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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1997
Commission File Number 000-21157
C O M P U R A D, I N C.
(Exact name of small business issuer as specified in its charter)
Delaware 86-0710268
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1350 North Kolb
Tucson, Arizona 85715
(Address of principal executive offices)
(520) 298-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At August 6, 1997 there were 3,860,710 shares, $.01 par value, outstanding.
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COMPURAD, INC.
FORM 10-QSB
TABLE OF CONTENTS
Part I. - FINANCIAL INFORMATION
Page
Item 1. FINANCIAL STATEMENTS
Condensed Balance Sheets - June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations - Three Months and Six Months
Ended June 30, 1997 and June 30, 1996 4
Condensed Statements of Cash Flows - Six Months
Ended June 30, 1997 and June 30, 1996 5
Notes to Condensed Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
Part II. - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 17
Item 2. CHANGES IN SECURITIES 17
Item 3. DEFAULTS UPON SENIOR SECURITIES 17
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 17
Item 5. OTHER INFORMATION 17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 19
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COMPURAD, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,702,469 $ 4,051,968
Accounts receivable, net of $140,000 and $80,000 allowance at June
30, 1997 and December 31, 1996, respectively 2,735,566 1,423,910
Inventories 659,720 313,724
Prepaid expenses and other 196,523 75,789
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Total current assets 5,294,278 5,865,391
Property and equipment, net 654,697 538,018
----------- -----------
Total assets $ 5,948,975 $ 6,403,409
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 872,783 $ 558,290
Accrued expenses 331,942 456,428
Customer deposits and unearned revenue 359,803 227,329
----------- -----------
Total current liabilities 1,564,528 1,242,047
Note payable to related party 121,935 117,969
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares
issued or outstanding at June 30, 1997 and December 31,
1996, respectively -- --
Common stock, $.01 par value; 20,000,000 shares authorized, 3,860,710
and 3,857,260 shares issued and outstanding at June 30, 1997 and
December 31, 1996, respectively 6,551,972 6,551,967
Paid in capital--stock-based compensation and expenses 473,500 467,500
Accumulated deficit (2,762,960) (1,976,074)
----------- -----------
Total stockholders' equity 4,262,512 5,043,393
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Total liabilities and stockholders' equity $ 5,948,975 $ 6,403,409
=========== ===========
</TABLE>
See accompanying notes.
3
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COMPURAD, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Net revenues $ 2,238,951 $ 2,044,018 $ 4,682,420 $ 3,180,345
Cost of revenues 1,265,300 1,201,982 2,458,621 1,879,181
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Gross profit 973,651 842,036 2,223,799 1,301,164
Operating expenses:
Selling and marketing 611,292 250,758 1,111,836 440,828
Research and development 541,007 301,555 1,074,961 498,975
General and administrative 489,633 221,512 880,391 353,556
Stock-based compensation and expenses 3,000 199,500 6,000 361,500
--------------------------------------------------------------------
Loss from operations (671,281) (131,289) (849,389) (353,695)
Other income (expense) 17,915 (2,836) 62,503 (7,211)
--------------------------------------------------------------------
Net loss $ (653,366) $ (134,125) $ (786,886) $ (360,906)
====================================================================
Net loss per common share $ (0.17) $ (0.05) $ (0.20) $ (0.14)
====================================================================
Shares used in computing net loss per common share 3,860,075 2,610,323 3,858,980 2,605,406
====================================================================
</TABLE>
See accompanying notes.
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COMPURAD, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
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1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (786,886) $(360,906)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 113,990 25,270
Stock-based compensation and expenses 6,000 361,500
Provision for bad debt 60,000 --
Changes in operating assets and liabilities:
Accounts receivable (1,371,656) (549,939)
Inventories (345,996) 79,303
Prepaid expenses and other (120,734) (877)
Accounts payable and accrued expenses 193,973 250,312
Customer deposits and unearned revenue 132,474 13,133
----------------------------
Net cash used in operating activities (2,118,835) (182,204)
----------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (230,669) (26,542)
----------------------------
Net cash used in investing activities (230,669) (26,542)
----------------------------
FINANCING ACTIVITIES:
Proceeds from note payable -- 250,000
Principal payments on note payable -- (1,545)
Proceeds from issuance of common stock 5 16,044
----------------------------
Net cash provided by financing activities 5 264,499
----------------------------
Net increase (decrease) in cash and cash equivalents (2,349,499) 55,753
Cash and cash equivalents, beginning of period 4,051,968 36,024
----------------------------
Cash and cash equivalents, end of period $ 1,702,469 $ 91,777
============================
</TABLE>
See accompanying notes.
5
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COMPURAD, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of CompuRAD, Inc. (the
"Company" or "CompuRAD") presented herein have been prepared in accordance with
generally accepted accounting principles for interim financial information,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, such unaudited interim information reflect all
adjustments, consisting of normal recurring adjustments, necessary to present
the Company's financial position and results of operations for the periods
presented. The results of operations for the three months and six months ended
June 30, 1997 are not necessarily indicative of the results to be expected for a
full fiscal year or future operating periods. The Condensed Balance Sheet as of
December 31, 1996 was derived from audited financial statements as of that date
but does not include all of the information and footnotes required by generally
accepted accounting principles. The information included in this report should
be read in conjunction with the Company's audited financial statements for the
year ended December 31, 1996, which are contained in the Company's 1996 Form
10-KSB, filed with the Securities and Exchange Commission.
2. SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The Company develops, manufactures, and markets
computer software which captures, stores, distributes, and displays electronic
medical images and other types of clinical information and distributes this
information: (i) between hospitals and physicians' offices and homes; (ii)
between clinicians and healthcare delivery systems; and (iii) between various
departments within hospitals and clinics. The Company currently operates
primarily in North America and in only one business segment, the medical
software industry.
Inventories: The Company values its inventories at the lower of cost or market.
Cost is computed on a first-in, first-out basis. Substantially all inventories
are comprised of finished computer hardware goods purchased from computer
manufacturers. The Company does not modify any such computer hardware, but
integrates its software into the customer's ordered system.
Software Development Costs: Under Statement of Financial Accounting Standards
No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed, once technological feasibility is established related to
software development costs for new products or for enhancements to existing
products which extend the product's useful life, such costs are capitalized up
until the time the product or enhancement is available for release to customers,
after which the capitalized costs are amortized over the estimated life of the
products.
Income Taxes: The Company was a subchapter S-corporation for income tax purposes
until August 28, 1996 (the date of the Company's initial public offering). At
the date of the offering, deferred taxes were established for the difference in
the financial reporting and tax basis of the Company's assets and liabilities.
The Company's deferred tax assets at June 30, 1997 and December 31, 1996
approximate $640,000 and $322,000, respectively. The deferred tax assets at each
such date were fully offset by a valuation allowance due to uncertainties
regarding recoverability.
Revenue Recognition: Revenue from the sale of hardware and software is
recognized when the product has been shipped. Related costs of installation are
not significant and are accrued upon shipment. Revenue from maintenance,
service, and support agreements is recognized over the term of the agreement,
which in most instances is one year. Revenue from post-contract customer support
is recognized in the period the customer support services are provided. At the
request of certain customers, the Company acquires computer hardware for
purposes of configuration with its software products. The Company expects that
this service of acquiring hardware for resale will be phased out in the next
several years.
Loss per Common Share: Loss per common share is computed using the weighted
average number of shares of common stock outstanding, except as noted below.
Common equivalent shares from stock options are excluded from the computation
when their effect is antidilutive, except that, pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins and Staff Policy, common shares,
warrants, and options issued during the period commencing 12
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months prior to the initial filing of the initial public offering at prices
below the anticipated public offering price are presumed to have been in
contemplation of the public offering and have been included in the calculation
as if they were outstanding for all periods presented prior to the initial
public offering determined using the treasury stock method.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share ("SFAS No. 128"),
which is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. Due to the Company's net losses for the three months and six
months ended June 30, 1997 and 1996, the impact of SFAS No. 128 will not be
material.
3. COMMON STOCK
On August 28, 1996, the Company completed an initial public offering (the
"Offering"), selling 1,000,000 shares of common stock at $6.00 per share. The
net proceeds to the Company were $5,130,000 after payment of underwriting
discounts and offering expenses. In conjunction with the Offering, the Company
effected a 150-for-1 stock split. All share and per share amounts have been
retroactively adjusted to reflect the stock split. On October 1, 1996 the
Company's underwriters exercised their overallotment option. The underwriters
purchased an additional 150,000 shares of Common Stock from the Company,
resulting in additional net proceeds of $837,000 to the Company after payment of
underwriting discounts and offering expenses.
4. RELATED PARTY TRANSACTIONS
The Company's president, was, and certain of the Company's stockholders are,
stockholders of Arizona State Radiology, P.C. ("ASR"). Certain technology was
transferred to the Company at its inception by ASR. The terms and amount to be
paid to ASR for such technology were subject to negotiations between the
parties, which were finalized in July 1996. The final settlement, which is
reflected in the accompanying condensed financial statements as if it had
occurred on January 1, 1993, called for the Company to pay ASR a settlement
consisting of common stock, a note payable ($121,935 and $117,969 at June 30,
1997 and December 31, 1996, respectively), and a deferred payment of $541,676
due either in cash or stock. The technology was valued at $610,000, based on the
value of consideration given, and was amortized over a three year period
beginning January 1, 1993. The technology is fully amortized on the accompanying
condensed balance sheets. The Company issued 93,480 shares of stock to ASR in
November 1996 in compensation of the deferred payment. Subsequently, ASR
requested mediation with the Company related to the number of shares tendered.
Should mediation be unsuccessful, ASR could file litigation against the Company.
While the outcome of such litigation is uncertain, the Company believes it has
meritorious defenses to the claims and intends to conduct a vigorous defense.
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COMPURAD, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IMPORTANT NOTE ABOUT FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-QSB contains forward looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Predictions of future events
are inherently uncertain. Actual events could differ materially from those
predicted in the forward looking statements as a result of the risks set forth
in the following discussion, and in particular, the risks discussed below under
the caption "Risk Factors that Could Effect Operating Results." Readers are also
encouraged to refer to the Company's 1996 Form 10-KSB for a further discussion
of the Company's business and the risks and opportunities attendant thereto.
GENERAL
CompuRAD, Inc. is a leading provider of software that enables
healthcare clinicians to access medical images and clinical information at any
point of care. The Company pioneered the use of personal computer software in
the point-to-point, on call teleradiology market, with the introduction of its
PC Teleradiology product. In response to the increasing acceptance of
teleradiology and increasing demand for multi-user and multi-access off-site
teleradiology systems, the Company introduced its iNET product line in late
1994. The Company has entered the larger clinical information market with its
release of ClinicalWare in the first quarter of 1997. ClinicalWare is an
Internet/Intranet software solution which provides enterprise-wide, secure
electronic access through a Web browser to clinical information systems at any
point of care.
On July 30, 1997 CompuRAD acquired technology from Star Technologies,
Inc., a Delaware corporation, ("Star"). The technology acquired includes a DICOM
archive, formerly known as Image Management Server ("IMS"). Management believes
that this acquisition complements and extends the Company's existing iNETPro and
iVIEWPro DICOM image product lines allowing the Company to offer a
comprehensive, top-to-bottom, medical image networking solution to a wider
spectrum of customers. The product, which has received 510(k) clearance, will be
marketed by CompuRAD under the brand name iSTORE and is configurable for shelf
storage management as well as multi-terabyte, robotic archival of medical images
on jukeboxes of magneto-optical disks or digital linear tape.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH
THREE MONTHS ENDED JUNE 30, 1996
Net Revenues
Net revenues for the three months ended June 30, 1997 were $2.2
million, compared with $2.0 million for the three months ended June 30, 1996,
reflecting an increase of 9.5%. Hardware sales, software licenses and
maintenance and support services accounted for 45.5%, 42.4% and 12.1%,
respectively, of net revenues for the 1997 period and 44.6%, 48.4% and 7.0%,
respectively, for the 1996 period. The overall increase in revenues was
attributable to a substantial increase in revenues from sales of iNET software,
partially offset by a decrease in revenues from sales of the Company's PC
Teleradiology products. One customer represented 18.5% and 21.9% of net revenues
for the three months ended June 30, 1997 and 1996, respectively. No other
customer accounted for more than 10% of net revenues in either period.
Gross Margin
Gross margin increased to 43.5% for the three months ended June 30,
1997 from 41.2% for the three months ended June 30, 1996. This increase in gross
margin was attributable to the relative mix of higher margin direct, OEM and
channel software sales. Cost of hardware sales for the three months ended June
30, 1997 was $1.0 million and for the three months ended June 30, 1996 was
$855,000. Cost of software licenses for the three months ended June 30, 1997 was
$143,000 and for the three months ended June 30, 1996 was $239,000. Cost of
maintenance and support services for the three months ended June 30, 1997 was
$122,000 and for the three months ended June 30, 1996 was $108,000.
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Selling and Marketing Expense
Selling and marketing expense for the three months ended June 30, 1997
was $611,000, or 27.3% of net revenues, compared with $251,000 or 12.3% of net
revenues, for the three months ended June 30, 1996, an increase of 143.8%. This
increase was attributable primarily to increases in compensation associated with
a larger sales force and greater advertising and marketing expenses.
Research and Development Expense
Research and development expense for the three months ended June 30,
1997 was $541,000, or 24.2% of net revenues, compared with $302,000, or 14.8% of
net revenues, for the three months ended June 30, 1996, an increase of 79.4%.
This increase was attributable primarily to the Company's hiring and contracting
additional research and development staff.
General and Administrative Expense
General and administrative expense for the three months ended June 30,
1997 was $490,000, or 21.9% of net revenues, compared with $222,000, or 10.8% of
net revenues, for the three months ended June 30, 1996, reflecting an increase
of 121.0%. This increase was attributable primarily to the Company's hiring of
additional administrative staff and additional legal and other professional
services.
Stock-Based Compensation and Expenses
Stock-based compensation and expenses are comprised of non-cash charges
primarily associated with the Company's grant of options to purchase 75,000
shares of the Company's Common Stock to the co-signer of the Company's borrowing
from BankOne Arizona, N.A. in May 1996. The difference between the exercise
price for such options and the deemed fair market value of the Company's Common
Stock on the date of grant of $2.50 per share was recognized immediately as a
$187,500 non-cash charge. Total stock-based compensation and expenses for the
three months ended June 30, 1996 were $199,500.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1996
Net Revenues
Net revenues for the six months ended June 30, 1997 were $4.7 million,
compared with $3.2 million for the six months ended June 30, 1996, reflecting an
increase of 47.2%. Of these amounts, hardware sales, software licenses and
maintenance and support services accounted for 45.1%, 46.0% and 8.9%,
respectively, for the 1997 period and 44.9%, 48.0% and 7.1%, respectively, for
the 1996 period. The overall increase in revenues was attributable to a
substantial increase in revenues from sales of iNET software, partially offset
by a decrease in revenues from sales of the Company's PC Teleradiology products,
and initial sales of the Company's ClinicalWare line. One customer represented
24.4% and 22.4% of net revenues for the six months ended June 30, 1997 and 1996,
respectively. No other customer accounted for more than 10% of net revenues in
either period.
Gross Margin
Gross margin increased to 47.5% for the six months ended June 30, 1997
from 40.9% for the six months ended June 30, 1996. This increase in gross margin
was attributable to a continued change in the relative mix of higher margin
direct, OEM and channel software sales. Cost of hardware sales for the six
months ended June 30, 1997 was $2.0 million and for the six months ended June
30, 1996 was $1.3 million. Cost of software licenses for the six months ended
June 30, 1997 was $285,000 and for the six months ended June 30, 1996 was
$374,000. Cost of maintenance and support services for the six months ended June
30, 1997 was $189,000 and for the six months ended June 30, 1996 was $169,000.
Selling and Marketing Expense
Selling and marketing expense for the six months ended June 30, 1997
was $1.1 million, or 23.7% of net revenues, compared with $441,000 or 13.9% of
net revenues, for the six months ended June 30, 1996, an increase of
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152.2%. This increase was attributable primarily to increases in compensation
associated with a larger sales force and greater advertising and marketing
expenses.
Research and Development Expense
Research and development expense for the six months ended June 30, 1997
was $1.1 million, or 23.0% of net revenues, compared with $499,000, or 15.7% of
net revenues, for the six months ended June 30, 1996, an increase of 115.4%.
This increase was attributable primarily to the Company's hiring and contracting
additional research and development staff.
General and Administrative Expense
General and administrative expense for the six months ended June 30,
1997 was $880,000, or 18.8% of net revenues, compared with $354,000, or 11.1% of
net revenues, for the six months ended June 30, 1996, reflecting an increase of
149.0%. This increase was attributable primarily to the Company's hiring of
additional administrative staff and additional legal and other professional
services.
Stock-Based Compensation and Expenses
Stock-based compensation and expenses are comprised of non-cash charges
primarily associated with the Company's grant of options to purchase 75,000
shares of the Company's Common Stock to the co-signer of the Company's borrowing
from BankOne Arizona, N.A. in May 1996 and the Company's issuance of 150,000
shares of the Company's Common Stock to an executive officer of the Company in
March 1996. The difference between the exercise price of such options (or in the
case of the March 1996 issuance, the price paid for such shares) and the deemed
fair market value of the Company's Common Stock on the dates of grant of $2.50
and $1.00 per share, respectively, was recognized immediately as a $337,500
non-cash charge. Total stock-based compensation and expenses for the six months
ended June 30, 1996 were $361,500.
LIQUIDITY AND CAPITAL RESOURCES
Although there are no current capital commitments, the Company expects
its capital needs and operating expenditures to increase in the next few years.
There can be no assurance that the Company will not need additional capital. The
Company's need for additional financing will depend upon numerous factors,
including, but not limited to, the level of future revenues and expenditures,
market acceptance of new products, the results and scope of ongoing research and
development projects, competing technologies, market and regulatory developments
and increased working capital requirements. There can be no assurance that
additional financing will be available when needed or, if available, that it
will be available on acceptable terms. If additional funds are raised by issuing
equity securities, further dilution to then existing stockholders may result and
debt financing, if available, may involve restrictive covenants. If adequate
funds are not available, the Company's business, financial condition and results
of operations could be materially affected.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS
No. 128"), which is required to be adopted on December 31, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating primary earnings per share, the dilutive effect of stock options
will be excluded. Due to the Company's net losses for the three months and six
months ended June 30, 1997 and 1996, the impact of SFAS No. 128 will not be
material.
RISK FACTORS THAT COULD EFFECT OPERATING RESULTS
The Company's future operating results are subject to a number of risks
and uncertainties including those listed below.
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History of Operating Losses; Uncertain Profitability
The Company incurred net losses of approximately $653,000 and $787,000
for the three months and six months ended June 30, 1997 and $134,000 and
$361,000 for the three months and six months ended June 30, 1996, and, as of
June 30, 1997, had an accumulated deficit of $2,763,000. The development and
marketing by the Company of new and existing products will continue to require
substantial product development and other expenditures. The Company's prior
operating history and dependence upon emerging and developing markets and key
personnel, as well as competition, uncertainty in the consolidation of the
healthcare industry, and general economic and other factors make the prediction
of future operating results difficult. There can be no assurance that any of the
Company's business strategies will be successful or that the Company will be
able to achieve consistent revenue growth or achieve profitability on a
quarterly or annual basis.
Variability in Quarterly Operating Results; Seasonality
The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results may fluctuate as
a result of a variety of factors, including the following: demand for the
Company's software, applications and services, including the relative mix of
hardware and software purchased by its customers; the number, timing and
significance of announcements and releases of software enhancements and new
applications by the Company and its competitors; the number, timing and
significance of announcements and releases of hardware and other related
peripherals by third party suppliers; the termination of, or a reduction in,
offerings of the Company's software, applications and services; the loss of
customers due to consolidation in the healthcare industry; delays in delivery
requested by customers or caused by other factors; customer budgeting cycles;
marketing and sales promotional activities; software defects and other system
quality factors; and general economic conditions. In addition, since purchases
of the Company's software generally involve a significant commitment of capital,
any downturn in a potential customer's business or the economy in general,
including changes in the healthcare market, could have a materially adverse
effect on the Company's business, financial condition and results of operations.
Moreover, the Company's operating expense levels are relatively fixed and, to a
large degree, are based on anticipated revenues, therefore, if revenues are
below expectations, net income is likely to be disproportionately effected.
Further, it is likely that in some future quarter the Company's operating
results, including the Company's revenues, gross margins, expenses or backlog,
will be below the expectations of public market analysts and investors. In such
event, the trading price of the Company's Common Stock could be materially
adversely effected.
The Company has historically experienced some seasonality. The Company
believes a number of its customers and potential customers defer making purchase
commitments in the fourth quarter because of budget constraints and the timing
of the Radiological Society of North America trade show and convention in the
fourth quarter. This has had the effect of increasing the level of orders
received by the Company in the first quarter. However, the timing and amount of
large purchase orders from significant customers may decrease the effect of such
seasonality. There can be no assurance that the Company will not experience
seasonality in the future.
Possible Need for Additional Funds; Uncertainty of Additional Financing
The Company expects its capital needs and operating expenditures to
increase in the next few years. There can be no assurance that the Company will
not need additional capital. The Company's need for additional financing will
depend upon numerous factors, including, but not limited to, the level of future
revenues and expenditures, market acceptance of new products, the results and
scope of ongoing research and development projects, competing technologies,
market and regulatory developments and increased working capital requirements.
There can be no assurance that additional financing will be available when
needed or, if available, that it will be available on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
then existing stockholders may result and debt financing, if available, may
involve restrictive covenants. If adequate funds are not available, the
Company's business, financial condition and results of operations could be
materially adversely effected.
Integration of Acquisitions
The Company acquired the IMS archive and Film Image Scan System and
software products from Star in July 1997 for 100,000 shares of the Company's
Common Stock and future royalties on software sales.
The Company intends to continue to evaluate potential acquisitions of,
or investments in, companies which the Company believes will complement or
enhance its existing business. In connection with any future acquisitions or
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strategic investments, the Company may incur debt or issue debt or equity
securities depending on market conditions and other factors. There can be no
assurances that the Company will consummate any acquisition in the future or, if
consummated, that any such acquisition will ultimately be beneficial to the
Company.
The integration of acquired companies is typically difficult, time
consuming and subject to a number of inherent risks. In particular, the success
of acquisitions is often dependent upon the integration and retention of
existing employees. There can be no assurance that employees of an acquired
enterprise will remain with the Company after an acquisition. The success of
acquisitions will also be dependent upon the Company's ability to fully
integrate the management information and accounting systems and procedures of
acquired companies with those of the Company. The Company's management will be
required to devote substantial time and attention to the integration of these
businesses and to any material operational or financial problems which may occur
as a result of the acquisitions. Failure to effectively integrate acquired
businesses could have a material adverse effect on the Company's business,
results of operations and financial condition.
Need to Manage Anticipated Growth in Operations; Dependence Upon Key Personnel
The Company intends to expand its operations which may place a strain
on its management systems and resources. In addition, planned increases in the
number of products sold by the Company and an increased number of distributors
requiring training and support may place additional strains on the Company's
installation and support services requiring the Company to train and manage
additional customer service personnel. There can be no assurance that the
Company will be able to effectively manage these tasks, and the failure to do so
could have a materially adverse effect on the Company's business, financial
condition and results of operations.
The Company's future success also depends to a significant part upon
the continued service of its executive officers and other key sales, marketing,
development and installation employees. The loss of the services of any of its
executive officers or other key employees could have a materially adverse effect
on the Company's business, financial condition and results of operations.
Dependence on Emerging Medical Image Management and Teleradiology Systems
Markets; Uncertainty of Market Acceptance
The Company's success is dependent on the development of the medical
image management and teleradiology systems markets and on market acceptance of
its existing software, as well as software it is currently developing. To date,
substantially all of the Company's revenues have been derived from the sale of
software and related hardware for the teleradiology market. The markets for the
Company's software are still relatively undeveloped and may not grow in the near
future, if at all. In the event that the medical image management and
teleradiology systems markets do not develop as anticipated by the Company, the
Company's business, financial condition and results of operations would be
materially adversely effected.
The commercial success of the Company's software will depend upon its
acceptance by the healthcare community as a useful, cost-effective component of
radiological procedures and healthcare delivery. There can be no assurance that
sales of the Company's software will continue at historical rates or that the
Company will introduce new software products that will achieve significant
market acceptance in the future. Furthermore, new product introductions or
enhancements by the Company's competitors or the use of other technologies could
cause a decline in sales or loss of market acceptance of the Company's software.
In addition, third-party payors, such as governmental programs and private
insurance plans, can indirectly affect the pricing and the relative
attractiveness of the Company's software by regulating the reimbursement that
they will provide for rendering professional and technical radiology services. A
decrease in the amount of reimbursement or elimination of reimbursement for
services using teleradiology may decrease or eliminate the amount which
radiologists and healthcare providers are able to charge parties for such
services and could result in a reduction of the Company's historical customer
base. Additionally, a reduction in reimbursement rates could cause hospitals and
other healthcare providers to decrease the number of radiology procedures
performed, which may slow the adoption of teleradiology and/or Picture Archiving
and Communications Systems ("PACS"), thereby significantly reducing the
potential demand for the Company's software. In the event that the Company's
existing software and software under development do not achieve market
acceptance, the Company's business, financial condition and results of
operations would be materially adversely effected.
12
<PAGE> 13
Consolidation and Uncertainty in the Healthcare Industry
Many healthcare providers are consolidating to create larger healthcare
networks with greater market concentration. Such consolidation could erode the
Company's existing customer base and reduce the size of the Company's target
markets. In addition, the resulting enterprises could have greater bargaining
power, which could lead to price erosion of the Company's software and services.
The reduction in the size of the Company's target market or the failure of the
Company to maintain adequate price levels could have a materially adverse effect
on the Company's business, financial condition and results of operations. The
healthcare industry also is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operation of
healthcare industry participants. During the past several years, the United
States healthcare industry has been subject to an increase in governmental
regulation and reform proposals. These proposed reforms, if adopted, may
increase governmental involvement in healthcare, lower reimbursement rates and
otherwise change the operating environment for the Company's customers.
Healthcare industry participants may react to these proposals and the
uncertainty surrounding such proposals by curtailing or deferring investments,
including those for the Company's software and services. This could have a
materially adverse effect on the Company's business, financial condition and
results of operations.
Long Sales Cycles
The sales cycle for medical image management systems is lengthy. The
sales cycle of the Company's products is subject to delays associated with
changes or the anticipation of changes in the regulatory environment affecting
healthcare enterprises, changes in the customer's strategic system initiatives,
competing information systems projects within the customer organization,
consolidation in the healthcare industry in general, the highly sophisticated
nature of the Company's software and competition in the medical image management
and healthcare information systems markets in general. The time required from
initial contact to purchase order typically ranges from one to six months, and
the time from purchase order to delivery and recognition of revenue typically
ranges from one to six months. During the sales process, the Company expends
substantial time, effort and funds preparing a contract proposal, demonstrating
the software and negotiating the purchase order. For these and other reasons,
the Company cannot predict when or if the sales process with a prospective
customer will result in a purchase order.
Product Liability
The Company's software captures, stores, distributes and displays
clinical information used by clinicians in the diagnosis and treatment of
patients. Any failure by the Company's software to provide accurate, reliable
and timely information, or to adequately protect the confidentiality of the
information, could result in claims against the Company. The Company maintains
insurance to protect against claims associated with the use of its software or
systems, but there can be no assurance that its insurance coverage would
adequately cover any claims asserted against the Company. A successful claim
brought against the Company in excess of its insurance coverage could have a
materially adverse effect on the Company's business, financial condition and
results of operations. Even unsuccessful claims could result in the Company's
expenditure of funds in litigation and diversion of management time and
resources. There can be no assurance that the Company's insurance will cover
such claims, that the Company will not be subject to product liability claims
that will result in liability in excess of its insurance coverage or that
appropriate insurance will continue to be available to the Company in the future
at commercially reasonable rates.
International Sales
To date, the Company's international sales have been insignificant. The
Company intends to increase its marketing efforts in the international markets.
To the extent that international sales become significant, the Company's results
of operations may be subject to the risks inherent in international
transactions, including difficulties in staffing and managing foreign sales
operations, changes in regulatory requirements, exchange rates and tariffs or
other barriers. The Company has limited experience in business operations
outside the United States, and there can be no assurance that the Company's
software will be accepted in international markets or that the Company can
compete successfully in such markets.
Control by Directors, Executive Officers and Affiliated Entities
As of June 30, 1997, the Company's executive officers, directors and
their affiliates beneficially own approximately 42% of the outstanding shares of
the Company's Common Stock. As a result, these stockholders may be able to elect
all of the Company's directors, retain the voting power to approve all matters
requiring stockholder
13
<PAGE> 14
approval, including the acceptance and rejection of any proposals relating to a
merger of the Company or an acquisition of the Company by another entity, and
has significant influence over the affairs of the Company. Such concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of the Company.
Products
Software and systems as complex as those offered by the Company
frequently contain undetected errors or failures when first introduced or when
new versions are released. The Company has in the past discovered bugs and
system errors in certain of its software enhancements, both before and after
initial shipment. There can be no assurance that, despite testing by the
Company, errors will not occur in the Company's products resulting in loss of,
or delay in, market acceptance. Any such loss or delay could have a materially
adverse effect on the Company's business, financial condition and results of
operations. Peripherals and hardware from third party manufacturers may contain
defects and incompatibilities which could adversely effect market acceptance of
the Company's software products.
In addition, the markets for the Company's software are characterized
by rapid technological advances, changes in customer requirements and frequent
new product introductions and enhancements of products, operating systems and
environments. The Company's future success will depend upon its ability to
enhance its current product line, to complete products currently under
development, to develop and introduce new products that keep pace with
technological developments and to respond to evolving customer requirements. Any
failure by the Company to anticipate or respond adequately to technological
developments by its competitors or to changes in customer requirements, or any
significant delays in product development or introduction could have a
materially adverse effect on the Company's business, financial condition and
results of operations. In the past, the Company has occasionally experienced
delays in the development and introduction of new software and software
enhancements, and there can be no assurance that the Company will not experience
such delays in the future. Timeliness of delivery is of critical importance to
certain customers, and the Company's failure to successfully develop and ship
such products in a timely manner could result in cancellation of customer orders
which could have a materially adverse effect on the Company's business,
financial condition and results of operations.
New Product Development; Technological Change
The market for Internet/Intranet-related software designed for use in
healthcare environments is in the early stages of development. Since this market
is new, and because current and future competitors are likely to introduce
competing Internet/Intranet software, it is difficult to predict the rate at
which the market will grow, if at all, or the rate at which new or increased
competition will result in market saturation. The success of ClinicalWare is
highly dependent upon the market acceptance of the Internet/Intranet
technologies for healthcare environments. If the market for such
Internet/Intranet software fails to grow or grows more slowly than anticipated,
the Company's business, financial condition and results of operations would be
materially adversely effected. The Company expects that the sales cycle for
ClinicalWare will be longer than that for its other existing products and that
the price for ClinicalWare will be higher than that for many of the Company's
other current products. Accordingly, the Company's quarterly revenues and
operating results may be subject to greater fluctuation as the Company begins to
market and sell ClinicalWare. Additionally, the Company faces greater challenges
in installing and supporting ClinicalWare because of the complexity of
Internet/Intranet related software and systems. The Company has limited
experience in marketing, installing and supporting Internet/Intranet clinical
information systems, and there can be no assurance that the Company can obtain
the necessary resources to market, install and support ClinicalWare in an
efficient, cost-effective and competitive manner. The failure of ClinicalWare to
achieve market acceptance for any reason could have a materially adverse effect
on the Company's business, financial condition and results of operations.
Customers
CompuRAD presently has licensed its products to hospitals, clinics,
other healthcare facilities and physician groups. The Company's customers
include New York University Medical Center, Alliant Health Systems, Symphony
Mobilex, which is a subsidiary of Integrated Health Services, Inc., and the
Nursing Home Group plus many other leading healthcare facilities and
organizations.
For the three months and six months ended June 30, 1997 and 1996, one
customer, Symphony Mobilex, a subsidiary of Integrated Health Services, Inc.
("Symphony Mobilex"), accounted for 18.5% and 21.9% and 24.4% and 22.4%,
respectively, of the Company's revenues. The Company has agreements with OEMs
and some of these agreements require OEMs to purchase a minimum amount of the
Company's products each year. A significant reduction
14
<PAGE> 15
in sales volume attributable to the loss of any of the Company's customers,
losses arising from customer disputes regarding shipments or license,
installation and service fees or the Company's inability to collect accounts
receivable from any major customer could have a materially adverse effect on the
Company's business, financial condition and results of operations.
To date, sales of the Company's teleradiology products, including PC
Teleradiology and its successor iNET, accounted for a substantial majority of
its revenues. Sales of the iNET product line could decline for a number of
reasons including consolidation in the healthcare market and changes in
government regulation that reduce or eliminate reimbursement for teleradiology
services. If sales of the Company's iNET product line decline for any reason,
the Company's business, financial condition and results of operations would be
materially adversely effected.
Competition
The Company believes that the principal competitive factors for
selecting medical image management software and systems are the reputation and
market position of the vendor and the price, reliability, ease of use,
functionality and performance of the product or system. The Company believes it
competes effectively with respect to these factors.
Competition in the markets for medical image management products and
healthcare information systems and services is intense and is expected to
increase. The Company's competitors include other providers of medical image
management and healthcare information products. The Company's principal
competitors in the medical image management industry are E-Med, an E-Systems
Medical Electronics Inc. company, which is a subsidiary of Raytheon Corp.,
Cemax-Icon, Inc. and Applicare Medical Imaging B.V. Furthermore, other major
healthcare information and equipment companies not presently offering competing
products may enter the Company's markets. In addition, the emerging market for
Internet/Intranet clinical information systems is expected to be highly
competitive, and the Company's competitors in this market could include many of
its competitors in the medical image management systems market as well as other
providers of healthcare information systems and new entrants into the
marketplace. Increased competition could result in price reductions, reduced
gross margins and loss of market share, any of which could materially adversely
effect the Company's business, financial condition and results of operations. In
addition, many of the Company's competitors and potential competitors have
significantly greater financial, technical, product development, marketing and
other resources and market recognition than the Company. Many of the Company's
competitors also currently have, or may develop or acquire, substantial
installed customer bases in the healthcare industry. As a result of these
factors, the Company's competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products than the
Company. There can be no assurances that the Company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the Company will not have a materially adverse effect on its
business, financial condition or results of operations.
Proprietary Rights
The Company relies on a combination of trade secrets, copyright and
trademark laws, nondisclosure and other contractual provisions to protect its
proprietary rights. The Company has not filed any patent applications covering
its technology or registered its trademarks; however, the Company is in the
process of completing its first patent application. There can be no assurance
that measures taken by the Company to protect its intellectual property will be
adequate or that the Company's competitors will not independently develop
systems and services that are substantially equivalent or superior to those of
the Company. Substantial litigation regarding intellectual property rights
exists in the software industry, and the Company expects that software products
may be increasingly subject to third party infringement claims as the number of
competitors in the Company's industry segment grows and the functionality of
systems overlap. Although the Company believes that its systems and applications
do not infringe upon the proprietary rights of third parties, there can be no
assurance that third parties will not assert infringement claims against the
Company in the future, that the Company would prevail in any such dispute or
that a license or similar agreement will be available on reasonable terms in the
event of an unfavorable ruling on any such claim. In addition, any such claim
may require the Company to incur substantial litigation expenses or subject the
Company to significant liabilities and could have a material adverse effect on
the Company's business, financial condition and results of operations.
Government Regulation
Medical image management software is subject to extensive government
regulation as a medical device in the United States by the Food and Drug
Administration ("FDA") and in other countries by corresponding foreign
regulatory
15
<PAGE> 16
authorities. The process of obtaining and maintaining required regulatory
clearances and approvals is lengthy, expensive and uncertain. Generally, before
a new medical device can be introduced into the market in the United States, the
manufacturer or distributor must obtain FDA clearance of a 510(k) premarket
notification or approval of a Premarket Approval ("PMA") application. If a
medical device manufacturer or distributor can establish, among other things,
that a device is "substantially equivalent" in intended use and technological
characteristics to certain legally marketed devices, for which the FDA has not
required a PMA, the manufacturer or distributor may seek clearance from the FDA
to market the device by filing a 510(k). In recent years, the FDA has been
requiring a more rigorous demonstration of substantial equivalence. Material
changes to legally marketed medical devices are also subject to FDA review and
clearance or approval prior to commercialization in the United States.
The Company has obtained 510(k) clearance for its current medical image
management software and will rely on the 510(k) clearance received from the FDA
by Star for iSTORE. However, the Company believes that its success depends upon
commercial sales of new versions of its medical image management software which
may be subject to clearance or approval from the FDA and its foreign
counterparts. There can be no assurance that a similar 510(k) clearance for any
future product or enhancement of an existing product will be granted or that the
process will not be lengthy. If the Company cannot establish that a product is
"substantially equivalent" to certain legally marketed devices, the 510(k)
clearance procedure may be unavailable and the Company may be required to
utilize the longer and more expensive PMA process. Failure to receive or delays
in receipt of FDA clearances or approvals, including the need for additional
data as a prerequisite to clearance or approval, could have a materially adverse
effect on the Company's business, operating results and financial condition.
The process of obtaining a 510(k) clearance generally requires
supporting data, which can be extensive and extend the regulatory review process
for a considerable length of time. FDA enforcement policy strictly prohibits the
marketing of cleared or approved medical devices for uncleared or unapproved
uses. The Company has been inspected once and will continue to be inspected on a
routine basis by the FDA for compliance with the FDA's Quality System Regulation
("QSR") and other applicable regulations. The Company will be required to adhere
to applicable FDA QSR regulations and similar regulations in other countries,
which include testing, control, and documentation requirements. Failure to
comply with applicable regulatory requirements could result in the failure of
the government to grant market clearance or premarket approval, withdrawal of
approvals or criminal prosecution. The Company is also subject to other federal,
state and local laws and regulations relating to safe working conditions and
manufacturing practices. The extent of government regulation that might result
from any future legislation or administrative action cannot be predicted.
Failure to comply with regulatory requirements could have a materially adverse
effect on the Company's business, financial condition and results of operations.
Sales of the Company's software outside the United States are subject
to foreign regulatory requirements that vary from country to country. Additional
approvals from foreign regulatory authorities may be required, and there can be
no assurance that the Company will be able to obtain foreign marketing approvals
on a timely basis or at all, or that it will not be required to incur
significant costs in obtaining or maintaining its foreign regulatory approvals.
In Europe, the Company will be required to obtain certifications necessary to
enable the "CE" mark to be affixed to the Company's products by mid 1998 to
continue commercial sales in member countries of the European Union. The CE mark
is an international symbol of quality and complies with applicable European
medical device directives. The Company has not obtained such certifications, and
there can be no assurance it will be able to obtain such certifications or any
other international regulatory approvals in a timely manner, or at all. Failure
to obtain such certifications, any necessary foreign regulatory approvals or any
other failure to comply with regulatory requirements outside the United States
could have a materially adverse effect on the Company's business, financial
condition and results of operations.
16
<PAGE> 17
COMPURAD, INC.
PART II. - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings
at this time. However, there can be no assurances that the
Company will not be subject to legal proceedings in the
future, which could have a material effect on the Company's
financial position. In addition, even if the ultimate outcome
of such legal proceedings is resolved in favor of the Company,
the defense of such litigation could entail considerable costs
and the diversion of efforts of management, either of which
could have a material adverse effect on the Company's results
of operations.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of security
holders during the period of this report at
the Annual Meeting of Stockholders, held May 22, 1997.
Proposal No. 1 - Election of Directors
Directors elected at the meeting whose term expires at the
2000 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
Name Votes Cast For Votes Cast Against Votes Withheld
---- -------------- ------------------ --------------
<S> <C> <C> <C>
Jose L. Canchola 2,807,461 0 6,100
Stewart F. Gross 2,807,461 0 6,100
David I. Lapan, M.D. 2,807,461 0 6,100
</TABLE>
Other directors continuing their term of office after the
meeting:
Phillip Berman, M.D. Term expires 1999
Cary Cole Term expires 1998
Henky Wibowo Term expires 1999
Proposal No. 2 - Ratify the Appointment of Ernst & Young LLP
as Independent Auditors for 1997
<TABLE>
<CAPTION>
Votes Cast For Votes Cast Against Abstain Broker Non-Vote
-------------- ------------------ ------- ---------------
<S> <C> <C> <C> <C>
2,570,961 237,500 100 0
</TABLE>
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Description
2.1 (1) Technology Purchase Agreement.
3.1 (2) Restated Certificate of Incorporation, as amended, of
Registrant.
17
<PAGE> 18
3.2 (2) Bylaws, as amended, of Registrant.
3.3 (5) Certificate of Amendment of Bylaws of Registrant.
4.1 (2) Form of Common Stock certificate.
4.2 (2) Form of Warrant.
10.1 (2) Stock Option Plan and form of option agreement thereunder.
10.2 (2) 1996 Stock Plan and form of option agreement thereunder.
10.3 (2) 1996 Employee Stock Purchase Plan and form of subscription
agreement thereunder.
10.4 (2) Form of Indemnification Agreement to be entered into
between Registrant and its directors and officers.
10.5 (2) Shareholder Agreement dated January 15, 1993 between
Registrant and certain holders of Common Stock, amended by
Settlement Agreement - See Exhibit 10.10.
10.6 (3) Lease dated August 24, 1996, relating to facility located
at Tucson, Arizona.
10.7 (3) Amendment one to the lease dated August 24, 1996, relating
to facility located at Tucson, Arizona.
10.8 (3) Amendment two to the lease dated August 24, 1996, relating
to facility located at Tucson, Arizona.
10.9 (4) Amendment three to the lease dated August 24, 1996,
relating to facility located at Tucson, Arizona.
10.10 (2) Settlement Agreement dated as of July 14, 1996 among the
Company, Arizona State Radiology, P.C. et al.
10.11 Employment Agreement between Registrant and Phillip
Berman.
10.12 Employment Agreement between Registrant and Cary Cole.
10.13 (5) Amendment four to the lease dated August 24, 1996,
relating to facility located at Tucson, Arizona.
10.14 Employment Agreement between Registrant and Henky Wibowo
11.1 Statement Regarding Computation of Net Loss Per Share.
27.1 Financial Data Schedule.
- ----------
(1) Incorporated by reference to the Company's Form 8-K (File No.
0000-21157) and its exhibits for the report dated July 30, 1997.
(2) Incorporated by reference to exhibits filed with the Company's
Registration Statement on Form SB-2 (File No. 333-5296-LA), in the form
declared effective on August 27, 1996.
(3) Incorporated by reference to the Company's Form 10-QSB (File No.
000-21157) and its exhibits filed for the quarterly period ended
September 30, 1996.
(4) Incorporated by reference to the Company's Form 10-KSB (File No.
0000-21157) and its exhibits filed for the year ended December 31,
1996.
(5) Incorporated by reference to the Company's Form 10-QSB (File No.
0000-21157) and its exhibits filed for the quarterly period ended March
31, 1997.
(b) REPORTS ON FORM 8-K
A Form 8-K was filed during the quarter for which this report
is filed for item 2, acquisition of assets, dated July 30,
1997.
18
<PAGE> 19
COMPURAD, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CompuRAD, Inc.
Date: August 12, 1997 /s/ Phillip Berman
--------------- ------------------------
Phillip Berman, M.D.
Chairman, Chief Executive Officer
and President
Date: August 12, 1997 /s/ Kevin Donovan
--------------- -----------------
Kevin Donovan
Vice President, Finance and Chief
Financial Officer
19
<PAGE> 20
COMPURAD, INC.
EXHIBITS
Exhibit No. Description
2.1 (1) Technology Purchase Agreement.
3.1 (2) Restated Certificate of Incorporation, as amended, of
Registrant.
3.2 (2) Bylaws, as amended, of Registrant.
3.3 (5) Certificate of Amendment of Bylaws of Registrant.
4.1 (2) Form of Common Stock certificate.
4.2 (2) Form of Warrant.
10.1 (2) Stock Option Plan and form of option agreement thereunder.
10.2 (2) 1996 Stock Plan and form of option agreement thereunder.
10.3 (2) 1996 Employee Stock Purchase Plan and form of subscription
agreement thereunder.
10.4 (2) Form of Indemnification Agreement to be entered into
between Registrant and its directors and officers.
10.5 (2) Shareholder Agreement dated January 15, 1993 between
Registrant and certain holders of Common Stock, amended by
Settlement Agreement - See Exhibit 10.10.
10.6 (3) Lease dated August 24, 1996, relating to facility located
at Tucson, Arizona.
10.7 (3) Amendment one to the lease dated August 24, 1996, relating
to facility located at Tucson, Arizona.
10.8 (3) Amendment two to the lease dated August 24, 1996, relating
to facility located at Tucson, Arizona.
10.9 (4) Amendment three to the lease dated August 24, 1996,
relating to facility located at Tucson, Arizona.
10.10 (2) Settlement Agreement dated as of July 14, 1996 among the
Company, Arizona State Radiology, P.C. et al.
10.11 Employment Agreement between Registrant and Phillip
Berman.
10.12 Employment Agreement between Registrant and Cary Cole.
10.13 (5) Amendment four to the lease dated August 24, 1996,
relating to facility located at Tucson, Arizona.
10.14 Employment Agreement between Registrant and Henky Wibowo
11.1 Statement Regarding Computation of Net Loss Per Share.
27.1 Financial Data Schedule.
- ----------
(1) Incorporated by reference to the Company's Form 8-K (File No.
0000-21157) and its exhibits for the report dated July 30, 1997.
(2) Incorporated by reference to exhibits filed with the Company's
Registration Statement on Form SB-2 (File No. 333-5296-LA), in the form
declared effective on August 27, 1996.
(3) Incorporated by reference to the Company's Form 10-QSB (File No.
000-21157) and its exhibits filed for the quarterly period ended
September 30, 1996.
(4) Incorporated by reference to the Company's Form 10-KSB (File No.
0000-21157) and its exhibits filed for the year ended December 31,
1996.
(5) Incorporated by reference to the Company's Form 10-QSB (File No.
0000-21157) and its exhibits filed for the quarterly period ended March
31, 1997.
<PAGE> 1
Berman Page 1
EMPLOYMENT AGREEMENT EXHIBIT 10.11
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective
as of June 1 , 1997, by and among CompuRAD, Inc., a Delaware corporation
("Company") and Phillip Berman, M.D., the Employee.
RECITALS:
A. Employee is currently an "at will" employee of the Company; and
B. The Company and Employee mutually desire to modify the terms and
conditions of Employee's employment, including the conversion of Employee's at
will status to employment for a described term of years, and to enter into this
Agreement which set forth the terms and conditions of Employee's employment;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which the parties hereby acknowledge, the parties agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ Employee, and Employee, in
consideration of such employment and other consideration set forth herein,
hereby accepts employment, upon the terms and conditions set forth herein.
2. POSITION AND DUTIES
During the term of this Agreement, Employee shall be employed in the
position specified on the attached Exhibit A. While employed hereunder, Employee
shall do all things necessary, legal and incident to the above position. If the
Company believes that the Employee has been derelict in the performance of his
duties or has been insubordinate or failed, in a material way to carry out the
directions of the Board, it must deliver to Employee a written notice
specifically identifying the conduct in question and the Company shall grant
Employee thirty days from the date that Employee receives such notice to take
fully corrective or remedial action.
3. COMPENSATION
The Employee shall receive the compensation and benefits listed on the
attached Exhibit A. Such compensation shall be paid by the Company.
4. EXPENSES
Within 30 days of request by Employee, the Company shall pay or
reimburse Employee for all travel, including air travel, and out-of-pocket
expenses reasonably incurred or paid by Employee in connection with the
performance of Employee's duties as an employee of the Company, upon compliance
with the Company's procedures for expense reimbursement including the
presentation of expense statements or receipts or such other supporting
documentation as the Company may reasonably require.
The Company shall provide Employee with a corporate credit card for use
by Employee
<PAGE> 2
Berman Page 2
solely to reimburse Company expenses.
5. PRIOR EMPLOYMENT
The Employee warrants and represents to the Company (i) that the
Employee will take no action in violation of any employment agreement or
arrangement with any prior employer, (ii) that the Employee has disclosed to the
Company all such prior written agreements, (iii) that any employment agreement
or arrangement with any prior employer is null and void and of no effect, and
(iv) that the Employee has the full right and authority to enter into this
Agreement and to perform all of the Employee's obligations hereunder. The
Employee agrees to indemnify and hold the Company harmless from and against any
and all claims, liabilities or expenses incurred by the Company as a result of
any claim made by any prior employer arising out of this Agreement or the
employment of the Employee by the Company.
6. OUTSIDE EMPLOYMENT
Employee shall devote Employee's full time and attention to the
performance of the duties incident to Employee's position with the Company, and
shall not have any other employment with any other enterprise or substantial
responsibility for any enterprise which would be inconsistent with Employee's
duty to devote Employee's full time and attention to Company matters. The
foregoing shall not prevent the Employee from participating in any charitable or
civic organization or any other type of employment or activity that does not
interfere with Employee's performance of the duties and responsibilities to be
performed by Employee under this Agreement, nor shall Employee be prevented from
acting as a Director of any organization not in direct competition with the
Company.
7. CONFIDENTIAL INFORMATION
Employee shall not, during the term of this Agreement or at any time
thereafter, disclose, or cause to be disclosed, in any way, Confidential
Information, or any part thereof, to any person, firm, corporation, association,
or any other operation or entity, or use the Confidential Information on
Employee's own behalf, for any reason or purpose. Employee further agrees that,
during the term of this Agreement or at any time thereafter, Employee will not
distribute, or cause to be distributed, Confidential Information to any third
person or permit the reproduction of the Confidential Information, except on
behalf of the Company in Employee's capacity as an employee of the Company.
Employee shall take all reasonable care to avoid unauthorized disclosure or use
of the Confidential Information. Employee hereby assumes responsibility for
disclosure or use of the Confidential Information in violation of this
Agreement.
For the purpose of this Agreement, "Confidential Information" shall
mean any written or unwritten information that specifically relates to and/or is
used in the Company's business (including without limitation, the Company's
services, processes, patents, systems, equipment, creations, designs, formats,
programming, discoveries, inventions, improvements, computer programs, data kept
on computer, engineering, research, development, applications, financial
information, information regarding services and products in development, market
information including test marketing or localized marketing, other information
regarding processes or plans in development, trade secrets, training manuals,
know-how of the Company, and the customers, clients, suppliers and others with
whom the Company does or has in the past done, business, regardless of when and
by whom such information was developed or acquired) that
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Berman Page 3
the Company deems confidential and proprietary and is generally not known to
others outside the Company and that gives or tends to give the Company a
competitive advantage over persons who do not possess such information or the
secrecy of which is otherwise of value to the Company in the conduct of its
business -- regardless of when and by whom such information was developed or
acquired, and regardless of whether any of these are described in writing,
reduced to practice, copyrightable, patentable or considered patentable,
"Confidential Information" shall not include general industry information or
information that is publicly available or is otherwise in the public domain
without breach of this Agreement, information that Employee has lawfully
acquired from a source other than the Company, or information that is required
to be disclosed pursuant to any law, regulation, or rule of any governmental
body or authority or court order. Company and Employee both acknowledge that the
Confidential Information is that information which is novel, proprietary to and
of considerable value to the Company. Therefore, "Confidential Information"
shall relate only to those items and information in print which are marked by
the Company as "Confidential."
Employee agrees that all restrictions contained in this Section 7 are
reasonable and valid under the circumstances and hereby waives all defenses to
the strict enforcement thereof by the Company.
Employee agrees that, upon the request of the Company, Employee will
immediately deliver up to the requesting entity all Confidential Information in
Employee's possession and/or control, and all notes, records, memoranda,
correspondence files and other papers, and all copies, relating to or containing
Confidential Information whether in written, electronic, or other mediums.
Employee does not have, nor can Employee acquire, any property or other right in
the Confidential Information.
8. PROPERTY OF THE COMPANY
All ideas, inventions, discoveries, proprietary information, know-how,
processes and other developments and, more specifically improvements to existing
inventions, conceived by the Employee, alone or with others, during the term of
the Employee's employment, whether or not during working hours and whether or
not while working on a specific project, that are within the scope of the
Company's medical business operations or that relate to any work or projects of
the Company, are and shall remain the exclusive property of the Company.
Inventions, improvements and discoveries relating to the business of the Company
conceived or made by the Employee, either alone or with others, while employed
with the Company are conclusively and irrefutably presumed to have been made
during the period of employment and are the sole property of the Company. The
Employee shall promptly disclose in writing any such matters to the Company but
to no other person without the consent of the Company. The Employee hereby
assigns and agrees to assign all right, title, and interest in and to such
matters to the Company. The Employee will, upon request of Company execute such
assignments or other instruments and assist the Company in the obtaining, at the
Company's sole expense of any patents, trademarks or similar protection, if
available, in the name of the Company.
9. NON-COMPETITION AGREEMENT
(A) During the term of this Agreement and for a period of six months
after the termination date of this Agreement (whether such termination is with
or without cause), Employee agrees that he will not directly or indirectly, own,
operate or otherwise work for or participate in any competitive business in the
United States which designs, develops,
<PAGE> 4
Berman Page 4
manufactures or markets any product or service that directly competes with the
Company's business, products or services as conducted, or planned to conducted,
on the date of termination (a "Competitive Business").
Employee and the Company agree for a period ending six months from the
termination of Employee's employment with the Company, whether by reason of
resignation, discharge by the Company or otherwise (except by expiration of this
Agreement or change in control, as defined in Section 12), Employee hereby
agrees that Employee will not, directly or indirectly:
(i) solicit, otherwise attempt to employ or contract with any
current employee of the Company for employment or otherwise in any Competitive
Business or otherwise offer any inducement to any current or future employee of
the Company to leave the Company's employ; or
(ii) contact or solicit any customer or client of the Company
(an "Existing Customer"), contact or solicit any individual or business entity
with whom the Company has directly communicated for the purpose of rendering
services prior to the effective date of such termination (a "Potential
Customer") or otherwise provide any other products or services for any Existing
Customer or Potential Customer of the Company, on behalf of a Competitive
Business or in a manner that is competitive to the Company's Business; or
(iii) Use or divulge to anyone any information about the
identity of the Company's customers or suppliers (including without limitation,
mental or written customer lists and customer prospect lists), or information
about customer requirements, transactions, work orders, pricing policies, plans
or any other Confidential Information.
(B) For the purpose of this Agreement, Competitive Business shall
mean any business operation including a sole proprietorship) in the United
States which designs, develops, manufactures or markets any product or service
that in any way competes with the Company's health information access system
business, products or services as conducted, on the date of termination.
(C) This Non-Competition Agreement is not effective if Employee
leaves his employment with company solely due to expiration of this Agreement
(12/31/99) or if Employee is terminated by Company without Good Cause (as
defined in Paragraph 11(D)).
10. TERM
Unless earlier terminated pursuant to Section 11 hereof, the term of
this Agreement shall be for the time period beginning January 1, 1997 the date
hereof and continuing through December 31, 1999 (the "Term"). Neither the
Company not the Employee shall have any obligation to the other to negotiate a
new period of employment subsequent to the end of the Term.
The term of this Agreement shall be automatically extended by one year
on each January 1, beginning on and after January 1, 1998, unless notice of
non-extension is given by Employee or the Company at least 30 days prior to any
January 1. As a result, assuming no notice of non-extension is given, on each
such January 1, the remaining term of this Agreement shall be three years. For
example, assuming no notice of non-extension is given, on January 1, 1998, an
additional year shall be added to the term of this Agreement and, on that date,
this
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Berman Page 5
Agreement shall expire on December 31, 2000. On January 1, 1998, assuming
no notice of non-extension is given, an additional year shall be added to the
term of this Agreement and, on that date, this Agreement shall expire on
December 31, 2001, etc.
11. TERMINATION
(A) Death. This Agreement and Employee's employment thereunder shall be
terminated on the death of Employee, effective as of the date of the employee's
death.
(B) Continued Disability. This Agreement and Employee's employment
thereunder may be terminated, at the option of the Company upon a Continued
Disability of Employee, effective as of the date of the determination of
Continued Disability as that term is hereinafter defined. For the purposes of
this Agreement, "Continued Disability" shall be defined as the inability or
incapacity (either mental or physical) of Employee to continue to perform
Employee's duties hereunder for a continuous period of one hundred twenty (120)
working days, or if, during any calendar year of the Term hereof because of
disability, Employee shall have been unable to perform Employee's duties
hereunder for a total period of one hundred eighty (180) working days regardless
of whether or not such days are consecutive. The determination as to whether
Employee is unable to perform the essential functions of Employee's job shall be
made by Company's Board of Directors in its reasonable discretion; provided,
however, that if the Employee is not satisfied with the decision of the Board,
Employee will submit to examination by three competent physicians who practice
in the metropolitan area in which the Employee then resides, one of whom shall
be selected by Company, another of whom shall be selected by Employee, with the
third to be selected by the physicians so selected. The decision of a majority
of the physicians so selected shall supersede the decision of the Board and
shall be final and conclusive.
(C) Termination For Good Cause. Notwithstanding any other provision of
this Agreement, Company may at any time immediately terminate this Agreement and
Employee's employment thereunder for Good Cause. For this purpose, "Good Cause"
shall be defined as: the current use of illegal drugs; indictment for any crime
involving moral turpitude, fraud or misrepresentation; commission of any act
which would constitute a felony and which would adversely impact the business or
reputation of the Company; fraud; misappropriation or embezzlement of Company
funds or property; willful conduct which is materially injurious to the
reputation, business or business relationships of the Company; Employee's
failure to perform his responsibilities and/or duties within the thirty (30) day
period described in Section 2 hereof; or material violation of any of the
provisions of this Agreement. Any alleged cause for termination shall be
delivered in writing to Employee stating the full basis for such cause along
with any notice of such termination.
(D) Termination without Good Cause. The Company may terminate
Employee's employment prior to the Expiration Date at any time whether or not
for Good Cause (as "Good Cause" is defined in Section 11(C) above). In the event
the Company terminates Employee without cause, the Company will pay Employee a
lump sum amount equal to the greater of (i) two times the Employee's annual
salary at the time of termination, or (ii) the total base salary remaining
unpaid under this Agreement through its full term. Such severance payment shall
be paid within 90 days following the date of Employee's termination. In
addition, the company shall provide at no cost to the Employee continuing health
and welfare benefit coverage at least equal to his existing coverage for a
period of two years.
<PAGE> 6
Berman Page 6
12. CHANGE IN CONTROL: ACCELERATED VESTING SCHEDULES.
In the event of a change-in-control of the Company, including a merger
or sale of substantially all of the Company's assets, outstanding options or
rights must be substituted at full intrinsic value. In addition, if within
twelve months of a change in control of Company, Employee's employment by the
Company is terminated prior to the end of the Term or Employee terminates his
employment due to a material reduction in his duties or compensation, or if the
Company requires relocation greater than 10 miles away from the current place of
business, the Company will pay Employee a lump sum amount equal to two times the
Employee's annual salary at the time of termination. In addition, the company
shall provide at no cost to the Employee continuing health and welfare benefit
coverage at least equal to his existing coverage for a period of two years. For
purposes of this Agreement, the term Change of Control shall mean and include
any one or more of the following transactions or situations:
(A) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) through a single transaction or a series of
transactions of securities of the Company representing twenty-five percent (25%)
or more of the combined voting power of the Company's then outstanding
securities to any Unrelated Person or Unrelated Persons acting in concert with
one another. For purposes of this Agreement, the term "Unrelated Person" shall
mean and include any person other than a person who owns at least ten percent
(10%) of the combined voting power of the Company's securities on the Effective
Date (a "Related Person"). The term shall not include a sale, transfer or other
disposition by a Related Person to his spouse, lineal descendants or his heirs,
devisees and donees and trusts created by him, inter vivos or by will, for the
benefit of such persons or for the benefit of charitable or educational
institutions.
(B) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) by the Company through a single transaction or a
series of transactions of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's then
outstanding securities to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(C) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) through a single transaction or a series of
transactions of all or substantially all of the assets of the Company to an
Unrelated Person or Unrelated Persons acting in concert with one another.
(D) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least a majority of the combined voting power of the Company's then outstanding
securities. For purposes of this Agreement, the term "Beneficial Owner" shall
have the same meaning as given to that term in Rule 13d-3 of the General Rules
and Regulations of the Securities Exchange Act of 1934, provided that any
pledgee of voting securities shall not be deemed to be the Beneficial Owner
thereof prior to its acquisition of voting rights with respect to such
securities.
(E) During any period of two years, individuals who, at the beginning
of such period, constituted the Board of Directors of the Company cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election of each new Director was
<PAGE> 7
Berman Page 7
approved by the vote of at least two-thirds of the Directors then still in
office who were Directors at the beginning of such period.
13. ACKNOWLEDGMENTS
The Company and Employee each hereby acknowledge and agree as follows:
(A) The covenants, restrictions, agreements and obligations set forth
herein are founded upon valuable consideration, and, with respect to the
covenants, restrictions, agreements and obligations set forth in Sections 7, 8
and 9 hereof, are reasonable in duration and geographic scope;
(B) In the event of a breach or threatened breach by Employee of any of
the covenants, restrictions, agreements and obligations set forth in Section 7,
8 and/or 9, monetary damages or the other remedies at law that may be available
to the Company for such breach or threatened breach will be inadequate and,
without prejudice to the Company's right to pursue any other remedies at law or
in equity available to it for such breach or threatened breach, including,
without limitation, the recovery of damages from Employee, the Company will be
entitled to injunctive relief from a court of competent jurisdiction; and
(C) The time period and geographical area set forth in Section 9 hereof
are each divisible and separable, and, in the event that the covenants not to
compete contained therein are judicially held invalid or unenforceable as to
such time period and/or geographical area, they will be valid and enforceable in
such geographical area(s) and for such time periods(s) which the court
determines to be reasonable and enforceable. The Employee agrees that in the
event any court of competent jurisdiction determines that the above covenants
are invalid or unenforceable to join with the Company in requesting that court
to construe the applicable provision by limiting or reducing it so as to be
enforceable to the extent compatible with the then applicable law. Furthermore,
any period of restriction or covenant herein stated shall not include any period
of violation or period of time required for litigation to enforce such
restriction or covenant.
14. NOTICES
Any notice or communication required or permitted hereunder shall be
given in writing and shall be sufficiently given if delivered personally or sent
by telecopier to such party addressed as follows:
(A) In the case of the Company, if addressed to it as follows:
CompuRAD, Inc.
1350 N. Kolb Road
Tucson, AZ 85715
Attn: Corporate Secretary
(B) In the case of Employee, if addressed to Employee as follows:
_________________________
_________________________
_________________________
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Berman Page 8
Any such notice delivered personally or by telecopier shall be deemed
to have been received on the date of such delivery. Any address for the giving
of notice hereunder may be changed by notice in writing.
15. ASSIGNMENT, SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors and
assigns. The Company may assign or otherwise transfer its rights under this
Agreement to any successor or affiliated business or corporation (whether by
sale of stock, merger, consolidation, sale of assets or otherwise), but this
Agreement may not be assigned, nor may the duties hereunder be delegated by
Employee. In the event that the Company assigns or otherwise transfers its
rights under this Agreement to any successor or affiliated business or
corporation (whether by sale of stock, merger, consolidation, sale of assets or
otherwise), for all purposes of this Agreement the "Company" shall then be
deemed to include the successor or affiliated business or corporation to which
the Company, respectively, assigned or otherwise transferred its rights
hereunder.
16. MODIFICATION
This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed by each of the
parties hereto.
17. SEVERABILITY
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect any other provisions hereof, and this Agreement shall
be construed in all respects as if any such invalid provision were omitted
herefrom.
18. COUNTERPARTS
This Agreement may be signed in counterparts and each of such
counterpart shall constitute an original document and such counterparts, taken
together, shall constitute one in the same instrument.
19. DISPUTE RESOLUTION
Except as set forth in Section 13 above, any and all disputes arising
out of or in connection with the execution, interpretation, performance, or
non-performance of this Agreement or any agreement or other instrument between,
involving or affecting the parties (including the validity, scope and
enforceability of this arbitration clause), shall be submitted to and resolved
by arbitration. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association. Either party may notify the other party at any time of
the existence of an arbitrable controversy by certified mail and shall attempt
in good faith to resolve their differences within fifteen (15) days after the
receipt of such notice. If the dispute cannot be resolved within the fifteen-day
period, either party may file a written demand for arbitration with the American
Arbitration Association. The place of arbitration shall be Tucson, Arizona.
20. GOVERNING LAW
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Berman Page 9
The provisions of this Agreement shall be governed by and interpreted
in accordance with the laws of the State of Arizona and the laws of the United
States applicable therein. The Employee acknowledges and agrees that Employee is
subject to personal jurisdiction in state and federal courts in Pima County,
Arizona.
<PAGE> 10
Berman Page 10
21. INDEMNIFICATION FOR LEGAL EXPENSES
The Company shall indemnify Employee for legal expenses incurred by
Employee in disputes with Arizona State Radiology and the physicians of Arizona
State Radiology (who were and are shareholders of the Company). In addition,
Company shall pay for the tail malpractice premium for Employee to terminate
active practice as a physician/radiologist in the State of Arizona.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the date first above written.
COMPURAD, INC.
By: /s/ Henky Wibowo
-----------------------------------
Its: Secretary
-----------------------------------
EMPLOYEE
/s/ Phillip Berman
- --------------------------------
<PAGE> 11
Berman Page 11
EXHIBIT A - COMPENSATION AND BENEFITS
Employee: Phillip Berman
Position: CEO
Salary: Fiscal Year 1997 (1/1/97 - 12/31/97)
Annual Base Salary - $168,000, payable in such number of
installments as may be agreed upon among the Company and
Employee.
Target Fiscal Year 1997 Cash Bonus $58,000
Within thirty (30) days of the end of the fiscal year, the
Company's Board of Directors, or Compensation Committee
thereof, may annually adjust Employee's base salary upward and
Employee will be eligible to participate in any bonus plan
approved by the Company's Board of Directors, or Compensation
Committee thereof, at the highest level as the Board or
Committee establishes pursuant to any such plan. (This
employee shall then have the sole option to elect to receive
that bonus compensation either in cash or in the form of
unrestricted registered stock (in which event the stock will
be valued at a per share price equal to its lowest trading
closing price during the calendar quarter for which the bonus
is being awarded.)
Stock options:
Company agrees that Employee shall be eligible to participate
in 1996 CompuRAD, Inc. Employee Stock Option Plan and to
receive stock option grants as the Company's Board of
Directors may determine appropriate from time to time
hereafter.
In addition, Employee shall receive: (i) 4,000 options for
shares of CompuRAD common stock for each calendar quarter in
which this Employee is employed, to be delivered to this
Employee no later than ten (10) days following the close of
each calendar quarter; and (ii) at least 4,000 additional
options for shares of CompuRAD common stock for each quarter
CompuRAD meets the quarterly goals approved by the Board of
Directors, which options for shares shall be determined and
delivered no later than thirty (30) days after the end of the
quarter. These stock options shall be immediately vested in
full and immediately exercisable by this Employee and adjusted
in number of shares to reflect the effect of future splits.
For example, if the shares of common stock split 2:1, then the
4,000 options referred to in this subparagraph shall become
8,000 options.
Perquisite Allowance:
$1,000 per month.
Benefits: Employee shall be eligible to participate in all other
employee fringe benefit plans of the Company to the same
extent and at the same levels as other executive officers of
the Company are then participating.
<PAGE> 12
Berman Page 12
Auto Lease: Not to exceed $1,000 per month, including licensing,
maintenance and insurance.
<PAGE> 1
COMPURAD, INC.
EMPLOYMENT AGREEMENT EXHIBIT 10.12
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective
as of June 1, 1997, by and among CompuRAD, Inc., a Delaware corporation
("Company") and Cary Cole, the Employee.
RECITALS:
A. Employee is currently an "at will" employee of the Company; and
B. The Company and Employee mutually desire to modify the terms and
conditions of Employee's employment, including the conversion of Employee's at
will status to employment for a described term of years, and to enter into this
Agreement which set forth the terms and conditions of Employee's employment;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which the parties hereby acknowledge, the parties agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ Employee, and Employee, in
consideration of such employment and other consideration set forth herein,
hereby accepts employment, upon the terms and conditions set forth herein.
2. POSITION AND DUTIES
During the term of this Agreement, Employee shall be employed in the
position specified on the attached Exhibit A. While employed hereunder, Employee
shall do all things necessary, legal and incident to the above position. If the
Company believes that the Employee has been derelict in the performance of his
duties or has been insubordinate or failed, in a material way to carry out the
directions of the Board, it must deliver to Employee a written notice
specifically identifying the conduct in question and the Company shall grant
Employee thirty days from the date that Employee receives such notice to take
fully corrective or remedial action.
3. COMPENSATION
The Employee shall receive the compensation and benefits listed on the
attached Exhibit A. Such compensation shall be paid by the Company.
4. EXPENSES
Within 30 days of request by Employee, the Company shall pay or
reimburse Employee for all travel, including air travel, and out-of-pocket
expenses reasonably incurred or paid by Employee in connection with the
performance of Employee's duties as an employee of the Company, upon compliance
with the Company's procedures for expense reimbursement including the
presentation of expense statements or receipts or such other supporting
documentation as the Company may reasonably require.
1
<PAGE> 2
COMPURAD, INC.
The Company shall provide Employee with a corporate credit card for use
by Employee solely to reimburse Company expenses.
5. PRIOR EMPLOYMENT
The Employee warrants and represents to the Company (i) that the
Employee will take no action in violation of any employment agreement or
arrangement with any prior employer, (ii) that the Employee has disclosed to the
Company all such prior written agreements, (iii) that any employment agreement
or arrangement with any prior employer is null and void and of no effect, and
(iv) that the Employee has the full right and authority to enter into this
Agreement and to perform all of the Employee's obligations hereunder. The
Employee agrees to indemnify and hold the Company harmless from and against any
and all claims, liabilities or expenses incurred by the Company as a result of
any claim made by any prior employer arising out of this Agreement or the
employment of the Employee by the Company.
6. OUTSIDE EMPLOYMENT
Employee shall devote Employee's full time and attention to the
performance of the duties incident to Employee's position with the Company, and
shall not have any other employment with any other enterprise or substantial
responsibility for any enterprise which would be inconsistent with Employee's
duty to devote Employee's full time and attention to Company matters. The
foregoing shall not prevent the Employee from participating in any charitable or
civic organization or any other type of employment or activity that does not
interfere with Employee's performance of the duties and responsibilities to be
performed by Employee under this Agreement, nor shall Employee be prevented from
acting as a Director of any organization not in direct competition with the
Company.
7. CONFIDENTIAL INFORMATION
Employee shall not, during the term of this Agreement or at any time
thereafter, disclose, or cause to be disclosed, in any way, Confidential
Information, or any part thereof, to any person, firm, corporation, association,
or any other operation or entity, or use the Confidential Information on
Employee's own behalf, for any reason or purpose. Employee further agrees that,
during the term of this Agreement or at any time thereafter, Employee will not
distribute, or cause to be distributed, Confidential Information to any third
person or permit the reproduction of the Confidential Information, except on
behalf of the Company in Employee's capacity as an employee of the Company.
Employee shall take all reasonable care to avoid unauthorized disclosure or use
of the Confidential Information. Employee hereby assumes responsibility for
disclosure or use of the Confidential Information in violation of this
Agreement.
For the purpose of this Agreement, "Confidential Information" shall
mean any written or unwritten information that specifically relates to and/or is
used in the Company's business (including without limitation, the Company's
services, processes, patents, systems, equipment, creations, designs, formats,
programming, discoveries, inventions, improvements, computer programs, data kept
on computer, engineering, research, development, applications, financial
information, information regarding services and products
2
<PAGE> 3
COMPURAD, INC.
in development, market information including test marketing or localized
marketing, other information regarding processes or plans in development, trade
secrets, training manuals, know-how of the Company, and the customers, clients,
suppliers and others with whom the Company does or has in the past done,
business, regardless of when and by whom such information was developed or
acquired) that the Company deems confidential and proprietary and is generally
not known to others outside the Company and that gives or tends to give the
Company a competitive advantage over persons who do not possess such information
or the secrecy of which is otherwise of value to the Company in the conduct of
its business -- regardless of when and by whom such information was developed or
acquired, and regardless of whether any of these are described in writing,
reduced to practice, copyrightable, patentable or considered patentable,
"Confidential Information" shall not include general industry information or
information that is publicly available or is otherwise in the public domain
without breach of this Agreement, information that Employee has lawfully
acquired from a source other than the Company, or information that is required
to be disclosed pursuant to any law, regulation, or rule of any governmental
body or authority or court order. Company and Employee both acknowledge that the
Confidential Information is that information which is novel, proprietary to and
of considerable value to the Company. Therefore, "Confidential Information"
shall relate only to those items and information in print which are marked by
the Company as "Confidential."
Employee agrees that all restrictions contained in this Section 7 are
reasonable and valid under the circumstances and hereby waives all defenses to
the strict enforcement thereof by the Company.
Employee agrees that, upon the request of the Company, Employee will
immediately deliver up to the requesting entity all Confidential Information in
Employee's possession and/or control, and all notes, records, memoranda,
correspondence files and other papers, and all copies, relating to or containing
Confidential Information whether in written, electronic, or other mediums.
Employee does not have, nor can Employee acquire, any property or other right in
the Confidential Information.
8. PROPERTY OF THE COMPANY
All ideas, inventions, discoveries, proprietary information, know-how,
processes and other developments and, more specifically improvements to existing
inventions, conceived by the Employee, alone or with others, during the term of
the Employee's employment, whether or not during working hours and whether or
not while working on a specific project, that are within the scope of the
Company's medical business operations or that relate to any work or projects of
the Company, are and shall remain the exclusive property of the Company.
Inventions, improvements and discoveries relating to the business of the Company
conceived or made by the Employee, either alone or with others, while employed
with the Company are conclusively and irrefutably presumed to have been made
during the period of employment and are the sole property of the Company. The
Employee shall promptly disclose in writing any such matters to the Company but
to no other person without the consent of the Company. The Employee hereby
assigns and agrees to assign all right, title, and interest in and to such
matters to the Company. The Employee will, upon request of Company execute such
assignments or other instruments and assist the Company in the obtaining, at the
Company's sole expense of any patents, trademarks or similar protection, if
available, in the name of the Company.
3
<PAGE> 4
COMPURAD, INC.
9. NON-COMPETITION AGREEMENT
(A) During the term of this Agreement and for a period of six
months after the termination date of this Agreement (whether such termination is
with or without cause), Employee agrees that he will not directly or indirectly,
own, operate or otherwise work for or participate in any competitive business in
the United States which designs, develops, manufactures or markets any product
or service that directly competes with the Company's business, products or
services as conducted, or planned to conducted, on the date of termination (a
"Competitive Business").
Employee and the Company agree for a period ending six months from the
termination of Employee's employment with the Company, whether by reason of
resignation, discharge by the Company or otherwise (except by expiration of this
Agreement or change in control, as defined in Section 12), Employee hereby
agrees that Employee will not, directly or indirectly:
(i) solicit, otherwise attempt to employ or contract with any
current employee of the Company for employment or otherwise in any Competitive
Business or otherwise offer any inducement to any current or future employee of
the Company to leave the Company's employ; or
(ii) contact or solicit any customer or client of the Company
(an "Existing Customer"), contact or solicit any individual or business entity
with whom the Company has directly communicated for the purpose of rendering
services prior to the effective date of such termination (a "Potential
Customer") or otherwise provide any other products or services for any Existing
Customer or Potential Customer of the Company, on behalf of a Competitive
Business or in a manner that is competitive to the Company's Business; or
(iii) Use or divulge to anyone any information about the
identity of the Company's customers or suppliers (including without limitation,
mental or written customer lists and customer prospect lists), or information
about customer requirements, transactions, work orders, pricing policies, plans
or any other Confidential Information.
(B) For the purpose of this Agreement, Competitive Business shall
mean any business operation including a sole proprietorship) in the United
States which designs, develops, manufactures or markets any product or service
that in any way competes with the Company's health information access system
business, products or services as conducted on the date of termination.
(C) This Non-Competition Agreement is not effective if Employee
leaves his employment with company solely due to expiration of this Agreement
(12/31/99) or if Employee is terminated by Company without Good Cause (as
defined in Paragraph 11(D)).
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COMPURAD, INC.
10. TERM
Unless earlier terminated pursuant to Section 11 hereof, the term of
this Agreement shall be for the time period beginning January 1, 1997 the date
hereof and continuing through December 31, 1999 (the "Term"). Neither the
Company not the Employee shall have any obligation to the other to negotiate a
new period of employment subsequent to the end of the Term.
The term of this Agreement shall be automatically extended by one year
on each January 1, beginning on and after January 1, 1998, unless notice of
non-extension is given by Employee or the Company at least 30 days prior to any
January 1. As a result, assuming no notice of non-extension is given, on each
such January 1, the remaining term of this Agreement shall be three years. For
example, assuming no notice of non-extension is given, on January 1, 1998, an
additional year shall be added to the term of this Agreement and, on that date,
this Agreement shall expire on December 31, 2000. On January 1, 1998, assuming
no notice of non-extension is given, an additional year shall be added to the
term of this Agreement and, on that date, this Agreement shall expire on
December 31, 2001, etc.
11. TERMINATION
(A) Death. This Agreement and Employee's employment thereunder shall be
terminated on the death of Employee, effective as of the date of the employee's
death.
(B) Continued Disability. This Agreement and Employee's employment
thereunder may be terminated, at the option of the Company upon a Continued
Disability of Employee, effective as of the date of the determination of
Continued Disability as that term is hereinafter defined. For the purposes of
this Agreement, "Continued Disability" shall be defined as the inability or
incapacity (either mental or physical) of Employee to continue to perform
Employee's duties hereunder for a continuous period of one hundred twenty (120)
working days, or if, during any calendar year of the Term hereof because of
disability, Employee shall have been unable to perform Employee's duties
hereunder for a total period of one hundred eighty (180) working days regardless
of whether or not such days are consecutive. The determination as to whether
Employee is unable to perform the essential functions of Employee's job shall be
made by Company's Board of Directors in its reasonable discretion; provided,
however, that if the Employee is not satisfied with the decision of the Board,
Employee will submit to examination by three competent physicians who practice
in the metropolitan area in which the Employee then resides, one of whom shall
be selected by Company, another of whom shall be selected by Employee, with the
third to be selected by the physicians so selected. The decision of a majority
of the physicians so selected shall supersede the decision of the Board and
shall be final and conclusive.
(C) Termination For Good Cause. Notwithstanding any other provision of
this Agreement, Company may at any time immediately terminate this Agreement and
Employee's employment thereunder for Good Cause. For this purpose, "Good Cause"
shall be defined as: the current use of illegal drugs; indictment for any crime
involving moral turpitude, fraud or misrepresentation; commission of any act
which would constitute a felony and which would adversely impact the business or
reputation of the Company; fraud; misappropriation or embezzlement of Company
funds or property; willful conduct which is materially injurious to the
reputation, business or business relationships of the Company;
5
<PAGE> 6
COMPURAD, INC.
Employee's failure to perform his responsibilities and/or duties within the
thirty (30) day period described in Section 2 hereof; or material violation of
any of the provisions of this Agreement. Any alleged cause for termination shall
be delivered in writing to Employee stating the full basis for such cause along
with any notice of such termination.
(D) Termination without Good Cause. The Company may terminate
Employee's employment prior to the Expiration Date at any time whether or not
for Good Cause (as "Good Cause" is defined in Section 11(C) above). In the event
the Company terminates Employee without cause, the Company will pay Employee a
lump sum amount equal to the greater of (i) two times the Employee's annual
salary at the time of termination, or (ii) the total base salary remaining
unpaid under this Agreement through its full term. Such severance payment shall
be paid within 90 days following the date of Employee's termination. In
addition, the company shall provide at no cost to the Employee continuing health
and welfare benefit coverage at least equal to his existing coverage for a
period of two years.
12. CHANGE IN CONTROL: ACCELERATED VESTING SCHEDULES.
In the event of a change-in-control of the Company, including a merger
or sale of substantially all of the Company's assets, outstanding options or
rights must be substituted at full intrinsic value. In addition, if within
twelve months of a change in control of Company, Employee's employment by the
Company is terminated prior to the end of the Term or Employee terminates his
employment due to a material reduction in his duties or compensation, or if the
Company requires relocation greater than 10 miles away from the current place of
business, the Company will pay Employee a lump sum amount equal to two times the
Employee's annual salary at the time of termination. In addition, the company
shall provide at no cost to the Employee continuing health and welfare benefit
coverage at least equal to his existing coverage for a period of two years. For
purposes of this Agreement, "change in control" means any of the following
events:
(A) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) through a single transaction or a series of
transactions of securities of the Company representing twenty-five percent (25%)
or more of the combined voting power of the Company's then outstanding
securities to any Unrelated Person or Unrelated Persons acting in concert with
one another. For purposes of this Agreement, the term "Unrelated Person" shall
mean and include any person other than a person who owns at least ten percent
(10%) of the combined voting power of the Company's securities on the Effective
Date (a "Related Person"). The term shall not include a sale, transfer or other
disposition by a Related Person to his spouse, lineal descendants or his heirs,
devisees and donees and trusts created by him, inter vivos or by will, for the
benefit of such persons or for the benefit of charitable or educational
institutions.
(B) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) by the Company through a single transaction or a
series of transactions of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's then
outstanding securities to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(C) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) through a single transaction or a series of
transactions of all or substantially all
6
<PAGE> 7
COMPURAD, INC.
of the assets of the Company to an Unrelated Person or Unrelated Persons acting
in concert with one another.
(D) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least a majority of the combined voting power of the Company's then outstanding
securities. For purposes of this Agreement, the term "Beneficial Owner" shall
have the same meaning as given to that term in Rule 13d-3 of the General Rules
and Regulations of the Securities Exchange Act of 1934, provided that any
pledgee of voting securities shall not be deemed to be the Beneficial Owner
thereof prior to its acquisition of voting rights with respect to such
securities.
(E) During any period of two years, individuals who, at the beginning
of such period, constituted the Board of Directors of the Company cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election of each new Director was approved by the vote of at
least two-thirds of the Directors then still in office who were Directors at the
beginning of such period.
13. ACKNOWLEDGMENTS
The Company and Employee each hereby acknowledge and agree as follows:
(A) The covenants, restrictions, agreements and obligations set forth
herein are founded upon valuable consideration, and, with respect to the
covenants, restrictions, agreements and obligations set forth in Sections 7, 8
and 9 hereof, are reasonable in duration and geographic scope;
(B) In the event of a breach or threatened breach by Employee of any of
the covenants, restrictions, agreements and obligations set forth in Section 7,
8 and/or 9, monetary damages or the other remedies at law that may be available
to the Company for such breach or threatened breach will be inadequate and,
without prejudice to the Company's right to pursue any other remedies at law or
in equity available to it for such breach or threatened breach, including,
without limitation, the recovery of damages from Employee, the Company will be
entitled to injunctive relief from a court of competent jurisdiction; and
(C) The time period and geographical area set forth in Section 9 hereof
are each divisible and separable, and, in the event that the covenants not to
compete contained therein are judicially held invalid or unenforceable as to
such time period and/or geographical area, they will be valid and enforceable in
such geographical area(s) and for such time periods(s) which the court
determines to be reasonable and enforceable. The Employee agrees that in the
event any court of competent jurisdiction determines that the above covenants
are invalid or unenforceable to join with the Company in requesting that court
to construe the applicable provision by limiting or reducing it so as to be
enforceable to the extent compatible with the then applicable law. Furthermore,
any period of restriction or covenant herein stated shall not include any period
of violation or period of time required for litigation to enforce such
restriction or covenant.
7
<PAGE> 8
COMPURAD, INC.
14. NOTICES
Any notice or communication required or permitted hereunder shall be
given in writing and shall be sufficiently given if delivered personally or sent
by telecopier to such party addressed as follows:
(A) In the case of the Company, if addressed to it as follows:
CompuRAD, Inc.
1350 N. Kolb Road
Tucson, AZ 85715
Attn: Corporate Secretary
(B) In the case of Employee, if addressed to Employee as follows:
---------------------------------
---------------------------------
---------------------------------
Any such notice delivered personally or by telecopier shall be deemed
to have been received on the date of such delivery. Any address for the giving
of notice hereunder may be changed by notice in writing.
15. ASSIGNMENT, SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors and
assigns. The Company may assign or otherwise transfer its rights under this
Agreement to any successor or affiliated business or corporation (whether by
sale of stock, merger, consolidation, sale of assets or otherwise), but this
Agreement may not be assigned, nor may the duties hereunder be delegated by
Employee. In the event that the Company assigns or otherwise transfers its
rights under this Agreement to any successor or affiliated business or
corporation (whether by sale of stock, merger, consolidation, sale of assets or
otherwise), for all purposes of this Agreement the "Company" shall then be
deemed to include the successor or affiliated business or corporation to which
the Company, respectively, assigned or otherwise transferred its rights
hereunder.
16. MODIFICATION
This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed by each of the
parties hereto.
17. SEVERABILITY
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect any other provisions hereof, and this Agreement shall
be construed in all respects as if any such invalid provision were omitted
herefrom.
18. COUNTERPARTS
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COMPURAD, INC.
This Agreement may be signed in counterparts and each of such
counterpart shall constitute an original document and such counterparts, taken
together, shall constitute one in the same instrument.
19. DISPUTE RESOLUTION
Except as set forth in Section 13 above, any and all disputes arising
out of or in connection with the execution, interpretation, performance, or
non-performance of this Agreement or any agreement or other instrument between,
involving or affecting the parties (including the validity, scope and
enforceability of this arbitration clause), shall be submitted to and resolved
by arbitration. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association. Either party may notify the other party at any time of
the existence of an arbitrable controversy by certified mail and shall attempt
in good faith to resolve their differences within fifteen (15) days after the
receipt of such notice. If the dispute cannot be resolved within the fifteen-day
period, either party may file a written demand for arbitration with the American
Arbitration Association. The place of arbitration shall be Tucson, Arizona.
20. GOVERNING LAW
The provisions of this Agreement shall be governed by and interpreted
in accordance with the laws of the State of Arizona and the laws of the United
States applicable therein. The Employee acknowledges and agrees that Employee is
subject to personal jurisdiction in state and federal courts in Pima County,
Arizona.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the date first above written.
COMPURAD, INC.
By: /s/ Phillip Berman
----------------------------------
Its: President, CEO
---------------------------------
EMPLOYEE
/s/ Cary Cole
---------------
9
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COMPURAD, INC.
EXHIBIT A - COMPENSATION AND BENEFITS
Employee: Cary Cole
Position: Vice President, Sales and Marketing
Salary: Fiscal Year 1997 (1/1/97 - 12/31/97)
Annual Base Salary - $154,000, payable in such number of
installments as may be agreed upon among the Company and
Employee
Target Fiscal Year 1997 Cash Bonus - $27,500
Within thirty (30) days of the end of the fiscal year, the
Company's Board of Directors, or Compensation Committee
thereof, may annually adjust Employee's base salary upward and
Employee will be eligible to participate in any bonus plan
approved by the Company's Board of Directors, or Compensation
Committee thereof, at the highest level as the Board or
Committee establishes pursuant to any such plan. (This
employee shall then have the sole option to elect to receive
that bonus compensation either in cash or in the form of
unrestricted registered stock (in which event the stock will
be valued at a per share price equal to its lowest trading
closing price during the calendar quarter for which the bonus
is being awarded.)
Stock options:
Company agrees that Employee shall be eligible to participate
in the 1996 CompuRAD, Inc. Employee Stock Option Plan and to
receive stock option grants as the Company's Board of
Directors may determine appropriate from time to time
hereafter.
In addition, Employee shall receive: (i) 3,000 options for
shares of CompuRAD common stock for each calendar quarter in
which this Employee is employed, to be delivered to this
Employee no later than ten (10) days following the close of
each calendar quarter; and (ii) at least 3,000 additional
options for shares of CompuRAD common stock for each quarter
CompuRAD meets the quarterly goals approved by the Board of
Directors, which options for shares shall be determined and
delivered no later than thirty (30) days after the end of the
quarter. These stock options shall be immediately vested in
full and immediately exercisable by this Employee and adjusted
in number of shares to reflect the effect of future splits.
For example, if the shares of common stock split 2:1, then the
3,000 options referred to in this subparagraph shall become
6,000 options.
Perquisite Allowance:
$1,000 per month
Benefits: Employee shall be eligible to participate in all other
employee fringe benefit plans of the Company to the same
extent and at the same levels as other executive officers of
the Company are then participating.
Auto Lease: Not to exceed $1,000 per month, including licensing,
maintenance and insurance.
10
<PAGE> 1
COMPURAD, INC.
EMPLOYMENT AGREEMENT EXHIBIT 10.14
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective
as of June 1, 1997, by and among CompuRAD, Inc., a Delaware corporation
("Company") and Henky Wibowo, the Employee.
RECITALS:
A. Employee is currently an "at will" employee of the Company; and
B. The Company and Employee mutually desire to modify the terms and
conditions of Employee's employment, including the conversion of Employee's at
will status to employment for a described term of years, and to enter into this
Agreement which set forth the terms and conditions of Employee's employment;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which the parties hereby acknowledge, the parties agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ Employee, and Employee, in
consideration of such employment and other consideration set forth herein,
hereby accepts employment, upon the terms and conditions set forth herein.
2. POSITION AND DUTIES
During the term of this Agreement, Employee shall be employed in the
position specified on the attached Exhibit A. While employed hereunder, Employee
shall do all things necessary, legal and incident to the above position. If the
Company believes that the Employee has been derelict in the performance of his
duties or has been insubordinate or failed, in a material way to carry out the
directions of the Board, it must deliver to Employee a written notice
specifically identifying the conduct in question and the Company shall grant
Employee thirty days from the date that Employee receives such notice to take
fully corrective or remedial action.
3. COMPENSATION
The Employee shall receive the compensation and benefits listed on the
attached Exhibit A. Such compensation shall be paid by the Company.
4. EXPENSES
Within 30 days of request by Employee, the Company shall pay or
reimburse Employee for all travel, including air travel, and out-of-pocket
expenses reasonably incurred or paid by Employee in connection with the
performance of Employee's duties as an employee of the Company, upon compliance
with the Company's procedures for expense reimbursement including the
presentation of expense statements or receipts or such other supporting
documentation as the Company may reasonably require.
<PAGE> 2
COMPURAD, INC.
The Company shall provide Employee with a corporate credit card for use
by Employee solely to reimburse Company expenses.
5. PRIOR EMPLOYMENT
The Employee warrants and represents to the Company (i) that the
Employee will take no action in violation of any employment agreement or
arrangement with any prior employer, (ii) that the Employee has disclosed to the
Company all such prior written agreements, (iii) that any employment agreement
or arrangement with any prior employer is null and void and of no effect, and
(iv) that the Employee has the full right and authority to enter into this
Agreement and to perform all of the Employee's obligations hereunder. The
Employee agrees to indemnify and hold the Company harmless from and against any
and all claims, liabilities or expenses incurred by the Company as a result of
any claim made by any prior employer arising out of this Agreement or the
employment of the Employee by the Company.
6. OUTSIDE EMPLOYMENT
Employee shall devote Employee's full time and attention to the
performance of the duties incident to Employee's position with the Company, and
shall not have any other employment with any other enterprise or substantial
responsibility for any enterprise which would be inconsistent with Employee's
duty to devote Employee's full time and attention to Company matters. The
foregoing shall not prevent the Employee from participating in any charitable or
civic organization or any other type of employment or activity that does not
interfere with Employee's performance of the duties and responsibilities to be
performed by Employee under this Agreement, nor shall Employee be prevented from
acting as a Director of any organization not in direct competition with the
Company.
7. CONFIDENTIAL INFORMATION
Employee shall not, during the term of this Agreement or at any time
thereafter, disclose, or cause to be disclosed, in any way, Confidential
Information, or any part thereof, to any person, firm, corporation, association,
or any other operation or entity, or use the Confidential Information on
Employee's own behalf, for any reason or purpose. Employee further agrees that,
during the term of this Agreement or at any time thereafter, Employee will not
distribute, or cause to be distributed, Confidential Information to any third
person or permit the reproduction of the Confidential Information, except on
behalf of the Company in Employee's capacity as an employee of the Company.
Employee shall take all reasonable care to avoid unauthorized disclosure or use
of the Confidential Information. Employee hereby assumes responsibility for
disclosure or use of the Confidential Information in violation of this
Agreement.
For the purpose of this Agreement, "Confidential Information" shall
mean any written or unwritten information that specifically relates to and/or is
used in the Company's business (including without limitation, the Company's
services, processes, patents, systems, equipment, creations, designs, formats,
programming, discoveries, inventions, improvements, computer programs, data kept
on computer, engineering, research, development, applications, financial
information, information regarding services and products in development, market
information including test marketing or localized marketing, other information
regarding processes or plans in development, trade secrets, training manuals,
<PAGE> 3
COMPURAD, INC.
know-how of the Company, and the customers, clients, suppliers and others with
whom the Company does or has in the past done, business, regardless of when and
by whom such information was developed or acquired) that the Company deems
confidential and proprietary and is generally not known to others outside the
Company and that gives or tends to give the Company a competitive advantage over
persons who do not possess such information or the secrecy of which is otherwise
of value to the Company in the conduct of its business -- regardless of when and
by whom such information was developed or acquired, and regardless of whether
any of these are described in writing, reduced to practice, copyrightable,
patentable or considered patentable, "Confidential Information" shall not
include general industry information or information that is publicly available
or is otherwise in the public domain without breach of this Agreement,
information that Employee has lawfully acquired from a source other than the
Company, or information that is required to be disclosed pursuant to any law,
regulation, or rule of any governmental body or authority or court order.
Company and Employee both acknowledge that the Confidential Information is that
information which is novel, proprietary to and of considerable value to the
Company. Therefore, "Confidential Information" shall relate only to those items
and information in print which are marked by the Company as "Confidential."
Employee agrees that all restrictions contained in this Section 7 are
reasonable and valid under the circumstances and hereby waives all defenses to
the strict enforcement thereof by the Company.
Employee agrees that, upon the request of the Company, Employee will
immediately deliver up to the requesting entity all Confidential Information in
Employee's possession and/or control, and all notes, records, memoranda,
correspondence files and other papers, and all copies, relating to or containing
Confidential Information whether in written, electronic, or other mediums.
Employee does not have, nor can Employee acquire, any property or other right in
the Confidential Information.
8. PROPERTY OF THE COMPANY
All ideas, inventions, discoveries, proprietary information, know-how,
processes and other developments and, more specifically improvements to existing
inventions, conceived by the Employee, alone or with others, during the term of
the Employee's employment, whether or not during working hours and whether or
not while working on a specific project, that are within the scope of the
Company's medical business operations or that relate to any work or projects of
the Company, are and shall remain the exclusive property of the Company.
Inventions, improvements and discoveries relating to the business of the Company
conceived or made by the Employee, either alone or with others, while employed
with the Company are conclusively and irrefutably presumed to have been made
during the period of employment and are the sole property of the Company. The
Employee shall promptly disclose in writing any such matters to the Company but
to no other person without the consent of the Company. The Employee hereby
assigns and agrees to assign all right, title, and interest in and to such
matters to the Company. The Employee will, upon request of Company execute such
assignments or other instruments and assist the Company in the obtaining, at the
Company's sole expense of any patents, trademarks or similar protection, if
available, in the name of the Company.
9. NON-COMPETITION AGREEMENT
<PAGE> 4
COMPURAD, INC.
(A) During the term of this Agreement and for a period of six
months after the termination date of this Agreement (whether such termination is
with or without cause), Employee agrees that he will not directly or indirectly,
own, operate or otherwise work for or participate in any competitive business in
the United States which designs, develops, manufactures or markets any product
or service that directly competes with the Company's business, products or
services as conducted, or planned to conducted, on the date of termination (a
"Competitive Business").
Employee and the Company agree for a period ending six months from the
termination of Employee's employment with the Company, whether by reason of
resignation, discharge by the Company or otherwise (except by expiration of this
Agreement or change in control, as defined in Section 12), Employee hereby
agrees that Employee will not, directly or indirectly:
(i) solicit, otherwise attempt to employ or contract with any
current employee of the Company for employment or otherwise in any Competitive
Business or otherwise offer any inducement to any current or future employee of
the Company to leave the Company's employ; or
(ii) contact or solicit any customer or client of the Company
(an "Existing Customer"), contact or solicit any individual or business entity
with whom the Company has directly communicated for the purpose of rendering
services prior to the effective date of such termination (a "Potential
Customer") or otherwise provide any other products or services for any Existing
Customer or Potential Customer of the Company, on behalf of a Competitive
Business or in a manner that is competitive to the Company's Business; or
(iii) Use or divulge to anyone any information about the
identity of the Company's customers or suppliers (including without limitation,
mental or written customer lists and customer prospect lists), or information
about customer requirements, transactions, work orders, pricing policies, plans
or any other Confidential Information.
(B) For the purpose of this Agreement, Competitive Business shall
mean any business operation including a sole proprietorship) in the United
States which designs, develops, manufactures or markets any product or service
that in any way competes with the Company's health information access system
business, products or services as conducted on the date of termination.
(C) This Non-Competition Agreement is not effective if Employee
leaves his employment with company solely due to expiration of this Agreement
(12/31/99) or if Employee is terminated by Company without Good Cause (as
defined in Paragraph 11(D)).
<PAGE> 5
COMPURAD, INC.
10. TERM
Unless earlier terminated pursuant to Section 11 hereof, the term of
this Agreement shall be for the time period beginning January 1, 1997 the date
hereof and continuing through December 31, 1999 (the "Term"). Neither the
Company not the Employee shall have any obligation to the other to negotiate a
new period of employment subsequent to the end of the Term.
The term of this Agreement shall be automatically extended by one year
on each January 1, beginning on and after January 1, 1998, unless notice of
non-extension is given by Employee or the Company at least 30 days prior to any
January 1. As a result, assuming no notice of non-extension is given, on each
such January 1, the remaining term of this Agreement shall be three years. For
example, assuming no notice of non-extension is given, on January 1, 1998, an
additional year shall be added to the term of this Agreement and, on that date,
this Agreement shall expire on December 31, 2000. On January 1, 1998, assuming
no notice of non-extension is given, an additional year shall be added to the
term of this Agreement and, on that date, this Agreement shall expire on
December 31, 2001, etc.
11. TERMINATION
(A) Death. This Agreement and Employee's employment thereunder shall be
terminated on the death of Employee, effective as of the date of the employee's
death.
(B) Continued Disability. This Agreement and Employee's employment
thereunder may be terminated, at the option of the Company upon a Continued
Disability of Employee, effective as of the date of the determination of
Continued Disability as that term is hereinafter defined. For the purposes of
this Agreement, "Continued Disability" shall be defined as the inability or
incapacity (either mental or physical) of Employee to continue to perform
Employee's duties hereunder for a continuous period of one hundred twenty (120)
working days, or if, during any calendar year of the Term hereof because of
disability, Employee shall have been unable to perform Employee's duties
hereunder for a total period of one hundred eighty (180) working days regardless
of whether or not such days are consecutive. The determination as to whether
Employee is unable to perform the essential functions of Employee's job shall be
made by Company's Board of Directors in its reasonable discretion; provided,
however, that if the Employee is not satisfied with the decision of the Board,
Employee will submit to examination by three competent physicians who practice
in the metropolitan area in which the Employee then resides, one of whom shall
be selected by Company, another of whom shall be selected by Employee, with the
third to be selected by the physicians so selected. The decision of a majority
of the physicians so selected shall supersede the decision of the Board and
shall be final and conclusive.
(C) Termination For Good Cause. Notwithstanding any other provision of
this Agreement, Company may at any time immediately terminate this Agreement and
Employee's employment thereunder for Good Cause. For this purpose, "Good Cause"
shall be defined as: the current use of illegal drugs; indictment for any crime
involving moral turpitude, fraud or misrepresentation; commission of any act
which would constitute a felony and which would adversely impact the business or
reputation of the Company; fraud; misappropriation or embezzlement of Company
funds or property; willful conduct which is materially injurious to the
reputation, business or business relationships of the Company; Employee's
failure to perform his responsibilities and/or duties within the thirty (30) day
<PAGE> 6
COMPURAD, INC.
period described in Section 2 hereof; or material violation of any of the
provisions of this Agreement. Any alleged cause for termination shall be
delivered in writing to Employee stating the full basis for such cause along
with any notice of such termination.
(D) Termination without Good Cause. The Company may terminate
Employee's employment prior to the Expiration Date at any time whether or not
for Good Cause (as "Good Cause" is defined in Section 11(C) above). In the event
the Company terminates Employee without cause, the Company will pay Employee a
lump sum amount equal to the greater of (i) two times the Employee's annual
salary at the time of termination, or (ii) the total base salary remaining
unpaid under this Agreement through its full term. Such severance payment shall
be paid within 90 days following the date of Employee's termination. In
addition, the company shall provide at no cost to the Employee continuing health
and welfare benefit coverage at least equal to his existing coverage for a
period of two years.
12. CHANGE IN CONTROL: ACCELERATED VESTING SCHEDULES.
In the event of a change-in-control of the Company, including a merger
or sale of substantially all of the Company's assets, outstanding options or
rights must be substituted at full intrinsic value. In addition, if within
twelve months of a change in control of Company, Employee's employment by the
Company is terminated prior to the end of the Term or Employee terminates his
employment due to a material reduction in his duties or compensation, or if the
Company requires relocation greater than 10 miles away from the current place of
business, the Company will pay Employee a lump sum amount equal to two times the
Employee's annual salary at the time of termination. In addition, the company
shall provide at no cost to the Employee continuing health and welfare benefit
coverage at least equal to his existing coverage for a period of two years. For
purposes of this Agreement, "change in control" means any of the following
events:
(A) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) through a single transaction or a series of
transactions of securities of the Company representing twenty-five percent (25%)
or more of the combined voting power of the Company's then outstanding
securities to any Unrelated Person or Unrelated Persons acting in concert with
one another. For purposes of this Agreement, the term "Unrelated Person" shall
mean and include any person other than a person who owns at least ten percent
(10%) of the combined voting power of the Company's securities on the Effective
Date (a "Related Person"). The term shall not include a sale, transfer or other
disposition by a Related Person to his spouse, lineal descendants or his heirs,
devisees and donees and trusts created by him, inter vivos or by will, for the
benefit of such persons or for the benefit of charitable or educational
institutions.
(B) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) by the Company through a single transaction or a
series of transactions of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's then
outstanding securities to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(C) A sale, transfer, or other disposition (including, but not limited
to, a merger or consolidation) through a single transaction or a series of
transactions of all or substantially all of the assets of the Company to an
Unrelated Person or Unrelated Persons acting in concert with one another.
<PAGE> 7
COMPURAD, INC.
(D) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least a majority of the combined voting power of the Company's then outstanding
securities. For purposes of this Agreement, the term "Beneficial Owner" shall
have the same meaning as given to that term in Rule 13d-3 of the General Rules
and Regulations of the Securities Exchange Act of 1934, provided that any
pledgee of voting securities shall not be deemed to be the Beneficial Owner
thereof prior to its acquisition of voting rights with respect to such
securities.
(E) During any period of two years, individuals who, at the beginning
of such period, constituted the Board of Directors of the Company cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election of each new Director was approved by the vote of at
least two-thirds of the Directors then still in office who were Directors at the
beginning of such period.
13. ACKNOWLEDGMENTS
The Company and Employee each hereby acknowledge and agree as follows:
(A) The covenants, restrictions, agreements and obligations set forth
herein are founded upon valuable consideration, and, with respect to the
covenants, restrictions, agreements and obligations set forth in Sections 7, 8
and 9 hereof, are reasonable in duration and geographic scope;
(B) In the event of a breach or threatened breach by Employee of any of
the covenants, restrictions, agreements and obligations set forth in Section 7,
8 and/or 9, monetary damages or the other remedies at law that may be available
to the Company for such breach or threatened breach will be inadequate and,
without prejudice to the Company's right to pursue any other remedies at law or
in equity available to it for such breach or threatened breach, including,
without limitation, the recovery of damages from Employee, the Company will be
entitled to injunctive relief from a court of competent jurisdiction; and
(C) The time period and geographical area set forth in Section 9 hereof
are each divisible and separable, and, in the event that the covenants not to
compete contained therein are judicially held invalid or unenforceable as to
such time period and/or geographical area, they will be valid and enforceable in
such geographical area(s) and for such time periods(s) which the court
determines to be reasonable and enforceable. The Employee agrees that in the
event any court of competent jurisdiction determines that the above covenants
are invalid or unenforceable to join with the Company in requesting that court
to construe the applicable provision by limiting or reducing it so as to be
enforceable to the extent compatible with the then applicable law. Furthermore,
any period of restriction or covenant herein stated shall not include any period
of violation or period of time required for litigation to enforce such
restriction or covenant.
14. NOTICES
Any notice or communication required or permitted hereunder shall be
given in writing
<PAGE> 8
COMPURAD, INC.
and shall be sufficiently given if delivered personally or sent by telecopier to
such party addressed as follows:
(A) In the case of the Company, if addressed to it as follows:
CompuRAD, Inc.
1350 N. Kolb Road
Tucson, AZ 85715
Attn: Corporate Secretary
(B) In the case of Employee, if addressed to Employee as follows:
_________________________
_________________________
_________________________
Any such notice delivered personally or by telecopier shall be deemed
to have been received on the date of such delivery. Any address for the giving
of notice hereunder may be changed by notice in writing.
15. ASSIGNMENT, SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors and
assigns. The Company may assign or otherwise transfer its rights under this
Agreement to any successor or affiliated business or corporation (whether by
sale of stock, merger, consolidation, sale of assets or otherwise), but this
Agreement may not be assigned, nor may the duties hereunder be delegated by
Employee. In the event that the Company assigns or otherwise transfers its
rights under this Agreement to any successor or affiliated business or
corporation (whether by sale of stock, merger, consolidation, sale of assets or
otherwise), for all purposes of this Agreement the "Company" shall then be
deemed to include the successor or affiliated business or corporation to which
the Company, respectively, assigned or otherwise transferred its rights
hereunder.
16. MODIFICATION
This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed by each of the
parties hereto.
<PAGE> 9
COMPURAD, INC.
17. SEVERABILITY
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect any other provisions hereof, and this Agreement shall
be construed in all respects as if any such invalid provision were omitted
herefrom.
18. COUNTERPARTS
This Agreement may be signed in counterparts and each of such
counterpart shall constitute an original document and such counterparts, taken
together, shall constitute one in the same instrument.
19. DISPUTE RESOLUTION
Except as set forth in Section 13 above, any and all disputes arising
out of or in connection with the execution, interpretation, performance, or
non-performance of this Agreement or any agreement or other instrument between,
involving or affecting the parties (including the validity, scope and
enforceability of this arbitration clause), shall be submitted to and resolved
by arbitration. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association. Either party may notify the other party at any time of
the existence of an arbitrable controversy by certified mail and shall attempt
in good faith to resolve their differences within fifteen (15) days after the
receipt of such notice. If the dispute cannot be resolved within the fifteen-day
period, either party may file a written demand for arbitration with the American
Arbitration Association. The place of arbitration shall be Tucson, Arizona.
20. GOVERNING LAW
The provisions of this Agreement shall be governed by and interpreted
in accordance with the laws of the State of Arizona and the laws of the United
States applicable therein. The Employee acknowledges and agrees that Employee is
subject to personal jurisdiction in state and federal courts in Pima County,
Arizona.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the date first above written.
COMPURAD, INC.
By: /s/ Phillip Berman
--------------------------------
Its: CEO, President
-------------------------------
EMPLOYEE
/s/ Henky Wibowo
----------------------------------------
<PAGE> 10
COMPURAD, INC.
EXHIBIT A - COMPENSATION AND BENEFITS
Employee: Henky Wibowo
Position: Vice President, Engineering
Salary: Fiscal Year 1997 (1/1/97 - 12/31/97)
Annual Base Salary - $140,000, payable in such number of
installments as may be agreed upon among the Company and
Employee
Target Fiscal Year 1997 Cash Bonus - $35,000, payable in
quarterly installments of $8,750 each.
Within thirty (30) days of the end of the fiscal year, the
Company's Board of Directors, or Compensation Committee
thereof, may annually adjust Employee's base salary upward and
Employee will be eligible to participate in any bonus plan
approved by the Company's Board of Directors, or Compensation
Committee thereof, at the highest level as the Board or
Committee establishes pursuant to any such plan. (This
employee shall then have the sole option to elect to receive
that bonus compensation either in cash or in the form of
unrestricted registered stock (in which event the stock will
be valued at a per share price equal to its lowest trading
closing price during the calendar quarter for which the bonus
is being awarded.)
Stock options:
Company agrees that Employee shall be eligible to participate
in the 1996 CompuRAD, Inc. Employee Stock Option Plan and to
receive stock option grants as the Company's Board of
Directors may determine appropriate from time to time
hereafter.
In addition, Employee shall receive: (i) 3,000 options for
shares of CompuRAD common stock for each calendar quarter in
which this Employee is employed, to be delivered to this
Employee no later than ten (10) days following the close of
each calendar quarter; and (ii) at least 3,000 additional
options for shares of CompuRAD common stock for each quarter
CompuRAD meets the quarterly goals approved by the Board of
Directors, which options for shares shall be determined and
delivered no later than thirty (30) days after the end of the
quarter. These stock options shall be immediately vested in
full and immediately exercisable by this Employee and adjusted
in number of shares to reflect the effect of future splits.
For example, if the share of common stock split 2:1, then the
3,000 options referred to in this subparagraph shall become
6,000 options.
Perquisite Allowance:
$1,000 per month
Benefits: Employee shall be eligible to participate in all other
employee fringe benefit plans of the Company to the same
extent and at the same levels as other executive officers of
the Company are then participating.
Auto Lease: Not to exceed $1,000 per month, including licensing,
maintenance and insurance.
<PAGE> 1
EXHIBIT 11.1
COMPURAD, INC.
SCHEDULE REGARDING COMPUTATION OF LOSS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------------------------------------------------
1997 1996 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $ 653,366 $ 134,125 $ 786,886 $ 360,906
====================================================================
Weighted average common shares
outstanding 3,860,075 2,391,320 3,858,980 2,251,650
Less: stock issued within one year of initial filing -- (417,930) -- (283,177)
Common stock equivalents pursuant to
SAB No. 83: Stock and options issued
within one year of initial filing -- 636,933 636,933
Common stock equivalents-dilutive options -- -- -- --
Weighted average common shares and
common share equivalents outstanding
during the period
--------------------------------------------------------------------
3,860,075 2,610,323 3,858,980 2,605,406
====================================================================
Net loss per common share $ (0.17) $ (0.05) $ (0.20) $ (0.14)
====================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE
30, 1997. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<CIK> 0001019947
<NAME> COMPURAD, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,702,469
<SECURITIES> 0
<RECEIVABLES> 2,875,566
<ALLOWANCES> 140,000
<INVENTORY> 659,720
<CURRENT-ASSETS> 5,294,278
<PP&E> 878,522
<DEPRECIATION> 223,825
<TOTAL-ASSETS> 5,948,975
<CURRENT-LIABILITIES> 1,564,528
<BONDS> 0
0
0
<COMMON> 6,551,972
<OTHER-SE> 473,500
<TOTAL-LIABILITY-AND-EQUITY> 5,948,975
<SALES> 4,682,420
<TOTAL-REVENUES> 4,682,420
<CGS> 2,458,621
<TOTAL-COSTS> 2,458,621
<OTHER-EXPENSES> 3,073,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (786,886)
<INCOME-TAX> 0
<INCOME-CONTINUING> (786,886)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (786,886)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
