expected to make significant acquisitions in 2002. Financial reporting and integration of acquisitions are challenging given the geographic locations and the fact that reliance is placed heavily on local management. We are now located in 19 countries and Puerto Rico and the accounting is performed by local staff. As with any business, there is turnover of management at these locations. Reliance for proper financial reporting is placed on the local management team, with oversight from corporate office management and internal audit.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are as follows:

Revenue Recognition. We recognize our revenue primarily from two sources: (i) product revenue, which includes sales from our radiopharmacies and (ii) services revenue, primarily from our imaging business. As described below, significant judgments and estimates must be used by management in connection with the revenue recognized in any period for the imaging business. Material differences may impact the amount of revenue recorded in any period if management judgments or estimates are significantly different than actual.

We provide imaging services to patients that generally have medical insurance through a governmental payor, managed care payor, or a commercial third-party payor. Our Medical imaging business has several hundred contracts. These contracts can change or be amended frequently due to changes in the payors or governmental agencies reimbursement. Additionally, as we acquire medical imaging centers, new contracts have to be entered into our computer systems. If the contracts have not been updated in our systems, we need to make estimates about the anticipated contracted amounts that we will ultimately receive from all of our various payors. This requires us to record estimates when recording imaging revenues based upon historical data and trends. These estimates have to be continually evaluated and compared to actual reimbursements from the various payors to ensure that we have properly recorded revenues and appropriately adjusted for shifts in our

payor mix. Accordingly, these recorded revenues are based on current information available, but subject to estimation, which may lead to adjustments in future periods as actual reimbursement rates are determined, such adjustments have not been material in 2001 and 2000.

Estimating Valuation Allowances for Doubtful Accounts. The preparation of financial statements requires our management to make estimates and assumptions on the collectibility of our accounts receivable. Management specifically analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends, aging of accounts and changes in payment terms when evaluating the adequacy of the allowance for doubtful accounts. Any changes in these estimates or assumptions could cause material differences in recorded allowances.

Valuation of Long-Lived Assets and Goodwill. We assess the impairment of identifiable intangibles, long-lived assets and related goodwill and enterprise level goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

	•	significant underperformance relative to expected historical or projected future operating results;

	•	significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

	•	significant negative industry or economic trends;

	•	our market capitalization relative to net book value.

When we determine that the carrying value of intangibles, long-lived assets and related goodwill and enterprise level goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected undiscounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Net intangible assets, long-lived assets, and goodwill amounted to $339.5 million as of December 31, 2001.

The cost in excess of net assets of acquired businesses is being amortized on a straight-line basis over periods of 15 to 40 years.

In the first quarter of 2002, Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” will become effective and as a result, we will cease to amortize approximately $162.1 million of goodwill. We had recorded approximately $6.6 million, $4.5 million, and $4.9 million of goodwill amortization during 2001, 2000 and 1999, respectively. We would have recorded approximately $7.0 million of goodwill amortization during 2002. Under the provisions of the Statement, we did not record amortization related to the six post-June 30, 2001 acquisitions. Such amortization would have amounted to $0.9 million. In lieu of amortization, we are required to perform an initial impairment review of our goodwill in 2002 and an annual impairment review thereafter. We expect to complete our initial review during the second quarter of 2002.

We currently do not expect to record an impairment charge upon completion of the initial impairment review. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded.

NET SALES

Net sales increased 23.1%, or $145.3 million, to $774.7 million. All three of our business segments had double-digit sales growth during the year. Pharmacy services revenue increase was primarily from organic growth while Imaging services and International growth was primarily from acquisitions.

			Revenues
	2001		2000

U.S. Pharmacy Services Business	$565,309	$489,405
U.S. Medical Imaging Business	160,054	100,848
International Operations	49,355	39,141

Total	$774,718	$629,394

U.S. Radiopharmacy Business

Net sales increased 15.5%, or $75.9 million, to $565.3 million driven primarily by increased sales of cardiology imaging agents. This business realized both volume and price increases during the year in its cardiology imaging agents. The price increases ranged between 3.0% and 3.5% for 2000 and 2001. Sales of cardiology imaging agents increased 11.5%, or $40.1 million, compared to the prior year and represented 70.6% of our U.S. radiopharmacy business net sales in 2001. Sales of oncology products which includes FDG and brachytherapy seeds, increased by 25.0% or $13.1 million as compared to the prior year. Of the remaining sales increase, acquisitions made during 2001 accounted for $15.5 million of the increase. For 2002, we anticipate sales growth to continue in the 10-12% range for our cardiology products. We anticipate higher sales growth in oncology, primarily as the result of our continued expansion of our FDG business that we started in mid 2000. We are growing our FDG business by adding cyclotrons and signing new FDG distribution agreements. Finally, we expect to realize sales growth in 2002 due to the delivery of complex pharmaceuticals, such as Xigris and Zevalin.

U.S. Medical Imaging Business

Net sales increased 58.7%, or $59.2 million, to $160.0 million. Sales at existing centers, which means centers open all twelve months in 2000 and 2001, increased by 10.0% or $6.7 million compared to the prior year. The remaining increase in sales was the result of acquisitions and start-up centers. The volume of imaging procedures performed at our existing centers increased 8% for MRI and 17% for CT compared to the same period in 2000. These volume increases are due to new contracts, which expanded our physician referral base, and new equipment or upgraded equipment, which increased the efficiencies and scope of testing in many of these centers. We anticipate our 2002 sales growth to be in the range of 8% to 10%; this growth will be primarily the result of improvements in same store sales and also due to the opening of several company-built imaging centers. We anticipate that this business will not make any acquisitions in 2002.

International Operations

Net sales increased 26.1%, or $10.2 million, to $49.4 million due primarily to start-up businesses and acquisitions. Net sales at our existing centers or facilities were flat during the year primarily as a result of a slowdown in healthcare spending in Taiwan. Radiopharmacy services continue to represent the greatest percentage of our international net sales at 36.3%. We continued our expansion into the radiology product and service areas, which include the operation of nuclear medicine departments and equipment, as well as the ownership and operation of freestanding outpatient imaging centers. Net sales of radiology products and services represented 17.9% of our 2001 international net sales. Service and distribution businesses represented 35.5% of our international sales in 2001, primarily as a result of an acquisition made in late 2001. We anticipate that our Overseas segment will have improved sales in 2002 due to improved economic conditions and expanded healthcare spending in Taiwan. Taiwan accounts for 26.7% of this segment’s business. On an overall segment basis, we anticipate that sales growth will be 15%-20% for 2002 due to the improvements in Taiwan and contributions from start-ups and acquisitions that contributed sales for a partial year in 2001 but will be contributing sales for all twelve months in 2002.

GROSS PROFIT

Gross profit increased 31.2%, or $70.1 million, to $295.0 million. Our consolidated gross profit margin as a percentage of sales improved to 38.1% in 2001 as compared to 35.7% in 2000 driven by continued improvement in product mix, price increases, and operating efficiencies at our radiopharmacies. Additionally, our margin as a percentage of sales improved in 2001 due to increased net sales from our medical imaging business and international operations, both of which have higher gross profit margins than our U.S. radiopharmacy business.

	Gross Profit
	2001	2000

U.S. Pharmacy Services Business	$166,579	$138,510
U.S. Medical Imaging Business	107,719	70,208
International Operations	20,685	16,128

Total	$294,983	$224,846

U.S. Radiopharmacy Business

Gross profit increased 20.3%, or $28.1 million, to $166.6 million. Gross profit margin as a percentage of sales improved to 29.5% in 2001 as compared to 28.3% in 2000. This increase was due primarily to growth in sales of cardiology imaging agents resulting from higher volumes combined with price increases. Our gross profit increased as a result of continued leveraging of our existing radiopharmacy infrastructure which increased volumes without comparable increases in material, labor and delivery costs. Going forward, we plan to leverage our radiopharmacy distribution network and deliver complex pharmaceutical products. We expect the gross profit margin growth that we have experienced the last several years will slow because complex pharmaceuticals traditionally have lower margins than our traditional nuclear imaging products.

U.S. Medical Imaging Business

Gross profit increased 53.4%, or $37.5 million, to $107.7 million. Our gross profit increased due to acquisitions and improved sales performance at existing imaging sites, offset by higher fees paid to radiologists. During 2001, acquisitions and start-up sites accounted for $37.3 million of the increase in gross profit and increased sales at our existing centers accounted for the remainder. Our gross profit margin as a percentage of sales decreased in 2001 to 67.3% compared to 69.6% in 2000. This decrease is primarily due to the increase in the number of multi-modality sites during 2001. These multi-modality sites traditionally have lower margins than MRI-only sites. Our imaging business added multi-modality sites in many markets during 2001 in order to secure new payor contracts.

International Operations

Gross profit increased 28.3%, or $4.6 million, to $20.7 million. Gross profit increased due to acquisitions and new businesses. Our gross profit margin as a percentage of sales increased in 2001 to 41.9% compared to 41.2% in 2000. Margin growth at our existing radiopharmacy sites and imaging centers was flat in 2001 compared to the prior year. Our business was impacted by a slowdown in healthcare reimbursement in Taiwan, which is our largest sales volume location overseas.

OPERATING, SELLING AND ADMINISTRATIVE EXPENSES

Operating, selling and administrative expenses increased 26.9%, or $38.3 million, to $180.5 million. The ratio of these expenses to net sales for the year ended December 31, 2001 was 23.3% compared to 22.6% for the same period in 2000. Operating, selling and administrative costs at our medical imaging business are higher than such costs at our radiopharmacy business. As the imaging business becomes a larger share of our overall business, the consolidated ratio of these expenses to net sales increases.

	Operating, Selling and Administrative Expenses
	2001	2000

U.S. Pharmacy Services Business	$86,917	$76,698
U.S. Medical Imaging Business	67,806	44,609
International Operations	14,724	11,125
Unallocated Corporate	11,098	9,790

Total	$180,545	$142,222

U.S. Radiopharmacy Business

Operating, selling and administrative costs increased 13.3%, or $10.2 million, to $86.9 million. This increase was due primarily to increased costs associated with acquired businesses, which accounted for $6.1 million of this increase. Start up costs associated with opening six new cyclotrons, used in the production of FDG, accounted for an additional $2.2 million. As a percentage of sales, operating, selling and administrative expenses decreased from 15.7% in 2000 to 15.4% in 2001.

U.S. Medical Imaging Business

Operating, selling and administrative costs increased 52.0%, or $23.2 million, to $67.8 million. These expenses increased primarily as a result of acquisitions made in 2000 and 2001. As a percentage of sales, these expenses declined from 44.2% in 2000 to 42.4% in 2001.

International Business

Operating, selling and administrative expenses increased 32.4%, or $3.6 million, to $14.7 million. Of this amount, $3.0 million was attributable to the costs of acquiring new businesses and starting new centers during 2001. The remaining $0.6 million of the increase was attributable to the expansion of services and products offered at our existing facilities and the addition of new management resources to support the expanded operations. As a percentage of sales, these expenses increased from 28.4% in 2000 to 29.8% in 2001.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased 50.4%, or $13.3 million, to $39.6 million. Of the increase, $8.6 million was attributable to our medical imaging business and acquisitions made in 2000 and 2001 to support this segment’s expansion. The remainder of the increase was attributable to expansions in: our international operations, with an increase of $2.0 million; our pharmacy services business, primarily in new FDG production facilities, with an increase of $1.9 million; and our corporate operations, with an increase of $0.8 million.

	Depreciation and Amortization
	2001	2000

U.S. Pharmacy Services Business	$7,367	$5,508
U.S. Medical Imaging Business	21,726	13,132
International Operations	4,733	2,763
Unallocated Corporate	5,735	4,906

Total	$39,561	$26,309

2000 VS. 1999

NET SALES

Net sales increased 21.0%, or $109.1 million, to $629.4 million. Net sales increased in each of our three business segments due to high growth in the cardiology sector of our Pharmacy Services business and primarily through acquisitions in our Medical Imaging and International businesses.

		Revenues
	2000		1999

U.S. Pharmacy Services Business	$489,405		$440,385
U.S. Medical Imaging Business	100,848		55,187
International Operations	39,141		24,737

Total	$629,394		$520,309

U.S. Radiopharmacy Business

Net sales increased 11.1%, or $49.0 million, to $489.4 million. This business realized both volume and price increases during the year from its cardiology imaging agents. The price increases ranged between 3.0% and 3.5% for 2000 and 1999. Sales of cardiology imaging agents increased 12.0%, compared to the prior year and represented 71.0% of our U.S. radiopharmacy business net sales in 2000 compared to 70.4% in 1999.

U.S. Medical Imaging Business

Net sales increased 82.7%, or $45.7 million, to $100.9 million. Existing centers accounted for $6.9 million of the increase in net sales, with acquisitions and start-up centers accounting for the remaining increase. The volume of imaging procedures performed at our existing centers increased 18% for MRI and 21.0% for CT over the same period in 1999, due to the expansion in the scope of the clinical applications for these procedures and the expansion of our physician referral base. We also improved our market penetration, particularly in Arizona, California and Florida, through acquisitions during 2000.

International Operations

Net sales increased 58.2%, or $14.4 million, to $39.1 million. This increase in net sales was due to a combination of acquisitions, start-ups, higher net sales at our existing facilities and expansion of the services and products we offered. Net sales at our existing facilities increased 25.0%. Radiopharmacy services continue to represent the greatest portion of our international net sales, at 36%. We continued our expansion into the radiology product and service areas, which include the operation of nuclear medicine departments and equipment, as well as the ownership and operation of free-standing outpatient imaging centers. Net sales of radiology services and products constituted 21.0% of our 2000 international net sales.

GROSS PROFIT

Gross profit increased 32.8%, or $55.5 million, to $224.8 million. Our consolidated gross profit margin as a percentage of sales improved to 35.7% in 2000 as compared to 32.5% in 1999. This increase was due primarily to continued improvement in product mix (primarily increased sales of Cardiolite®), and price increases for Cardiolite® and other cardiology imaging agents. We also increased net sales from our medical imaging business and international operations, both of which have higher gross profit margins than our U.S. radiopharmacy business.

		Gross Profit
	2000		1999

U.S. Pharmacy Services Business	$138,510		$118,682
U.S. Medical Imaging Business	70,208		41,052
International Operations	16,128		9,587

Total	$224,846		$169,321

U.S. Radiopharmacy Business

Gross profit increased 16.7%, or $19.8 million, to $138.5 million. Gross profit margin as a percentage of sales improved to 28.3% in 2000 as compared to 26.9% in 1999. This increase was due primarily to growth in sales of cardiology imaging agents combined with price increases. We incurred start-up costs of $2.1 million in 2000 associated with FDG radioisotope and brachytherapy seeds production.

U.S. Medical Imaging Business

Gross profit increased 71.0%, or $29.2 million, to $70.2 million. This increase corresponded with increased net sales attributable to acquisitions and existing centers, which were offset by increases in the reading fees that we paid radiologists and the start-up costs of new centers. Acquisitions accounted for $16.5 million of the increase in gross profit, and increased sales at our existing centers accounted for the remainder. Our gross profit margin as a percentage of sales decreased in 2000 to 69.6% compared to 74.4% in 1999.

International Operations

Gross profit increased 68.2%, or $6.5 million, to $16.1 million. This increase was due primarily to increased sales at our existing radiopharmacies, which contributed $1.3 million of the increase, increased net sales of medical imaging services, which contributed $2.2 million, and acquisitions and new businesses, which contributed the remaining $3.0 million of the increase. Our gross profit margin as a percentage of sales increased in 2000 to 41.2% compared to 38.8% in 1999. This margin increased at a higher rate than our net sales as a result of more efficient utilization of raw materials and labor.

OPERATING, SELLING AND ADMINISTRATIVE EXPENSES

Operating, selling and administrative expenses increased 28.9%, or $31.9 million, to $142.2 million. The ratio of these expenses to net sales for the year ended December 31, 2000 was 22.6% compared to 21.2% over the same period in 1999. The increase was due primarily to the start-up and acquisition of certain businesses in 2000, the expansion of services and products we offer, increased corporate staffing to support our expansion and general corporate infrastructure costs. Operating, selling and administrative costs associated with medical imaging services were higher than for radiopharmacy services.

	Operating, Selling and Administrative Expenses
		2000	1999

U.S. Pharmacy Services Business		$76,698	$65,551
U.S. Medical Imaging Business		44,609	27,497
International Operations		11,125	7,741
Unallocated Corporate		9,790	9,519

Total		$142,222	$110,308

U.S. Radiopharmacy Business

Operating, selling and administrative costs increased 17.0%, or $11.1 million, to $76.7 million. This increase was due primarily to increased costs of our expanded sales force and increased labor-related expenses, including merit increases and bonuses.

U.S. Medical Imaging Business

Operating, selling and administrative costs increased 62.2%, or $17.1 million, to $44.6 million. Of this amount, $8.9 million was attributable to the costs of acquired centers during 2000. This increase compared favorably with our net sales increase of 82.7%.

International Operations

Operating, selling and administrative expenses increased 43.7% or $3.4 million, to $11.1 million. Of this amount, $1.5 million was attributable to the costs of acquiring and starting-up new centers during 2000. The remaining $1.9 million of the increase was attributable to the expansion of services and products offered at our existing facilities and the addition of new management resources to support the expanded operations.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased 34.8%, or $6.8 million, to $26.3 million. Of this amount, $5.5 million was attributable to the acquisition of new medical imaging centers. The remainder of the increase was attributable to the expansion of our international operations and for corporate information systems.

	Depreciation and Amortization
		2000		1999

U.S. Pharmacy Services Business		$5,508		$4,751
U.S. Medical Imaging Business		13,132		7,674
International Operations		2,763		2,249
Unallocated Corporate		4,906		4,841

Total			$26,309	$19,515

LIQUIDITY

The Company believes that sufficient resources are available through a combination of internal and external sources to fund all of its 2002 operating and business expansion needs. Cash flow from operations improved to $65.0 million in 2001 from $39.0 million in 2000. Our net cash provided by operating activities has improved for three straight years and during this time the compounded growth rate has been 72.3%. The improvements continue to be due to increased profitability and management of our working capital accounts.

Trade receivables, which relate to our U.S. Pharmacy and International businesses, have increased due to overall sales increases and from receivables acquired through acquisitions. Patient receivables, which relate to our Imaging business, have also increased due to organic sales growth but primarily as a result of acquisitions made in 2000 and 2001.

The Company increased its line of credit from $150 million in 2000 to $200 million as of December 31, 2001. The Company has traditionally used its cash provided from operations to fund its capital asset purchases. The Company’s credit line has been utilized to fund significant acquisitions.

In 2001, the Company acquired additional imaging centers and additional businesses in the pharmacy business segment for approximately $55 million utilizing its line of credit. The Company also assumed approximately $6 million in debt in these acquisition transactions. The results of these acquisitions are partly reflected in the change in the categories of “Property and Equipment”, “Goodwill”, and “Other” assets. The Company had $28.5 million available but unused for borrowing under the line of credit at December 31, 2001.

On January 17, 2002, the Company completed an asset securitization agreement using the trade receivables as collateral. This securitization program allows the Company to borrow up to $65 million at rates generally more favorable than the credit line agreement. Upon execution of the securitization agreement, our credit line had a provision that required a 50% reduction of the securitization amount, or $32.5 million. Therefore, the credit line has a current borrowing limit of $167.5 million. At January 17, 2002, the Company had $52.6 million combined credit available but unused from its credit line and asset securitization line.

The Company plans to slow the pace of acquisitions during 2002 in the Imaging and International business segments so that the focus can be on improving the profitability and cash flows of these lines of business. As mentioned above, the Company believes it has sufficient resources available to fund its 2002 acquisition needs and purchases of capital assets.

STOCK REPURCHASE PROGRAM

On June 23, 1999, our board of directors authorized the repurchase of up to 1,075,600 shares of our common stock. Through December 31, 2001, we had repurchased 761,662 shares of our common stock leaving 313,938 shares remaining for repurchase under the program. The timing and size of any future stock repurchases are subject to market conditions, stock prices and cash availability. A portion of such repurchases are expected to cover future issuances in our Employees’ Savings and Stock Ownership Plan (ESSOP).

CAPITAL SPENDING

The Company’s medical imaging operations, both foreign and domestic, are capital intensive. The Company may, from time to time, purchase new equipment or upgrade existing equipment. The cost of these capital purchases or upgrades can vary from several thousand dollars to amounts well over $1 million per piece of equipment. The Company, on an on-going basis, evaluates its needs for acquiring new equipment or upgrading existing equipment. We have made significant investments during the last three years in new equipment and upgrades of existing equipment. The Company expects that capital investments during 2002 for the Medical Imaging and Pharmacy Services business segments will be less than historical levels.

RECENT DEVELOPMENTS IN MEDICARE REIMBURSEMENT

On August 1, 2000, CMS began setting reimbursement rates for radiopharmaceuticals based on the prices submitted by manufacturers, which tend to be lower than the previous prices based on the pass-through rate. Since our sales of radiopharmaceuticals are made to hospitals and clinics, we get paid by them, not reimbursed by CMS. The introduction of set reimbursement rates nevertheless could have an impact on the prices that customers will be willing to pay for the radiopharmaceuticals that they purchase from us, and that impact, in turn, could affect our revenues. We cannot predict at this time what impact those changes will have on our radiopharmacy business.

Further, CMS recently approved reductions in reimbursement rates for PET studies for hospital outpatients effective April 1, 2002. We are not able to predict the effects of this change in Medicare reimbursement policies, nor can we predict whether CMS will also make reductions in reimbursement rates for PET studies conducted at independent diagnostic testing facilities such as our medical imaging centers.

SAFE HARBOR STATEMENT

Statements which are not historical facts, including statements about our confidence, strategies and expectations, opportunities, industry and market growth, demand and acceptance of new and existing products, and return on investments are forward-looking statements that involve risks and uncertainties, including without limitation, the effect of general economic and market conditions, supply and demand for our products, competitor pricing, maintenance of our current market position and other risk factors documented in the section entitled “Risk Factors” in Part I of the Form 10-K. Given these uncertainties, undue reliance should not be placed on such forward-looking statements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest income earned on the Company's investment portfolio is affected by changes in the general level of U.S. interest rates. The Company's line of credit borrowings, effectively bear interest at variable rates and therefore, changes in U.S. interest rates affect interest expense incurred thereon. Changes in interest rates do not affect interest expense incurred on the Company's fixed rate debt. The following table provides information about the Company's financial debt instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity dates. The Company did engage in an interest rate swap during 2001, but the dollar amount of the swap was not significant. The gain or loss on this transaction did not materially affect the financial results. The fair value of the financial instruments approximates the carrying value.

DECEMBER 31, 2001 (IN THOUSANDS)	2002	2003	2004	2005	2006	Thereafter	Total


Long-term debt

Fixed rate	$11,473	$17,238	$10,298	$7,948	$3,103	$2,612	$52,672

Average interest rate	8.47%	8.51%	6.67%	5.30%	4.38%	3.14%

Variable rate	$4,575	—	—	—	$169,450	—	$174,025

Average interest rate	3.67%	3.69%	3.69%	3.69%	3.69%

Based upon the Company’s variable rate borrowing levels, a 1% change in interest rates would have resulted in a pre-tax fluctuation of approximately $1.4 million and $0.9 million, in 2001 and 2000 respectively.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Company’s consolidated financial statements at December 31, 2001 and 2000 and the Report of KPMG LLP, Independent Accountants, are included in this Annual Report on Form 10-K on pages F-1 through F-6.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information called for by this Item 10 is incorporated by reference from our definitive Proxy Statement for our Annual Meeting of Stockholders, to be held on June 17, 2002, which will be filed with the Commission pursuant to Regulation 14A of the Securities and Exchange Commission (“Regulation 14A”) within 120 days from December 31, 2001.

Based solely upon our review of Forms 3, 4 and 5 furnished to us, we believe that all reports required to be filed during 2001 pursuant to Section 16(b) of the Securities Exchange Act of 1934 were timely filed, except that Robert Funari was 25 days late in filing his Form 4 to report a zero cost collar transaction in December 2001.

Item 11. EXECUTIVE COMPENSATION.

The information called for by this Item 11 is hereby incorporated by reference from our definitive Proxy Statement for our Annual Meeting of Stockholders to be held on June 17, 2002.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information called for by this Item 12 is hereby incorporated by reference from our definitive Proxy Statement for our Annual Meeting of Stockholders to be held on June 17, 2002.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information called for by this Item 13 is hereby incorporated by reference from our definitive Proxy Statement for our Annual Meeting of Stockholders to be held on June 17, 2002.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

The following documents are filed as part of this report:

(a) 1. Consolidated Financial Statements.

		Page
	Independent Auditors' Report	F-1
	Consolidated Balance Sheets	F-2
	Consolidated Statements of Income	F-3
	Consolidated Statements of Stockholders' Equity and
	Comprehensive Income	F-4
	Consolidated Statements of Cash Flows	F-5
	Notes to Consolidated Financial Statements	F-6

2. Financial Statement Schedules.

The following schedule supporting the financial statements of the Company is included herein:

		Page

Schedule II	Valuation and Qualifying Accounts	S-1

All other schedules and financial statements of the Company are omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto.

(b) Reports on Form 8-K filed in the Quarter Ended December 31, 2001.

None.

(c) Exhibits.

	Exhibit
	No.	Description


	3.	Certificate of Incorporation and By-Laws

	3.1	Restated Certificate of Incorporation of the Company filed as Exhibit 3.1 to the Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference.

	3.2	Restated By-Laws of the Company, filed as Exhibit 3.2 to the Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.

	4.	Instruments Defining the Rights of Security Holders

	4.1	Stock Certificate for Common Stock of the Company filed as Exhibit 4.1 to the Form 10-K for the year ended May 31, 1986, and incorporated herein by reference.

	4.2	Rights Agreement dated as of September 28, 1999 between the Company and American Stock Transfer & Trust Company filed as Exhibit 4 to the Form 8-K dated September 28, 1999 and filed on October 12, 1999, and incorporated herein by reference.

	10.	Material Contracts

	10.1	Form of Indemnity Agreement substantially as entered into between the Company and each Director and Officer, filed as Exhibit 3.2 Appendix A to the Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.*

	10.2	Form of Benefits Agreement substantially as entered into between the Company and each Director, filed as Exhibit 10.8 to the Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.*

	10.3	Form of Benefits Agreement substantially as entered into between the Company and certain employees, filed as Exhibit 10.8 to the Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.*

	10.4	Syncor International Corporation 1990 Master Stock Incentive Plan, as amended and restated as of June 18, 1997, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 1997, and incorporated herein by reference.*

	10.5	First Amendment to the Syncor International Corporation 1990 Master Stock Incentive Plan, as amended and restated as of June 23, 1999, filed as Exhibit 10.4 to the Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference.*

	10.6	Form of Stock Option Agreement substantially as entered into between the Company and certain employee Directors and employees filed as Exhibit 10.15 to the Form 10-K for year ended December 31, 1993, and incorporated herein by reference.*

	10.7	Form of Stock Option Agreement substantially as entered into between the Company and certain non-employee Directors filed as Exhibit 10.16 to the Form 10-K for the year ended December 31, 1993, and incorporated herein by reference.*

__________________________

Management contract or compensatory plan

	10.8	Non-Employee Director 1995 Stock Incentive Award Agreement dated January 24, 1995 entered into between the Company and Arnold E. Spangler, filed as Exhibit 10.17 to the Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.*

	10.9	Non-Employee Director 1995 Stock Incentive Award Agreement dated January 24, 1995 entered into between the Company and George S. Oki, filed as Exhibit 10.18 to the Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.*

	10.10	Non-Employee Director 1995 Stock Incentive Award Agreement dated April 29, 1996, entered into between the Company and Gail Wilensky, filed as Exhibit 4.3(b) to the Registration Statement on Form S-8 filed on December 20, 1996 to register the shares underlying said Award Agreement, and incorporated herein by reference.*

	10.11	Non-Employee Director 1995 Stock Incentive Award Agreement dated April 29, 1996, entered into between the Company and Steven Gerber, filed as Exhibit 4.3(a) to the Registration Statement on Form S-8 filed on December 20, 1996 to register the shares underlying said Award Agreement, and incorporated herein by reference.*

	10.12	Subscription Agreement, dated July 15, 1996, executed by Syncor Management Corporation in favor of American Tax Credit Corporate Fund III, L.P., together with a Promissory Note, dated July 15, 1996, executed by Syncor Management Corporation in favor of John Hancock Mutual Life Insurance Company, as assignee of Corporate Credit, Inc., and the Guarantee of Parent Corporation, dated July 15, 1996, executed by the Company in favor of John Hancock Mutual Life Insurance Company, as assignee of Corporate Credit, Inc. These agreements were filed as Exhibit 10.15 to the Form 10-K for the year ended December 31, 1996, and are incorporated herein by reference.

	10.13	The Office Lease, dated as of September 30, 1996, between Massachusetts Life Insurance Company and the Company, relating to the office lease for the Company’s corporate headquarters in Woodland Hills, California, filed as Exhibit 10.19 to the Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.

	10.14	Office Lease, dated October 19, 2000, between the Company and Nomura-Warner Center Associates, L.P., filed as Exhibit 10.16 to the Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.

	10.15	Non-Employee Director Stock Compensation Plan, dated August 27, 1996, filed as Exhibit 4.3 to the Form S-8 Registration Statement filed by the Company with the SEC on December 20, 1996, and incorporated herein by reference.*

	10.16	Loan Agreement, dated March 31, 1997, among Syncor Pharmaceuticals, Inc., as borrower, the Company, as guarantor, and Bank One, NA (formerly The First National Bank of Chicago), as lender, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 1997, and incorporated herein by reference.

	10.17	Syncor International Corporation Deferred Compensation Plan effective January 1, 1998, filed as Exhibit 10.24 to the Form 10-K for the year ended December 31, 1997, and incorporated herein by reference.*

	10.18	Amendment No. 1 to Syncor International Corporation Deferred Compensation Plan, dated November 21, 2000, filed as Exhibit 10.21 to the Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.*

_________________________

Management contract or compensatory plan

	10.19	Amendment No. 2 to Syncor International Corporation Deferred Compensation Plan, dated November 1, 2001.*

	10.20	Executive Long-Term Performance Equity Plan, effective as of January 1, 1998, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by reference.*

	10.21	First Amendment to Executive Long-Term Performance Equity Plan, dated as of November 17, 1998, filed as Exhibit 10.25 to the Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.*

	10.22	Second Amendment to Executive Long-Term Performance Equity Plan, dated as of June 23, 1999, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference.*

	10.23	Third Amendment to Executive Long-Term Performance Equity Plan, dated as of June 20, 2000, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by reference.*

	10.24	Fourth Amendment to Executive Long-Term Performance Equity Plan, dated as of June 20, 2000, filed as Exhibit 10.2 to the Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by reference.*

	10.25	Fifth Amendment to Executive Long-Term Performance Equity Plan, dated August 22, 2000, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended September 30, 2000, and incorporated herein by reference.*

	10.26	1998 Senior Management Stock Purchase Plan, effective as of June 16, 1998, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference.*

	10.27	Universal Performance Equity Participation Plan, effective as of June 16, 1998, filed as Exhibit 10.2 to the Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference.*

	10.28	First Amendment to the Universal Performance Equity Participation Plan, dated as of June 16, 1998, filed together with the Universal Performance Equity Plan that was filed as Exhibit 10.2 to the Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference.*

	10.29	Second Amendment to the Universal Performance Equity Participation Plan, dated as of June 23, 1999, filed as Exhibit 10.2 to the Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference.*

	10.30	Third Amendment to the Universal Performance Equity Participation Plan, dated as of June 23, 1999, filed as Exhibit 10.3 to the Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference.*

	10.31	New Employee Stock Option Plan, dated as of June 1, 1998, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended September 30, 1998, and incorporated herein by reference.*

_________________________

Management contract or compensatory plan

	10.32	First Amendment to the Syncor International Corporation New Employee Stock Option Plan, dated December 5, 2000, filed as Exhibit 10.34 to the Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.*

	10.33	Form of Stock Option Agreement under the New Employee Stock Option Plan as entered into between the Company and certain employees, filed as Exhibit 10.31 to the Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.*

	10.34	Non-Qualified Stock Option Award Agreement, dated February 24, 1999, between the Company and Robert G. Funari, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 1999, and incorporated herein by reference.*

	10.35	Non-Employee Director 1999 Stock Incentive Plan, dated November 11, 1999, filed as Exhibit 10.35 to the Form 10-K for the year ended December 31, 1999, and incorporated herein by reference.*

	10.36	Form of Non-Employee Director 1999 Stock Incentive Award Agreement, dated November 11, 1999, entered into between the Company and each of the non-employee directors (excluding Ronald Williams), filed as Exhibit 10.36 to the Form 10-K for the year ended December 31, 1999, and incorporated herein by reference.*

	10.37	Split Dollar Agreement between the Company and the Monty and Wendy Fu 1998 Irrevocable Trust, dated January 8, 1999, filed as Exhibit 10.37 to the Form 10-K for the year ended December 31, 1999, and incorporated herein by reference.*

	10.38	Employment Agreement of Robert G. Funari, dated as of January 1, 2000, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by reference.*

	10.39	Employment Agreement of Monty Fu, dated as of January 1, 2000, filed as Exhibit 10.2 to the Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by reference.*

	10.40	Severance Agreement dated August 24, 2001 between Haig Bagerdjian and the Company, filed as Exhibit 10.2 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.41	Severance Agreement dated August 24, 2001 between John S. Baumann and the Company, filed as Exhibit 10.3 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.42	Severance Agreement dated August 24, 2001 between Rodney Boone and the Company, filed as Exhibit 10.4 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.43	Severance Agreement dated August 24, 2001 between Jack Coffey and the Company, filed as Exhibit 10.5 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.44	Severance Agreement dated August 24, 2001 between Sheila Coop and the Company, filed as Exhibit 10.6 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

__________________________

Management contract or compensatory plan

	10.45	Severance Agreement dated August 24, 2001 between William Forster and the Company, filed as Exhibit 10.7 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.46	Severance Agreement dated August 24, 2001 between Monty Fu and the Company, filed as Exhibit 10.8 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.47	Severance Agreement dated August 24, 2001 between Robert Funari and the Company, filed as Exhibit 10.9 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.48	Severance Agreement dated August 24, 2001 between Lewis William Terry, Jr. and the Company, filed as Exhibit 10.10 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.49	Severance Agreement dated August 24, 2001 between David Ward and the Company, filed as Exhibit 10.11 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.50	Syncor International Corporation Special Severance Plan, filed as Exhibit 10.12 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.*

	10.51	Term Loan Credit Agreement, dated as of May 5, 2000, between Bank One, N.A. and Syncor Management Corporation, filed as Exhibit 10.7 to the Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by reference.

	10.52	Credit Agreement, dated as of October 17, 2000, among the Company, Bank One, N.A., as Administrative Agent, Bank One Capital Markets, Inc., as Lead Arranger, The Bank of Nova Scotia, as Documentation Agent, and other lenders signatories thereto, filed as Exhibit 10.43 to the Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.

	10.53	Letter Amendment to Credit Agreement, dated February 5, 2001, between the Company and Bank One, N.A., filed as Exhibit 10.44 to the Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.

	10.54	First Amended and Restated Credit Agreement, dated as of May 10, 2001 with Bank One, N.A. as Lender and the Bank of Nova Scotia as Document Agent, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 2001, and incorporated herein by reference.

	10.55	First Amendment to First Amended and Restated Credit Agreement dated as of September 13, 2001, among Bank One, N.A. as Lender, The Bank of Nova Scotia as Document Agent, the Company and Syncor Management Corporation, filed as Exhibit 10.1 to the Form 10-Q for the quarter ended September 30, 2001, and incorporated herein by reference.

	10.56	Second Amendment to First Amended and Restated Credit Agreement dated as of December 21, 2001, among Bank One, N.A. as Lender, The Bank of Nova Scotia as Document Agent, the Company and Syncor Management Corporation.

__________________________

Management contract or compensatory plan

	10.57	Receivables Financing Agreement dated January 4, 2002 among Syncor Financing Corporation, as Seller, Syncor Management Corporation, as Servicer, Jupiter Securitization Corporation, the Financial Institutions listed therein and Bank One, N.A., as Agent.

	21.	Subsidiaries of the Registrant

	23.	Independent Auditors' Consent

_________________________

Management contract or compensatory plan

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2002	SYNCOR INTERNATIONAL CORPORATION


	By /s/Robert G. Funari
	Robert G. Funari
	President and Chief Executive Officer

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.



/s/Monty Fu	Chairman of the Board	Date: March 31, 2002
Monty Fu	and Director


/s/Robert G. Funari	President, Chief Executive	Date: March 31, 2002
Robert G. Funari	Officer (Principal Executive Officer)
	and Director

/s/William P. Forster	Senior Vice President, Chief	Date: March 31, 2002
William P. Forster	Financial Officer and Treasurer
	(Principal Financial
	and Accounting Officer)

/s/Steven B. Gerber	Director	Date: March 31, 2002
Steven B. Gerber, M.D.


/s/George S. Oki	Director	Date: March 31, 2002
George S. Oki


/s/Arnold E. Spangler	Director	Date: March 31, 2002
Arnold E. Spangler


/s/Henry N. Wagner, Jr.	Director	Date: March 31, 2002
Henry N. Wagner, Jr., M.D.


/s/Gail R. Wilensky	Director	Date: March 31, 2002
Dr. Gail R. Wilensky


/s/Ronald A. Williams	Director	Date: March 31, 2002
Ronald A. Williams

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders, Syncor International Corporation

We have audited the accompanying consolidated balance sheets of Syncor International Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Syncor International Corporation and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective July 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” and certain provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” as required for goodwill and intangible assets, resulting from business combinations consummated after June 30, 2001.

/s/KPMG LLP

Los Angeles, California
February 15, 2002

MANAGEMENT’S REPORT

The Management of Syncor International Corporation is responsible for the consolidated financial statements and all other information presented in this report. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances and, therefore, included in the consolidated financial statements are certain amounts based on management's informed estimates and judgments. Management is responsible for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. The concept of reasonable assurance is based on the recognition that there are inherent limitations in all systems of internal control, and that the cost of such systems should not exceed the benefits to be derived there from. Other financial information in this report is consistent with that in the consolidated financial statements. The consolidated financial statements have been audited by Syncor International Corporation's independent certified public accountants and have been reviewed by the Audit Committee of the Board of Directors.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT PER SHARE DATA)	DECEMBER 31, 2001		DECEMBER 31, 2000


ASSETS

Current Assets:
Cash and cash equivalents	$17,634		$24,330
Short-term investments	11,908		4,156
Trade receivables, less allowance for doubtful
accounts of $3,749 and $2,485, respectively	102,759		81,716
Patient receivables, less allowance for doubtful
accounts of $12,968 and $6,543, respectively	52,944		37,686
Inventory	30,630		59,926
Prepaids and other current assets	31,521		16,023


Total current assets	247,396		223,837


Marketable investment securities	1,006		1,190
Property and equipment, net	177,364		114,286
Excess of purchase price over net assets acquired, net of
accumulated amortization of $21,097 and $14,524, respectively	141,333		108,530

Other assets	20,742		22,728


	587,841		$470,571


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$65,853		$83,683
Accrued liabilities	20,763		22,371
Accrued wages and related costs	22,522		19,796
Federal and state taxes payable	6,482		5,543
Current maturities of long-term debt	16,048		12,091


Total current liabilities	131,668		143,484


Long-term debt, net of current maturities	210,649		137,886
Deferred taxes	10,696		3,321

Stockholders' Equity:
Common stock $.05 par value; authorized 200,000
shares; issued 24,831 and 24,425 shares at
December 31, 2001 and 2000, respectively	1,420		1,376
Additional paid-in capital	124,909		107,268
Notes receivables from related parties	(6,197	)	(16,796	)
Accumulated other comprehensive loss	(3,653	)	(1,245	)
Employee savings and stock ownership loan guarantee	—		(1,685	)
Retained earnings	151,888		114,019
Treasury stock, at cost, 3,575 and 3,072 shares
at December 31, 2001 and 2000, respectively	(33,539	)	(17,057	)


Total stockholders' equity	234,828		185,880


	$587,841		$470,571

See accompanying Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)	YEAR ENDED DECEMBER 31, 2001		YEAR ENDED DECEMBER 31, 2000		YEAR ENDED DECEMBER 31, 1999


Net sales	$774,718		$629,394		$520,309
Cost of sales	479,735		404,548		350,988


Gross profit	294,983		224,846		169,321

Operating, selling and administrative expenses	180,545		142,222		110,308
Depreciation and amortization	39,561		26,309		19,515


Operating income	74,877		56,315		39,498

Other income (expense):
Interest income	2,265		2,298		2,188
Interest expense	(13,374	)	(10,248	)	(7,014	)
Other, net	(1,687	)	863		(756	)


Other income (expense), net	(12,796	)	(7,087	)	(5,582	)

Income before income taxes	62,081		49,228		33,916
Provision for income taxes	24,212		19,690		14,695


Net income	$37,869		$29,538		$19,221


Net income per share – basic:

Net income	$1.54		$1.23		$0.82


Weighted average shares outstanding	24,570		23,948		23,340


Net income per share – diluted:

Net income	$1.40		$1.11		$0.75


Weighted average shares outstanding	27,029		26,657		25,478

See accompanying Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

							Accumulated Other
							Comprehensive Income
					Employee
					Savings									Notes
					& Stock		Unrealized		Foreign					Receivable
				Additional	Ownership		Gain or		Currency					From		Total
	Common Stock			Paid-In	Loan		(Loss) on		Translation		Retained	Treasury		Related		Stockholders’
(IN THOUSANDS)	Shares		Amount	Capital	Guarantee		Investments		Adjustment		Earnings	Stock		Parties		Equity


Balance at December 31, 1998	22,322		$1,252	$71,996	$(5,056	)	$(317	)	$(210	)	$65,260	$(12,524	)	$(9,028	)	$111,373
Issuance of common stock	1,578		78	15,865										(9,664	)	6,279
Tax benefit from the exercise of stock options				2,743												2,743
Reacquisition of common stock for treasury	(74	)										(1,082	)			(1,082	)
Amortization of loan guarantee					1,686											1,686
Comprehensive Income:
Unrealized gain on investments							172
Foreign currency translation adjustment									(55	)
Net income											19,221
Total Comprehensive Income:																19,338


Balance at December 31, 1999	23,826		$1,330	$90,604	$(3,370	)	$(145	)	$(265	)	$84,481	$(13,606	)	$(18,692	)	$140,337
Issuance of common stock	885		46	10,400												10,446
Tax benefit from the exercise of stock options				6,264												6,264
Reacquisition of common stock for treasury	(286	)										(3,451	)			(3,451	)
Amortization of loan guarantee					1,685											1,685
Payment from related parties														1,896		1,896
Comprehensive Income:
Unrealized gain on investments							138
Foreign currency translation adjustment									(973	)
Net income											29,538
Total Comprehensive Income:																28,703


Balance at December 31, 2000	24,425		$1,376	$107,268	$(1,685	)	$(7	)	$(1,238	)	$114,019	$(17,057	)	$(16,796	)	$185,880
Issuance of common stock	908		44	12,770												12,814
Tax benefit from the exercise of stock options				4,871												4,871
Reacquisition of common stock for treasury	(502	)										(16,482	)			(16,482	)
Payment from related parties														10,599		10,599
Amortization of loan guarantee					1,685											1,685
Comprehensive Income:
Unrealized gain on investments							20
Foreign currency translation adjustment									(2,428	)
Net income											37,869
Total Comprehensive Income:																35,461


Balance at December 31, 2001	24,831		$1,420	$124,909	$0		$13		$(3,666	)	$151,888	$(33,539	)	$(6,197	)	$234,828

See accompanying Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)	YEAR ENDED DECEMBER 31, 2001		YEAR ENDED DECEMBER 31, 2000		YEAR ENDED DECEMBER 31, 1999


Cash flows from operating activities:
Net income	$37,869		$29,538		$19,221
Adjustments to reconcile net income to net cash provided operating activities:
Depreciation and amortization	39,561		26,309		19,515
Provision for losses on receivables	9,720		7,232		466
Amortization of loan guarantee	1,685		1,685		1,686
Decrease (increase) in:
Accounts receivable – trade	(15,453	)	(9,690	)	(9,592	)
Accounts receivable – patient	(22,251	)	(20,615	)	(1,348	)
Inventory	35,605		(38,153	)	(10,219	)
Prepaids and other current assets	(12,955	)	(626	)	(2,369	)
Other assets	(157	)	(3,966	)	(9,032	)
Increase (decrease) in:
Accounts payable	(20,513	)	29,969		8,647
Accrued liabilities	2,167		5,102		1,597
Accrued wages and related costs	(3,514	)	2,821		4,427
Deferred items	5,831		—		(312	)
Federal and state tax payable	7,375		9,408		4,001


Net cash provided by operating activities	64,970		39,014		26,688

Cash flows from investing activities:
Purchase of property and equipment, net	(64,892	)	(31,389	)	(24,463	)
Payments for acquisitions, net of cash	(54,779	)	(51,498	)	(18,031	)
Net (decrease) increase in short-term investments	(7,726	)	4,368		(3,823	)
Net decrease (increase) in long-term investments	260		(5	)	6
Unrealized gain in investments	20		138		171


Net cash used in investing activities	(127,117	)	(78,386	)	(46,140	)

Cash flows from financing activities:
Issuance of common stock	12,814		10,445		6,279
Reacquisition of common stock	(16,482	)	(3,451	)	(1,082	)
Proceeds from long-term debt	62,657		44,270		23,643
Repayment of long-term debt	(13,713	)	(2,420	)	(9,955	)
Note receivable related parties	10,599		1,896		—


Net cash provided by financing activities	55,875		50,740		18,885

Net (decrease) increase in cash and cash equivalents	(6,272	)	11,368		(567	)

Effect of exchange rate on cash	(424	)	(390	)	95

Cash and cash equivalents at beginning of period	24,330		13,352		13,824

Cash and cash equivalents at end of period	$17,634		$24,330		$13,352

See accompanying Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are as follows:

Revenue Recognition. We recognize our revenue primarily from two sources: (i) product revenue, which includes sales from our radiopharmacies and (ii) services revenue, primarily from our imaging business. As described below, significant judgments and estimates must be used by management in connection with the revenue recognized in any period for the imaging business. Material differences may impact the amount of revenue recorded in any period if management judgments or estimates that are significantly different than actual.

Estimating Valuation Allowances for Doubtful Accounts. The preparation of financial statements requires our management to make estimates and assumptions on the collectibility of our accounts receivable. Management specifically analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends, aging of accounts and changes in payment terms when evaluating the adequacy of the allowance for doubtful accounts. Any changes in these estimates or assumptions could cause material differences in recorded allowances.

Valuation of Long-Lived Assets and Goodwill. We assess the impairment of identifiable intangibles, long-lived assets and related goodwill and enterprise level goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

	•	significant underperformance relative to expected historical or projected future operating results;

	•	significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

	•	significant negative industry or economic trends;

	•	our market capitalization relative to net book value.

The cost in excess of net assets of acquired businesses is being amortized on a straight-line basis over periods of 15 to 40 years.

Principles of Consolidation: The consolidated financial statements include the assets, liabilities and operations of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents and Short-Term Investments: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments consist principally of time deposits and tax-exempt municipal securities and are carried at cost, which approximates market value.

Financial Instruments: The carrying value of financial instruments such as cash and cash equivalents, trade receivables, payables and floating rate short and long-term debt, approximate fair value.

Patient Revenues and Receivables: The Company's medical imaging facilities have entered into agreements with third-party payors, including government programs and managed care health care plans, under which the facilities are paid based upon established charges, predetermined rates per service or discounts from established charges.

Revenues are recorded at estimated amounts due from patients and third-party payors for the services provided. Management believes that adequate provisions have been made for any potential adustments.

During the years ended December 31, 2001, 2000 and 1999 approximately 15.5%, 11.4% and 9.1% of the Company's patient revenues related to patients participating in the Medicare and Medicaid programs. The Company does not believe that there are any other significant concentrations of revenues from any particular payor that would subject the Company to any significant credit risk in the collection of its patient accounts receivable.

Inventory: Inventories, primarily consisting of purchased products, are stated at the lower of cost (first-in, first-out) or market.

Property and Equipment: Property and equipment are stated at cost and depreciated or amortized on a straight-line basis over estimated useful lives ranging from two to fifteen years.

Self Insurance: The Company historically has purchased insurance in excess of self-insured retentions or deductibles for losses and liabilities related to vehicle claims, medical claims and general product liability claims. Losses accrued under self-insured and deductible plans are based upon the Company’s estimates of aggregated liability claims incurred using certain actuarial assumptions followed in the insurance industry and the Company's own experience.

Marketable Investment Securities: Marketable investment securities consist primarily of corporate debt and United States government obligations. The Company classifies debt and marketable equity securities in one of three categories: trading, available-for-sale or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities that the Company has the ability and intent to hold until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale.

Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a component of accumulated other comprehensive income until realized.

Foreign Currency Translation: Assets and liabilities of foreign operations are translated into U.S. dollars based upon the prevailing exchange rates in effect at the balance sheet date. Foreign exchange gains and losses resulting from these translations are included as a component of accumulated other comprehensive income. Actual gains or losses incurred on currency transactions in other than the country's functional currency are included in net income currently. During 2001, the Company’s fixed assets decreased by $2.1 million due to currency translation adjustments when we corrected our policy of using historical exchange rates to current exchanges rates. This change did not have an earnings impact but impacted the valuation of fixed assets of our International business and accumulated other comprehensive income on the balance sheet.

Stock Options: The Company measures stock-based compensation using the intrinsic value method, which assumes that options granted at market price at the date of grant have no intrinsic value. Proforma net income and earnings per share are presented in Note 9 as if the fair value method had been applied.

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Use of Estimates: The Company’s management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the reporting of sales and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

Reclassifications: Certain items in the prior years’ consolidated financial statements have been reclassified to conform to the current year's presentation.

New Accounting Standards. In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

The Company is required to adopt the provisions of Statement 141 immediately, except with regard to business combinations initiated prior to July 1, 2001, which it expects to account for using the pooling-of-interests method, and Statement 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142.

Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

In connection with the transitional goodwill impairment evaluation, Statement 142 will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit’s carrying amount. To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the Company must perform the second step of the transitional impairment test.

In the second step, the Company must compare the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s fair value to all of it assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company’s statement of earnings.

In August 2001, the Financial Accounting Standards Board issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144), which supersedes both FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (Statement 121) and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30), for the disposal of a segment of a business (as previously defined in that Opinion). Statement 144 retains the fundamental provisions in Statement 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with Statement 121. Statement 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike Statement 121, an impairment assessment under Statement 144 will never result in a write-down of goodwill. Rather, goodwill is evaluated for impairment under Statement No. 142, Goodwill and Other Intangible Assets.

The Company is required to adopt Statement 144 no later than the year beginning after December 15, 2001. Accordingly, the Company will adopt Statement 144 in the first quarter of 2002. Management does not expect the adoption of Statement 144 for long-lived assets held for use to have a material impact on the Company’s financial statements because the impairment assessment under Statement 144 is largely unchanged from Statement 121. The provisions of the Statement for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities.We currently do not expect to record an impairment charge upon completion of the initial impairment review. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded.

Note 2. ACQUISITIONS

During 2000 and 2001, the Company made several acquisitions. Our 2000 acquisitions were made primarily by CMI, our U.S. medical imaging subsidiary. During 2001, significant acquisitions were made by Syncor Overseas Ltd., our International subsidiary, by our US Pharmacy business, and by CMI.

2001 Acquisitions:

During January 2001, we acquired three imaging center sites in California for a purchase price of $13.4 million.

In March 2001, we acquired a Gamma knife venture in Brazil for a purchase price of $2.0 million and a distributor of radiopharmceuticals in New Zealand for a purchase price of $0.3 million plus the assumption of $0.2 million of debt.

During May 2001, we entered a management service agreement with an oncology clinic in Brazil for an investment of $1.8 million.

During June 2001, we acquired a distributor and manufacturer of diagnostic radiopharmeceuticals in Australia for an acquisition price of $0.7 million.

During July 2001, we acquired a manufacturer of radiation detection and measurement equipment in Ohio for an acquisition price of $10.8 million. We also acquired two imaging centers in Texas for $4.3 million plus the assumption of $3.6 million of debt. In addition, we acquired an imaging center in Florida for a purchase price of $5.1 million plus the assumption of $2.0 million of debt.

During September 2001, we acquired a cardiovascular service company in North Carolina for an acquisition price of $13.7 million plus the assumption of $0.2 million of debt. In addition, we acquired a radiology and cardiology distribution company in Belgium for an acquisition price of $2.0 million.

During October 2001, we acquired a nuclear services company for an acquisition price of $0.8 million.

2000 Acquisitions:

During March 2000, we acquired four imaging center sites. The first was the acquisition of three sites previously managed by CMI for a price of $2.1 million plus the assumption of $2.7 million in debt. The second was a site acquisition in Boynton Beach, FL for a purchase price of $0.2 million plus the assumption of $1.3 million in debt.

During April 2000, we acquired the remaining interest in seven managed imaging center sites for a total acquisition price of $8.7 million plus the assumption of $1.0 million of debt.

During September 2000, we acquired thirteen imaging centers located in California and Florida for a total acquisition price of $31 million plus the assumption of $1.3 million in debt. In addition, the Company acquired certain PET production facilities for an acquisition price of $0.9 million plus the assumption of $5.8 million in debt.

During November 2000, we acquired an imaging center and a catheterization laboratory in Trinidad and Tobago for an acquisition price of $2.0 million. In addition, we acquired a nuclear medicine business in Puerto Rico for $0.75 million. In December 2000, we acquired an imaging center in Phoenix, AZ for an acquisition price of $4.7 million plus the assumption of $4.2 million in debt.

The following table represents the allocation of purchase price for acquisitions in 2001 and 2000:

	Allocation of Acquisitions Purchase Price
	2001		2000

Accounts Receivable	$8,510		$6,822
Goodwill	37,762		35,608
Inventory	6,374		-
Property & Equipment	10,854		32,354
Other Liabilities	(2,823	)	(7,280	)


Sub-Total	60,677		67,504

Less Assumption of Debt	(5,898	)	(16,006	)

Total	$54,779		$51,498

The Company accounted for these transactions as purchases and the purchase prices were allocated as indicated above. Goodwill for these acquisitions is being amortized from 15 to 20 years period. The results of operations related to the above 2001 and 2000 transactions are included in the Company’s consolidated financial statements from the effective acquisition dates.

The following unaudited pro forma information presents a summary of our consolidated results of operation’s for 2001 and 2000 as if the acquisitions had occurred at the beginning of those years.

(IN THOUSANDS, EXCEPT PER SHARE)	YEAR END DECEMBER 31, 2001	YEAR END DECEMBER 31, 2000


Sales	$810,543	$679,093
Net earnings	$ 39,428	$ 30,755
Net earnings per diluted share (continuing operations)	$ 1.46	$ 1.15

These unaudited proforma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred or the future results of operations of the consolidated entities.

Note 3. PROPERTY AND EQUIPMENT, NET

The major classes of property were as follows:

	DECEMBER 31,		DECEMBER 31,
(IN THOUSANDS)	2001		2000


Land and buildings	$ 17,962		$ 14,197
Furniture and equipment	197,934		142,486
Leasehold improvements	44,609		27,290
Construction in progress	16,161		7,463


	276,666		191,436

Less accumulated depreciation and amortization	(99,302	)	(77,150	)


	$177,364		$114,286

Note 4. MARKETABLE INVESTMENT SECURITIES

Marketable investment securities consist of:

	DECEMBER 31,	DECEMBER 31,
(IN THOUSANDS)	2001	2000

Available-for-sale, at fair value, net of tax effect	$506	$690
Held-to-maturity, at amortized cost	$500	500


	$1,006	$1,190

The amortized cost, gross unrealized holding gains and losses and fair value for available-for-sale and held-to-maturity securities by major security type at December 31, 2001 and 2000 were as follows:

			2001 UNREALIZED
(IN THOUSANDS)	AMORTIZED COST	HOLDING GAINS		HOLDING LOSSES		FAIR VALUE

Available-for-sale:
Corporate debt securities	$ 493	$13		$—		$ 506

Held-to-maturity:
U.S. Treasury securities	500	$—		$—		500

	$ 993	$13		$—		$1,006


			2000 UNREALIZED
(IN THOUSANDS)	AMORTIZED COST	HOLDING GAINS		HOLDING LOSSES		FAIR VALUE

Available-for-sale:
Corporate debt securities	$ 697	$—		$ (7	)	$ 690

Held-to-maturity:
U.S. Treasury securities	500	—		—		500

	$1,197	—		$ (7	)	$1,190

The unrealized holding losses on held-to-maturity securities have not been recognized in the accompanying consolidated financial statements.

Maturities of investment securities classified as available-for-sale and held-to-maturity at December 31, 2001 and 2000 were as follows:

	2001			2000
(IN THOUSANDS)	AMORTIZED COST	FAIR VALUE	AMORTIZED COST		FAIR VALUE

Available-for-sale:
Due after one year through five years	$493	$506	$499		$499
Due after five years through ten years	$ 0	$ 0	$198		$191


Held-to-maturity:
Due within one year	$500	$500	$500		$500

Note 5. LINE OF CREDIT

At December 31, 2001, the Company had an unsecured revolving line of credit for short-term borrowings aggregating $200,000,000. The line of credit was increased from $150,000,000 to $200,000,000 effective May 10, 2001. The terms of this revolving credit line include two interest rate borrowing options, the Eurodollar rate plus an applicable margin or the bank's Prime rate (4.75 percent at December 31, 2001). At December 31, 2001, the availability of the line of credit was reduced by $2.0 million as a result of outstanding standby letters of credit resulting in available credit of $28.5 million. To maintain this line of credit, the Company is required to pay a quarterly commitment fee of 1/4 of one percent per annum on the unused portion.

The line of credit agreement specifies that certain covenants be maintained, including limitations on investments and acquisitions, new borrowings and issuance of new stock. Certain financial ratios also need to be maintained under this agreement, including minimum Net Worth, EBITDA ratio and Fixed Charge Coverage ratio. At December 31, 2001, the Company was in compliance with all debt covenants under the credit line agreement.

Note 6. LONG-TERM DEBT

The Company's long-term debt was as follows:

	DECEMBER 31,	DECEMBER 31,
(IN THOUSANDS)	2001	2000


Notes payable, unsecured, payable in installments through 2015,
with effective interest rates ranging from 2.15% to 9%	$ 2,905	$ 905


Note payable, unsecured, payable in installments through 2001,
with a floating interest rate of either the lower of prime rate or
LIBOR plus .75%, 6.57% at December 31, 2000	0	1,685


Notes payable, secured, payable in installments through 2003,
with a non-interest bearing rate, net of unamortized discount
at 8.38% to 9.58% of $11 and $47 at December 31, 2001
and 2000, respectively	2,017	2,519


Note payable, unsecured, payable in installments through 2002,
with a floating interest rate of LIBOR plus .95%, 2.85% and
7.39% at December 31, 2001 and 2000, respectively	4,575	5,275


Note payable, unsecured, payable in lump sum on May 1, 2006
with a floating interest rate of LIBOR plus 1.625% or prime rate,
with interest rates ranging from 3.56% to 3.88% at December 31, 2001
and with average interest rate for 2001 of 6.37%, and 7.82% for 2000	169,450	108,100


Notes payable, payable in varying installments through 2012
with effective interest rates ranging from 5.28% to 12.01%	5,460	6,817


Non-Compete agreement paid in varying installments through 2002,
with effective interest rate of 6%	20	264


Capital Lease obligations, payable in installments through 2006,
with effective interest rates from 5.50% to 15.57%	42,270	24,412


Total debt	226,697	149,977


Less current maturities of long-term debt	16,048	12,091


Long-term debt, net of current maturities	$210,649	$137,886

At December 31, 2001, long-term debt maturing over the next five years is as follows: 2002, $16,048; 2003, $17,238; 2004, $10,298; 2005, $7,948; 2006, $172,553; and $2,612 thereafter.

Interest paid was $13,148, $10,128, and $6,945 for the years ended December 31, 2001, 2000 and 1999, respectively.

Note 7. INCOME TAXES

Total income tax expense for the years ended December 31, 2001, 2000 and 1999 was allocated as follows:

	YEAR ENDED		YEAR ENDED		YEAR ENDED
	DECEMBER 31,		DECEMBER 31,		DECEMBER 31,
(IN THOUSANDS)	2001		2000		1999


Domestic income	$22,695		$18,155		$13,914
Foreign income	1,517		1,535		781
Total income from continuing operations	24,212		19,690		14,695
Stockholders' equity for compensation expense for tax purposes in excess of amounts recognized for financial reporting	(4,871	)	(6,264	)	(2,743	)


	$19,341		$13,426		$11,952

Income tax expense (benefit) attributable to income from continuing operations consisted of:

(IN THOUSANDS)	YEAR ENDED DECEMBER 31, 2001	YEAR ENDED DECEMBER 31, 2000		YEAR ENDED DECEMBER 31, 1999


Current:
Federal	$15,328	$16,963		$9,281
Foreign	1,517	1,551		781
State	3,038	3,863		2,324


	19,883	22,377		12,386
Deferred:
Federal	3,476	(2,212	)	2,163
Foreign	0	(16	)	0
State	853	(459	)	146


	4,329	(2,687	)	2,309


	$24,212	$19,690		$14,695

The amounts differed from the amounts computed by applying the federal income tax rate of 35 percent to pretax income from continuing operations as a result of the following:

	YEAR ENDED DECEMBER 31, 2001		YEAR ENDED DECEMBER 31, 2000		YEAR ENDED DECEMBER 31, 1999

(IN THOUSANDS)


Federal income taxes at “expected” rate	$21,728		$17,230		$ 11,871
Increase (reduction) in income taxes resulting from:
Meals and entertainment	311		273		221
Tax exempt interest	(44	)	(53	)	(50	)
Non-deductible amortization of intangible assets	315		407		365
Foreign losses and foreign tax rate differential	702		926		1,027
State taxes, net of Federal benefit	2,529		2,213		1,605
Utilization of general business credits	(1,483	)	(1,340	)	(631	)
Other	154		34		287


	$24,212		$19,690		$14,695

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000, are presented below:

	DECEMBER 31,	DECEMBER 31,
(IN THOUSANDS)	2001	2000


Deferred tax assets:
Net operating loss and credit carryforwards	$ 0	$ 66
Compensated absences, principally due to accrual for financial reporting purposes	2,714	2,253
Accounts receivable, due to allowance for doubtful accounts	6,246	3,469
Accrued liabilities, primarily due to self-insurance and other contingency accruals for financial reporting purposes	2,479	3,536
Deferred compensation, due to accrual for financial reporting purposes	3,336	3,341
Covenant not to compete due to difference in amortization	466	542
Other	314	754


Total gross deferred tax asset	$15,555	$13,961


	DECEMBER 31,	DECEMBER 31,
(IN THOUSANDS)	2001	2000


Deferred tax liabilities:
Plant, equipment and internal software, due to differences in depreciation & amortization	$ 6,483	$ 1,801
Partnership basis, due to book to tax differences at partnership level	812	621
Deferred expenses	101	126
Goodwill	4,338	3,147
Other	139	255


Total gross deferred tax liabilities	$11,873	$ 5,950


Net deferred tax asset	$ 3,682	$ 8,011

Management has reviewed the recoverability of deferred income tax assets and has determined that it is more likely than not that the deferred tax assets will be fully realized through future taxable earnings. The gross deferred tax asset is recorded on the balance sheet in Prepaid and other current assets. Income tax payments amounted to $13,670, $12,299, and $7,704 for the years ended December 31, 2001, 2000, and 1999 respectively.

Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries and other foreign investments carried at equity. The amount of such earnings included in consolidated retained earnings amounted to $6,938 and $4,325, at December 31, 2001 and 2000 respectively. These earnings have been substantially reinvested, and we do not plan to initiate any action that would precipitate the payment of income taxes thereon.

Note 8. COMMITMENTS

The Company leases facilities, vehicles and equipment with terms ranging from three years to fifteen years. The majority of property leases contain renewal options and some have escalation clauses for increases in property taxes, Consumer Price Index and other items.

The Company leases certain items of equipment under capital leases which had a cost of $47,023, $29,039, and $17,144, at December 31, 2001, 2000 and 1999 respectively, and accumulated depreciation of $8,759, $7,139, and $5,603, respectively. The increase in equipment leases in 2001 was due primarily to continued expansion of our medical imaging businesses and for FDG (fluorodeoxyglucose) production equipment.

Future minimum lease payments under capital leases and non-cancelable operating leases with terms greater than one year and related sublease income at December 31, 2001 were as follows:

YEAR ENDING DECEMBER 31,
(IN THOUSANDS)	CAPITAL LEASES		OPERATING LEASES	SUBLEASE INCOME


2002	$12,662		$12,475	$ 5
2003	14,858		9,386	—
2004	10,920		7,763	—
2005	7,865		5,679	—
2006	2,450		3,809	—
Thereafter	—		9,979	—


	$48,755		$49,091	$ 5


Less amount representing interest	$(6,485	)


Present value of net minimum lease payments	$42,270

Rental expense under operating leases was $15,864, $11,450, and $10,173 for the years ended December 31, 2001, 2000 and 1999, respectively.

Note 9. STOCK OPTIONS AND RIGHTS

Options to purchase common stock have been granted under various plans to officers, directors and other employees at prices equal to the market prices at date of grant. An aggregate of 10,267,000 shares have been authorized for issuance under the various plans as of December 31, 2001. Options are generally exercisable at a rate of 25 percent per year beginning one year from the date of grant and expire ten years after the date of grant. At December 31, 2001, 2,516,000 shares were reserved for issuance under the various plans.

The per share weighted-average fair value of stock options granted during 2001, 2000 and 1999 was $19.91, $20.14, and $21.47, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 2001 expected dividend yield of 0%, risk-free interest rate of 4.72%, expected volatility of 61.66% and an expected life of 5.32 years. 2000 expected dividend yield of 0%; risk-free interest rate of 6.33%; expected volatility of 63.25% and an expected life of 5.63 years; 1999 expected dividend yield of 0%; risk-free interest rate of 5.62%; expected volatility of 58.7% and an expected life of 5.21 years.

The Company applies APB Opinion No. 25 in accounting for its plans and, accordingly, no compensation cost has been recognized for its stock options in the Consolidated Statements of Operations. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts indicated in the following table:

	YEAR ENDED	YEAR ENDED	YEAR ENDED
	DECEMBER 31,	DECEMBER 31,	DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)	2001	2000	1999


Net income
As reported	$37,869	$29,538	$19,221
Pro forma	$33,441	$11,307	$15,545
Earnings per share
Basic:
As reported	$ 1.54	$ 1.23	$ 0.82
Pro forma	$ 1.36	$ 0.47	$ 0.66
Diluted:
As reported	$ 1.40	$ 1.11	$ 0.75
Pro forma	$ 1.24	$ 0.42	$ 0.61

A summary of employee stock options is as follows:

(IN THOUSANDS, EXCEPT SHARE PRICE)	NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE


Outstanding at December 31, 1998	5,698		$ 6.88
Granted	2,144		$15.60
Exercised	(806	)	$ 4.63
Cancelled	(482	)	$ 8.68


Outstanding at December 31, 1999	6,554		$ 9.47
Granted	2,818		$29.71
Exercised	(865	)	$ 6.87
Cancelled	(630	)	$10.46


Outstanding at December 31, 2000	7,877		$16.70
Granted	1,072		$31.88
Exercised	(815	)	$13.19
Cancelled	(383	)	$21.28

Outstanding at December 31, 2001	7,751		$18.55

At December 31, 2001, the range of exercise prices and weighted average remaining contractual life of outstanding options was $4.25 to $38.59 and 6.97 years, respectively.

At December 31, 2001, 2000, and 1999, the number of options exercisable was approximately 3,071,000, 3,269,000, and 1,976,000, respectively, and the weighted average price of those options was $15.18, $14.86, and $6.40, respectively.

The Company derives a tax benefit from the options exercised and sold by employees and the benefit is credited to additional paid-in capital.

In September 1999, the Company adopted a new Rights Plan and declared a dividend distribution of one right for each outstanding share of the Company’s common stock. The new Rights Plan replaced the Company’s original rights plan, which was set to expire in September 1999. The rights under the new Rights Plan are set to expire in September 2009, unless redeemed earlier by the Board. At least once every three years, an independent committee of the Board will review the Rights Plan and, if the committee deems it appropriate, recommend to the entire Board that the Rights Plan be modified or terminated. Each right represents the right to purchase, if and when the right becomes exercisable, a unit consisting of one share of Syncor common stock at a per unit price of $90 (the “Purchase Price”). The rights generally will be exercisable only if a person or group (an “Acquiring Person”) acquires beneficial ownership of 15% or more of Syncor’s common stock or commences a tender or exchange offer upon consummation of which such person or group would beneficially own 15% or more of Syncor’s common stock (other than as a result of repurchases of stock by Syncor, or certain purchases by institutional or similar stockholders so long as they do not own 20% or more). In the event any person becomes an Acquiring Person (other than pursuant to an offer for all shares that the majority of the independent directors not associated or affiliated with the Acquiring Person determines to be adequate and otherwise in the best interest of the Company and its stockholders), each of the rights becomes a discount right entitling the holder (other than the Acquiring Person) upon payment of the Purchase Price, to common stock having a value equal to twice the Purchase Price (i.e., $180 worth of Syncor stock for a purchase price of $90). If following someone becoming an Acquiring Person, the Company engages in a merger or other business combination in which the Company does not survive or the common stock is changed or exchanged, or transfers more than 50% of its assets, cash flow or earning power in one transaction or a series of related transactions, each right becomes a right (except for the Acquiring Person) to acquire common shares of the other party to the transaction having a value equal to twice the Purchase Price.

Note 10. EMPLOYEE BENEFIT PLANS

The Company’s 401(k) plan is open to all employees who are at least 18 years of age and have a minimum of three consecutive months of service. In 1989, the Company's Board of Directors amended the plan to an Employees’ Savings and Stock Ownership Plan (ESSOP) to allow the plan to acquire one million of the Company's shares through a leveraged employee stock ownership plan transaction. In June 1995, September 1996, and August 1997, an additional 1,500,000 shares, in total, which were purchased in the open market, were contributed to the plan. These shares were originally classified as “treasury stock.” The contributions totaled $8,657,000 and reflected the fair market value at the time of contribution. In connection with these transactions, the Company made a loan to the ESSOP. The ESSOP loan was paid off as of December 31, 2001.

Under the ESSOP, participants may contribute one percent to fourteen percent of their compensation to 401(k) investment options and an additional two percent of their compensation to purchase Company stock. The Company makes matching contributions to 50 percent of the employees’ 401(k) investment contributions up to a maximum of four percent of the employee’s compensation and to 100 percent of the employees’ Company stock purchases up to two percent of the employee’s compensation. The Company’s matching contribution is made in Company stock. If an ESSOP loan payment is outstanding, the number of shares available to match employee contributions is directly related to the amount of principal payments made on the ESSOP loan. Once the number of available shares is determined, the Company matches the employees’ contributions based on the fair market value of the shares and the remainder of any shares not allocated after all matching is complete is allocated to all eligible employees based on relative compensation.

Participants are fully and immediately vested in their contributions and vest in employer contributions over a five-year period of continuous employment. After five years of continuous employment, any further employer contributions are fully and immediately vested. The Company’s contributions for the years ended December 31, 2001, 2000 and 1999 amounted to $1,735,000, $1,895,000, and $1,957,000, respectively, of which $1,685,000, $1,685,000, and $1,686,000, respectively, were used to pay down principal on the ESSOP loan and $50,000, $210,000, and $271,000 respectively, to pay interest.

Note 11. NET INCOME PER SHARE

The following table presents the computation of basic earnings per share (EPS):

(IN THOUSANDS EXCEPT

FOR THE YEAR ENDED

PER SHARE DATA)

DECEMBER 31, 2001

DECEMBER 31, 2000

DECEMBER 31, 1999

Income
(Numerator)

Shares
(Denominator)

Per Share
Amount

Income
(Numerator)

Shares
(Denominator)

Per Share
Amount

Income
(Numerator)

Shares
(Denominator)

Per Shares
Amount

Income from continuing

Operations

$37,869

$29,538

$19,221

Basic EPS

$37,869

24,570

$1.54

$29,538

23,948

$1.23

$19,221

23,340

$0.82

Effect of Dilutive

Stock Options

2,459

2,709

2,138

Diluted EPS

$37,869

27,029

$1.40

$29,538

26,657

$1.11

$19,221

25,478

$0.75

Note 12. LITIGATION AND CONTINGENCIES

There are various litigation proceedings in which the Company and its subsidiaries are involved. Many of the claims asserted against the Company in these proceedings are covered by insurance. The results of litigation proceedings cannot be predicted with certainty. However, in the opinion of the Company’s general counsel, such proceedings either are without merit or do not have a potential liability which would materially affect the financial condition of the Company and its subsidiaries on a consolidated basis.

Note 13. SUBSEQUENT EVENT

On January 17, 2002, the Company completed an asset securitization agreement with one of our banks using the U.S. Pharmacy business segment’s trade receivables as collateral. This securitization program will allow the Company to borrow up to $65 million at rates generally more favorable than under the credit line agreement. Upon execution of the securitization agreement, our credit line had a provision that required a 50% reduction of the securitization amount, or $32.5 million. Therefore, the credit line has a current borrowing limit of $167.5 million.

Note 14. BUSINESS SEGMENTS

The Company is currently in three different business segments: The first segment is the compounding, dispensing, and distribution of complex pharmaceuticals in the United States. The second segment is the management and provision of medical diagnostic imaging services in the United States. The third segment is the compounding, dispensing, and distribution of complex pharmaceuticals and the provision of radiology services outside of the United States.

(IN THOUSANDS)
U.S. PHARMACY SERVICES BUSINESS	2001		2000


Revenues	$565,309		$489,405
Operating Income	$72,295		$56,304
Total Assets	$189,840		$160,256
Capital Expenditures	$25,655		$4,707
Depreciation/Amortization	$7,367		$5,508

U.S. MEDICAL IMAGING BUSINESS	2001		2000


Revenues	$160,054		$100,848
Operating Income	$18,187		$12,467
Total Assets	$265,437		$192,826
Capital Expenditures	$19,874		$9,815
Depreciation/Amortization	$21,726		$13,132

INTERNATIONAL OPERATIONS	2001		2000


Revenues	$49,355		$39,141
Operating Income	$1,228		$2,240
Total Assets	$76,432		$66,806
Capital Expenditures	$6,903		$9,300
Depreciation/Amortization	$4,733		$2,763

UNALLOCATED CORPORATE	2001		2000


Operating Loss	$(16,833	)	$(14,696	)
Total Assets	$56,132		$50,683
Capital Expenditures	$12,460		$7,567
Depreciation/Amortization	$5,735		$4,906

		OPERATING	TOTAL
GEOGRAPHIC SEGMENTS	REVENUES	INCOME	ASSETS

United States
2001	$725,363	$73,649	$511,409
2000	$590,253	$54,075	$403,765

Rest of World
2001	$ 49,355	$ 1,228	$ 76,432
2000	$ 39,141	$ 2,240	$ 66,806

SELECTED QUARTERLY RESULTS OF OPERATIONS

The unaudited quarterly operating results in the Selected Quarterly Results of Operations have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, include all adjustments necessary for a fair presentation for the periods presented.

Unaudited calendar quarterly information is summarized below:

(IN THOUSANDS, EXCEPT PER SHARE DATA)	MARCH 31,	JUNE 30,	SEPTEMBER 30,	DECEMBER 31,	2001


Net sales	$181,416	$187,692	$193,794	$211,816	$774,718
Gross profit	$ 68,689	$ 72,179	$72,789	$81,326	$294,983

Net income	$ 10,207	$ 10,982	$ 7,834	$ 8,846	$ 37,869
Net income per share:
Basic	$ .42	$ .45	$ .32	$ .36	$ 1.54
Diluted	$ .38	$ .41	$ .29	$ .33	$ 1.40
Weighted average shares outstanding:
Basic	24,473	24,405	24,603	24,798	24,570
Diluted	27,101	26,936	27,024	26,985	27,029


Market price per share:
High	$ 38.81	$ 42.29	$ 38.74	$ 33.31	$ 42.29
Low	$ 27.25	$ 26.64	$ 26.63	$ 26.03	$ 26.03


(IN THOUSANDS, EXCEPT PER SHARE DATA)	MARCH 31,	JUNE 30,	SEPTEMBER 30,	DECEMBER 31,	2000


Net sales	$148,958	$154,366	$155,462	$170,608	$629,394
Gross profit	$ 50,958	$ 55,479	$ 55,418	$ 62,991	$224,846

Net income	$ 7,480	$ 9,078	$ 6,258	$ 6,722	$ 29,538
Net income per share:
Basic	$ .32	$ .38	$ .26	$ .28	$ 1.23
Diluted	$ .30	$ .34	$ .23	$ .25	$ 1.11
Weighted average shares outstanding:
Basic	23,726	23,772	24,091	24,201	23,948
Diluted	25,190	26,328	27,374	26,936	26,657


Market price per share
High	$ 16.50	$ 36.00	$ 43.94	$ 39.06	$ 43.94
Low	$ 11.02	$ 13.00	$ 32.75	$ 23.75	$ 11.02

SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES

Schedule II. Valuation and Qualifying Accounts

(In thousands)


Description	Balance At Beginning Of Period	Costs And Expenses (A)	Deductions (B)	Balance At End Of Period

Year Ended
December 31, 2001
Allowance for doubtful accounts	$9,028	$9,720	$2,031	$16,717

Year Ended
December 31, 2000
Allowance for doubtful accounts	$4,648	$7,232	$2,852	$9,028

Year Ended
December 31, 1999
Allowance for doubtful accounts	$3,774	$2,362	$1,488	$4,648

(A) Estimated bad debt.
(B) Uncollectible accounts written-off, net of recoveries and change in reserve.

EX-10 3 exhib1019.htm DEFERRED COMPENSATION PLAN Notes to Accompanying

Exhibit 10.19

AMENDMENT NO. 2 TO
SYNCOR INTERNATIONAL CORPORATION
DEFERRED COMPENSATION PLAN

Pursuant to the authority in Section 5.1 of the Syncor International Corporation Deferred Compensation Plan (the “Plan”), Syncor International Corporation, a Delaware corporation, hereby amends the Plan as follows:

1.	Effective November 1, 2001, Section 3.1(a) is amended by substituting “as soon as administratively feasible, but no longer than sixty (60) days” for “within thirty (30) days” therein.

2.	Effective November 1, 2001, Section 3.1(b) is deleted and the following is substituted in its place:

	3.1 (b)	As of the date a Participant commences participation in the Plan, such Participant shall elect a Standard Distribution Option (a “Termination Benefit Election”). The Termination Benefit Election may thereafter be changed only once a year, effective April 1^st of the immediately following Plan Year after the date of such election. The Termination Benefit Election shall not be binding unless made in accordance with Section 2.2. If the Termination Date should occur after the election under 2.2 but before April 1 of the immediately following Plan Year, the last valid Termination Benefit Election made will be effective. Or, if no Termination Benefit Election is otherwise in effect, the Termination Benefit attributable to the Deferred Amounts and Additions thereto shall be payable in a lump sum.

Dated this 1st day of November, 2001.

Syncor International Corporation

By:/s/Sheila H. Coop
Its: Sr. Vice President

EX-10 4 exhib1056.htm CREDIT AGREEMENT PRO 8888 Z00362 N CB/RE154A

Exhibit 10.56

SECOND AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is made and dated as of the 21st day of December, 2001 by and among the Lenders currently party to the Credit Agreement referred to below, BANK ONE, NA, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”), THE BANK OF NOVA SCOTIA, as documentation agent (in such capacity, the “Documentation Agent”), SYNCOR INTERNATIONAL CORPORATION, a Delaware corporation (the “Parent”), and SYNCOR MANAGEMENT CORPORATION, a Delaware corporation (the “Borrower”).

RECITALS

A. Pursuant to that certain First Amended and Restated Credit Agreement dated as of May 10, 2001, by and among the Administrative Agent, the Documentation Agent, the Lenders, the Parent and the Borrower (as amended, extended and replaced from time to time, the “Credit Agreement”), the Lenders agreed to extend credit to the Borrower on the terms and subject to the conditions set forth therein. All capitalized terms not otherwise defined herein are used with the meanings given such terms in the Credit Agreement.

B. The parties to the Credit Agreement have agreed to amend the same in certain respects and desire to set forth the terms and conditions of such amendment pursuant hereto.

NOW, THEREFORE, in consideration of the foregoing Recitals and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENT

1. Limited Recourse Sales of Assets. To reflect certain agreements of the parties hereto with respect to securitization transactions which may be entered into from time to time by the Parent and the Borrower, effective as of the Second Amendment Effective Date (as defined in Paragraph 4 below):

(a) Subsection (iii) of Section 6.13 of the Credit Agreement is hereby amended to read in its entirety as follows:

“(iii) Any transfer of an interest in accounts or notes receivable on a limited recourse basis, provided that such transfer qualifies as a sale under Agreement Accounting Principles and, notwithstanding that such transaction may not qualify as such a sale, the Initial Permitted Accounts Receivable Financing Facility; provided, however, that the aggregate dollar amount owing by the obligors under the assets which are the subject of such sales or secure the Initial Permitted Accounts Receivable Financing Facility does not exceed at any time $100,000,000.”

(b) A new subsection (viii) is hereby added in correct numerical order to Section 6.15 of the Credit Agreement to read in its entirety as follows:

“(viii) Liens granted in connection with transfers of interests in accounts or notes receivable permitted pursuant to Section 6.13(iii) of this Agreement, including, without limitation, pursuant to the Initial Permitted Accounts Receivable Financing Facility; provided, however, that: (1) such Liens secure only the obligations of the Parent and its Subsidiaries, as applicable, arising under such transactions, (2) such obligations remain non-recourse to the Parent and its Subsidiaries, as applicable, except to the extent of such Person’s interest in the assets transferred, the proceeds thereof and rights associated therewith arising in connection with such transactions (the “Securitization Assets”) and with respect to customary indemnification provisions provided in connection with such transactions, and (3) such Liens attach only to the Securitization Assets.”

(c) The definition of “Indebtedness” set forth in Article I of the Credit Agreement is hereby amended to read in its entirety as follows:

“’Indebtedness’ of a Person means, without duplication, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) Capitalized Lease Obligations, (vi) Contingent Obligations, and (vii) to the extent not otherwise included in subsections (i) through (vi) hereof, obligations arising under transactions permitted pursuant to Section 6.13(iii).

(d) A new definition of “Initial Permitted Accounts Receivable Financing Facility” is hereby added to Article I of the Credit Agreement in correct alphabetical order to read in its entirety as follows:

"’Initial Permitted Accounts Receivable Financing Facility’ means that certain accounts receivable financing facility which will be consummated in or around January 2002 evidenced by: (i) that certain Receivables Financing Agreement among Syncor Financing Corporation, as seller, the Borrower, as servicer, Jupiter Securitization Corporation and the other financial institutions party thereto, as purchasers, and Bank One, as agent, (ii) that certain Receivables Sale Agreement between the Borrower, as selling subsidiary, and Syncor Financing Corporation, as buyer, and (c) that certain Receivables Sale Agreement between the Parent, as originator, and the Borrower, as buyer, as each such agreement may be amended, restated, supplemented or otherwise modified from time to time.”

2. Reaffirmation of Loan Documents. The Parent and Borrower hereby affirm and agree that except to the extent expressly provided herein, the Credit Agreement, the Notes and the other Loan Documents remain in full force and effect.

3. Reaffirmation of Guaranties. By acknowledging and agreeing to this Amendment as provided below, each of the Guarantors affirms and agrees that: (a) the execution and delivery by the Borrower and the Parent and the performance of their obligations under this Amendment shall not in any manner or to any extent affect any of the obligations of the Guarantors or the rights of the Lenders and the Administrative Agent under the Guaranties or any other document, instrument or agreement made or given by the Guarantors in connection therewith, (b) the term “Obligations” as used in the Guaranties includes, without limitation, the Obligations under the Credit Agreement as amended hereby, and (c) the Guaranties remain in full force and effect.

4. Second Amendment Effective Date. This Amendment shall be effective as of the date (the “Second Amendment Effective Date”) the Administrative Agent shall have received each of the following:

(a) A copy of this Amendment duly executed by the Borrower, the Parent and Lenders constituting not less than the Required Lenders under the Credit Agreement; and

(b) Such other documents, instruments, agreements, corporate authorizations and opinions of legal counsel as the Administrative Agent or the Lenders may reasonably request.

5. Representations and Warranties. The Borrower and the Parent hereby represent and warrant to the Administrative Agent and the Lenders that as of the date hereof and at and as of the Second Amendment Effective Date and both before and after giving effect hereto:

(a) Each of the Borrower and the Parent has the corporate power and authority and the legal right to execute, deliver and perform the Amendment and has taken all necessary corporate action to authorize such execution, delivery and performance.

(b) The Amendment has been duly executed and delivered on behalf of such Person and constitutes the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity.

(c) The representations and warranties of the Borrower and the Parent contained in the Credit Agreement as amended hereby are accurate and complete in all material respects.

(d) There has not occurred a Default or Unmatured Default.

6. No Other Amendment. Except as expressly amended hereby, the Loan Documents shall remain in full force and effect as written and amended to date.

7. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

[Signature pages following]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written.

SYNCOR MANAGEMENT CORPORATION, as the Borrower

                                                                By: /s/William P. Forster
                                                                Name: William P. Forster
                                                                Title: Vice President

SYNCOR INTERNATIONAL CORPORATION, as the Parent

                                                                By: /s/William P. Forster
                                                                Name: William P. Forster
                                                                Title: Chief Financial Officer

BANK ONE, NA, as Administrative Agent and as a Lender

                                                                By: /s/Joseph R. Perdenza
                                                                Name: Joseph R. Perdenza
                                                                Title: Associate Director

THE BANK OF NOVA SCOTIA, as Documentation Agent and as a Lender

                                                                By:/s/R.P. Reynolds
                                                                Name: R.P. Reynolds
                                                                Title: Director

FLEET NATIONAL BANK, as a Lender

                                                                By:
                                                                Name:
                                                                Title:

MELLON BANK, N.A., as a Lender

                                                                By:
                                                                Name:
                                                                Title:

THE NORTHERN TRUST COMPANY, as a Lender

                                                                By: /s/Steven W. Ryan
                                                                Name: Steven W. Ryan
                                                                Title: Vice President

UNITED CALIFORNIA BANK (formerly Sanwa Bank California), as a Lender

                                                                By:
                                                                Name:
                                                                Title:

UNION BANK OF CALIFORNIA, N.A., as a Lender

                                                                By: /s/P M Roesner
                                                                Name: Philip M. Roesner
                                                                Title: Vice President

KEY CORPORATE CAPITAL INC., as a Lender

                                                                By:
                                                                Name:
                                                                Title:

Acknowledged and agreed to
as of the __ day of December, 2001:

COMPREHENSIVE MEDICAL IMAGING, INC.,
as a Guarantor

By: /s/David Ward
Name: David Ward
Title: President

SYNCOR OVERSEAS LTD.,
as a Guarantor

By: /s/William P. Forster
Name: William P. Forster
Title: Chief Financial Officer

SYNCOR INTERNATIONAL CORPORATION,
as a Guarantor

By: /s/William P. Forster
Name: William P. Forster
Title: Chief Financial Officer

EX-10 5 exhib1057.htm RECEIVABLES FINANCING AGREEMENT DRAFT 01/2000

Exhibit 10.57

RECEIVABLES FINANCING AGREEMENT

dated as of January 4, 2002

Among

SYNCOR FINANCING CORPORATION, as Seller,

SYNCOR MANAGEMENT CORPORATION, as Servicer,

JUPITER SECURITIZATION CORPORATION,

THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO,

as Financial Institutions

and

BANK ONE, NA (MAIN OFFICE CHICAGO)

as Agent

RECEIVABLES FINANCING AGREEMENT

This Receivables Financing Agreement dated as of January 4, 2002, is among SYNCOR FINANCING CORPORATION, a Delaware corporation (“Seller”), SYNCOR MANAGEMENT CORPORATION, a Delaware corporation (“SMC”), as initial Servicer (the Servicer together with Seller, the “Seller Parties” and each a “Seller Party”), the entities listed on Schedule A to this Agreement (together with any of their respective successors and assigns hereunder, the “Financial Institutions”), Jupiter Securitization Corporation (“Jupiter”, together with the Financial Institutions, the “Purchasers”) and Bank One, NA (Main Office Chicago), as agent for the Purchasers hereunder or any successor agent hereunder (together with its successors and assigns hereunder, the “Agent”). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I.

PRELIMINARY STATEMENTS

Seller desires to transfer and assign Purchaser Interests to the Purchasers from time to time.

Jupiter may, in its absolute and sole discretion, purchase Purchaser Interests from Seller from time to time.

In the event that Jupiter declines to make any purchase, the Financial Institutions shall, at the request of Seller, purchase Purchaser Interests from time to time. In addition, the Financial Institutions have agreed to provide a liquidity facility to Jupiter in accordance with the terms hereof.

Bank One, NA (Main Office Chicago) has been requested and is willing to act as Agent on behalf of Jupiter and the Financial Institutions in accordance with the terms hereof.

ARTICLE I
FINANCING ARRANGEMENTS

Section 1.1 Purchase Facility.

(a) Upon the terms and subject to the conditions hereof, Seller may, at its option, sell and assign Purchaser Interests to the Agent for the benefit of one or more of the Purchasers. In accordance with the terms and conditions set forth herein, Jupiter may, at its option, instruct the Agent to purchase on behalf of Jupiter, or if Jupiter shall decline to purchase, the Agent shall purchase, on behalf of the Financial Institutions, Purchaser Interests from time to time in an aggregate amount not to exceed at such time the lesser of (i) the Purchase Limit and (ii) the aggregate amount of the Commitments during the period from the date hereof to but not including the Facility Termination Date.

(b) Seller may, upon at least ten (10) Business Days’ notice to the Agent, terminate in whole or reduce in part, ratably among the Financial Institutions, the unused portion of the Purchase Limit; provided that each partial reduction of the Purchase Limit shall be in an amount equal to $5,000,000 or an integral multiple thereof.

Section 1.2 Increases.

Seller shall provide the Agent with at least two (2) Business Days’ prior notice in a form set forth as Exhibit II hereto of each Incremental Purchase (a “Financing Notice”). Each Financing Notice shall be subject to Section 6.2 hereof and, except as set forth below, shall be irrevocable and shall specify the requested Purchase Price (which shall not be less than $3,000,000) and date of purchase (which, in the case of any Incremental Purchase (after the initial Incremental Purchase hereunder), shall only be on a Settlement Date) and, in the case of an Incremental Purchase to be funded by the Financial Institutions, the requested type of Discount Rate and Tranche Period. Following receipt of a Financing Notice, the Agent will determine whether Jupiter agrees to make the purchase. If Jupiter declines to make a proposed purchase, Seller may cancel the Financing Notice or, in the absence of such a cancellation, the Incremental Purchase of the Purchaser Interest will be made by the Financial Institutions. On the date of each Incremental Purchase, upon satisfaction of the applicable conditions precedent set forth in Article VI, Jupiter or the Financial Institutions, as applicable, shall deposit to the Facility Account, in immediately available funds, no later than 12:00 noon (Chicago time), an amount equal to (i) in the case of Jupiter, the aggregate Purchase Price of the Purchaser Interests Jupiter is then purchasing or (ii) in the case of a Financial Institution, such Financial Institution’s Pro Rata Share of the aggregate Purchase Price of the Purchaser Interests the Financial Institutions are purchasing.

Section 1.3 Decreases. Seller shall provide the Agent with priorwritten notice in conformity with the Required Notice Period (a “Reduction Notice”) of any proposed reduction of Aggregate Capital from Collections other than automatic reductions under Sections 2.2 and 2.3. Such Reduction Notice shall designate (i) the date (the “Proposed Reduction Date”) upon which any such reduction of Aggregate Capital shall occur (which date shall give effect to the applicable Required Notice Period), and (ii) the amount of Aggregate Capital to be reduced which shall be applied ratably to the Purchaser Interests of Jupiter and the Financial Institutions in accordance with the amount of Capital (if any) owing to Jupiter, on the one hand, and the amount of Capital (if any) owing to the Financial Institutions (ratably, based on their respective Pro Rata Shares), on the other hand (the “Aggregate Reduction”). Only one (1) Reduction Notice shall be outstanding at any time. No AggregateReduction will be made following the occurrence of the Amortization Date without the consent of the Agent.

Section 1.4 Payment Requirements. All amounts to be paid or deposited by any Seller Party pursuant to any provision of this Agreement shall be paid or deposited in accordance with the terms hereof no later than 11:30 a.m. (Chicago time) on the day when due in immediately available funds, and if not received before 11:30 a.m. (Chicago time) shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to a Purchaser they shall be paid to the Agent, for the account of such Purchaser, at 1 Bank One Plaza, Chicago, Illinois 60670 until otherwise notified by the Agent. Upon notice to Seller, the Agent may debit the Facility Account for all amounts due and payable hereunder. All computations of Yield, per annum fees calculated as part of any CP Costs, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day.

ARTICLE II
PAYMENTS AND COLLECTIONS

Section 2.1 Payments. Notwithstanding any limitation on recourse contained in this Agreement, Seller shall immediately pay to the Agent when due, for the account of the relevant Purchaser or Purchasers on a full recourse basis, (i) such fees as set forth in the Fee Letter (which fees shall be sufficient to pay all fees owing to the Financial Institutions), (ii) all CP Costs, (iii) all amounts payable as Yield, (iv) all amounts payable as Deemed Collections (which shall be due and payable by Seller and applied to reduce outstanding Aggregate Capital and/or make Reinvestments hereunder in accordance with Sections 2.2 and 2.3 hereof, as applicable), (v) all amounts payable to reduce the Seller Interest, if required, pursuant to Section 2.6, (vi) all amounts payable pursuant to Article X, if any, (vii) all Servicer costs and expenses, including the Servicing Fee, in connection with servicing, administering and collecting the Receivables, (viii) all Broken Funding Costs and (ix) all Default Fees (collectively, the “Obligations”). If any Person fails to pay any of the Obligations when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid. Notwithstanding the foregoing, no provision of this Agreement or the Fee Letter shall require the payment or permit the collection of any amounts hereunder in excess of the maximum permitted by applicable law. If at any time Seller receives any Collections or is deemed to receive any Collections, Seller shall pay such Collections or Deemed Collections to the Servicer for application in accordance with the terms and conditions hereof and, at all times prior to such payment, such Collections or Deemed Collections shall be held in trust by Seller for the exclusive benefit of the Purchasers and the Agent.

Section 2.2 Collections Prior to Amortization. Prior to the Amortization Date, any Collections and/or Deemed Collections received by the Servicer shall be set aside and held in trust by the Servicer for the payment of any accrued and unpaid Aggregate Unpaids or for aReinvestment as provided in this Section 2.2. If at any time any Collections are received by the Servicer prior to the Amortization Date, (i) the Servicer shall set aside the Termination Percentage (hereinafter defined) of Collections evidenced by the Purchaser Interests of each Terminating Financial Institution and (ii) Seller hereby requests and the Purchasers (other than any Terminating Financial Institutions) hereby agree to make, simultaneously with such receipt, a reinvestment (each a “Reinvestment”) with that portion of the balance of each and every Collection received by the Servicer that is part of any Purchaser Interest (other than any Purchaser Interests of Terminating Financial Institutions), such that after giving effect to such Reinvestment, the amount of Capital of such Purchaser Interest immediately after such receipt and corresponding Reinvestment shall be equal to the amount of Capital immediately prior to such receipt. On each Settlement Date prior to the occurrence of the Amortization Date, the Servicer shall remit to the Agent’s account the amounts set aside during the preceding Settlement Period that have not been subject to a Reinvestment and apply such amounts (if not previously paid in accordance with Section 2.1) first, to reduce unpaid Obligations and second, to reduce the Capital of all Purchaser Interests of Terminating Financial Institutions, applied ratably to each Terminating Financial Institution according to its respective Termination Percentage. If such Capital and Obligations shall be reduced to zero, any additional Collections received by the Servicer (i) if applicable, shall be remitted to the Agent’s account no later than 11:30 a.m. (Chicago time) to the extent required to fund any Aggregate Reduction on such Settlement Date and (ii) any balance remaining thereafter shall be remitted from the Servicer to Seller on such Settlement Date. Each Terminating Financial Institution shall be allocated a ratable portion of Collections from the date of any assignment by Jupiter pursuant to Section 13.6 (the “Termination Date”) until such Terminating Financing Institution’s Capital shall be paid in full. This ratable portion shall be calculated on the Termination Date of each Terminating Financial Institution as a percentage equal to (i) Capital of such Terminating Financial Institution outstanding on its Termination Date, divided by (ii) the Aggregate Capital outstanding on such Termination Date (the “Termination Percentage”). Each Terminating Financial Institution’s Termination Percentage shall remain constant prior to the Amortization Date. On and after the Amortization Date, each Termination Percentage shall be disregarded, and each Terminating Financial Institution’s Capital shall be reduced ratably with all Financial Institutions in accordance with Section 2.3.

Section 2.3 Collections Following Amortization. On the Amortization Date and on each day thereafter, the Servicer shall set aside and hold in trust, for the holder of each Purchaser Interest, all Collections received on such day and an additional amount for the payment of any accrued and unpaid Obligations owed by Seller and not previously paid by Seller. On and after the Amortization Date, the Servicer shall, at any time upon the request from time to time by (or pursuant to standing instructions from) the Agent (i) remit to the Agent’s account the amounts set aside pursuant to the preceding sentence, and (ii) apply such amounts to reduce the Capital associated with each such Purchaser Interest and any other Aggregate Unpaids.

Section 2.4 Application of Collections. If there shall be insufficient funds on deposit for the Servicer to distribute funds in payment in full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as applicable), the Servicer shall distribute funds:

	first, to the payment of the Servicer’s reasonable out-of-pocket costs and expenses in connection with servicing, administering and collecting the Receivables, including the Servicing Fee, if SMC or one of its Affiliates is not then acting as the Servicer,

	second, to the reimbursement of the Agent’s costs of collection and enforcement of this Agreement,

	third, ratably to the Agent for the benefit of the Purchasers for payment of all accrued and unpaid fees under the Fee Letter, CP Costs and Yield,

	fourth, (to the extent applicable) to the ratable reduction of the Aggregate Capital (without regard to any Termination Percentage),

	fifth, for the ratable payment of all other unpaid Obligations, provided that to the extent such Obligations relate to the payment of Servicer costs and expenses, including the Servicing Fee, when SMC or one of its Affiliates is acting as the Servicer, such costs and expenses will not be paid until after the payment in full of all other Obligations, and

	sixth, after the Aggregate Unpaids have been reduced to zero, to Seller.

Collections applied to the payment of Aggregate Unpaids shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth in Section 2.4 above, shall be shared ratably (within each priority) among the Agent and the Purchasers in accordance with the amount of such Aggregate Unpaids owing to each of them in respect of each such priority.

Section 2.5 Payment Recission. No payment of any of the Aggregate Unpaids shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. Seller shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Agent (for application to the Person or Persons who suffered such recission, return or refund) the full amount thereof, plus the Default Fee from the date of any such recission, return or refunding.

Section 2.6 Maximum Purchaser Interests. Seller shall ensure that as of the last day of each calendar month the Purchaser Interests of the Purchasers shall not exceed in the aggregate 100%, and if the Purchaser Interests of the Purchasers exceeds 100%, Seller shall pay to the Agent within one (1) Business Day an amount to be applied to reduce the Aggregate Capital (asallocated by the Agent), such that after giving effect to such payment the aggregate of the Purchaser Interests equals or is less than 100%.

Section 2.7 Unconditional Call. In addition to Seller’s rights pursuant to Section 1.3, Seller shall have the right, after providing 30 days' written notice to the Agent, to repurchase from the Purchasers all, but not less than all, of the then outstanding Purchaser Interests. The purchase price in respect thereof shall be an amount equal to the Aggregate Unpaids through the date of such repurchase, payable in immediately available funds. Such repurchase shall be without representation, warranty or recourse of any kind by, on the part of, or against any Purchaser or the Agent.

ARTICLE III
COMPANY FUNDING

Section 3.1 CP Costs. Seller shall pay CP Costs with respect to the Capital associated with each Purchaser Interest of Jupiter for each day that any Capital in respect of such Purchaser Interest is outstanding. Each Purchaser Interest funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share the Capital in respect of such Purchaser Interest represents in relation to all assets held by Jupiter and funded substantially with Pooled Commercial Paper.

Section 3.2 CP Costs Payments. On each Settlement Date, Seller shall pay to the Agent (for the benefit of Jupiter) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the Capital associated with all Purchaser Interests of Jupiter for the immediately preceding Accrual Period in accordance with Article II.

Section 3.3 Calculation of CP Costs. On the third Business Day immediately preceding each Settlement Date, Jupiter shall calculate the aggregate amount of CP Costs for the applicable Accrual Period and shall notify Seller of such aggregate amount.

ARTICLE IV
FINANCIAL INSTITUTION FUNDING

Section 4.1 Financial Institution Funding. Each Purchaser Interest of the Financial Institutions shall accrue Yield for each day during its Tranche Period at either the LIBO Rate or the Base Rate in accordance with the terms and conditions hereof. Until Seller gives notice to the Agent of another Discount Rate in accordance with Section 4.4, the initial Discount Rate for any Purchaser Interest transferred to the Financial Institutions pursuant to the terms and conditions hereof shall be the Base Rate. If the Financial Institutions acquire by assignment from Jupiter any Purchaser Interest pursuant to Article XIII, each Purchaser Interestso assigned shall each be deemed to have a new Tranche Period commencing on the date of any such assignment.

Section 4.2 Yield Payments. On the Settlement Date for each Purchaser Interest of the Financial Institutions, Seller shall pay to the Agent (for the benefit of the Financial Institutions) an aggregate amount equal to the accrued and unpaid Yield for the entire Tranche Period of each such Purchaser Interest in accordance with Article II.

Section 4.3 Selection and Continuation of Tranche Periods.

(a) With consultation from (and approval by) the Agent, Seller shall from time to time request Tranche Periods for the Purchaser Interests of the Financial Institutions, provided that, if at any time the Financial Institutions shall have a Purchaser Interest, Seller shall always request Tranche Periods such that at least one Tranche Period shall end on the date specified in clause (A) of the definition of Settlement Date.

(b) Seller or the Agent, upon notice to and consent by the other received at least three (3) Business Days prior to the end of a Tranche Period (the “Terminating Tranche”) for any Purchaser Interest, may, effective on the last day of the Terminating Tranche: (i) divide any such Purchaser Interest into multiple Purchaser Interests, (ii) combine any such Purchaser Interest with one or more other Purchaser Interests that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Purchaser Interest with a new Purchaser Interests to be purchased on the day such Terminating Tranche ends, provided, that in no event may a Purchaser Interest of Jupiter be combined with a Purchaser Interest of the Financial Institutions.

Section 4.4 Financial Institution Discount Rates. Seller may select the LIBO Rate or the Base Rate for each Purchaser Interest of the Financial Institutions. Seller shall by 11:30 a.m. (Chicago time): (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Discount Rate and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Base Rate is being requested as a new Discount Rate, give the Agent irrevocable notice of the new Discount Rate for the Purchaser Interest associated with such Terminating Tranche. Until Seller gives notice to the Agent of another Discount Rate, the initial Discount Rate for any Purchaser Interest transferred to the Financial Institutions pursuant to the terms and conditions hereof shall be the Base Rate.

Section 4.5 Suspension of the LIBO Rate.

(a) If any Financial Institution notifies the Agent that it has determined that funding its Pro Rata Share of the Purchaser Interests of the Financial Institutions at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Purchaser Interests at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost ofacquiring or maintaining a Purchaser Interest at such LIBO Rate, then the Agent shall suspend the availability of such LIBO Rate and require Seller to select the Base Rate for any Purchaser Interest accruing Yield at such LIBO Rate.

(b) If less than all of the Financial Institutions give a notice to the Agent pursuant to Section 4.5(a), each Financial Institution which gave such a notice shall be obliged, at the request of Seller, Jupiter or the Agent, to assign all of its rights and obligations hereunder to (i) another Financial Institution or (ii) another funding entity nominated by Seller or the Agent that is acceptable to Jupiter and willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Financial Institution; provided that (i) the notifying Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Financial Institution’s Pro Rata Share of the Capital and Yield owing to all of the Financial Institutions and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions, and (ii) the replacement Financial Institution otherwise satisfies the requirements of Section 12.1(b).

ARTICLE V
REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of the Seller Parties. Each Seller Party hereby represents and warrants to the Agent and the Purchasers, as to itself, as of the date hereof and as of the date of each Incremental Purchase and the date of each Reinvestment that:

(a) Corporate Existence and Power. Such Seller Party is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Such Seller Party is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except, in the case of the Servicer, where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect.

(b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document (whether individually or together with this Agreement, as applicable) to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Seller, Seller’s use of the proceeds of purchases made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party.

(c) No Conflict. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or bylaws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claimon assets of such Seller Party or its Subsidiaries (except as created hereunder); and no transaction contemplated hereby requires compliance with any bulk sales act or similar law.

(d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder.

(e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of such Seller Party’s knowledge, threatened, against or affecting such Seller Party, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Such Seller Party is not in default with respect to any order of any court, arbitrator or governmental body except, in the case of Servicer, where such default could not reasonably be expected to have a Material Adverse Effect.

(f) Binding Effect. This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(g) Accuracy of Information. All information heretofore furnished by such Seller Party or any of its Affiliates to the Agent or the Purchasers for purposes of or in connection with this Agreement, any of the other Transaction Documents (including, but not limited to, all Monthly Reports) or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Seller Party or any of its Affiliates to the Agent or the Purchasers will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading.

(h) Use of Proceeds. No proceeds of any purchase hereunder will be used (i) for a purpose that violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(i) Good Title. Immediately prior to each purchase hereunder, Seller shall be the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. Upon filing of the financing statements in the form attached as Exhibit X and in the jurisdictions set forth on Exhibit X, there shall have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller’s ownership interest in each Receivable, its Collections and the Related Security.

(j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to, and shall, upon each purchase hereunder, transfer to the Agent for the benefit of the relevant Purchaser or Purchasers (and the Agent for the benefit of such Purchaser or Purchasers shall acquire from Seller) a valid and perfected first priority security interest in each Receivable existing or hereafter arising and in the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, except as created by the Transactions Documents. Upon filing of the financing statements in the form attached as Exhibit XI and in the jurisdictions set forth on Exhibit XI, there shall have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Agent’s (on behalf of the Purchasers) ownership or security interest in the Receivables, the Related Security and the Collections.

(k) Places of Business and Locations of Records. The name of each Seller Party as it appears in official filings in the state of its incorporation or other organization, the type of entity of each Seller Party (including corporation, partnership, limited partnership or limited liability company), the organizational identification number issued by each Seller Party’s state of incorporation or organization or a statement that no such number has been issued are listed on Exhibit III or as Agent has otherwise been notified in accordance with Section 7.2(a). The jurisdiction of incorporation or organization, principal places of business and chief executive office of each Seller Party and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit III or such other locations of which the Agent has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 14.4(a) has been taken and completed. Each Seller Party’s Federal Employer Identification Number is correctly set forth on Exhibit III.

(l) Collections. The conditions and requirements set forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Seller at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit IV or such other Collection Banks and account numbers of which Agent has been notified in accordance with Section 8.2(a). Seller has not granted any Person, other than the Agent as contemplated by this Agreement, dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event.

(m) Material Adverse Effect. (i) The initial Servicer represents and warrants that since December 31, 2000, no event has occurred that would have a Material Adverse Effect, and (ii) Seller represents and warrants that since the date of this Agreement, no event has occurred that would have a Material Adverse Effect.

(n) Names. In the past five (5) years, Seller has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement.

(o) Ownership of Seller. Parent Originator owns, directly or indirectly, 100% of the issued and outstanding capital stock of SMC, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of SMC. SMC owns, directly or indirectly, 100% of the issued and outstanding capital stock of Seller, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of Seller.

(p) Not a Holding Company or an Investment Company. Such Seller Party is not a “holding company” or a “subsidiary holding company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller Party is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

(q) Compliance with Law. Such Seller Party has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject except, with respect to the Servicer only, where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Contract is in violation of any such law, rule or regulation except where such contravention or violation could not reasonably be expected to have a Material Adverse Effect.

(r) Compliance with Credit and Collection Policy. Such Seller Party has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and has not made any change to such Credit and Collection Policy, other than as permitted under Section 7.2(c) and in compliance with the notification requirements of Section 7.1(a)(vii).

(s) Payments to Selling Subsidiary. With respect to each Receivable transferred to Seller under the SMC Sale Agreement, Seller has given reasonably equivalent value to Selling Subsidiary in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by Selling Subsidiary of any Receivable under the SMC Sale Agreement is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. §§ 101 et seq.), as amended.

(t) Enforceability of Contracts. Each Contract with respect to each Eligible Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(u) Eligible Receivables. Each Receivable included in the Net Receivables Balance as an Eligible Receivable on the date of its purchase under the SMC Sale Agreement was an Eligible Receivable on such purchase date.

(v) Net Receivables Balance. Seller has determined that based on the most recent Monthly Report, or if more frequent reporting is required by Agent, the most current report, and as otherwise informed, immediately after giving effect to each purchase hereunder, the Net Receivables Balance is at least equal to the sum of (i) the Aggregate Capital, plus (ii) the Aggregate Reserves.

(w) Accounting. The manner in which such Seller Party accounts for the transactions contemplated by this Agreement and the SMC Sale Agreement and Parent Sale Agreement does not jeopardize the true sale analysis.

(x) Purpose. Seller has determined that, from a business viewpoint, the purchase of the Receivables and related interests thereto from the Selling Subsidiary under the SMC Sale Agreement, and the sale of Purchaser Interests to the Purchasers and the other transactions contemplated herein, are in the best interests of Seller.

(y) Evidencing Transfer. Seller has marked its master date processing records evidencing the Receivables in accordance with Section 7.1(e) hereof.

(z) Other Representations and Warranties. Seller has determined that this Agreement is effective to transfer to the Agent and the Purchasers, as assignees of Seller, the full benefit of and a direct claim against the Selling Subsidiary and Parent Originator in respect of each representation or warranty made by the Selling Subsidiary and Parent Originator under any Transaction Document.

Section 5.2 Financial Institution Representations and Warranties. Each Financial Institution hereby represents and warrants to the Agent and Jupiter that:

(a) Existence and Power. Such Financial Institution is a corporation or a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, and has all corporate or other comparable power to perform its obligations hereunder.

(b) No Conflict. The execution and delivery by such Financial Institution of this Agreement and the performance of its obligations hereunder are within its corporate or other comparable powers, have been duly authorized by all necessary corporate or other comparable action, do not contravene or violate (i) its certificate or articles of incorporation or association or bylaws (or other comparable organizational documents), (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets. This Agreement has been duly authorized, executed and delivered by such Financial Institution.

(c) Governmental Authorization. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Financial Institution of this Agreement and the performance of its obligations hereunder.

(d) Binding Effect. This Agreement constitutes the legal, valid and binding obligation of such Financial Institution enforceable against such Financial Institution in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

ARTICLE VI
CONDITIONS OF PURCHASES

Section 6.1 Conditions Precedent to Initial Incremental Purchase. The initial Incremental Purchase of a Purchaser Interest under this Agreement is subject to the conditions precedent that (a) the Agent shall have received on or before the date of such purchase those documents listed on Schedule B, (b) the Agent shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the Fee Letter, and (c) auditors and due diligence team members of the Agent or Bank One Capital Markets, Inc. shall have visited Parent Originator’s and Servicer’s operating locations, which visits shall have resulted in a satisfactory due diligence review and approval by Purchasers.

Section 6.2 Conditions Precedent to All Purchases and Reinvestments. Each purchase of a Purchaser Interest (other than pursuant to Section 13.1) and each Reinvestment shall be subject to the further conditions precedent that in the case of each such purchase or Reinvestment:

(a) the Servicer shall have delivered to the Agent on or prior to the date of such purchase, in form and substance satisfactory to the Agent, all Monthly Reports as and when due under Section 8.5 and upon the Agent’s request, the Servicer shall have delivered to the Agent at least three (3) days prior to such purchase or Reinvestment an interim Monthly Report showing the amount of Eligible Receivables as of a date not more than two (2) Business Days prior to such Monthly Report;

(b) the Facility Termination Date shall not have occurred;

(d) on the date of each such Incremental Purchase or Reinvestment, the following statements shall be true (and acceptance of the proceeds of such Incremental Purchase or Reinvestment shall be deemed a representation and warranty by Seller that such statements are then true):

	(i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental Purchase or Reinvestment as though made on and as of such date;

	(ii) based on the most recently delivered Monthly Report, no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that would constitute a Potential Amortization Event, and Seller has no actual knowledge to the contrary; and

	(iii) based on the most recently delivered Monthly Report, or if more frequent reporting is required by Agent, the most current report, the Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser Interests do not exceed 100%, and Seller has no actual knowledge to the contrary.

It is expressly understood that each Reinvestment shall, unless otherwise directed by the Agent or any Purchaser, occur automatically on each day that the Servicer shall receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of Seller to satisfy any of the foregoing conditions precedent in respect of any Reinvestment shall give rise to a right of the Agent, which right may be exercised at any time on demand of the Agent, to rescind the related purchase and direct Seller to pay to the Agent for the benefit of the Purchasers an amount equal to the Collections prior to the Amortization Date that shall have been applied to the affected Reinvestment.

ARTICLE VII
COVENANTS

Section 7.1 Affirmative Covenants of The Seller Parties. Until the later of the date on which the Aggregate Unpaids have been paid in full and the Amortization Date, each Seller Party hereby covenants, as to itself, as set forth below:

(a) Financial Reporting. Such Seller Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Agent:

	(i) Annual Reporting. Within one hundred (100) days after the close of each of its respective fiscal years, audited, unqualified consolidated, and with respect to the Selling Subsidiary and Seller, consolidating, financial statements (which shall include balance sheets, statement of income, stockholders equity statement and a statement of cash flows) for Parent Originator and such Seller Party for such fiscal year certified in a manner acceptable to the Agent by independent public accountants acceptable to the Agent.

	(ii) Quarterly Reporting. Within fifty (50) days after the close of the first three (3) quarterly periods of each of its respective fiscal years, balance sheets of each of Parent Originator and the Servicer as at the close of each such period and statements of income and a statement of cash flows for each such Person for the period from the beginning of such fiscal year to the end of such quarter, all certified by its respective chief financial officer.

	(iii) Compliance Certificate. Together with the financial statements required under clauses (i) and (ii) above, a compliance certificate in substantially the form of Exhibit V signed by such Seller Party’s Authorized Officer and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.

	(iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of Parent Originator or such Seller Party copies of all financial statements, reports and proxy statements so furnished.

	(v) S.E.C. Filings. Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which Parent Originator or any of its Subsidiaries files with the Securities and Exchange Commission.

	(vi) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than the Agent or Jupiter, copies of the same.

	(vii) Change in Credit and Collection Policy. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to the Credit and Collection Policy, a copy of the Credit and Collection Policy then in effect and a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Agent’s consent thereto.

	(viii) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of such Seller Party as the Agent may from time to time reasonably request in order to protect the interests of the Agent and the Purchasers under or as contemplated by this Agreement.

(b) Notices. Such Seller Party will notify the Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

	(i) Amortization Events or Potential Amortization Events. The occurrence of each Amortization Event and each Potential Amortization Event, by a statement of an Authorized Officer of such Seller Party.

	(ii) Judgment and Proceedings. (1) The entry of any judgment or decree against the Servicer or any of its respective Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against the Servicer and its Subsidiaries exceeds $3,000,000 and (2) the institution of any litigation, arbitration proceeding or governmental proceeding against the Servicer which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and (B) the entry of any judgment or decree or the institution of any litigation, arbitration proceeding or governmental proceeding against Seller.

	(iii) Material Adverse Effect. The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect.

	(iv) Termination Date. The occurrence the “Termination Date” under and as defined in either Receivables Sale Agreement.

	(v) Defaults Under Other Agreements. The occurrence of a default or an event of default under any other financing arrangement (1) pursuant to which Seller is a debtor or an obligor or (2) that has an aggregate outstanding principal amount in excess of $1,500,000 and pursuant to which Servicer is a debtor or an obligor.

	(vi) Downgrade of Parent Originator. Any downgrade in the rating of any Indebtedness of Parent Originator by Standard & Poor’s Ratings Group or by Moody’s Investors Service, Inc., setting forth the Indebtedness affected and the nature of such change.

(c) Compliance with Laws and Preservation of Corporate Existence. Such Seller Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except, with respect to the Servicer only, where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted except, with respect to the Servicer only, where such failure to so qualify could not reasonably be expected to have a Material Adverse Effect.

(d) Audits. Such Seller Party will furnish to the Agent from time to time such information with respect to it and the Receivables as the Agent may reasonably request. Such Seller Party will, from time to time during regular business hours as requested by the Agent upon reasonable notice and at the sole cost of such Seller Party, permit the Agent, or its agents or representatives (and shall cause the Originators to permit the Agent or its agents or representatives), (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person’s financial condition or the Receivables and the Related Security or any Person’s performance under any of the Transaction Documents or any Person’s performance under the Contracts and, in each case, with any of the officers or employees of such Person having knowledge of such matters; provided, however, that for so long as no Amortization Event or Potential Amortization Event shall have occurred and be continuing, (A) such examinations and/or visits hereunder shall be limited to four times per calendar year and (B) such cost shall be borne by the Seller not more than once per calendar year (although in no event shall the foregoing be construed to limit the Agent (or its assigns) or their respective agents and representatives to one such examination and/or visit during such calendar year period). Notwithstanding Section 4.1(d) in each Receivables Sale Agreement, so long as no Amortization Event or Potential Amortization Event shall have occurred and be continuing, Agent’s and Purchasers’ costs of audits may be reimbursed only once per calendar year.

(e) Keeping and Marking of Records and Books.

	(i) The Servicer will (and will cause Originators to) maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the identification of each new Receivable on the last Business Day of the month such Receivable was generated and immediate identification of all Collections of and adjustments to each existing Receivable). The Servicer will (and will cause Originators to) give the Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence.

	(ii) Such Seller Party will (and will cause Originators to) (A) on or prior to the date hereof, mark its master data processing records and other books and records relating to the Purchaser Interests with a legend, acceptable to the Agent, describing the Purchaser Interests and (B) upon the request of the Agent (x) mark each Contract with a legend describing the Purchaser Interests and (y) deliver to the Agent all Contracts (including, without limitation, all multiple originals of any such Contract) relating to the Receivables. On the last Business Day of each calendar month, the Servicer shall record the Parent’s ownership of the Receivables originated during such month, the subsequent sale to SMC, the subsequent sale to Seller and the Purchaser Interests therein.

(f) Compliance with Contracts and Credit and Collection Policy. Such Seller Party will (and will cause Originators to) timely and fully (i) perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract.

(g) Performance and Enforcement of SMC Sale Agreement. Seller will perform its obligations and undertakings under and pursuant to the SMC Sale Agreement, will purchase Receivables thereunder in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to Seller under the SMC Sale Agreement. Seller will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Agent and the Purchasers as assignees of Seller) under the SMC Sale Agreement as the Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the SMC Sale Agreement.

(h) Ownership. Seller will (or will cause Originators to) take all necessary action to (i) vest legal and equitable title to the Receivables, the Related Security and the Collections purchased under the SMC Sale Agreement irrevocably in Seller, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent and the Purchasers (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller’s interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Seller therein as the Agent may reasonably request), and (ii) establish and maintain, in favor of the Agent, for the benefit of the Purchasers, a valid and perfected first priority security interest in all Receivables, Related Security and Collections to the full extent contemplated herein, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent for the benefit of the Purchasers (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent’s (for the benefit of the Purchasers) interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of the Agent for the benefit of the Purchasers as the Agent may reasonably request).

(i) Purchasers’ Reliance. Seller acknowledges that the Purchasers are entering into the transactions contemplated by this Agreement in reliance upon Seller’s identity as a legal entity that is separate from Originators. Therefore, from and after the date of execution and delivery of this Agreement, Seller shall take all reasonable steps, including, without limitation, all steps that the Agent or any Purchaser may from time to time reasonably request, to maintain Seller’s identity as a separate legal entity and to make it manifest to third parties that Seller is an entity with assets and liabilities distinct from those of each Originator and any Affiliates thereof and not just a division of either Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Seller will:

	(A) conduct its own business in its own name and require that all full‑time employees of Seller, if any, identify themselves as such and not as employees of either Originator (including, without limitation, by means of providing appropriate employees with business or identification cards identifying such employees as Seller’s employees);

	(B) compensate all employees, consultants and agents directly, from Seller’s own funds, for services provided to Seller by such employees, consultants and agents and, to the extent any employee, consultant or agent of Seller is also an employee, consultant or agent of either Originator or any Affiliate thereof, allocate the compensation of such employee, consultant or agent between Seller and such Originator or such Affiliate, as applicable, on a basis that reflects the services rendered to Seller and such Originator or such Affiliate, as applicable;

	(C) clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of either Originator, Seller shall lease such office at a fair market rent (which rent may be charged as a component of an administrative fee rather than separately billed);

	(D) have a separate telephone number, which will be answered only in its name and separate stationery, invoices and checks in its own name;

	(E) conduct all transactions with Originators and the Servicer (including, without limitation, any delegation of its obligations hereunder as Servicer) strictly on an arm’s‑length basis, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between Seller and either Originator on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use;

	(F) at all times have a Board of Directors consisting of three members, at least one member of which is an Independent Director;

	(G) observe all corporate formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection, maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of Seller or (C) the initiation of, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving Seller, are duly authorized by unanimous vote of its Board of Directors (including the Independent Director);

	(H) maintain Seller’s books and records separate from those of each Originator and any Affiliate thereof and otherwise readily identifiable as its own assets rather than assets of Originators and any Affiliate thereof;

	(I) prepare its financial statements separately from those of Originators and insure that any consolidated financial statements of Originators or any Affiliate thereof that include Seller and that are filed with the Securities and Exchange Commission or any other governmental agency have notes clearly stating that Seller is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of Seller;

	(J) except as herein specifically otherwise provided, maintain the funds or other assets of Seller separate from, and not commingled with, those of Originators or any Affiliate thereof and only maintain bank accounts or other depository accounts to which Seller alone is the account party, into which Seller alone makes deposits and from which Seller alone (or the Agent hereunder) has the power to make withdrawals;

	(K) pay all of Seller’s operating expenses from Seller’s own assets (except for certain payments by Originators or other Persons pursuant to allocation arrangements that comply with the requirements of this Section 7.1(i));

	(L) operate its business and activities such that: it does not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, other than the transactions contemplated and authorized by this Agreement and the SMC Sale Agreement; and does not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than (1) as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (2) the incurrence of obligations under this Agreement, (3) the incurrence of obligations, as expressly contemplated in the SMC Sale Agreement, to make payment to Selling Subsidiary for the purchase of Receivables from Selling Subsidiary under the SMC Sale Agreement, and (4) the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated by this Agreement;

	(M) maintain its corporate charter in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise modify its certificate or articles of incorporation or bylaws in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1(i) of this Agreement;

	(N) maintain the effectiveness of, and continue to perform under the SMC Sale Agreement, such that it does not amend, restate, supplement, cancel, terminate or otherwise modify the SMC Sale Agreement, or give any consent, waiver, directive or approval thereunder or waive any default, action, omission or breach under the SMC Sale Agreement or otherwise grant any indulgence thereunder, without (in each case) the prior written consent of the Agent;

	(O) maintain its corporate separateness such that it does not merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, nor at any time create, have, acquire, maintain or hold any interest in any Subsidiary.

	(P) maintain at all times the Required Capital Amount (as defined in the SMC Sale Agreement) and refrain from making any dividend, distribution, redemption of capital stock or payment of any subordinated indebtedness which would cause the Required Capital Amount to cease to be so maintained; and

	(Q) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Troy & Gould Professional Corporation, as counsel for Seller, in connection with the closing or initial Incremental Purchase under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times.

(j) Collections. Such Seller Party will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to Seller or any Affiliate of Seller, Seller will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, Seller will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agent and the Purchasers. Seller will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement) of each Lock-Box and Collection Account and shall not grant the right to take dominion and control of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to the Agent as contemplated by this Agreement.

(k) Taxes. Such Seller Party will file all tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing, except with respect to the Servicer only, any non-material taxes or governmental charges, and except with respect to each Seller Party, any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. Seller will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of Jupiter, the Agent or any Financial Institution.

(l) Insurance. Seller will maintain in effect, or cause to be maintained in effect, at Seller’s own expense, such casualty and liability insurance as Seller shall deem appropriate in its good faith business judgment. The Agent, for the benefit of the Purchasers, shall be named as an additional insured with respect to all such liability insurance maintained by Seller. Seller will pay or cause to be paid, the premiums therefor and deliver to the Agent evidence satisfactory to the Agent of such insurance coverage. Copies of each policy shall be furnished to the Agent and any Purchaser in certificated form upon the Agent’s or such Purchaser’s request. The foregoing requirements shall not be construed to negate, reduce or modify, and are in addition to, Seller’s obligations hereunder.

(m) Payment to Selling Subsidiary. With respect to any Receivable purchased by Seller from Selling Subsidiary, such sale shall be effected under, and in strict compliance with the terms of, the SMC Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to Selling Subsidiary in respect of the purchase price for such Receivable.

Section 7.2 Negative Covenants of The Seller Parties. Until the later of the date on which the Aggregate Unpaids have been paid in full and the Amortization Date, each Seller Party hereby covenants, as to itself, that:

(a) Name Change, Offices and Records. Such Seller Party will not change its name, identity, jurisdiction of organization or incorporation, or corporate structure (within the meaning of Section 9-402(7) or any successor provision of any applicable enactment of the UCC) or relocate its chief executive office or any office where Records are kept unless it shall have: (i) given the Agent at least forty-five (45) days’ prior written notice thereof and (ii) delivered to the Agent all financing statements, instruments and other documents requested by the Agent in connection with such change or relocation.

(b) Change in Payment Instructions to Obligors. Except as may be required by the Agent pursuant to Section 8.2(b) or as otherwise permitted in Section 8.2(a), such Seller Party will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless the Agent shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided, however, that the Servicer may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account that is subject to an executed Collection Account Agreement.

(c) Modifications to Contracts and Credit and Collection Policy. Such Seller Party will not, and will not permit any Originator to, amend, modify or otherwise make any change to the Credit and Collection Policy that could adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables. Except as provided in Section 8.2(c), the Servicer will not, and will not permit any Originator to, extend, amend or otherwise modify the terms of any Receivable or any Contract related thereto other than in accordance with the Credit and Collection Policy.

(d) Sales, Liens. Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable, Related Security or Collections, or upon or with respect to any Contract under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of the Agent and the Purchasers provided for herein), and Seller will defend the right, title and interest of the Agent and the Purchasers in, to and under any of the foregoing property, against all claims of third parties claiming through or under Seller or any Originator. Seller will not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory.

(e) Net Receivables Balance. At no time prior to the Amortization Date shall Seller permit the Net Receivables Balance to be less than an amount equal to the sum of (i) the Aggregate Capital plus (ii) the Aggregate Reserves.

(f) Termination Date Determination. Seller will not designate the Termination Date (as defined in the SMC Sale Agreement), or send any written notice to Selling Subsidiary in respect thereof, without the prior written consent of the Agent, except with respect to the occurrence of such Termination Date arising pursuant to Section 5.1(d) of the SMC Sale Agreement.

(g) Restricted Junior Payments. From and after the occurrence of any Amortization Event, Seller will not make any Restricted Junior Payment if, after giving effect thereto, Seller would fail to meet its obligations set forth in Section 7.2(e).

(h) Keeping and Marking of Records and Books. Except on the last Business Day of each calendar month, and except as otherwise permitted in Section 7.1(e), the Servicer will make no recordation of the origination of new Receivables by Parent nor of the ownership thereof by Parent or SMC.

ARTICLE VIII
ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer.

(a) The servicing, administration and collection of the Receivables shall be conducted by such Person (the “Servicer”) so designated from time to time in accordance with this Section 8.1. SMC is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms of this Agreement. The Agent may at any time following the occurrence and during the continuation of an Amortization Event designate as Servicer any Person to succeed SMC or any successor Servicer.

(b) Without the prior written consent of the Agent and the Required Financial Institutions, SMC shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than (i) Seller and (ii) with respect to certain Charged-Off Receivables, outside collection agencies in accordance with its customary practices. Seller shall not be permitted to further delegate to any other Person any of the duties or responsibilities of the Servicer delegated to it by SMC. If at any time the Agent shall designate as Servicer any Person other than SMC, all duties and responsibilities theretofore delegated by SMC to Seller may, at the discretion of the Agent, be terminated forthwith on notice given by the Agent to SMC and to Seller.

(c) Notwithstanding the foregoing subsection (b), until such time as Servicer’s duties have been terminated by Agent and a successor Servicer has commenced its duties as Servicer, (i) SMC shall be and remain primarily liable to the Agent and the Purchasers for the full and prompt performance of all duties and responsibilities of the Servicer hereunder and (ii) the Agent and the Purchasers shall be entitled to deal exclusively with SMC in matters relating to the discharge by the Servicer of its duties and responsibilities hereunder. Unless and until the Agent has replaced SMC as Servicer, the Agent and the Purchasers shall not be required to give notice, demand or other communication to any Person other than SMC in order for communication to the Servicer and its sub-servicer or other delegate with respect thereto to be accomplished. SMC, at all times that it is the Servicer, shall be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Agreement.

Section 8.2 Duties of Servicer. The Servicer shall take or cause to be taken all such commercially reasonable actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy.

(a) The Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or Collection Account. The Servicer shall effect a Collection Account Agreement substantially in the form of Exhibit VI with each bank party to a Collection Account at any time. The Servicer will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless Agent shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box. Notwithstanding the foregoing, Servicer may make changes in instructions to Obligors regarding payments if (A) such new instructions require such Obligor to make payments to another existing Collection Account that is subject to an executed Collection Account Agreement or (B) such new instructions require such Obligor to make payments directly to Servicer, provided, that Servicer may not give such instructions specified in clause (B) to the extent that (1) an Amortization Event or Potential Amortization Event has occurred and is continuing or (2) the aggregate Outstanding Balance of Receivables owing by all Obligors in receipt of such instructions exceeds $2,000,000. In the case of any remittances received in any Lock-Box or Collection Account that shall have been identified, to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security, the Servicer shall promptly remit such items to the Person identified to it as being the owner of such remittances. From and after the date the Agent delivers to any Collection Bank a Collection Notice pursuant to Section 8.3, the Agent may request that the Servicer, and the Servicer thereupon promptly shall instruct all Obligors with respect to the Receivables, to remit all payments thereon to a new depositary account specified by the Agent and, at all times thereafter, Seller and the Servicer shall not deposit or otherwise credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections.

(b) The Servicer shall administer the Collections in accordance with the procedures described herein and in Article II. The Servicer shall set aside and hold in trust for the account of Seller and the Purchasers their respective shares of the Collections in accordance with Article II. The Servicer shall, upon the request of the Agent, segregate, in a manner acceptable to the Agent, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or Seller prior to the remittance thereof in accordance with Article II. If the Servicer shall be required to segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit with a bank designated by the Agent such allocable share of Collections of Receivables set aside for the Purchasers on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer.

(c) The Servicer may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer determines to be appropriate to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or Charged-Off Receivable or limit the rights of the Agent or the Purchasers under this Agreement. Notwithstanding anything to the contrary contained herein, the Agent shall have the absolute and unlimited right to direct the Servicer to commence or settle any legal action with respect to any Receivable or to foreclose upon or repossess any Related Security.

(d) The Servicer shall hold in trust for Seller and the Purchasers all Records that (i) evidence or relate to the Receivables, the related Contracts and Related Security or (ii) are otherwise necessary or desirable to collect the Receivables and shall, as soon as practicable upon demand of the Agent, deliver or make available to the Agent all such Records, at a place selected by the Agent. The Servicer shall, as soon as practicable following receipt thereof turn over to Seller any cash collections or other cash proceeds received with respect to Indebtedness not constituting Receivables. The Servicer shall, from time to time at the request of any Purchaser, furnish to the Purchasers (promptly after any such request) a calculation of the amounts set aside for the Purchasers pursuant to Article II.

(e) Any payment by an Obligor in respect of any indebtedness owed by it to any Originator or Seller shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor.

Section 8.3 Collection Notices. The Agent is authorized at any time after the occurrence and during the continuation of a Potential Amortization Event or Amortization Event to date and to deliver to the Collection Banks the Collection Notices. Seller hereby transfers to the Agent for the benefit of the Purchasers, effective when the Agent delivers such notice, the exclusive ownership and control of each Lock-Box and the Collection Accounts. In case any authorized signatory of Seller whose signature appears on a Collection Account Agreement shall cease to have such authority before the delivery of such notice, such Collection Notice shall nevertheless be valid as if such authority had remained in force. Seller hereby authorizes the Agent, and agrees that the Agent shall be entitled after the occurrence of a Potential Amortization Event or an Amortization Event to (i) endorse Seller’s name on checks and other instruments representing Collections, (ii) enforce the Receivables, the related Contracts and the Related Security and (iii) take such action as shall be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Agent rather than Seller.

Section 8.4 Responsibilities of Seller. Anything herein to the contrary notwithstanding, the exercise by the Agent and the Purchasers of their rights hereunder (other than with respect to the Servicer only, the termination of Servicer in accordance with Section 8.1) shall not release the Servicer, Originators or Seller from any of their duties or obligations with respect to any Receivables or under the related Contracts. The Purchasers shall have no obligation or liability with respect to any Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of Seller.

Section 8.5 Reports. The Servicer shall prepare and forward to the Agent (i) on the fifteenth (15^th) day of each month and at such times as the Agent shall request, a Monthly Report and (ii) at such times as the Agent shall request, a listing by Obligor of all Receivables together with an aging of such Receivables.

Section 8.6 Servicing Fees. In consideration of SMC’s agreement to act as Servicer hereunder, the Purchasers hereby agree that, so long as SMC shall continue to perform as Servicer hereunder, Seller shall pay over to SMC a fee (the “Servicing Fee”) on the first calendar day of each month, in arrears for the immediately preceding month, equal to one percent (1.0%) per annum of the average Net Receivables Balance during such period.

ARTICLE IX
AMORTIZATION EVENTS

Section 9.1 Amortization Events. The occurrence of any one or more of the following events shall constitute an Amortization Event:

(a) Any Seller Party shall fail (i) to make any payment or deposit required hereunder when due and, for any such payment or deposit which is not in respect of Capital, such failure continues for one (1) day, or (ii) to perform or observe any term, covenant or agreement hereunder (other than as referred to in clause (i) of this clause (a) and Sections 9.1(e) and (g) and such failure shall continue for five (5) consecutive Business Days.

(b) Any representation, warranty, certification or statement made by any Seller Party (i) set forth in Sections 5.1(t) or (u) or otherwise with respect to the eligibility of a Receivable in any other Transaction Document shall prove to have been incorrect in any respect when made or deemed made, except to the extent that a Deemed Collection has been paid in accordance with Section 2.1 with respect to such breach or (ii) in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto or thereto (other than as described in the immediately preceding clause (i)) shall prove to have been incorrect in any material respect when made or deemed made.

(c) (i) Failure of Seller to pay any Indebtedness when due; (ii) failure of Parent Originator or any other Seller Party to pay Indebtedness when due, which individually or together with such other Indebtedness as to which any such failure exists has an aggregate outstanding principal amount in excess of $3,000,000; or (iii) the default by Parent Originator or any Seller Party in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of Parent Originator or any Seller Party shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof.

(d) Parent Originator, any Seller Party or any Material Subsidiary shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against Parent Originator, any Seller Party or any Material Subsidiary seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or (iii) Parent Originator, any Seller Party or any Material Subsidiary shall take any corporate or other comparable action to authorize any of the actions set forth in clauses (i) or (ii) above in this subsection (d).

(e) Seller shall fail to comply with the terms of Section 2.6 hereof.

(f) As at the end of any calendar month, (i) the three-month rolling average Delinquency Trigger Ratio shall exceed 4.0%, (ii) the three-month rolling average Default Trigger Ratio shall exceed 5.0% or (iii) the three-month rolling average Dilution Trigger Ratio shall exceed 1.25%.

(g) The Net Receivables Balance shall be less than the sum of Aggregate Capital plus Aggregate Reserves.

(h) A Change of Control shall occur.

(i) (i) One or more final judgments for the payment of money shall be entered against Seller or (ii) any Originator or the Servicer shall fail within thirty (30) days to pay, bond or otherwise discharge one or more final judgments for the payment of money in an amount in excess of $3,000,000, individually or in the aggregate (to the extent not covered by insurance or as to which the insurance carrier has denied its responsibility).

(j) (i) An “Amortization Event” or the “Amortization Date” under and each as defined in the SMC Sale Agreement shall occur (and, with respect to the former, be continuing) under the SMC Sale Agreement, (ii) an “Amortization Event” or the “Amortization Date” under and each as defined in the Parent Sale Agreement shall occur (and, with respect to the former, be continuing) under the Parent Sale Agreement, (iii) Seller or any Originator shall fail to perform or observe any material term, covenant or agreement under the Receivables Sale Agreement to which it is a party, Selling Subsidiary shall fail to enforce its rights under the Parent Sale Agreement after the occurrence of any such failure, or Seller shall fail to enforce its rights under either Receivables Sale Agreement after the occurrence of any such failure, (iv) any Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Seller under the applicable Receivables Sale Agreement, or (v) any Receivables Sale Agreement or the Termination Agreement shall cease to be effective or to be the legally valid, binding and enforceable obligation of any Originator.

(k) This Agreement shall terminate in whole or in part (except in accordance with its terms), or shall cease to be effective or to be the legally valid, binding and enforceable obligation of Seller, or any Obligor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability, or the Agent for the benefit of the Purchasers shall cease to have a valid and perfected first priority security interest in the Receivables, the Related Security and the Collections with respect thereto and the Collection Accounts.

(l) Seller shall fail to have a Net Worth equal to or greater than the lesser of (i) 3.0% of the Outstanding Balance of Receivables and (ii) 3.0% of the Purchase Limit.

Section 9.2 Remedies. Upon the occurrence and during the continuation of an Amortization Event, the Agent may, or upon the direction of the Required Financial Institutions shall, take any of the following actions: (i) replace the Person then acting as Servicer, (ii) declare the Amortization Date to have occurred, whereupon the Amortization Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Seller Party; provided, however, that upon the occurrence of an Amortization Event described in Section 9.1(d)(ii), or of an actual or deemed entry of an order for relief with respect to any Seller Party under the Federal Bankruptcy Code, the Amortization Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Seller Party, (iii) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any of the Aggregate Unpaids outstanding at such time, (iv) deliver the Collection Notices to the Collection Banks, and (v) notify Obligors of the Purchasers’ interest in the Receivables. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of the Agent and the Purchasers otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative.

ARTICLE X
INDEMNIFICATION

Section 10.1 Indemnities by The Seller Parties. Without limiting any other rights that the Agent or any Purchaser may have hereunder or under applicable law, (A) Seller hereby agrees to indemnify (and pay upon demand to) the Agent and each Purchaser and their respective assigns, officers, directors, agents and employees (each an “Indemnified Party”) from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys’ fees (which attorneys may be employees of the Agent or such Purchaser) and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by a Purchaser of an interest in the Receivables, and (B) the Servicer hereby agrees to indemnify (and pay upon demand to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them arising out of the Servicer’s activities as Servicer hereunder excluding, however, in all instances specified in this Section 10.1:

	(i) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification;

	(ii) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or

	(iii) taxes imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the characterization for income tax purposes of the acquisition by the Purchasers of Purchaser Interests as a loan or loans by the Purchasers to Seller secured by the Receivables, the Related Security, the Collection Accounts and the Collections;

provided, however, that nothing contained in this sentence shall limit the liability of any Seller Party or limit the recourse of the Purchasers to any Seller Party for amounts otherwise specifically provided to be paid by such Seller Party under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Seller shall indemnify the Agent and the Purchasers for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Seller or the Servicer) relating to or resulting from:

	(iv) any representation or warranty made by any Seller Party or any Originator (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which shall have been false or incorrect when made or deemed made;

	(v) the failure by Seller, the Servicer or any Originator to comply with any applicable law, rule or regulation with respect to any Receivable or Contract related thereto, or the nonconformity of any Receivable or Contract included therein with any such applicable law, rule or regulation or any failure of any Originator to keep or perform any of its obligations, express or implied, with respect to any Contract;

	(vi) any failure of Seller, the Servicer or any Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document;

	(vii) any products liability, personal injury or damage suit, or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable;

	(viii) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services;

	(ix) the commingling of Collections of Receivables at any time with other funds;

	(x) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of an Incremental Purchase or a Reinvestment, the ownership of the Purchaser Interests or any other investigation, litigation or proceeding relating to Seller, the Servicer or any Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby;

	(xi) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding;

	(xii) any Amortization Event described in Section 9.1(d);

	(xiii) any failure of Seller to acquire and maintain legal and equitable title to, and ownership of any Receivable and the Related Security and Collections with respect thereto from Selling Subsidiary, free and clear of any Adverse Claim (other than as created hereunder); or any failure of Seller to give reasonably equivalent value to Selling Subsidiary under the SMC Sale Agreement in consideration of the transfer by Selling Subsidiary of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action;

	(xiv) any failure to vest and maintain vested in the Agent for the benefit of the Purchasers, or to transfer to the Agent for the benefit of the Purchasers, legal and equitable title to, and ownership of, a first priority perfected undivided percentage ownership interest (to the extent of the Purchaser Interests contemplated hereunder) or security interest in the Receivables, the Related Security and the Collections, free and clear of any Adverse Claim (except as created by the Transaction Documents);

	(xv) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivable, the Related Security and Collections with respect thereto, and the proceeds of any thereof, whether at the time of any Incremental Purchase or Reinvestment or at any subsequent time;

	(xvi) any action or omission by any Seller Party which reduces or impairs the rights of the Agent or the Purchasers with respect to any Receivable or the value of any such Receivable;

	(xvii) any attempt by any Person to void any Incremental Purchase or Reinvestment hereunder under statutory provisions or common law or equitable action; and

	(xviii) the failure of any Receivable included in the calculation of the Net Receivables Balance as an Eligible Receivable to be an Eligible Receivable at the time so included.

Section 10.2 Increased Cost and Reduced Return. If after the date hereof, any Funding Source shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy) or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (a “Regulatory Change”): (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source’s obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (iii) that imposes any other condition the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source’s capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by the Agent, Seller shall pay to the Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction.

Section 10.3 Other Costs and Expenses. Seller shall pay to the Agent and Jupiter on demand all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, including without limitation, the cost of Jupiter’s auditors auditing the books, records and procedures of Seller, reasonable fees and out-of-pocket expenses of legal counsel for Jupiter and the Agent (which such counsel may be employees of Jupiter or the Agent) with respect thereto and with respect to advising Jupiter and the Agent as to their respective rights and remedies under this Agreement. Seller shall pay to the Agent on demand any and all costs and out-of-pocket expenses of the Agent and the Purchasers, if any, including reasonable counsel fees and out-of-pocket expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following an Amortization Event. Seller shall reimburse Jupiter on demand for all other costs and expenses incurred by Jupiter (“Other Costs”), including, without limitation, the cost of auditing Jupiter’s books by certified public accountants, the cost of rating the Commercial Paper by independent financial rating agencies, and the reasonable fees and out-of-pocket expenses of counsel for Jupiter or any counsel for any shareholder of Jupiter with respect to advising Jupiter or such shareholder as to matters relating to Jupiter’s operations.

Section 10.4 Allocations. Jupiter shall allocate the liability for Other Costs among Seller and other Persons with whom Jupiter has entered into agreements to purchase interests in receivables (“Other Sellers”). If any Other Costs are attributable to Seller and not attributable to any Other Seller, Seller shall be solely liable for such Other Costs. However, if Other Costs are attributable to Other Sellers and not attributable to Seller, such Other Sellers shall be solely liable for such Other Costs. All allocations to be made pursuant to the foregoing provisions of this Article X shall be made by Jupiter in its sole discretion and shall be binding on Seller and the Servicer.

ARTICLE XI
THE AGENT

Section 11.1 Authorization and Action. Each Purchaser hereby designates and appoints Bank One to act as its agent hereunder and under each other Transaction Document, and authorizes the Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to the Agent by the terms of this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for the Agent. In performing its functions and duties hereunder and under the other Transaction Documents, the Agent shall act solely as agent for the Purchasers and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Seller Party or any of such Seller Party’s successors or assigns. The Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Agent hereunder shall terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each Purchaser hereby authorizes the Agent to execute each of the Uniform Commercial Code financing statements, the Collection Account Agreements and the Fee Letter on behalf of such Purchaser (the terms of which shall be binding on such Purchaser).

Section 11.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

Section 11.3 Exculpatory Provisions. Neither the Agent nor any of its directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, their or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by any Seller Party contained in this Agreement, any other Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement, or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Transaction Document or any other document furnished in connection herewith or therewith, or for any failure of any Seller Party to perform its obligations hereunder or thereunder, or for the satisfaction of any condition specified in Article VI, or for the perfection, priority, condition, value or sufficiency of any collateral pledged in connection herewith. The Agent shall not be under any obligation to any Purchaser toascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Seller Parties. The Agent shall not be deemed to have knowledge of any Amortization Event or Potential Amortization Event unless the Agent has received notice from Seller or a Purchaser.

Section 11.4 Reliance by Agent. The Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Seller), independent accountants and other experts selected by the Agent. The Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of Jupiter or the Required Financial Institutions or all of the Purchasers, as applicable, as it deems appropriate and it shall first be indemnified to its satisfaction by the Purchasers, provided that unless and until the Agent shall have received such advice, the Agent may take or refrain from taking any action, as the Agent shall deem advisable and in the best interests of the Purchasers. The Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of Jupiter or the Required Financial Institutions or all of the Purchasers, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Purchasers.

Section 11.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including, without limitation, any review of the affairs of any Seller Party, shall be deemed to constitute any representation or warranty by the Agent. Each Purchaser represents and warrants to the Agent that it has and will, independently and without reliance upon the Agent or any other Purchaser and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of Seller and made its own decision to enter into this Agreement, the other Transaction Documents and all other documents related hereto or thereto.

Section 11.6 Reimbursement and Indemnification. The Financial Institutions agree to reimburse and indemnify the Agent and its officers, directors, employees, representatives and agents ratably according to their Pro Rata Shares, to the extent not paid or reimbursed by the Seller Parties (i) for any amounts for which the Agent, acting in its capacity as Agent, is entitled to reimbursement by the Seller Parties hereunder and (ii) for any other expenses incurred by the Agent, in its capacity as Agent and acting on behalf of the Purchasers, in connection with the administration and enforcement of this Agreement and the other Transaction Documents.

Section 11.7 Agent in its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with Seller or any Affiliate of Seller as though the Agent were not the Agent hereunder. With respect to the acquisition of Purchaser Interests pursuant to this Agreement, the Agent shall have the same rights and powers under this Agreement in its individual capacity as any Purchaser and may exercise the same as though it were not the Agent, and the terms “Financial Institution,” “Purchaser,” “Funding Source”, “Financial Institutions”, “Funding Sources” and “Purchasers” shall include the Agent in its individual capacity.

Section 11.8 Successor Agent. The Agent may, upon five days’ notice to Seller and the Purchasers, and the Agent will, upon the direction of all of the Purchasers (other than the Agent, in its individual capacity) resign as Agent. If the Agent shall resign, then the Required Financial Institutions during such five-day period shall appoint from among the Purchasers a successor agent. If for any reason no successor Agent is appointed by the Required Financial Institutions during such five-day period, then effective upon the termination of such five day period, the Purchasers shall perform all of the duties of the Agent hereunder and under the other Transaction Documents and Seller and the Servicer (as applicable) shall make all payments in respect of the Aggregate Unpaids directly to the applicable Purchasers and for all purposes shall deal directly with the Purchasers. After the effectiveness of any retiring Agent’s resignation hereunder as Agent, the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Transaction Documents and the provisions of this Article XI and Article X shall continue in effect for its benefit with respect to any actions taken or omitted to be taken by it while it was Agent under this Agreement and under the other Transaction Documents.

ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS

Section 12.1 Assignments. Seller and each Financial Institution hereby agree and consent to the complete or partial assignment by Jupiter of all or any portion of its rights under, interest in, title to and obligations under this Agreement to the Financial Institutions pursuant to Section 13.1 or to any other Person, and upon such assignment, Jupiter shall be released from its obligations so assigned. Further, Seller and each Financial Institution hereby agree that any assignee of Jupiter of this Agreement or all or any of the Purchaser Interests of Jupiter shall have all of the rights and benefits under this Agreement as if the term “Jupiter” explicitly referred to such party,and no such assignment shall in any way impair the rights and benefits of Jupiter hereunder. Neither Seller nor the Servicer shall have the right to assign its rights or obligations under this Agreement.

(a) Any Financial Institution may at any time and from time to time assign to one or more Persons (“Purchasing Financial Institutions”) all or any part of its rights and obligations under this Agreement pursuant to an assignment agreement, substantially in the form set forth in Exhibit VII hereto (the “Assignment Agreement”) executed by such Purchasing Financial Institution and such selling Financial Institution. The consent of Jupiter shall be required prior to the effectiveness of any such assignment. Each assignee of a Financial Institution must (i) have a short-term debt rating of A-1 or better by Standard & Poor’s Ratings Group and P-1 by Moody’s Investor Service, Inc. and (ii) agree to deliver to the Agent, promptly following any request therefor by the Agent or Jupiter, an enforceability opinion in form and substance satisfactory to the Agent and Jupiter. Upon delivery of the executed Assignment Agreement to the Agent, such selling Financial Institution shall be released from its obligations hereunder to the extent of such assignment. Thereafter the Purchasing Financial Institution shall for all purposes be a Financial Institution party to this Agreement and shall have all the rights and obligations of a Financial Institution under this Agreement to the same extent as if it were an original party hereto and no further consent or action by Seller, the Purchasers or the Agent shall be required.

(b) Each of the Financial Institutions agrees that in the event that it shall cease to have a short-term debt rating of A-1 or better by Standard & Poor’s Ratings Group and P-1 by Moody’s Investor Service, Inc. (an “Affected Financial Institution”), such Affected Financial Institution shall be obliged, at the request of Jupiter or the Agent, to assign all of its rights and obligations hereunder to (x) another Financial Institution or (y) another funding entity nominated by the Agent and acceptable to Jupiter, and willing to participate in this Agreement through the Liquidity Termination Date in the place of such Affected Financial Institution; provided that the Affected Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such Financial Institution’s Pro Rata Share of the Aggregate Capital and Yield owing to the Financial Institutions and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions.

Section 12.2 Participations. Any Financial Institution may, in the ordinary course of its business at any time sell to one or more Persons (each a “Participant”) participating interests in its Pro Rata Share of the Purchaser Interests of the Financial Institutions, its obligation to pay Jupiter its Acquisition Amounts or any other interest of such Financial Institution hereunder. Notwithstanding any such sale by a Financial Institution of a participating interest to a Participant, such Financial Institution’s rights and obligations under this Agreement shall remain unchanged, such Financial Institution shall remain solely responsible for the performance of its obligations hereunder, and Seller, Jupiter and the Agent shall continue to deal solely and directly with such Financial Institution in connection with such Financial Institution’s rights and obligations under this Agreement. Each Financial Institution agrees that any agreement between such Financial Institution and any such Participant in respect of such participating interest shall not restrict such Financial Institution’s right to agree to any amendment, supplement, waiver or modification to this Agreement, except for any amendment, supplement, waiver or modification described in Section 14.1(b)(i).

ARTICLE XIII
LIQUIDITY FACILITY

Section 13.1 Transfer to Financial Institutions. Each Financial Institution hereby agrees, subject to Section 13.4, that immediately upon written notice from Jupiter delivered on or prior to the Liquidity Termination Date, it shall acquire by assignment from Jupiter, without recourse or warranty, its Pro Rata Share of one or more of the Purchaser Interests of Jupiter as specified by Jupiter. Each such assignment by Jupiter shall be made pro rata among all of the Financial Institutions, except for pro rata assignments to one or more Terminating Financial Institutions pursuant to Section 13.6. Each such Financial Institution shall, no later than 1:00 p.m. (Chicago time) on the date of such assignment, pay in immediately available funds (unless another form of payment is otherwise agreed between Jupiter and any Financial Institution) to the Agent at an account designated by the Agent, for the benefit of Jupiter, its Acquisition Amount. Unless a Financial Institution has notified the Agent that it does not intend to pay its Acquisition Amount, the Agent may assume that such payment has been made and may, but shall not be obligated to, make the amount of such payment available to Jupiter in reliance upon such assumption. Jupiter hereby sells and assigns to the Agent for the ratable benefit of the Financial Institutions, and the Agent hereby purchases and assumes from Jupiter, effective upon the receipt by Jupiter of the Jupiter Transfer Price, the Purchaser Interests of Jupiter which are the subject of any transfer pursuant to this Article XIII.

Section 13.2 Transfer Price Reduction Yield. If the Adjusted Funded Amount is included in the calculation of the Jupiter Transfer Price for any Purchaser Interest, each Financial Institution agrees that the Agent shall pay to Jupiter the Reduction Percentage of any Yield received by the Agent with respect to such Purchaser Interest.

Section 13.3 Payments to Jupiter. In consideration for the reduction of the Jupiter Transfer Prices by the Jupiter Transfer Price Reductions, effective only at such time as the aggregate amount of the Capital of the Purchaser Interests of the Financial Institutions equals the Jupiter Residual, each Financial Institution hereby agrees that the Agent shall not distribute to the Financial Institutions and shall immediately remit to Jupiter any Yield, Collections or other payments received by it to be applied pursuant to the terms hereof or otherwise to reduce the Capital of the Purchaser Interests of the Financial Institutions.

Section 13.4 Limitation on Commitment to Purchase from Jupiter. Notwithstanding anything to the contrary in this Agreement, no Financial Institution shall have any obligation to purchase any Purchaser Interest from Jupiter, pursuant to Section 13.1 or otherwise, if:

	(i) Jupiter shall have voluntarily commenced any proceeding or filed any petition under any bankruptcy, insolvency or similar law seeking the dissolution, liquidation or reorganization of Jupiter or taken any corporate action for the purpose of effectuating any of the foregoing; or

	(ii) involuntary proceedings or an involuntary petition shall have been commenced or filed against Jupiter by any Person under any bankruptcy, insolvency or similar law seeking the dissolution, liquidation or reorganization of Jupiter and such proceeding or petition shall have not been dismissed.

Section 13.5 Defaulting Financial Institutions. If one or more Financial Institutions defaults in its obligation to pay its Acquisition Amount pursuant to Section 13.1 (each such Financial Institution shall be called a “Defaulting Financial Institution” and the aggregate amount of such defaulted obligations being herein called the “Jupiter Transfer Price Deficit”), then upon notice from the Agent, each Financial Institution other than the Defaulting Financial Institutions (a “Non-Defaulting Financial Institution”) shall promptly pay to the Agent, in immediately available funds, an amount equal to the lesser of (x) such Non-Defaulting Financial Institution’s proportionate share (based upon the relative Commitments of the Non-Defaulting Financial Institutions, after excluding the Commitment of any Approved Unconditional Liquidity Providers) of the Jupiter Transfer Price Deficit and (y) the unused portion of such Non-Defaulting Financial Institution’s Commitment; provided, however, that if an Approved Unconditional Liquidity Provider is the Defaulting Financial Institution, the Non-Defaulting Financial Institutions shall have no obligation to pay any amount to the Agent pursuant to this Section 13.5 as a result of a default by such Approved Unconditional Liquidity Provider; provided, further, that in no event shall any Approved Unconditional Liquidity Provider be required to make any payment as a Non-Defaulting Financial Institution pursuant to this Section 13.5. A Defaulting Financial Institution shall forthwith upon demand pay to the Agent for the account of the Non-Defaulting Financial Institutions all amounts paid by each Non-Defaulting Financial Institution on behalf of such Defaulting Financial Institution, together with interest thereon, for each day from the date a payment was made by a Non-Defaulting Financial Institution until the date such Non-Defaulting Financial Institution has been paid such amounts in full, at a rate per annum equal to the Federal Funds Effective Rate plus two percent (2%). In addition, without prejudice to any other rights that Jupiter may have under applicable law, each Defaulting Financial Institution shall pay to Jupiter forthwith upon demand, the difference between such Defaulting Financial Institution’s unpaid Acquisition Amount and the amount paid with respect thereto by the Non-Defaulting Financial Institutions, together with interest thereon, for each day from the date of the Agent’s request for such Defaulting Financial Institution’s Acquisition Amount pursuant to Section 13.1 until the date the requisite amount is paid to Jupiter in full, at a rate per annum equal to the Federal Funds Effective Rate plus two percent (2%).

Section 13.6 Terminating Financial Institutions.

(a) Each Financial Institution hereby agrees to deliver written notice to the Agent not more than thirty (30) Business Days and not less than five (5) Business Days prior to the Liquidity Termination Date indicating whether such Financial Institution intends to renew its Commitment hereunder. If any Financial Institution fails to deliver such notice on or prior to the date that is five (5) Business Days prior to the Liquidity Termination Date, such Financial Institution will be deemed to have declined to renew its Commitment (each Financial Institution which has declined or has been deemed to have declined to renew its Commitment hereunder, a “Non-Renewing Financial Institution”). The Agent shall promptly notify Jupiter of each Non-Renewing Financial Institution and Jupiter, in its sole discretion, may (A) to the extent of Commitment Availability, declare that such Non-Renewing Financial Institution’s Commitment shall, to such extent, automatically terminate on a date specified by Jupiter on or before the Liquidity Termination Date or (B) upon one (1) Business Days’ notice to such Non-Renewing Financial Institution assign to such Non-Renewing Financial Institution on a date specified by Jupiter its Pro Rata Share of the aggregate Purchaser Interests then held by Jupiter, subject to, and in accordance with, Section 13.1. In addition, Jupiter may, in its sole discretion, at any time (x) to the extent of Commitment Availability, declare that any Affected Financial Institution’s Commitment shall automatically terminate on a date specified by Jupiter or (y) assign to any Affected Financial Institution on a date specified by Jupiter its Pro Rata Share of the aggregate Purchaser Interests then held by Jupiter, subject to, and in accordance with, Section 13.1 (each Affected Financial Institution or each Non-Renewing Financial Institution is hereinafter referred to as a “Terminating Financial Institution”). The parties hereto expressly acknowledge that any declaration of the termination of any Commitment, any assignment pursuant to this Section 13.6 and the order of priority of any such termination or assignment among Terminating Financial Institutions shall be made by Jupiter in its sole and absolute discretion.

(b) Upon any assignment to a Terminating Financial Institution as provided in this Section 13.6, any remaining Commitment of such Terminating Financial Institution shall automatically terminate. Upon reduction to zero of the Capital of all of the Purchaser Interests of a Terminating Financial Institution (after application of Collections thereto pursuant to Sections 2.2 and 2.3) all rights and obligations of such Terminating Financial Institution hereunder shall be terminated and such Terminating Financial Institution shall no longer be a “Financial Institution” hereunder; provided, however, that the provisions of Article X shall continue in effect for its benefit with respect to Purchaser Interests held by such Terminating Financial Institution prior to its termination as a Financial Institution.

ARTICLE XIV
MISCELLANEOUS

Section 14.1 Waivers and Amendments.

(a) No failure or delay on the part of the Agent or any Purchaser in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given.

(b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing in accordance with the provisions of this Section 14.1(b). Jupiter, Seller and the Agent, at the direction of the Required Financial Institutions, may enter into written modifications or waivers of any provisions of this Agreement, provided, however, that no such modification or waiver shall:

	(i) without the consent of each affected Purchaser, (A) extend the Liquidity Termination Date or the date of any payment or deposit of Collections by Seller or the Servicer, (B) reduce the rate or extend the time of payment of Yield or any CP Costs (or any component of Yield or CP Costs), (C) reduce any fee payable to the Agent for the benefit of the Purchasers, (D) except pursuant to Article XII hereof, change the amount of the Capital of any Purchaser, any Financial Institution’s Pro Rata Share (except pursuant to Sections 13.1 or 13.5) or any Financial Institution’s Commitment, (E) amend, modify or waive any provision of the definition of Required Financial Institutions or this Section 14.1(b), (F) consent to or permit the assignment or transfer by Seller of any of its rights and obligations under this Agreement, (G) amend or modify Section 9.1(f) or change the definition of “Aggregate Reserve,” “Concentration Limit,” “Default Proxy Ratio,” “Default Trigger Ratio,” “Delinquency Trigger Ratio,” “Dilution Trigger Ratio,” “Dilution Ratio,” “Dilution Reserve,” “Dilution Reserve Ratio,” “Eligible Receivable,” “Loss Reserve,” “Loss Reserve Ratio,” or “Servicer and Yield Reserve” or (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses; or

	(ii) without the written consent of the then Agent, amend, modify or waive any provision of this Agreement if the effect thereof is to affect the rights or duties of such Agent.

Notwithstanding the foregoing, (i) without the consent of the Financial Institutions, but with the consent of Seller, the Agent may amend this Agreement solely to add additional Persons as Financial Institutions hereunder and (ii) the Agent, the Required Financial Institutions and Jupiter may enter into amendments to modify any of the terms or provisions of Article II, Article XI, Article XII, Article XIII, Section 14.13 or any other provision of this Agreement without the consent of Seller, provided that such amendment has no negative impact upon Seller. Any modification or waiver made in accordance with this Section 14.1 shall apply to each of the Purchasers equally and shall be binding upon Seller, Servicer, the Purchasers and the Agent.

Section 14.2 Notices. Except as provided in this Section 14.2, all communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on the signature pages hereof or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communicationshall be effective if given by telecopy, upon the receipt thereof, if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or if given by any other means, when received at the address specified in this Section 14.2. Seller hereby authorizes the Agent to effect purchases and Tranche Period and Discount Rate selections based on telephonic notices made by any Person whose name is set forth on Schedule 14.2 as may be supplemented from time to time by Seller in written notice to Agent. Seller agrees to deliver promptly to the Agent a written confirmation of each telephonic notice signed by an Authorized Officer of Seller; provided, however, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs from the action taken by the Agent, the records of the Agent shall govern absent manifest error.

Section 14.3 Ratable Payments. If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any portion of the Aggregate Unpaids owing to such Purchaser (other than payments received pursuant to Section 10.2 or 10.3) in a greater proportion than that received by any other Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of such Aggregate Unpaids held by the other Purchasers so that after such purchase each Purchaser will hold its ratable proportion of such Aggregate Unpaids; provided that if all or any portion of such excess amount is thereafter recovered from such Purchaser, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

Section 14.4 Protection of Ownership Interests of the Purchasers. Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that the Agent may request, to perfect, protect or more fully evidence the Purchaser Interests, or to enable the Agent or the Purchasers to exercise and enforce their rights and remedies hereunder. At any time after the occurrence of an Amortization Event, the Agent may, or the Agent may direct Seller or the Servicer to, notify the Obligors of Receivables, at Seller’s expense, of the ownership or security interests of the Purchasers under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Agent or its designee. Seller or the Servicer (as applicable) shall, at any Purchaser’s request, withhold the identity of such Purchaser in any such notification.

(a) If any Seller Party fails to perform any of its obligations hereunder, the Agent or any Purchaser may (but shall not be required to) perform, or cause performance of, such obligations, and the Agent’s or such Purchaser’s costs and expenses incurred in connection therewith shall be payable by Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of such Seller Party (i) to execute on behalf of Seller as debtor and to file financing statements necessary or desirable in the Agent’s sole discretion to perfect and to maintain the perfection and priority of the interest of the Purchasers in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the interests of the Purchasers in the Receivables. This appointment is coupled with an interest and is irrevocable.

Section 14.5 Confidentiality.

(a) Each Seller Party and each Purchaser shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to the Agent and Jupiter and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that (i) such Seller Party may provide any Transaction Document other than the Fee Letter to prospective purchasers of securities of, lenders to, or underwriters, brokers, dealers or counsel for, such Seller Party so long as such Seller Party makes a good faith effort to obtain a confidentiality agreement from such Person with respect to such Transaction Document, (ii) such Seller Party may disclose such matters (other than the Fee Letter) in filings with the Securities and Exchange Commission and (iii) such Seller Party and such Purchaser and its officers and employees may disclose such information to such Seller Party’s and such Purchaser’s external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding.

(b) Anything herein to the contrary notwithstanding, each Seller Party hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Agent, the Financial Institutions or Jupiter by each other, (ii) by the Agent or the Purchasers to any prospective or actual assignee or participant of any of them provided such Person is informed of the confidential nature of such information and agrees to maintain such confidentiality and further provided that such Person is not a competitor of any Seller Party nor is it an Affiliate of a competitor of any Seller Party and (iii) by the Agent to any rating agency, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to Jupiter or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which Bank One acts as the administrative agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided each such Person is informed of the confidential nature of such information. In addition, the Purchasers and the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law).

Section 14.6 Bankruptcy Petition. Seller, the Servicer, the Agent and each Financial Institution hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of Jupiter or any Unconditional Liquidity Provider, it will not institute against, or join any other Person in instituting against, Jupiter or any such entity any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

Section 14.7 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of Jupiter, the Agent or any Financial Institution, no claim may be made by any Seller Party or any other Person against Jupiter, the Agent or any Financial Institution or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and each Seller Party hereby waives, releases, and agrees not to sue uponany claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.

Section 14.9 CONSENT TO JURISDICTION. EACH SELLER PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON‑EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE AGENT OR ANY PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

Section 14.11 Integration; Binding Effect; Survival of Terms.

(a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.

(b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by any Seller Party pursuant to Article V, and (ii) the indemnification and payment provisions of Article X, and Sections 14.5 and 14.6, shall be continuing and shall survive any termination of this Agreement.

Section 14.12 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to “Article,” “Section,” “Schedule” or “Exhibit” shall mean articles and sections of, and schedules and exhibits to, this Agreement.

Section 14.13 Bank One Roles. Each of the Financial Institutions acknowledges that Bank One acts, or may in the future act, (i) as administrative agent for Jupiter or any Financial Institution, (ii) as issuing and paying agent for the Commercial Paper, (iii) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper and (iv) to provide other services from time to time for Jupiter or any Financial Institution (collectively, the “Bank One Roles”). Without limiting the generality of this Section 14.13, each Financial Institution hereby acknowledges and consents to any and all Bank One Roles and agrees that in connection with any Bank One Role, Bank One may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as administrative agent for Jupiter, and the giving of notice to the Agent of a mandatory purchase pursuant to Section 13.1.

Section 14.14 Characterization.

(a) It is the intention of the parties hereto that each purchase hereunder shall constitute and be treated as an absolute and irrevocable sale, which purchase shall provide the applicable Purchaser with the full benefits of ownership of the applicable Purchaser Interest. Except as specifically provided in this Agreement, each sale of a Purchaser Interest hereunder is made without recourse to Seller; provided, however, that (i) Seller shall be liable to each Purchaser and the Agent for all representations, warranties, covenants and indemnities made by Seller pursuant to the terms of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by any Purchaser or the Agent or any assignee thereof of any obligation of Seller or any Originator or any other person arising in connection with the Receivables, the Related Security, or the related Contracts, or any other obligations of Seller or Originator.

(b) In addition to any ownership interest which the Agent may from time to time acquire pursuant hereto, Seller hereby grants to the Agent for the ratable benefit of the Purchasers a valid and perfected security interest in all of Seller’s right, title and interest in, to and under the following assets now existing or hereafter arising: the Receivables, the Collections, each Lock-Box, each Collection Account, all Related Security, all other rights and payments relating to such Receivables, and all proceeds of any of the foregoing, and all other assets in which the Agent has acquired, or may hereafter acquire and/or purport to have acquired an interest in hereunder (the “SFC Collateral”), prior to all other liens on and security interests therein to secure the prompt and complete payment of the Aggregate Unpaids. The Agent and the Purchasers shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof.

                                                                                SYNCOR FINANCING CORPORATION
                                                                                By:/s/William P. Forster
                                                                                Name: William P. Forster
                                                                                Title: CFO
                                                                                Address: 6464 Canoga Ave.
                                                                                Woodland Hills, CA 91367
                                                                                Facsimile: 818-737-4468
                                                                                Attention: CFO & General Counsel

                                                                                SYNCOR MANAGEMENT CORPORATION
                                                                                By:/s/William P. Forster
                                                                                Name: William P. Forster
                                                                                Title: VP & Treasurer
                                                                                Address: 6464 Canoga Ave.
                                                                                Woodland Hills, CA 91367
                                                                                Facsimile: 818-737-4468
                                                                                Attention: VP & Treasurer/General Counsel

                                                                                JUPITER SECURITIZATION CORPORATION
                                                                                By:/s/Elizabeth R. Cohen
                                                                                Name: Elizabeth R. Cohen
                                                                                Title: Authorized Signatory
                                                                                Address: c/o Bank One, NA (Main Office Chicago),
                                                                                as Agent
                                                                                Asset Backed Finance
                                                                                Suite IL1-0079, 1-19
                                                                                1 Bank One Plaza
                                                                                Chicago, Illinois 60670-0079
                                                                                Attention: ABF Treasury
                                                                                Phone: (312) 732-2722
                                                                                Fax: (312) 732-1844

                                                                                BANK ONE, NA (MAIN OFFICE CHICAGO), as a
                                                                                Financial Institution and as Agent
                                                                                By:/s/Elizabeth R. Cohen
                                                                                Name: Elizabeth Cohen
                                                                                Title: Authorized Signatory
                                                                                Address: Bank One, NA (Main Office Chicago)
                                                                                Asset Backed Finance
                                                                                Suite IL1-0596, 1-21
                                                                                1 Bank One Plaza
                                                                                Chicago, Illinois 60670-0596
                                                                                Attention: Elizabeth Cohen
                                                                                Phone: (312) 732-8629
                                                                                Fax: (312) 732-4487

EXHIBIT I
DEFINITIONS

As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Accrual Period” means each calendar month, provided that the initial Accrual Period hereunder means the period from (and including) the date of the initial purchase hereunder to (and including) the last day of the calendar month thereafter.

“Acquisition Amount” means, on the date of any purchase from Jupiter of one or more Purchaser Interests pursuant to Section 13.1, (a) with respect to each Financial Institution (other than any Unconditional Liquidity Provider), the lesser of (i) such Financial Institution’s Pro Rata Share of the sum of (A) the lesser of (1) the Adjusted Liquidity Price of each such Purchaser Interest and (2) the Capital of each such Purchaser Interest and (B) all accrued and unpaid CP Costs for each such Purchaser Interest and (ii) such Financial Institution’s unused Commitment and (b) with respect to each Unconditional Liquidity Provider, the lesser of (x) such Unconditional Liquidity Provider’s Pro Rata Share of the sum of (1) the Capital of each such Purchaser Interest and (2) all accrued and unpaid CP Costs for each such Purchaser Interest and (y) such Unconditional Liquidity Provider’s unused Commitment.

“Adjusted Funded Amount” means, in determining the Jupiter Transfer Price for any Purchaser Interest, an amount equal to the sum of (a) the Adjusted Liquidity Price of each such Purchaser Interest and (b) an amount equal to each Unconditional Liquidity Provider’s Pro Rata Share of the difference between (i) the Adjusted Liquidity Price of each such Purchaser Interest and (ii) the Capital of each such Purchaser Interest.

“Adjusted Liquidity Price” means an amount equal to:

NDR

RI[ DC +[ --------------------------]]

1+(.50x***[12]***)

where:

RI = the undivided percentage interest evidenced by such Purchaser Interest.

DC = the Deemed Collections.

NDR = the Outstanding Balance of all Receivables which are not Defaulted Receivables.

Each of the foregoing shall be determined from the most recent Monthly Report received from the Servicer.

“Adverse Claim” means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person’s assets or properties in favor of any other Person.

“Affected Financial Institution” has the meaning specified in Section 12.1(c).

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or any Subsidiary of such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“Agent” has the meaning set forth in the preamble to this Agreement.

“Aggregate Capital” means, on any date of determination, the aggregate amount of Capital of all Purchaser Interests outstanding on such date.

“Aggregate Reduction” has the meaning specified in Section 1.3.

“Aggregate Reserves” means, on any date of determination, the sum of the Loss Reserve, the Dilution Reserve and the Servicer and Yield Reserve.

“Aggregate Unpaids” means, at any time, an amount equal to the sum of all Aggregate Capital and all other unpaid Obligations (whether due or accrued) at such time.

“Agreement” means this Receivables Financing Agreement, as it may be amended or modified and in effect from time to time.

“Amortization Date” means the earliest to occur of (i) the day on which any of the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the Business Day immediately prior to the occurrence of an Amortization Event set forth in Section 9.1(d)(ii), (iii) the Business Day specified in a written notice from the Agent following the occurrence of any other Amortization Event, and (iv) the date which is thirty (30) Business Days after the Agent’s receipt of written notice from Seller that it wishes to terminate the facility evidenced by this Agreement.

“Amortization Event” has the meaning specified in Article IX.

“Approved Unconditional Liquidity Provider” means an Unconditional Liquidity Provider which has received approval from Standard & Poor’s Ratings Group and Moody’s Investors Service, Inc. to be relieved from any obligation to pay amounts as a Non-Defaulting Financial Institution pursuant to Section 13.5 hereof.

“Assignment Agreement” has the meaning set forth in Section 12.1(b).

“Authorized Officer” means, with respect to any Person, its president, corporate controller, treasurer or chief financial officer.

“Bank One” means Bank One, NA (Main Office Chicago) in its individual capacity and its successors.

“Base Rate” means a rate per annum equal to the corporate base rate, prime rate or base rate of interest, as applicable, announced by the Bank One or Bank One Corporation from time to time, changing when and as such rate changes.

“Broken Funding Costs” means for any Purchaser Interest which: (i) has its Capital reduced without compliance by Seller with the notice requirements hereunder or (ii) does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice or (iii) is assigned under Article XIII or terminated prior to the date on which it was originally scheduled to end; an amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable) that would have accrued during the remainder of the Tranche Periods or the tranche periods for Commercial Paper determined by the Agent to relate to such Purchaser Interest (as applicable) subsequent to the date of such reduction, assignment or termination (or in respect of clause (ii) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of the Capital of such Purchaser Interest if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Capital is allocated to another Purchaser Interest, the amount of CP Costs or Yield actually accrued during the remainder of such period on such Capital for the new Purchaser Interest, and (y) to the extent such Capital is not allocated to another Purchaser Interest, the income, if any, actually received during the remainder of such period by the holder of such Purchaser Interest from investing the portion of such Capital not so allocated. In the event that the amount referred to in clause (B) exceeds the amount referred to in clause (A), the relevant Purchaser or Purchasers agree to pay to Seller the amount of such excess. All Broken Funding Costs shall be due and payable hereunder upon demand.

“Business Day” means any day on which banks are not authorized or required to close in New York, New York or Chicago, Illinois and The Depository Trust Jupiter of New York is open for business, and, if the applicable Business Day relates to any computation or payment to be made with respect to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London interbank market.

“Capital” of any Purchaser Interest means, at any time, (A) the Purchase Price of such Purchaser Interest, minus (B) the sum of the aggregate amount of Collections and other payments received by the Agent which in each case are applied to reduce such Capital in accordance with the terms and conditions of this Agreement; provided that such Capital shall be restored (in accordance with Section 2.5) in the amount of any Collections or other payments so received and applied if at any time the distribution of such Collections or payments are rescinded, returned or refunded for any reason.

“Change of Control” means (i) with respect to the Parent Originator, the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding shares of voting stock of the Servicer, (ii) with respect to the Servicer, the Parent Originator ceases to own directly, free and clear of any Adverse Claim, 100% of the outstanding shares of voting stock of the Servicer, and (iii) with respect to the Seller, the Selling Subsidiary ceases to own directly, free and clear of any Adverse Claim, 100% of the outstanding shares of voting stock of the Seller.

“Charged‑Off Receivable” means a Receivable: (i) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 9.1(d) (as if references to Seller Party therein refer to such Obligor); (ii) as to which the Obligor thereof, if a natural person, is deceased, (iii) which, consistent with the Credit and Collection Policy, would be written off Seller’s books as uncollectible, (iv) which has been identified by Seller as uncollectible or (v) which is a Defaulted Receivable.

“Collection Account” means each concentration account, depositary account, lock-box account or similar account in which any Collections are collected or deposited and which is listed on Exhibit IV.

“Collection Account Agreement” means an agreement substantially in the form of Exhibit VI among Originators, Seller, the Agent and a Collection Bank.

“Collection Bank” means, at any time, any of the banks holding one or more Collection Accounts.

“Collection Notice” means a notice, in substantially the form of Annex A to Exhibit VI, from the Agent to a Collection Bank.

“Collection Period” means each calendar month.

“Collections” means, with respect to any Receivable, all cash collections and other cash proceeds in respect of such Receivable, including, without limitation, all yield, Finance Charges or other related amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such Receivable.

“Commercial Paper” means promissory notes of Jupiter issued by Jupiter in the commercial paper market.

“Commitment” means, for each Financial Institution, the commitment of such Financial Institution to purchase Purchaser Interests from (i) Seller and (ii) Jupiter, in an amount not to exceed (i) in the aggregate, the amount set forth opposite such Financial Institution’s name on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof (including, without limitation, any termination of Commitments pursuant to Section 13.6 hereof) and (ii) with respect to any individual purchase hereunder, its Pro Rata Share of the Purchase Price therefor.

“Commitment Availability” means at any time the positive difference (if any) between (a) an amount equal to the aggregate amount of the Commitments minus an amount equal to 2% of such aggregate Commitments at such time minus (b) the Aggregate Capital at such time.

“Concentration Limit” means, at any time, for any Obligor, 4.0% of the aggregate Outstanding Balance of all Eligible Receivables at such time or such other amount (a “Special Concentration Limit”) for such Obligor designated by the Agent; provided, that in the case of an Obligor and any Affiliate of such Obligor, the Concentration Limit shall be calculated as if such Obligor and such Affiliate are one Obligor; and provided, further, that Jupiter or the Required Financial Institutions may, upon not less than three (3) Business Days’ notice to Seller, cancel any Special Concentration Limit.

“Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take‑or‑pay contract or application for a letter of credit.

“Contract” means, with respect to any Receivable, any and all instruments, agreements, invoices or other writings pursuant to which such Receivable arises or which evidences such Receivable.

“CP Costs” means, for each day, the sum of (i) discount or yield accrued on Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions in respect of placement agents and Commercial Paper dealers, and issuing and paying agent fees incurred, in respect of such Pooled Commercial Paper for such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase facilities which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase facilities funded substantially with Pooled Commercial Paper, minus (v) any payment received on such day net of expenses in respect of Broken Funding Costs related to the prepayment of any Purchaser Interest of Jupiter pursuant to the terms of any receivable purchase facilities funded substantially with Pooled Commercial Paper. In addition to the foregoing costs, if Seller shall request any Incremental Purchase during any period of time determined by the Agent in its sole discretion to result in incrementally higher CP Costs applicable to such Incremental Purchase, the Capital associated with any such Incremental Purchase shall, during such period, be deemed to be funded by Jupiter in a special pool (which may include capital associated with other receivable purchase facilities) for purposes of determining such additional CP Costs applicable only to such special pool and charged each day during such period against such Capital.

“Credit and Collection Policy” means Seller’s credit and collection policies and practices relating to Contracts and Receivables existing on the date hereof and summarized in Exhibit VIII hereto, as modified from time to time in accordance with this Agreement.

“Deemed Collections” means the aggregate of all amounts Seller shall have been deemed to have received as a Collection of a Receivable. Seller shall be deemed to have received a Collection in full of a Receivable if at any time (i) the Outstanding Balance of any such Receivable is either (x) reduced as a result of any defective or rejected goods or services, any discount or any adjustment or otherwise by Seller (other than cash Collections on account of such Receivable) or (y) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (ii) any of the representations or warranties in Article V are no longer true with respect to such Receivable.

“Default Fee” means with respect to any amount due and payable by Seller in respect of any Aggregate Unpaids, an amount equal to the greater of (i) $1000 and (ii) interest on any such unpaid Aggregate Unpaids at a rate per annum equal to 2% above the Base Rate.

“Default Proxy Ratio” means, for any Collection Period, a fraction (calculated as a percentage) equal to (i) the sum of (A) the aggregate Outstanding Balance of all Defaulted Receivables as of the last day of such Collection Period plus (B) the aggregate Outstanding Balance of all Receivables (other than Defaulted Receivables) that became Charged-Off Receivables during such Collection Period, divided by (ii) the aggregate Outstanding Balance of all Receivables generated during the Collection Period which is four (4) Collection Periods prior to such Collection Period.

“Default Trigger Ratio” has the meaning assigned to the term “Default Proxy Ratio”.

“Defaulted Receivable” means a Receivable as to which any payment or part thereof remains unpaid for ninety-one (91) days or more from the original due date for such payment.

“Defaulting Financial Institution” has the meaning set forth in Section 13.5.

“Delinquency Trigger Ratio” means, at any time, a percentage equal to (i) the aggregate Outstanding Balance of all Receivables that at such time remain unpaid for sixty (60) days or more but not more than ninety (90) days from the original due date for such payment divided by (ii) the aggregate Outstanding Balance of all Receivables that are not Defaulted Receivables at such time.

“Delinquent Receivable” means a Receivable as to which any payment, or part thereof, remains unpaid for sixty-one (61) days or more from the original due date for such payment.

“Designated Obligor” means an Obligor indicated by the Agent to Seller in writing.

“Dilution Ratio” means, at any time, a percentage equal to (i) the aggregate amount of Dilutions which occurred during the Collection Period then most recently ended, divided by (ii) the aggregate Outstanding Balance of all Receivables generated during the Collection Period which is two (2) Collection Periods prior to the Collection Period then most recently ended.

“Dilution Reserve” means, on any date, an amount equal to (i) the greater of (a) two percent (2.0%) and (b) the Dilution Reserve Ratio then in effect, multiplied by (ii) the Outstanding Balance of all Eligible Receivables as of the close of business of the Servicer on such date.

“Dilution Reserve Ratio” means, as of any date, an amount calculated as follows:

DRR = [(2.0 x ADR) + [(HDR-ADR) x (HDR/ADR)]] x DHR

where:

DRR = the Dilution Reserve Ratio;

ADR = the average of the Dilution Ratios for the past twelve Collection Periods;

HDR = the highest three-month average of the Dilution Ratios during the most recent

twelve Collection Periods; and

DHR = the aggregate of all Receivables generated during the two Collection Periods

immediately preceding such date divided by the aggregate Outstanding Balance

of total non-Delinquent Receivables as at the last day of the most recently ended

Collection Period.

“Dilution Trigger Ratio” has the meaning assigned to the term “Dilution Ratio”.

“Dilutions” means, at any time, the aggregate amount of reductions or cancellations described in clause (i) of the definition of “Deemed Collections”.

“Discount Rate” means, the LIBO Rate or the Base Rate, as applicable, with respect to each Purchaser Interest of the Financial Institutions.

“Eligible Receivable” means, at any time, a Receivable:

	(i) the Obligor of which (a) if a natural person, is a resident of the United States or, if a corporation or other business organization, is organized under the laws of the United States or any political subdivision thereof and has its chief executive office in the United States; (b) is not an Affiliate of any of the parties hereto; and (c) is not a Designated Obligor;

	(ii) the Obligor of which is not the United States or a governmental subdivision or agency of the United States to the extent that the Receivables of such Obligors in the aggregate constitute more than four percent (4.0%) of the Outstanding Balance of all Eligible Receivables;

	(iii) the Obligor of which is not the Obligor of any Defaulted Receivable which in the aggregate constitutes more than twenty-five percent (25%) of the Outstanding Balance of all Receivables of such Obligor,

	(iv) which is not a Charged-Off Receivable or a Delinquent Receivable,

	(v) (a) which by its terms is due and payable within thirty (30) days of the original billing date therefor and has not had its payment terms extended, and (b) to the extent that the stated term of which, if any, is greater than 30 days and less than 61 days, such Receivables shall constitute no more than five percent (5.0%) of the aggregate Outstanding Balance of all Eligible Receivables;

	(vi) which is an “account” within the meaning of 9102(a)(2) of the UCC of all applicable jurisdictions,

	(vii) which is denominated and payable only in United States dollars in the United States,

	(viii) which arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms subject to no offset, counterclaim or other defense,

	(ix) which arises under a Contract which (A) does not require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights and duties of Parent Originator or any of its assignees under such Contract and (B) does not contain a confidentiality provision that purports to restrict the ability of any Purchaser to exercise its rights under this Agreement, including, without limitation, its right to review the Contract,

	(x) which arises under a Contract that contains an obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of services by Parent Originator,

	(xi) which, together with the Contract related thereto, does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation,

	(xii) which satisfies all applicable requirements of the Credit and Collection Policy,

	(xiii) which was generated in the ordinary course of Parent Originator’s business,

	(xiv) which arises solely from the sale of goods or the provision of services to the related Obligor by Parent Originator, and not by any other Person (in whole or in part),

	(xv) as to which the Agent has not notified Seller that the Agent has determined that such Receivable or class of Receivables is not acceptable as an Eligible Receivable, including, without limitation, because such Receivable arises under a Contract that is not acceptable to the Agent,

	(xvi) which is not subject to any right of rescission, set‑off, counterclaim, any other defense (including defenses arising out of violations of usury laws) of the applicable Obligor against any Originator or any other Adverse Claim, and the Obligor thereon holds no right as against any Originator to cause such Originator to repurchase the goods or merchandise the sale of which shall have given rise to such Receivable (except with respect to sale discounts effected pursuant to the Contract, or defective goods returned in accordance with the terms of the Contract),

	(xvii) as to which Parent Originator has satisfied and fully performed all obligations on its part with respect to such Receivable required to be fulfilled by it, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor,

	(xviii) all right, title and interest to and in which has been validly transferred by Parent Originator directly to Selling Subsidiary under and in accordance with the Parent Sale Agreement, and by Selling Subsidiary to Seller under and in accordance with the SMC Sale Agreement, and Seller has good and marketable title thereto free and clear of any Adverse Claim, and

	(xix) which arises under a Contract which represents all or part of the sale price of merchandise, insurance and services within the meaning of the Investment Company Act of 1940, Section 3(c)(5), as amended.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Facility Account” means Seller’s Account No. 55-36642 at Bank One.

“Facility Termination Date” means the earlier of (i) the fifth anniversary of the date hereof, (ii) the Liquidity Termination Date and (iii) the Amortization Date.

“Federal Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as amended and any successor statute thereto.

“Federal Funds Effective Rate” means, for any period, a fluctuating interest rate per annum for each day during such period equal to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:30 a.m. (Chicago time) for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” means that certain letter agreement dated as of the date hereof among Seller, Parent Originator and the Agent, as it may be amended or modified and in effect from time to time.

“Finance Charges” means, with respect to a Contract, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Contract.

“Financial Institutions” has the meaning set forth in the preamble in this Agreement.

“Financing Notice” has the meaning set forth in Section 1.2.

“Funding Agreement” means this Agreement and any agreement or instrument executed by any Funding Source with or for the benefit of Jupiter.

“Funding Source” means (i) any Financial Institution or (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to Jupiter.

“GAAP” means generally accepted accounting principles in effect in the United States of America as of the date of this Agreement.

“Incremental Purchase” means a purchase of one or more Purchaser Interests which increases the total outstanding Aggregate Capital hereunder.

“Indebtedness” of a Person means such Person’s (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA.

“Independent Director” shall mean a member of the Board of Directors of Seller who is not at such time, and has not been at any time during the preceding five (5) years, (A) a director, officer, employee or affiliate of Seller (other than as an Independent Director hereunder), any Originator, or any of their respective Subsidiaries or Affiliates, or (B) the beneficial owner (at the time of such individual’s appointment as an Independent Director or at any time thereafter while serving as an Independent Director) of any of the outstanding common shares of Seller, Originators, or any of their respective Subsidiaries or Affiliates, having general voting rights.

“Jupiter” has the meaning set forth in the preamble to this Agreement.

“Jupiter Residual” means the sum of the Jupiter Transfer Price Reductions.

“Jupiter Transfer Price” means, with respect to the assignment by Jupiter of one or more Purchaser Interests to the Agent for the benefit of one or more of the Financial Institutions pursuant to Section 13.1, the sum of (i) the lesser of (a) the Capital of each such Purchaser Interest and (b) the Adjusted Funded Amount of each such Purchaser Interest and (ii) all accrued and unpaid CP Costs for each such Purchaser Interest.

“Jupiter Transfer Price Deficit” has the meaning set forth in Section 13.5.

“Jupiter Transfer Price Reduction” means in connection with the assignment of a Purchaser Interest by Jupiter to the Agent for the benefit of the Financial Institutions, the positive difference (if any) between (i) the Capital of such Purchaser Interest and (ii) the Adjusted Funded Amount for such Purchaser Interest.

“LIBO Rate” means the rate per annum equal to the sum of (i) (a) the applicable British Bankers’ Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of the relevant Tranche Period, and having a maturity equal to such Tranche Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable LIBO Rate for the relevant Tranche Period shall instead be the applicable British Bankers’ Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Tranche Period, and having a maturity equal to such Tranche Period, and (ii) if no such British Bankers’ Association Interest Settlement Rate is available to the Agent, the applicable LIBO Rate for the relevant Tranche Period shall instead be the rate determined by the Agent to be the rate at which Bank One offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Tranche Period, in the approximate amount to be funded at the LIBO Rate and having a maturity equal to such Tranche Period, divided by (b) one minus the maximum aggregate reserve requirement (including all basic, supplemental, marginal or other reserves) which is imposed against the Agent in respect of Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time (expressed as a decimal), applicable to such Tranche Period plus (ii) 2% per annum. The LIBO Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.

“Liquidity Termination Date” means 364 days after the date hereof.

“Lock-Box” means each locked postal box with respect to which a bank who has executed a Collection Account Agreement has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and which is listed on Exhibit IV.

“Loss Reserve” means, on any date of determination, an amount equal to (x) the greater of (i) twelve percent (12.0%) and (ii) the Loss Reserve Ratio then in effect multiplied by (y) the Outstanding Balance of all Eligible Receivables as of the close of business of the Servicer on such date.

“Loss Reserve Ratio” means, as of any date, an amount calculated as follows:

LRR = 2.0 X DPR X LHR, where

LRR = Loss Reserve Ratio;

DPR = the highest average Default Proxy Ratio for any three consecutive Collection

Periods during the twelve (12) Collection Periods immediately preceding such

date;

LHR = the aggregate Outstanding Balance of all Receivables generated during the three

(3) most recently ended Collection Periods divided by the aggregate Outstanding

Balance of total non-Delinquent Receivables as at the last day of the most

recently ended Collection Period.

“Material Adverse Effect” means a material adverse effect on (i) the financial condition or operations of Parent Originator and its Subsidiaries as a whole, Servicer and its Subsidiaries as a whole, or Parent Originator, Servicer or any Material Subsidiary, (ii) the ability of any Seller Party or Originator to perform its obligations under this Agreement or any Transaction Document, (iii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iv) any Purchaser’s interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables.

“Material Subsidiary” means, as of any date of determination, (i) any Subsidiary of Parent Originator (whether now existing or hereafter established or acquired) that has total assets equal to or in excess of ten percent (10.0%) of the consolidated total assets of Servicer and its Subsidiaries as of the last day of the most recent fiscal quarter and (ii) SMC.

“Monthly Report” means a report, in substantially the form of Exhibit IX hereto (appropriately completed), furnished by the Servicer to the Agent pursuant to Section 8.5.

“Net Receivables Balance” means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by the aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Concentration Limit for such Obligor.

“Net Worth” means, with respect to any Person, the excess of assets over liabilities.

“Non-Defaulting Financial Institution” has the meaning set forth in Section 13.5.

“Non-Renewing Financial Institution” has the meaning set forth in Section 13.6(a).

“Obligations” shall have the meaning set forth in Section 2.1.

“Obligor” means a Person obligated to make payments pursuant to a Contract.

“Originators” mean the Parent Originator and the Selling Subsidiary.

“Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof.

“Parent Originator” means Syncor, in its capacity as seller under the Parent Sale Agreement.

“Parent Sale Agreement” means that certain Receivables Sale Agreement dated as of January 4, 2002, between Parent Originator as seller and Selling Subsidiary as buyer, as amended, restated, supplemented or otherwise modified from time to time.

“Participant” has the meaning set forth in Section 12.2.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Pooled Commercial Paper” means Commercial Paper notes of Jupiter subject to any particular pooling arrangement by Jupiter, but excluding Commercial Paper issued by Jupiter for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by Jupiter.

“Potential Amortization Event” means an event which, with the passage of time or the giving of notice, or both, would constitute an Amortization Event.

“Proposed Reduction Date” has the meaning set forth in Section 1.3.

“Pro Rata Share” means, for each Financial Institution, a percentage equal to (i) the Commitment of such Financial Institution, divided by (ii) the aggregate amount of all Commitments of all Financial Institutions hereunder, adjusted as necessary to give effect to the application of the terms of Sections 13.5 or 13.6.

“Purchase Limit” means $65,000,000.

“Purchase Price” means, with respect to any Incremental Purchase of a Purchaser Interest, the amount paid to Seller for such Purchaser Interest which shall not exceed the least of (i) the amount requested by Seller in the applicable Financing Notice, (ii) the unused portion of the Purchase Limit on the applicable purchase date and (iii) the excess, if any, of the Net Receivables Balance (less the Aggregate Reserves) on the applicable purchase date over the aggregate outstanding amount of Aggregate Capital determined as of the date of the most recent Monthly Report, taking into account such proposed Incremental Purchase.

“Purchasers” has the meaning set forth in the preamble of the Agreement.

“Purchaser Interest” means, at any time, an undivided percentage ownership interest (computed as set forth below) associated with a designated amount of Capital, selected pursuant to the terms and conditions hereof in (i) each Receivable arising prior to the time of the most recent computation or recomputation of such undivided interest, (ii) all Related Security with respect to each such Receivable, and (iii) all Collections with respect to, and other proceeds of, each such Receivable. Each such undivided percentage interest shall equal:

- -----------------------

NRB - AR

where:

C = the Capital of such Purchaser Interest.

AR = the Aggregate Reserves.

NRB = the Net Receivables Balance.

Such undivided percentage ownership interest shall be initially computed on its date of purchase. Thereafter, until the Amortization Date, each Purchaser Interest shall be automatically recomputed (or deemed to be recomputed) on each day prior to the Amortization Date. The variable percentage represented by any Purchaser Interest as computed (or deemed recomputed) as of the close of the business day immediately preceding the Amortization Date shall remain constant at all times thereafter.

“Purchasing Financial Institution” has the meaning set forth in Section 12.1(b).

“Receivable” means all indebtedness and other obligations owed to Seller or any Originator (at the time it arises, and before giving effect to any transfer or conveyance under the Receivables Sale Agreements or hereunder) or in which Seller or any Originator has a security interest or other interest, including, without limitation, any indebtedness, obligation or interest constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by Parent Originator, and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. “Receivable” shall not include any obligations owed to Seller or any Originator with respect to sublicense fees. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; provided further, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or Seller treats such indebtedness, rights or obligations as a separate payment obligation.

“Receivables Sale Agreements” mean the SMC Sale Agreement and the Parent Sale Agreement.

“Records” means, with respect to any Receivable, all Contracts and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable, any Related Security therefor and the related Obligor.

“Reduction Notice” has the meaning set forth in Section 1.3.

“Reduction Percentage” means, for any Purchaser Interest acquired by the Financial Institutions from Jupiter for less than the Capital of such Purchaser Interest, a percentage equal to a fraction the numerator of which is the Jupiter Transfer Price Reduction for such Purchaser Interest and the denominator of which is the Capital of such Purchaser Interest.

“Regulatory Change” has the meaning set forth in Section 10.2(a).

“Reinvestment” has the meaning set forth in Section 2.2.

“Related Security” means, (A) with respect to any Receivable:

	(i) all of Seller’s interest in the inventory and goods (including returned or repossessed inventory or goods), if any, the sale, financing or lease of which by Parent Originator gave rise to such Receivable, and all insurance contracts with respect thereto,

	(ii) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable,

	(iii) all guaranties, letters of credit, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise,

	(iv) all service contracts and other contracts and agreements associated with such Receivable,

	(v) all Records related to such Receivable,

	(vi) all Collection Accounts,

(B) all of Seller’s right, title and interest in, to and under the Receivables Sale Agreements, and

“Required Financial Institutions” means, at any time, Financial Institutions with Commitments in excess of 66-2/3% of the Purchase Limit.

“Required Notice Period” means two Business Days:

“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of Seller now or hereafter outstanding, except a dividend payable solely in shares of that class of stock or in any junior class of stock of Seller, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of Seller now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to the Subordinated Loans, (iv) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock of Seller now or hereafter outstanding, and (v) any payment of management fees by Seller (except for reasonable management fees to any Originator or its Affiliates in reimbursement of actual management services performed).

“Seller” has the meaning set forth in the preamble to this Agreement.

“Seller Interest” means, at any time, an undivided percentage ownership interest of Seller in the Receivables, Related Security and all Collections with respect thereto equal to (i) one, minus (ii) the aggregate of the Purchaser Interests.

“Seller Parties” has the meaning set forth in the preamble to this Agreement.

“Selling Subsidiary” means SMC, in its capacity as seller under the SMC Sale Agreement.

“Servicer” means at any time the Person (which may be the Agent) then authorized pursuant to Article VIII to service, administer and collect Receivables.

“Servicer and Yield Reserve” means, on any date, an amount equal to two percent (2.0%) multiplied by the Outstanding Balance of all Eligible Receivables as of the close of business of the Servicer on such date.

“Servicing Fee” has the meaning set forth in Section 8.6.

“Settlement Date” means (A) the eighteenth (18^th) day at each month, and (B) the last day of the relevant Tranche Period in respect of each Purchaser Interest of the Financial Institutions.

“Settlement Period” means (A) in respect of each Purchaser Interest of Jupiter, the immediately preceding Accrual Period, and (B) in respect of each Purchaser Interest of the Financial Institutions, the entire Tranche Period of such Purchaser Interest.

“SFC Collateral” has the meaning set forth in Section 14.14(b).

“SMC” has the meaning set forth in the preamble to this Agreement.

“SMC Sale Agreement” means that certain Receivables Sale Agreement dated as of January 4, 2002 between Selling Subsidiary as seller and Seller as buyer, as amended, restated, supplemented or otherwise modified from time to time.

“Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of Seller.

“Termination Date” has the meaning set forth in Section 2.2.

“Termination Percentage” has the meaning set forth in Section 2.2.

“Terminating Financial Institution” has the meaning set forth in Section 13.6(a).

“Terminating Tranche” has the meaning set forth in Section 4.3(b).

“Tranche Period” means, with respect to any Purchaser Interest held by a Financial Institution:

(a) if Yield for such Purchaser Interest is calculated on the basis of the LIBO Rate, a period of one, two, three or six months, or such other period as may be mutually agreeable to the Agent and Seller, commencing on a Business Day selected by Seller or the Agent pursuant to this Agreement. Such Tranche Period shall end on the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such Tranche Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Tranche Period shall end on the last Business Day of such succeeding month; or

(b) if Yield for such Purchaser Interest is calculated on the basis of the Base Rate, a period commencing on a Business Day selected by Seller and agreed to by the Agent, provided no such period shall exceed one month.

If any Tranche Period would end on a day which is not a Business Day, such Tranche Period shall end on the next succeeding Business Day, provided, however, that in the case of Tranche Periods corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month, such Tranche Period shall end on the immediately preceding Business Day. In the case of any Tranche Period for any Purchaser Interest which commences before the Amortization Date and would otherwise end on a date occurring after the Amortization Date, such Tranche Period shall end on the Amortization Date. The duration of each Tranche Period which commences after the Amortization Date shall be of such duration as selected by the Agent.

“Transaction Documents” means, collectively, this Agreement, each Financing Notice, the Receivables Sale Agreements, each Collection Account Agreement, each Monthly Report, the Fee Letter, the Subordinated Note (as defined in the SMC Sale Agreement) and all other instruments, documents and agreements executed and delivered in connection herewith.

“UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“Unconditional Liquidity Provider” means a Financial Institution that is identified by the Agent or by Bank One as an entity which will not under any circumstance receive any Jupiter Transfer Price Reduction hereunder.

“Yield” means for each respective Tranche Period relating to Purchaser Interests of the Financial Institutions, an amount equal to the product of the applicable Discount Rate for each Purchaser Interest multiplied by the Capital of such Purchaser Interest for each day elapsed during such Tranche Period, annualized on a 360 day basis.

All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in such Article 9.

EX-21 6 exhib21.htm SUBSIDIARIES OF THE REGISTRANT Exhibit 21

Exhibit 21

Subsidiaries of the Registrant

			State or Country
	Name of Subsidiary		of Organization

	Syncor Management Corporation		Delaware
	Comprehensive Medical Imaging, Inc.		Delaware
	Comprehensive Medical Imaging Centers, Inc.		Delaware
	Syncor Overseas Ltd.		British Virgin Islands

EX-23 7 exhib23.htm INDEPENDENT AUDITORS' CONSENT Exhibit 23

Exhibit 23

Independent Auditors’ Consent

The Board of Directors
Syncor International Corporation:

We consent to incorporation by reference in the registration statements (No. 33-7325, 33-39251, 33-57762, 33-52607, 333-18373, 333-18375, 333-18377, 333-39999, 333-40117, 333-62091, 333-62093, 333-68277, 333-78681, 333-45312 and 333-45310) on Form S-8 of Syncor International Corporation and subsidiaries of our report dated February 15, 2002, relating to the consolidated balance sheets of Syncor International Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2001, and related schedule, which report appears in the December 31, 2001 annual report on Form 10-K of Syncor International Corporation.

/s/ KPMG LLP

Los Angeles, California
March 30, 2002

PART I

PART II

PART IV

Comprehensive Income

Common Stock

2001 UNREALIZED

2000 UNREALIZED